Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2020 IHS Markit Earnings Conference Call. At this time, all participant lines are in a listen-only mode. [Operator Instructions] I would now like to hand the conference over to your speaker today, Eric Boyer, Senior Vice President, Investor Relations. Please go ahead.

Good morning and thank you for joining us for the IHS Markit Q3 2020 earnings conference call. Earlier this morning, we issued our Q3 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, the conference call is being recorded and webcast and is a 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 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 Uggla. Lance?

Okay, thank you, Eric and thank you for joining us for the IHS Markit Q3 earnings call. Today, we will review our Q3 performance, outlook for the rest of the year and provide an update on our 2021 expectations that we introduced on the call in the second quarter. In Q3, we delivered solid results as the markets we operate in have begun to recover at varying speeds. We are positioned to deliver results for the year that include recurring organic revenue growth, strong margin expansion and double-digit earnings growth on a normalized basis. As a company, we have used the COVID environment to become more efficient by rethinking how we collaborate, service our customers and innovate. We have adapted to a virtual work environment and are effectively utilizing technology to connect in new ways with colleagues and customers. We expect this experience to have permanent changes in how we operate going forward, including more flexible work arrangements, a reduced office footprint, less travel and increased productivity. The early cost management as a result of COVID accelerated some longer term actions that have enabled us to actually increase our overall investments in growth-related activities during 2020 over prior years. This gives us further confidence in our ability to achieve our organic growth commitments in 2021 and beyond. Let’s move on to the quarter’s results. When we speak to normalized results, we will be excluding the impact of the aerospace and defense divestiture [chains] [ph] on growth rates for adjusted EBITDA and adjusted EPS as well as the Q3 biennial BPVC on organic revenue growth. Let’s look at the financial highlights in the quarter: revenue of $1.07 billion, which is flat on a normalized organic basis; adjusted EBITDA of $486 million and margin of 45.3%, up 460 basis points year-over-year due to strong and early cost management and adjusted EPS of $0.77, up 16% over the prior year on a normalized basis. Let me provide some segment commentary for our Q3 and rest of year assumptions. Financial services provided steady organic growth of 4%, with 5% recurring growth. Performance was as expected led by a rebound in solutions and solid growth in information somewhat offset by lower Q3 volumes in processing. Information’s key areas of strength, included our core pricing services, valuation services and index businesses. Within solutions, we had a boost from the equity and municipal markets activity and some recovery in our managed services and implementation projects that were delayed due to COVID. Strong performers in solutions included our monitoring services for private markets and loans and corporate actions data and services. As expected, processing was impacted by lower volatility within our derivatives business and lower loan volume year-over-year. Going forward, we continue to expect mid single-digit organic revenue growth for the segment in 2020 with steady Q4 growth in information and solutions and a return to growth within processing. Transportation in Q3 had a strong start to its recovery with organic revenue growth that was flat, but recurring revenue growth, up 5%. Revenue from CARFAX and automotiveMastermind, both returned to growth as pricing for our new and used car dealer customers returned to normal levels as those markets began to rebound. Our dealer retention rates have remained very strong. And we are pleased that our CARFAX for Life free trials during the downturn are seeing strong conversion into paying customers. Now, remember CARFAX for Life, which helps dealers with their service loyalty, operates in a large TAM of over $2 billion and will be an exciting growth driver for our automotive business over the coming years. As expected, we did experience a slower recovery in our new car business, servicing OEMs and parts manufacturers as our customers work through lower new car inventories as a result of their Q2 COVID-related production shutdowns. Nonetheless, even in this part of our portfolio, we expect to grow our subscription base in 2020 as the impact has been mainly in the non-recurring items of revenue. Our maritime and trade business also performed as expected and we are gaining good traction from our new product offerings serving the trade finance commodities markets. Our organic revenue growth guidance for transportation for the year has improved slightly to a decline now of low single-digits for the year. Let’s move over to resources, which reported an organic revenue decline of 9% with the recurring down 5%. Downstream recurring organic growth was strong, while non-recurring revenue was impacted by lower global demand. Our upstream revenue was impacted by customers experiencing operation – operational and financial challenges. And we have partnered with our customers to balance near-term flexibility with longer term agreements, which support future revenue growth, while helping those customers through a difficult time. We have successfully increased the percentage of our upstream data revenue under long-term contracts to now over 50%. We expect normalized organic revenue growth for resources in 2020 to be negative mid single-digits. CMS organic revenue growth normalized for the BPVC was low single-digits as expected, with growth in product design somewhat offset by weakness in ECR and TMT businesses. For the year, we continue to expect normalized organic revenue growth in the low single-digits. Overall, I am very pleased and I feel we are well positioned to deliver solid earnings growth this year and return to strong organic revenue growth in 2021, which I will discuss after Jonathan goes over our Q3 results in more detail. Jonathan?

Great. Thank you, Lance. Diving into Q3 results, we delivered revenue of $1.07 billion, which represents an organic decline of 1% and total revenue decline of 4%. Normalized organic growth was 0% with recurring growth of 2%. Net income of $163 million and a GAAP EPS of $0.41. Our adjusted EBITDA of $486 million, an increase of 9% on a normalized basis with a margin of 45.3%. This represents a margin expansion of 460 basis points and we also delivered adjusted EPS of $0.77, an increase of 16% on a normalized basis. Moving on to revenue, our Q3 normalized organic of 0% included recurring organic growth of 2% and a non-recurring organic decline of 22% or 18% normalized. This decline in non-recurring was primarily driven by three items, slower delivery of software implementations driven by COVID, continued lower OEM auto activities and finally lower energy consulting and software sales. Moving on to segment performance, our financial services segment drove organic growth of 4%, including 5% recurring in the quarter. Information and solutions in particular has strong performances delivering 4% and 7% organic growth, while processing had an 8% organic decline due to the expected lower volumes year-over-year. Within processing, we do expect a return to growth in Q4 and for the year to be in low single-digits. Our transportation segment delivered organic growth of 0% in the quarter. This included growth of 5% recurring as pricing returned to more normalized levels for our dealer customers and a decline of 12% in non-recurring, primarily driven by continued delays in digital marketing and recall. Our resources segment had 9% organic decline, which is comprised of 5% recurring decline and 39% non-recurring decline. Q3 organic ACV decreased by $34 million in the quarter and our trailing 12-month organic ACV is negative 6% and has been heavily impacted by challenges in the North American energy market as Lance discussed. Our CMS segment delivered 1% normalized organic growth per BPVC, including 2% recurring and a decline of 12% normalized non-recurring. Moving now to profits and margins adjusted EBITDA was $486 million, up $33 million versus prior year. Adjusted EBITDA grew 9% on a normalized basis, with a margin of 45.3%, up 460 basis points. Moving on to our segments, financial services adjusted EBITDA was $226 million, with a margin of 50.7%, up 430 basis points. Financial services margin was driven by strong revenue flow-through benefiting from our Q2 cost reductions. We do expect some moderation in financial services margin in Q4 due both to increased investments and a shift in product mix. Transportation’s adjusted EBITDA was $154 million, with a margin of 51.4%, up 880 basis points driven by a return of dealer revenue and a slower return of variable cost. We do expect margins in Q4 to moderate as expenses tied to revenue come back with a return of growth and also increase investment spending, which will drive future growth. Resources adjusted EBITDA was $86 million, with a margin of 41.5%, a decrease of 230 basis points and CMS adjusted EBITDA was $31 million, with a margin of 25.7%, up 330 basis points. This large increase was driven by the rationalization of a TMT product group, post a divestiture and cost control measures across product design and ECR. Our adjusted EPS was $0.77 per diluted share, an increase of 16% on a normalized basis and 15% in total and our GAAP tax rate was 20% with adjusted tax rate of 18%. Moving on to Q3 free cash flow, we delivered $339 million. As a reminder, our trailing 12-month conversion rate has been impacted by several non-recurring items, including the following. A one-time tax payment in Q4 2019 associated with changes in the U.S. tax provisions. The settlement of our U.S. and UK pension plans Q1 payroll taxes associated with the exercising of a majority of their remaining outstanding options and finally one-time cost tied to the cost reduction efforts in Q2 of this year. Turning to the balance sheet, our Q3 ending debt balance was $5.0 billion and represented a gross leverage ratio of approximately 2.7x on a bank covenant basis and 2.6x net of cash. We continued to manage our balance sheets to provide liquidity and flexibility. We closed the quarter with $157 billion of cash and our Q3 un-drawn revolver balance was approximately $1.182 billion representing a great liquidity position. Our Q3 weighted average diluted share count was 401 million shares and reflected the pause of our repurchase program, which we announced in March. As we indicated during our Q2 earnings call, we did anticipate and expect to return to share buybacks and we announced a redemption of this program in August. We subsequently launched a $200 million ASR on September 1. Moving on to guidance, we remain very confident in our 2020 ranges. We are now trending to the midpoint of our revenue range of $4.28 billion to $4.3 billion. This represents a normalized organic growth rate for the year of between 0% and 1% led by recurring organic growth of 2% to 3%. On adjusted EBITDA, we were also trending to the midpoint of our range of $1.825 billion to 1.835 billion. This represents a margin of 42.7% and applies quarter-over-quarter contraction as our variable costs are reintroduced due to the improving revenue and also due to increased product investment. For adjusted EPS, we are trending to the high-end of our $2.76 to $2.78 range, which represents 10% year-on-year growth. And finally, we do expect free cash flow to run at 50% of adjusted EBITDA. And now, I will pass the call back to Lance to talk about 2021.

Okay, thanks, Jonathan. 2020 has been really an unprecedented period for operating a global information services company. And consistent with Q2, I want to provide comfort in the return to normal in 2021. So as usual, we will provide our formal guidance in November, but remain comfortable with the overall 2021 framework that we have already provided you on our Q2 call. The one item to point out is our decision not to hold physical events in 2021 and to move to a virtual model, which we have talked about as a possibility on the last call. Overall, we are looking for a strong year in 2021. Let me tell you what that includes. So, organic revenue growth of 6% to 8%, so that now accounts the lack of physical events, so strong organic revenue growth in 2021. In financial services, be in line with the firm’s growth still in the 6% to 8% range, transportation organic growth, we are now looking at 12% to 15% as we finished 2020 stronger than expected, although the absolute revenue that we are going to have, the amount of that revenue remains relatively the same, resources organic growth of down low single-digits to account for the events and CMS in the mid single-digits. For adjusted EBITDA and adjusted EPS, the ranges remain the same, which imply 100 basis points of margin expansion and 13% to 15% earnings growth. In closing, I feel very good about how we are managing the COVID challenges, while continuing to make the right long-term decisions for the company, shareholders and the communities that we operate in and serve. Finally, I want to thank our shareholders for their support and our colleagues around the world for their continued efforts during these unique times that we find ourselves managing through. So now operator, we are ready to open up the lines for questions.

Thank you. [Operator Instructions] Our first question comes from the line of Gary Bisbee with Bank of America. Your line is now open.

Hey, guys. Good morning. Good to see you...

Hi, Gary.

…rebound, particularly transportation revenue, I guess my question is around the fiscal ‘20 guidance and I heard your commentary about spend beginning to come back. But if we look at revenue, EBITDA and earnings, in all three cases, it implies not a lot of sequential improvement in revenue growth and sort of in a big step up in cost sequentially. I guess anymore color you can provide and really as we think about margins, any color you can provide on the level of permanent cost savings that have come out of your initial comments plans on that versus what was sort of deferred spending, we should see coming back? Thank you.

Right, right. So, well the costs that we don’t see coming back in 2021. So let’s start off any offices that we closed, of course those are permanent closures. And as I said earlier in the call, we continue to reexamine our forward footprint and we do see with the flexible work arrangements that we feel will carry on forward, we can reduce our footprint and so we will continue to protect those fixed costs that have come out and we will add to that. The second big move that was made through COVID was the move from contract based employees into permanent employees and we used the COVID period to provide that organizational design and change and those are permanent savings that aren’t going to come back at lower – just lower cost per head, and so those are – that would be the second place. The third place I would say is that some of the variable costs with respect to travel and entertainment that have come out this year, we would expect some of those to return but not all of them and maybe less than we had originally thought. So, we see a continued reduction there in terms of that overall spend. Where else, where we have done, where we have made moves on salaries, those types of moves, we have started to bring some of the salaries back to our employees. And as we go into next year, ex the top executives of the company, myself and the reports, I would expect those to be back to normal. And so I don’t know Jonathan, any other fixed takeouts? I would say generally one last one before I hand it to Jonathan, I would say that organizational design, so our ability to flex our global location strategy has been a permanent change that I just think in this COVID period through attrition and the early works done in our investment strategies throughout the year, the teams have really pushed our location strategy and those are permanent reductions in average head cost - average cost per head globally. Jonathan, do you want to add anything that I missed there?

Yes, sure thing, Lance. So first, it’s, I mean, you covered it well, but the two things I would add is when we think about the cost reductions we took in Q2, three categories, there is a fixed cost, which are gone permanently, and as Lance said is this perfect opportunity or this future opportunities to continue to work our cost structure, there is a natural variable cost that comes with revenue going up and down. And the third is the revenue that we – are the variable costs we chose to kind of squeeze up – squeeze down quite a bit in Q2. And what happened in Q3 is a good news story frankly is the revenue, particularly in transportation came back faster than we expected and faster than as been our ramp back on that variable cost that we have squeezed. The other thing I would call out is investments. We did open up some additional investments starting in Q3 heading into Q4. It certainly will benefit us in 2021 and beyond. But Gary, when it comes back to when you see in Q4, you are going to see the margin at the second level come down a bit really is the fact that our revenue performance was a bit better in Q3 than we expected certainly in transportation.

Hey, thanks, Jonathan. Next question?

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

Thank you. Good morning. Lance, you have talked a lot about some of the structural changes in your cost base. I guess what I was wondering is in terms of other items, whether it’s your portfolio mix or maybe try to convert some recurring revenue to subscription, are there any other things there you feel like structurally you need to change in the business?

No, I think the – I think when you look at the energy markets, I think you have got just to look forward into 2021, then we have got a negative mid single-digit this year and we are talking low single-digit next year. I really think you have got to look at the supply and demand around the energy markets. So, upstream will remain under pressure, you are going to have lower CapEx and you are going to have some bankruptcies. So, my view is the $600 million of upstream revenues is the only place I feel is structurally challenged as we go into 2021 and the remaining $400 million of energy should be expected to grow high single-digit 7% to 10%. So, my view is that – that’s something that we are going to have to manage through in 2021. The team has done a great job this year in terming out about 50% of the revenues to multiyear contracts. But in that discounting, some of that will flow into ‘21. They have managed bankruptcies and most importantly, they have stepped up for our key customers and helped them through a tough period. So, I actually think the energy guys really had to work hard this year to deliver the results they have delivered, but structurally, they still will be challenged on that $600 million, out of our whatever $4.6 billion, that $600 million is going to still be challenged next year, but the downstream and renewables and agriculture and OPIS and chemicals, all are healthy, recurring revenue growth expected and overall ACV positive. So, I am pleased with the performance there. Outside of that, we have managed our portfolio well. We have increased our investments in all other parts of the business. And so when I lay out the 6% to 8% organic growth yet next year margin expansion flowing through to 13% to 15% EPS growth, I feel like we are in a really good position looking forward in 2021. And hence a complete lockdown, which would bring the new car market in automotive and the dealer footprint, constrained. Ex that, my view is this we have given you a real good look into ‘21 and throughout ‘20 we have given you the revenue guidance. We have told you what we are going to do on expenses, we managed earnings, we told you what’s going to go into 2021. And so I really feel the team has done an exceptional job here and set us up great for ‘21, so no real big changes to our normal operating plan. Jonathan, do you want to add, I think that covered most of it, anything else? No, okay. Next question?

I think you covered it, Lance. Thanks.

Okay, thanks. Yes. Next question.

Thank you. Our next question comes from the line of Bill Warmington with Wells Fargo. Your line is now open.

Thank you. Good morning, everyone. So on…

Hey, Bill.

On annual – on annual contract value for energy, I wanted to ask in terms of the – it sounds like you made a number of improvements on that segment shifting upstream clients to longer term contracts. You are talking about 2021 low single-digit negative organic revenue growth for resources. I wanted to ask what you thought the trajectory of the curve was going to look like for the annual contract value growth and it tipped negative to minus 6% this quarter. When do you think it bottoms and starts moving up?

Yes. Brian, do you want to move up Brian on here? Brian, do you want to handle that one? You are not – you are muted, Brian.

Alright, sorry about that. So Bill, when you look at ACV, right now through the quarter, our upstream group is showing negative ACV, but all the other groups are already showing positive. So, we see a lot of strength in our especially in our clean-tech kind of gas business, good demand for LNG analytics, good demand in plastics and that’s just going to continue through FY ‘21, Lance mentioned bankruptcies, there is also closures that also have been affecting upstream ACV. So, in addition to bankruptcies, you had about 40 companies that have also just shutdown. You saw yesterday, Devon merged with WPX. So, those are factoring into the ACV, but the companies that went into bankruptcy are also coming out of bankruptcy now. So you have companies like Denbury, Whiting Sanches, those companies are now emerging and they are buying our services.

Thanks. Thanks, Brian. No, I think the energy guys have, really managed that shift in business from upstream into the mid and downstream. And we just got to continue to do that. Here. We have got great customer relations, very deep. All customers, you heard shell announcement yesterday in terms of energy transition, and their focus, you heard BP talk about their net zero targets and where they are headed. We have got a lot to offer customers in and around clean tech renewables. And so my view is, is if I look at the TAM, for non fossil fuel driven energy analytics, data, scenario analysis, climate scenarios, ESG, my view is, we are the best firm in the world positioned to drive revenue growth into those segments as we go forward. So all I can tell you is I expect the mid and downstream to grow high single digits to double digits. And I expect that the upstream will wane through ‘21 with recovery into ‘22 and beyond, from a much lower base. And so really, we got to be the architects of that shift in change. But we have done this before, and it, the upstream is $300 million, less than $300 million of data now and about $300 million of analytics and thought leadership so it’s not that it’s not a big problem for the overall firm, but it is a challenge for Brian and his team and they are doing a great job. Next question?

Thank you. Our next question comes from the line of Jeff Meuler with Baird. Your line is now open.

Yes, thanks and good morning and first fully recognize your two largest segments performed well. So apologies for piling on with another resources question. But the magnitude of the step down and recurring was pretty sizable relative to what we usually see in a subscription based business. So I guess what I am wondering is, are there temporary pricing concessions that quickly come back in resources like you had in transport? Because normally, when I think about trading off for longer term contracts, it’s more that you get the annual price escalator that kicks in, as you trip over on an annual basis. So but are there temporary pricing concessions or anything else you could say? And then, yes, I guess just to clarify, Lance, is the guidance for the outlook for 2021 resources. Is it down low single digits? I think I heard you say that on the call, it’s down single-digits down?

Down low, yes, down low single-digits. So one, two or three to me would be low single-digits in terms of a negative number. And so let me go to the first part of your question. So, I guess, well, first of all, I wouldn’t compare what’s going on in the energy markets to anything anywhere else in the firm. So transportation, here recurring revenue – we have had declines in some non-recurring revenue like recalls. So, government regulatory pressure has waned through COVID and therefore the recall agenda has been slowed down, but in the future, we expect recall to be an active part of our business and we will take the lion’s share of that when it comes our way. The second thing we would say is that with less cars on the lots and less cars being manufactured in ‘20 deal the cars in some ways, I hate to say sell themselves, because there is a lack of supply and therefore easier to sell the cars, less money spent on marketing and audience building. That’s a short-term issue. And then in the used car market, we have seen that accelerate back and all other products showing good demand, our forecasting and ability to deal with shifts in types of cars being manufactured and drive trains, etcetera position us really well. So, don’t compare energy with automotive or transportation. When you get into energy, I really think if you are sitting in my shoes today, I think of this very simply. We got whatever $4.6 billion, $4.7 billion of revenues in IHS Markit. I take it down to the $600 million of upstream, which is less than 300 of data and pre-merger was more than 400. This data in upstream, the declining market and it’s going to find its base and grow from there. So, in our 3-year contracts, after year 1, we put in 7% to 8% growth on average into those datasets. But this is miniscule in the picture of IHS Markit. So, it’s not a dial mover, it helps, but it’s not going to move the dial. So, I think you have to take that $600 million of data and say, okay, number one, the world as long as anybody is on this call is going to live plus all your children are still going to be using fossil fuels. So, we do have $600 million of revenue that’s going to support that piece of the world economies. So, whether it’s 70 million, 80 million or 100 million barrels a day, we need fossil fuels and nobody is connecting, turning on their lights getting to work moving around without some piece of their – the world’s needs in fossil fuels. So, we are going to find our home in data somewhere around $200 million, $250million will be the world leaders will continue to support all of our customers and we are going to help them and leverage that position into energy transition and I feel really lucky that we have got financial markets, transportation and energy right at the core and the epicenter of decisions that are going to happen to drive the energy transition and the beyond zero, net zero world that we are heading to. The second thing I would say is the existing players that remain. So, all the sovereign oil companies, big national oil companies that still have committed resources and of course the small entrepreneurial exploration activities need help in analytics, cost management, they want the thought leadership, they want to understand pricing, forecasting, etcetera. So, I think that our analytics, so the non-data piece of upstream will wane a bit into ‘21 through bankruptcies in difficult times, but again should return to a more normalized, whereas high single-digits, but I would say looking forward, I think of 3% to 5%, mid single-digit growth. So net-net, take the whole firm, you’ve got to take resources, the billion of revenues next year, put it at low negative single-digits and expect it to be low to mid single-digits in ‘22 led by the continued transition both organically or through bolt-on acquisitions that are going to drive our future energy growth and that’s it. That’s how I am running the firm. That’s how the team has been instructed to manage the challenges. And when I put that together across the whole firm, been there before and we just got to execute well. I have got a great team. We have got great customers. And I think from a shareholder perspective, we do exactly what we tell we are going to – we tell you we are going to do and therefore you have got great transparency into our capabilities. Next question?

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

Great, thanks. Hey, Lance or Jonathan, as you walk through some of the expense savings, some of that sounds obviously more structural as you think about, does that come to talk to potential increases to come to that 100 basis point target or do you reinvest that back into the business, which would kind of fuel organic growth or a combination of both. Is there anyway to maybe frame what that potential can be and how you redeploy it across the enterprise?

Yes. Well, COVID, given us a real great vision into our cost footprint in terms of real estate, in terms of where we can hire people to effectively do the jobs in the company, so what’s the location and our ability to actively manage 16,000 people working from home. And I guess nowadays, if somebody is in New York City, in the Finger Lakes, working in Taos, New Mexico or in their summer home in south of France, I can’t really tell anymore, their backgrounds or walls mostly or fake backgrounds, where they want to quote one. And so really we have become experts at managing in this virtual new world and that’s given us a chance to really look at our forward organizational design and I believe through attrition, so not having to let people go. But just managing attrition and managing a forward location strategy, leveraging technology, there is no issue with us thinking that we can expand 100 basis points per annum. Now, your second bit is can you have more and my view is an information services company that’s diversified like we are and diversified means that if you do five things, usually one out of the five is you have got to be focused and it’s a bit challenged and we have always had that. My view is, as we can grow steadily at mid single-digits, 5% to 8% or 6% to 8%, I really feel good about our ability to manage our revenue levers, but they all include services that over time wane in growth as they become saturated and those products end up falling to 2% to 3%, 1% to 3% revenue growth, see, you have got to be fueling the new growth products. So, investment is key. This year, we have invested $7.5 million more than we invested in the previous year in what we call investments in organic growth, both within each of the divisions, but even layering some additional expense over top. So, the teams got to invest. So my view is as I look forward, I don’t really want to expand margin faster than 100 basis points if it’s ever going to cost me a slippage on organic growth below 5%. So, therefore I want to invest, make sure that we push to the high-end of our organic revenue growth range, do it consistently, invest smartly, measure our approach and you know what 100 basis points margin expansion is good margin expansion and it helps us give you double-digit earnings growth that you can expect for the next 3 to 5 years. And I guess at merger, we were negative 2% to flat on revenue growth and 0% to 2%, 2% to 4%, 4% to 6%, 5% to 7%. We made a couple acquisitions, we pushed to 6% to 8%, haven’t missed a thing. We promised 100 basis points every year, you never missed it, promised double-digit earnings growth every year. So, the fact is, is just expect that’s what we are going to do and we will manage through the $600 million of resources challenge, put it behind us drive on grow the new business organically and make sure that we deliver the returns, a vibrant company service our customers well, I think all the metrics are strong and bode well for ‘21. Next question?

Our next question comes from the line of Andrew Steinerman with JPMorgan. Your line is now open.

Good morning, Lance. I wanted to hear more about Ipreo, which I know is now sub-segment into solutions and info. How did Ipreo contribute to organic revenue here in the third quarter and should Ipreo still have a double-digit organic revenue profile over the medium term and why?

I will start. I think Adam is on with me, not sure, but I will start and then if he comes on he can join in with me. Okay. So first off, alternative markets, super strong private markets growth, we have got the leading asset in that space, Andrew. And as far as I can see forward, we are going to grow double-digits in that alternative space. So a piece of that came from Ipreo, which was the eye level piece. We were already doing valuations. We were already doing private debt markets, WSO compliance etcetera. So that net-net altogether, I don’t see any of that waning. And if anything, we are continuing to build into that. On the actual volumes across munis, equities, fixed income in terms of the Ipreo businesses and the corporate solutions, I will let Adam give you some color on. Adam?

Sure. Thanks, Lance. Just maybe as a starting point, we have deeply integrated Ipreo into our businesses at this point. So, we are not forward measuring organic growth within that subset of business part of a much larger whole. Performance has been good over the years, as Lance mentioned, capital markets continue to be open volumes have been strong there. The private markets business is growing at or above our expectations of it. So I think we continue to see it as a large contributor to our growth and I think even looking out farther we think those areas will [Technical Difficulty]

Adam, in my remarks, I called out munis in the quarter, like just in terms of volumes, how are the muni markets through this year?

So municipal markets have been strong as local governments look to address their own capital requirements and low interest rate environments. Most municipalities have looked to refinance their debt and those have been very strong markets over the last 6 months even. Equities markets, that will just get us obviously that’s all when the COVID pandemic first hit, but as everyone on this call knows over the last month, we have seen accelerated equity markets again and we are seeing extended volumes there and the equity markets are one where volume is helpful for us. Lot of those relationships are volume dependent, for good reason so…

Okay, good. Thanks, Adam. Next question?

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

Thanks for taking my question. Congrats on the solid quarter and good to see the rebound in transportation. And Lance thanks for providing the details on the CARFAX for Life. Maybe if I can have a two-pronged question just on the auto dealership, you have introduced a lot of new products recently over the last few years. Can you just talk about the penetration for, let’s say, AMM or carfax.com in your existing dealer customer base, how much room runway do you have and how do you accelerate that? And then quickly on the OEM side, you provide some good color there on the recall and digital marketing, when should we start to see that come back as well? Thanks.

Okay, good. Well, I have got Edouard on with me. Edouard, do you want to take that one?

Yes, Ashish, thanks for your question and great point. So, we do work with a vast majority of dealers in the North American market one way or the other. The great news is we have a portfolio of products as you mentioned with different levels of penetration for each of those products. So if you take a mature product like CARFAX advantage, then we are approaching kind of maximum penetration. The great news is we have products like CARFAX used car listings or CARFAX for Life, which has plenty of runway and which we see growing for a number of years ahead of us, same story for Mastermind. Mastermind has been growing its penetration rapidly over the past 2 years, but frankly, we still have most of the markets to go after and we are continuing to introduce new offerings like our used car capability this summer, which gives us plenty more growth for the future.

Thanks, Edouard. Next question.

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

Hey, thank you for taking my question. So Lance, the clear message over the last several years has definitely been that you are focused on the long-term or sustainable organic growth. And in that vein, can you talk a little bit about the nature of the stepped up investments that you have made during COVID, more of the move towards getting the technology to be cloud-native where you are kind of the 3-year plan and what’s going on with kind of the data lake commercializing just kind of an overall update and where you are in the investments?

Okay, excellent. Okay, so I will break that in two and then if Adam, sorry, if Yaacov wants to come in after me, if I leave anything out on the data lake or our tech journey, be happy for you to add to that Yaacov. So the first thing I would say, is, every year since merger, we have increased the absolute dollars we have spend on organic growth investments. So all of our divisions have, in their regular planning cycle, are incrementally investing in their business. But every year, we also run almost like a shark tank approach to what we call incremental investments that can be above our, or internal rate of return, targets for investing in every year, that number has been higher since merger. So we are getting increasing confidence in our ability to invest, and then execute a result that leads to an expanded organic growth. And I have mentioned a bit and maybe we do an investor day, we could really dig into our internal vitality score. And our vitality score is our measurement of this year’s organic revenue coming from internal investments made over the last three years, or it’s longer than the last three years, they have never been less than double the firm’s organic growth results. So if we produce, 5% organic growth, we would leave it in if it was better than 10%. Because sometimes our investments take a bit longer to come in but if they’re operating at double our firm growth, we feel they are still adding to the vitality of the company. Every single year, since merger, the vitality measurement has improved. The absolute dollars of vitality revenue and the percentage of revenue from vitality has improved. So I feel really good that organic growth investment in IHS Markit has a great cadence and a great story. And it’s really impressive, I was with a reg and compliance head, John Barneson, the other day at a board update on organic, some of the new investments we have made and described the product with circa $1 million of investment over the last year, that’s already has run-rate of heading over $5 million and we will have actual revenue next year of $10 million. Now not every investment we make of 1 million drives 10 million in new revenue. If that was the case, we would be growing at 10%, but the fact is, is the better we get at organic investment, the better this company is. It attracts more – it cracks better people, it’s more exciting to work in, it’s got more of a buzz and people feel they are part of investing in their products with technology to be better. So, I am super happy with that. And I wish I had $50 million every year to incrementally add, but the fact is, we don’t have that, but incrementally, we are continuing to invest at what I would say is a growing cadence, well measured, well managed. The second thing I would say when we merged emerged with IHS Markit and IHS. And after merger you find, you have got technical debt, you have got old technology stacks that you don’t want to just connect to new technology, you actually want to rip them out, throw them away and build something brand new. And that’s been Yaacov’s job. And Yaacov has taken the last 3.5 years building out a world class data lake with a $0.5 billion partnership with Amazon, which puts us completely cloud native. It’s a long-term 7-year deal, which is the data lake is built and now all the products are going cloud-native and the connectivity of all of our key datasets to product development to customers out of the data lake into our cloud-native strategy is changing the profile of IHS Markit substantively. And so those investments are made. They are in our numbers. We have managed to do the CapEx OpEx switch, which is very difficult for companies. We map that into our investments with Amazon. And I just think the team here again, not to keep bragging about them, but this big shifts in info security cloud-native software and data lake architecture, that’s what the best companies in the world are doing and our teams have orchestrated that. Yaacov, maybe you just want to tell our shareholders and our analysts here just a little bit about how you see the journey improving our client connectivity, our organic revenue growth, project development and just anything, maybe 5 minutes that you want to add around our cadence for excellence.

Thank you, Lance. So, I will just talk about, I will start with the data lake just to give an update on that and if there is time, I will go into technology. So first of all, after extensive internal use of data lake by internal IHS Markit advanced analytics team and some of the business lines, we went to market in May this year, making multi-tenant data lake available to our clients as well as extended our reach to potential partners. We have several sign clients, we have got roughly 15 clients in serious evaluation and we have got 150 active client conversations. We are leveraging our existing broad-based sales force and account management teams in reaching our client base worldwide. We are now building out a multimillion dollar engagement pipeline vis-à-vis data lake and our client. Our client engagements in the context span their financial services, energy and automotive client base since data lake is domain agnostic. We have ingested into the data lake the entirety of IHS Markit structured and semi-structured data, this process is ongoing and it is automated from day one since our data footprint is expanded by way of adding new business domains, e.g., agribusiness and similar. At the end of November, we will release the next version of data lake, which will contain around just shy of 1 million unstructured data items, e.g., research documents and analyst reports that will be catalog, discoverable and curated in a similar way per structured data content. In addition, we will provide some advanced features such as document summarization and other advanced machine learning and AI feature engineering based benefits. This type of functionality forms part and parcel of our unstructured data ingest pipeline. By the end of 2020, we will achieve decentralization and discoverability of our data estate across structured and unstructured data and provide same functionalities to our clients. There is one more step I would like to mention for us to deliver to complete the data lake journey as in connecting relevant the data dots across our entire data estate. So, I will pause here for a moment.

Yes, great, so a lot going on and great question. But key for us has been this tech investment over the last 3 years and we are seeing the results. And I think the team has done a great job. Next question.

Our next question comes on the line of Andrew Jeffrey with Truist Securities. Your line is now open.

Thank you. Good morning. I appreciate you squeezing me in here towards the end of the long productive call. My question is high level, Lance, around pricing. And I am thinking about a few areas. CARFAX for Life stands out as a monetization opportunity. I am also wondering about pricing trends and pricing power within your financial services business and broadly, if 6% to 8% of the organic revenue growth goal, is it possible to parse out how much of that is coming from price recognizing that you are pricing for value?

Yes, I think historically, we have always said, 1% or 2% of our overall growth across the whole firm comes from price. And I don’t know if Jonathan if you want to add any further detail on that, but I think that generally when you look across the whole firm, we get about 1% to 2% organic growth for the – related to price. Jonathan, do you want to add to that?

Yes, I will just be real brief, Andrew. So when you think about our buildup on the subs line, I was going to start the year at 100%, we have cancellations for whatever reason, our renewal rate has been kind of low to mid 90s and then you build up from there. And as Lance said, pricing we do and it does vary by end markets, the condition of the end markets, think about option right now, it’s more difficult to capture the capture price, given the challenges there. But typically about a couple of points that you get from price, the biggest driver really get on the buildup is really on cross-selling and up-selling products and certainly the focus, as we have talked about this call is around introducing – divesting dollars into innovation and driving new products into that customer base and into our channel, but think about just for your modeling purposes about a couple.

Okay, thank you. Next question.

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

Good morning. Thank you. I was just hoping if you could just talk about how you are thinking about free cash flow conversion for next year. I think you are talking about 50% for this year. So any puts and takes to think about around free cash flow for next year. I know you have sort of the EBITDA framework you laid out?

Yes. So 60 to 65, we return back into the 60s, mainly, we had some one-offs this year with the pensions that we posed profitably the teams did a good job there. We had some of the restructuring for COVID. So, the tax costs that were left over from the Trump changes, I think our view is as we go into 2021, we will be back 60% plus. Jonathan, is that accurate?

It is. And I will just add to it, Lance, as several one-offs this year, those items you mentioned, the pension being a third. And we also had some COVID-related impacts to working capital, working capital typically is positive as we sign a new contract and bill upfront and the support some of our clients took in auto and auto OEMs and energy we have supported slightly different payment terms. But looking forward to next year as we have cycled through, look what happened with our contracts, the one-time items will flush through we expect to be back up to mid 60s next year.

Great, thank you.

Thanks, Jonathan. Next question.

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

Hey, guys. Good morning. Thanks for keeping the call going. Just real quickly on the financial services business. Solutions flip back positive here in the quarter. I know, last quarter, you talked about the pipeline being strong. Do you feel like we have turned the corner here in the solutions business and can you just give us any kind of forward commentary for how your customers are thinking about that business? Thanks.

Yes. No, definitely, installing software solutions through COVID has been strained, but the team did do a good job getting us through 2020. We have a strongest pipeline we have ever had across the business. And Adam might want to add a few details into that picture. Adam?

Yes, thanks, Lance. It is an historically lumpy business. You do see variations quarter to quarter, but we have continued to deliver into that high single-digit and in some cases touching double-digit growth through that group. Over this past year, we have actually been focusing more on larger, more comprehensive relationships with our customers. We have focused our product teams on being able to develop those capabilities, so we could provide customers even more value in larger solutions we are seeing and that’s hard to pull through and Lance talked about an exciting pipeline. Really not just more deals, but larger deals and I think once we get past the COVID interruption, because obviously it interrupts our customers’ ability to do larger implementations, I think as we pull through that, we will see continued acceleration there.

Thanks, Adam. Next question.

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

Yes, hey, good morning. Maybe just to round it out on capital allocation and returns, I don’t think we have touched upon this today. You mentioned the $200 million ASR some folks have reached out to me and said they thought that was a little bit small. So maybe just talk about how you think about buybacks in general beyond that $200 million? And then M&A, you mentioned on the resources you are still thinking about tuck-ins, is that across the board in other segments as well or how is the environment looking for you in general as you think about M&A in this environment and coming out of it?

Okay, no, good question. We haven’t had that one for a bit. So, first off on buybacks, we have committed the 50% to 75%. So that’s – nothing has changed on that. I think you can look forward at us and be thinking $200 million to $300 million a quarter is a reasonable cadence for buybacks. Well, maintaining our leverage, sub three times. I think that leads us, half a billion plus, in terms of bolt on acquisitions, and anything above that would require us to, increase our leverage before delivering again. And so we, are good acquirers we, we make great acquisitions in the past. And we are always monitoring the markets. But if you ask me, the return on invested capital on organic growth, versus acquisitions, I would say when the teams are doing their jobs we should always be going after the organic growth. And we definitely increased our cadence of organic growth over the last, three, four years, so I am pleased that we don’t need to acquire to support our long term objectives. What I would say, is, scale matters. And I feel a lot better about being a $30 billion dollar company versus being a $10 billion company. And I think that scale matters didn’t top difficult worlds that we operate in. And so we have done a great job to grow the company, grow our free cash flow, and then use it accordingly. And so the dividend is great for our shareholders, they like that certain cash flow, share buybacks is another way to pay back. And we think given 50% to 75% of our cash, our cash back to shareholders is a good strategy. And if great M&A is there, we have got ample room for bolt-ons. And we have some room on leverage if we wanted to do something a bit bigger. So I can’t say more than that, except that our strategy of that combination is voted well. And we are very cautious on the return on invested capital of all those different strategic alternatives. And so, if COVID brings the cost of assets down, somewhat, that could be good, but actually are multiple, I would love to see our multiple, two or three turns better. So things look a lot cheaper to us. So that is where we are, I wouldn’t expect any strategic change, short term, but you should expect this to always look at what’s best for the company, and best for the long term goals of the company and shareholders. Next question, we must be getting near the end operator.

We do have three questions left in the queue. Our next question comes from…

Okay, we will answer all three of them.

Perfect. Our next question comes from the line of Jeff Silber with BMO Capital Markets. Your line is now open.

Thanks so much for squeezing me. And I will be quick. I know you are not giving 2021 guidance towards year end, but if we look at the quarters and using your outlook for the year, does it make sense that you will see year-over-year growth and margin expansion in your fiscal first quarter next year? That’s the last comp, pre-COVID? Thanks.

Yes. Okay. Jonathan, do you want to grab that in terms of our forward model?

Sure. So – and I will be staying on top of my head a bit here, Jeff, but for Q1 year-over-year of ‘21 compared to ‘20, I think we likely will see some margin expansion just because a lot of our cost reduction took place, going to be an impact in Q2, Q3, Q4. And so Q1 year- over-year is going to be before all the COVID impact that takes place. Certainly, for the year, we do expect to drive over the course of the year, continued margin expansion.

Thanks, Jonathan. Next question.

Our next question comes from the line of Toni Kaplan with Morgan Stanley. Your line is now open.

Thanks a lot. Can you talk about any potential implications you are thinking about from the upcoming U.S. election? If there is a Biden win, maybe that helps globalization, but it could impact resources and maybe transportation given more stringent climate policies or do you view that as the transitions happening anyway, so maybe it’s not as big of a factor? And then actually, if you could help us think about the implications of the energy transition for transportation, I know we just saw the California ban on sales of gasoline powered cars starting in 2035. So, just what are you providing to your auto customers in terms of helping with those policies? Thanks.

Right, okay. Thanks, Toni. So I think Biden drives green. And so in terms of energy transition, everything we are doing around supply chain, maritime measurement of the ESG of the maritime fleet, our ESG advisory and products around our indices into financial markets, I think Biden pushing a green agenda forward is good for us. I also think that Biden, pushing a regulatory compliance driven agenda is also good for a firm like ours. So those two things are things that might bode well. I think that, more free flowing, globalization and better global relationships could be a win for IHS Markit as well. But I have to say volatility and challenging marketplaces, fuel financial markets, services providers, and that hasn’t heard us through COVID. In terms of the automotive sector, Edouard can add to it, but people need as much advice and solutions, and used in new car advice around shifts to ease as they do on combustion engines. And we do provide a lot of services around the drive train and that shift from combustion TVs. But, Edouard, do you want to drive a little bit deeper detail on that?

Yes, a couple of quick words turn in response to your question. So as Lance said policy and regulatory uncertainty drives and need for data for decision making by our customers. And so in that sense, this is a interesting environments to create new data assets and new products. You mentioned the California ban. You could have mentioned also the EU revised targets for emissions reduction by 2030, which were published last week. And all of this creates a need for large scale simulation of what does this mean for my business? What does it mean for my portfolio, Lance mentioned innovation. So I would say this whole area of emissions compliance, and electrification is probably the most innovative area of our portfolio. I will give you a couple of examples, next month, where we are releasing a monthly rolling forecast of compliance versus EU, China and U.S. regulations, which is a new tracking and monitoring tool for customers. And in January, we are very excited about this. We are launching a simulation tool that will allow our customers, parts makers as well as carmakers to really run a variety of simulations on the portfolio, their competitors’ portfolio to understand how they achieve compliance cost effectively, so very exciting area for us for customers and the place in which we are focusing a lot of resources.

Thanks, Edouard. Next question.

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

Hi, thanks. Good morning. You mentioned that you can grow steadily 5% to 8% or 6% to 8% organically driven by consistent if not elevated investments. Is this an increased your long-term organic growth framework? And then related to your long-term framework, you talked about several drivers of permanent cost savings. How did those permanent savings impact your framework for long-term EBITDA margins in the 45% to 47% range?

Yes, so 5% to 7% had been our long-term forecast for driving the firm. And then when we acquired Ipreo, we boosted the – no sorry, we are 4% to 6% and when we acquired Ipreo, we boosted financial service to 6% to 8%. And therefore we raise the overall organic growth forecast of the firm, to 5% to 7%. And I still believe 5% to 7%, the right level of conservatism in terms of what we provide to shareholders, our expectations across the firm. And I have to tell you that there is nobody in the firm that doesn’t want to be at the high end or beating that range, but there is always something that across our company that might put us in 6%, instead of 7% or 5%, instead of 6% and so hence the 5% to 7%. As we go through the year, you can see from our forecast right now on revenue, we have got to pin down to like a $5 million spread. So, we know our revenues and our ability to keep them very, very well. So, I think 5% to 7% is the right level. As we grow things like alternatives, renewable energy, energy transition, our asset management related platform activities, our roles and reg and compliance, these are areas that’s growing double-digit. As those grow and gain additional cadence in the firm and investments play through, I expect those areas to push us up to the higher end. And I would love one day to come on here and say 6 days. But for 2021, we can say 6-day, because we are coming off a 4-year in terms of comps. And so really, I think 6 or 8 next year is not, it’s just it’s not the highest order. It’s a return from a really challenge year. And therefore, I think the more interesting year is 2022, are we back in line for the 5% to 7%. And I have to say hand in my heart, I think we have got more than enough target addressable market to do that. So I don’t worry about our long-term ability to grow revenue, I think we are leading edge with our customers, where we have got great employment practices, even proved right through COVID. With our diversity and inclusion measurements, our community scores with our employees and our community scores with our customers. So feels buoyant, feels good, I feel great about that. When you grow at the top end of the range, you start to grow margin, automatically. But we have a business that’s very global, can easily work from home, can easily deliver many of our solutions virtually and leadership virtually, we just got to use more technology. So we have been investing in more technology. And therefore, I see no problem with IHS Markit being one of those 50% margin companies, like many of our peers, they do a damn good job, they manage expenses, they grow revenue, and they find their home around that high 40% to 50% margin. And I expect us to be there as well. And I don’t want to rush it, because I want to make sure that we are constantly investing in those new market opportunities. And I think we are doing that just fine. And then when you look down through earnings this year, we have always had double-digit earnings, I just said earlier in the call, 13% to 15% because all of a sudden we were fully termed out on our debt. So, no rising interest costs, good management of depreciation, excellent tax team that’s given us a good adjusted tax rate. And so I have to say that all of those mechanisms are in place. And so as the last call of the day, all I can say to you is, I will reiterate again, competence in revenue growth, competence in expense management, competence in the double-digit earnings growth. Our portfolio has been adjusted over the 3 to 4 years since merger. We will continue to fuel the strengths and lessen impacts of challenge markets, we will grow through that. And we have ample opportunity with the free cash flow we have to invest back into our shareholders or into the company for new opportunities. So I think we are – nothing has s really changed except that we have been through the most surreal period of our lives. It’s been tough for customers. We have helped them. It’s been tough for employees and we have reached out to them and delivered for our teams. It’s been tough to build new products virtually, but the teams have managed to do it. So, next year, the only thing I can say to you is, if we get a complete shutdown or lockdown and we have to keep people at home locked up and they are not out on the dealer floors, they are not out buying cars, there is nobody out drilling for oil, the financial markets will continue to operate, they have proven they can do that. It will be another tough year. And I will give you crystal clear transparency in what we are doing every quarter. But I actually think the world is heading towards an eased lockdown situation, not that they are not going to lockdown regional, I think there is going to be all sorts of regional lockdowns. But I don’t see us coming to a complete standstill again in terms of our forward forecast. And if that happens, when we give you our guidance in November, we will have to update it. But at the moment, I think you have got as much knowledge as I do and I hope the transparency is appreciated and thank you for all your support. At this point, Eric, we will end the call.

Yes, we thank you for your interest in IHS Markit. This call can be accessed via replay at 855-859-2056 or international dial-in 404-537-3406, conference ID 3199681 beginning in about 2 hours and running through October 6, 2020. In addition, the webcast will be archived for 1 year on our website. Thank you and we appreciate your interest and time.

Ladies and gentlemen, this concludes today’s conference call. We thank you for your participation. You may now disconnect.