IHS Class A Earnings Call Nuggets: Organic Growth Outlook and PFC Acquisition

IHS Class A (NYSE:IHS) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Organic Growth Outlook

Eric Boyer – Wells Fargo Securities, LLC: Just to clarify, you expect all-in organic growth for the second half to be around 5% and that would include, I think, 6% for subscription business and then for the non-subscription business to improve upon the first half results. Then could you just give us some confidence for the subscription piece of the business having bottomed here at 6%?

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Scott Key – President and COO: Thanks Eric. So, you listened really well. As you indicated, we see non-subscription growth rising in the back half of the year and this will elevate our overall organic growth into the 5% to 7% range. We started the year talking about 6% to 8% subscription organic growth and are delivering that right now. Remember in Q1 we had a slightly elevated rate due to in-period items. So, we’re tracking pretty steady and pretty stable on the subs base and we believe that’s going to continue for the full year. So, we see solid consistent performance, despite what’s going on in the world around us.

Eric Boyer – Wells Fargo Securities, LLC: Could you then just give us the deferred organic revenue growth as well?

Scott Key – President and COO: Right in line with what it was in Q1. So the deferred balance – we don’t believe it’s the best measure and we’re going to give you some better ones as we get SFA up and running, but it was right in line at 10% in total and the organic levels right in line with Q1 and right in line with our subs base. So, we feel good about how the deferred is building and our subs base going forward.

PFC Acquisition

Suzanne Stein – Morgan Stanley: First of all, Jerre, we’re going to miss you. So good luck to you. Can you guys be a little more specific about the PFC acquisition? I guess you’re not giving too much in terms of detail, but any sense of the size of the acquisition, or the financial profile of the company? I didn’t see anything in the release.

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Scott Key – President and COO: We tend to – Suzie, thanks and thanks for the question. It’s actually a great asset and a great history. We are very careful about given details on purchase price and that level of detail, because, of course, it tends to come back to bite us as we look to acquire great assets going forward, but what you can derive from it is, first, if you look at both the sequester that we talked about and FX headwinds and the remaining stub period for PFC is kind of right in line on revenue and profit. It’s a roughly 20s margin company. It’s in our core space. It expands to have a great presence in Asia, great presence in the Middle East. It really gives us, as we said, breadth and depth, subscription base. So, it’s really going to build our energy business into a market-leading capability that, of course, we’ve been building for many years.

A Closer Look: IHS Earnings Cheat Sheet>>