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Fourth quarter and Full Year 2014 Financial Results February 11 th 2015

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Page 1: Q4 14 results presentation  final

Fourth quarter and Full Year 2014 Financial Results February 11th 2015

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Important notice

Forward-looking statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and

Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this

presentation that address activities, events or developments that Markit Ltd. (“Markit” or the “Company”) expects, believes or

anticipates will or may occur in the future are forward-looking statements. 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 the Company. 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 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 Markit.

When used in this presentation, the words “anticipate,” “believe,” “intend,” “expect,” “plan,” “will” or other similar words are

intended to identify forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties,

many of which are beyond the control of Markit, which may cause actual results to differ materially from those implied or

expressed by the forward-looking statements. Further information on such assumptions, risks and uncertainties is available in

Markit’s filings with the United States Securities and Exchange Commission (“SEC”). Markit’s SEC filings are available at

www.sec.gov or on the investor relations section of its website, www.markit.com. Markit undertakes no obligation and does not

intend to update these forward-looking statements to reflect events or circumstances occurring after the date of this presentation.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press

release. All forward-looking statements are qualified in their entirety by this cautionary statement.

Non-IFRS financial measures

This presentation also includes measures defined by the SEC as non-IFRS financial measures. Markit believes that these non-

IFRS measures can provide useful supplemental information to securities analysts, investors and other interested parties

regarding financial and business trends relating to its financial condition and results of operations when read in conjunction with

the company’s reported results. Definitions and reconciliations of these non-IFRS measures to most directly comparable IFRS

financial measures are available in the Appendix of this presentation and in Markit’s earnings release dated February 11, 2015.

Copyright ©2015, Markit Group Limited. All rights reserved and all intellectual property rights are retained by Markit.

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Agenda

Full year 2014 overview

Lance Uggla, CEO

Fourth quarter and full year 2014 financial results

Jeff Gooch, CFO

Appendix

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Full year 2014 overview

Lance Uggla

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2014 results

2014 overview

─ Successful IPO listing on Nasdaq

─ Strong full year 2014 financial performance

─ Revenue increased 12.4% to a record of $1.065 billion

─ Constant currency revenue growth +10.9% (7.8% organic, 3.1% acquired)

─ Driven by revenue growth in all three business segments:

Information +5.9%, organic growth +4.4%

Processing +7.4%, organic growth +5.1%

Solutions +31.7%, organic growth +17.8%, acquired growth +13.1%

─ Adjusted EBITDA grew 15.9%; Adjusted EBITDA margin of 46%

─ Adjusted Earnings up 12.3% and Adjusted EPS diluted up 7.1%

─ Continued innovation through product enhancements and new

product launches to address the needs of our customers

─ Completed two acquisitions – thinkFolio and CTI

─ Well positioned to deliver on our longterm financial objectives

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Q4 and FY 2014 financial results

Jeff Gooch

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Q4 and FY 2014 financial results

Summary financial results

($ million)

Q4 2014 Q4 2013 YoY% FY 2014 FY 2013 YoY%

Revenue 271.4 243.8 11.3% 1,065.1 947.9 12.4%

Constant currency growth - - 12.4% - - 10.9%

Adjusted EBITDA (1) 124.7 108.4 15.0% 488.2 421.3 15.9%

Adjusted EBITDA margin (2) 46.3% 44.5% N/A 46.0% 45.6% N/A

Adjusted Earnings (3) 69.1 65.4 5.7% 279.0 248.4 12.3%

Adjusted EPS diluted (4) $0.37 $0.37 - $1.51 $1.41 7.1%

Weighted average number of shares

used to compute earnings per share,

diluted

187.3 176.7 6.0% 184.5 175.6 5.1%

1. Adjusted EBITDA is defined as profit for the period from continuing operations before income taxes, net finance costs, depreciation and amortisation on fixed assets and

intangible assets (including acquisition related intangible assets), acquisition related items, exceptional items, share based compensation and related items, net other

gains or losses, including Adjusted EBITDA attributable to joint ventures and excluding Adjusted EBITDA attributable to non-controlling interests.

2. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue, excluding revenue attributable to non-controlling interests.

3. Adjusted Earnings is defined as profit for the period from continuing operations before amortisation of acquired intangibles, acquisition related items, exceptional items,

share based compensation, net other gains or losses and unwind of discount, less the tax effect of these adjustments and excluding Adjusted Earnings attributable to

non-controlling interests.

4. Adjusted EPS diluted is defined as Adjusted Earnings divided by the weighted average number of shares used to compute earnings per share diluted.

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Q4 and FY 2014 financial results

Revenue growth ($ million)

$243.8

$21.6

$8.6 $(2.6) $271.4

$200

$210

$220

$230

$240

$250

$260

$270

$280

Q4 2013revenue

Organicgrowth

Acquiredgrowth

FX /Currency

impact

Q4 2014revenue

+8.9%

+3.5% (1.1)%

+11.3%

$947.9

$73.4 $29.2

$14.6

$700

$750

$800

$850

$900

$950

$1,000

$1,050

$1,100

FY 2013revenue

Organicgrowth

Acquiredgrowth

FX /Currency

impact

FY 2014revenue

+7.8%

+3.1%

+1.5%

+12.4%

Q4 2014 vs. Q4 2013 FY 2014 vs. FY 2013

$1,065.1

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Q4 and FY 2014 financial results

Revenue mix – Q4 2014

$ million / % Q4 2014 % Q4 2013 % Q4 YoY FY 2014 % FY 2013 % FY YoY

Recurring fixed $146.0 53.8% $124.3 51.0% $21.7 $559.2 52.5% $479.6 50.6% $79.6

Recurring variable $111.0 40.9% $108.3 44.4% $2.7 $450.5 42.3% $429.4 45.3% $21.1

Non-recurring $14.4 5.3% $11.2 4.6% $3.2 $55.4 5.2% $38.9 4.1% $16.5

Total Revenue $271.4 $243.8 $27.6 $1,065.1 $947.9 $117.2

53.8% 40.9%

5.3%

Recurring fixed

Recurring variable

Non-recurring

Q4 2014: $271.4 million

Q4 highlights:

─ Recurring fixed revenue

increased due primarily to

new business wins

─ Recurring variable revenue

decreased as a percentage

of total revenue

─ Non-recurring revenue

increased due to new

business wins in Solutions

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Q4 and FY 2014 financial results

Operating expenses

($ million)

Q4 2014 Q4 2013 YoY% FY 2014 FY 2013 YoY%

Personnel

costs (85.3) (75.8) 12.5% (350.4) (307.3) 14.0%

Non

personnel

costs

(54.0) (59.6) (9.4)% (218.8) (207.8) 5.3%

Total

operating

expenses

(139.3) (135.4) 2.9% (569.2) (515.1) 10.5%

Q4 highlights:

─ Personnel costs increased

due to acquisitions and new

hires

─ Employee growth was

predominantly in low cost

locations

─ Non personnel costs

decreased following closure

of Credit Centre and other

items

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Q4 and FY 2014 financial results

Information

($ million)

116.9 123.2

56.4 64.3

0

20

40

60

80

100

120

140

Q4 2013 Q4 2014

Revenue Adjusted EBITDA

+5.4%

Q4 2014 Q4 2013 YoY% FY 2014 FY 2013 YoY%

Revenue 123.2 116.9 5.4% 486.5 459.6 5.9%

Organic growth - - 6.8% - - 4.4%

Adjusted EBITDA 64.3 56.4 14.0% 239.2 217.2 10.1%

Adjusted

EBITDA margin 52.2% 48.2% - 49.2% 47.3% -

Q4 highlights:

─ Growth in Pricing and

Reference Data, primarily in

Fixed Income

─ Strong operating leverage

leading to increased EBITDA

margins

─ Customer retention and

renewals remain strong

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Q4 and FY 2014 financial results

Processing

($ million)

Q4 highlights:

─ Derivatives processing revenue

benefitted from higher volumes

─ Limited revenue impact from

SEF regulations

─ Cost savings are starting be to

delivered

65.0 68.5

29.8 36.5

0

10

20

30

40

50

60

70

80

Q4 2013 Q4 2014

Revenue Adjusted EBITDA

+5.4%

Q4 2014 Q4 2013 YoY% FY 2014 FY 2013 YoY%

Revenue 68.5 65.0 5.4% 284.9 265.3 7.4%

Organic growth - - 6.2% - - 5.1%

Adjusted EBITDA 36.5 29.8 22.5% 156.6 138.1 13.4%

Adjusted

EBITDA margin 53.3% 45.8% - 55.0% 52.1% -

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Q4 and FY 2014 financial results

Solutions

($ million)

61.9

79.7

22.2 24.3

0

10

20

30

40

50

60

70

80

90

Q4 2013 Q4 2014

Revenue Adjusted EBITDA

+28.8%

Q4 2014 Q4 2013 YoY% FY 2014 FY 2013 YoY%

Revenue 79.7 61.9 28.8% 293.7 223.0 31.7%

Organic growth - - 15.7% - - 17.8%

Acquisition related - - 13.9% - - 13.1%

Adjusted EBITDA 24.3 22.2 9.5% 93.1 77.5 20.1%

Adjusted EBITDA

margin 30.5% 35.9% - 31.7% 34.8% -

Q4 highlights:

─ Double digit organic revenue

growth driven by new business

wins across both Managed

Services and Enterprise Software

─ Continued momentum in KYC

across both buy and sell side

─ Margin decrease reflects

continued investment in new

initiatives

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Q4 and FY 2014 financial results

Exceptional items ($ million)

Q4 2014 Q4 2013 FY 2014 FY 2013

Legal advisory costs (1.6) (2.5) (5.6) (6.3)

Impairments (31.5) (40.8) (39.8) (53.5)

Profit on sale of available-for-sale financial asset

- - - 4.2

IPO preparation and execution costs - - (12.1) -

Accelerated share based compensation charges

- - (7.3) -

Recognition of liability for social security costs on option exercise

- - (20.1) -

Indirect taxes - (5.0) - (5.0)

Total exceptional items (33.1) (48.3) (84.9) (60.6)

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Q4 and FY 2014 financial results

Net debt / leverage

($ million)

December

31st 2014

December

31st 2013

Bank borrowings 224.5 268.0

Share buyback 211.1 306.6

Total borrowings 435.6 574.6

Cash and cash equivalents (117.7) (75.3)

Net debt 317.9 499.3

Adjusted EBITDA 488.2 421.3

Leverage

(Net debt/ Adjusted EBITDA) 0.65x 1.19x

Highlights:

─ Operating cash flow was $369.9

million for the full year 2014, up

8.9% year on year

─ Capital expenditure full year 2014

was $124.9 million, down 4.3% or

$5.6 million year on year

─ Net debt down 36.3% or $181.4

million

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Appendix

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Q4 and FY 2014 financial results

Shares outstanding

Summary

─ Average share price is a key driver of the

dilution calculation, an indicative estimate of

the impact of share price fluctuations on

diluted share count is shown in the table

─ Weighted average number of shares, diluted

is calculated in accordance with IFRS

─ The majority of options priced at below

$26.70 vested on IPO

─ Options priced at $26.70 largely vest in

tranches over a 5 year period from IPO date

or January 2014

─ Option exercises will generate substantial

cash inflows as well as cash tax benefits

(million except share price)

2014

2013

Number of shares outstanding at the reporting date 182.5 176.8

Weighted average number of shares, basic 180.6 175.4

Option dilution 5.7 0.7

Restricted shares dilution 1.0 0.6

Weighted average number of shares, diluted 187.3 176.7

Share price used for Q414 dilution calculation $23.97 -

Illustrative average

share price

Illustrative diluted average

number of shares (million)

$23 186.4

$27 190.3

$30 195.8

Exercise price Outstanding (million) Unvested (million)

< $15.00 4.7 –

$15.00- $19.99 5.8 0.7

$20.00- $26.69 22.0 6.3

> $26.69 33.7 33.0

Total 66.2 40.0

Three months ended December 31st – Reported

Illustrative weighted average diluted number of shares

three months ended December 31st 2014

Total outstanding options at December 31st 2014

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Sub-segment revenue summary

Sub-segment revenue – 3 year summary

($ million)

Segments FY 2012 FY 2013 FY 2014

CAGR %

FY2012 – 2014

Pricing and Reference Data 159.0 182.8 199.8 12.1%

Indices 80.3 86.6 91.5 6.7%

Valuation and Trading Services 192.0 190.2 195.2 0.8%

Information 431.3 459.6 486.5 6.2%

Processing 238.8 265.3 284.9 9.2%

Managed Services 108.3 131.6 167.6 24.4%

Enterprise Software 82.2 91.4 126.1 23.9%

Solutions 190.5 223.0 293.7 24.2%

Group 860.6 947.9 1,065.1 11.2%

Note: We reorganised certain products within our Information segment between the Pricing and Reference Data, Indices and Valuation and Trading Services sub-segments in 2014. For

comparability purposes, all prior year figures above have been presented to reflect this change.

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5 year historic financial performance

Note: Financials presented under IFRS accounting guidelines. Adjusted EBITDA, Adjusted Earnings, Adjusted earnings per share, diluted and Adjusted EBITDA margin are non-IFRS financial measures.

Please see Appendix for definitions of these measures and a reconciliation of non-IFRS financial measures to IFRS financial measures.

5 year historic financial performance

($ million)

668.4

762.5

860.6

947.9

1,065.1

261.0 305.0

358.2

421.3

488.2

144.9 184.8

218.4 248.4

279.0

46.2% 45.8% 47.0%

45.6% 46.0%

25%

30%

35%

40%

45%

50%

0

200

400

600

800

1,000

1,200

1,400

2010 2011 2012 2013 2014

Revenue Adjusted EBITDA Adjusted Earnings Adjusted EBITDA margin

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Reconciliation

Reconciliation to Adjusted EBITDA

($ million) FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Q4 2013 Q4 2014

Profit for the period 151.2 156.2 153.1 147.0 164.1 2.9 15.7

Income tax expense 43.8 50.6 42.7 63.7 56.5 11.6 19.7

Finance costs – net 18.2 22.9 28.9 19.4 16.9 4.4 4.1

Depreciation and amortisation - other 48.2 62.7 66.7 86.0 100.1 23.6 28.2

Amortisation – acquisition related 28.5 34.4 46.2 50.1 57.9 13.1 14.6

Acquisition related items (11.3) 4.8 0.9 (1.4) (12.4) (1.6) (1.4)

Exceptional items 30.9 11.6 40.3 60.6 84.9 48.3 33.1

Share based compensation and related items 14.9 11.7 16.2 8.1 16.0 2.2 9.2

Other losses / (gains) – net 0.1 4.6 11.6 (0.7) 6.0 3.9 3.0

Share of results from joint venture not attributable

to Adjusted EBITDA - - - - (1.1) - (1.1)

Adjusted EBITDA attributable to non-controlling

interests (63.5) (54.5) (48.4) (11.5) (0.7) - (0.4)

Adjusted EBITDA 261.0 305.0 358.2 421.3 488.2 108.4 124.7

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Reconciliation

Reconciliation to Adjusted Earnings

($ million)

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Q4 2013 Q4 2014

Profit for the period 151.2 156.2 153.1 147.0 164.1 2.9 15.7

Amortisation – acquisition related 28.5 34.4 46.2 50.1 57.9 13.1 14.6

Acquisition related items (11.3) 4.8 0.9 (1.4) (12.4) (1.6) (1.4)

Exceptional items 30.9 11.6 40.3 60.6 84.9 48.3 33.1

Share based compensation and related items 14.9 11.7 16.2 8.1 16.0 2.2 9.2

Other losses / (gains) – net 0.1 4.6 11.6 (0.7) 6.0 3.9 3.0

Unwind of discount(1)

3.4 8.9 9.3 12.4 10.5 2.6 2.7

Tax effect of above adjustments (14.6) (7.6) (24.1) (18.0) (47.4) (6.0) (6.9)

Adjusted Earnings attributable to non-controlling

interests (58.2) (39.8) (35.1) (9.7) (0.6) - (0.9)

Adjusted Earnings 144.9 184.8 218.4 248.4 279.0 65.4 69.1

Weighted average number of shares for

computation of earnings per share, diluted 175,550,760 184,467,540 176,667,290 187,335,924

1. Unwind of discount represents the non-cash unwinding of discount, recorded through finance costs – net in the income statement, primarily in relation to our share buyback liability.

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Q4 and FY 2014 financial results

Definitions

Revenue growth

We measure revenue growth in terms of organic revenue growth, acquisition related revenue growth, foreign currency impact on revenue growth and constant currency revenue growth. We

define these components as follows:

Organic – Revenue growth from continuing operations from factors other than acquisitions and foreign currency fluctuations. We derive organic revenue growth from the development of new

products and services, increased penetration of existing products and services to new and existing customers, price changes for our products and services and market driven factors such as

increased trading volumes or changes in customer assets under management.

Acquisition related – Revenue growth from acquired businesses through the end of the fiscal year following the fiscal year in which the acquisition was completed. This growth results from our

strategy of making targeted acquisitions that facilitate growth by complementing our existing products and services and addressing market opportunities.

Foreign currency – The impact on revenue growth resulting from the difference between current revenue at current exchange rates and current revenue at the corresponding prior period

exchange rates.

Constant currency – Total revenue growth, excluding the impact of exchange rate movements from the prior period to the current period. This is equal to the combination of organic and

acquisition related revenue growth, as described above.

Revenue by type

Revenue by type is how we classify the income recognised from the sale of our products and services into three groups as defined below:

Recurring fixed revenue – Revenue generated from contracts specifying a fixed fee for services delivered over the life of the contract. The fixed fee is typically paid annually, semiannually or

quarterly in advance. These contracts are typically subscription contracts where the revenue is recognised across the life of the contract. The initial term of these contracts can range from one to

five years and usually includes auto-renewal clauses.

Recurring variable revenue – Revenue derived from contracts that specify a fee for services which is typically not fixed. The variable fee is typically paid monthly in arrears. Recurring variable

revenue is based on, among other factors, the number of trades processed, assets under management or the number of positions we value. Many of these contracts do not have a maturity

date while the remainder have an initial term ranging from one to five years.

Non-recurring revenue – Revenue that relates to certain software license sales and the associated consulting revenue.

Other Non-IFRS Measures

Adjusted EBITDA is defined as profit for the period from continuing operations before income taxes, net finance costs, depreciation and amortisation on fixed assets and intangible assets

(including acquisition related intangible assets), acquisition related items, exceptional items, share based compensation and related items, net other gains or losses, including Adjusted EBITDA

attributable to joint ventures and excluding Adjusted EBITDA attributable to non-controlling interests.

Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue, excluding revenue attributable to non-controlling interests.

LTM Adjusted EBITDA is defined as Adjusted EBITDA for the previous twelve month period from date reported.

Adjusted Earnings is defined as profit for the period from continuing operations before amortisation of acquired intangibles, acquisition related items, exceptional items, share based

compensation, net other gains or losses and unwind of discount, less the tax effect of these adjustments and excluding Adjusted Earnings attributable to non-controlling interests.

Adjusted EPS diluted is defined as Adjusted Earnings divided by the weighted average number of shares used to compute earnings per share, diluted.