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spk11: Ladies and gentlemen, thank you for standing by, and welcome to the fourth quarter 2020 IHS Market Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your host today, Eric Boyer, Head of Investor Relations. Please go ahead.
spk05: Good morning, and thank you for joining us for the IHS Market Q4 2020 Earnings Conference Call. Earlier this morning, we issued our Q4 earnings press release and posted supplemental materials to the IHS Market Investor Relations website. Our discussions on the quarter are based on non-GAAP measures or adjusted numbers, which exclude stock-based compensation, amortization of acquired intangibles, and other items. IHS market 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 in webcast and is a copyrighted property of IHS market. Any rebroadcast of this information whole or in part without the prior written consent of IHS market is prohibited. This conference call, especially 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 markets filings with the SEC and on the IHS market website. After our prepared remarks, Lance Ugla, Chairman and CEO, and Jonathan Gere, 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, you're on mute.
spk03: Oh, sorry. There we go. The first mute of the year. There we go. If everybody can go mute on the teams. There we go. Okay. Sorry. I'll start fresh. Thank you, Eric, and Happy New Year, and thank you for joining us for the IHS Market Q4 Earnings Call. We achieved a lot in 2020. Solid financial results, proven the resiliency of our business model, greater levels of innovation across the company, higher employee satisfaction scores, and finally, we announced a strategic merger with S&P Global, which will create the leading global information services provider. Overall, we finished the year ahead of expectations and are reiterating our 2021 revenue and adjusted EBITDA guidance. We are updating our adjusted EPS by 3 cents due to our share repurchase restriction because of the pending merger. Now onto the financial highlights for the quarter and the year. When we speak to Q4 and fiscal year results, they are normalized to exclude the impact of the aerospace and defense divestiture and the cancellation of Q2 events on growth rates for organic revenue and adjusted EPS. Organic revenue growth was 0% for the quarter and the year Adjusted EBITDA margin expansion was 160 basis points in the quarter and 250 basis points for the year. And adjusted EPS growth was 11% in the quarter and 13% for the year. In terms of our core industry verticals, I'll provide Q4 and full year 2020 highlights and our outlook for 2021. First, our financial services segment. had organic revenue growth of 6% in Q4 and 5% for the full year. In 2020, within information, we continued to benefit from the innovation and demand for our pricing, reference data, and valuations offerings, the successful launch of new regulatory solutions, notably our SFTR reporting platform, and we had strong growth from indices, led by our fixed income and newly launched ESG indices. Within solutions, we continue to invest in our leading products and integration capabilities, launch the private debt investment lifecycle solution, and experience robust growth from continued expansion of our managed corporate action solutions. Within processing, we invested in our core OTC and loan settlement platforms to help the industry facilitate the IBOR transition and regulatory requirements. We also successfully service the industry through one of the most volatile periods in recent history. In 2021, we expect organic growth within financial services in the 6% to 8% range. Within information, growth will be led by increasing customer demand in new products within our pricing, reference data, and valuation services businesses, We also expect continued strength for our regulatory reporting and compliance offerings. Within this business, we'll integrate our recent acquisition at Capitech, which will help solidify our leading industry position. Now, within solutions, we expect high growth across our diversified offerings and a rebound in managed services and implementation of projects. In particular, We are looking for a strong year from our onboarding and compliance management tools, expansion of our portfolio and data management solutions into new sectors, and continued high growth in private market offerings. We also expect normalized levels of equity and debt issuance that will drive solid performance in our syndication and book building businesses. Processing is expected to be slightly up year over year with mixed market conditions in both loans and derivative markets. Now let's move on to transportation, with organic revenue growth in the quarter of 2% and a decline of 2% for the year. In 2020, the pandemic had a major impact on the automotive industry, and we responded proactively to the crisis by working with our customers and continue to see the rebound in our business with recurring organic growth of 6% in Q4. During the pandemic, we also increased our focus on drive and adoption of newer products, such as Carfax for Life, while accelerating product innovation across our portfolios in areas such as marketing audiences, enhanced compliance simulation, and Mastermind, now available for used cars. Our maritime and trade business had a solid year, excluding the impact of the cancellation of our TPM conference. In 2021, we expect organic growth within transportation in the 12% to 15% range. We expect our automotive business to revert to its longer-term growth range. Although economic uncertainty remains, our dealer-facing businesses have strong momentum going into 2021, and the strong retention rates we have maintained through 2020 attest to the critical nature of our products. Products supporting our OEMs and supplier customers will recover more gradually as the industry adjusts to lower long-term volumes coming out of COVID. In addition to the underlying growth of the business, we expect to see a one-time pickup in organic growth from pricing being at normal levels for the full year, specifically within Carfax and Mastermind businesses. And finally, maritime and trade will continue to see accelerating subscription growth driven by product innovation in our risk and compliance and commodities analytics businesses. Moving on to resources, where organic decline was 11% in the quarter and negative 5% for the full year. In 2020, our upstream business was impacted by the industry undergoing severe CapEx reductions, leading to cost pressure within our customer base and bankruptcies, particularly in North America. Our downstream organic revenue growth proved resilient when normalizing for our events. Growth within our gas, power, and renewables businesses were driven by customer expansion into areas such as wind, battery, solar, and hydrogen services. This was somewhat offset by lower non-recurring revenue within consulting. We also completed the integration of the agribusiness and acquired TrueView, a small upstream analytics company. And in 2021, we expect organic revenue results within resources to improve compared to 2020 and to be down year over year in the low single digits. Our downstream businesses are expected to return to mid-single digit organic growth driven by continued demand for our pricing, chemical information, the release of additional plastic circularity products, a new database of estimated energy chain emissions, and from the realization of synergies from the agribusiness integrations. Within our upstream businesses, we expect customer capex spend to continue to be constrained for our annual contract value, which will bottom in Q1. In 2021, we are excited to launch our new predictive analytics tools that will marry our upstream and midstream global data sets with our proprietary insights and research and will drive additional forward growth. Finally, CMS organic revenue growth was 0% for the quarter and 1% normalized for the impact of BPVC for the full year. Product design proved its resilience with organic growth in the low single digits normalized for BPVC, while TMT and ECR performed as expected. In 2021, we expect our organic revenue growth to be in the mid single digits. Moving on to some of our recently announced strategic initiatives. We entered into a 50-50 joint venture with shared control with CME to combine our post-trade services, including trade processing and risk mitigation operations. The venture is going to incorporate our market-served business, and CME's optimization business. Through the combination, we'll achieve increased operating efficiencies and new revenue opportunities by being able to better service clients with enhanced platforms and services for OTC markets across interest rates, FX, equity, and credit asset classes. We expect the deal to close in the summer and to be neutral to our adjusted earnings in the near term. And finally, we announced the strategic merger with S&P Global, which joins two world-class organizations with unique, highly complementary assets. This combination creates a pro forma company with increased scale, world-class products and core markets, and strong joint offerings in the high growth adjacencies, including ESG and energy transition, private assets, and small and medium enterprises. counterparty risk management, supply chain and trade, and alternative data. Our unique and complementary assets will leverage cutting-edge innovation and technology capability, including the IHS market data lake and S&P Global's Ken Show to enhance the customer value proposition. For IHS market shareholders, employees, and customers, merging with S&P Global was the best strategic fit to create the most long-term value. Post the merger announcement, Doug Peterson, CEO of S&P Global, announced his executive team for the pro forma company, which includes the following members of my executive team. First, Adam Kanzler will lead the combined S&P Global market intelligent business and the IHS market financial services segment. Edward Tavernier will lead the transportation segment. Sherry Granite will be the combined company's Chief Admin Officer and General Counsel. And Sally Moore will lead strategic alliances and will have responsibility for corporate development and strategy. Other members of my executive team and myself have also agreed to help with the integration for 12 to 18 months post the close. I believe Doug has assembled a great executive team that will bring together members of both companies, including Doug has assembled a great executive team that will bring together members of both companies' leadership and will be a great first step in merging the two companies. And now I'll turn the call over to Jonathan.
spk04: Great. Thank you, Lance. We had a strong finish to the year with results ahead of our expectations. Our Q4 financial performance included revenue of $1.107 billion with organic growth of 0%, an all-in revenue of negative 1%, GAAP net income of $151 million, and GAAP EPS of $0.38, adjusted EBITDA of $465 million, an increase of 3% with margins of 42.0%, and adjusted EPS was $0.72, an increase of $0.07, or 11%. We were pleased with the finish of the year and the solid revenue and profit performance we delivered throughout 2020. Relative to revenue, our Q4 organic revenue growth of 0% included recurring organic growth of 2% and non-recurring organic growth of negative 11%. Moving to segment performance, financial services revenue growth was 7%, including 6% organic and 1% FX. Recurring organic was 6%, while non-recurring organic growth was 9%. Our information business organic was 4% led by strength in our pricing, indices, and equities information products. Processing organic was 1% as we saw a return to growth in loan markets offset by a slight decline in derivatives processing. Solutions organic was 10% due primarily to strong performance in our corporate actions, private markets, and digital businesses. Transportation had revenue decline of negative 4%, including 2% organic, flat FX, and divestiture of negative 6%. Organic growth was comprised of 6% recurring and negative 9% non-recurring. Resources revenue declined 11%, including negative 11% organic and flat FX. Recurring organic was negative 8%, and non-recurring organic was negative 32%. Our Q4 ACB decreased $22 million, and our full-year ACB decreased $74 million, down 9% versus prior year. We ended the year with an ACB of $719 million, which now includes agri of approximately $30 million. CMS revenue declined 2%, including 0% organic. Our benchmarking business divestiture impact of negative 1% and flat FX. Recurring organic was 2%, and non-recurring organic growth was negative 13%. Turning now to profits and margins, adjusted EBITDA was $465 million, up 3%. Our adjusted EBITDA margin was 42.0%, up 160 basis points. Moving to segment profitability, financial services adjusted EBITDA margin was 48.7%, up 260 basis points. Transportation's margin was 45.3%, up 350 basis points. Resources' margin was 40.2%, down 200 basis points. And CMS' margin was 24.7%, up 20 basis points. Gap net income was $151 million, or $0.38 per share. Our adjusted EPS was $0.72 per diluted share, a $0.07, or 11% improvement over the prior year. Our full year adjusted tax rate was 18%. Q4 free cash flow was $275 million. Our full year free cash flow was $940 million and represented a conversion rate of 51%. As a reminder, our full year conversion rate was impacted by several non-recurring items. Turning to the balance sheet, our year-end debt balance was $4.9 billion which represented a gross leverage ratio of approximately 2.7 times on a bank covenant basis. And we closed the quarter with 126 million of cash. At year end, our undrawn revolver balance was approximately $1.2 billion. Our Q4 weighted average share count was 400.5 million shares, and our full year was 401.5 million shares. We completed the 200 million ASR in November of 2020. Our four-year share repurchases were approximately 1.1 billion or 14.6 million shares at an average price of $73.71. The merger agreement with S&P Global restricts our ability to purchase our shares, and therefore, our share repurchase program is currently suspended other than for the repurchase of shares associated with tax withholding requirements for share-based compensation. We paid a dividend of $67 million in Q4 for an FY 2020 total of $270 million of dividends. The merger agreement allows for the continued paying of a regular quarterly cash dividend in the future, and we are recommending to our Board for approval in our January 2021 meeting to increase the quarterly dividend from 17 cents per share to 20 cents per share effective for the Q1 2021 dividend payment. Moving to full-year financial results, when we speak to full-year results, they are normalized to exclude the impact of the aerospace and defense investiture and the cancellation of Q2 events on growth rates for organic revenue, adjusted EBITDA, and adjusted EPS. Total four-year revenue was $4.288 billion, which represented decline of negative 3%, 0% organic, negative 2% acquisitive, flat FX. Turning now to reported profits, adjusted EBITDA was $1.837 billion, up 8% versus prior year. Adjusted EBITDA margin was 42.8%, with reported margin expansion of 250 basis points. GAAP net income was $871 million with GAAP EPS of $2.17. And adjusted EPS was $2.84, a 13% increase versus prior year. In terms of guidance, we are reiterating our 2021 revenue and adjusted EBITDA guidance and updating our adjusted EPS for a 3 cents impact due to our inability to repurchase shares as a result of the pending merger. Our 2021 guidance is as follows. Revenue of $4.535 to $4.635 billion with organic revenue growth of 6% to 8%, including recurring organic growth of 6% to 7%. Adjusted EBITDA of $2 billion to $2.03 billion with adjusted EBITDA margin expansion of 100 basis points. and it tests with EPS of 3.11 to 3.16 per share. Finally, we do expect cash conversion in the mid-60s as we lap our 2020 one-time cash impacts. And with that, I will turn the call back over to Lance. Okay, thanks, Jonathan.
spk03: We managed through the many challenges of 2020 very well and are positioned to have a strong 2021. We're excited about the merger with S&P Global and believe it will create long-term value for shareholders, new insights and capabilities for customers, and greater opportunities for employees. Finally, I want to thank our shareholders for their continued support and our colleagues around the world for their dedication and focus through what was a very challenging 2020. Operator, we're ready to open the lines for questions.
spk11: Thank you. As a reminder, to ask a question, you will need to press star then one on your telephone. To withdraw your question, please press the pound key. Our first question comes from the line of Kevin McVeigh with Credit Suisse. Your line is now open.
spk15: Great. Thanks so much. Pardon me. Congratulations. Hey, Lancer, Jonathan, you know, as you think about kind of the – the joint venture you announced with CME seems really interesting. Is there more opportunity, you know, just given the unique data sets to cultivate beyond CME and to other opportunities and just, you know, I think it underscores your strategic rationale for the S&P deal. Is there more opportunity, you know, from a client perspective, any initial reactions around the announced acquisition and then just additional opportunities that you're seeing similar to kind of what you do with CME?
spk03: Okay. No, why don't I start and then I'll pass it to Adam, uh, who, uh, did the transaction for us. But, um, you know, this was something that when we originally thought about, um, selling markets served, we actually thought that the, um, there would be a, uh, impetus of buyers that wanted to find ways to consolidate the assets. But I think given that the assets are primarily held by strategics and consortia and a variety of, um, you know, industry-owned relationships, I think it proved a tall order for any private equity firm to create that consolidation. And so, you know, post that, we looked at the strategic assets across the industry. And, of course, between ourselves and CME, we have the majority of the OTC processing assets. And so, therefore, the synergies for both on the cost side, but also, you know, in terms of the servicing the customer and creating incremental margin for investment, you know, stood out really strong. And we think that the consolidation of processing assets across the industry is something that the CME IHS market transaction as a JV is a first step. But why don't I pass it over to Adam who can... give you some incremental color. Adam?
spk08: Sure. Thanks, Lance. There'll be much more to come over the next few months as we bring the two businesses together, but sort of as a high-level answer to your question, you have a very common set of customers, common set of workflows, and a lot of the same data enriching the workflows that the customers use on multiple platforms across the CME assets and ours. So this opportunity to bring it together, you'll have a much more complete data set across all of those workflows, certainly within the derivatives markets, giving you the opportunity to build additional analytical tools, workflow tools, and things that allow our customer set to manage their risk and processes more efficiently. I think the customer set has found for many years that maintaining these data sets and these workflows in multiple places is highly inefficient. It's expensive. and it causes breaks in some circumstances. So this is an opportunity to improve the risk management profile for our customer set, bring efficiency, bring their costs down, and bring a better set of tools. So there will certainly be innovation and new applications and tools against those data sets and in bringing those workflows together over time.
spk03: Thanks, Adam.
spk08: Next question.
spk03: Thanks, Lach.
spk11: Thank you. Our next question comes from the line of Manal Patnik with Barclays. Your line is now open.
spk16: Yeah, good morning, guys. I just want to focus on the resources business. So if I got the ACB right, if you exclude the agribusinesses down 9% and that's decelerated again to the third quarter in a row. So I was just curious, you know, why are you confident that things are going to bottom in Q1 here?
spk03: Jonathan, do you want to start and then pass that to Brian or vice versa?
spk04: Sure. I'll go ahead and start and then pass it on to Brian Crotty. Yamar, so the resources really is playing out as we expected back in Q2 of this year when we saw the impact coming in on upstream. And we're seeing a two-tier world, obviously, where upstream business challenged by the external markets and our downstream business performing pretty much in line on the subscription side. With the ACV, we need to lap a full 12 months from the restructuring of the marketplace, which took place in kind of mid-Q2. As we know and as we've discussed on previous calls, we've kind of leaned into this pretty heavily, worked closely with our customers and industry customers around this, but it does take a full 12 months. So as we look forward, Q4 performed as we expected. We expect further decline of Q1, but Q1 for ACB being more bottoming out and then building in Q2. But I'll pass it over to Brian for any specific color that he's seeing. You know, Brian, I don't think we can hear you, Brian.
spk19: I think you're... Oh, okay. Sorry. Okay. Yeah, I said, Jonathan, you know, you're exactly right. When I look at the ACVs, it's really upstream that drove the decline in ACV. When you look out at the next, you know, at the next year, you can see us. You're going to need to mute the other one, Brian.
spk03: Mute the other call. All right, thank you.
spk19: Can you hear me now? I'm sorry. Yes. Okay. Yeah, when you look at the ACVs on the rest of the group, you can see them improving steadily. And even upstream, we hit bottom in Q1, and then we steadily improve and get positive ACVs Q2, Q3, Q4. Right.
spk03: Thanks, Brian and Jonathan. Next question.
spk11: Our next question comes from the line of Gary Bisbee with Bank of America. Your line is now open. Thanks.
spk18: Hey, guys. Good morning. Maybe I'll stick with resources. One of the key questions I get from people around the S&P transaction is just thinking through potential synergies. And with resources, it's not so clear to me and I think to others exactly where those will be. Since you acquired Opus a couple years ago, which is a similar business model to a lot of plats, can you just help us understand – What synergies adding Opus to your portfolio has delivered for the resources business? Has it helped innovation? Has it helped create new data sets? Have there been some real clear benefits to business and especially the top line from adding that to your portfolio over the last couple of years? Thank you.
spk03: Maybe I can start, Brian, and then I'll hand it to you. So first off, if you look at our business, it's a – 50% upstream consulting data analytics. And of course, that business is different than the S&P global business. And so there aren't the numerous product synergies, but there's definitely scale with customers and new customer opportunities for opportunity. As you shift down through chemicals, agriculture, Opus all the pricing McCluskey coal indices as you get into the pricing and indices of course all of those services where we have synergies between them have the same opportunity set with the Platts teams so we're quite excited about the mid and downstream synergies around the pricing and news services and where there's overlap and we'll have to address that within the closing of the merger. But that's a small piece of the revenue. Brian, do you want to add to that?
spk19: Yeah, you know, I think for us it gives us a whole new customer base as well. You know, when you look at wholesalers, convenience store marketers, even penetrates us more into traders. So I think that was a good thing for the Opus acquisition project. Also, you know, pricing services tend to have stickier renewal rates. And then the strong news component gives us a lower-end product to upsell higher-end services. So I think strategically it was a very good acquisition.
spk03: Thank you. Okay, thanks, Brian. Next question.
spk11: Our next question comes from the line of Jeff Mueller with Bayard. Your line is now open.
spk06: Yeah, thank you. On the transportation outlook issue, Is it the typical annual pricing increase in Carfax and AMM, or is there some catch-up since I don't think you got your typical increase this year? And what's the timing of that? And then any comment on kind of forward visibility on non-recurring within transportation? I know that, like, the timing of recall campaigns can impact that. But just as we think about getting back to the growth that you're projecting, thanks.
spk03: Okay. Edward, do you want to take that one?
spk12: Yeah, happy to pick it up. Thank you, Jeff, for the question. So on the pricing side, there will be pricing increases in 2021, but we will proceed carefully. Let's remember that across North America, we're still in the middle of a pandemic, so we are still reflecting on exactly the right time to introduce a pricing increase. So that currently is planned, but it will be a normal pricing increase and no particular catch-ups. we are very focused on the health of our customers and dealer partners. In terms of the forward visibility, as you mentioned, Jeff, a lot of our transactional revenues are tied to things like marketing spend by the industry, as well as activity in the recall business. Now we're seeing some of those spend items come back. They were higher in Q4 than in Q3, and we're seeing a lot of good marketing activity coming through in Q1. So we are confident they are on their way back, but as Lars mentioned in the introductory comments, it will take a bit longer for them to reverse to normalize trends. We expect that in the second half of the next year.
spk03: Thank you. Thanks, Edward. Next question.
spk11: Our next question comes from the line of Alex Cram with UBS. Your line is now open.
spk17: Yeah, hey, just Quick one on the guidance. I know largely unchanged, but the margin upside, pretty consistent with prior years. Any things to point out there on a segment basis or on a seasonal basis that we should be aware of as we think about 2021 or pretty consistent with what we've seen in the past?
spk04: Okay, sure, Alex. Yeah, we'll do, Alex. Thanks for the question. Now, in terms of the 100 basis points margin performance, again, that's really just building, as you know, in the last fiscal year, a very unusual fiscal year for us in many, many ways. But we did make some structural changes in our cost, and we're seeing a flow through there. That plus the normal growth rate that we're seeing on the 6%, 8% total, that helps drive that overall margin. I think you will see, in particular, as you flow through, I would look at, at FY21 as a relatively normal year, the comparison to 20 is where it gets a bit hairy at times from quarter to quarter. So Q2 and transportation, for example, was a particularly challenging time for us. So I think you'll see some odd seasonality on year-to-year comparisons there. But I would think of FY21 really as a pretty normal year for us. Make sense? Thanks.
spk03: Thanks. Thanks. Thanks, Jonathan. Next question.
spk11: Our next question comes from the line of Andrew Steinerman with J.P. Morgan. Your line is now open.
spk01: Hi, John. I know you just said on transport the May quarter will have this kind of disproportional pop. to make the 12% to 15% organic revenue growth for the year. Could you just be a little more directional in the current quarter, how that's trending, knowing that the May quarter will be kind of a disproportional year-over-year comparison?
spk04: Sure. We'll do, Andrew. I would call you to take a look at the supplemental. You kind of see what happened in FY20, and that will kind of tell you to see what's going to happen in FY21. But just to go back over what happened last year, as a reminder, when COVID hit, we gave significant price concessions voluntarily, particularly in transportation in Q2. A little bit of it also, Andrew, in Q3. So it leaked a little bit into Q3. As we look forward now, right now, so first, the industry overall has seen a strong recovery in the second half of 2021. In fact, I have a son turning 16. I tried to buy him a used car. It's very hard to find a used car right now, and it speaks to the strength of the industry. Though I did use Carfax and Benjamin to find a great car. I'd recommend it to you, Andrew. But if you look forward, the industry has recovered there. So as we see the performance in FY21, we're seeing a pretty healthy industry, particularly at the dealership level. As Edward mentioned, we do work closely and support the health of our dealer customers, so we're being careful as to how we look at value capture, the price increase, the timing around that. But right now, we're seeing our customers doing pretty well, and that's reflected in kind of our expectations. But, Edward, is there anything else you want to comment on?
spk12: No, I think you covered the key points, Jonathan, but there is a seasonality effect, right? If you look at 2020, we took a significant haircut in Q2 on revenues. Even as we're working on our cost base, in Q3, revenue started coming back in when costs were low, and that did create some seasonality in the margin accretion, and you're going to see some of that play out in 2021 in the comps. But otherwise, you captured all the key points, Jonathan. Thank you.
spk03: Thank you. Appreciate it. Thanks. Next question.
spk11: Our next question comes from the line of Ashish Subhadra with Deutsche Bank. Your line is now open.
spk13: Thanks for taking my question, and congrats on the quarter. So my question is on the SNP strategic rationale and revenue synergies, as both teams have had a chance to spend some more time. Can you just talk about the ability to develop a new product and improve commercialization of Info's data lake by combining it with SNP's Kensho, as well as the power of combining Info's data lake with SNP's market intelligence platform? If you can talk about just the new product development as well as improved distribution of data asset, how that can help going forward. Thanks.
spk03: Sure, okay. We'll maybe focus this question around market intelligence and financial services because that is the area where we have substantive product-related synergies. And I'll pass it to Adam to add on to this as well. But if we start with the data lake, and can show. The data lake is where IHS Markit has spent three years organizing all of its alternative data sets into a common library with ease of access for both our internal use as well as now to commercialize to customers. So we've done the heavy lifting to organize those data sets. S&P Global acquired the Kensho assets, which are advanced analytics data science experts, which have scale and size that are very excited to be able to begin working with the information alternative data sets that we have to help provide new forms of decision-making schools, decision-making signals as well as trading signals, alerts, and just deeper decision-making tools and ways that without the organized data sets tied to an advanced analytics platform like Kensho, you don't have the same opportunity to do so. So that's the first thing. The second thing is market intelligence is a platform that has – you know, hundreds of thousands of users that are active on the platform. And that gives us an opportunity for direct distribution as well as the buildup of tools and services to be offered on the platform. And I'll let Adam add on to that because there's several other ways the two financial services groups that Adam will lead have revenue synergies mapped out and excited about going forward. Adam?
spk08: Yeah, thanks, Lance. A lot of this was discussed by both Doug and Lance at the time of the merger, and I think a lot of those themes remain true. And as we've continued to explore and get ready for integration, a lot of those original themes have played out. And that's really looking at the scale of data and insights available to the combined business. The ability to put the massive data sets and content available through the market intelligence platform into some of the technology solutions we offer to our customers in their reg and compliance risk management workflows should be a real game changer in their ability to make decisions and us to give them a very efficient platform for consuming those wide-ranging data sets. If you look at a corporate customer group, automotive, oil and gas, engineering companies, We'll have the opportunity to give them both financial market and risk capabilities they need to run their business, but also data, tools, capabilities, you know, let them thrive in their core markets with deep industry-specific expertise, market insight, and including things like asset valuations, which they haven't been able to give before, you know, because of the, you know, they're really, that's an expertise that we're now bringing to that core customer set that's a user of the market intelligence products. So those are sort of the key areas. It's really the combination of a cross-asset, cross-industry data set with workflow solutions already touching many of those same customers. Thanks, Adam.
spk03: Next question.
spk11: Thank you. Our next question comes from the line of Shlomo Rosenbaum with Stiefel. Your line is now open.
spk02: Hi. Thank you very much for taking my questions. Lance, just kind of Two questions I want to sneak in. First is just the data lake went fully live, I think, in the summer. I just want to ask you to comment a little about what the uptake from customers were. Did it really validate the fact that you'll be able to, you know, improve the selling motion over there? That seems to be a key kind of point that you're hoping to capitalize on with, you know, Kensho being able to use a lot of the stuff that's in the data lake. And then just Just maybe for Jonathan, what are you assuming for events in the year? Are you assuming that we're not going to go back to any live events, and what would the events revenue be in kind of a normalized year? Thank you.
spk03: Okay. Let me start with that. Yeah, so the data lake, we launched the commercialization, you know, in, you know, the first half of 2020. And we started off with several proof of concepts with, you know, bigger, active, large users, hedge funds, banks that have, you know, big decision-making strategies around the use of alternative data. And, you know, so far, we've started to commercialize those relationships, turn them into longer-term contracts. Contracts are reasonably sized with terms and give the customers the ability to be able to access parts or all of the library for defined decision-making purposes. And then sometimes the ability to create some form of redistribution if it's into their own products and services that wouldn't cannibalize our data sets. So we're building out two things. One, the pipeline of customers. Two, we've now started to convert the customers. I don't want to say we've converted 100 customers, but we definitely have converted 10 customers in the year. So that's starting to pick up. We have a great pipeline, and we have numerous ways of creating customers the commercial set. Somebody's typing. Oh, you must be typing your notes, right? I'll put that up. Sorry about that. I don't know if this is coming through. Okay. So then the next bit that I'd like to say is that, you know, for us, the data lake gives us a speed of development and new products, but also, you know, this ability to attach our content with our customers' content and give them new, unique ways of leveraging and utilizing the data sets. So we see a bunch of efficiencies and a bunch of commercial activities of which we've started to get a positive trend going on those already. On the second part of the questions on the events, I'll pass it over to Jonathan.
spk04: Great. Thanks, Lance. So on the events, as we know, we offer events throughout the year, but Q2 is our heavy, heavy events month from a revenue perspective. We have our three large flagship events, the SEER Week, the World Petrochemical Conference, and the TPM Conference in our maritime segment. we are not planning on holding those physical events this year. So when we look at our forecast, revenue forecast for the year, we've anticipated no revenue from physical events. We are, however, holding virtual events in those three events. The revenue from those is significantly lower, Shlomo, so don't expect to see a significant pop there. But I think it's an important way for our teams to continue to lead the industry and lead in with our customers and help connect the industry together. during these times. So again, you won't see any revenue, significant revenue from events for us in FY21, but we will be holding the events virtually.
spk03: Can I add, Jonathan, as we, one of the things I'd say, Shlomo, that I was quite impressed with is with the virtual events, we do have experience running Sarah Week India last year, which we did with Positive Revenue. And so we're applying that virtual model to the bigger Sarah Week event for 2021. And I have to say that the customer take-up in terms of participating in the events, as well as sponsoring and participating from a commercial perspective, has been reasonable. And, you know, so I've been quite impressed with the team's work. I know they've involved me with some of the discussions in building some of the panels up, etc. But they're doing a great job. And I know they won't be able to produce the revenue they did physically. But they sure are, you know, building some momentum to add some revenue, positive revenue for virtual events as well. And, you know, let's see how that plays out in the quarter going into next quarter. But they'll definitely have a number. Thanks. Next question.
spk11: Our next question comes from the line of Hamza Mazar with Jefferies. Your line is now open.
spk10: Happy New Year. My question is just on the S&P transaction expected to close second half. You know, any next steps or milestones, any delays you expect from an antitrust perspective? You know, are there divestitures you have to do? How long do you expect the HSR process to take? Sort of any color around that would be great, Lance. Thank you so much.
spk03: Okay. Well, first off, you know, our expectation is that it will close in the second half. We don't see anything specifically that's going to create any, you know, substantive hurdles. So all the hurdles that we knew going into it in terms of the business overlap within our Platts and Opus businesses are there, and the teams are working to address those. And so, you know, my view is there shouldn't be any significant roadblocks or hurdles. We'd expect to close in the second half. I expect the teams to work with the regulatory bodies to determine the precise nature of the overlap of any assets, which is insignificant in terms of size across the transaction. I don't know, Jonathan, anything else you want to add?
spk04: No, I think you have it right, Lance. We've already started engaging with the government regulators, so very positive engagement there. And, I mean, as Lance said, I'll just reiterate what he said. We see no surprises. Given the size of this transaction, it, of course, requires appropriate review by government agencies. But there's nothing, I think, that we see nor have we heard any feedback that would cause us any concern. And it's just the nature of the size of it. I think it will be a second-half completion.
spk20: Thank you so much. Excellent. Next question.
spk11: Our next question comes from the line of George Tong with Goldman Sachs. Your line is now open.
spk09: Hi, thanks. Good morning. Diving a bit deeper into transportation, you expect organic growth to be in the 12 to 15% range in 2021. And you mentioned dealers are performing relatively well. Can you elaborate a little bit more on the health of dealers and OEMs and what needs to change at the customer level for you to hit your targets? Also, can you discuss a bit whether you've seen any negative impact from the full reversal now of earlier pricing concessions in transportation?
spk04: Edward?
spk12: Yes. Hi, George. Thanks for the question. So in terms of what we've assumed in our forecast and our plans, it's a continuation of current trends, right, which means a market that in the U.S. is probably down roughly 10% year-on-year. It means continuing challenges with inventories. but it means, by and large, significant volumes of both used cars and new cars, and most dealers remain in open, even if there are kind of local business restrictions. So we have factored in all of those risks, and we can execute on our plan and our forecast within the current market environment. In terms of what we're seeing in the dealer market and signposts about their health, I would say a couple of things. In the end, many dealers had a very strong 2020 because even though volumes were down, because they had to lower costs and because inventories were very low, the margins by and large were high and dealers remained profitable throughout 2020. So in fact, most dealers are in pretty good shape coming into 2021 and expect to remain in pretty good shape. They expect prices to remain pretty solid throughout the year. What they do see is uncertainty, right? And that uncertainty means there is risk. It means they're not bringing in all of their costs back into the dealership, and it means that there may be some ups and downs throughout the year. But by and large, that is the market environment we're seeing today, and that is the environment in which we can execute on our plan. George, that was the first question. Can you just remind me what the second question was?
spk09: Yeah, if there has been any negative impact from the full reversal now of pricing concessions.
spk12: Yeah, it's a great question. Thanks for asking it. I think we mentioned on the Q3 call that as we were removing the pricing concessions, we would be tracking the retention rate very, very closely through Q3 and Q4. Well, the great news is it's remained very, very strong, right? So our cancellation rates have remained low, even as we took out the option to suspend service, and we're very happy about this. If you remember back in Q2 when the crisis struck, we said, The most important thing for our business is to make sure that when we come out of the crisis, we come out with customer relationships that are even stronger than they were coming into the crisis. That's why we made hard decisions. That's why we took a short-term kind of revenue hit because we believe that's what we had to do to get through the pandemic. I think we're coming out of it in the right place with very strong customer relationships, with critical products, and with high retention rates.
spk03: Thank you, Edward. Next question.
spk11: Our next question comes from the line at Jeff Silber with BMO. Your line is now open.
spk20: Thank you so much. I've had a few investors ask me this question, so I'll just ask you. Can you talk a little bit about morale and internal turnover at your company since the merger announcement, especially in light of last month's announcement of the new divisional structure for the combined company? Thanks.
spk03: Okay, so, no, it's a good question. So, you know, there's not a lot of product sales management overlaps in terms of the, you know, the products and services that both companies offer, and we have a lot of opportunity for revenue synergies where we're going to have to apply new people to work on the new opportunity sets. So, therefore, the... The synergies come across all of the shared services, and of course, in a merger like this, we put in retention in order to keep the teams well-motivated, intact, with successful performance-related retention that ties into us executing the deal really well. And that goes across the executives, including myself, that will stay on post-closing to help make sure the deal's a success. And, you know, other people across the shared services that may not be having long-term roles, but their short-term roles are very important, and therefore we structure in compensation to help make that happen. I have to say, as we went into the end of the year, post the merger announcement, you know, we really had the, and the pandemic, we've really been operating that the absolute highest, um, satisfaction levels in the firm that we've ever had. It's been a real pleasure, uh, motivating people through the pandemic, getting the teams, uh, working on, uh, you know, uh, running the company in a tough time doing the merger and, you know, post the merger, we've announced, uh, our hub platform, JB with CME, a Capitech acquisition. You know, there's no stopping. And this is a company that's going into a close of a merger in the second half. We're still doing the things that, you know, IHS market has been, you know, designed to do and does very well. And so, no, I'm very pleased with how everybody's responded and the morale and how we're treating employees that may be without a long-term job post the close. I think it's all done.
spk20: Jonathan, do you want to talk whatever has been disclosed there? I was over-talked. That was the dollar amount of the retention.
spk03: Yes, please. Our total retention pools across the two companies.
spk04: Sure. So we created a $60 million retention pool, which we had to announce at the time of the merger. And that's a cash pool being used to retain jobs which could potentially be at risk. And I'll emphasize potentially. As you can imagine, you do a merger like this, a lot of excitement at an individual level. People worry, what does it mean for me personally? And that retention pool really allows, as Lance said, It basically buys time for people to kind of see what their future looks like kind of going forward and kind of de-risk the delivery of this year. But it's a $60 million pool, which we began to roll out shortly after announcing the merger.
spk20: Okay. Appreciate the call. Thanks so much. Thank you. Next question.
spk11: Our next question comes from the line of Andrew Nicholas with William Blair. Your line is now open.
spk21: Great. Thank you. I was hoping you could speak a little bit more to the hub announcement you made last week. Certainly a handful of major players coming together for that initiative. And so I'm wondering if you could speak to the specific set of middle and or back office solutions the company is targeting. I think there's already a handful of skilled players in that space. So I want to make sure I understand where in the asset manager operations stack hub plans to play. And then also, how Hub will be differentiated versus some of the incumbents in that space. Thank you.
spk03: Right. Okay. Well, Hub initiates out of two very large customers that were looking at opportunities to create efficiencies with respect to technology going forward, and those were announced in the press release, PIMCO and Man Group. And, you know, they have a very close relation given the PIMCO CEO, you know, was formerly the Man Group CEO. So a close relationship. And both CEOs looking at the forward use of new technologies to create efficiencies in the total cost of ownership of the solutions that they're needed. And so Hub's initial job is to build a foundation of client transactions and reference data storage for the management of the activities of the middle and back office of an asset manager. So, therefore, reducing the inefficiencies that happen from using multiple different systems. You know, it's early stage. Microsoft, as a partner, is, of course, a choice of Azure with respect to the build and advisory on the build. McKinsey, of course, great partner who are working with asset managers who are trying to make their forward technology decisions. And State Street, great partner because technology They manage the outsourced back office for PIMCO and ourselves who have a lot of experience at data management and the build-out of financial services technologies. So it's really a joint venture of senses where we have many owners who are going to own a build of a foundation technology that will help bring asset management total cost of ownership down across the middle and back office functional needs to better manage those data sets. And it will be a platform that will connect to all the industry administrators over time, various software assets, OMS, PMS, risk management, risk attribution, pricing, you know, a real integrated hub, hence the name, that looks to reduce the costs of management of data with respect to, you know, a big asset manager. And the two asset managers that, you know, are announced in the transaction, you know, of course, they have a lot of knowledge and IP themselves and will be, you know, putting that expertise to work. as we look at the forward plans of HUB. I don't know, Adam, if you want to add anything else, or we can pause there. Okay. So we'll go for the next question. Thank you.
spk11: Thank you. Our next question comes from the line of Tony Kaplan with Morgan Stanley. Your line is now open.
spk00: Thank you. ESG is a high-growth area, and it will be an important part of your future with S&P. And for S&P, we know that their ESG revenue is about $60 million annualized, growing at about 40%. How big is your ESG revenue and how fast is it growing? And are there any specific products or areas that you can talk about that you're focused on for this year in particular? Thanks.
spk03: Right. No, that's a good question, Tony. Our revenues, as Doug and I mentioned in the combination, are slightly larger, but they're a little bit different than what you'd call the purebred ESG revenues because we don't have ESG rating products per se. We have a whole bunch of products that really play into the E of ESG and will be naturally combined and will create synergies with the S&P products. So, for example, we have a carbon registry, which is where we're – where we have voluntary emissions receipts that are used for carbon offsets. We also build carbon auction platforms, Costa Rica, California, Quebec, to name a few. And those auction platforms for pricing a carbon locally in a state or a region or a country are increasingly important, and we'll continue to build those out. Then within our energy and transportation businesses, of course, we have a lot of geolocation data around all the energy-related assets, which are important to the climate discussions going forward. We have a lot of data with respect to some of the land use around agriculture. We have, of course, knowledge of the tailpipe emissions of all the automotive fleets. So we have these, what you would call is within all of our businesses, we have parts of the E of ESG. And when we combine that with the ESG rating services, the true cost, the Rubico SAMs of S&P Global, we start to have a much more significant, you know, circa 125 to 150 million of ESG of kind of base revenues that need to be brought together and then continue to grow at double digits. Doug has mentioned the 40% publicly. We've never really talked about our growth rate, but it's also strong double digits.
spk11: Thank you.
spk03: Thanks, Tony. Next question, maybe our final one.
spk11: Our last question comes from the line of Andrew Jeffrey with Truist Securities. Your line is now open.
spk07: Thank you. Good morning. I appreciate you squeezing me in here at the end. Lance, I actually wanted to ask a question about financial services, which has been such a steady business for you, and specifically in solutions in iPreo. Can you give us an update on sort of performance of alternatives broadly? And then I wonder if you might talk a little bit about a couple of trends, and I wonder if you're participating or if you have any thoughts. And those would be Bitcoin and the emergence of SPACs as funding vehicles. Are those areas where you think IPO can monetize over time along with alternatives?
spk03: Those are both good questions, and I'll start and then Adam can conclude. So first off, our financial services business has – you know, proved even through this tough, you know, year of the pandemic to provide, you know, strong mid-single-digit recurring revenue growth. And I don't see that, you know, waning going forward. And I think with the synergies has an opportunity to accelerate. iPreo as an acquisition and now fully, you know, embedded part of our financial services business is accretive to our growth. And it's accreted to our growth because of the market activity that occurred this year through the pandemic, but equally the alternatives business, which brings me to that second part of your question, which is I think we're one of two platforms that significantly plays in the alternative space, private equity, private debt, and the provision of services that will help the GP-LP relationship manage more effectively. And that strong double-digit growth for us, whether it's valuations, whether it's reporting, whether it's our new index JV, we've got some real exciting growth assets and ones that we can continue to build on. We don't have any plans at the moment. I don't know about S&P Global, but ourselves, with respect to Bitcoin, maybe Adam's going to correct me in a moment, but I'll leave him to do so. But nothing big and significant. Of course, every millennial that works for us thinks we should have a major pricing, data, services, software, and participation around a marketplace. that is really legitimizing itself. So we've got to take it seriously. Um, and so, you know, I expect pricing and data services, et cetera, that we normally would provide any OTC pricing or contracts, those types of things we'll be looking to value and, and participate. Um, the second, um, part, um, which you mentioned was SPACs. Well, you know, to me, uh, SPACs is just another form of a new issue. Uh, so therefore, you know, the IPO, uh, teams, uh, you know, through their activities, stay on top of all of the new issuance. And so as a SPAC, you know, participates into the marketplace, if there's any follow-on equity activity, et cetera, of course, they would be participating. But in terms of the setup or management process, You know, that's not something that we do, but I imagine the data sets, et cetera, will be ones as they continue to grow that we've got to keep track of. Adam, do you want to add anything else to that?
spk08: I think you covered things well, Lance. Maybe two quick comments. First, on the iPreo acquisition, I mean, that really is fully integrated today, so we don't look at it separately, but each of those businesses has continued to perform really well. really providing central market infrastructure in a couple of places in highly volatile and really complicated financial markets over this past year, and have performed incredibly well and brought transparency and enhanced capabilities. And that includes, you mentioned SPACs, the level of issuance in the SPAC market, many of those transactions, again, carried through our platforms. In the alternatives segment of that iPreo business, combination with our existing capabilities like valuations, data management, the expansion into credit asset classes, you know, has proven to be consistent with where the markets are going. The increased flow of capital into those spaces has positioned those businesses well to be market leaders in providing portfolio management tools, risk management tools, and in particular, data management tools to go forward to both GP and LP community. Those businesses have grown you know, well up into the double digits over this past year. And we see that for the next, you know, next several years ahead. And the last point I'd make is around crypto. Though not a singular focus for us, we obviously are responding to our customers' needs to be able to value those products. You'll see last November we announced a partnership with a firm called Luca. We have several other tactical partnerships where we do collect a lot of different pricing and reference data and other valuation information around cryptocurrencies in order to help customers value portfolios that may include cryptocurrencies. So it's an area where we'll continue to focus not just on the valuations side, but probably even moving into the index side in the near future as well.
spk03: Okay. Thanks, Adam. And thanks, everybody, for your questions today. I'll turn it back to Eric, Operator.
spk05: We thank you for your interest in IHS Market. This call can be accessed via replay 855-859-2056 or international dial in 404-537-3406. Conference ID 808-9142. Beginning in about two hours and running through January 20th, 2021. In addition, the webcast will be archived for one year on our website. Thank you and we appreciate your interest and time.
spk11: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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