IHS : Reports Third Quarter 2014 Results

IHS Inc. (NYSE: IHS), the leading global source of information and analytics, today reported results for the third quarter ended August 31, 2014.

• Revenue of $556 million, up 16 percent from the prior-year period
• Total organic revenue growth of 5 percent, as normalized, anchored by 6 percent subscription organic revenue growth
• Adjusted EBITDA of $174 million, up 21 percent from the prior-year period
• Adjusted earnings per diluted share (Adjusted EPS) of $1.49, up 17 percent from the prior-year period
• Free cash flow of $135 million, up 124 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 2014 Financial Performance

“We are pleased with the solid progress on our commercial expansion initiatives this quarter as we continue to build our organic performance,” said Scott Key, IHS president and chief executive officer. “The disciplined execution of our strategy is resulting in a consistent delivery of organic revenue growth, profit growth and margin expansion as we are also building new growth in our sales and product pipelines.”

“We continue to drive strong cash flows, delivering $586 million of free cash flow over the last 12 months, and we also drove solid margin expansion in the quarter,” said Todd Hyatt, IHS chief financial officer. “These attributes of our business model provide us with great operational and capital structure flexibility.”

Third Quarter and Year-to-Date 2014 Revenue Performance

Third quarter 2014 revenue increased 16 percent compared to the third quarter of 2013, and year-to-date 2014 revenue increased 29 percent compared to the same period in 2013. The components of revenue growth are described below by segment and in total.

The subscription-based business grew 6 percent organically in the third quarter of 2014 compared to the third quarter of 2013, as described in the following table.

Third Quarter and Year-to-Date 2014 Segment Performance

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

• Americas. Third quarter revenue for Americas increased $56 million, or 18 percent, to $363 million, and included 5 percent organic growth for the subscription-based business. Third quarter Adjusted EBITDA for Americas increased $11 million, or 9 percent, to $134 million. Third quarter operating income for Americas increased $19 million, or 26 percent, to $90 million.
  
  Year-to-date revenue for Americas increased $297 million, or 37 percent, to $1.091 billion. Year-to-date Adjusted EBITDA for Americas increased $68 million, or 21 percent, to $392 million. Year-to-date operating income for Americas increased $48 million, or 23 percent, to $261 million.
  
  Americas results for both the third quarter and year-to-date 2014 periods benefited from the inclusion of R. L. Polk.

• EMEA. Third quarter revenue for EMEA increased $16 million, or 13 percent, to $138 million, and included 8 percent organic growth for the subscription-based business. Third quarter Adjusted EBITDA for EMEA increased $15 million, or 56 percent, to $41 million. Third quarter operating income for EMEA increased $15 million, or 78 percent, to $35 million. EMEA profit benefited from revenue growth and prior investment in scaled infrastructure.
  
  Year-to-date revenue for EMEA increased $59 million, or 17 percent, to $404 million. Year-to-date Adjusted EBITDA for EMEA increased $36 million, or 47 percent, to $113 million. Year-to-date operating income for EMEA increased $38 million, or 67 percent, to $94 million.

• APAC. Third quarter revenue for APAC increased $4 million, or 7 percent, to $54 million, and included 6 percent organic growth for the subscription-based business. Third quarter Adjusted EBITDA for APAC increased $3 million, or 30 percent, to $13 million. Third quarter operating income for APAC increased $2 million, or 18 percent, to $11 million.
  
  Year-to-date revenue for APAC increased $12 million, or 8 percent, to $154 million. Year-to-date Adjusted EBITDA for APAC increased $6 million, or 21 percent, to $37 million. Year-to-date operating income for APAC increased $5 million, or 16 percent, to $34 million.

Outlook (forward-looking statement)

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

• Revenue in a range of $2.225 billion to $2.235 billion, including 6 percent organic growth on the subscription base;
• Adjusted EBITDA in a range of $685 million to $695 million; and
• Adjusted EPS in a range of $5.70 to $5.80 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 2014 results on September 18, 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 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 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 approximately 8,000 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.
© 2014 IHS Inc. All rights reserved.

Excluding the effect of the BPVC engineering standard release in the third quarter of 2013 results in the following organic revenue growth percentages:

• Americas organic revenue growth was 3 percent for the three months ended August 31, 2014 and 4 percent for the nine months ended August 31, 2014;
• EMEA organic revenue growth was 8 percent for both the three and nine months ended August 31, 2014;
• APAC organic revenue growth was 6 percent for the three months ended August 31, 2014 and 3 percent for the nine months ended August 31, 2014;
• Non-subscription organic revenue growth was 1 percent for the three months ended August 31, 2014 and 2 percent for the nine months ended August 31, 2014;
• Horizontal products organic revenue growth was 2 percent for the three months ended August 31, 2014 and 4 percent for the nine months ended August 31, 2014; and
• Total organic revenue growth was 5 percent for both the three and nine months ended August 31, 2014.