Attached files
| file | filename |
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| 8-K - 8-K - IHS Markit Ltd. | q3-16earningsrelease.htm |
| EX-99.1 - MEDIA RELEASE - IHS Markit Ltd. | exh991q316.htm |
© 2016 IHS Markit. All Rights Reserved.
Q3 16 Earnings
Supplemental Financials
September 27, 2016
© 2016 IHS Markit. All Rights Reserved.
Forward-looking statements
This presentation contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as
“expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” “aim” and similar expressions, and variations or negatives of these words. Without limiting the generality of the foregoing,
forward-looking statements contained in this presentation may include the expectations of management regarding plans, strategies, objectives and anticipated financial and operating results of IHS Markit.
IHS Markit’s estimates and forward-looking statements are mainly based on its current expectations and estimates of future events and trends, which affect or may affect its businesses and operations.
Although IHS Markit believes that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made in light of
information currently available to IHS Markit. These and other forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual
results to differ materially from those expressed in any forward-looking statements. Important risk factors that may cause such a difference include, but are not limited to, those risks discussed in IHS Markit’s
filings with the US Securities and Exchange Commission (the “SEC”). IHS Markit’s SEC filings are available at www.sec.gov or on the investor relations section of its website, www.ihsmarkit.com. However,
those factors should not be considered to be a complete statement of all potential risks and uncertainties. Other factors may present significant additional obstacles to the realization of forward-looking
statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational
problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on IHS Markit’s consolidated financial condition, results of operations, credit rating or
liquidity. IHS Markit does 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. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as
of the date of this presentation. All forward-looking statements are qualified in their entirety by this cautionary statement.
Important Information
IHS Inc. was the accounting acquirer in the merger with Markit Ltd. IHS operated, and IHS Markit operates, under a fiscal year that ends on November 30th of each year, while Markit operated under a fiscal
year that ended on December 31st of each year. As a result, financial results for the fiscal year ended November 30, 2016 will include 12 months of results of IHS and results of Markit from and after the July
12, 2016 closing date of the merger in the new Financial Services segment that IHS Markit has created. The 2016 guidance set forth in this presentation includes results of Markit only since closing of the
merger.
Unless otherwise indicated in this presentation, the combined historical information presented is based on the reported GAAP results of IHS for its fiscal year ended November 30th and the historical IFRS
results of Markit (now reported as the Financial Services segment of IHS Markit) adjusted to reflect a fiscal year ended November 30th. The combined historical financial information set forth in this
presentation has not been prepared in accordance with SEC rules, including Article 11 of Regulation S-X, and it therefore does not reflect any of the pro forma adjustments that would be required by Article
11 of Regulation S-X. In addition, certain stand alone historical results of Markit (now reported as the Financial Services segment of IHS Markit) are presented based on the reported results of Markit for its
December 31st fiscal year without any adjustment for the new fiscal year.
Non-GAAP measures
Non-GAAP financial information is presented only as a supplement to IHS Markit’s financial information based on GAAP. Non-GAAP financial information is provided to enhance the reader’s understanding of
the financial performance of IHS Markit, 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 IHS Markit non-GAAP measures to the most directly comparable GAAP measures are provided with the schedules to the
IHS Markit quarterly earnings release and are available on IHS Markit’s website (www.ihsmarkit.com).
IHS Markit uses non-GAAP measures in its operational and financial decision making, and believes that it is useful to exclude certain items in order to focus on what it regards to be a more reliable indicator
of the underlying operating performance of the business and its ability to generate cash flow from operations. As a result, internal management reports used during monthly operating reviews feature non-
GAAP measures. IHS Markit also believes that investors may find non-GAAP financial measures for IHS Markit useful for the same reasons, although investors are cautioned that non-GAAP financial
measures are not a substitute for GAAP disclosures.
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 IHS Markit’s performance against its peer companies because it believes he measures provide users with valuable insight
into key components of GAAP financial disclosures. However, non-GAAP measures have limitations as an analytical tool. Non-GAAP measures are not necessarily comparable to similarly titled measures
used by 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.
This presentation 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. 2
© 2016 IHS Markit. All Rights Reserved.
We are [reaffirming] 2016 guidance
$ in millions, except for per
share amounts
IHS Stand Alone Markit
(4.5 months ended
11/30/16)
Combined 2016
IHS Markit
Low Mid High
Revenue $2,290 - $2,310 $445 - $455 $2,735 $2,750 $2,765
Adjusted EBITDA $785 - $795 $190 - $200 $975 $985 $995
Margin % 34.3% - 34.4% 42.7% - 44.0% 35.6% 35.8% 36.0%
Adjusted EPS $1.72 - $1.78 $1.72 $1.75 $1.78
Additional combined items of the following:
• Depreciation expense of $115 - $120 million
• Interest expense of $115 - $120 million
• Amortization (acquisition related intangibles) expense of $220 – $225 million
• Adjusted effective tax rate of 25% - 26%
Post July Guidance Updates:
• Stock-based compensation expense of $195- $205 million
• GAAP effective tax rate of approximately 5%
• Full-year ended weighted average diluted shares of approximately 319 million (reflects weighting of IHS only for 7.5
months and IHS Markit combined for 4.5 months)
We are reaffirming 2016 guidance
3
© 2016 IHS Markit. All Rights Reserved.
Combined Quarterly Revenue by Reported Segment
Combined Quarterly Revenue SEGMENT View – HISTORICAL Basis
• Below figures reflect combined legacy IHS and legacy Markit (Financial Services) historical results on a consistent fiscal (Nov
year end) quarter basis
4
(1) Reflects combined IHS Markit results including Financial Services from June 1 – August 31, 2016
(2) Reflects combined IHS Markit results including Financial Services from July 12 – August 31, 2016
(3) Historical IFRS revenue results for legacy Markit. No pro forma adjustments to revenue results required by Article 11 of Regulation S-X
(4) Normalized for the shift in CERAWeek from Q1 to Q2, resources organic growth was (9%) in Q1 16 and (7%) in Q2 16
(5) Excluding impact of BPVC, normalized total CMS organic growth was (4%) in reported Q3 16
(6) Excluding impact of BPVC, normalized total IHS Markit organic growth was (1%) in reported Q3 16
Reported
For the period ended: Feb May Aug Nov Nov Feb May Aug Aug
Q1 15 Q2 15 Q3 15 Q4 15 FY 15 Q1 16 Q2 16 Q3 16 Q3 16
Full Qtr
(1)
Reported
(2)
Total Revenue
Resources 218 235 218 215 885 216 221 210 210
Transportation 176 190 193 199 758 200 231 227 227
CMS 121 132 147 142 541 133 136 130 130
Total Revenue - Legacy IHS 514 557 558 556 2,184 548 588 568 568
Financial Services
(3) 265 270 279 290 1,105 285 294 294 157
Total Revenue 779 827 837 846 3,289 833 882 862 725
Total Organic Growth %
Resources
(4)
0% -4% -4% -8% -4% -2% -13% -12% -12%
Transportation 7% 9% 12% 9% 9% 10% 12% 9% 9%
CMS
(5)
1% 0% 9% 3% 4% 4% 2% -9% -9%
Total Organic Growth % - Legacy IHS 3% 1% 4% 0% 2% 3% -1% -4% -4%
Financial Services 6% 6% 5% 1% 4% 2% 3% 3% 3%
Total Organic Growth %
(6) 4% 3% 4% 0% 3% 3% 0% -1% -2%
Re
ven
ue
by
To
tal
Se
gm
en
t
2015 Combined Results 2016 Combined Results
© 2016 IHS Markit. All Rights Reserved.
Combined Quarterly Revenue by Reported Category
Combined Quarterly Revenue CATEGORY View – HISTORICAL Basis
• Below figures reflect combined legacy IHS and legacy Markit (Financial Services) historical results on a consistent fiscal (Nov
year end) quarter basis
5
(1) Reflects combined IHS Markit results including Financial Services from June 1 – August 31, 2016
(2) Reflects combined IHS Markit results including Financial Services from July 12 – August 31, 2016
(3) Normalized for the shift in CERAWeek from Q1 to Q2, resources non-recurring organic growth was (23%) in Q1 16 and (5%) in Q2 16
(4) Excluding impact of BPVC, normalized CMS non-recurring organic growth was (23%) in reported Q3 16.
(5) Excluding impact of BPVC, normalized total IHS Markit non-recurring organic growth was (5%) in reported Q3 16.
Reported
For the period ended: Feb May Aug Nov Nov Feb May Aug Aug
Q1 15 Q2 15 Q3 15 Q4 15 FY 15 Q1 16 Q2 16 Q3 16 Q3 16
Full Qtr
(1)
Reported
(2)
Recurring Fixed Organic Growth %
Resources 6% 2% 2% -3% 2% -7% -8% -10% -10%
Transportation 9% 10% 12% 11% 11% 10% 10% 9% 9%
CMS 5% 4% 4% 4% 4% 4% 3% 0% 0%
Subscription Organic Growth % - Legacy IHS 7% 5% 5% 3% 5% 1% 1% -1% -1%
Financial Services na na na na na na na 3% 3%
Total Recurring Fixed Organic Growth % na na na na na na na 0% -1%
Recurring Variable Organic Growth %
Financial Services (only) na na na na na na na 3% 3%
Total Recurring Variable Organic Growth % na na na na na na na 3% 3%
Non-Recurring Organic Growth %
Resources
(3)
-28% -23% -30% -30% -27% 28% -36% -21% -21%
Tr n portation 3% 5% 12% 2% 5% 9% 19% 9% 9%
CMS
(4)
-19% -18% 35% 2% 0% 3% -1% -44% -44%
Non-Subs Organic Growth % - Legacy IHS -15% -12% 0% -10% -9% 14% -6% -14% -14%
Financial Services na na na na na na na 10% 10%
Total Non-Recurring Organic Growth %
(5)
na na na na na na na -12% -12%
Re
ve
nu
e b
y C
ate
go
ry
2015 Combined Results 2016 Combined Results
© 2016 IHS Markit. All Rights Reserved.
Supplemental Financial Services (Legacy Markit)
Legacy Markit / Financial Services Revenue
• Below 2015 figures reflect revenue by historical reporting segment on both originally reported basis (calendar Dec year-end) and
adjusted (fiscal Nov year-end) basis
• Below 2016 figures reflect revenue on a fiscal Nov year-end basis with full quarter of Q3 16 results
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(1) Q1 16 calendar quarter revenue was $288M total with 1% total organic growth. Q2 16 calendar quarter revenue was $300M total with 4% total organic growth.
For the period ended: Mar June Sept Dec Dec Feb May Aug Nov Nov Feb May Aug
Q1 15 Q2 15 Q3 15 Q4 15 FY 15 Q1 15 Q2 15 Q3 15 Q4 15 FY 15 Q1 16 Q2 16 Q3 16
Total Revenue
Information 121 123 126 132 502 121 120 127 129 497 131 131 133
Processing 67 68 61 60 256 61 67 65 63 256 59 63 64
Solutions 84 82 90 100 356 84 83 87 98 352 95 101 97
Total Revenue 272 273 277 292 1,113 265 270 279 290 1,105 285 294 294
Total revenue growth % 5% 3% 3% 7% 5% 6% 4% 4% 5% 5% 7% 9% 5%
Tot l Organic Growth %
In rmati n 6% 5% 5% 5% 5% 7% 4% 6% 4% 5% 6% 6% 3%
Processing -2% -3% -14% -15% -8% -6% -3% -8% -18% -9% -6% -8% 0%
Solutions 16% 14% 16% 11% 14% 16% 19% 15% 15% 15% 3% 6% 6%
Total Organic Growth % 6% 5% 3% 2% 4% 6% 6% 5% 1% 4% 2% 3% 3%
Reported Basis (Dec YE) Adjusted Fiscal Basis (1)Adjusted Fiscal Basis (Nov YE)
2015 Results 2016 Results
© 2016 IHS Markit. All Rights Reserved.
Estimated 2016 shares
in millions Q1 16A Q2 16A Q3 16A Q4 16E FY 16E
IHS – Pre Conversion 68.1 67.8 68.3 68.9 68.4
IHS – Converted @ 3.5566 242.1 241.2 242.9 245.0 243.0
Markit na na (1)106.1 (2)195.0 (3)76.0
IHS Markit 242.1 241.2 349.0 440.0 319.0
Projected 2016 Weighted Average Diluted Shares Outstanding
• Q3 reflects $157 million of share
repurchase (4.5 million shares at average
$35 price)
• Q4 assumes option dilution based on
estimated $37 stock price and 43M of
outstanding options
• The full-year weighted average diluted
share count of 319M is significantly less
than the Q4 ending share count due to
heavier weighting of the pre acquisition
(IHS only) period
• Q1 17 opening share count should be
based off the ending Q4 16 share count
Illustrative Option Dilution Impact
# of
Outstanding
Options
Estimated
Share Price
Total
Dilution (4)
FY Weighted
Average
Diluted Shares
9/27/16 View 43M $37 11.0M 319.0
$38 11.8M
$39 12.5M
$40 13.2M
• FY 16 total weighted average share
count reflects option dilution of combined
company over ~4.5 months versus 12
• As an example, if the current share price
increases from $37 to $40, this would
increase the Q4 share count by ~2 million
Illustrative Price
Sensitivity:
(1) Q3 16 reflects weighted average legacy Markit share contribution from July 12 – August 31st (51 of 92 days)
(2) Q4 16 reflects full impact of legacy Markit shares (91 of 91 days)
(3) FY 16 reflects weighted average legacy Markit share contribution from July 12 – November 30th (142 of 366 days)
7
(4) Represents dilution as calculated by multiplying the number of options outstanding by the assumed share price less proceeds
(proceeds calculated as number of outstanding option shares x strike price).