馬基特 (INFO) 2021 Q2 法說會逐字稿

Thank you for standing by, and welcome to the Second Quarter 2021 IHS Markit Earnings Conference Call. (Operator Instructions) Please be advised that today's call is being recorded. (Operator Instructions)

I would now like to hand the call over to Eric Boyer. Please go ahead.

Good morning, and thank you for joining us for the IHS Markit Q2 2021 Earnings Conference Call. Earlier this morning, we issued our Q2 earnings press release and posted supplemental materials to the IHS Markit Investor Relations website. Our discussion on the quarter are based on non-GAAP measures or adjusted numbers, which exclude stock-based compensation, amortization of acquired intangibles and other items. IHS Markit believes non-GAAP results are useful in order to enhance understanding of our ongoing operating performance, but they are a supplement to and should not be considered in isolation from or as a substitute for GAAP financial information. As a reminder, this conference call is being recorded and webcast and is copyrighted property of IHS Markit. Any rebroadcast of this information in 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 is my pleasure to turn the call over to Lance.

Thank you, Eric. Thank you for joining us for the IHS Markit Q2 earnings call. We had another very strong quarter. Q2 revenue was $1.18 billion, with organic growth of 13%; adjusted EBITDA of $517 million and margin of 43.8%, up 30 basis points year-over-year FX adjusted, and up 80 basis points now year-to-date; adjusted EPS, up 0.81 or $0.81, up 17% over the prior year. So overall, we're pleased with the first half of our year, which puts us in an excellent position to raise our full year guidance today.

In terms of core industry verticals, let me first start with our Financial Services segment, which had another strong quarter, with 9% organic growth in Q2. Within the division, Information performed solidly with organic growth of 5%. Contributors included increased demand for our pricing, reference data and valuations offerings as well as continued growth in our equities regulatory reporting and trade and analytics platforms.

Solutions had an excellent quarter with 15% organic growth, and they continued to benefit from robust market activity in equities and loan markets, combined with a broad-based rebound of investment for customers in our software solutions and our corporate actions and regulatory and compliance offerings. Finally, our Processing business grew 6% organically, strength in loans and derivatives performance as expected. For the full year, we still expect Financial Services to be in the 7% to 8% organic growth range.

Now moving on to Transportation, which had organic revenue growth of 39% in Q2. Now you'll recall that the basis for comparison, the second quarter of 2020, was depressed by significant pricing concessions that we granted our customers at the height of the COVID-related lockdowns as well as by particularly challenging trading conditions in the automotive market. However, there is more to this quarter than a low comparison. I'm pleased to say that this quarter's performance also reflected strong underlying organic growth right across the Transportation businesses.

Our dealer businesses, that includes CARFAX and Mastermind, are once again experiencing rapid growth. In a retail environment that's marked by a shortage of inventory, both used and new and by rapidly escalating used car prices, our products are critical to helping dealers acquire and sell more cars at the right price in the right time.

Demand for our predictive solutions, volumes planning, powertrain emissions compliance, supply chain and technology are all accelerating as the industry grapples with multiple supply chain disruptions and as it faces major strategic decisions related to the technology megatrends. Those include the connected car, autonomous driving and electrification.

Our marketing audience and measurements business is rapidly expanding its footprint with automotive market tiers. And recently, we announced a wide-ranging partnership with Nielsen, which we are very excited about.

And finally, our Maritime & Trade business continued to deliver strong performance. This has been the result of a very focused product strategy and disciplined execution over multiple quarters. We also hosted a successful virtual TPM conference in March.

So for the full year, we now expect Transportation organic growth to be higher and in the 14% to 16% range, which is up from our previously noted 13% to 15% range. This represents a healthy underlying high single-digit growth rate, excluding the favorable year-over-year comparison due to the pandemic.

Moving on to Resources, where organic growth was flat in Q2. Our Resources business performance was as expected, with recurring revenue consistent with Q1 and nonrecurring revenue benefiting from the return of both CERAWeek and the World Petrochemical conferences.

As expected, our ECB experienced slight positive growth in Q2, which we believe should accelerate in the back half, providing a stronger foundation for our 2022 recurring revenue. Our Downstream organic revenue growth performed as expected and should accelerate throughout the rest of the year. Downstream is now 50% of the overall division and Upstream 50%, that's a 10% shift year-over-year.

In 2021, we continue to expect organic revenue results within Resources to improve compared to 2020 and to be down year-over-year in the low single digits as Upstream improves and Downstream continues its growth trajectory.

Finally, CMS organic revenue growth was in line with our expectations of 1% for the quarter. We expect improving results continuing across CMS throughout the year. For the full year, we expect CMS to deliver mid-single-digit organic growth.

The only update we have on the merger is what S&P Global recently disclosed, that we expect the deal to now close in calendar Q4. And now I'll turn the call over to Jonathan.

Great. Thank you, Lance. Q2 highlights included revenue organic growth of 13%, adjusted EBITDA growth of 14%. GAAP net income and EPS both had growth of 122%, and adjusted EPS had a growth of 17% year-over-year. Regarding revenue, our Q2 revenue was $1.18 billion, with total growth of 15%.

Organic growth in the quarter was 13%, which included recurring organic growth of 10% and nonrecurring organic growth of 41%. This increase was driven by strong underlying growth in Financial Services and Transportation as well as benefiting from favorable year-over-year comparisons due to the impact of COVID on some of our Transportation and Resources businesses.

Moving on to segment performance. Our Financial Services segment drove organic growth of 9%, including 7% recurring in the quarter. Solutions, in particular, had strong performance, delivering 15% organic growth, primarily from strength in capital market issuances, corporate actions and reg and compliant offerings, while Information had 5% growth driven by pricing and valuations in our equities, regulatory reporting and trading analytics platforms. Processing had a 6% organic increase driven by volumes, primarily in loans.

Our Transportation segment delivered organic growth of 39% in the quarter. This included growth of 38% recurring as Q2 continued to have strong growth within our CARFAX and automotiveMastermind businesses and accelerated growth within our Maritime & Trade business.

Nonrecurring revenue increased by 41%, primarily driven by strong performance in CARFAX, consumer and dealer transactions, core automotive insights and Maritime & Trade events.

Our Resources segment remained flat, which is comprised of an 8% recurring decline and 73% nonrecurring increase. Q2 organic ACV increased by $2 million in the quarter and our trailing 12-month organic ACV is down 8% as we have now cycled through our subscription renewals since the North American energy market was severely impacted at the end of Q1 last year.

We had great success with our entirely virtual CERAWeek and World Petrochem conferences, and we continue to see strong demand in our Downstream businesses, particularly in our products and services that support energy transition and energy market supply chains. Our CMS segment had 1% organic growth, including 2% recurring and a decrease of 10% nonrecurring.

Moving now to profits and margins. Adjusted EBITDA was $517 million, up $63 million versus prior year. Adjusted EBITDA grew 14% and with a margin of 43.8%, down 40 basis points and up 30 basis points FX adjusted.

Moving to our segments. Financial Services adjusted EBITDA was $238 million with a margin of 48.2%, down 320 bps FX adjusted. Financial Services margins reflects a return to more normal margin levels post-COVID.

Transportation's adjusted EBITDA was $171 million with a margin of 49.6%, up 870 bps FX adjusted. We do expect margins to moderate in forward quarters as we see more expense tied to revenue growth. Resources adjusted EBITDA was $91 million with a margin of 41.4%, a decrease of 210 bps FX adjusted as a result of lower revenue.

CMS adjusted EBITDA was $29 million with a margin of 23.3%, down 520 bps FX adjusted. This quarter's decrease was driven primarily by the return to more normal margins compared to the prior year in addition to a mix shift. We do expect margins to continue to improve in the back half of the year.

Moving now to net income and EPS. Net income was $159 million, and GAAP EPS was $0.40. Adjusted EPS was $0.81, an increase of 17% over prior year. Our GAAP tax rate was 26%, and our adjusted tax rate was 20%. Q2 free cash flow was $301 million, and our trailing 12-month free cash flow conversion has increased to 56%.

Turning to the balance sheet. Our Q2 ending debt balance was $5.0 billion, and represented a gross leverage ratio of approximately 2.6x on a bank covenant basis and 2.5x net of cash. We closed the quarter with $217 million of cash, and our Q2 undrawn revolver balance was approximately $917 million. In the quarter, we paid off our $250 million 364-day term loan.

Our Q2 weighted average diluted share count was 400.7 million shares. As we mentioned in Q4, 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.

Moving to guidance. We had a strong first half of the year and are adjusting and raising our guidance ranges. We are raising revenue guidance to $4.635 billion to $4.675 billion with organic growth of 7% to 8%. Approximately $30 million of this increase is due to changes in FX rates, which are benefiting revenue, negative to margin percentage but neutral to adjusted EBITDA.

Adjusted EBITDA is being raised to $2.02 billion to $2.03 billion with adjusted EBITDA margin expansion of approximately 100 basis points adjusted for FX. Adjusted EPS is being increased to $3.15 to $3.17 per share. Finally, we expect cash conversion in the mid-60s as we lap our 2020 onetime cash impacts.

And with that, I will turn the call back over to Lance.

Thanks, Jonathan. We had another strong quarter as our end markets continue to recover, and the teams have executed at a high level. We remain very confident in our ability to deliver strong results for the year as represented by our updated guidance.

And operator, we're now ready to open the lines for questions.

(Operator Instructions) Our first question comes from Kevin McVeigh with Crédit Suisse.

Really, really great numbers in Transportation and, obviously, easier comp. But what's interesting to me is we read a lot about constrained inventories, things like that. So seems like the numbers would have been that much stronger if not for -- even if there was more inventory out there. Any puts and takes you'd call out in particular, Lance or Jonathan? Just because again, just really amazing number there.

Yes. Why don't I start, and then we'll pass it over to Edouard, actually, because he's on with us. But I think the biggest thing is -- and Edouard can build on this some more. If you took out 2020, what you really want to look at is recurring revenue growth '19 to '21 and that's a mid- to upper teens number. So that's the blow away number from my perspective. The team has done an amazing job.

That comes down with nonrecurring revenue. And if you take the overall quarter '19 to '21, it's high single digits, and that's right in line if you look back to '18, '19, et cetera. So my view is the teams recovered. They've done the maximum they can. They've innovated into new products. They worked virtually well. I really think it's been a stellar performance for them.

But Edouard, do you want to add a little bit to that in terms of just your own color on the numbers?

Yes, absolutely. Thank you, Lance. Can you hear me now? Okay. Cool.

Thanks, Kevin, for the question. And just to build on what Lance said, good callout on the inventories. So the industry is still in a process of recovery. And you're right, in this current environment, both dealers and carmakers have less of a need to spend on marketing. And that does create a headwind for some of our products.

On the other hand, I would say that dealers in particular, are currently seeing higher margins than they have ever recorded. And when our customers do well, that's obviously a good thing for us. So you sort of have a balance here of headwinds and tailwinds.

But the takeaway for me is that even in marked environments, like today's auto industry, I think we're showing that our products are critical, must-have products that are helping dealers and carmakers sell more cars. And also in the case of dealers, acquire used cars in a really tough end of used car market. So that's a big deal for us, and I'm really happy with how the business has been performing in response.

Thanks, Edouard.

Our next question comes from Gary Bisbee with Bank of America.

I guess on Financial Services continues to do quite well. A two-part question. How important is issuance in the last couple of quarters across equity and debt markets? And outside of the issuance benefit, what else would you call out that continues to do quite well here?

Okay. Maybe I can start, and then I'll hand it over to Adam. I guess, first off, yes, I look at Financial Services in high single digits. And I just -- to me, that's super strong quarter, so great performance. I'd say that one thing I'd call out, which if you were following Markit, then IHS Markit over the years, we always viewed our Solutions business as having double-digit growth opportunities. And for a little while, that slipped into high single digits. It's been -- throughout '19, '20 and now '21, we've started to see that recover. And that 15% Solutions growth, albeit some of it's nonrecurring, what's really important is that Solutions growth brings and draws recurring revenue. So a really super performance by the Solutions team.

I don't know, Adam, do you want to add in terms of issuance, et cetera?

Yes. I mean one of the nice things about our business is the diversification of the asset classes in which we operate and the types of businesses that we have. So a strong issuance market, it gives us a bit of a lift. But in other market environments where you see volatility, we have other platforms or other businesses that respond well in those environments. So you do have a bit of a balance.

A heavy issuance market, like we saw in Q1 in particular, that started to moderate a bit into Q2. It gives us some amount of lift. But across the portfolio, the core is really the strength in our pricing, our valuations, continued growth and demand for those products. And as Lance mentioned, our Solutions, we made a significant investment over the last couple of years. And we're winning some pretty significant mandates, and that's fueling growth. I think that will be an area of continued growth for us, certainly over the midterm.

Thanks, Adam.

Our next question comes from Jeff Meuler with Baird.

On the macro around connected cars that you called out in the prepared remarks, obviously not new. But I guess what's the strategy for CARFAX or IHS Auto to collect connected car data in real time or near real time? And I guess, how important is that to you, kind of intermediate to long term, as you defend your position or look to find new sources of revenue?

Edouard, do you want to take that one?

Yes, sure. Thank you, Jeff, and great question. So over time, availability of connected car data is going to get bigger. Car reg is going to get much better. And we see a couple of opportunities for us, both in terms of access to data to supplement what we do today and also new business models. Today, we are running a number of POCs across our business, both on the CARFAX side of the business to figure out like what can we get from that base and how can we supplement our existing sources. But also building that data set into work flow for carmakers, such as dealer network optimization, dealer network design. So an exciting opportunity for us.

We see connected car data has being a critical source for us in the future. Right now, availability is limited. Coverage is very light, and there are still some significant question marks around access to VIN-level data, who owns that data which will have to play out over the next 2 or 3 years. So let's continue to watch this space together on the floors, but it will take 2 or 3 years for connected car data to emerge as something that we can really leverage.

Thanks, Edouard.

Our next question comes from Andrew Steinerman with JPMorgan.

I just wanted to hear a little bit more specifically about what will drive the recovery in IHS' Resources ACV for the balance of the year. Surely I recognize Brent oil is back into the 70s. But just give us a sense of kind of where and why IHS is seeing additional subscription revenue coming into ACV.

Okay. Okay. Probably Brian can give you real good detail and more granular. So I'll pass it over to you, Brian.

Yes. So what we're seeing is there's a really high demand right now for our clean tech, carbon, biofuels, crop science in our agri group and plastics for chemicals. And what we've done this year is we have new or expanded offerings in all those areas. So we're just seeing that segment of the business really take off.

Okay. Thanks, Brian. Really, that's that I mentioned that I think back, 35%; at the merger, 60-40; now for the first time ever 50% Downstream, with agri having a 10% quarter. It really -- the diversification is much, much better, and we'll continue to balance the set of assets with the energy transition and the team has done a good job. Thank you.

Our next question comes from Hamzah Mazari with Jefferies.

My question is more related to the S&P merger. Could you maybe, Lance, talk about any integration preplanning that's going on? Maybe you could touch on employee morale. Clearly, the deal closes, as you mentioned, in Q4. But how is employee morale shaping up in terms of culturally? And with that integration, anything you can touch on? Any color you can provide there from a preplanning process and also from an employee morale perspective.

Right. Okay. Well, the -- a year -- will be a year, December 1 to that final quarter. So it is a long time. But I have to say, the team really got motivated together through COVID. So I just think the firm rallied around COVID and culturally improved and delivered great results. And that carried us through most of the last year.

Like anything, we worry that over time, you can get merger fatigue, but we haven't noticed that at all. I think S&P has done a great job working with my teams on premerger planning. And because we probably had an extra 3 to 4 months, they really have rolled up their sleeves and just went deeper.

The other thing you should know is we don't have that much of employee morale issues because our energy team is completely different. You know, the Platts overlap is going to create a sale that's been announced. So even within Opus, people are excited about the fact that they'd be doing something new again. So that's not an issue. There's no overlap with our Upstream and Downstream businesses into Platts really.

The Financial Services, Adam is going to be leading that, and it's an exciting integration given lots of opportunities. Automotive, Transportation, no real need for overlaps. So Edouard is leading that. Sally's leading alliances and building a new team across S&P. So I think the teams are all highly motivated.

Where the overlap is, of course, in the services. And we did a really good job. Both firms have treated the employees very well through this merger period. And so we haven't had a lot of people at all leaving the firm. And I feel my teams have done an exceptional job and are still highly motivated. Jonathan has been leading the IMO from our side, so maybe you can add a little bit additional color to that.

Sure, Lance. Will do. I mean just as you led in your question, certainly there's been some very intensive integration planning going on really going back December 1 when we announced this. And teams are being stood up across all the different functions, all the different areas, of course, being careful not to jump the gun, but really get ahead on the integration planning.

And in that process, I think a couple of things have come out. First, I think as we identified synergies at -- when we announced the deal, we take the last few quarters to really begin to certify exactly the path to achieve those synergies. And I think we're increasing confidence on how to get there.

And the second thing, culturally, to your question, it's been a great opportunity for the teams to really work with one another and get to know each other and get to know their future colleagues extremely well. And I think what's come out of it is, certainly, Lance and I knew from our discussions in the fall, is the values of the 2 firms are very, very similar. And I think as the 2 teams have gotten to know each other, it's been relieving, if you will, for them to get to know that their colleagues they're going to be working with are people that they want to work with. So it's been -- we're making great progress, both culturally as well as the integration planning. And we should be well set up when we close.

Thanks, Jonathan.

Your next question comes from Shlomo Rosenbaum with Stifel.

This is Adam on for Shlomo. What level of costs were reintroduced into the business due to the reopenings? And how might this have impacted margins in the quarter?

Jonathan, do you want to do that one?

Sure. So it's, I would say, a couple of different areas where we did it. So if you recall last year at Q2 call last year, when we were entering COVID, we took some significant cost reductions. Some of those were permanent, and those permanent cost savings have indeed been permanent. They haven't crept back in. But some were certainly temporary. There was impacts on executive salaries, a few other things we did. We pulled back on marketing spend, for example, in CARFAX, given that the dealers have shut down in North America.

And so those costs, we certainly built it into our plan, into our guidance this year. Those costs have been reversed. And so it does create a, I'll call it, somewhat odd dynamic on the absolute margin at the segment level. Where in Transportation, for example, where we took significant cost reductions in Q2 of last year, you see a significant year-on-year margin accretion, which is a little bit of a false economy, I would say. You should see that normalize going forward. But those have been the main costs that have come back in.

Then of course, we continued to invest in the business, and where we see strong performance, make sure we're making investments to fund future growth. But the key thing I will call out is really you're seeing the year-on-year reversal of some of those temporary cost reductions from last year.

Thanks, Jonathan.

Our next question comes from George Tong with Goldman Sachs.

You increased your full year guidance for organic revenue growth given strength in Transportation. How do you expect your updated guide to flow through to your fiscal 2022 outlook given current trends in each of your segments?

Yes. I think I'll let Jonathan add after me. The key thing that I think people should look at is it's a very -- we're over halfway through our fiscal year. We've given you a very narrow $40 million of revenue guidance and an even narrower EBITDA guidance. And if you look at our track record over the last many years, we don't miss our guidance. So the fact is we've given you a very accurate picture for this year, flowed all the way through into earnings.

Of course, we also feel that our strong mid- to upper single-digit revenue profile as a firm is one that's very intact, and we expect that to continue. And so I don't see us changing the percentage of revenue growth expected into '22, '23, '24. But that's not to say that as we go into those years, if we have a strong first, second quarter, we don't have any issue with raising our view forward. And we'd love to beat our guidance. But I don't see us changing across the mix of our businesses. So high -- mid- to high single-digit revenue growth in '22 off of our closing '21 numbers. Jonathan, do you want to add anything else to that?

Maybe just a couple of comments to add to yours, Lance. I mean first of all, we did give our 2021 guidance this time last year coming out of all the noise of COVID. And I'm actually really proud of the team that even with all the uncertainties back then, we are landing the plane kind of as we expected. And as Lance has alluded to, great, great performance by the team.

Now what I would say, George, in terms of raising the guidance this time, obviously, we're doing that on the back of what we saw in the first half of the year and what we're seeing going forward. I think at this point, we're not prepared to really give formal guidance for 2022. And we'll be back to our normal cadence. Obviously, we'd much rather be in a position of strength exiting the year than a position of weakness. But as Lance was saying, I think at this point, no new news in terms of changes to future growth. We'll certainly get back to you later in the year once we finalize our plans.

Thanks, Jonathan.

Our next question comes from Toni Kaplan with Morgan Stanley.

Wanted to ask about ESG. When you think about the $70 million of ESG revenue that spans across a number of different areas, emissions data, supply chain, solar, wind, hydrogen, et cetera, I guess who's competing against you in these areas? And are there any capabilities or data sets that you don't have right now that you would like to?

Yes. That's a good question, Toni. Thanks for that. So we -- I think where IHS Markit stand-alone has an edge in ESG is clearly around the E. And scope 1, 2, 3 emissions, science-based targets, the challenges of -- for corporations, governments who will want to regulate coming out of the COP26, these are areas where we have real substantive detail. Climate analytics, we have data that plays into climate analytics, so location data around energy assets. Our Maritime & Trade group have very detailed supply chain footprints for all the maritime fleet. We have some great new products and services that play into research and development around E. So I think we have a competitive edge as IHS Markit in E.

When you marry that with S&P Global, I actually think the combination gets even stronger. And they do have the RobecoSAM, Trucost and other assets that are very, very valuable in terms of competing with the likes of MSCI, FTSE, the LSE group, various of ESG ratings and scores that are much more driven off the public knowledge, S and G versus the E. So I think our combination is going to give us a competitive edge and give us a lot of opportunity to grow into.

And I think across S&P Global and IHS Markit, this is a very strong, double-digit growth engine for at least a decade. Because there's $1.5 trillion a year being spent on climate change now, and that number is expected to grow to something like $4.5 trillion. And so I think we've got lots to offer, and we'll watch this space closely.

Our next question comes from Jeff Silber with BMO Capital Markets.

This is actually a follow-up from Hamzah's question on your internal workforce. You said you have not had a lot of people leave since the merger announcement. That's great. I'm assuming you've been hiring since. If you could just confirm the size of your workforce has increased since the merger announcement. And if so, how difficult is it to find these people? And are you having to pay higher-than-normal wages?

I'll have let the team add to this one. So I'll go to Jonathan or if he wants to pass it to any of the division heads, he can. We're definitely hiring, and we're definitely, with the growth numbers, we're growing. And in many cases, we're growing into new spaces in the markets we operate in.

So I haven't seen us having any challenges to hire. Of course, in a merger, we make sure that we retain our people and look after them. So I don't notice anything that stands out from my perspective. But if any of the division heads want to add anything in terms of hiring, et cetera. Maybe you can start, Jonathan, if you know our overall employment growth across the group year-over-year. And then if any of the division heads want to add.

Sure. Maybe I'll just give a general overview and then as -- the division heads can supplement as they like. So first, Jeff, to your point, is first, the attrition we've seen kind of year-to-date has been very much in line with what we normally see. And so no abnormalities there. We are growing. And you're absolutely right, we are growing and investing in all the different businesses that Adam, Edouard and Brian lead. In particular, growing in India, that's always been a growth center for us. India is a hot market. It's always -- well, we're very attractive employers. Always a challenge to find great people.

I would say that the challenge we have finding people this year really is not that different from other years. It's always -- we look to attract the best people and pull them in. It's never easy, but we always find a way to get it done.

So the -- we are growing. Certain markets are hotter than other markets, certain segments, particularly in technology, data science, et cetera, the usual places you would expect. Always difficult, but I wouldn't say dramatically different this year from prior years. But happy to open it up to the divisional leads to add some more color.

Any of the divisional heads. Edouard?

I'll just add something to what Jonathan said. I would say it's in pockets, right? I think it's a great question. Technology is one of those pockets. We may have seen in some places an uptick in attrition, and we have struggled to hire great tech talent in some locations. So our strategy here is to diversify kind of sources of talent. As you know, we are actively engaged in globalizing our talent footprint, and that's helping us and in some cases, adjusted wages. But actually, by and large, we're finding the talent we need.

Adam, do you want to add anything? Or Brian?

Yes. No, the only comment maybe I'd make, Lance, is we -- obviously, we're all operating in a competitive job market. We put a lot of attention into our internship and our early careers programs where we've brought large groups of young people into the firm. And that pipeline gives us great strength forward. That's a real investment in the future of the firm. And I think that's a place where we've seen real progress, both in our diversity and equality as well as just bringing great talent that continues to join and progress within our firm.

Okay. Brian, anything?

No, I mean I think I agree. I'm seeing the same things that Edouard and Adam are. And definitely, our internship programs really help onboard good talent as does our grad. So I think we're firing on all cylinders there.

Yes. No, that's great. We have over 250 interns and 250 graduates joining. So that fuels a lot of our growth and manages our expenses.

Our next question comes from Andrew Nicholas with William Blair.

I know it's a smaller piece of the business, but I was wondering if you could speak a bit to the performance of CMS in the quarter. And what the medium-term outlook looks like for that segment? I think recurring revenue held up decently well throughout the past kind of year plus. And I know you get some nonrecurring revenue from the Boiler Pressure Vessel Codes in the back half of this year. But excluding that, do you think CMS can get into the mid-single-digits range longer term? And if so, what are the primary drivers to getting there?

Yes. I'll start, then Jonathan can add if he needs to. But we've really retooled CMS for mid-single-digit growth. We called it out in this quarter that we expect the full year to be mid-single digits. So again, I think you guys have strong confidence in the numbers we give you, and we expect to hit them.

So -- but long-term organic growth means you do it over and over and over again, and then people give you that valuation expectation. And CMS has been in need of retooling and building out our tech platform. The team has done a great job. They are seeing demand, and that's flowing through to better recurring revenue. So I think the team has done a great job. I think moving from low up to mid-single digits is step 1. And we expect that the team will be able to do that through this year and then again into next year. Jonathan?

Great, Lance. Maybe just 2 things I would add. Because if you look at CMS, there are really 2 divisions or 2 major divisions in there: one is Product Design, one is our Economics & Country Risk. So within Product Design, it has been a multiyear investment back in technology and in new platforms and products. And we begin to see that lift take place that drives, as Lance said, not just a single year, but kind of a multiyear sustainable organic growth. We do certainly see, as we look at the first half of the year, then look at what's building in the second half of the year, we do see a path for that to get to mid-single digits for the full year based upon what we're seeing. And that, we think should be a sustainable growth rate.

On our Economic & Country Risk that Adam mentioned, there's been some significant investments in terms of new products and new packaging around how we get much more persona-based approach with our products there. And similar story where those investments were made kind of end of last year, early this year. And we're seeing the benefit in our growth of our pipeline. We expect to see that lift second half of the year. So it's -- of our 4 divisions, our lowest growth rate first half of the year. We would expect it to get to mid singles by end of the year.

Thanks, Jonathan.

Our next question comes from Andrew Jeffrey with Truist Securities.

Just wondering a little bit, Lance, the Transportation business has been fantastic, and it sounds broad-based. Some of what you described in terms of the end market dynamics feels a little bit like peak cycle. I just wonder if you could address that next year, obviously, compares aside, assuming supply chains loosen up a little bit, used car prices perhaps normalize, anything we need to think about in terms of '21 as being sort of an exceptional year that sets up just a tougher sort of macro backdrop for Transportation next year?

Right. Well, I guess since the merger of IHS and Markit, that's -- I got used to that question every single quarter. So about 20 quarters of that same question. So it's a good -- it obviously is a good question because it's one that's on the mind of all of our analysts.

And I think what you should be really looking at is high single-digit growth for Transportation, and it does that time and time again in a very diversified way. And sometimes it's used car markets, sometimes it's new car markets. Sometimes, it's marketing and advertising; sometimes, it's supply chain and predictive analytics. And so when everything is ticking, we can peak into double digits.

But in general, I look at Transportation, say it's a strong high single-digit performer with ample opportunity in its markets to maintain that. And it's not reliant on new or used car sales alone, but many things that are actually needed by the automotive suppliers and the OEMs regardless of the environment we're in. So they all need to market for cars. They all need to spend their incentives. They all need to measure their emissions. They all need to order parts and study the supply chains. They all need to do R&D and look into the future car, the connected car, the electrification of vehicles. Next, it will be hydrogen. So there's always stuff to be done.

Then we get on the dealer floor and the marriage of CARFAX and Mastermind and helping dealers sell cars in a connected digital world. So those types of tools become even more important. And -- so I think you can expect more of the same in that high single-digit range for Transportation.

But this is an outsized quarter that's catching up from a COVID period where really the comparison, it's exciting to get to say, 39%. We actually teased the team that it was at 40% because it would have been a nicer number to shut out. But the fact is it's really a high single-digit, consistent growth scenario where the teams recovered really well. I'll end there. I think that was our final question, operator.

We do have a question from Doug Arthur with Huber Research.

I'll make it quick. Lance, just on the ACV turning up, would you -- I mean you've given various updates on your kind of pendulum swinging there on ACV. Is it sort of as expected at this point? Or is it a little ahead of schedule?

No, I'd say as expected. We're definitely not ahead of schedule. But what I really like is the continued shift to a division that's highly diversified, like Financial Services, like Transportation, where we've got strong diversification across many facets of global economies that are dealing with energy transition, new sources of energy, circular economy and demands, waste. This division is, with its expertise in chemicals to agricultural business. The continued need for 90 million, 100 million barrels a day of oil. Oil prices at $70, when it wasn't long ago, they were sub-$50.

So this team is always in thought leadership in center stage. And yes, we've had -- it's been one of the toughest divisions as we've come out of -- had to go through COVID. But we're back to a expected probably low to mid-single-digit growth year in '22 for Energy. And if '22 could be the first year where you've got CMS, you've got Energy in the mid-single digits, and you've got Transportation and Financial Services in high single digits, that's kind of -- that's the home run. And we're going to deliver this firm very strong into the S&P Global strategic merger.

I think that might be the final question, but let me know, operator.

Our final question is from Manav Patnaik with Barclays.

Sorry. I just wanted to unpack maybe -- I'll keep it quick, that low to mid-single-digit growth, you talked about Resources. Can you just help break it down? Clearly, everyone's talking about energy transition growing well, but that's probably a smaller part of the business. And I just wanted to understand how you guys see the dynamics between, obviously, oil prices going up, but the energy companies still pressured in the 0 carbon world or whatever. So how do you see those moving pieces there?

Yes. I think the easiest thing to do is you take 50% of that division, and you call it high single digits. Agriculture had a 10%. Chemicals has been consistently mid- to high single digits. Opus has been consistent mid- to high single digits, even occasional quarter in double digits. And then you go to Upstream, and if you really want to be tough on Upstream, you could say it's flat, and that's your low single digits. Upstream, recovering though off of the price concessions, et cetera, to be low to mid-single digits, puts the whole division at 5% to 7%. And so I don't think it's a tall order to see those types of revenue growth in 2022, and we're well set up for that.

And the demand around just understanding energy-related assets in a world of -- driven by regulatory change, climate change, investor perceptions and demands, I actually think our team's roles to help energy market participants navigate these forward challenges, I think there's a lot of growth. We saw it. CERAWeek virtually, I was shocked at the turnout and the needs of the teams to engage market participants in thought leadership. We saw the same in the World Petrochemical Conference and our Maritime & Trade, which is more around supply chain and the trade analytics.

So I really -- yes, I guess I just -- I'm not a crazy optimist, but I think that when we say mid single digits, we mean it. And I think that Brian and the team have navigated COVID very well. But it was tough. It was the toughest division to run from a strategic point of view through this challenging period. It just had the most moving parts and the team, I have to say, they don't have the highest results. But for me, I'd give them a badge of honor. So great job.

We'll end there. I think, operator, I'll try it one more time unless somebody came in for another question. I think we're...

There are no further questions.

I'll turn it back to Eric.

Great. We thank you for your interest in IHS Markit. This call can be accessed via replay (855) 859-2056 or international dial in 404 536-3406, conference ID 9174115, beginning in about 2 hours, running through June 30, 2021. 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 does conclude the program. You may now disconnect. Everyone, have a great day.