UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended November 30, 20182019
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to
Commission file number 001-36495
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IHS MARKIT LTD.
(Exact name of registrant as specified in its charter)
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| Bermuda | 98-1166311 | |
(State or | (IRS Employer Identification No.) | |
4th Floor, Ropemaker Place
25 Ropemaker Street
London, England
EC2Y 9LY
(Address of Principal Executive Offices)
+44207260 2000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| Common Shares, $0.01 par value per share | New York Stock Exchange | |||
Securities registered pursuant to Section 12(g) of the Act:
None.
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x☒ Yes o☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. o☐ Yes x☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x☒ Yes o☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x☒ Yes o☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o☐ Yes x☒ No
The aggregate market value of the voting and non-voting common equity held by non-affiliates, based upon the closing price for the common shares as reported on the NASDAQ Global Select Market on the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $13.4$15.1 billion. All executive officers, directors, and holders of five percent or more of the outstanding common shares of the registrant have been deemed, solely for purposes of the foregoing calculation, to be “affiliates” of the registrant.
As of December 31, 2018,2019, there were 397,359,890392,948,672 of our common shares outstanding, excluding 25,219,470 outstanding common shares held by the Markit Group Holdings Limited Employee Benefit Trust.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
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Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. These statements, which express management’s current views concerning future business, events, trends, contingencies, financial performance, or financial condition, appear at various places in this report and use words like “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “goal,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “see,” “seek,” “should,” “strategy,” “strive,” “target,” “will,” and “would” and similar expressions, and variations or negatives of these words. Examples of forward-looking statements include, among others, statements we make regarding: guidance and predictions relating to expected operating results, such as revenue growth and earnings; strategic actions such as acquisitions, joint ventures, and dispositions, the anticipated benefits therefrom, and our success in integrating acquired businesses; anticipated levels of capital expenditures in future periods; anticipated levels of indebtedness, capital allocation, dividends, and share repurchases in future periods; our belief that we have sufficient liquidity to fund our ongoing business operations; expectations of the effect on our financial condition of claims, litigation, environmental costs, contingent liabilities, and governmental and regulatory investigations and proceedings; and our strategy for customer retention, growth, product development, market position, financial results, and reserves. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on management’s 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. 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: operating in competitive markets, economic and financial conditions, including volatility in interest and exchange rates; our ability to develop new products and services; our ability to manage system failures or capacity constraints; our ability to manage fraudulent or unpermitted data access or other cyber-security or privacy breaches; our ability to successfully manage risks associated with changes in demand for our products and services; our ability to manage our relationships with third-party service providers; legislative, regulatory, and economic developments, including any new or proposed U.S. Treasury rule changes; 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; the anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion, and growth of our operations; our ability to retain and hire keyqualified personnel; our ability to satisfy our debt obligations and our other ongoing business obligations; and the occurrence of any catastrophic events, including acts of terrorism or outbreak of war or hostilities. These risks, as well as other risks which would cause actual results to be significantly different from those expressed or implied by these forward-looking statements, are more fully discussed under the caption “Risk Factors” in this Annual Report on Form 10-K, along with our other filings with the U.S. Securities and Exchange Commission (“SEC”). While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as
compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on our consolidated financial condition, results of operations, credit rating, or liquidity. Therefore, you should not rely on any of these forward-looking statements. Any forward-looking statement made by us in this Annual Report on Form 10-K is based only on information currently available to our management and speaks only as of the date of this report. We do not assume any obligation to publicly provide revisions or updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.
Website and Social Media Disclosure
We use our website (www.ihsmarkit.com) and corporate Twitter account (@IHSMarkit) as routine channels of distribution of company information, including news releases, analyst presentations, and supplemental financial information, as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor our website and our corporate Twitter account in addition to following press releases, SEC filings, and public conference calls and webcasts. Additionally, we provide notifications of news or announcements as part of our investor relations website. Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts.
None of the information provided on our website, in our press releases, public conference calls, and webcasts, or through social media channels is incorporated into, or deemed to be a part of, this Annual Report on Form 10-K or in any other report or
document we file with the SEC, and any references to our website or our social media channels are intended to be inactive textual references only.
Financial Presentation
We operate on a November 30 fiscal year end. Unless otherwise indicated, references in this Annual Report on Form 10-K to an individual year means the fiscal year ended November 30. For example, “2018”“2019” refers to the fiscal year ended November 30, 2018.2019.
Trademarks, Service Marks, and Copyrights
We own or have rights to use the trademarks, service marks, and trade names that we use in connection with the operation of our business; other trademarks, service marks, and trade names referred to in this Annual Report on Form 10-K are, to our knowledge, the property of their respective owners. We also own or have the rights to copyrights that protect aspects of our products and services. Solely for convenience, the trademarks, service marks, trade names, and copyrights referred to in this Annual Report on Form 10-K are listed without the ®, ™, and © symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks, and trade names.
PART I
Item 1. Business
History and Development of the Company
Our principal executive offices are located at 4th Floor, Ropemaker Place, 25 Ropemaker Street, London, England EC2Y 9LY. Our telephone number at this address is +44 20 7260 2000. We maintain a registered office in Bermuda at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. The telephone number of our registered office is +1 441 295 5950.
Our Vision
Our vision is to be our customers’ leading source for critical information, analytics, and insight. Our purpose is to help our customers grow, enabling better decision making and operational efficiency.
Our Business
We deliver data, insight, and software that combine our expertise, unique content sets, and leading technology to the world’s major industries, financial markets, and governments. Our analytics reveal interdependencies across complex industries, which enhances transparency, reduces risk, and improves operational efficiency for our customers. Our information, analytics, and solutions are significant components in the systems and workflows of many of our customers and continue to become increasingly important to our customers’ operations. We leverage leading technologies and our industry expertise to create innovative products and services that provide information and insight to our customers to help them be more efficient and make more informed decisions. We are committed to sustainable, profitable growth.
Our core competency is using our expertise to source and transform data into information and analytics that our customers can use when making operational and strategic decisions. We are a dependable resource for our customers, who require and demand the most accurate and robust information available. We are dedicated to providing the information and analysis our customers need to make critical decisions that drive growth and value for their operations.
By integrating and connecting our information and analytics with proprietary and widely used decision-support technology on scalable platforms, we produce critical information and insight designed to meet our customers’ needs. Our product development teams have also created proprietary Web services and application interfaces that enhance access to our information and allow our customers to integrate our offerings with other data, business processes, and applications (such as computer-aided design, enterprise resource planning (“ERP”), supply chain management, and product data/lifecycle management).
Our Objectives
To achieve our vision, we are focusing our efforts primarily on the following areas:
| • | Customers. We are working together with our customers to be a trusted and valued partner through meaningful and responsive engagement, deep and differentiated expertise, and best-in-class delivery. |
| • | Product. We strive to develop innovative, best-in-class products that deliver real value, are reliable, and stand out from our competitors. |
| • | Technology and data science. We are using technology and data science as a differentiator to maximize and optimize our content, expertise, and operations. |
| • | People. Our work environment is designed to encourage excitement and pride in the work we do and where our people are constantly learning and feel challenged, respected, and valued. |
| • | Efficiency. We expect to achieve operational excellence by consistently improving productivity and efficiency by leveraging technology and operations. |
| • | Financial strength. We seek to consistently deliver on our key financial commitments. |
We benchmark our progress annually against these objectives using external and internal metrics. For example, to
measure customer and employee satisfaction, we use third-party surveys and develop goals based on those metrics.
Our Strategy
Our strategy is to bring together information, research, analytics, and technology to deliver integrated offerings to customers in separate but interconnected industries. We believe that we can best implement our strategy by using our strong foundation of leading assets, talent, and competitive positioning in large growing global markets to achieve the following:
| • | Increase in geographic, product, and customer penetration. We believe there are continued opportunities to add new customers and to increase the use of our products and services by existing customers. We plan to add new customers and build our relationships with existing customers by leveraging our existing sales channels, broad product portfolio, global footprint, and industry expertise to anticipate and respond to the changing demands of our end markets. |
| • | Introduce innovative offerings and enhancements. To maintain and enhance our position as a leading information services provider, we introduce enhancements to our products and services, as well as launch new products and services. We maintain an active dialogue with our customers and partners to allow us to understand their needs and anticipate market developments. We also seek to develop innovative uses for our existing products and services to generate incremental revenue, find more cost-effective inputs to support our existing products and services, and facilitate development of profitable new products and services.Our investment priorities are primarily in energy, automotive, and financial services, and we intend to continue to invest across our business to increase our customer value proposition. |
| • | Balance capital allocation. We expect to balance capital allocation between returning capital to shareholders (targeting an annual capital return of 50 to 75 percent of our annual capital capacity through a combination of share repurchases and cash dividends) and completing mergers and acquisitions, focused primarily on targeted transactions in our core end markets that will allow us to continue to build out our strategic position. We intend to operate at the high end of our capital policy target leverage ratio of 2.0-3.0x. |
Our Global Organizational Structure
To serve our customers, we are organized into the following four industry-focused segments:
•Resources, which includes our Energy and Chemicals product offerings;
Financial Services, which includes our financial Information, Solutions, and Processing product offerings;
•Transportation, which includes our Automotive and SolutionsMaritime & Trade product offerings, as well asofferings;
•Resources, which includes our Upstream and Downstream product offerings of Ipreo, our recent acquisition.offerings; and
| • | Consolidated Markets & Solutions, which includes our Product Design, Economics & Country Risk, and TMT benchmarking product offerings. |
We believe that this sales and operating model helps our customers do business with us by providing a cohesive, consistent, and effective product, sales, and marketing approach by segment.
Our Competitive Strengths
We believe that our competitive strengths include the following:
| • | Trusted partner with diversified, global customer base and strong brand recognition. We believe that our customers trust and rely on us for our consultative approach to product development, dedication to customer satisfaction, and ability to execute and deliver effective product and service offerings. Our industry expertise allows us to effectively anticipate, understand, and address our customers’ needs. Our global footprint allows us to serve our customers throughout the world and to introduce our products and services to customers in new markets. Our product offerings are well established and recognized in multiple industries. We also own a number of well-known brands, including CARFAX, CERAWeek, the Purchasing Managers Index series, and the iBoxx indices. |
| • | Breadth and depth of information and analytics. Our customers benefit from a concentration of intellectual wealth and thought leadership in a variety of industries. We believe that our global team of information and industry experts, research analysts, and economists provides our customers with leading strategic information and research. We convert raw data into critical information through a series of transformational steps that reduce the uncertainty that is inherent in unrefined data. Our goal is to ensure that the information we provide through our product offerings is correct, current, complete, and consistent; therefore, we place a high degree of emphasis on the data transformation process. |
| • | Attractive financial model. We believe we have an attractive financial model due to our recurring revenue, margin expansion, cash generation, and capital flexibility characteristics. |
| ◦ | Significant recurring revenue. We offer our products and services primarily through recurring fixed and variable fee agreements, and this business model has historically delivered stable revenue and predictable cash flows. For the year ended November 30, |
| ◦ | Solid margin expansion. Our customer focus and fiscal discipline |
| ◦ | High cash generation. Our business has low capital requirements for product enhancement and new product development, allowing us to generate strong cash flow. |
| ◦ | Capital flexibility. Our cash flow model and credit quality provide us with a significant amount of flexibility in decision-making, allowing us to balance internal resource and investment needs, acquisitions, and shareholder return. |
Our Customers
We have a diverse customer base, with more than 50,000 business and government customers, including 80 percent of the Fortune Global 500 and 70more than 80 percent of the Fortune U.S. 1000. Our customers operate in global interconnected industries and financial markets, and we continue to build on our existing scale to integrate our comprehensive content, expertise, tools, technology, and research and analysis to produce a differentiated offering that makes us an important part of many of our customers’ core workflows. In 2018,2019, no customer or group of affiliated customers represented more than 10 percent of our revenue.
Our Operating Segments
We develop our products and services based on customer needs in the target industries we serve and in the workflows that our customers use. We have organized our business to address the following key industries:
Financial Services
Our Financial Services segment provides pricing and reference data, indices, valuation and trading services, trade processing, enterprise software, and managed services. Financial Services end users include front- and back-office professionals, such as traders, portfolio managers, risk managers, research professionals, and other financial markets participants, as well as operations, compliance, and enterprise data managers. This segment includes our Information, Processing, and Solution offerings.
Information. Our Information offerings provide enriched content consisting of pricing and reference data, indices, and valuation and trading services across multiple asset classes and geographies through both direct and third-party distribution channels. Our Information products and services are used for independent valuations, investor analyses, research, trading, and liquidity and risk assessments. These products and services help our customers price instruments, comply with relevant regulatory reporting and risk management requirements, and analyze financial markets. Some of our key Information offerings include the following:
| ◦ | Pricing and Reference Data Services provide independent pricing across major geographies and key asset classes as well as instrument, entity, and reference data products. We price instruments spanning major asset classes, including fixed income, equities, credit, and foreign exchange (“FX”). Customers use our pricing data primarily for independent valuations, risk analytics, and pre-trade analytics, and they use our reference data products in a broad range of valuation, trading, and risk applications in both cash and derivative markets. |
| ◦ | The Indices product portfolio includesowned and administered indices covering all asset classes. Key proprietary index families include the PMI series, iBoxx, iTraxx, and CDX. In addition, we provide a range of index-related services for custom indices. Our indices are used for benchmarking, risk management, |
valuation, and trading. They also form the basis of a wide range of financial products, including exchange-traded funds, index funds, structured products, and derivatives.
| ◦ | Valuation Services provide a broad range of valuations to both derivative and cash market participants, focused on instrument and portfolio valuations. Our portfolio valuation service provides independent valuations for a wide range of derivatives and cash products across all asset classes to a range of financial institutions, including many buy-side firms. Our private equity services provide independent valuation and performance reporting solutions for investors in unlisted equity, private placements, and hard-to-value debt. |
| ◦ | Research, Sales and Trading Services offer investment bank and financial institution customers a range of platforms and tools to perform trading performance and analysis, research aggregation and distribution, investment process and sales workflows, and relationship management. |
| ◦ | Corporate product offerings deliver capital market intelligence, real-time investor analysis and targeting, event management systems, and desktop workflow solutions to senior management and investor relations professionals within the corporate suite. |
Solutions. Our Solutions offerings provide configurable enterprise software platforms, managed services, and hosted solutions.
| ◦ | Enterprise Software Platforms include both standardized and custom solutions to automate our customers’ in-house processing and connectivity for trading and post-trading processing, as well as enterprise data and risk management solutions to enable customers to more effectively manage their data and calculate risk measures. These solutions are also generally offered by us in hosted solution alternatives. Managed services and hosted solutions offerings are targeted at a broad range of financial services industry participants and help our customers capture, organize, process, display, and analyze information; manage risk; reduce fixed costs; and meet regulatory requirements. Some of our primary solutions offerings include the following: |
| ▪ | Wall Street Office and WSO Services provide a loan portfolio management platform and related services to participants in the syndicated bank loan market across the complete trading lifecycle. |
| ▪ | Global Markets Group product offerings deliver bookbuilding platforms, investor prospecting solutions, and road show systems to capital markets and financial services firms across multiple asset classes, including municipal bonds, equities, fixed income, and loans. |
| ▪ | Regulatory Compliance products and services include KYC remediation tools and services, our KY3P vendor management and risk platform, advanced risk and analytics systems, and platforms and services to support counterparty transparency, tax regulations, and regulatory support for Dodd-Frank Act, EMIR, FRTB, SFTR, and other global regulations designed to increase oversight of financial markets. |
| ▪ | Private Markets product offerings, including iLevel, provide portfolio data management services, analytics, reporting and valuation solutions, and platform services to private and alternatives market participants. |
| ▪ | Enterprise Data Management (“EDM”) software and services provide customers a central hub to manage the acquisition, validation, storage, and distribution of data sets from multiple sources. |
| ▪ | Digital designs, builds, and hosts custom web solutions for customers in both the retail and institutional financial services markets. |
| ▪ | Corporate actions solutions, including a managed data service and Information Mosaic, provide a centralized source of validated corporate action data for equities, fixed income, and structured securities across the globe, as well as robust processing solutions for financial institutions. |
| ▪ | Thinkfolio is an enterprise order management and portfolio modeling system. |
Processing. Our Processing offerings provide trade processing products and services globally for over-the-counter (“OTC”) derivatives, FX, and syndicated loans. Our trade processing services enable buy-side and sell-side firms to process transactions rapidly, which increases efficiency by optimizing post-trade workflow, reducing risk, complying with reporting regulations, and improving connectivity. We believe we are among the largest providers of end-to-end multiple asset OTC derivatives trade processing services, as well as the largest providers of syndicated loan processing services.
Transportation
Our Transportation segment includes our Automotive offerings, which represented approximately 85 percent of the segment’s revenue for 2019, our Maritime & Trade offerings, and our recently divested Aerospace & Defense offerings.
Automotive. We serve the full automotive value chain with a focus on original equipment manufacturers (“OEMs”), parts suppliers, and dealers.
Within the new car market, we provide authoritative analysis and forecasts of sales and production for light vehicles, medium and heavy commercial vehicles, powertrain, components, and technology systems across all major markets. Our comprehensive forecast database covers 99 percent of global light vehicle sales and production. We forecast sales and production of more than 50,000 unique vehicle model variants, as well as more than 100 different vehicle systems, sub-systems, and components.
We also provide a wide range of performance measurement and marketing tools for carmakers, dealers, and agencies. We continue to leverage analytics and innovation to develop product and service offerings aimed at addressing needs across the value chain, including strategy and planning, marketing, sales, dealer services, and after sales. In the U.S., our sales and marketing offerings draw on a database of more than 7 billion ownership records, covering 760 million vehicles and more than 240 million U.S. households over a period of 25 years. We also offer a range of vehicle recall solutions to carmakers, including identifying households to be contacted, providing accurate measurement of recall program completion, and in some cases, providing a full turnkey solution that manages the entire fulfillment process for their safety recall campaigns.
Our automotiveMastermind (“aM”) offering provides predictive analytics and marketing automation software for the new car dealer market, enabling dealers to improve their customer retention and extend their customer portfolio through “conquest” campaigns.
Within the used car market, we support dealers, insurers, and consumers through our CARFAX products. These offerings provide critical information for used car dealers and their customers in the used car buying process. For example, CARFAX vehicle history reports provide maintenance, accident, odometer, and commercial use information on cars in the United States. This history, based on more than 23 billion records collected from more than 112,000 data sources, provides confidence to dealers and consumers in the car buying process. We have expanded our product line under CARFAX to include a used car listing service for dealers and vehicle-specific valuation offerings.
Maritime & Trade (“M&T”). We have been gathering data on ships since 1764 when the first Lloyd’s Register of Ships was published. We provide, on behalf of the International Maritime Organization (“IMO”), the unique global ID (the IMO number) for all ocean-going ships over 100 gross tons. Our M&T content and analytics provide comprehensive data on more than 200,000 ships over 100 gross tons, as well as monthly import and export statistics on more than 100 countries and tracking and forecasting approximately 95 percent of international trade by value.
Aerospace & Defense (“A&D”). On December 2, 2019, we completed the sale of our A&D product portfolio to a private equity firm for approximately $470 million.
Resources
Our Resources segment includes our EnergyUpstream offerings, which represent approximately 8760 percent of Resources revenue, and our ChemicalsDownstream offerings, which make up the balanceapproximately 40 percent of the segment’sResources revenue.
Upstream. Our EnergyUpstream offerings are focused oninclude technical information, analytical tools, and market forecasting and consulting for the upstream midstream, downstream, and power/gas/coal/renewables (“PGCR”) services. Within those offerings, we also offer proprietary physical commodity pricing through our OPIS Price Reporting Agency Group.
and 6,200 marine vessels, and a database of 47,000 merger and acquisition transactions. We do this through a combination of energy technical information, analytical tools, and market forecasting and consulting. For instance, strategicStrategic planners, geoscientists, and engineers use our insight and leading geotechnical database and analytical tools to facilitate exploration, development, and production of energy assets. Some of our key offerings include the following:
| ◦ | Our Global Well, Production, Land, and Subsurface Content provides a comprehensive inventory of current and historical energy data. This content forms the basis for all of our upstream technical research, intelligence, analysis, and software portfolio. |
| ◦ | The Kingdom/Harmony Suite provides leading-edge analysis of subsurface properties, including seismic interpretation and production estimation, for the geoscience and engineering markets globally. |
| ◦ | Vantage is a global asset evaluation system that contains more than 23,000 oil and gas assets across the globe, performing forward-looking analysis of an asset’s expected return and permitting large-scale asset comparisons from distinct individual regions. |
| ◦ | Companies and Transactions performs database-driven analysis of roughly 47,000 merger and acquisition transactions, as well as financial analysis of all major oil and gas companies globally. |
| ◦ | Market analyses and forecasts provide insight and intelligence on market fundamentals. |
Downstream. Our midstream and downstreamDownstream offerings provide market forecasting, midstream market analysis and supply chain data, refining and marketing economics, and oil product intelligence. For instance, we are a leading provider of pricing information for the chemical, refined products, on spot, rack,agriculture, and retail markets. This information provides critical reference and benchmark information for buyers and sellers of refined products.power industries. We are also a leading supplierprovider of bespoke consulting, providingoffering strategic direction and capital investment advisory services. ASome of our key pricing product offering for our midstream and downstream offerings is the OPIS Spot Ticker, which allows almost a thousand petroleum wholesalers in North America to time their rack purchases in order to reduce expenditures on their fuel purchases.
| ◦ | Data for manufacturing processes, as well as capital expenditure, cost, price, production, trade, demand, and capacity industry analysis and forecasts for more than 250 chemicals in more than 110 countries. |
| ◦ | An extensive library of detailed techno-economic analyses of chemicals and refining process technologies. |
| ◦ | Actionable intelligence across the value chain from agricultural inputs to agricultural and processed food commodities. |
| ◦ | Pricing information for refined products on spot, rack, and retail gasoline markets. |
| ◦ | Global and regional outlooks and forecasts for power, coal, gas, and renewable markets. |
In addition, we leverage our market leadership in these industries to convene global industry, government, and regulatory leaders inat global and regional events, such as our annual CERAWeek and World Petrochemical conferences.
Consolidated Markets & Solutions (“CMS”)
Our CMS segment includes our Product Design offerings, which representrepresented approximately 6066 percent of the segment’s revenue for 2019, our Economics and Country Risk offerings, which represented approximately 21 percent of the segment’s revenue for 2019, and our Technology, Media & Telecom and Economics and Country Risk offerings, the majority of which make up the balance of the segment’s revenue.were divested in August 2019.
Product Design. Our Product Design solutions provide technical professionals with the information and insight required to more effectively design products, optimize engineering projects and outcomes, solve technical problems, and address complex supply chain challenges. Our offerings utilize advanced knowledge discovery technologies, research tools, and software-based engineering decision engines to advance innovation, maximize productivity, improve quality, and reduce risk. Our Product Design offerings include the following:
| ◦ | Engineering |
| ◦ | BOM Intelligence, including data on more than |
| ◦ | Goldfire’s cognitive search and other advanced knowledge discovery capabilities help pinpoint answers buried in enterprise systems and unstructured data, enabling engineers and technical professionals to accelerate problem solving and make better decisions more quickly. |
Economics and Country Risk (“ECR”). Our ECR team consists of approximately 450 economists, country risk analysts, data management specialists, and consultants monitoring, analyzing, and forecasting developments and risks in 211 countries and regions and 105 industries. We provide a vast range of economic and risk data and analytics, forecasts, and analyticscenario tools to assist customers forin their strategic market planning, procurement, and risk management decisions. Our economists and analysts globally monitor economic developments and the risk environment inWe assess risks across more than 200 countries20 risk perils, help companies with their capital deployment and regions.
Technology, Media & Telecom (“TMT”). In August 2019, we sold the majority of our key Information offerings include the following:
Sales and Marketing
Our sales teams are located throughout the world and are organized within their respective business lines to align with our
customers. In addition to field experience, we also conduct regular customer surveys to understand both current customer satisfaction levels and potential opportunities for product and coverage improvement.
Our financial services and corporate account management teams are part of our overall sales organization and are responsible for the delivery of the full breadth of our products and services to new and existing customers. The account management teams are also responsible for our overall relationship with our larger customers, focusing on developing new business, increasing our sales pipeline, and developing strategic transactions.
Our marketing organization is aligned with our sales organization and defines our marketing strategy and executes marketing programs. A primary focus for marketing strategy is to empowerbuild IHS Markit brand awareness, revenue acceleration, and market leadership across our key industries for all products and services globally. Functionally, this includes corporate marketing, product marketing, and field marketing.
Competition
We believe the principal competitive factors in our business include the following:
Depth, breadth, timeliness, and accuracy of information and data provided
•Quality of decision-support tools and services
•Quality and relevance of our analysis and insight
•Ease of use
•Customer support
•Value for price
We believe that we compete favorably on each of these factors. Although we face competition in specific industries and with respect to specific offerings, we do not believe that we have a direct competitor across all of the industries we serve due to the depth and breadth of our offerings. Competitors within specific industries or with respect to specific offerings are described below.
Transportation. In the Automotive market, we primarily compete with offerings from Experian, LMC Automotive, Urban Science, and Experian and, with respect to vehicle history reports, principally with Experian and various other providers approved by the National Motor Vehicle Title Information System of the United States Department of Justice.Auto Alert. In Maritime & Trade markets, we primarily compete with offerings from Informa, Verisk, and Genscape,S&P Global, as well as niche providers such as Trade Data Monitor, Datamyne, and increasingly BloombergKpler.
Resources. Our Upstream and Thomson Reuters. In AD&S markets, weDownstream offerings compete primarily compete with offerings from Avascent in the area of market forecasts, PalantirVerisk, Enverus, Schlumberger, Halliburton, GeoScout, Reed Elsevier, Bloomberg NEF, Argus, RS Energy, DTN, S&P Global, and IBM Cognitive in the area of deep analytics, and Accenture in procurement and system sustainability.Nexant.
CMS. Our Product Design offerings primarily compete with offerings offrom SAI Global, Clarivate Analytics, and TechStreet, and the standards developing organizations (“SDOs”), among others. Our Technology, Media & Telecom and electronic design offerings compete principally with offerings from Interactive Data, Gartner, Ampere, Arrow Electronics, SiliconExpert and parts manufacturers and distributors. Our ECR offerings compete primarily with offerings from the Economist Group, Oxford Economics, BMI Research, Fitch Solutions, Moody’s Analytics, McGraw-Hill Education, Control Risks, and Verisk.
Government Contracts
We sell our products to various government agencies and entities. No individual contract is significant to our business. Although some of our government contracts are subject to terms that would allow renegotiation of profits or termination at the election of the government, we believe that no renegotiation or termination of any individual contract or subcontract at the election of the government would have a material adverse effect on our financial results.
Intellectual Property
We rely heavily on intellectual property, including the intellectual property we own and license. We regard our trademarks, copyrights, licenses, and other intellectual property as valuable assets and use intellectual property laws, as well as
license and confidentiality agreements with our employees, customers, channel and strategic partners, and others, to protect our rights. In addition, we exercise reasonable measures to protect our intellectual property rights and enforce these rights when we become aware of any potential or actual violation or misuse.
We use intellectual property licensed from third parties, including SDOs, government agencies, public sources, market data providers, financial institutions, and manufacturers, as a component of our offerings and, in many cases, it cannot be independently replaced or recreated by us or others. We have longstanding relationships with most of the third parties from whom we license information. Almost all of the licenses that we rely upon are nonexclusive and expire within one to two years, unless renewed, although we have longer licenses with some of those third parties, particularly in the Financial Services segment.
We maintain registered trademarks and service marks in jurisdictions around the world. In addition, we have obtained patents and applied for patents in the United States, primarily related to our software portfolio, including our Kingdom,
Employees
As of November 30, 2018,2019, we had approximately 14,900more than 15,500 employees located in 3538 countries around the world.
Seasonality
Our business has seasonal aspects. Our first quarter generally has our lowest quarterly levels of revenue and profit. We also experience event-driven seasonality in our business; for instance, we typically hold our annual CERAWeek, an annual energy conference, is typically heldWorld Petrochemical, and TPM conferences in the second quarter of each year. Another example is the biennial release of the Boiler Pressure Vessel Code (“BPVC”) engineering standard, which generates revenue for us predominantly in the third quarter of every other year. The most recent BPVC release was in the third quarter of 2017.2019.
Financial Information aboutAbout Segments
See “Item 8 - Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 17” in Part II of this Form 10-K for information with respect to each segment’s revenues, profits, and total assets and for information with respect to our revenues and long-lived assets for the U.S., U.K., and the rest of the world in aggregate. See also “Item 1A. Risk Factors - Our international operations are subject to risks relating to worldwide operations.”
Available Information
IHS Markit files annual, quarterly, and current reports, proxy statements, and other information with the Securities and Exchange Commission (“SEC”). The SEC maintains a website that contains annual, quarterly, and current reports, proxy statements, and other information regarding issuers that file electronically with the SEC (including IHS Markit). The SEC’s website is www.sec.gov.
We maintain an internet website for investors at http://investor.ihsmarkit.com. On this website, we make available, free of charge, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4, and 5 filed on behalf of directors and executive officers, and all amendments to any of those reports or filings, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC. Unless specifically incorporated by reference, information on our website is not a part of this Annual Report on Form 10-K.
Also available on the website for investors at http://investor.ihsmarkit.com are our Amended and Restated Bye-laws, Corporate Governance Guidelines, Audit Committee Charter, Risk Committee Charter, Human Resources Committee Charter, Nominating and Governance Committee Charter, Business Code of Conduct, and Compliance Hotline and Reporting Misconduct Policy. Our corporate governance documents are available in print, free of charge to any shareholder who requests them, by contacting IHS Markit Investor Relations and Corporate Communications at 15 Inverness Way East, Englewood, CO 80112 or by calling (303) 790-0600.+1 303 790 0600.
Information About Our Executive Officers
Set forth below is information concerning our executive officers as of December 31, 2019.
| Name | Age | Position | ||
| Lance Uggla | 57 | Chairman and Chief Executive Officer | ||
| Brian Crotty | 57 | Executive Vice President, Resources | ||
| Jonathan Gear | 49 | Executive Vice President, President of Resources, Transportation and CMS | ||
| Sari Granat | 49 | Executive Vice President, Chief Administrative Officer and General Counsel | ||
| Todd Hyatt | 59 | Executive Vice President and Chief Financial Officer | ||
| Adam Kansler | 50 | Executive Vice President, President of Financial Services | ||
| Edouard Tavernier | 46 | Executive Vice President, Transportation | ||
Executive officers are appointed by our Board until their resignation or until their appointments are revoked by the Board.
In November 2019, Mr. Hyatt announced that he planned to retire at the end of 2020 and would step down as our Chief Financial Officer in early 2020. We announced that we would appoint Jonathan Gear, currently Executive Vice President and President of Resources, Transportation and CMS, to be our Chief Financial Officer once Mr. Hyatt leaves the role.
As of December 1, 2019, Mr. Crotty and Mr. Tavernier were promoted to the positions of Executive Vice President, Resources and Executive Vice President, Transportation, respectively, and became executive officers.
A brief biography for each of our current executive officers follows.
Lance Uggla
Mr. Uggla is Chairman and CEO of IHS Markit. He served as President from July 2016 to December 2017 and was appointed Chief Operating Officer in October 2017. Prior to the Merger, Mr. Uggla was Chairman and CEO of Markit since January 2003, responsible for leading the Company’s strategic development and managing day-to-day operations. He founded Markit in 2003 after spotting an opportunity to bring transparency to the credit default swap market. The Company launched the first daily credit default swap pricing service that year. He oversaw Markit’s growth from a startup to a global public company with more than 4,200 employees in 28 offices worldwide, serving more than 3,000 customers. Between 1995 and 2003, Mr. Uggla held a number of executive management positions at Toronto-Dominion Securities, including Vice Chairman and Head of Europe and Asia. Mr. Uggla graduated from the Simon Fraser University in Canada with a BBA and holds a Master of Science from the London School of Economics, U.K.
Brian Crotty
Brian Crotty is Executive Vice President, Resources of IHS Markit, responsible for business lines supporting the upstream and downstream industries. Mr. Crotty joined IHS Markit in 2016 through the acquisition of OPIS, where he was the Chief Executive Officer since 2002. Mr. Crotty has more than 25 years of experience running database and SaaS platform businesses, with a particular specialty in commodity pricing and supply database models. Before joining OPIS in 2002, Mr. Crotty spent eight years as a vice president of Hart Publications. Mr. Crotty has a master’s degree in journalism from American University and an undergraduate degree from Johns Hopkins University.
Jonathan Gear
Jonathan Gear is Executive Vice President and President of Resources, Transportation and CMS of IHS Markit, including business lines supporting the automotive, technology, engineering, digital, upstream, downstream, maritime, and aerospace industries. Mr. Gear was previously Executive Vice President of Resources and Transportation for IHS. Earlier, he served in multiple leadership roles across IHS. Prior to joining IHS in 2005, Mr. Gear held leadership positions at Activant Solutions, smarterwork.com, and Booz Allen Hamilton. He holds a B.A. from the University of California, Berkeley, and an MBA from Stanford Graduate School of Business.
Sari Granat
Sari Granat is Executive Vice President, Chief Administrative Officer and General Counsel of IHS Markit, responsible for the legal, compliance, enterprise risk, information security, and information technology functions. Ms. Granat previously served as head of legal and General Counsel at Markit. Prior to joining Markit in 2012, Ms. Granat was lead counsel and chief administrative officer of TheMarkets.com LLC. She has served in senior legal and strategy positions at media and technology companies including Dow Jones & Company and Kaplan, Inc. Ms. Granat holds a B.A. in English from Yale University and a J.D. from New York University School of Law.
Todd Hyatt
Todd Hyatt is Executive Vice President and Chief Financial Officer of IHS Markit. Mr. Hyatt joined IHS Inc. in 2005 where he most recently served as executive vice president and chief financial officer after previously serving as chief information officer, senior vice president of financial planning & analysis, and leading the finance organization for the company's engineering segment. Prior to joining IHS, Mr. Hyatt also worked for LoneTree Capital, US WEST/MediaOne, AT&T, Arthur Young, and Arthur Andersen. He holds a B.S. in accounting from the University of Wyoming and an M.S. in management from Purdue University.
Adam Kansler
Adam Kansler is Executive Vice President and President of Financial Services of IHS Markit, responsible for our Financial Services segment, which includes pricing and reference data, trade processing, valuations, indices, and economic and country risk products. From April 2015 to July 2016, Mr. Kansler served as global co-head of Markit’s information division and head of North American operations. Prior to that, Mr. Kansler was Markit’s chief administrative officer and general counsel, leading human resources, legal, corporate communications, risk, regulatory and strategic alliances. Before joining Markit in 2009, Mr. Kansler spent 17 years with Proskauer LLP, becoming a corporate partner. Mr. Kansler holds a B.A. in economics from Hobart College and received his J.D. from Columbia University School of Law.
Edouard Tavernier
Edouard Tavernier is Executive Vice President, Transportation of IHS Markit, responsible for business lines supporting the automotive and maritime industries. Mr. Tavernier was previously senior vice president of transportation and senior vice president of automotive for IHS Inc. He joined the company in 2008 and served in multiple product management, marketing, and commercial leadership roles. Before joining IHS Inc., Mr. Tavernier held management positions at LexisNexis, Global Insight, and United Business Media. He also worked at Goldman Sachs and BNP Paribas. Mr. Tavernier has a Master’s Degree in Business Studies from Ecole des Hautes Etudes Commerciales (HEC) in France.
Item 1A. Risk Factors
In addition to the other information provided in this Annual Report on Form 10-K, you should carefully consider the risks described in this section. The risks described below are not the only risks that could adversely affect our business; other risks currently deemed immaterial or additional risks not currently known to us could also adversely affect us. TheseIf any of the following risks actually occurs, our business, financial condition, or results of operations could be materially and other factors could haveadversely affected. You should read the section titled “Cautionary Note Regarding Forward-Looking Statements” for a material adverse effect ondescription of the valuetypes of your investment in our securities, meaningstatements that you could lose all or part of your investment.
We operate in competitive markets, which may adversely affect our financial results.
While we do not believe that we have a direct competitor across all of the industries we serve, we face competition across all markets for our products and services, including byfrom larger orand smaller competitors that may be able to adopt new or emerging technologies to address customer requirements more quickly than we can. We may also face competitioncan, from incumbent companies with strong market share in specific markets, or from organizations and businesses that have not traditionally competed with us but that could adapt their products and services or utilizeuse their significant financial and information-gathering resources recognized brands, or technological expertise to begin competing with us.competing. We believe that competitors are continuously investing, developing, and enhancing their products, and services, developing new products and services, investing in technology, and consolidating or acquiring new businesses to better serve the needs of their existing customers and to attract new customers. Increased competitionIn addition, the internet, widespread availability of sophisticated search engines, and public sources of free or relatively inexpensive information and solutions have simplified the process of locating, gathering, and disseminating data, potentially diminishing the perceived value of our offerings. While we believe our offerings are distinguished by such factors as complex compilation, standardization and analytical processes, currency,
accuracy and completeness, and our other added value, our customers could require us to make additional capital investments. The impact of cost-cutting pressures across the industries we serve could lower demand for our products and services, as customers intensify their focus on containing or reducing costs. Our competitors may choose to sell productsobtain the information and services competitive with ours at lower pricessolutions they need from public, regulatory, governmental, or bundled with other offerings, which may require us to reduce the prices of our offerings or offer additional products or services to compete.sources. An increase in our capital investments, price reductions for our offerings, or reduced spending, or increased self-sufficiency by our customers due to competition could negatively impact our revenues, marginsbusiness, financial condition, and results of operations.
We may be unsuccessful in achieving our guidance, growth and profitability objectives.
We provide public, full-year financial guidance based upon assumptions regarding our expected financial performance, including our ability to grow revenue, our planned expenses and tax rates, and our ability to achieve our profitability targets. We seek to achieve our growth objectives by enhancingby: organically developing our offerings to meet the needs of our customers through organic development, including by delivering integrated workflow platforms, cross-sellingcustomers; cross selling our products across ourand services to existing customer base andcustomers; acquiring new customers,customers; entering into strategic partnerships acquisitions, and byacquisitions; and implementing operational efficiency initiatives. Most of our revenue is recurring, typically based on subscriptions to our offerings, and our operating results depend on our ability to achieve and sustain high renewal rates on our existing subscription base and to enter into new subscriptions at commercially acceptable terms. In addition, a proportion of our revenue in our Financial Services segment is variable and depends upon transaction volumes, investment levels (i.e., assets under management), or the number of positions we value. We devote significant resources to establish relationships with our customers, and our strategies depend on our ability to persuade customers to maintain and grow their relationship with us over time. Many of our products and services, particularly in our resources and financial end-markets, are also dependent upon the robustness of the core end-markets in which we operate, as well as the financial health of the participants in those markets and the general economy. Customers are focused on controlling or reducing their operating costs, and may use strategies that result in a reduction in their spending on our products and services, such as by consolidating their spending with fewer or lower cost vendors, by deferring capital spending, or by internally developing functionality. In addition, mergers or consolidations among our customers could reduce the number of our customers and potential customers, which could cause them to discontinue or reduce their use of our products and services. All such developments could lower demand or reduce the prices for our products and services or require us to offer additional products or services to compete. If we are unable to successfully execute on our strategies to achieve our growth objectives, or drive operational efficiencies,retain existing customers, or if we experience higher than expected operating costs that cannot be adjusted accordingly, our growth and profitability rates could be adversely affected. An additional factor that may adversely affector taxes, our growth rates, is global economic uncertainty, particularly in our energyprofitability and financial end markets. Our resources and financial markets segments in particular mayoperating results could be materially adversely affected by industry dynamics, including decisions onand we may fail to meet the part of our customersfull-year financial guidance that we provide, or find it necessary to defer capital spending in uncertain economic environments.
revise such guidance during the year.
If we are unable to identify opportunities, develop successful new products and services, or adapt to rapidly changing technology, our business could suffer serious harm.
The information services industry is characterized by significant and rapidly changing technology, evolving industry standards, and changing regulatory requirements. Ourrequirements, and our growth and success depend uponon our ability to enhancemeet our existing products and services and to develop and introduce new products and services to keep pace with such changes and developments and to meet changing and increasingly sophisticated customer needs. The process of developing and enhancing our products and services is complex and may become increasingly complex and expensive in the future due to the introduction of new platforms, operating systems, technologies, and customer expectations. Current areas of significant technological change include artificial intelligence, mobility, cloud-based computing, blockchain, speed of availability of data, and the storing, processing, and analysis of large amounts of data. We may find it difficult or costly to updateenhance our servicescurrent products and softwareservices and to develop new products and services quickly enough to work effectively with new or changed technologies and regulations, to keep the pace with evolving technologies, industry standards or regulations, or to meet our customers’ needs. If we are unable to develop new products or services, or to successfully enhance or update existing products and services,needs, in which case we may not be able to grow our business as quickly as we anticipate.
Fraudulent or unpermitted access to our data, accessservices, or systems, or other cyber-security or privacy breaches may negatively impact our business and harm our reputation.
Many of our products and services and systems involve the collection, storage, use, and transmission of proprietary information and sensitive or confidential data.data, including data from our employees, customers and suppliers, intellectual property, proprietary business information, personally identifiable information, and information that may be confidential, sensitive, or material and nonpublic. Similar to other global multinational companies that provide services online, we experience cyber-threats, cyber-attacks, and security breaches of varying degrees of severity on our products and our information technology systems and applications, which can include unauthorized attempts to access, disable, improperly modify or degrade our information, systems, and networks, the introduction of computer viruses and other malicious codes, and fraudulent “phishing” e-mails that seek to misappropriate data and information or install malware onto users’ computers. For example, in 2018, unauthorized actors obtained access to
information technology systems and infrastructure against security breaches and cyber-incidents. Our information systems must also be constantly updated, patched, and upgraded to protect against known vulnerabilities and optimize performance. We may be required to incur significant costs to minimize or misusealleviate the effects of such informationcyber-attacks or dataother security vulnerabilities and to protect against damage caused by employeesfuture disruptions, security breaches, or third parties. The precautions we take to detectcyber-attacks. However, our responsive and prevent such activity, including trading and contractual obligations,precautionary measures may not be adequate or effective to prevent, identify, or mitigate attacks by hackers, foreign governments, or other actors or breaches, disruptions, slowdowns or misconduct caused by employee error, malfeasance, or other third parties. In addition, if a customer experiences a data security breach that results in all cases.
the misappropriation of our proprietary business information, our reputation could be harmed, even if we were not responsible for the breach.
Any fraudulent, malicious, or accidental breach of data security controls could alsocan impact our ability to provide our products and services to customers, prevent authorized access to our systems by customers, suppliers, and employees or result in unintentional disclosure of, or unauthorized access to, or misappropriation or misuse of, customer, vendor, employee, or other confidential or sensitive data or information, which could potentially result in additional costs to our company to enhance security or to respond to occurrences, lost sales, loss of confidence in our processes and reliability, damages to our brand and reputation, violations of regulations or laws relating to the privacy of personal or payment card information, sanctions, fines, penalties, or litigation. Similarly, if any confidential or embargoed data is inadvertently disclosed or deliberately misused prior to our authorization, customers and financial markets could be negatively affected, and any resulting need to change our procedures for handling and sharing this data may diminish the value of such offerings. In addition, media or other reports of perceived security vulnerabilities to our systems or those of our third-party suppliers, even if no breach has been attempted or occurred, could also adversely impact our reputation and materially impactreputation. We are also dependent on security measures that some of our business.
While we maintain what we believe is sufficient insurance coverage that may (subject to certain policy terms and conditions, including deductibles) cover certain aspects of third-party security and cyber-risks and business interruption, our insurance coverage may not always cover all costs or losses.
We could experience system failures or capacity constraints that could negatively impact our business.
Our ability to provide reliable service largely depends on the efficient and uninterrupted operation of complex systems, relying on people, processes, and technology to function effectively. Most of our products and services are delivered electronically, and our customers rely on our ability to process and deliver substantial quantities of information and other services on computer-based networks. Some elements of these systems have been outsourced to third-party providers, including critical data inputs received from third-party suppliers.suppliers and data systems stored on cloud-based computing infrastructure. Some of our systems have been consolidated for the purpose of enhancing scalability and efficiency, which increases our dependency on a smaller number of systems. Any failure of, or significant interruption, delay, or disruption to, or security breaches affecting, our systems could result in: disruption to our
operations; significant expense to repair, replace, or remediate systems, equipment or facilities; a loss of customers; legal or regulatory claims, proceedings, or fines; damage to our reputation; and harm to our business.
System interruption,interruptions or failures or security breaches could result from a wide variety of causes, including: human error, natural disasters (such as hurricanes and floods), infrastructure or network failures (including failures at third-party data centers, by third partythird-party cloud-computing providers, or of aging technology assets), disruptions to the internet, malicious attacks or cyber incidents such as unauthorized access, ransomware, loss or destruction of data (including confidential and/or personal customer information), account takeovers, computer viruses or other malicious code, and the loss or failure of systems over which we have no control. In addition, significant growth of our customer base or increases in the number of products or services or in the speed at which we are required to provide products and services may also strain our systems in the future. We may also face significant increases in our use of power and data storage and may experience a shortage of capacity and increased costs associated with such usage. We may also face additional strain on our systems and networks due to aging or end-of-life technology that we have not yet updated or replaced. While we generally have disaster recovery and business continuity plans that utilize industry standards and best practices for much of our business, including back-up facilities for our primary data centers, a testing program, and staff training, our systems are not always fully redundant and our disaster recovery and business continuitysuch plans may not always be sufficient or effective. In the past when we have experienced slow operation of our systemssystem interruptions or service interruptions,failures, some of our products or services have been unavailable for a limited period of time, but none of these occurrences have been material to our business. However, any of the above factors could individually or in the aggregate adversely affect our business and results of operations, and our insurance may not be adequate to compensate us for all failures, interruptions, delays, disruptions or security breaches.disruptions.
Our transition to cloud-based technologies could expose us to operational disruptions.
We are transitioning our technology to cloud-based infrastructure, which is complex, time consuming, and can involve substantial expenditures. Our utilization of cloud services is critical to developing and providing products and services to our customers, scaling our business for future growth, accurately maintaining data and otherwise operating our business; any such implementation involves risks inherent in the conversion to a new system, including loss of information and potential disruption to our normal operations. We may discover deficiencies in our design or implementation or maintenance of the new cloud-based systems that could adversely affect our business. Upon implementation of the new cloud-based solutions, failure of cloud infrastructure providers to maintain adequate physical, technical and administrative safeguards to protect the security of our confidential information and data could result in unauthorized access to our systems or a system or network disruption that could lead to improper disclosure of confidential information or data, regulatory penalties and remedial costs. There may also be a discrepancy between the contractual liability profile that the cloud service provider has agreed to and our contractual liability profile with our customers. Any disruption to either the outsourced systems or the communication links between us and the outsourced suppliers could negatively affect our ability to operate our data systems, and could impair our ability to provide services to our customers. As we increase our reliance on these third-party systems, our exposure to damage from service disruptions may increase. We may incur additional costs to remedy the damages caused by these disruptions.
Design defects, errors, failures, or delays associated with our products or services could negatively impact our business.
We depend on externally obtained software, content, and services to support our offerings, and the inability to continue to obtain accessinterruption or cessation of important third-party content or services could prove harmful to our business.
We obtain data from a wide variety of external sources that we transform into critical information and analytics and use to create integrated product and service offerings for our customers. Many of our offerings include content and information that is purchased or licensed from third parties, including from public record sources or parties that are our customers or our competitors, or obtained using independent contractors. In addition, we often rely on third-party dealers to sell or distribute some of our offerings, such as in locations where we do not maintain a sales office or sales teams or for methods of distribution to which we do not have direct access. For instance, our industry standards offerings that are part of our Product Design workflow rely on information licensed from standards developing organizations, and many of our financial institution customers provide us with data whichthat is a critical input for many of our Financial Services offerings. We believe that the content licensed from many of these third parties might not be able to be obtained from alternate sources on favorable terms, if at all.
Our license agreements with these third parties are often nonexclusive and many are terminable on less than one year’s notice. In addition, many of these third parties compete with one another and with us, including by providing data to our competitors, consolidating with each other, or becoming competitors themselves, which may cause them to reduce their willingness to supply, or increase the price of, data and content that are important to our products and services. Our competitors could also enter into exclusive contracts with, or acquire, our data sources, which may preclude us from receiving certain data from these supplierssuch sources or restricted inrestrict our use of such data. WeOur business, data sources, or content could also become subject to legislative, regulatory, judicial, or contractual restrictions onthat limit or prohibit the use of data, such as if such data is not collected by the third parties in a way which allows us towe collect, process, the data or use it legally.content or data sources in our products and services. Contracts with third-party content providers are increasingly subject to information and physical security and compliance audits. We also collect data for our products and services through independent service providers. We are also limited in our ability to monitor and direct the activities of our independent contractors and customers, but if any actions or business practices of these individuals or entities violate our policies or procedures or are otherwise deemed inappropriate or illegal, we could lose access to the data they collect,content, as well as be subject to litigation, regulatory sanctions, or reputational damage.
If we lose access to, or are restricted in receiving, a significant number of data sources and cannot replace the data through alternative sources, or we are unable to obtain information licensed to us consistently, in a timely manner, or on terms commercially reasonable to us, specific products, services, and customer solutions may be impacted or disrupted and our business, reputation, financial condition, operating results, and cash flow could be materially adversely affected.
Our relationships with third-party service providers may not be successful or may change, which could adversely affect our results of operations.
We have commercial relationships with third-party service providers whose capabilities complement our own for integral services, software, and technologies. Many of our products and services are developed using third-party service providers’ data or services, or are made available to our customers or are integrated for our customers’ use throughusing integral infrastructure, information, and technology solutions provided by such third-party service providers. For example, we outsource certain functions involving our data transformation process and data hosting functions to business partners, including cloud-computing providers, who we believe offer us deep expertise in these areas, as well as scalability and cost effectivecost-effective services. In addition, we sometimes rely on third-party dealers to sell or distribute some of our offerings, such as in locations where we do not maintain a sales office or sales teams or for methods of distribution to which we do not have direct access. In some cases, these providers are also our competitors or may in the future become our competitors, as we expand our product and service offerings, which could impact our relationships.
The priorities and objectives of these providers may differ from ours, which may make us vulnerable to changes in, or terminations of, our commercialthird-party relationships and could reduce our access over time to infrastructure, information, and technology. We have little control over these third-party providers, which increases our vulnerability to errors, defects, failures, interruptions, or disruptions or problems with their services or technologies. We also face risks that one or more service providers may perform work that deviates from our standards or that we may not be able to adequately protect our intellectual property.property or protect the security of our confidential information and data. Any errors, failures to perform, interruptions, delays, breaches, or terminations of service experienced in connection with these third-party providers, or if we do not obtain the expected benefits from our relationships with third-party service providers, we may be less competitive, our products and services may be negatively affected, and our results of operations could be adversely impacted.
Contracts with customers increasingly include performance requirements as customers seek to increase the liability profile taken by third-party providers like us. For example, contracts with customers are increasingly subject to audits, which may include a review of performance on contracts, pricing practices, cost structure, information and physical security, and compliance with applicable laws and regulations. Contracts with governmental customers are also generally subject to various procurement regulations and other requirements relating to their performance. Many of our customers, particularly in the financial services sector, are also subject to regulations and requirements to adopt risk management processes commensurate with the level of risk and complexity of their third-party relationships, and provide rigorous oversight of relationships that involve certain “critical activities,” some of which may be deemed to be provided by us. Any failure on our part to comply with the specific provisions in customer contracts, policies or processes, or any violation of government contracting regulations or requirements, could beresult in the imposition of various penalties, which may include termination of contracts, forfeiture of profits, suspension of payments, and, in the case of government contracts, fines and suspension from future government contracting. Any negative publicity with respect to customer contracts or any related proceedings, regardless of accuracy, may damage our business by harming our ability to compete for new contracts. While no one customer contract is material to our business as a whole, if a significant number of our customer contracts are terminated, or our ability to compete for new contracts is adversely affected.
affected, our financial performance could suffer.
The loss of, or the inability to attract and retain, keyqualified personnel could impair our future success.
Our future success depends to a large extent on the continued service of our highly skilled, educated, and trained employees, including our experts in research and analysis, information technology, and the industries in which we operate, and colleagues in sales, marketing, product development, operations, technology, and management, including our executive officers. We do not carry any “key person” insurance policies that could offset potential loss of service under applicable circumstances. We must maintain our ability to attract, motivate, compensate, and retain highly qualified colleagues in order to support our customers and achieve business results. The markets we serve are highly competitive and competition for skilled employees in our industry is intense for both onshore and offshore locales, and uncertainty around future employment opportunities, facility locations, organizational and reporting structures, acquisitions and divestitures, and other related concerns may impair our ability to attract and retain qualified personnel. The loss of the services of keyqualified personnel and any inability to recruit effective replacements or to otherwise attract, motivate, train, or retain highly qualified personnel could have a material adverse effect on our business, financial condition, and operating results.
We also must manage leadership development and succession planning throughout our business. Any significant leadership change and accompanying senior management transition involves inherent risk, and any failure to ensure a smooth transition could hinder our strategic planning, execution, and future performance. While we strive to mitigate the negative impact associated with changes to our senior management team, such changes may cause uncertainty among investors, employees, customers, creditors, and others concerning our future direction and performance. If we fail to effectively manage our leadership changes, including ongoing organizational and strategic changes, our business, financial condition, operating results, and ability to successfully attract, motivate and retain highly qualified colleagues, could be harmed.
We may not be able to protect our intellectual property rights and confidential information.
Our success depends in part on our proprietary technology, processes, methodologies, and information. We rely on a combination of copyright, trademark, trade secret, patent, and other intellectual property laws and nondisclosure, license, assignment, and confidentiality arrangements to establish, maintain, and protect our proprietary rights, as well as the intellectual property rights of third parties whose assets we license. However, we cannot assure that the steps we have taken to protect our intellectual property rights, and the rights of those from whom we license intellectual property, aremay not be adequate to prevent unauthorized use, misappropriation, or theft of our intellectual property. Intellectual property laws differ in various jurisdictions in which we operate and are also subject to change at any time, andwhich could further restrict our ability to protect our intellectual property and proprietary rights. In particular, a portion of our revenues areis derived from jurisdictions where adequately protecting intellectual property rights may prove more challenging or impossible. We may also not be able to detect unauthorized uses or take timely and effective steps to remedy unauthorized conduct. To prevent or respond to unauthorized
uses of our intellectual property, we might be required to engage in costly and time-consuming litigation or other proceedings and we may not ultimately prevail. Courts, in particular, may be reluctant to enforce our proprietary rights against individual employees or contractors. Any failure to establish, maintain, or protect our intellectual property or proprietary rights could have a material adverse effect on our business, financial condition, or results of operations.
We may be exposed to litigation related to products we make available to customers and we may face legal liability or damage to our reputation.
Companies in our industry have increasingly pursued patent and other intellectual property protection for their data, technologies, and business methods. As we do not actively monitor third-party intellectual property, if any of our data, technologies, or business methods are covered or become covered by third-party intellectual property protection and used without license or if we misuse data, technologies or business methods outside the terms of our licenses, we may be subject to claims or threats of infringement, misappropriation, or other violation of intellectual property rights, or have the use of our data, technologies, and business methods otherwise challenged. We have also in the past been, and may in the future be, called upon to defend partners, customers, suppliers, or distributors against such third-party claims under indemnification clauses in our agreements.
Responding to such claims or threats, regardless of merit, can consume valuable time and resources, result in costly or unfavorable litigation or settlements that could exceed the limits of applicable insurance coverage, delay operations of our business, require redesign of our products and services, or require new royalty and licensing agreements. It could also damage our reputation for any reason, which could adversely affect our ability to attract and retain customers, employees, and information suppliers. Any such factors could have a material adverse effect on our financial condition or results of operations.
We are subject to litigation and investigation risks which could adversely affect our business, results of operations, and financial condition.
We are from time to time involved in various litigation matters and claims, including regulatory proceedings, administrative proceedings, lawsuits, governmental investigations, and contract disputes, as they relate to our products, services, and business. We may face potential commercial or intellectual property claims or liability for, among other things, breach of contract, defamation, libel, fraud, antitrust, or negligence, with respect to the use of our offerings by our customers, particularly if the information in our offerings was incorrect for any reason, or if it were misused or used inappropriately. We may also face employment-related litigation and investigations, including claims of age discrimination, sexual harassment, gender discrimination, racial discrimination, immigration violations, or other local, state, and federal labor, environmental, health, and safety violations. In addition, we may receive routine requests for information from governmental agencies in connection with their regulatory or investigatory authority.authority or from private third parties pursuant to subpoena. In the past, certain of our business practices have been investigated by government antitrust or competition agencies, and we have on multiple occasions been sued by private parties for alleged violations of the antitrust and competition laws of various jurisdictions, and there is a risk based upon the leading position of certain of our business operations or the relationships between our customers in using our products and services that we could, in the future, be the target of investigations by government entities or actions by private parties challenging the legality of our business practices. Because of the uncertain nature of litigation, investigations, and insurance coverage decisions, we cannot predict the outcome of these matters, which could have a material adverse effect on our business, results of operations, and financial condition. Litigation and investigations are very costly, and the costs associated with prosecuting and defending litigation and investigation matters could have a material adverse effect on our business, results of operations, and financial condition. Depending on the outcome of future claims or investigations, we may also be required to change the way we offer, and how other parties purchase or interact with, particular products or services, which could result in material disruptions to and costs incurred by our business. In light of the potential costtime, expense, and uncertainty involved in litigation and investigations, including fines, penalties, damages, or injunctions or other equitable remedies, we may settle matters even when we believe we have a meritorious defense. We are unable to estimate precisely the ultimate dollar amount of
exposure to loss or the amounts we actually pay in connection with litigation and investigation matters, due to inherent uncertainties and the inherent shortcomings of the estimation process, the uncertainties involved in litigation, and other factors.
Our use of open source software could result in litigation or impose unanticipated restrictions on our ability to commercialize our products and services.
We use open source software in our technology, most often as small components within a larger product or service. Open source code is also contained in some third-party software we rely on. The terms of many open source licenses are ambiguous and have not been interpreted by U.S. or other courts, and these licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to commercialize our products and services, license the software on unfavorable terms, require us to re-engineer our products and services or take other remedial actions, any of which could have a material adverse effect on our business. We could also be subject to suits by parties claiming breach of the terms of licenses, which could be costly for us to defend.
Our brand and reputation are key assets and competitive advantages of our company and our business may be affected by how we are perceived in the marketplace.
The integrity and external perceptions of our brand and reputation are key to our ability to remain a trusted source of products and services and to attract and retain customers. We also enter into redistribution arrangements that allow other firms to represent certain of our products and services as partners or agents. Reputational damage from negative perceptions or publicity, or
actual, alleged, or perceived issues regarding any of our products or services, or misrepresentation of our products and services by third parties, could damage our reputation and relationships with customers, prospects, and the public generally. Although we monitor developments, including social media, for areas of potential risk to our brand and reputation, negative perceptions or publicity or misrepresentations by third parties may adversely impact our credibility as a trusted source for critical information, analytics, and insight and may have a negative impact on our business.
Failure to operate our pricing and valuation services, benchmarks, and indices in a manner that maintains their independence and integrity could adversely affect our reputation and our business.
reputation and our business.
Some of our products and services typically face long selling cycles to secure new contracts, which require significant resource commitments and result in long lead times before we receive revenue.
For certain new products and services, and especially for complex products and services, we often face long selling cycles to secure new contracts and customers, and there can be a long preparation period before we commence providing products and services. For instance, some of our Financial Services products and services can require active engagement with potential customers and can take 12 months or more to reach deal closure. Some products’ success is also dependent on building a network of users and may not be profitable while such a network is developing. We can incur significant business development expenses during the selling cycle, and we may not succeed in winning a new customer’s business, in which case we receive no revenue and may receive no reimbursement for such expenses. Selling cycle periods have historically lengthened and could lengthen, further, causing us to incur even higher business development expenses with no guarantee of winning a new customer’s business. Even if we succeed in developing a relationship with a potential new customer, we may not be successful in obtaining contractual commitments after the selling cycle or in maintaining contractual commitments after the implementation cycle, and our business, financial condition, and results of operations could be adversely affected.
Changes in the legislative, regulatory, and commercial environments in which we operate may adversely impact our ability to collect, compile, use, transfer, publish, or sell data, subject us to increased regulation or decreased demand of our products and services, or prevent us from offering certain products or services, which could adversely affect our financial condition and operating results.
Certain types of information we collect, compile, store, use, transfer, publish and/or sell, and certain of our products and services, are subject to regulation by law and governmental authorities in various jurisdictions in which we operate.
There is an increasing public concern regarding, and resulting regulations of, privacy, data, and consumer protection issues, and the number of jurisdictions with data protection laws has been increasing.issues. Certain types of information, we collect, compile, use, and publish, including offerings in our Automotive businesses, are subject to laws and regulations by governmental authorities in jurisdictions in which we operate. These laws and regulations pertain primarily to “personallypersonally identifiable information” and “personal data” (i.e., information relating to an identified or identifiable individual),individuals, and constrain whetherthe collection, use, storage, and how we collecttransfer of that data, how that data may be used and stored, and whether, to whom, and where that data may be transferred, as well as notificationother obligations with which we must comply. If we fail to comply with these laws or regulations, we could be subject to significant litigation and other requirements that must be followedcivil or criminal penalties (including monetary damages, regulatory enforcement actions or fines) in one or more jurisdictions and reputational damage resulting in the eventloss of data, is accessed by unauthorized persons.brand equity and business. To conduct our operations, we regularlyalso move data across national borders and consequently are subject to a variety of continuously evolving and developing laws and regulations regarding privacy, data protection, and data security.security in an increasing number of jurisdictions. Many jurisdictions have passed laws in this area, such as the European Union General Data Protection Regulation(the “GDPR”) and, the cyber-security law adopted by China in June 2017, and the 2020 California Privacy Act, and other jurisdictions are considering imposing additional restrictions. These laws and regulations are increasing in complexity and number, change frequently, and increasingly conflict among the various countries in which we operate, which has resulted in greater compliance risk and cost for us. It is possible that we could be prohibited or constrained from collecting or disseminating certain types of data or from providing certain products or services. If we fail to comply with these laws or regulations, we could be subject to significant litigation, civil or criminal penalties, monetary damages, regulatory enforcement actions or fines in one or more jurisdictions. For example, a failure to comply with the GDPR could result in fines up to the greater of €20 million or 4% of annual global revenues.
Our operations are subject to risks relating to worldwide operations, and our compliance and risk management methods might not be effective and may result in outcomes that could adversely affect our reputation, financial condition, and operating results.
Operating in many jurisdictions around the world, we may be affected by numerous, and sometimes conflicting, legal and regulatory regimes, including: changes in tax rates and tax lawslaw or their interpretation including changes related to tax holidays or tax incentives;(including trade protection laws, policies and measures, and other regulatory requirements affecting trade and investment, including export controls and economic sanctions laws;laws); changes in tax rates, holidays, incentives and laws, or their interpretation; unexpected changes in regulatory requirements; and political conditions and events, including embargoes; differentevents. Different liability standards and legal systems, that may be less developed and less predictable than those in the United States and the United Kingdom, restrictive actions by the United States, the United Kingdom, the European Union, and foreign governments that could limit our ability to provide services in specific countries;countries and subject us to potential noncompliance with a wide variety of laws and regulations. We must also manage social, political, labor, or economic conditions in a specific country or region; restrictive actions by governments, including embargoes; difficulties in
staffing and managing local operations; difficulties with local or grassroots activism; difficulties in penetrating new markets because of established and entrenched competitors; uncertainties of obtaining data and creating products and services that are relevant to particular geographic markets; lack of recognition of our brands, products, or services; unavailability of local joint venture partners; restrictions or limitations on outsourcing contracts or services abroad; differing levels of data privacy and intellectual property protection in various
As we operate our business around the world, we must manage the potential conflicts between locally accepted business practices in any given jurisdiction and our obligations to comply with laws and regulations, including anti-corruption laws or regulations applicable to us, such as the U.K. Bribery Act 2010, the U.S. Foreign Corrupt Practices Act (the “FCPA”) and regulations established by the UK Bribery Act 2010 (the “UKBA”). The U.S., U.K., and other foreign Office of Foreign Assets Control. Government agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against companies for violations of export controls, the FCPA, the UKBA,anti-corruption laws or regulations, and other laws, rules, sanctions, embargoes, and regulations, including those established by the Office of Foreign Assets Control (“OFAC”).regulations. For example, the United States, the European Union, and other countries have imposed significant sanctions measures against Russia targeting the energy, defense, and financial sectors of Russia’s economy as well asand specific Russian officials and businesses that they own.businesses. There is also significant uncertainty about the future relationship between the United States and various other countries, most significantly China, with respect to trade policies, treaties, government regulations and tariffs. Although we believe all our business activities are permissible under all current applicable laws, rules, sanctions, embargoes, and regulations, we may be required to discontinue or limit our business activities in the future. Further, the implementation of new trade policies, treaties, tariffs, legislation or regulations, or changes in or unfavorable interpretations of existing regulations by courts or regulatory bodies, could require us to incur significant compliance costs and impede our ability to operate, expand, and enhance our products and services as necessary to remain competitive and grow our business.
Our ability to comply with applicable complex and changing laws and rules, including anti-corruption laws, is largely dependent on our establishment and maintenance of compliance, surveillance, audit, and reporting systems, as well as our ability to attract and retain qualified compliance and other risk management personnel. We have developed and instituted a corporate compliance program intended to promote and facilitate compliance with all applicable laws, which includes among other things, employee training and the creation of appropriate policies and procedures defining employee behavior that mandate adherence to laws.behavior. We also have policies, procedures, and controls designed to comply with all applicable laws, rules, sanctions, embargoes, and regulations.regulations and measure the compliance of our third-party providers. However, we cannot assure you that these measures willmay not always be effective, and we may fail to appropriately monitor or evaluate the risks to which we are or may be exposed or identify business activities that violate laws, rules, sanctions, embargoes, and regulations. WeIn addition, we may also not always be successful in detecting if our employees, contractors, agents, and suppliers, including those independent companies to which we outsource certain business operations, are engaging in misconduct, fraud, or other errors, or otherwise taking actions in violation of our policies, procedures, and controls. In addition, some of our risk management methods depend upon evaluation of public information regarding markets, customers, or other matters that are publicly available or otherwise accessible by us. That information may not in all cases be accurate, complete, up-to-date, or properly evaluated. In case of non-compliance or alleged non-compliance with applicable laws or regulations by us or our employees, contractors, agents, or suppliers,such cases, we could be subject to investigations and proceedings that may be very expensive to defend and may result in criminal enforcement actions, penalties for non-compliance, or civil actions or lawsuits, including by customers, for damages which canthat could be significant.
Any of these outcomes could adversely affect our business, reputation, financial condition, and operating results.
The referendum in the future termsUnited Kingdom in favor of the United Kingdom’s relationshipKingdom leaving the European Union (“E.U.”), commonly referred to as “Brexit,” could cause disruption to our business, including affecting relationships with existing and future customers, suppliers, and employees. The United Kingdom held an election in December 2019, resulting in a majority government that is expected to complete Brexit whether or not a formal withdrawal agreement is in place with the European Union, with the United Kingdom due to exit the European Union on March 29, 2019.Union. We are headquartered and tax domiciled in the United Kingdom and conduct business in Europethroughout the European Union primarily through our U.K. subsidiaries. The United Kingdom will cease to be a member state of the European Union by January 31, 2020, if not delayed, and will lose access to the E.U. single market and to E.U. trade deals negotiated with other jurisdictions at that time, so the long-term effects of Brexit will depend on the agreements or arrangements with the European Union for the United Kingdom to retain access to E.U. markets either during a transitional period or more permanently. Depending on the final terms of Brexit and the agreements or arrangements negotiated with the European Union, we could face
new regulatory costs and challenges. For instance, the United Kingdom could lose access to the single E.U. market and to the global trade deals negotiated by the European Union on behalf of its members, and we may be required to move certain operations to other European UnionE.U. member states to maintain such access.access to the E.U. single market and to E.U. trade deals. A decline in trade could affect the attractiveness of the United Kingdom as a global investment center and as a result, could have a detrimental impact on U.K. growth. Although we have an international customer base, we could be adversely affected by reduced growth and greater currency and economic volatility in the Pound SterlingUnited Kingdom. Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which E.U. laws to replace or replicate, including U.K. economy.competition laws. Changes to U.K. immigration policy related to Brexit could likewise occur as a result of Brexit.also affect our business. Although the United Kingdom would likely retain its diverse pool of talent, London’s role as a global financial center may decline, particularly if financial institutions shift their operations to the European Union andas the United Kingdom loses the E.U. financial services passport is not maintained.passport. Any adjustments we make to our business and operations as a result of Brexit could
result in significant time and expense to complete. Any of the foregoing factors could have a material adverse effect on our business, results of operations, or financial condition.
Our international operations are subject to exchange rate fluctuations.
We operate in many countries around the world and a significant part of our revenue comes from international sales. In 2018,2019, we generated approximately 40 percent of our revenues from sales outside the United States. ApproximatelyStates and approximately 20 percent of our revenue was transacted in currencies other than the U.S. dollar in 2018.dollar. We earn revenues, pay expenses, own assets, and incur liabilities in countries using currencies other than the U.S. dollar, including, but not limited to, the British Pound, the Euro, the Canadian Dollar, the Singapore Dollar, and the Indian Rupee. As we continue to leverage our global delivery model, more of our expenses will likely be incurred in currencies other than those in which we bill for the related products and services. An increase in the value of certain currencies against the U.S. dollar could increase costs for delivery of services at offshore sites by increasing labor and other costs that are denominated in local currency. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income, expenses, and the value of assets and liabilities into U.S. dollars at exchange rates in effect during or at the end of each reporting period. We may use derivative financial instruments to reduce our net exposure to currency exchange rate fluctuations. Nevertheless, increases or decreases in the value of the U.S. dollar against other major currencies can materially affect our net operating revenues, operating income, and the value of balance sheet items denominated in other currencies.
International hostilities, terrorist or cyber-terrorist activities, natural disasters, pandemics, and infrastructure disruptions could prevent us from effectively serving our customers and thus adversely affect our results of operations.
Acts of terrorist violence,terrorism, cyber-terrorism, political unrest, war, civil disturbance, armed regional and international hostilities and international responses to these hostilities, natural disasters including(including hurricanes or floods,floods), global health risks or pandemics, or the threat of or perceived potential for these events could have a negative impact on us. These events could adversely affect our customers’ levels of business activity and precipitate sudden significant changes in regional and global economic conditions and cycles. These events also pose significant risks to our employees, information systems, and our physical facilities and operations around the world, whether the facilities are ours or those of our third-party service providers or customers. By disrupting communications and travel and increasing the difficulty of obtaining and retaining highly skilled and qualified personnel, these events could make it difficult or impossible for us to deliver products and services to our customers. Extended disruptions of electricity, other public utilities, or network services at our facilities, as well as system failures at our facilities or otherwise, could also adversely affect our ability to serve our customers. We may be unable to protect our employees, facilities, and systems against all such occurrences. We generally do not have insurance for losses and interruptions caused by terrorist attacks, conflicts, and wars. If these disruptions prevent us from effectively serving our customers, our results of operations could be adversely affected.
Acquisitions, joint ventures, partnerships, alliances, or similar strategic relationships, or dispositions of any of our businesses, and the related integration or separation risks, may require significant resources or result in unanticipated costs or liabilities or fail to deliver anticipated benefits, and may disrupt or otherwise have a material adverse effect on our business and financial results.
As part of our business strategy, we pursue selective acquisitions of complementary businesses, products or technologies, or joint ventures, partnerships, alliances, or similar strategic transactions and relationships with third parties, to support our business, such as the Merger of IHS and Markit in June 2016 and the acquisition of Ipreo, a leading financial services solutions and data provider, in August 2018.business. We may also undertake dispositions of certain of our businesses or products. We seek to be disciplined in a highly competitive market and there can be no assurance that we willmay not be able to identify suitable candidates on favorable terms to successfully complete acquisitions, joint ventures, partnerships, alliances or strategic relationships, or dispositions of businesses.dispositions. In addition, we typically fund our acquisitions through our credit facilities. Although we have capacity under our credit facilities, those may not be sufficient. Therefore, future acquisitions or strategic relationships may require us to obtain additional financing through debt or equity, which may not be available on favorable terms or at all and could result in shareholder dilution.
If such acquisitions or other strategic transactions are completed, the anticipated growth and other strategic objectives of such transactions may not be fully realized, and a variety of factors may adversely affect any anticipated benefits from such transactions. Thebenefits. Their success of such transactions
depends on, among other things, our ability to combine the variousintegrate businesses in a manner that realizes anticipated synergies and exceeds the projected stand-alone cost savings and revenue growth trends we have identified, which is a complex, costly, and time-consuming process. We expect to benefit from cost synergies driven by a number of strategies, such as integrating corporate functions, reducing technology spending byusing cost-competitive locations, optimizing IT infrastructure, using centers of excellence in cost-competitive locations, and optimizing real estate, and other costs, as well as greater tax efficiencies from global management and global cash movement. We may also enjoy revenue synergies, including
We cannot assure you that we willmay not be successful in integrating acquired businesses, or otherand completed strategic transactions or that they willmay not perform at the levels we anticipate or achieve theour expected cost or revenue synergies expected. synergies.
The completion of such transactions may have material unanticipated risks, difficulties, expenses,costs, liabilities, competitive responses,response, and diversion of management focus and attention, such as:
difficulties, or delays, and expenses in integrating or remediating operations, systems, and technology and maintaining institutional knowledge and procedures;
challenges in conforming standards, controls, procedures, accounting and other policies, business cultures, and compensation structures;
challenges in keeping existing, and developing new, customers and business relationships;
difficulties in managing the expanded operations of the company;
other intangible assets; disruption of operations;
unexpected regulatory and operating difficulties and expenditures;
contingent liabilities (including contingent tax liabilities) that are larger than expected; and
Our indebtedness could adversely affect our business, financial condition, and results of operations.
Our indebtedness could have significant consequences on our future operations, including:
making it more difficult for us to satisfy our indebtedness obligations and our other ongoing business obligations, which may result in defaults;
events of default if we fail to comply with the financial and other covenants contained in the agreements governing our debt instruments, which could result in all of our debt becoming immediately due and payable or require us to negotiate an amendment to financial or other covenants that could cause us to incur additional fees and expenses;
sensitivity to interest rate increases on our variable rate outstanding indebtedness, which could cause our debt service obligations to increase significantly;
reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;
limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industries in which we operate, and the overall economy;
placing us at a competitive disadvantage compared to any of our competitors that have less debt or are less leveraged; and
increasing our vulnerability to the impact of adverse economic and industry conditions.
Our ability to meet our payment and other obligations under our debt instruments depends on our ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative, and regulatory factors as well as other factors that are beyond our control. We cannot be certain that our business will generate cash flow from operations, or that future borrowings will be available to us under our existing or any future credit facilities or otherwise, in an amount sufficient to enable us to meet our indebtedness obligations and to fund other liquidity needs. We may incur substantial additional indebtedness, including secured indebtedness, for many reasons, including to fund acquisitions. If we add additional indebtedness or other liabilities, the related risks that we face could intensify.
A downgrade to our credit ratings would increase our cost of borrowing under our credit facilitiesfacility and adversely affect our ability to access the capital markets.
We are party to a $2.0$1.25 billion senior unsecured revolving credit agreement that matures in June 2023 and a $1.206 billion term loan facility that matures in July 2021 (collectively, the SeniorNovember 2024 (the “Senior Credit Facilities)Facility”). The cost of borrowing under the Senior Credit FacilitiesFacility and our ability to, and the terms under which we may, access the credit markets are affected by credit ratings assigned to us by the major credit rating agencies. These ratings are premised on our performance under assorted financial metrics and other measures of financial strength, business and financial risk, industry conditions, timeliness of financial reporting, and other factors determined by the credit rating agencies. Our current ratings have served to lower our borrowing costs and facilitate access to a variety of lenders. However, there can be no assurance that our credit ratings or outlook will not be lowered in the future in response to adverse changes in these metrics and factors caused by our operating results or by actions that we take that reduce our profitability, or that require us to incur additional indebtedness for items such as substantial acquisitions, significant increases in costs and capital spending in security and IT systems, significant costs related to settlements of litigation or regulatory requirements, or by returning excess cash to shareholders through dividends or under our share repurchase program. A downgrade of our credit ratings would increase our cost of borrowing under the Senior Credit Facilities,
Facility, negatively affect our ability to access the capital markets on advantageous terms, or at all, negatively affect the trading price of our securities, and have a significant negative impact on our business, financial condition, and results of operations.
The U.S. Internal Revenue Service (the “IRS”) may not agree that, after the Merger,2016 merger of IHS Inc. and Markit Ltd., IHS Markit should be treated as a foreign corporation for U.S. federal income tax purposes, and/or that we are not subject to certain other adverse U.S. federal income tax laws relating to certain transactions that we may undertake in the future. In addition, future changes to U.S. tax laws could adversely affect us.
Audits, investigations, and tax proceedings and future changes in tax laws could have a material adverse effect on our results of operations and financial condition.
We are subject to direct and indirect taxes in numerous jurisdictions. jurisdictions, and tax laws, including tax rates, in the jurisdictions in which we operate may change as a result of macroeconomic, political, or other factors.
We calculate and provide for such taxes in each tax jurisdiction in which we operate. The amount of tax we pay is subject to our interpretation of applicable tax laws in the jurisdictions in which we file. In complex transactions or jurisdictions, we regularly utilize third-party advisers to help us make judgments about the proper application of tax law. We have taken and will continue to take tax positions based on our interpretation of tax laws, but tax accounting often involves complex matters and judgment is required in determining our worldwide provision for taxes and other tax liabilities. Although we believe that we have complied with all applicable tax laws, we have been and expect to continue to be subject to ongoing tax audits in various jurisdictions, and tax authorities have disagreed, and may in the future disagree, with some of our interpretations of applicable tax law. We regularly assess the likely outcomes of these audits to determine the appropriateness of our tax provisions. However, our judgments may not be sustained on completion of these audits, and the amounts ultimately paid could be different from the amounts previously recorded, which may have a material adverse effect on our results of operations and financial condition.
recorded.
Our tax liabilities and effective tax rate in the future could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in tax laws. Tax laws, including tax rates, in the jurisdictions in which we operate may change as a result of macroeconomic, political or other factors, and such changes could have a negative impact on our profitability. For example, the U.S. Congress, the Organisation for Economic Co-operation and Development (“OECD”), and other government agencies have had an extended focus on issues related to the taxation of multinational corporations. One example is incorporations, such as the area of “base erosion and profit shifting.” The G20 finance ministers have endorsed a comprehensive plan set forth by the OECD to create an agreed set of international rules for fighting base erosion and profit shifting. As a result, theThe tax laws in the United States, the United Kingdom, and other countries in which we operate could change on a prospective or retroactive basis, and any such changes could adversely affect us. In addition, changes in tax laws, treaties, or regulations, or their interpretation or enforcement, may be unpredictable, particularly in less developed markets, and could become more stringent, whichstringent. Any of these occurrences could materially adversely affect our tax position. Any of these occurrences couldposition and have a material adverse effect on our results of operations and financial condition.
Bermuda law differs from the laws in effect in the United States and may afford less protection to holders of our common shares, including enforcing judgments against us or our directors and executive officers.
We are organized under the laws of Bermuda as a Bermuda exempted company. As a result, our corporate affairs and the rights of holders of our common shares are governed by Bermuda law, including the Companies Act 1981 (the “Companies Act”), which differs in some material respects from laws typically applicable to U.S. corporations and shareholders, including the provisions relating to interested directors, amalgamations, mergers and acquisitions, takeovers, shareholder lawsuits, and indemnification of directors. Generally, the duties of directors and officers of a Bermuda company are owed to the company only. Shareholders of Bermuda companies typically do not have rights to take action against directors or officers of the company and may only do so in limited circumstances. Class actions are not available under Bermuda law. The circumstances in which derivative actions may be available under Bermuda law are substantially more proscribed and less clear than they would be to shareholders of U.S. corporations. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where the act complained of is alleged to be beyond the corporate power of the company or illegal, or would result in the violation of the company’s memorandum of association or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than that which actually approved it.
When the affairs of a company are being conducted in a manner that is oppressive or prejudicial to the interests of some shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company. Additionally, under our bye-laws and as permitted by Bermuda law, each shareholder has waived any claim or right of action against our directors or officers for any action taken by directors or officers in the performance of their duties, except for actions involving fraud or dishonesty. In addition, the rights of holders of our common shares and the fiduciary responsibilities of our directors under Bermuda law are not as clearly established as under statutes or judicial precedent in existence in jurisdictions in the United States, particularly the State of Delaware. It is also doubtful whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the United States, against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors or officers under the securities laws of other jurisdictions. Therefore, holders of our common shares may have more difficulty protecting their interests than would shareholders of a corporation incorporated in a jurisdiction within the United States.
We have anti-takeover provisions in our bye-laws that may discourage a change of control.
Our bye-laws contain provisions that could make it more difficult for a third party to acquire us without the consent of our Board of Directors. These provisions provide for:
directors only to be removed for cause;
restrictions on the time period in which directors may be nominated;
our Board of Directors to determine the powers, preferences, and rights of our preference
shares and to issue the preference shares without shareholder approval; and
an affirmative vote of 66-2/3% of our voting shares for certain “business combination” transactions which have not been approved by our Board of Directors.
These provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many shareholders. As a result, shareholders may be limited in their ability to obtain a premium for their shares.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our Facilities
Our colleagues work in offices at 113119 locations around the world, comprised of 54comprising 59 offices in the Americas (44(47 in the United States), 34; 38 offices in Europe, the Middle East, and Africa,Africa; and 2522 offices in the Asia Pacific region. We own the buildings at three of our locations. All of our other facilities are leased with terms ranging from month-to-month at some locations to an expiration date in 2032 for one of our facilities. We believe that our properties, taken as a whole, are in good operating condition, are suitable and adequate for our current business operations, and that additional or alternative space will be available on commercially reasonable terms for future use and expansion.
Item 3. Legal Proceedings
See “Item 8 - Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 13” in Part II of this Form 10-K for information about legal proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common shares are traded on the NASDAQNew York Stock MarketExchange under the symbol “INFO.”
As of December 31, 2018,2019, we had 8172 holders of record of our common shares and approximately 175,000220,000 beneficial holders of our common shares.
Our authorized share capital of $30 million consists of 3,000,000,000 shares of common shares, par value $0.01 per share, and undesignated shares, par value $0.01 per share, that our Board of Directors is authorized to designate from time to time as common shares or as preference shares. As of November 30, 2018,2019, no preference shares were issued and outstanding. The holders of our common shares are entitled to one vote per share.
Exchange Controls
Under Bermuda law, there are currently no restrictions on the export or import of capital, including foreign exchange controls or restrictions that affect the remittance of dividends, interest or other payments to non-resident holders of our common shares.
We have been designated by the Bermuda Monetary Authority as a non-resident for Bermuda exchange control purposes. This designation allows us to engage in transactions in currencies other than the Bermuda dollar, and there are no restrictions on our ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to U.S. residents who are holders of our common shares.
Under Bermuda law, “exempted” companies are companies formed for the purpose of conducting business outside Bermuda from a principal place of business in Bermuda. As an exempted company, we may not carry on certain business in Bermuda without a license or consent granted by the Minister responsible for the Companies Act 1981.
Dividend Policy
We have not previously paid a dividend. We periodically reviewdividend, but on October 17, 2019, the Board of Directors reviewed our capital allocation policy withand approved a plan to initiate a regular quarterly cash dividend, beginning in the first quarter of 2020, to all of our common shareholders of record (except for common shares held by the Markit Group Holdings Limited Employee Benefit Trust, which has, subject to certain limited exceptions, waived its right to receive dividends), subject to the quarterly declaration by the Board of Directors as to the amount and timing of any dividend.
On January 17, 2020, our Board of Directors and could paydeclared a quarterly cash dividend in an amount of $0.17 per common share, to be paid on February 14, 2020 to common shareholders of record as of the future.close of trading on February 6, 2020 (other than the Markit Group Holdings Limited Employee Benefit Trust as a result of the waiver described above).
The declaration and payment of future dividends will be determined by the Board of Directors in light of conditions then existing, including our earnings, financial condition and capital requirements, business conditions, corporate law requirements, and other factors.
The Transfer Agent and Registrar for our common shares is Computershare Inc.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth information as of November 30, 2018,2019, the last day of fiscal year 2018,2019, with respect to compensation plans under which equity securities are authorized for issuance.
| Equity Compensation Plan Information | Equity Compensation Plan Information | Equity Compensation Plan Information | ||||||||||||||||||||
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights ( a ) | Weighted-average exercise price of outstanding options, warrants, and rights ( b ) | Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a)) ( c ) | Number of securities to be issued upon exercise of outstanding options, warrants and rights (in millions) ( a ) | Weighted-average exercise price of outstanding options, warrants, and rights ( b ) | Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a)) (in millions) ( c ) | ||||||||||||||||
| Equity compensation plans approved by security holders | 25.6 | (1) | $ | 26.61 | (2) | 20.0 | (3) | 18.3 | (1) | $ | 26.81 | (2) | 17.5 | (3) | ||||||||
| Equity compensation plans not approved by security holders | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||
| Total | 25.6 | N/A | 20.0 | 18.3 | N/A | 17.5 | ||||||||||||||||
| (1) Includes (a) 15.7 million stock options, (b) 6.9 million restricted share units and 1.4 million performance share units at target performance levels that were issued with no exercise price or other consideration, (c) 1.3 million shares reserved for issuance if maximum performance on performance share units is met, and (d) 0.3 million deferred share units payable to non-employee directors upon their termination of service. Of the 25.6 million awards currently outstanding, approximately 0.7 million restricted share units and 0.3 million deferred share units were issued under the Amended and Restated IHS Inc. 2004 Long-Term Incentive Plan, which plan was assumed in the Merger. Our 2014 Equity Plan contains a provision that increases the authorized maximum share amount by (a) the number of shares granted and outstanding under the Key Employee Incentive Program, the 2013 Share Option Plan, and the 2014 Share Option Plan as of June 24, 2014 that terminate by expiration, forfeiture, cancellation or otherwise without the issuance of our common shares, and (b) on January 1 of each year through January 1, 2024, in an amount equal to the lesser of: (x) 2.5 percent of the total number of IHS Markit’s common shares issued and outstanding on a fully diluted basis as of December 31 of the immediately preceding calendar year and (y) such number of common shares determined by our Board of Directors. | ||||||||||||||||||||||
| (1) Includes (a) 9.0 million stock options, (b) 5.6 million restricted share units and 1.7 million performance share units at target performance levels that were issued with no exercise price or other consideration, (c) 1.7 million shares reserved for issuance if maximum performance on performance share units is met, and (d) 0.3 million deferred share units payable to non-employee directors upon their termination of service. Our 2014 Equity Plan contains a provision that increases the authorized maximum share amount by (a) the number of shares granted and outstanding under the Key Employee Incentive Program, the 2013 Share Option Plan, and the 2014 Share Option Plan as of June 24, 2014 that terminate by expiration, forfeiture, cancellation or otherwise without the issuance of our common shares, and (b) on January 1 of each year through January 1, 2024, in an amount equal to the lesser of: (x) 2.5 percent of the total number of IHS Markit’s common shares issued and outstanding on a fully diluted basis as of December 31 of the immediately preceding calendar year and (y) such number of common shares determined by our Board of Directors. | (1) Includes (a) 9.0 million stock options, (b) 5.6 million restricted share units and 1.7 million performance share units at target performance levels that were issued with no exercise price or other consideration, (c) 1.7 million shares reserved for issuance if maximum performance on performance share units is met, and (d) 0.3 million deferred share units payable to non-employee directors upon their termination of service. Our 2014 Equity Plan contains a provision that increases the authorized maximum share amount by (a) the number of shares granted and outstanding under the Key Employee Incentive Program, the 2013 Share Option Plan, and the 2014 Share Option Plan as of June 24, 2014 that terminate by expiration, forfeiture, cancellation or otherwise without the issuance of our common shares, and (b) on January 1 of each year through January 1, 2024, in an amount equal to the lesser of: (x) 2.5 percent of the total number of IHS Markit’s common shares issued and outstanding on a fully diluted basis as of December 31 of the immediately preceding calendar year and (y) such number of common shares determined by our Board of Directors. | |||||||||||||||||||||
| (2) The weighted-average exercise price is reported for the outstanding stock options reported in the first column. There are no exercise prices for the restricted share units, performance share units, or deferred share units included in the first column. There are no other outstanding warrants or rights. | ||||||||||||||||||||||
| (3) Includes shares repurchased by the Company upon vesting of restricted share units and performance share units for tax withholding obligations. The total number of securities remaining available for issuance under equity compensation plans may be issued under the 2014 Equity Plan. | ||||||||||||||||||||||
Issuer Purchases of Equity Securities
The following table provides detail about our share repurchases during the three months ended November 30, 20182019. See “Item 8 - Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 14” in Part II of this Form 10-K for information regarding our stock repurchase programs.
Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions) | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions) | |||||||||||||||||
| September 1 - September 30, 2018: | ||||||||||||||||||||||||
| September 1 - September 30, 2019: | ||||||||||||||||||||||||
Employee transactions (1) | 32,161 | $ | 54.15 | N/A | N/A | 3,683 | $ | 67.10 | N/A | N/A | ||||||||||||||
| October 1 - October 31, 2018: | ||||||||||||||||||||||||
Accelerated share repurchase program (2) | 3,657,979 | $ | 67.39 | 3,657,979 | $ | 506.9 | ||||||||||||||||||
| October 1 - October 31, 2019: | ||||||||||||||||||||||||
Employee transactions (1) | 4,268 | $ | 53.73 | N/A | N/A | 1,029 | $ | 68.92 | N/A | N/A | ||||||||||||||
| November 1 - November 30, 2018: | ||||||||||||||||||||||||
| November 1 - November 30, 2019: | ||||||||||||||||||||||||
Employee transactions (1) | 143,575 | $ | 52.43 | N/A | N/A | 131,282 | $ | 71.36 | N/A | N/A | ||||||||||||||
Accelerated share repurchase program (2) | 793,503 | $ | 67.39 | 793,503 | $ | 2,500.0 | ||||||||||||||||||
| Total share repurchases | 180,004 | $ | 52.77 | — | 4,587,476 | $ | 67.50 | 4,451,482 | ||||||||||||||||
(1) Amounts represent common shares repurchased from employees in an amount equal to the statutory tax liability associated with the vesting of their equity awards. We then pay the statutory tax on behalf of the employee. Our Board of Directors has approved this program in an effort to reduce the dilutive effects of employee equity grants. This program is separate and additional to the repurchase program described in note (2).
(2) In October 2019, our Board of Directors authorized a new share repurchase program of up to $2.5 billion of IHS Markit common shares from October 17, 2019 through November 30, 2021, to be funded using our existing cash, cash equivalents, marketable securities, and future cash flows, or through the incurrence of short- or long-term indebtedness, at management’s discretion. This new program replaced the previous share repurchase program that was originally set to terminate on November 30, 2019, but was early terminated by our Board of Directors. This October 2019 share repurchase program does not obligate us to repurchase any set dollar amount or number of shares and may be modified, suspended, or terminated at any time without prior notice. Under the repurchase program, we are authorized to repurchase our common shares on the open market from time to time, in privately negotiated transactions, or through accelerated repurchase agreements, subject to availability of common shares, price, market conditions, alternative uses of capital, and applicable regulatory requirements, at management’s discretion.
In September 2019, we funded a $300 million accelerated share repurchase (“ASR”) agreement with a scheduled termination date in the fourth quarter of 2019. Upon funding of the ASR, we received an initial delivery of 3.658 million shares. At the completion of the ASR in November 2019, we received an additional 0.794 million shares. The average price paid per share presented above reflects the average price for the 4.451 million total shares repurchased through the ASR.
Performance Graph
The following graph compares our total cumulative stockholder return with the Standard & Poor’s Composite Stock Index (“S&P 500”) and a peer index representing the total price change of The Dun & Bradstreet Corporation; Equifax Inc.; FactSet Research Systems Inc.; Gartner, Inc.; Moody’s Corporation; MSCI Inc.; Nielsen Holdings N.V.; S&P Global Inc.; TransUnion; Thomson Reuters Corporation; and Verisk Analytics, Inc.
The graph assumes a $100 cash investment on June 19,November 28, 2014 (our first trading day as a public company) and the reinvestment of all dividends, (which we did not pay).where applicable. This graph is not indicative of future financial performance.
Comparison of Cumulative Total Return Among IHS Markit, S&P 500 Index, and Peer Group
TAXATION
The following sets forth material Bermuda and U.K. income tax consequences of owning and disposing of our common shares. It is based upon laws and relevant interpretations thereof as of the date of this Form 10-K, all of which are subject to change. This discussion does not address all possible tax consequences relating to an investment in our common shares, such as the tax consequences under U.S. federal, state, local, and other tax laws.
Bermuda Tax Considerations
At the present time, there is no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty, or inheritance tax payable by us or by our shareholders in respect of our shares. We have obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits or income, or computed on any capital asset, gain, or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not, until March 31, 2035, be applicable to
us or to any of our operations or to our shares, debentures, or other obligations except insofar as such tax applies to persons ordinarily resident in Bermuda or is payable by us in respect of real property owned or leased by us in Bermuda.
United Kingdom Taxation
General
The following is a description of the material U.K. tax consequences of an investment in our common shares. It is intended only as a general guide to the position under current U.K. tax law and what is understood to be the current published practice of HMRC and may not apply to certain classes of investors, such as dealers in securities, persons who acquire (or are deemed to acquire) their securities by reason of an office or employment, insurance companies, and collective investment schemes. It is written on the basis that IHS Markit Ltd does not derive 75% or more of its qualifying asset value, directly or indirectly, from U.K. land. Rates of tax, thresholds, and allowances are given for the U.K. tax year 2018-19.2019-20. Any person who is in doubt as to his tax position is strongly recommended to consult his own professional tax adviser. To the extent this description applies to U.K. residentresidents and, if individuals, domiciled shareholders, it applies only to those shareholders who beneficially hold their shares as an investment (unless expressly stated otherwise) and hold less than 5 percent of the shares. This description does not apply to shareholders to whom split yearsplit-year treatment applies.
The Company
It is the intention of the directors to conduct the affairs of IHS Markit Ltd. so that the central management and control of IHS Markit Ltd. is exercised in the United Kingdom such that IHS Markit Ltd. is treated as resident in the United Kingdom for U.K. tax purposes.
Taxation of dividends
Withholding tax
We will not be required to withhold U.K. tax at source on any dividends paid to shareholders in respect of our common shares.
U.K. resident shareholders
Individuals resident in the United Kingdom for taxation purposes will pay no tax on the first £2,000 of dividend income received in a tax year (the “nil rate amount”). The rates of income tax on dividends received above the nil rate amount for the 2018-192019-20 tax year are: (a) 7.5 percent for dividends taxed in the basic rate band; (b) 32.5 percent for dividends taxed in the higher rate band; and (c) 38.1 percent for dividends taxed in the additional rate band. Dividend income that is within the nil rate amount counts towards an individual’s basic or higher rate limits. In calculating into which tax band any dividend income over the nil rate amount falls, dividend income is treated as the highest part of an individual’s income.
A U.K. resident shareholder who holds common shares in an individual savings account will be exempt from income tax on dividends in respect of such shares. Subject to certain exceptions, including for traders in securities and insurance companies, dividends paid by us and received by a corporate shareholder resident in the United Kingdom for tax purposes should be within the provisions set out in Part 9A of the Corporation Tax Act 2009, which exempt certain classes of dividend from corporation tax. Each shareholder’s position will depend on its own individual circumstances, although it would normally be expected that the dividends paid by us would fall into an exempt class and will not be subject to corporation tax.
Non-U.K. resident shareholders
Non-U.K. resident shareholders are not subject to tax (including withholding tax) in the United Kingdom on dividends received on our common shares unless they carry on a trade, profession, or vocation in the United Kingdom through a branch or agency (or, in the case of a non-U.K. resident corporate shareholder, a permanent establishment) to which the common shares are attributable.
Taxation of capital gains
U.K. resident shareholders
A disposal of common shares by an individual shareholder who is (at any time in the relevant U.K. tax year) resident in the United Kingdom for tax purposes, may give rise to a chargeable gain or an allowable loss for the purposes of U.K. taxation of chargeable gains, depending on the shareholder’s circumstances and subject to any allowable deductions and any available exemption or relief including the annual exempt amount (being £11,700£12,000 for 2018-19)2019-20). Capital gains tax is charged on chargeable gains at a rate of 10 percent or 20 percent (or a combination of both rates) depending on whether the individual is a basic rate taxpayer or a higher or additional rate taxpayer.
For shareholders within the charge to U.K. corporation tax on chargeable gains in respect of the common shares, indexation allowance, frozen with effect from December 31, 2017, may be available to reduce the amount of any chargeable gain realized on a disposal of common shares (but not to create or increase any loss).
Non-resident shareholders
A shareholder who is not resident in the United Kingdom for tax purposes will not be subject to U.K. taxation of capital gains on the disposal or deemed disposal of common shares unless they carry on a trade, profession, or vocation in the United Kingdom through a branch or agency (or, in the case of a non-U.K. resident corporate shareholder, a permanent establishment) to which the common shares are attributable, in which case they will be subject to the same rules which apply to U.K. resident shareholders.
A shareholder who is an individual and who is temporarily resident for tax purposes outside the United Kingdom at the date of disposal of common shares may also be liable, on his return, to U.K. taxation of chargeable gains (subject to any available exemption or relief).
Stamp duty and stamp duty reserve tax (“SDRT”)
The statements below summarize the current law and are intended as a general guide only to stamp duty and SDRT. Special rules apply to agreements made by broker dealers and market makers in the ordinary course of their business and to transfers, agreements to transfer, or issues to certain categories of person (such as depositaries and clearance services) which may be liable to stamp duty or SDRT at a higher rate.
No stamp duty reserve tax will be payable on any agreement to transfer the common shares, provided that the common shares are not registered in a register kept in the United Kingdom. It is not intended that such a register will be kept in the United Kingdom. Further, no stamp duty will be payable on transfer of the common shares provided thatthat: (i) any instrument of transfer is not executed in the United Kingdom; and (ii) such instrument of transfer does not relate to any property situated, or any matter or thing done or to be done, in the United Kingdom.
Inheritance tax
U.K. inheritance tax may be chargeable on the death of, or on a gift of common shares by, a U.K. domiciled shareholder. For inheritance tax purposes, a transfer of assets at less than full market value may be treated as a gift and particular rules apply to gifts where the donor reserves or retains some benefit. Special rules also apply to the trustees of settlements who hold common shares. Potential investors should consult an appropriate professional adviser if they make a gift or transfer at less than full market value or they intend to hold common shares through trust arrangements.
ISA
The common shares are eligible for inclusion in the stocks and shares component of an ISA, subject, where applicable, to the annual subscription limits for new investments into an ISA (for the tax year 2018-19,2019-20, this is £20,000). Sums received by a shareholder on a disposal of common shares will not count towards the shareholder’s annual limit, but a disposal of common shares held in an ISA will not serve to make available again any part of the annual subscription limit that has already been used by the shareholder in that tax year.
Item 6. Selected Financial Data
You should read the following selected consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes appearing in Part II of this Form 10-K.
| Years Ended November 30, | Years Ended November 30, | |||||||||||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||||
| (in millions, except for per share amounts) | (in millions, except for per share amounts) | |||||||||||||||||||||||||||||
| Statement of Operations Data: | ||||||||||||||||||||||||||||||
| Revenue | $ | 4,009.2 | $ | 3,599.7 | $ | 2,734.8 | $ | 2,184.3 | $ | 2,079.8 | $ | 4,414.6 | $ | 4,009.2 | $ | 3,599.7 | $ | 2,734.8 | $ | 2,184.3 | ||||||||||
| Income from continuing operations attributable to IHS Markit Ltd. | $ | 542.3 | $ | 416.9 | $ | 143.6 | $ | 188.9 | $ | 178.0 | $ | 502.7 | $ | 542.3 | $ | 416.9 | $ | 143.6 | $ | 188.9 | ||||||||||
| Income from discontinued operations | — | — | 9.2 | 51.3 | 16.5 | — | — | — | 9.2 | 51.3 | ||||||||||||||||||||
| Net income attributable to IHS Markit Ltd. | $ | 542.3 | $ | 416.9 | $ | 152.8 | $ | 240.2 | $ | 194.5 | $ | 502.7 | $ | 542.3 | $ | 416.9 | $ | 152.8 | $ | 240.2 | ||||||||||
| Basic earnings per share: | ||||||||||||||||||||||||||||||
| Income from continuing operations attributable to IHS Markit Ltd. | $ | 1.38 | $ | 1.04 | $ | 0.46 | $ | 0.78 | $ | 0.73 | $ | 1.26 | $ | 1.38 | $ | 1.04 | $ | 0.46 | $ | 0.78 | ||||||||||
| Income from discontinued operations | — | — | 0.03 | 0.21 | 0.07 | — | — | — | 0.03 | 0.21 | ||||||||||||||||||||
| Net income attributable to IHS Markit Ltd. | $ | 1.38 | $ | 1.04 | $ | 0.49 | $ | 0.99 | $ | 0.80 | $ | 1.26 | $ | 1.38 | $ | 1.04 | $ | 0.49 | $ | 0.99 | ||||||||||
| Diluted earnings per share: | ||||||||||||||||||||||||||||||
| Income from continuing operations attributable to IHS Markit Ltd. | $ | 1.33 | $ | 1.00 | $ | 0.45 | $ | 0.77 | $ | 0.72 | $ | 1.23 | $ | 1.33 | $ | 1.00 | $ | 0.45 | $ | 0.77 | ||||||||||
| Income from discontinued operations | — | — | 0.03 | 0.21 | 0.07 | — | — | — | 0.03 | 0.21 | ||||||||||||||||||||
| Net income attributable to IHS Markit Ltd. | $ | 1.33 | $ | 1.00 | $ | 0.48 | $ | 0.97 | $ | 0.79 | $ | 1.23 | $ | 1.33 | $ | 1.00 | $ | 0.48 | $ | 0.97 | ||||||||||
| Balance Sheet Data (as of period end): | ||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 120.0 | $ | 133.8 | $ | 291.6 | $ | 291.6 | $ | 153.2 | $ | 111.5 | $ | 120.0 | $ | 133.8 | $ | 138.9 | $ | 291.6 | ||||||||||
| Total assets | $ | 16,062.3 | $ | 14,554.4 | $ | 5,577.5 | $ | 5,577.5 | $ | 5,272.1 | $ | 16,087.2 | $ | 16,062.3 | $ | 14,554.4 | $ | 13,936.6 | $ | 5,577.5 | ||||||||||
| Total long-term debt and capital leases | $ | 4,889.2 | $ | 3,617.3 | $ | 2,071.5 | $ | 2,071.5 | $ | 1,806.1 | $ | 4,874.4 | $ | 4,889.2 | $ | 3,617.3 | $ | 3,279.3 | $ | 2,071.5 | ||||||||||
| Total stockholders' equity | $ | 8,020.5 | $ | 8,004.4 | $ | 2,200.9 | $ | 2,200.9 | $ | 2,159.5 | $ | 8,415.8 | $ | 8,020.5 | $ | 8,004.4 | $ | 8,084.4 | $ | 2,200.9 | ||||||||||