IHS IHS Holding Limited

IHS Inc. (NYSE: IHS), the leading global source of information and analytics, today reported results for the first quarter ended February 28, 2015.

• Revenue of $546 million, up 4 percent from the prior-year period
• Total organic revenue growth of 2 percent, with 7 percent subscription organic revenue growth
• Adjusted EBITDA of $169 million, up 8 percent from the prior-year period, resulting in margin expansion of 120 basis points
• Adjusted earnings per diluted share (Adjusted EPS) of $1.36, up 6 percent from the prior-year period
• Free cash flow of $149 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 2015 Financial Performance

      Three months ended February 28,       Change (in thousands, except percentages and per share data) 2015       2014 $       % Revenue $ 546,261 $ 524,458 $ 21,803 4 %   Net income $ 39,520 $ 32,422 $ 7,098 22 % Adjusted EBITDA $ 169,295 $ 156,175 $ 13,120 8 %   GAAP EPS $ 0.57 $ 0.47 $ 0.10 21 % Adjusted EPS $ 1.36 $ 1.28 $ 0.08 6 %   Cash flow from operations $ 188,038 $ 153,861 $ 34,177 22 % Free cash flow $ 149,226 $ 129,251 $ 19,975 15 %  

“Solid subscription organic growth was led by our Industrials, while overall growth was muted by energy headwinds,” said Scott Key, IHS president and chief executive officer. “We remain very confident in the resiliency of our strategy and business model; this was demonstrated by positive trends in some of our key performance metrics.”

“The strength of our business model enabled us to continue to drive solid margin expansion and strong free cash flow,” said Todd Hyatt, IHS chief financial officer.

First Quarter 2015 Revenue Performance

First quarter 2015 revenue increased 4 percent compared to the first quarter of 2014. The components of revenue growth are described below by segment and in total.

      Change in revenue First quarter 2015 vs. first quarter 2014 (All amounts represent percentage points) Organic       Acquisitive       Foreign

Currency

Americas 2 % 3 % (1 )% EMEA 2 % 2 % (3 )% APAC 7 % 8 % (2 )% Total 2 % 3 % (2 )%  

The subscription-based business grew 7 percent organically in the first quarter of 2015 compared to the same period of 2014, as described in the following table.

      Three months ended February 28,       Percent change (in thousands, except percentages) 2015       2014 Total       Organic Subscription revenue $ 447,807 $ 417,374 7 % 7 % Non-subscription revenue 98,454   107,084   (8 )% (14 )% Total revenue $ 546,261   $ 524,458   4 % 2 %  

First Quarter 2015 Segment Performance

Segment results were as follows:

• Americas. First quarter revenue for Americas increased $16 million, or 4 percent, to $366 million, and included 7 percent organic growth for the subscription-based business. First quarter Adjusted EBITDA for Americas increased $5 million, or 4 percent, to $129 million. First quarter operating income for Americas decreased $4 million, or 6 percent, to $73 million.
• EMEA. First quarter revenue for EMEA was unchanged at $127 million, and included 4 percent organic growth for the subscription-based business. First quarter Adjusted EBITDA for EMEA increased $3 million, or 10 percent, to $35 million. First quarter operating income for EMEA increased $1 million, or 2 percent, to $25 million.
• APAC. First quarter revenue for APAC increased $6 million, or 13 percent, to $53 million, and included 10 percent organic growth for the subscription-based business. First quarter Adjusted EBITDA for APAC increased $3 million, or 23 percent, to $13 million. First quarter operating income for APAC increased $1 million, or 8 percent, to $11 million.

Outlook (forward-looking statement)

For the year ending November 30, 2015, IHS revises guidance as follows:

• Revenue in a range of $2.27 billion to $2.31 billion, including 5-6 percent subscription organic growth and negative non-subscription organic growth. The guidance incorporates a full-year negative FX impact of approximately $75 million versus the prior year and a revised outlook for energy;
• Adjusted EBITDA in a range of $715 million to $735 million; and
• Adjusted EPS in a range of $5.77 to $5.97 per diluted share.

Additionally, for the year ending November 30, 2015, IHS expects:

• Depreciation expense to be approximately $82-86 million;
• Amortization expense related to acquired intangible assets to be approximately $135-140 million;
• Net interest expense to be approximately $70-75 million;
• Stock-based compensation expense to be approximately $150-160 million;
• An adjusted tax rate of approximately 27-29 percent;
• An effective tax rate of approximately 23-25 percent;
• Fully diluted shares to be approximately 70 million; and
• Capital expenditures of 5-6 percent of revenue.

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 2015 results on March 24, 2015, at 8:00 a.m. EDT. The conference call will be simultaneously webcast on the company’s website: www.ihs.com.

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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 EBITDA, 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 manage system failures, capacity constraints, and cyber risks; 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; our ability to satisfy our debt obligations and our other ongoing business obligations; 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 150 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 about 8,800 people in 32 countries around the world.

IHS is a registered trademark of IHS Inc. All other company and product names may be trademarks of their respective owners.

© 2015 IHS Inc. All rights reserved.

           

IHS INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except for share and per-share amounts)

  As of As of February 28, 2015 November 30, 2014 (Unaudited) (Audited) Assets Current assets: Cash and cash equivalents $ 209,719 $ 153,156 Accounts receivable, net 439,180 421,374 Income tax receivable 3,886 2,283 Deferred subscription costs 63,298 51,021 Deferred income taxes 61,632 81,780 Other 72,195   60,973   Total current assets 849,910   770,587   Non-current assets: Property and equipment, net 308,510 301,419 Intangible assets, net 1,107,309 1,091,109 Goodwill 3,273,237 3,157,324 Other 26,734   27,991   Total non-current assets 4,715,790   4,577,843   Total assets $ 5,565,700   $ 5,348,430   Liabilities and stockholders’ equity Current liabilities: Short-term debt $ 35,987 $ 36,257 Accounts payable 47,763 52,245 Accrued compensation 56,468 101,875 Accrued royalties 40,498 37,346 Other accrued expenses 135,367 131,147 Deferred revenue 737,039   596,187   Total current liabilities 1,053,122 955,057 Long-term debt 1,937,097 1,806,098 Accrued pension and postretirement liability 28,658 29,139 Deferred income taxes 351,434 347,419 Other liabilities 52,638 51,171 Commitments and contingencies Stockholders’ equity: Class A common stock, $0.01 par value per share, 160,000,000 shares authorized, 69,950,551 and 69,391,577 shares issued, and 68,797,518 and 68,372,176 shares outstanding at February 28, 2015 and November 30, 2014, respectively 700 694 Additional paid-in capital 953,489 956,381 Treasury stock, at cost: 1,153,033 and 1,019,401 shares at February 28, 2015 and November 30, 2014, respectively (121,419 ) (105,873 ) Retained earnings 1,454,589 1,415,069 Accumulated other comprehensive loss (144,608 ) (106,725 ) Total stockholders’ equity 2,142,751   2,159,546   Total liabilities and stockholders’ equity $ 5,565,700   $ 5,348,430          

IHS INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except for per-share amounts)(Unaudited)

  Three months ended February 28, 2015       2014 Revenue $ 546,261 $ 524,458 Operating expenses: Cost of revenue (includes stock-based compensation expense of $1,414 and $1,860 for the three months ended February 28, 2015 and 2014, respectively) 214,946 212,925 Selling, general and administrative (includes stock-based compensation expense of $32,076 and $42,104 for the three months ended February 28, 2015 and 2014, respectively) 195,938 197,716 Depreciation and amortization 55,919 49,637 Restructuring charges 14,284 3,175 Acquisition-related costs 176 940 Net periodic pension and postretirement expense 496 2,836 Other expense (income), net (924) 1,575   Total operating expenses 480,835 468,804   Operating income 65,426 55,654 Interest income 160 251 Interest expense (16,994) (15,245 ) Non-operating expense, net (16,834) (14,994 ) Income from continuing operations before income taxes 48,592 40,660 Provision for income taxes (9,072) (8,238 ) Net income $ 39,520 $ 32,422     Basic earnings per share $ 0.58 $ 0.48   Weighted average shares used in computing basic earnings per share 68,701 67,809     Diluted earnings per share $ 0.57 $ 0.47   Weighted average shares used in computing diluted earnings per share 69,303 68,693      

IHS INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)

  Three months ended February 28, 2015   2014 Operating activities: Net income $ 39,520 $ 32,422 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization 55,919 49,637 Stock-based compensation expense 33,490 43,964 Excess tax benefit from stock-based compensation (5,128 ) (9,412 ) Net periodic pension and postretirement expense 496 2,836 Pension and postretirement contributions (978 ) (825 ) Deferred income taxes 12,975 32,939 Change in assets and liabilities: Accounts receivable, net (16,096 ) (69,021 ) Other current assets (28,934 ) (19,983 ) Accounts payable (19,562 ) (982 ) Accrued expenses (22,469 ) (22,972 ) Income tax 2,949 (33,570 ) Deferred revenue 134,358 148,391 Other liabilities 1,498   437   Net cash provided by operating activities 188,038   153,861   Investing activities: Capital expenditures on property and equipment (38,812 ) (24,610 ) Acquisitions of businesses, net of cash acquired (168,618 ) — Intangible assets acquired — (714 ) Change in other assets (1,779 ) (1,304 ) Settlements of forward contracts 1,666   2,314   Net cash used in investing activities (207,543 ) (24,314 ) Financing activities: Proceeds from borrowings 170,000 30,000 Repayment of borrowings (39,272 ) (174,568 ) Excess tax benefit from stock-based compensation 5,128 9,412 Repurchases of common stock (53,271 ) (44,012 ) Net cash provided by (used in) financing activities 82,585   (179,168 ) Foreign exchange impact on cash balance (6,517 ) (3,691 ) Net increase (decrease) in cash and cash equivalents 56,563 (53,312 ) Cash and cash equivalents at the beginning of the period 153,156   258,367   Cash and cash equivalents at the end of the period $ 209,719   $ 205,055                

IHS INC.SUPPLEMENTAL REVENUE DISCLOSURE(In thousands)(Unaudited)

  Three months ended February 28, Percent change 2015       2014 Total       Organic Revenue by segment: Americas $ 366,081 $ 350,420 4 % 2 % EMEA 127,047 126,861 — % 2 % APAC 53,133   47,177   13 % 7 % Total revenue $ 546,261   $ 524,458   4 % 2 %   Revenue by transaction type: Subscription $ 447,807 $ 417,374 7 % 7 % Non-subscription 98,454   107,084   (8 )% (14 )% Total revenue $ 546,261   $ 524,458   4 % 2 %   Revenue by product category: Resources $ 217,569 $ 217,494 — % — % Industrials 196,590 171,723 14 % 7 % Horizontal products 132,102   135,241   (2 )% — % Total revenue $ 546,261   $ 524,458   4 % 2 %        

IHS INC.RECONCILIATION OF CONSOLIDATED NON-GAAP FINANCIAL MEASUREMENTS TOMOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS(In thousands, except for per-share amounts)(Unaudited)

  Three months ended February 28, 2015       2014 Net income $ 39,520 $ 32,422 Interest income (160 ) (251 ) Interest expense 16,994 15,245 Provision for income taxes 9,072 8,238 Depreciation 20,913 15,790 Amortization related to acquired intangible assets 35,006   33,847   EBITDA (1)(6) $ 121,345 $ 105,291 Stock-based compensation expense 33,490 43,964 Restructuring charges 14,284 3,175 Acquisition-related costs 176 940 Loss on sale of assets —   2,805   Adjusted EBITDA (2)(6) $ 169,295   $ 156,175     Three months ended February 28, 2015 2014 Net income $ 39,520 $ 32,422 Stock-based compensation expense 33,490 43,964 Amortization related to acquired intangible assets 35,006 33,847 Restructuring charges 14,284 3,175 Acquisition-related costs 176 940 Loss on sale of assets — 2,805 Income tax effect on adjusting items (28,511 ) (29,222 ) Adjusted net income (3) $ 93,965   $ 87,931   Adjusted EPS (4)(6) $ 1.36   $ 1.28   Weighted average shares used in computing Adjusted EPS 69,303   68,693     Three months ended February 28, 2015   2014 Net cash provided by operating activities $ 188,038 $ 153,861 Capital expenditures on property and equipment (38,812 ) (24,610 ) Free cash flow (5)(6) $ 149,226   $ 129,251          

IHS INC.RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASUREMENTS TOMOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS(In thousands)(Unaudited)

  Three months ended February 28, 2015 Americas       EMEA       APAC       Shared Services       Total Operating income $ 73,341 $ 25,173 $ 10,854 $ (43,942 ) $ 65,426 Adjustments: Stock-based compensation expense — — — 33,490 33,490 Depreciation and amortization 46,094 6,277 1,599 1,949 55,919 Restructuring charges 9,363 3,976 945 — 14,284 Acquisition-related costs 176   —   —   —   176 Adjusted EBITDA $ 128,974   $ 35,426   $ 13,398   $ (8,503 ) $ 169,295   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  

(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, gain or loss on debt extinguishment, 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, gain or loss on debt extinguishment, pension mark-to-market and settlement expense, and income or loss from discontinued operations, 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.

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