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IHS Markit Reports First Quarter 2019 Results

LONDON--(BUSINESS WIRE)--

IHS Markit (INFO), a world leader in critical information, analytics and solutions, today reported results for the first quarter ended February 28, 2019.

  • Revenue of $1.046 billion, including total organic revenue growth of 5 percent
  • Net income of $109 million and diluted earnings per share (EPS) of $0.27
  • Adjusted EBITDA of $408 million and Adjusted earnings per diluted share (Adjusted EPS) of $0.60
  • Cash flow from operations of $188 million and free cash flow of $125 million

Adjusted EBITDA, Adjusted EPS, and free cash flow are non-GAAP financial measures used by management to measure operating performance. These terms are defined elsewhere in this release. Please see schedules appearing later in this release for reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures.

 

First Quarter 2019 Financial Performance

   
Three months ended February 28, Change
(in millions, except percentages and per share data) 2019   2018 $   %
Revenue $ 1,046.4 $ 932.1 $ 114.3 12 %
 
Net income attributable to IHS Markit* $ 109.7 $ 241.3 $ (131.6 )

(55)

%

Adjusted EBITDA $ 408.1 $ 359.3 $ 48.8 14 %
 
GAAP EPS $ 0.27 $ 0.59 $ (0.32 )

(54)

%

Adjusted EPS $ 0.60 $ 0.53 $ 0.07 13 %
 
Cash flow from operations $ 188.0 $ 202.9 $ (14.9 )

(7)

%

Free cash flow $ 124.8 $ 147.7 $ (22.9 )

(16)

%

 

* Net income attributable to IHS Markit for the quarter ended February 28, 2018 includes a one-time tax benefit associated with U.S. tax reform estimated at
approximately $136 million.

 

“We continue to deliver strong diversified revenue growth and margin expansion while making the right level of investment to be able to sustain long-term financial returns for our shareholders,” said Lance Uggla, chairman and chief executive officer at IHS Markit.

“We are pleased with the start of the year and believe we are well positioned to deliver upon our full-year financial commitments,” said Todd Hyatt, chief financial officer at IHS Markit.

First Quarter 2019 Revenue Performance

First quarter 2019 revenue increased 12 percent compared to the first quarter of 2018. The following table provides additional revenue information by transaction type.

   
Three months ended February 28, Percentage change
(in millions, except percentages) 2019   2018 Total   Organic
Recurring fixed $ 767.2 $ 683.3 12 % 5 %
Recurring variable 136.0 117.1 16 % 3 %
Non-recurring 143.2   131.7   9 % 8 %
Total revenue $ 1,046.4   $ 932.1   12 % 5 %
 

The components of revenue growth are described below by segment and in total.

 
Change in revenue
First quarter 2019 vs. First quarter 2018
(All amounts represent percentage points) Organic   Acquisitive  

Foreign

Currency

  Total
Resources 6 % %

(1)

%

6 %
Transportation 8 % %

(1)

%

7 %
Consolidated Markets & Solutions

(3)

%

%

(1)

%

(4)

%

Financial Services 6 % 24 %

(1)

%

28 %
Total 5 % 8 %

(1)

%

12 %
 

First Quarter 2019 Operating Performance

Segment results were as follows (additional segment information is included later in this release):

  • Resources. First quarter revenue for Resources increased $12 million, or 6 percent, to $217 million, with recurring revenue increasing 5 percent organically. First quarter Adjusted EBITDA for Resources increased $8 million, or 10 percent, to $93 million.
  • Transportation. First quarter revenue for Transportation increased $19 million, or 7 percent, to $288 million, and included 9 percent organic growth for the recurring-based business. First quarter Adjusted EBITDA for Transportation increased $5 million, or 4 percent, to $114 million.
  • Consolidated Markets & Solutions (CMS). First quarter revenue for CMS decreased $5 million, or 4 percent, to $132 million, and had no organic growth for the recurring-based business. First quarter Adjusted EBITDA for CMS decreased $2 million, or 8 percent, to $29 million.
  • Financial Services. First quarter revenue for Financial Services increased $90 million, or 28 percent, to $409 million, and included 6 percent total organic growth. First quarter Adjusted EBITDA for Financial Services increased $38 million, or 26 percent, to $183 million.

Outlook (forward-looking statement)

For the year ending November 30, 2019, IHS Markit expects:

  • Revenue in a range of $4.425 billion to $4.500 billion, including total organic growth of 5 percent to 6 percent including Ipreo for the 4 month stub period, and total organic growth of 6 percent to 7 percent including Ipreo for the full 12 months;
  • Adjusted EBITDA in a range of $1.75 billion to $1.78 billion; and
  • Adjusted EPS in a range of $2.52 to $2.57 per diluted share.

The above outlook assumes no further currency movements, acquisitions, divestitures, pension mark-to-market adjustments or unanticipated events. See discussion of non-GAAP financial measures at the end of this release.

As previously announced, IHS Markit will hold a conference call to discuss first quarter 2019 results on March 26, 2019, at 8:00 a.m. ET. The conference call will be simultaneously webcast on the Investor Relations section of the company’s website: investor.ihsmarkit.com. A replay of the earnings webcast will be available approximately two hours after the conclusion of the live event. The webcast recording will be available for one year on the Investor Relations section of the company’s website.

Use of Non-GAAP Financial Measures

Non-GAAP results are presented only as a supplement to our financial statements based on U.S. generally accepted accounting principles (“GAAP”). Non-GAAP financial information is provided to enhance the reader’s understanding of our financial performance, but none of these non-GAAP financial measures are recognized terms under GAAP and should not be considered in isolation from, or as a substitute for, financial measures calculated in accordance with GAAP. Definitions and reconciliations of the non-GAAP measures, such as EBITDA, Adjusted EBITDA, Adjusted net income, Adjusted EPS, and free cash flow, to the most directly comparable GAAP measures are provided within the schedules attached to this release. This communication also includes certain forward-looking non-GAAP financial measures. IHS Markit is unable to present a reconciliation of this forward-looking non-GAAP financial information because management cannot reliably predict all of the necessary components of such measures. Accordingly, investors are cautioned not to place undue reliance on this information.

We use non-GAAP measures in our operational and financial decision-making. We believe that such measures allow us to focus on what we deem to be a more reliable indicator of ongoing operating performance and our ability to generate cash flow from operations. We also believe that investors may find these non-GAAP financial measures useful for the same reasons, although investors are cautioned that non-GAAP financial measures are not a substitute for GAAP financial measures or disclosures. None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to any other GAAP measure.

Non-GAAP measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies comparable to IHS Markit, many of which present non-GAAP measures when reporting their results. These measures can be useful in evaluating our performance against our peer companies because we believe the measures provide users with valuable insight into key components of GAAP financial disclosures. However, non-GAAP measures have limitations as an analytical tool. Because not all companies use identical calculations, our presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. They are not presentations made in accordance with GAAP, are not measures of financial condition or liquidity, and should not be considered as an alternative to profit or loss for the period determined in accordance with GAAP or operating cash flows determined in accordance with GAAP. As a result, you should not consider such performance measures in isolation from, or as a substitute analysis for, results of operations as determined in accordance with GAAP.

Forward-Looking Statements

This communication contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. These statements, which express management’s current views concerning future business, events, trends, contingencies, financial performance, or financial condition, appear at various places in this communication and use words like “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “goal,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “see,” “seek,” “should,” “strategy,” “strive,” “target,” “will,” and “would” and similar expressions, and variations or negatives of these words. Examples of forward-looking statements include, among others, statements we make regarding: guidance and predictions relating to expected operating results, such as revenue growth and earnings; strategic actions such as acquisitions, joint ventures, and dispositions, the anticipated benefits therefrom, and our success in integrating acquired businesses; anticipated levels of capital expenditures in future periods; our belief that we have sufficient liquidity to fund our ongoing business operations; expectations of the effect on our financial condition of claims, litigation, environmental costs, contingent liabilities, and governmental and regulatory investigations and proceedings; and our strategy for customer retention, growth, product development, market position, financial results, and reserves. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on management’s current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of our control. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements are more fully discussed under the caption “Risk Factors” in our Annual Report on Form 10-K, along with our other filings with the U.S. Securities and Exchange Commission (“SEC”). However, those factors should not be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which are based only on information currently available to our management and speaks only as of the date of this communication. We do not assume any obligation to publicly provide revisions or updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws. Please consult our public filings with the SEC or on our website at investor.ihsmarkit.com.

About IHS Markit (www.ihsmarkit.com)

IHS Markit (INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions. Headquartered in London, IHS Markit is committed to sustainable, profitable growth.

IHS Markit is a registered trademark of IHS Markit Ltd and/or its affiliates. All other company and product names may be trademarks of their respective owners © 2019 IHS Markit Ltd. All rights reserved.

 
IHS MARKIT LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
   
As of February 28, 2019 As of November 30, 2018
(Unaudited) (Audited)
Assets
Current assets:
Cash and cash equivalents $ 133.2 $ 120.0
Accounts receivable, net 980.4 792.9
Income tax receivable 15.2 20.8
Deferred subscription costs 88.1 77.3
Other current assets 109.3   88.4
Total current assets 1,326.2   1,099.4
Non-current assets:
Property and equipment, net 596.4 579.6
Intangible assets, net 4,443.0 4,484.8
Goodwill 9,916.5 9,836.0
Deferred income taxes 14.6 14.6
Other 86.7   47.9
Total non-current assets 15,057.2   14,962.9
Total assets $ 16,383.4   $ 16,062.3
Liabilities and equity
Current liabilities:
Short-term debt $ 484.9 $ 789.9
Accounts payable 56.4 63.8
Accrued compensation 96.6 214.1
Other accrued expenses 417.0 357.7
Income tax payable 6.0 8.0
Deferred revenue 1,026.3   886.8
Total current liabilities 2,087.2 2,320.3
Long-term debt, net 5,111.4 4,889.2
Accrued pension and postretirement liability 17.2 17.4
Deferred income taxes 701.0 699.9
Other liabilities 116.6 109.1
Commitments and contingencies
Redeemable noncontrolling interests 17.7 5.9
Shareholders' equity 8,332.3   8,020.5
Total liabilities and equity $ 16,383.4   $ 16,062.3
 
 
IHS MARKIT LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except for per-share amounts)
(Unaudited)
 
Three months ended February 28,
2019   2018
Revenue $ 1,046.4 $ 932.1
Operating expenses:
Cost of revenue 399.8 342.9
Selling, general and administrative 300.3 290.3
Depreciation and amortization 142.3 130.6
Restructuring charges 8.2
Acquisition-related costs 22.8 27.0
Other (income) expense, net (2.0 ) 1.4  
Total operating expenses 871.4   792.2  
Operating income 175.0 139.9
Interest income 0.4 0.7
Interest expense (66.9 ) (46.3 )
Net periodic pension and postretirement expense (0.3 ) (0.2 )
Non-operating expense, net (66.8 ) (45.8 )

Income from continuing operations before income taxes and equity in loss of equity
method investee

108.2 94.1
Benefit for income taxes 0.9 146.6
Equity in loss of equity method investee (0.1 )  
Net income 109.0 240.7
Net loss attributable to noncontrolling interest 0.7   0.6  
Net income attributable to IHS Markit Ltd. $ 109.7   $ 241.3  
 
Basic earnings per share attributable to IHS Markit Ltd. $ 0.28   $ 0.61  
Weighted average shares used in computing basic earnings per share 398.0   398.0  
 
Diluted earnings per share attributable to IHS Markit Ltd. $ 0.27   $ 0.59  
Weighted average shares used in computing diluted earnings per share 408.0   412.1  
 
 
IHS MARKIT LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 
Three months ended February 28,
2019   2018
(Unaudited) (Audited)
Operating activities:
Net income $ 109.0 $ 240.7
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization 142.3 130.6
Stock-based compensation expense 59.7 61.9
Net periodic pension and postretirement expense 0.3 0.2
Pension and postretirement contributions (0.5 ) (0.5 )
Deferred income taxes (23.4 ) (187.9 )
Change in assets and liabilities:
Accounts receivable, net (155.7 ) (110.6 )
Other current assets (51.5 ) (20.7 )
Accounts payable 4.0 (1.1 )
Accrued expenses (78.6 ) (67.2 )
Income tax 3.3 29.3
Deferred revenue 162.9 125.3
Other liabilities 16.2   2.9  
Net cash provided by operating activities 188.0   202.9  
Investing activities:
Capital expenditures on property and equipment (63.2 ) (55.2 )
Intangible assets acquired (3.1 )
Payments to acquire cost-method investments (5.1 )
Change in other assets (1.9 ) 0.1
Settlements of forward contracts 1.4   3.1  
Net cash used in investing activities (68.8 ) (55.1 )
Financing activities:
Proceeds from borrowings 307.0 745.0
Repayment of borrowings (392.9 ) (657.0 )
Payment of debt issuance costs (7.0 )
Payments for purchase of noncontrolling interests (7.7 )
Proceeds from noncontrolling interests 12.5
Contingent consideration payments (2.2 )
Repurchases of common shares (172.5 )
Proceeds from the exercise of employee stock options 25.7 56.9
Payments related to tax withholding for stock-based compensation (62.0 ) (76.6 )
Net cash used in financing activities (111.9 ) (118.9 )
Foreign exchange impact on cash balance 5.9   (6.7 )
Net increase in cash and cash equivalents 13.2 22.2
Cash and cash equivalents at the beginning of the period 120.0   133.8  
Cash and cash equivalents at the end of the period $ 133.2   $ 156.0  
 
 
IHS MARKIT LTD.
SUPPLEMENTAL REVENUE DISCLOSURE
(In millions)
(Unaudited)
   
Three months ended February 28, Percent change
2019   2018 Total   Organic
Recurring revenue:
Resources $ 191.5 $ 183.4 4 % 5 %
Transportation 215.4 198.7 8 % 9 %
CMS 117.4 118.9 (1 )% %
Financial Services - fixed 242.9   182.3   33 % 4 %
Total recurring fixed revenue $ 767.2 $ 683.3 12 % 5 %
Financial Services - variable 136.0   117.1   16 % 3 %
Total recurring revenue $ 903.2   $ 800.4   13 % 5 %
 
Non-recurring revenue:
Resources $ 25.3 $ 21.9 16 % 16 %
Transportation 72.7 70.9 3 % 4 %
CMS 14.9 18.7 (20 )%

(20)

%

Financial Services 30.3   20.2   50 % 37 %
Total non-recurring revenue $ 143.2   $ 131.7   9 % 8 %
 
Total revenue (segment):
Resources $ 216.8 $ 205.3 6 % 6 %
Transportation 288.1 269.6 7 % 8 %
CMS 132.3 137.6 (4 )% (3 )%
Financial Services 409.2   319.6   28 % 6 %
Total revenue $ 1,046.4   $ 932.1   12 % 5 %
 
 
IHS MARKIT LTD.
RECONCILIATION OF CONSOLIDATED NON-GAAP FINANCIAL MEASURES TO
MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES
(In millions, except for per-share amounts)
(Unaudited)
 
Three months ended February 28,
2019   2018
Net income attributable to IHS Markit Ltd. $ 109.7 $ 241.3
Interest income (0.4 ) (0.7 )
Interest expense 66.9 46.3
Benefit for income taxes* (0.9 ) (146.6 )
Depreciation 46.6 41.6
Amortization related to acquired intangible assets 95.7   89.0  
EBITDA (1)(6) $ 317.6 $ 270.9
Stock-based compensation expense 59.7 61.9
Restructuring charges 8.2
Acquisition-related costs 7.5 12.1
Acquisition-related performance compensation 15.3 14.9
Loss on debt extinguishment 0.2
Share of joint venture results not attributable to Adjusted EBITDA 0.1
Adjusted EBITDA attributable to noncontrolling interest (0.5 ) (0.5 )
Adjusted EBITDA (2)(6) $ 408.1   $ 359.3  
 
Three months ended February 28,
2019 2018
Net income attributable to IHS Markit Ltd. $ 109.7 $ 241.3
Stock-based compensation expense 59.7 61.9
Amortization related to acquired intangible assets 95.7 89.0
Restructuring charges 8.2
Acquisition-related costs 7.5 12.1
Acquisition-related performance compensation 15.3 14.9
Loss on debt extinguishment 0.2
Income tax effect of above adjustments* (52.8 ) (200.1 )
Adjusted earnings attributable to noncontrolling interest (0.4 ) (0.5 )
Adjusted net income (3) $ 243.1   $ 218.6  
Adjusted EPS (4)(6) $ 0.60   $ 0.53  
Weighted average shares used in computing Adjusted EPS 408.0   412.1  
 
 
* Income tax effect for the quarter ended February 28, 2018 includes a one-time tax benefit associated with U.S. tax reform estimated at approximately $136 million.
 
Three months ended February 28,
2019 2018
Net cash provided by operating activities $ 188.0 $ 202.9
Capital expenditures on property and equipment (63.2 ) (55.2 )
Free cash flow (5)(6) $ 124.8   $ 147.7  
 
 
IHS MARKIT LTD.
SUPPLEMENTAL SEGMENT OPERATING PROFIT MEASURE DISCLOSURE
(In millions)
(Unaudited)
 
  Three months ended February 28,
2019   2018
Adjusted EBITDA by segment:
Resources $ 93.2 $ 84.9
Transportation 114.3 109.7
CMS 29.4 31.8
Financial Services 183.2 145.4
Shared services (12.0 ) (12.5 )
Total Adjusted EBITDA $ 408.1   $ 359.3  
 
Adjusted EBITDA margin by segment:
Resources 43.0 % 41.4 %
Transportation 39.7 % 40.7 %
CMS 22.2 % 23.1 %
Financial Services 44.8 % 45.5 %
Total Adjusted EBITDA margin 39.0 % 38.6 %
 
 
(1) EBITDA is defined as net income plus or minus net interest, plus provision for income taxes, depreciation, and amortization.
(2) Adjusted EBITDA further excludes primarily non-cash items and other items that we do not consider to be useful in assessing our operating performance (e.g., stock-based compensation expense, restructuring charges, acquisition-related costs and performance compensation, exceptional litigation, net other gains and losses, pension mark-to-market and other adjustments, the impact of joint ventures and noncontrolling interests, and discontinued operations). All of the items included in the reconciliation from net income to Adjusted EBITDA are either non-cash items or items that we do not consider to be useful in assessing our operating performance. In the case of the non-cash items, we believe that investors can better assess our operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect our ability to generate free cash flow or invest in our business. For example, by excluding depreciation and amortization from EBITDA, users can compare operating performance without regard to different accounting determinations such as useful life. In the case of the other items, we believe that investors can better assess operating performance if the measures are presented without these items because their financial impact does not reflect ongoing operating performance.
(3) Adjusted net income is defined as net income plus primarily non-cash items and other items that management does not consider to be useful in assessing our operating performance (e.g., stock-based compensation expense, amortization related to acquired intangible assets, restructuring charges, acquisition-related costs and performance compensation, acquisition financing fees, net other gains and losses, pension mark-to-market expense and other adjustments, and the impact of noncontrolling interests, all net of the related tax effects).
(4) Adjusted EPS is defined as Adjusted net income (as defined above) divided by diluted weighted average shares.
(5) Free cash flow is defined as net cash provided by operating activities less capital expenditures.
(6) EBITDA, Adjusted EBITDA, Adjusted EPS, and free cash flow are used by many of our investors, research analysts, investment bankers, and lenders to assess our operating performance. For example, a measure similar to Adjusted EBITDA is required by the lenders under our term loan and revolving credit agreements.
 

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