q1 16 results presentation final unencrypted

First quarter 2016 financial results May 10th, 2016

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Important notice

Forward-looking statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the

Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this presentation that address activities,

events or developments that Markit Ltd. (“Markit” or the “Company”) expects, believes or anticipates will or may occur in the future are

forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this presentation may

include the expectations of management regarding plans, strategies, objectives and anticipated financial and operating results of the

Company. Markit’s estimates and forward-looking statements are mainly based on its current expectations and estimates of future events and

trends, which affect or may affect its businesses and operations. Although Markit believes that these estimates and forward-looking

statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made in light of information

currently available to Markit. When used in this presentation, the words “anticipate,” “believe,” “intend,” “expect,” “plan,” “will” or other similar

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

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

forward-looking statements. Further information on such assumptions, risks and uncertainties is available in Markit’s filings with the United

States Securities and Exchange Commission (“SEC”) including its annual report on Form 20-F. Markit’s SEC filings are available at

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

update these forward-looking statements to reflect events or circumstances occurring after the date of this presentation. You are cautioned not

to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. All forward-looking

statements are qualified in their entirety by this cautionary statement.

Non-IFRS financial measures

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

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

business trends relating to its financial condition and results of operations when read in conjunction with the company’s reported results.

Definitions and reconciliations of these non-IFRS measures to most directly comparable IFRS financial measures are available in the

Appendix of this presentation and in Markit’s earnings release dated May 10th, 2016.

Copyright ©2016, Markit Group Limited. All rights reserved and all intellectual property rights are retained by Markit.

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Agenda

First quarter 2016 overview and outlook

Lance Uggla, CEO

First quarter 2016 financial results

Jeff Gooch, CFO

Appendix

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Lance Uggla

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Q1 2016 overview and outlook

Q1 2016

overview

Revenue increased 7.8% on a constant currency basis with 1% organic growth,

6.8% acquired growth

Information – solid organic growth of 4.9%

Processing – 9.6% organic decline; price reductions and weak primary loan market

Solutions – 4% organic growth; challenging prior year comparison, as expected

Executing

on our

growth

strategies

EDM – demand for data management software drives further buyside penetration

KYC service – several milestones this quarter

Blockchain – innovation and new technology to help customers

MiFid II and FRTB – helping customers adapt and comply with EU regulations

Acquisition / partnership to further extend our CDS pricing leadership position

Proposed

merger

with IHS

Creates a global leader in critical information, analytics and solutions

Significant financial and strategic benefits for shareholders

Integration planning is underway and proxy filed today

Expect to close the transaction in the second half of 2016

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First quarter 2016 financial results

Jeff Gooch

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Q1 2016 financial results

Summary financial results

($ million)

Q1 2016 Q1 2015 YoY%

Revenue 287.8 271.5 6.0%

Constant currency growth - - 7.8%

Adjusted EBITDA (1) 123.7 120.7 2.5%

Adjusted EBITDA margin (2) 43.3% 44.8% (1.5)%

Adjusted Earnings (3) 64.3 68.5 (6.1)%

Adjusted EPS, diluted (4) $0.35 $0.36 (2.8)%

Weighted average number of shares used to

compute earnings per share, diluted (million)

186.1 191.7 (2.9)%

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

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

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

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

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

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

attributable to non-controlling interests.

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

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Revenue growth ($ million)

$271.5 $2.7

$18.4 $(4.8) $287.8

Q1 2015 revenue Organic growth Acquired growth FX / Currencyimpact (1)

Q1 2016 revenue

+1.0%

(1.8)%

+6.8%

+6.0%

Q1 2015 vs. Q1 2016

1) 10% movement in rates typically equates to $8m revenue impact & $7m opex impact in quarter

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Revenue mix

($ million) Q1 2016 % Q1 2015 % $ YoY

Recurring fixed $167.3 58.1% $145.3 53.5% $22.0

Recurring variable $103.1 35.8% $110.5 40.7% ($7.4)

Non-recurring $17.4 6.1% $15.7 5.8% $1.7

Total Revenue $287.8 $271.5 $16.3

Q1 overview:

─ Recurring fixed revenue

grew 15%, primarily due to

new business wins in

Information and Solutions

and acquisitions

─ Recurring variable revenue

decrease driven by

Processing

─ Q1 renewal rate ~90% 53.5% 58.1%

40.7% 35.8%

5.8% 6.1%

Q1 2015 Q1 2016

Non-recurringrevenue

Recurring variablerevenue

Recurring fixedrevenue

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Operating and exceptional expenses

($ million)

Q1 2016 Q1 2015 YoY%

Personnel costs (97.0) (91.9) 5.5%

Non personnel costs (63.5) (54.9) 15.7%

Total operating

expenses (160.5) (146.8) 9.3%

Exceptional items (9.5) (1.4) 578.6%

Q1 overview:

─ Operating expenses

increased primarily due to

acquisitions and new hires

─ Continued investment in

new product development,

such as KY3P and hosted

service Solutions offerings

─ Q1 2016 exceptional costs

include $8.7 million of

merger related costs

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Information

($ million)

120.6 129.5

58.2 63.2

0

20

40

60

80

100

120

140

Q1 2015 Q1 2016

Revenue Adjusted EBITDA

+7.4% Q1 overview:

─ Strong growth across fixed

income pricing and

reference data products

─ Double digit organic growth

in Indices

─ CoreOne acquisition

contributing 4.1% to

revenue growth

Organic

revenue

growth

+4.9%

Q1 2016 Q1 2015 YoY%

Revenue 129.5 120.6 7.4%

Organic growth - - 4.9%

Acquisition related - - 4.1%

Adjusted EBITDA 63.2 58.2 8.6%

Adjusted EBITDA margin 48.8% 48.3% 0.5%

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Processing

($ million)

Q1 overview:

─ Rates volumes down year over year,

coupled with price changes

implemented in Q2 15 and adverse

FX movements

─ Continued decline in credit volumes

─ Loans secondary volumes

maintained; primary loan issuance

volumes down from prior year

─ DealHub contributed 4.6% to

acquired revenue growth

67.4 62.3

35.4 31.7

0

10

20

30

40

50

60

70

80

Q1 2015 Q1 2016


(7.6)%

Q1 2016 Q1 2015 YoY%

Revenue 62.3 67.4 (7.6)%

Organic growth - - (9.6%)


Adjusted EBITDA 31.7 35.4 (10.5)%

Adjusted EBITDA margin 50.9% 52.5% (1.6)%

Organic

revenue

growth

(9.6)%

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Solutions

($ million)

83.5

96.0

27.8 29.4

0

20

40

60

80

100

120

Q1 2015 Q1 2016


+15.0%

Q1 2016 Q1 2015 YoY%

Revenue 96.0 83.5 15.0%

Organic growth - - 4.0%


Adjusted EBITDA 29.4 27.8 5.8%

Adjusted EBITDA margin 30.6% 33.3% (2.7)%

Q1 overview:

─ Lower non-recurring software

licence revenue year on year

─ Lower relative AUM growth in

WSO Services

─ EDM showed double digit growth,

with high single digit growth in

Markit Digital1

─ Acquisition related revenue

growth of 12.5% was driven by

Information Mosaic and CoreOne

Organic

revenue

growth

+4.0%

1) Markit On Demand was rebranded as Markit Digital in Q1 2016.

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Net debt and leverage

($ million) Q1 2016 FY 2015

Bank borrowings 137.5 197.4

Share buyback 107.6 128.6

Private placement 497.9 498.0

Total borrowings 743.0 824.0

Cash and cash equivalents (89.7) (146.0)

Net debt 653.3 678.0

LTM Adjusted EBITDA (1) 499.9 496.9

Leverage (2) 1.31x 1.36x

Overview:

─ Q1 free cash flow impacted

by payment of 2015 bonus

liability

─ Capex flat year on year at

$40m

─ Leverage reduced to 1.31x

1) LTM Adjusted EBITDA is defined as Adjusted EBITDA for the previous twelve month period to date reported

2) Leverage is defined as net debt divided by LTM Adjusted EBITDA

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Appendix

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Shares outstanding Summary

─ Average share price is a key driver of the

dilution calculation; an indicative estimate of

the impact of share price fluctuations on

diluted share count is shown in the table

─ Weighted average number of shares, diluted

is calculated in accordance with IFRS

─ The majority of options with a strike price

below $26.70 vested on IPO

─ Options with a strike price at $26.70 largely

vest in tranches over a 5 year period from

IPO date or January 2014

─ Option exercises will generate substantial

cash inflows as well as cash tax benefits

(million except share price) Q1 2016 Q1 2015

Number of shares outstanding at the reporting date 176.7 188.0

Weighted average number of shares, basic 175.7 183.3

Option dilution 8.0 7.3

Restricted shares dilution 2.4 1.1

Weighted average number of shares, diluted 186.1 191.7

Share price used for quarter end dilution calculation $28.98 $26.22

Illustrative average

share price

Illustrative diluted average

number of shares (million)

$30 187.6

$33 191.4

$36 194.7

$39 197.5

$42 199.8

$45 201.9

$48 203.7

Outstanding (million) Unvested (million)

Exercise price 6/19/2014

(IPO) 3/31/2016

Change

(%)

6/19/2014

(IPO) 3/31/2016

Change

(%)

< $15.00 5.0 2.6 (48)% – – -

$15.00- $19.99 6.5 1.7 (74)% 0.7 – (100)%

$20.00- $26.69 23.0 15.2 (34)% 6.5 6.0 (8)%

> $26.69 33.7 30.5 (9)% 33.7 28.2 (16)%

Total 68.1 50.0 (27)% 40.9 34.2 (16)%

Three months ended March 31, 2016 – reported

Illustrative weighted average diluted number of shares

three months ended March 31, 2016

Total outstanding options at March 31, 2016

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Reconciliation to Adjusted EBITDA

($ million)

Q1 2016 Q1 2015 FY 2015 LTM ended

Q1 2016

Profit for the period 24.7 54.5 152.1 122.3

Income tax expense 10.5 20.8 70.0 59.7

Finance costs – net 8.6 4.1 18.9 23.4

Depreciation and amortisation - other 27.9 24.9 107.0 110.0

Amortisation – acquisition related 18.9 14.4 63.7 68.2

Acquisition related items 1.6 - 4.2 5.8

Exceptional items 9.5 1.4 48.7 56.8

Share based compensation and related items 24.1 9.9 50.8 65.0

Other (gains) / losses – net (0.9) (7.9) (13.7) (6.7)

Share of results from joint venture not attributable to

Adjusted EBITDA (0.6) (0.7) (2.7) (2.6)

Adjusted EBITDA attributable to non-controlling interests (0.6) -(0.7) (2.1) (2.0)

Adjusted EBITDA 123.7 120.7 496.9 499.9

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Reconciliation to Adjusted Earnings

($ million)

Q1 2016 Q1 2015

Profit for the period 24.7 54.5

Amortisation – acquisition related 18.9 14.4

Acquisition related items 1.6 -

Exceptional items 9.5 1.4

Share based compensation and related items 24.1 9.9

Other (gains) / losses – net (0.9) (7.9)

Unwind of discount(1)

1.9 2.5

Tax effect of above adjustments (14.9) (5.6)

Adjusted Earnings attributable to non-controlling interests (0.6) (0.7)

Adjusted Earnings 64.3 68.5

Weighted average number of shares for computation of earnings per share, diluted 186,125,224 191,653,520

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

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Reconciliation to Adjusted earnings effective tax rate

($ million)

Q1 2016 Q1 2015

Income tax expense 10.5 20.8

Tax effect of adjusted earnings adjustments(1)

14.9 5.6

Tax on adjusted earnings (A) 25.4 26.4

Adjusted earnings(1)

64.3 68.5

Share of results from joint venture 2.4 2.6

Tax on adjusted earnings 25.4 26.4

Adjusted profit before tax (B) 92.1 97.5

Adjusted earnings effective tax rate (A divided by B) 27.6% 27.1%

1. See “Reconciliation to adjusted earnings”

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Definitions

Revenue growth

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

define these components as follows:

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

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

increased trading volumes or changes in customer assets under management.

Acquisition related – Revenue growth from acquired businesses from the date of acquisition to the first anniversary date of that acquisition, which is a change in the calculation methodology

from prior periods. Prior to the first quarter of 2016, this definition included revenue growth from acquired businesses from the date of acquisition to the end of the fiscal year following the fiscal

year in which the acquisition was completed. This growth results from our strategy of making targeted acquisitions that facilitate growth by complementing our existing products and services

and addressing market opportunities.

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

exchange rates.

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

acquisition related revenue growth, as described above.

Revenue by type

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

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

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

five years and usually includes auto-renewal clauses.

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

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

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

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

Other Non-IFRS Measures

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

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

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

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

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

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

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

interests.

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

Adjusted earnings effective tax rate is a rate calculated using income tax for the period adjusted for the tax effect of Adjusted earnings adjustments, divided by Adjusted earnings excluding

tax and excluding share of results from joint venture.

Leverage is defined as net debt divided by Adjusted EBITDA for the previous twelve month period from date reported.

Free cash flow is defined as net cash generated by or used in operating activities, less capital expenditure, purchases of property, plant and equipment and intangible assets.

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