IHS Inc. Reports First Quarter 2014 Results

IHS Inc. (NYSE: IHS), the leading global source of information and analytics, today reported results for the first quarter ended February 28, 2014.

Revenue of $524 million, up 37 percent from the prior-year period
Total organic revenue growth of 5 percent, anchored by 5 percent subscription organic revenue growth
Adjusted EBITDA of $156 million, up 32 percent from the prior-year period
Adjusted earnings per diluted share (Adjusted EPS) of $1.28, up 19 percent from the prior-year period
Free cash flow of $129 million, up 15 percent from the prior-year period

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 2014 Financial Performance

Three months ended February 28, Change (in thousands, except percentages and per share data) 2014 2013 $ % Revenue $ 524,458 $ 382,525 $ 141,933 37 % Net income $ 32,422 $ 24,671 $ 7,751 31 % Adjusted EBITDA $ 156,175 $ 118,194 $ 37,981 32 % GAAP EPS $ 0.47 $ 0.37 $ 0.10 27 % Adjusted EPS $ 1.28 $ 1.08 $ 0.20 19 % Cash flow from operations $ 153,861 $ 131,686 $ 22,175 17 % Free cash flow $ 129,251 $ 112,319 $ 16,932 15 %

“We began the year with solid performance that developed as we expected,” said Scott Key, IHS president and chief executive officer. “In particular and as projected, our non-recurring business showed stability and delivered positive results.”

“We continue to be pleased with the robust free cash flow generation of our business model, as it provides us with great operational and capital structure flexibility as we rapidly de-lever,” said Todd Hyatt, IHS chief financial officer.

First Quarter 2014 Revenue Performance

First quarter 2014 revenue increased 37 percent compared to the first quarter of 2013. The components of revenue growth are described below by segment and in total.

Increase in revenue First quarter 2014 vs. first quarter 2013 (All amounts represent percentage points) Organic Acquisitive Foreign

Currency

Americas 5 % 48 %

)

EMEA 5 % 9 % 2 % APAC — %

)

Total 5 % 33 % — %

The subscription-based business grew 5 percent organically in the current quarter compared to the first quarter of 2013, as described in the following table.

Three months ended February 28, Percent change (in thousands, except percentages) 2014 2013 Total Organic Subscription revenue $ 417,374 $ 307,727 36 % 5 % Non-subscription revenue 107,084 74,798 43 % 3 % Total revenue $ 524,458 $ 382,525 37 % 5 %

First Quarter 2014 Segment Performance

On a consolidated basis, IHS continued to deliver solid organic revenue growth. Segment results were as follows:

Americas. First quarter revenue for the Americas increased $121 million, or 53 percent, to $350 million, and included 5 percent organic growth for the subscription-based business. First quarter Adjusted EBITDA for the Americas increased $30 million, or 32 percent, to $124 million. First quarter operating income for the Americas increased $15 million, or 25 percent, to $78 million. Americas results benefited from the inclusion of R. L. Polk.
EMEA. First quarter revenue for EMEA increased $17 million, or 16 percent, to $127 million, and included 7 percent organic growth for the subscription-based business. First quarter Adjusted EBITDA for EMEA increased $8 million, or 34 percent, to $32 million. First quarter operating income for EMEA increased $9 million, or 54 percent, to $25 million. EMEA profit benefited from revenue growth and prior investment in scaled infrastructure.
APAC. First quarter revenue for APAC increased $3 million, or 7 percent, to $47 million, and included 3 percent organic growth for the subscription-based business. First quarter Adjusted EBITDA for APAC increased $1 million, or 7 percent, to $11 million. First quarter operating income for APAC increased $0.3 million, or 3 percent, to $10 million.

Outlook (forward-looking statement)

For the year ending November 30, 2014, IHS expects:

Revenue in a range of $2.17 billion to $2.23 billion, including 6-7 percent organic growth on the subscription base;
Adjusted EBITDA in a range of $675 million to $705 million; and
Adjusted EPS in a range of $5.50 to $5.85 per diluted share.

Additionally, for the year ending November 30, 2014, IHS expects:

Depreciation expense to be approximately $75-80 million;
Amortization expense related to acquired intangible assets to be approximately $135-140 million;
Net interest expense to be approximately $55-60 million;
Stock-based compensation expense to be approximately $185-195 million;
An adjusted tax rate of approximately 28-30 percent;
An effective GAAP tax rate of approximately 20-22 percent; and

Fully diluted shares to be approximately 69-70 million.

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 will hold a conference call to discuss first quarter 2014 results on March 20, 2014, at 8:00 a.m. EDT. The conference call will be simultaneously webcast on the company’s website: www.ihs.com.

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 non-GAAP measures should not be considered in isolation or as a substitute for financial measures calculated in accordance with GAAP. Reconciliations of the most directly comparable GAAP measures to non-GAAP measures, such as Adjusted EBITDA, Adjusted net income, Adjusted EPS, and free cash flow are provided within the schedules attached to this release.

We use non-GAAP measures in our operational and financial decision-making, believing that it is useful to exclude certain items in order 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. As a result, internal management reports used during monthly operating reviews feature the Adjusted EBITDA, Adjusted net income, Adjusted EPS, and free cash flow metrics. We also believe that investors may find non-GAAP financial measures useful for the same reasons, although investors are cautioned that non-GAAP financial measures are not a substitute for GAAP disclosures.

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. However, these measures can still 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.

IHS Forward-Looking Statements:

This release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “aim,” “strive,” “believe,” “project,” “predict,” "estimate," "expect," “continue,” "strategy," "future," "likely," "may," “might,” "should," "will," the negative of these terms and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding guidance relating to net income, net income per share, and expected operating results, such as revenue growth and earnings.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our 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. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: economic and financial conditions, including volatility in interest and exchange rates; our ability to successfully manage risks associated with changes in demand for our products and services as well as changes in our targeted industries; our ability to develop new platforms to deliver our products and services, pricing, and other competitive pressures, and changes in laws and regulations governing our business; the extent to which we are successful in gaining new long-term relationships with customers or retaining existing ones and the level of service failures that could lead customers to use competitors' services; our ability to successfully identify and integrate acquisitions into our existing businesses and manage risks associated therewith; and the other factors described under the caption “Risk Factors” in our most recent annual report on Form 10-K, along with our other filings with the U.S. Securities and Exchange Commission.

Any forward-looking statement made by us in this release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Please consult our public filings at www.sec.gov or www.ihs.com.

About IHS Inc. (www.ihs.com)

IHS Inc. (NYSE: IHS) is the leading source of information, insight and analytics in critical areas that shape today’s business landscape. Businesses and governments in more than 165 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs more than 8,000 people in 31 countries around the world.

IHS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for share and per-share amounts)

As of As of February 28, 2014 November 30, 2013 (Unaudited) (Audited) Assets Current assets: Cash and cash equivalents $ 205,055 $ 258,367 Accounts receivable, net 524,010 459,263 Income tax receivable 12,171 — Deferred subscription costs 59,883 49,327 Deferred income taxes 50,662 70,818 Other 59,792 43,065 Total current assets 911,573 880,840 Non-current assets: Property and equipment, net 255,139 245,566 Intangible assets, net 1,107,623 1,144,464 Goodwill 3,063,837 3,065,181 Other 21,748 23,562 Total non-current assets 4,448,347 4,478,773 Total assets $ 5,359,920 $ 5,359,613 Liabilities and stockholders’ equity Current liabilities: Short-term debt $ 210,320 $ 395,527 Accounts payable 57,420 57,001 Accrued compensation 58,431 89,460 Accrued royalties 40,639 36,289 Other accrued expenses 102,424 98,187 Income tax payable — 9,961 Deferred revenue 708,941 560,010 Total current liabilities 1,178,175 1,246,435 Long-term debt 1,819,704 1,779,065 Accrued pension and postretirement liability 29,200 27,191 Deferred income taxes 348,812 361,267 Other liabilities 43,214 38,692 Commitments and contingencies Stockholders’ equity:

Class A common stock, $0.01 par value per share, 160,000,000 shares

authorized, 68,952,895 and 67,901,101 shares issued, and 68,053,423 and 67,382,298 shares

outstanding at February 28, 2014 and November 30, 2013, respectively

690 679 Additional paid-in capital 836,364 788,670

Treasury stock, at cost: 899,472 and 518,803 shares

at February 28, 2014 and November 30, 2013, respectively

(89,957 ) (45,945 ) Retained earnings 1,252,942 1,220,520 Accumulated other comprehensive loss (59,224 ) (56,961 ) Total stockholders’ equity 1,940,815 1,906,963 Total liabilities and stockholders’ equity $ 5,359,920 $ 5,359,613

IHS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per-share amounts)

(Unaudited)

Three months ended February 28, 2014 2013 Revenue $ 524,458 $ 382,525 Operating expenses: Cost of revenue (includes stock-based compensation expense of $1,860 and $1,682 for the three months ended February 28, 2014 and 2013, respectively) 212,925 160,075 Selling, general and administrative (includes stock-based compensation expense of $42,104 and $38,080 for the three months ended February 28, 2014 and 2013, respectively) 197,716 142,229 Depreciation and amortization 49,637 32,479 Restructuring charges 3,175 4,788 Acquisition-related costs 940 1,895 Net periodic pension and postretirement expense 2,836 2,240 Other expense, net 1,575 2,419 Total operating expenses 468,804 346,125 Operating income 55,654 36,400 Interest income 251 344 Interest expense (15,245 ) (6,120 ) Non-operating expense, net (14,994 ) (5,776 ) Income from continuing operations before income taxes 40,660 30,624 Provision for income taxes (8,238 ) (5,953 ) Net income $ 32,422 $ 24,671 Basic earnings per share $ 0.48 $ 0.37 Weighted average shares used in computing basic earnings per share 67,809 65,790 Diluted earnings per share $ 0.47 $ 0.37 Weighted average shares used in computing diluted earnings per share 68,693 66,701

IHS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three months ended February 28, 2014 2013 Operating activities: Net income $ 32,422 $ 24,671 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization 49,637 32,479 Stock-based compensation expense 43,964 39,762 Impairment of assets — 1,629 Excess tax benefit from stock-based compensation (9,412 ) (11,345 ) Net periodic pension and postretirement expense 2,836 2,240 Pension and postretirement contributions (825 ) (10,933 ) Deferred income taxes 32,939 (15,534 ) Change in assets and liabilities: Accounts receivable, net (69,021 ) (33,696 ) Other current assets (19,983 ) (12,978 ) Accounts payable (982 ) (6,485 ) Accrued expenses (22,972 ) (8,930 ) Income tax payable (33,570 ) 16,063 Deferred revenue 148,391 116,157 Other liabilities 437 (1,414 ) Net cash provided by operating activities 153,861 131,686 Investing activities: Capital expenditures on property and equipment (24,610 ) (19,367 ) Acquisitions of businesses, net of cash acquired — (38,448 ) Intangible assets acquired (714 ) — Change in other assets (1,304 ) (846 ) Settlements of forward contracts 2,314 (776 ) Net cash used in investing activities (24,314 ) (59,437 ) Financing activities: Proceeds from borrowings 30,000 45,000 Repayment of borrowings (174,568 ) (53,786 ) Excess tax benefit from stock-based compensation 9,412 11,345 Repurchases of common stock (44,012 ) (81,900 ) Net cash used in financing activities (179,168 ) (79,341 ) Foreign exchange impact on cash balance (3,691 ) (19,219 ) Net decrease in cash and cash equivalents (53,312 ) (26,311 ) Cash and cash equivalents at the beginning of the period 258,367 345,008 Cash and cash equivalents at the end of the period $ 205,055 $ 318,697

IHS INC.

SUPPLEMENTAL REVENUE DISCLOSURE

(In thousands)

(Unaudited)

Three months ended February 28, Percent change 2014 2013 Total Organic Revenue by segment: Americas revenue $ 350,420 $ 229,166 53 % 5 % EMEA revenue 126,861 109,471 16 % 5 % APAC revenue 47,177 43,888 7 % — % Total revenue $ 524,458 $ 382,525 37 % 5 % Revenue by transaction type: Subscription revenue $ 417,374 $ 307,727 36 % 5 % Non-subscription revenue 107,084 74,798 43 % 3 % Total revenue $ 524,458 $ 382,525 37 % 5 % Revenue by information domain: Energy revenue $ 202,330 $ 175,471 Product Lifecycle (PLC) revenue 248,093 132,714 Security revenue 27,773 28,019 Environment revenue 24,779 25,281 Macroeconomic Forecasting and Intersection revenue 21,483 21,040 Total revenue $ 524,458 $ 382,525

IHS INC.

RECONCILIATION OF CONSOLIDATED NON-GAAP FINANCIAL MEASUREMENTS TO

MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS

(In thousands, except for per-share amounts)

(Unaudited)

Three months ended February 28, 2014 2013 Net income $ 32,422 $ 24,671 Interest income (251 ) (344 ) Interest expense 15,245 6,120 Provision for income taxes 8,238 5,953 Depreciation 15,790 9,880 Amortization related to acquired intangible assets 33,847 22,599 EBITDA (1)(6) $ 105,291 $ 68,879 Stock-based compensation expense 43,964 39,762 Restructuring charges 3,175 4,788 Acquisition-related costs 940 1,895 Impairment of assets — 1,629 Loss on sale of assets 2,805 1,241 Adjusted EBITDA (2)(6) $ 156,175 $ 118,194 Three months ended February 28, 2014 2013 Net income $ 32,422 $ 24,671 Stock-based compensation expense 43,964 39,762 Amortization related to acquired intangible assets 33,847 22,599 Restructuring charges 3,175 4,788 Acquisition-related costs 940 1,895 Impairment of assets — 1,629 Loss on sale of assets 2,805 1,241 Income tax effect on adjusting items (29,222 ) (24,531 ) Adjusted net income (3) $ 87,931 $ 72,054 Adjusted EPS (4)(6) $ 1.28 $ 1.08 Weighted average shares used in computing Adjusted EPS 68,693 66,701 Three months ended February 28, 2014 2013 Net cash provided by operating activities $ 153,861 $ 131,686 Capital expenditures on property and equipment (24,610 ) (19,367 ) Free cash flow (5)(6) $ 129,251 $ 112,319

IHS INC.

RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASUREMENTS TO

MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS

(In thousands)

(Unaudited)

Three months ended February 28, 2014 Americas EMEA APAC Shared Services Total Operating income $ 77,610 $ 24,595 $ 10,062 $ (56,613 ) $ 55,654 Adjustments: Stock-based compensation expense — — — 43,964 43,964 Depreciation and amortization 41,173 5,791 613 2,060 49,637 Restructuring charges 1,685 1,285 205 — 3,175 Acquisition-related costs 419 521 — — 940 Loss on sale of assets 2,805 — — — 2,805 Adjusted EBITDA $ 123,692 $ 32,192 $ 10,880 $ (10,589 ) $ 156,175 Three months ended February 28, 2013 Americas EMEA APAC Shared Services Total Operating income $ 62,133 $ 15,986 $ 9,749 $ (51,468 ) $ 36,400 Adjustments: Stock-based compensation expense — — — 39,762 39,762 Depreciation and amortization 24,284 5,917 461 1,817 32,479 Restructuring charges 3,896 947 (55 ) — 4,788 Acquisition-related costs 1,895 — — — 1,895 Impairment of assets 1,629 — — — 1,629 Loss on sale of assets — 1,241 — — 1,241 Adjusted EBITDA $ 93,837 $ 24,091 $ 10,155 $ (9,889 ) $ 118,194 (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, asset impairment charges, gain or loss on sale of assets, pension mark-to-market and settlement expense, and income or loss from 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, asset impairment charges, gain or loss on sale of assets, pension mark-to-market and settlement expense, and income or loss from discontinued operations). (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 agreement.

IHS Inc.News Media Contact:Dan Wilinsky, +1 303-397-2468dan.wilinsky@ihs.comorInvestor Relations Contact:Eric Boyer, +1 303-397-2969eric.boyer@ihs.com

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