IHS Inc. Reports Third Quarter 2013 Results

IHS Inc. Reports Third Quarter 2013 Results

ENGLEWOOD, Colo.--(BUSINESS WIRE)-- IHS Inc. (NYS: IHS) , the leading global source of information and analytics, today reported results for the third quarter ended August 31, 2013.

  • Revenue of $480 million, up 25 percent from the prior-year period

  • Organic revenue growth rate of five percent overall

  • Adjusted EBITDA of $144 million, up 19% from the prior-year period

  • Adjusted earnings per diluted share (adjusted EPS) of $1.27, up six percent from the prior-year period

  • Free cash flow of $279 million year-to-date, up 42 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.


Third Quarter and Year-to-Date 2013 Financial Performance

Three months ended August 31,

Change

Nine months ended August 31,

Change

(in thousands, except percentages and per share data)

2013

2012

$

%

2013

2012

$

%

Revenue

$

480,288

$

385,609

$

94,679

25

%

$

1,280,956

$

1,115,511

$

165,445

15

%

Net income

$

23,362

$

44,082

$

(20,720

)

(47

)%

$

90,923

$

111,748

$

(20,825

)

(19

)%

Adjusted EBITDA

$

143,853

$

121,259

$

22,594

19

%

$

392,203

$

344,978

$

47,225

14

%

GAAP EPS

$

0.35

$

0.66

$

(0.31

)

(47

)%

$

1.36

$

1.68

$

(0.32

)

(19

)%

Adjusted EPS

$

1.27

$

1.20

$

0.07

6

%

$

3.61

$

3.32

$

0.29

9

%

Cash flow from operations

$

83,203

$

68,082

$

15,121

22

%

$

344,369

$

246,256

$

98,113

40

%

Free cash flow

$

60,228

$

50,057

$

10,171

20

%

$

278,958

$

196,557

$

82,401

42

%

"Positive third-quarter results were highlighted by our best overall organic revenue growth rate yet this year and very strong initial results from our recent R.L. Polk acquisition," said Scott Key, IHS president and chief executive officer. "Additionally, we completed a series of strategic product releases during the quarter that have us on track in our strategy of converging IHS information, workflow tools, insight, research and analytics capabilities onto integrated platforms. The development and rollout of these integrated platforms represents the largest commercial deployment in our company's history and are a key element in our delivery of long-term profitable growth."

Third Quarter and Year-to-Date 2013 Revenue Performance

Third quarter 2013 revenue increased 25 percent compared to the third quarter of 2012, and year-to-date 2013 revenue increased 15 percent compared to the same period of 2012. The components of revenue growth for these periods are described below by segment and in total.

Increase in revenue

Third quarter 2013 vs. third quarter 2012

Year-to-date 2013 vs. year-to-date 2012

(All amounts represent percentage points)

Organic

Acquisitive

Foreign

Currency

Organic

Acquisitive

Foreign

Currency

Americas

4

%

28

%

%

3

%

16

%

%

EMEA

6

%

8

%

(1

)%

3

%

5

%

(1

)%

APAC

8

%

7

%

(2

)%

11

%

5

%

(1

)%

Total

5

%

21

%

(1

)%

4

%

11

%

(1

)%

The subscription-based business grew five percent organically in the current quarter compared to the third quarter of 2012, as described in the following table.

Three months ended August 31,

Percent change

Nine months ended August 31,

Percent change

(in thousands, except percentages)

2013

2012

Total

Organic

2013

2012

Total

Organic

Subscription revenue

$

365,025

$

294,516

24

%

5

%

$

986,675

$

855,160

15

%

6

%

Non-subscription revenue

115,263

91,093

27

%

5

%

294,281

260,351

13

%

(3

)%

Total revenue

$

480,288

$

385,609

25

%

5

%

$

1,280,956

$

1,115,511

15

%

4

%

Third Quarter and Year-to-Date 2013 Segment Performance

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

  • Americas. Third quarter revenue for the Americas increased $75 million, or 32 percent, to $307 million. Third quarter adjusted EBITDA for the Americas increased $26 million, or 28 percent, to $122 million. Third quarter operating income for the Americas increased $1 million, or two percent, to $71 million.

Year-to-date revenue for the Americas increased $124 million, or 19 percent, to $794 million. Year-to-date adjusted EBITDA for the Americas increased $56 million, or 21 percent, to $325 million. Year-to-date operating income for the Americas increased $23 million, or 12 percent, to $213 million.

  • EMEA. Third quarter revenue for EMEA increased $14 million, or 13 percent, to $122 million. Third quarter adjusted EBITDA for EMEA decreased $5 million, or 16 percent, to $26 million. Third quarter operating income for EMEA was down $5 million, or 20 percent, to $20 million. EMEA profit was impacted by product mix in a lower-growth environment, increased selling costs and adverse foreign currency movements.

Year-to-date revenue for EMEA increased $23 million, or seven percent, to $345 million. Year-to-date adjusted EBITDA for EMEA decreased $11 million, or 12 percent, to $77 million. Year-to-date operating income for EMEA decreased $13 million, or 19 percent, to $56 million.

  • APAC. Third quarter revenue for APAC increased $6 million, or 13 percent, to $51 million. Third quarter adjusted EBITDA for APAC decreased $0.5 million, or four percent, to $10 million. Third quarter operating income for APAC decreased $1 million, or 10 percent, to $9 million.

Year-to-date revenue for APAC increased $18 million, or 14 percent, to $142 million. Year-to-date adjusted EBITDA for APAC increased $0.5 million, or two percent, to $31 million. Year-to-date operating income for APAC decreased $0.5 million, or two percent, to $29 million.

Outlook (forward-looking statement)

For the year ending November 30, 2013, IHS expects:

  • Revenue in a range of $1.80 billion to $1.82 billion;

  • Adjusted EBITDA in a range of $540 million to $560 million; and

  • Adjusted EPS in a range of $4.75 to $5.00 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 will hold a conference call to discuss third quarter 2013 results on September 19, 2013, 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 eliminate 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," "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 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 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 and subsequent Forms 10-Q, 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. (NYS: 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 6,700 people in 31 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.

© 2013 IHS Inc. All rights reserved.

IHS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

As of

As of

August 31, 2013

November 30, 2012

(Unaudited)

(Audited)

Assets

Current assets:

Cash and cash equivalents

$

270,995

$

345,008

Accounts receivable, net

395,584

372,117

Income tax receivable

14,667

20,464

Deferred subscription costs

43,236

47,065

Deferred income taxes

61,308

55,084

Other

42,424

24,145

Total current assets

828,214

863,883

Non-current assets:

Property and equipment, net

233,294

163,013

Intangible assets, net

1,188,415

554,552

Goodwill

3,047,303

1,959,223

Other

25,142

8,540

Total non-current assets

4,494,154

2,685,328

Total assets

$

5,322,368

$

3,549,211

Liabilities and stockholders' equity

Current liabilities:

Short-term debt

$

394,248

$

170,102

Accounts payable

56,194

52,079

Accrued compensation

56,513

50,497

Accrued royalties

23,261

33,637

Other accrued expenses

86,856

55,304

Deferred revenue

561,137

515,318

Total current liabilities

1,178,209

876,937

Long-term debt

1,913,124

890,922

Accrued pension and postretirement liability

24,149

30,027

Deferred income taxes

362,634

139,235

Other liabilities

41,879

27,732

Commitments and contingencies

Stockholders' equity:

Class A common stock, $0.01 par value per share, 160,000,000 shares authorized, 67,621,367 shares issued, and 67,187,567 and 65,577,530 shares outstanding at August 31, 2013 and November 30, 2012, respectively

676

676

Additional paid-in capital

736,890

681,409

Treasury stock, at cost: 433,800 and 2,043,837 shares at August 31, 2013 and November 30, 2012, respectively

(36,293

)

(139,821

)

Retained earnings

1,179,710

1,088,787

Accumulated other comprehensive loss

(78,610

)

(46,693

)

Total stockholders' equity

1,802,373

1,584,358

Total liabilities and stockholders' equity

$

5,322,368

$

3,549,211