IHS Inc. Announces First Quarter 2006 Results Driven By Eleven Percent Revenue Growth

Business Wire, March 28, 2006

ENGLEWOOD, Colo. -- IHS Inc. (NYSE: IHS), one of the leading global providers of critical technical information, decision-support tools and related services, today reported results for the first quarter ended February 28, 2006. Revenue for the first quarter of 2006 totaled $129.9 million, representing an 11 percent increase over first quarter 2005 revenue of $117.0 million. Net income for the first quarter of 2006 increased three percent to $13.5 million, or $0.24 per diluted share, compared to first quarter 2005 net income of $13.1 million, or $0.23 per diluted share.

Adjusted EBITDA totaled $27.7 million for the first quarter of 2006, up 29 percent from $21.4 million in the first quarter of 2005. IHS generated approximately $22.5 million of cash flow from operations for the first quarter of 2006, an increase of $11.4 million over the prior year period. Adjusted EBITDA, a non-GAAP financial measure, is used by management to measure operating performance. See the end of this release for more information about this non-GAAP measure.

"We are excited about our strong first quarter operating results. We accelerated our rate of revenue growth, expanded our operating margins, and delivered higher levels of profit," said Charles Picasso, IHS President and CEO. "Additionally, we closed a strategic acquisition and enjoyed record attendance at CERAWeek, with over 1,800 industry leaders gathering in Houston last month." CERAWeek(R), the energy industry's premier executive gathering, is an annual event sponsored by CERA, an IHS company.

First Quarter 2006 Detail

The company grew its revenue by 12 percent over the prior year, after excluding the effects of acquisitions and foreign exchange (i.e. organic growth). Acquisitions added two percent to revenue growth and foreign exchange had a three percent negative impact. The organic growth was fueled in part by certain items unique to the quarter, such as the conference mentioned above. The Energy segment grew its revenue for the first quarter by 17 percent, to $68.2 million, compared to $58.1 million in the prior year first quarter. That segment's organic revenue growth contributed more than all of its increase, offset by foreign exchange impacts. The Engineering segment grew its first quarter revenue by approximately five percent, to $61.6 million, compared to $58.9 million in the prior year. The Engineering segment's organic revenue growth rate was up five percent compared to the first quarter 2005, while revenue contributions from acquisitions were effectively offset by foreign exchange impacts within this segment.

Adjusted EBITDA for the first quarter of 2006 grew 29 percent over the first quarter of last year and was driven primarily by strong top-line growth, expanded margins, and controlled investment in our SG&A cost structures. Operating income increased 14 percent year-over-year to $21.4 million, from $18.8 million for the first quarter of 2005. Higher stock compensation charges held down the rate of operating income growth when compared to Adjusted EBITDA. Energy operating income was $16.1 million, up 31 percent over the prior year quarter, and Engineering operating income was $8.2 million, up 33 percent from the first quarter of 2005.

Cash Flows

First quarter 2006 cash flow provided by operating activities was $22.5 million, up $11.4 million over the prior-year period, although first quarter 2005 operating cash flow included a $9.9 million payment related to the settlement of a stock option plan. The first quarter year-over-year comparison was also negatively impacted by an incremental $5.2 million in performance-based incentive payments made in the first quarter of 2006.

Balance Sheet

IHS ended the first quarter of 2006 with $151.6 million of cash and cash equivalents and short-term investments, and virtually no debt. Accounts receivable and deferred subscription revenue increased year-over-year primarily as a result of increased sales.

"Our first quarter performance demonstrated the leverage in our business model," stated Michael J. Sullivan, Executive Vice President and CFO. "The results showcase how strong top-line growth and control over the cost structure can translate into stronger margins and higher levels of cash flow."

Outlook (forward-looking statement)

Based upon first quarter performance, IHS is revising its annual guidance upward, and currently anticipates organic revenue growth in the range of eight to ten percent for the full year ending November 30, 2006. The company further expects Adjusted EBITDA to grow twelve to fifteen percent for fiscal 2006. See discussion of Adjusted EBITDA and non-GAAP financial measures at the end of this release.

"We are very pleased with our start to the year," said Mr. Picasso. "We will continue to invest for future growth, engage with customers to address their business challenges, and to execute on our strategic objectives."

As previously announced, IHS will hold a conference call to discuss first quarter results on March 28, 2006, at 3:00 p.m. MST (5:00 p.m. EST). The conference call will be simultaneously webcast on the company's website: www.ihs.com.