IHS Inc. (IHS)

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IHS Inc. (IHS)

F3Q08 Earnings Call

September 18, 2008 5:00 pm ET


Andy Schultz – Senior Director Investor Relations

Jerre L. Stead - Chairman & CEO

Michael J. Sullivan - Chief Financial Officer, Executive Vice President

Ron Mobed - Co-President, Co-Chief Operating Officer

Jeffrey R. Tarr - Co-President, Co-Chief Operating Officer


Ashley Hemphill - William Blair & Company, L.L.C.

John Neff -William Blair & Company, L.L.C.

John Crowther - Piper Jaffray



Welcome everyone to the IHS third quarter 2008 IHS earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call, Andy Schultz, Senior Director of Investor Relations.

Andy Schultz

We issued two news releases about an hour ago. If you do not have them you will find copies on our website at ihs.com In addition to announcing our third quarter and year-to-date results we also announced the signing of a definitive agreement to acquire, for $200 million, Global Insight, the worldwide leader in economic and financial analysis, forecasting and market intelligence for over 40 years. The deal is expected to close in the next month or so pending standard regulatory review.

Some of our comments and discussions on the quarter are based on non-GAAP measures. Our non-GAAP or adjusted numbers include stock-based compensation and other non-cash charges net pension income, restructuring charges, gains and losses on sales of assets 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 that 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 web cast and is the copyright and property of IHS. Any rebroadcasts of this information in whole or in part without the prior written consent of IHS are prohibited.

The agenda for today’s call is as follows: Jerre Stead our chairman & CEO will provide highlights of the quarter and review our most recent acquisitions, including the purchase of Global Insight; Mike Sullivan our executive vice president and CFO will review the third quarter and year-to-date financial results, discuss some of the financial aspects of the pending global Insight purchase, provide an update to our outlook for fiscal 2008 and preview our 2009 guidance. After formal comments we will then open the call for Q&A, at which time we will be joined by Ron Mobed and Jeff Tarr, co-presidents and co-COOs of IHS.

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 Stead

I would like to extend a special welcome to our soon to be new colleagues at Global Insight and our new colleagues at the acquisitions we have made since our last call. We have much to discuss today: continued strong operating and financial results, including record revenue, adjusted EBITDA and adjusted EPS; continuing progress on our internal initiatives; a change to our common stock structure with the conversion of all Class B shares to Class A shares and the associated elimination of the 10 to 1 voting structure; two closed acquisitions and the announcement of the Global Insight transaction, which is expected to close within the next few weeks.

First I want to express my sincere thanks to all of our colleagues for their continued hard work in delighting our customers and delivering these outstanding results for our shareowners.

Now let’s begin with our financial results.

Revenue for the third quarter was $207 million up 13% over last year. Adjusted EBITDA increased 28% or 320 basis points to a record $57 billion. Adjusted earnings per diluted share were $0.56, an increase of 30% over last year and we generated $40.3 million of free cash flow during the recent completed quarter.

Mike will discuss our financial results in further detail later.

At IHS our vision is to be the source for critical information and insight. When information and insight are mission critical to our customers achieving their business goals, we are the source they trust, rely on and come to first. Specifically we continue to improve our global leadership position for information and insight across four targeted information domains, energy, product life cycle, security, and environment.

Our strategies to drive profitable growth are directly linked to four objectives that include committed annual targets for customer delight, colleague success, profitable top and bottom line growth, and shareowner success as measured by margin improvement relative to our peer group.

Consistent implementation of our strategies for profitable growth continues to create value for all of our stakeholders. Our first strategy is to put customers first in everything we do. We set targets for improving customer delight each year and we benchmark our results through annual survey. This year’s customer first survey begins later this month. Our goal is to improve our customer delights score by at least 10% over 2007 results. Our second strategy is to create a best in class work environment that supports profitable growth. In order to create a better in class work environment, a best in class work environment, we must solicit input and feedback from our colleagues around the world. To that end, and similar to our customer first initiative, we also survey our colleagues annually with the goal to improve last years results by at least 10%. That survey is now under way.

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