OREANDA-NEWS. IHS Inc. (NYSE: IHS), the leading global source of information and analytics, today reported results for the first quarter ended February 29, 2016.

  • Revenue of $548 million, up 7 percent from the prior-year period
  • Total organic revenue growth of 3 percent, with 1 percent subscription organic revenue growth
  • Adjusted EBITDA of $180 million, up 13 percent from the prior-year period
  • Adjusted earnings per diluted share (Adjusted EPS) of $1.40, up 10 percent from the prior-year period
  • Free cash flow of $127 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 2016 Financial Performance

      Three months ended February 29/28,     Change
  (in thousands, except percentages and per share data)   2016   2015     $   %
  Revenue   $ 548,446   $ 513,876     $ 34,570     7 %
                     
  Net income   $ 45,044   $ 39,520     $ 5,524     14 %
  Adjusted EBITDA   $ 179,608   $ 159,298     $ 20,310     13 %
                     
  GAAP EPS   $ 0.66   $ 0.57     $ 0.09     16 %
  Adjusted EPS   $ 1.40   $ 1.27     $ 0.13     10 %
                     
  Cash flow from operations   $

151,902

   $ 188,038     $

(36,136

 )  

(19

 )%
  Free cash flow   $

127,412

   $ 149,226     $

(21,814

 )  

(15

 )%
                         

“I’m pleased with the performance in the first quarter despite continued headwinds in Energy,” said Jerre Stead, IHS chairman and chief executive officer. “Our non-Energy offerings performed exceptionally well and this year’s IHS Energy CERAWeek was one of the best ever from both an attendance and a revenue standpoint.”

“We had strong margin improvement in the first quarter of 2016, as we entered the year with a lower cost base, and are well positioned to deliver margin expansion in this lower growth environment,” said Todd Hyatt, IHS chief financial officer.

First Quarter 2016 Revenue Performance

The subscription-based business grew 1 percent organically in the first quarter of 2016 compared to the same period of 2015, as described in the following table.

      Three months ended February 29/28,   Percent change
  (in thousands, except percentages)   2016   2015   Total   Organic
  Subscription revenue   $ 443,159     $ 429,264     3 %   1 %
  Non-subscription revenue   105,287     84,612     24 %   14 %*
  Total revenue   $ 548,446     $ 513,876     7 %   3 %*
  * See supplemental revenue disclosure for effect of CERAWeek timing on these results.
   

First quarter 2016 revenue increased 7 percent compared to the first quarter of 2015. The components of revenue growth are described below by segment and in total.

      Change in revenue
      First quarter 2016 vs. first quarter 2015
  (All amounts represent percentage points)   Organic   Acquisitive   Foreign

Currency
  Resources   (2 )%*   3 %   (2 )%
  Transportation   10 %   5 %   (1 )%
  Consolidated Markets & Solutions   4 %   8 %   (2 )%
  Total   3 %*   5 %   (2 )%
  * See supplemental revenue disclosure for effect of CERAWeek timing on these results.
   

First Quarter 2016 Segment Performance

Segment results were as follows:

  • Resources. First quarter revenue for Resources decreased $2 million, or 1 percent, to $216 million, and included negative 7 percent organic growth for the subscription-based business. Our IHS Energy CERAWeek event generated approximately $14 million in revenue for the first quarter of 2016; this event was held in the second quarter last year. Excluding the effect of the CERAWeek timing shift, total Resources revenue declined 7 percent for the first quarter of 2016. First quarter Adjusted EBITDA for Resources increased $2 million, or 2 percent, to $87 million. First quarter operating income for Resources increased $3 million, or 5 percent, to $59 million.
  • Transportation. First quarter revenue for Transportation increased $24 million, or 14 percent, to $200 million, and included 10 percent organic growth for the subscription-based business. First quarter Adjusted EBITDA for Transportation increased $11 million, or 18 percent, to $73 million. First quarter operating income for Transportation increased $2 million, or 6 percent, to $43 million.
  • Consolidated Markets & Solutions (CMS). First quarter revenue for CMS increased $12 million, or 10 percent, to $133 million, and included 4 percent organic growth for the subscription-based business. First quarter Adjusted EBITDA for CMS increased $8 million, or 41 percent, to $28 million. First quarter operating income for CMS increased $10 million, or 167 percent, to $16 million.

Outlook (forward-looking statement)

For the year ending November 30, 2016, IHS expects:

  • Revenue in a range of $2.30 billion to $2.38 billion, including 2-3 percent subscription organic growth, neutral non-subscription organic growth, and total organic growth of 0-3 percent;
  • Adjusted EBITDA in a range of $770 million to $800 million; and
  • Adjusted EPS in a range of $6.00 to $6.30 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.

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.

 

About IHS Inc.

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 140 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 nearly 9,000 people in 33 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.
© 2016 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 29, 2016   November 30, 2015
    (Unaudited)   (Audited)
Assets        
Current assets:        
Cash and cash equivalents   $ 60,499     $ 291,580  
Accounts receivable, net   408,844     355,913  
Income tax receivable   4,585     4,585  
Deferred subscription costs   58,977     52,752  
Assets held for sale   198,824     193,377  
Other   74,049     57,135  
Total current assets   805,778     955,342  
Non-current assets:        
Property and equipment, net   319,339     314,366  
Intangible assets, net   1,339,396     1,014,691  
Goodwill   4,062,812     3,287,459  
Deferred income taxes   6,630     6,630  
Other   28,483     22,593  
Total non-current assets   5,756,660     4,645,739  
Total assets   $ 6,562,438     $ 5,601,081  
Liabilities and stockholders’ equity        
Current liabilities:        
Short-term debt   $ 588,158     $ 36,019  
Accounts payable   50,244     59,180  
Accrued compensation   62,834     105,477  
Accrued royalties   35,582     33,306  
Other accrued expenses   138,034     118,217  
Income tax payable   15,280     23,339  
Deferred revenue   663,258     552,498  
Liabilities held for sale   42,022     32,097  
Total current liabilities   1,595,412     960,133  
Long-term debt   2,410,043     2,095,183  
Accrued pension and postretirement liability   26,298     26,745  
Deferred income taxes   317,463     259,524  
Other liabilities   74,065     58,619  
Commitments and contingencies        
Stockholders’ equity:        
Class A common stock, $0.01 par value per share, 160,000,000 shares authorized, 71,078,443 and 70,287,707 shares issued, and 67,425,324 and 67,523,885 shares outstanding at February 29, 2016 and November 30, 2015, respectively   711     703  
Additional paid-in capital   1,071,134     1,053,141  
Treasury stock, at cost: 3,653,119 and 2,763,822 shares at February 29, 2016 and November 30, 2015, respectively   (415,680 )   (317,016 )
Retained earnings   1,700,306     1,655,262  
Accumulated other comprehensive loss   (217,314 )   (191,213 )
Total stockholders’ equity   2,139,157     2,200,877  
Total liabilities and stockholders’ equity   $ 6,562,438     $ 5,601,081  
     

IHS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per-share amounts)
(Unaudited)
     
    Three months ended February 29/28,
    2016   2015
Revenue   $ 548,446     $ 513,876  
Operating expenses:        
Cost of revenue (includes stock-based compensation expense of $1,289 and $1,414 for the three months ended February 29, 2016 and February 28, 2015, respectively)   210,795     200,345  
Selling, general and administrative (includes stock-based compensation expense of $28,807 and $30,459 for the three months ended February 29, 2016 and February 28, 2015, respectively)   186,515     186,448  
Depreciation and amortization   60,515     50,882  
Restructuring charges   5,703     13,421  
Acquisition-related costs   3,782     176  
Net periodic pension and postretirement expense   407     496  
Other expense (income), net   1,217     (838 )
Total operating expenses   468,934     450,930  
Operating income   79,512     62,946  
Interest income   264     160  
Interest expense   (28,140 )   (16,994 )
Non-operating expense, net   (27,876 )   (16,834 )
Income from continuing operations before income taxes   51,636     46,112  
Provision for income taxes   (10,409 )   (8,162 )
Income from continuing operations   41,227     37,950  
Income from discontinued operations, net   3,817     1,570  
Net income   $ 45,044     $ 39,520  
         
Basic earnings per share:        
Income from continuing operations   $ 0.61     $ 0.55  
Income from discontinued operations, net   0.06     0.02  
Net income   $ 0.67     $ 0.58  
Weighted average shares used in computing basic earnings per share   67,428     68,701  
         
Diluted earnings per share:        
Income from continuing operations   $ 0.61     $ 0.55  
Income from discontinued operations, net   0.06     0.02  
Net income   $ 0.66     $ 0.57  
Weighted average shares used in computing diluted earnings per share   68,084     69,303  
     

IHS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
     
    Three months ended February 29/28,
    2016   2015
Operating activities:        
Net income   $ 45,044     $ 39,520  
Reconciliation of net income to net cash provided by operating activities:        
Depreciation and amortization   60,515     55,919  
Stock-based compensation expense   30,575     33,490  
Excess tax benefit from stock-based compensation  

—

     (5,128 )
Net periodic pension and postretirement expense   407     496  
Pension and postretirement contributions   (856 )   (978 )
Deferred income taxes   12,891     12,975  
Change in assets and liabilities:        
Accounts receivable, net   (41,334 )   (16,096 )
Other current assets   (26,302 )   (28,934 )
Accounts payable   (16,463 )   (19,562 )
Accrued expenses   (14,274 )   (22,469 )
Income tax   (6,287 )   2,949  
Deferred revenue   101,721     134,358  
Other liabilities   6,265     1,498  
Net cash provided by operating activities  

151,902

     188,038  
Investing activities:        
Capital expenditures on property and equipment   (24,490 )   (38,812 )
Acquisitions of businesses, net of cash acquired   (1,113,440 )   (168,618 )
Change in other assets   2,059     (1,779 )
Settlements of forward contracts   5,482     1,666  
Net cash used in investing activities   (1,130,389 )   (207,543 )
Financing activities:        
Proceeds from borrowings   1,061,000     170,000  
Repayment of borrowings   (194,001 )   (39,272 )
Payment of debt issuance costs   (15,430 )  

—

  
Excess tax benefit from stock-based compensation  

—

 

   5,128  
Repurchases of common stock   (104,335 )   (53,271 )
Net cash provided by financing activities  

747,234

     82,585  
Foreign exchange impact on cash balance   (695 )   (6,517 )
Net increase (decrease) in cash and cash equivalents   (231,948 )   56,563  
Cash and cash equivalents at the beginning of the period   293,148     153,156  
Cash and cash equivalents at the end of the period   61,200     209,719  
Less: Cash and cash equivalents associated with discontinued operations at the end of the period   (701 )   —  
Cash and cash equivalents from continuing operations at the end of the period   $ 60,499     $ 209,719  
           

IHS INC.
SUPPLEMENTAL REVENUE DISCLOSURE
(In thousands)
(Unaudited)
           
    Three months ended February 29/28,   Percent change
    2016   2015   Total   Organic
Subscription revenue by segment:                  
Resources   $ 180,678     $ 189,993     (5 )%   (7 )%
Transportation   148,422     136,323     9 %   10 %
CMS   114,059     102,948     11 %   4 %
Total subscription revenue   $ 443,159     $ 429,264     3 %   1 %
                   
Non-subscription revenue by segment:                  
Resources   $ 35,244     $ 27,576     28 %  

28

%*
Transportation   51,254     39,393     30 %   9 %
CMS   18,789     17,643     6 %   3 %
Total non-subscription revenue   $ 105,287     $ 84,612     24 %  

14

%*
                   
Total revenue by segment:                  
Resources   $ 215,922     $ 217,569     (1 )%  

(2

)%*
Transportation   199,676     175,716     14 %   10 %
CMS   132,848     120,591     10 %   4 %
Total revenue   $ 548,446     $ 513,876     7 %  

3

%*
                   
Revenue by region:                  
Americas   $ 376,135     $ 340,830     10 %   4 %
EMEA   118,841     120,643     (1 )%   — %
APAC   53,470     52,403     2 %   3 %
Total revenue   $ 548,446     $ 513,876     7 %   3 %
                   
* Excluding the effect of the CERAWeek timing shift from the second quarter of 2015 to the first quarter of 2016 results in the following organic revenue growth percentages:
Resources non-subscription organic revenue growth               (23 )%
Total non-subscription organic revenue growth               (3 )%
Resources total organic revenue growth               (9 )%
Total organic revenue growth               1 %

 

    

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 29/28,
    2016   2015
Net income   $ 45,044     $ 39,520  
Interest income   (264 )   (160 )
Interest expense   28,140     16,994  
Provision for income taxes   10,409     8,162  
Depreciation   23,536     19,797  
Amortization related to acquired intangible assets   36,979     31,085  
EBITDA (1)(6)   $ 143,844     $ 115,398  
Stock-based compensation expense   30,096     31,873  
Restructuring charges   5,703     13,421  
Acquisition-related costs   3,782     176  
Income from discontinued operations, net   (3,817 )   (1,570 )
Adjusted EBITDA (2)(6)   $ 179,608     $ 159,298  
         
    Three months ended February 29/28,
    2016   2015
Net income   $ 45,044     $ 39,520  
Stock-based compensation expense   30,096     31,873  
Amortization related to acquired intangible assets   36,979     31,085  
Restructuring charges   5,703     13,421  
Acquisition-related costs   3,782     176  
Acquisition financing fees   4,973     —  
Income from discontinued operations, net   (3,817 )   (1,570 )
Income tax effect on adjusting items   (27,493 )   (26,271 )
Adjusted net income (3)   $ 95,267     $ 88,234  
Adjusted EPS (4)(6)   $ 1.40     $ 1.27  
Weighted average shares used in computing Adjusted EPS   68,084     69,303  
         
    Three months ended February 29/28,
    2016   2015
Net cash provided by operating activities   $

151,902

     $ 188,038  
Capital expenditures on property and equipment   (24,490 )   (38,812 )
Free cash flow (5)(6)   $

127,412

     $ 149,226  
                 
     

IHS INC.
RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASUREMENTS TO
MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(In thousands)
(Unaudited)
     
    Three months ended February 29, 2016
    Resources   Transportation   CMS   Shared Services   Total
Operating income   $ 59,381     $ 43,055     $ 15,667     $ (38,591 )   $ 79,512  
Adjustments:                    
Stock-based compensation expense   —     —     —     30,096     30,096  
Depreciation and amortization   24,465     26,032     10,062     (44 )   60,515  
Restructuring charges   2,845     1,102    

1,756

    

—

     5,703  
Acquisition-related costs   619     3,145     16     2     3,782  
Adjusted EBITDA   $ 87,310     $ 73,334     $

27,501

     $

(8,537

 )   $ 179,608  
Adjusted EBITDA as a percentage of revenue   40.4 %   36.7 %   20.7 %       32.7 %
                     
    Three months ended February 28, 2015
    Resources   Transportation   CMS   Shared Services   Total
Operating income   $ 56,459     $ 40,639     $ 5,875     $ (40,027 )   $ 62,946  
Adjustments:                    
Stock-based compensation expense   —     —     —     31,873     31,873  
Depreciation and amortization   21,149     19,932     9,747     54     50,882  
Restructuring charges   7,849     1,643     3,929     —     13,421  
Acquisition-related costs   —     50     —     126     176  
Adjusted EBITDA   $ 85,457     $ 62,264     $ 19,551     $ (7,974 )   $ 159,298  
Adjusted EBITDA as a percentage of revenue   39.3 %   35.4 %   16.2 %       31.0 %
                             
(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, acquisition financing fees, 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.