IHS's CEO Discusses F2Q12 Results - Earnings Call Transcript

IHS (IHS)

F2Q12 Earnings Call

June 18, 2012 5:00 p.m. ET

Executives

Jerre Stead- Chairman and CEO

Scott Key - President and COO

Richard Walker - EVP and CFO

Andy Schulz - IR

Analysts

Eric Boyer - Wells Fargo

Brian Karimzad - Goldman Sachs

Bill Warmington - Raymond James

Toni - Morgan Stanley

Kelly Flynn - Credit Suisse

Bill Sutherland - Northland Capital Markets

Andrew Steinerman - JP Morgan

Manav Patnaik - Barclays Capital

Presentation

Operator

Good day ladies and gentlemen, and welcome to the second quarter 2012 IHS Incorporated earnings conference call. [Operator instructions.] I would now like to turn the conference over to your host for today, Mr. Andy Schulz, vice president of investor relations. And you have the floor sir.

Andy Schulz

Thank you operator. Good afternoon and thank you for joining us for the IHS second quarter 2012 earnings conference call. We issued two news releases earlier this afternoon. In addition to announcing our second quarter earnings, we announced a secondary offering. If you do not have the releases we issued earlier today, you will find copies of them on our website at IHS.com.

Some of our comments and discussions on the quarter are based on non-GAAP measures. Our non-GAAP or adjusted numbers exclude stock-based compensation and other non-cash charges and other items. Our earnings release includes both our GAAP-based income statement and statement of cash flows and reconciliations to the non-GAAP measures discussed during this call. These reconciliation schedules can also be found on our website.

The non-GAAP results are a supplement to the GAAP financial statements. IHS believes this non-GAAP presentation and the elimination of these items is useful in order to focus on what we deem to be a more reliable indicator of ongoing operating performance.

As a reminder, this conference call is being recorded and webcast and is the copyrighted property of IHS. Any rebroadcast of this information, in whole or in part, without the prior written consent of IHS is prohibited.

Please keep in mind that this conference call, especially the discussion of our outlook, may contain statements about expected future events that are forward-looking and subject to risks and uncertainties. Factors that could cause actual results to differ and vary materially from expectations can be found in IHS's filings with the SEC and on the IHS website.

With that, it is my pleasure to turn the call over to Jerre Stead, IHS chairman and CEO. Jerre?

Jerre Stead

Thank you Andy. Good afternoon and welcome to our investors and to my IHS colleagues. After providing an overview of our performance highlights for the quarter, I will update you on the multiple investments we continue to make in our business, including the two acquisitions announced since investor day.

Before I brief you on the quarterly results, I want to quickly note the secondary offering we announced about an hour ago. This is a secondary offering for 8 million shares, plus a 1.2 million share [shoe]. As with the two secondary offerings we did shortly after our IPO, we are facilitating the organized sale of the shares of an existing share owner and IHS is not raising any primary funds.

Current share owners are not being diluted as a result of this offering, and we view this offering as a strong positive which will improve the liquidity of our stock. We’ll be happy to answer any questions you have on this offering.

Now, on to our financial results. Overall, we had a strong quarter, as expected. Revenue was up 20% in the second quarter, including solid organic growth of 8% in subscriptions and 7% overall. Adjusted EBITDA increased by 26%, and our adjusted EBITDA margin was 31%.

We are tracking to our updated guidance, which reflects our expectation of continued solid performance for the balance of the year. Scott Key, our president and chief operating officer, and Rich Walker, our executive VP and chief executive officer will provide more detail shortly.

This quarter we continued the implementation of new products, new platforms, and new processes to position IHS for long term profitable growth. When we think about our major investments and a scalable foundation, combined with a challenging situation in the broader global economy, our quarterly performance is especially notable. I want to thank all of my colleagues for their great work.

We continue to invest in our business at a historic rate, and we’re making great progress on our two major infrastructure projects, Vanguard and Newton. Vanguard is our platform to support business growth and drive business process simplification and standardization of all our financial, order to cash, and sales processes and systems. This is a very important enabler to all aspects of our business performance and growth.

On June 4, we reached another milestone in the Vanguard program, with the third release of the system. This release included the legacy legal entities of many of our largest acquisitions from the last five years, including IHS Jane’s, IHS Fairplay, IHS Global Insight, and our chemical assets.

Cross functional teams have been working diligently for months to ensure the effective launch and transition to Vanguard. I’m happy to report the release has gone according to our expectations and we are now commencing preparations for another significant release later this year.

We have created three regional centers of excellence for finance and customer care to support our growth worldwide. These centers are designed to create standard processes, maximize capacity and scalability, and continue to improve our customer’s experiences around the world. This represents an important investment in streamlining our operations, resulting in measurable progress and delighting our customers and contributing to the long term potential to expand margins and profitability. All of our teams are to be congratulated for their extraordinary efforts and great results produced to date.

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