JS Earnings Call Notes 1.12.2016 – IHS

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IHS CFO Todd Hyatt doesn’t expect their energy business to stabilize until the second half of 2016 and they see oil ending the year in the $50 range

“We expect continued pressure on our energy business in the first half of 2016 with some stability and improvement in the energy end-market in the second half of 2016.  Our experts are forecasting the price of oil to bottom in Q1 and to end the year in the $50 range.”

IHS CEO Jerre Stead said they are increasing their share buyback program, and at the same time, reducing stock options given to employees

“With capital allocation, we refocused our efforts on larger M&A transactions and started an ongoing allocation of capital through share buyback program and we committed to reducing the amount of shares being granted to employees by half.”

They saw a decline in revenue in data services sold to the energy sector

“In terms of our core industry verticals, resources, which include our energy and chemicals teams continues to experience declining subscription growth due to industry dynamics. Our overall resources’ organic growth was also negatively impacted by our non-subscription business.”

IHS CEO Jerre Stead said he plans on remaining CEO until the energy market bounces back

I will also tell you what I told our team, I am going to be here at least until we  get rid of the downturn and start enjoying the upturn of energy and oil prices, which might mean I am here 3 year or 4 years or 5 years or 6 years, I don’t know. But I am telling you, we will see it come back.”

With the lower energy prices, they’ve enjoyed particularly strong growth in the automobile segment

“Well, with autos we have seen growth across the entire portfolio. Growth has been especially strong in North America, as you pointed out. In the IHS legacy product where we have products that provide supply chain management capability in terms of production forecasting I mean that’s important information for part suppliers, for OEMs.”

Even with the lower energy prices, the firm delivered its strongest margin performance in the company’s history

“We increased Q4 all-in by 190 basis points for our highest margin reported ever as a public company on almost flat revenue. And so the teams are doing a great job and we feel really good about the confidence level to deliver that. That’s why I said earlier, when we see energy come back and it will we will be delivering great results across the board.”

IHS CEO Jerre Stead says his company cannot raise prices on their energy data services offering in the current environment 

So, in terms price realization and energy, I mean, obviously in this environment, we are not pushing prices.

IHS CEO Jerre Stead says this energy cycle is unlike any that has come before it

“Most of the energy price cycles have been these, if you will, high, down, back up. This is a deep U and we hope the bottom of the U as we said occurs and it’s for many, many reasons, different than ever before. We hope the bottom of the U, if you will, occurs in the first quarter.  If you go way out to 2020, our teams would be forecasting that there is actually going to be, as demand continues to increase, there will be a real tightening of pricing because the huge capital cuts that Todd has talked about where our key customers have cut 30% to 40%. So, I think it will be a different cycle than ever before.  as we do come out and pricing returns, because of the amazing amount of technology breakthroughs that have gone on with fracking, parallel drilling, etcetera, the price quality of returns of profit for the energy companies is at a lower level than ever before.”