db technology conference markit ceo presentation final 9-9-14 v001 r0fn7m
TRANSCRIPT
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8/11/2019 DB Technology Conference Markit CEO Presentation Final 9-9-14 v001 r0fn7m
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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 futureare 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, longterm objectives and anticipated financial and operating results of the Company. Markitsestimates 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 actualresults to differ materially from those implied or expressed by the forward-looking statements. Further information on such assumptions, risks and
uncertainties is available in Markitsfilings with the United States Securities and Exchange Commission (SEC) including the Risk Factors section
of its registration statement filed with the SEC. MarkitsSEC filings are available at www.sec.gov or on the investor relations section of its website,
www.markit.com. Markit undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances
occurring after the date of this presentation. You are cautioned not to place undue reliance on these forward-looking statements, which speak only
as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement.
Non-IFRS financial measuresThis 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 companys 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 Markits
earnings release dated August 13, 2014.
Copyright 2014, Markit Group Limited. All rights reserved and all intellectual property rights are retained by Markit.
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Overview
Leading provider of financial information services globally
Banks
Asset managersHedge funds
Private equity funds
Venture capital funds
Corporates
Insurance companies
Securities firms
Clearing firms
Software / data vendors
Traders
Risk managers
Compliance officers
IT professionals
Investment professionals
Portfolio managers
Valuation analysts
Actuaries
Research analysts
Equities
Credit
Loans
Rates
Bonds
FX
Structured finance
Commodities
CDS
Environmental
2003founded
10countries
22offices
3,000+institutionalcustomers
3,200+employees
$948m2013 revenue
$421m2013 adjustedEBITDA
Customers Coverage End users
Enhancing transparency
Reducing risk
Improving operational efficiency
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Customer focus
Deeply embedded in our customers systems and workflows
Work closely with customers to develop and introduce new offerings that aredesigned to enhance transparency, reduce risk and improve operational efficiency
Chart figures represent composition of customer base by number of custom
ers
20%
2%5%5%10%
12%
12%
17%
18%Asset Managers
Hedge Fund, Private Equity
Corporates & Insurance
Securities and Clearing
Banks
Software / Data Vendors
Government & Academic
Institutional Investors
Other
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Our divisions
Our operating divisions
Enterprise Software
Managed Services
Information
Critical financial marketinformation sourced /created, enriched anddelivered
Pricing & reference data
Indices
Valuation and tradingservices
2013 revenue: $460m
Processing
Trade processing for OTCderivatives, FX andsyndicated loans
Trade processing
Multi asset class tradeconfirmation and settlementplatform
2013 revenue: $265m
Solutions
Advanced enterprisesolutions tied to Markittechnology / software
Enterprise software
Managed services
2013 revenue: $223m
48%
28%
24%
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Market positioning
Well positioned to address critical industry trends
Markit is addressing the most critical areas in a massive market that is undergoingunprecedented change
We operate in growing markets
Focus on efficiency in financial services
Emerging markets and developing economy growth
Shifting investment styles
Changing regulatory landscape
Evolving technology and communication
Pricing, reference and valuation data
OTC / ET derivatives processing
Reporting and compliance
Data management
Risk management
Order management systems
Indices
...that offer significant opportunity
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Key corporate events
Track record of acquiring and growing complementary
businesses
CDS Pricing
CDS ReferenceEntityIdentifiers
DividendForecasting
IndexManagement
OTCDerivativesSell-SideValuations
Loan Pricing
Daily Equity &CommoditiesData
ABS Pricing
Credit EventAuctions
OTCDerivativesBuy-SideValuations
Metrics
ResearchAggregation
Instant Messaging
Desktop and DataFeed Solutions
OTC DerivativeTrade Processing
PortfolioReconciliation
Structured FinanceCashflow Modeling
Loan CDS Indices& Pricing
Bespoke Indices
DocumentManagement
MacroeconomicData
PortfolioCompression
Syndicated LoanPortfolioManagementSoftware
TradeConfirmations
Loan MappingService
Environmental Registry
Evaluated Bond Pricing
Credit TradeConfirmation
Market Share Analysis
Loan Settlement
Valuations Management
Entity Identifiers
Mobile Applications
Broker Voting
SmartText
Online AdvertisingManager
Liquidity Metrics
LoanProcessing
Risk Analytics
QuantitativeResearchand TradingAnalytics
FX TradeProcessing
CommissionManagement
Loan Index
SecuritiesFinance
EnterpriseDataManagement
Credit Factors
InstrumentReferenceData
ETF Data &Analytics
ISDA Amend
TD Bank Spin Off
RED Acquired
Nine Banks Invest
Totem & DaDDAcquired
LoanX Acquired
Hedge Funds Invest
Chasen Acquired
CommunicatorAcquired
MarketXS Acquired
Three Banks Invest
BOAT Acquired
CDS IndexCoAcquired
International IndexCompany Acquired
NTC EconomicsAcquired
FCS Acquired
SwapsWireAcquired
DTCC DerivSERVJoint Venture created
TZ1 Acquired
ClearPar Acquired
STORM Acquired
General AtlanticInvests
Wall Street onDemandAcquired
QuIC Acquired
LogicscopeAcquired
QSG Acquired
Data ExplorersAcquired
Cadis Acquired
26 94 140 313 470 1,081 1,439 2,041 2,414 2,849 3,000+
CLO Pricing
RMBS IndexTri- Party Repoand DataAnalysis
CorporateActions
Private EquityValuations
Loan Analytics
CreditChecking
Tax DocumentManagement
Collaboration
Remaining 50% ofMarkitSERV Acquired
GCA Acquired
Temasek Invests
Employees
Product
offering
StrategicEvents
Credit Indices
European ABSPerformanceMonitoring
European EquityTradeReporting Platform
QuoteParsing
OperationalBenchmarking
20042005
2006
2008
2009
2011
2012
2013 Rev:$948mm
2007
2010
2003
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Case study
Markitsloan franchise (revenue in $m)
$3.7 $5.4 $6.0$10.6
$47.4
$103.2
$135.2$143.8
$158.7
$193.9
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
LoanX/Loans Pricing WSO Clearpar/Storm Loans Indices
Acquisition Build
AcquireLoanX(LoanPricing)
LaunchloanCDSindicesandpricingservices
Acquire FCS(Loansoftware,servicingand data)
Launch loanmappingserviceLaunchLiLLI(Liquid LoanIndex)
LaunchLiquidityMetrics andMiLLI (LoanIndex andLoanLiquidity)
LaunchMarkit EntityIdentifier(MEI)
AcquireClearParand Storm(LoanSettlement)
Launch ofMarkitLoanSettlementplatform
Demonstrated ability for product innovation and
accretive acquisitions
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Financial overview
Attractive financial model
Markit has historically delivered consistent margins and strong revenue, adjustedEBITDA and adjusted earnings growth
Note: Financials presented under IFRS accounting guidelines. Please see Appendix for reconciliation of non-IFRS financial measures to IFRS financial measures.
$ 478.1
$ 668.4
$ 762.5
$ 860.6
$ 947.9
$208.4
$261.0$305.0
$358.2
$421.3
$115.2$144.9
$184.8$218.4
$248.4
48.1 %46.2 % 45.8 %
47.0 %45.6 %
2009 2010 2011 2012 2013
Revenue Adjusted EBITDA Adjusted Earnings Adjusted EBITDA Margin
$ million
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Our longterm objectives
Longterm financial objectives
Maintain 5-7% organic revenue growth
Overall double digit revenue growth including acquisitions
Maintain low to mid 40s Adjusted EBITDA margin %
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Investment highlights
Key investment highlights
Well positioned to address critical industry trends
Trusted partner for diversified, global customer base
Demonstrated ability for product innovation and accretive acquisitions
Attractive financial model
Founder-led experienced management team incentivised by ownership
culture
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Appendix
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174.5
214.5 217.2
46.7% 49.7% 47.3%
2011 2012 2013
373.4431.3
459.6
2011 2012 2013
Information division
Information division
Description Revenue ($m)
Adjusted EBITDA ($m) and adjusted EBITDA margin (%)
Provides pricing and reference data, indices and valuation andtrading services across multiple asset classes and geographies.Offerings used for independent valuations, research, trading, andliquidity and risk assessments
Serves buyside firms, sellside firms, exchanges, central banks,regulators, government agencies, rating agencies, researchorganisations, academics, accounting firms, consultancies,
technology and service providers, and other companies using bothdirect and third-party distribution channels
Predominantly recurring fixed fee, subscription based revenuemodel
Providesindependent pricingacross majorgeographies andkey asset classesas well asinstrument andentity reference dataproducts
Pricing &
reference data
Leading indexfranchise coveringloans, bonds, creditdefault swaps,structured financeand economicindicators
Indices
Suite of valuation &trading servicesdesigned to help ourcustomers createindependentvaluations andacquire, integrate,distribute, analyseand verify data
Valuation &
Tradingservices
Information
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128.8 124.5 138.1
56.7%52.1% 52.1%
2011 2012 2013
Adjusted EBITDA Adjusted EBITDA margin
227.3 238.8
265.3
2011 2012 2013
Processing division
Processing division
Description Revenue ($m)
Adjusted EBITDA ($m) and adjusted EBITDA margin (%)
Offers trade processing solutions globally for OTC derivatives, FX
and syndicated loans, including infrastructure for pre-trade and post-
trade support
Enables inter-dealer brokers, buyside and sellside firms, to confirm
transactions rapidly, increasing efficiency by optimizing post-trade
workflow, reducing risk, complying with reporting regulations and
improving connectivity
Predominantly recurring variable-fee revenue model
Provides end-to-end tradeprocessing and workflowsolutions to support allparticipants in OTC trading
MarkitSERV
Provides loan trade processingfor the US and Europeansyndicated loan market
Loan Settlement
Processing
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56.2
67.6
77.5
34.7% 35.5% 34.8%
2011 2012 2013
161.8190.5
223.0
2011 2012 2013
Solutions division
Solutions division
Description Revenues ($m)
Adjusted EBITDA ($m) and adjusted EBITDA margin
Provides configurable enterprise software platforms; design, hostand build websites; and end-to-end managed services
Our offerings capture, organise, process, display and analyseinformation, manage risk and meet our customers regulatoryrequirements
Broad customer base within the financial services industry and othercorporates including buyside and sellside firms, custodians, private
equity firms, wealth management firms and retail brokeragesA combination of recurring fixed-fee revenue model and softwaresales and associated services revenue
Enterprise Data Management
thinkFolio
Analytics
WSO Software
Enterprise Software
On Demand
Counterparty Manager
KYC Services
Hosted reference data
WSO Services
Collaboration Services
Corporate Actions
CTI
Managed Services
Solutions
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Financial overview
Capital allocation strategy
Dec 31st2012 ($m) Dec 31st 2013 ($m)
Bank borrowings 240.5 268.0
Share buyback 398.7 306.6
Interest free promissory note 14.5 -
Total borrowings 653.7 574.6
Cash and cash equivalents (110.2) (75.3)
Net debt 543.5 499.3
Adjusted EBITDA 358.2 421.3
Leverage (Net debt /Adjusted EBITDA)
1.52x 1.19x
Invest to grow business organically through product development and innovation Historically, have returned capital to shareholders through buybacks
Recently amended revolving credit facility to provide a 5-year term $1.05bn in size with accordionto $1.45bn
Supplement organic growth with acquisitions that we can further grow organically
Expect to fund future acquisitions primarily with debt and cash flow
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Key investment highlights
Founder-led management team incentivised by
ownership cultureManagement team has substantial experience within the industry, with an averageindustry tenure of 22 years for top 35 senior managers
NameYears
experienceTenure with
Markit
Armins Rusis
Co-Head of Information
28 Since 2008
(Board membersince 2007)
Chip CarverCo-Head of Information
28 Since 2008
Brad LevyHead ofProcessing
22 Since 2012(Board membersince inception)
Dan SimpsonHead ofEnterpriseSoftware
19 Since 2012
Michele TrogniHead of ManagedServices
26 Since 2013
Roy FlintHead of Infrastructure
29 Since 2008
NameYears
experienceTenure with
Markit
Lance Uggla
Chief Executive Officer
28 Since inception
Kevin GouldPresident
28 Since inception
Jeff GoochChief Financial Officer
26 Since 2007(Board member
since 2003)
Adam KanslerChief AdministrativeOfficer & General Counsel
21 Since 2009
(Advisor sinceinception)
Shane AkeroydHead of Sales
28 Since 2008
Stephen WolffHead of GroupCorporate Strategy
22 Since 2014(Board member
since 2009)
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Key investment highlights
Industry awards
Markitsinnovative products continue to be recognised as best-in-class (2009-2014)
Risk Management System of the Year 2014
OTC Infrastructure Service of the Year 2013
Back-Office Technology Product of the Year2013
Lifetime Achievement Award: Markit CEO, Lance Uggla2012
Industry Platform of the Year 2009
Best Company 2014
Best CDS Data2013
Best new data product2014
Best Reference Data Initiative2013
Best Evaluated Prices2013, 2012
Best Reference Data Provider2012
Best Data Provider for Derivatives2010, 2009
Best Voluntary Carbon Registry 2013
Best Registry Provider2012, 2011, 2010
Best Tradable Index2013
Best EDM Platform 2013
Most Innovative Data Provider2013
Best Data Service Provider 2012
Best Data Management Initiative 2011
Technology Development of the Year2011
Best Third Party Asset Valuation Provider 2011, 2010, 2009
Sellside Technology Provider of the Year 2014
Best Pricing / Valuation Service 2013
Best EDM for Buy-Side2013
Best EDM Platform 2013
Best Corporate Actions Service2013
Best Buy-Side Data Management Product 2012
Best TCA Provider to the Buy-Side 2012
Best Overall Product / Technology Provider2012
Best Pricing and Valuation Service2012, 2011Best Buy-Side Pricing/Valuation Service2010
Best Innovation by an ISVRegulatory Change2013
Innovation for IT: Connectivity2011
Data Vendor of the Year2013
Best New Data Service2013
Data Firm of the Year2009
European Middle Office Provider2013, 2010
Best Index Provider2013
Rising Star Index Provider 2011
UK Entrepreneur of the Year (Lance Uggla)2012
Best information and Data Vendor2014
Best Information and Data Vendor (US)2013
Data Vendor of the Year2014
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Reconciliation
Reconciliation to Adjusted EBITDA
($ million)
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Profit for the period 92.2 151.2 156.2 153.1 147.0
Income tax expense 44.4 43.8 50.6 42.7 63.7
Finance costsnet 17.2 18.2 22.9 28.9 19.4
Depreciation and amortisation 32.4 48.2 62.7 66.7 86.0
Amortisationacquisition related 5.7 28.5 34.4 46.2 50.1
Acquisition related items 5.1 (11.3) 4.8 0.9 (1.4)
Exceptional items 3.0 30.9 11.6 40.3 60.6
Share-based compensation 9.3 14.9 11.7 16.2 8.1
Other losses / (gains)net 16.5 0.1 4.6 11.6 (0.7)
Adjusted EBITDA attributable to non-controlling interests
(17.4) (63.5) (54.5) (48.4) (11.5)
Adjusted EBITDA 208.4 261.0 305.0 358.2 421.3
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Reconciliation
Reconciliation to Adjusted Earnings
($ million)FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Profit for the period 92.2 151.2 156.2 153.1 147.0
Amortisationacquisition related 5.7 28.5 34.4 46.2 50.1
Acquisition related items 5.1 (11.3) 4.8 0.9 (1.4)
Exceptional items 3.0 30.9 11.6 40.3 60.6
Share-based compensation 9.3 14.9 11.7 16.2 8.1
Other losses / (gains)net 16.5 0.1 4.6 11.6 (0.7)
Unwind of discount(1)
0.7 3.4 8.9 9.3 12.4
Tax effect of above adjustments (1.0) (14.6) (7.6) (24.1) (18.0)
Adjusted Earnings attributable tonon-controlling interests
(16.3) (58.2) (39.8) (35.1) (9.7)
Adjusted Earnings 115.2 144.9 184.8 141.2 248.4
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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Definitions
Revenue growth
We measure revenue growth in terms of organic revenue growth, acquisition related revenue growth and foreign currency impact on revenuegrowth. We define these components as follows:
OrganicRevenue 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 existingcustomers, price changes for our products and services and market driven factors such as increased trading volumes or changes in customerassets under management.
Acquisition relatedRevenue growth from acquired businesses through the end of the fiscal year following the fiscal year in which theacquisition was completed. This growth results from our strategy of making targeted acquisitions that facilitate growth by complementing ourexisting products and services and addressing market opportunities.
Foreign currencyThe impact on revenue growth resulting from the difference between current revenue at current exchange rates and currentrevenue at the corresponding prior period exchange rates.
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 revenueRevenue generated from contracts specifying a fixed fee for services delivered over the life of the contract. The fixedfee is typically paid annually, semiannually or quarterly in advance. These contracts are typically subscription contracts where the revenue isrecognised across the life of the contract. The initial term of these contracts can range from one to five years and usually includes auto-renewalclauses.
Recurring variable revenueRevenue derived from contracts that specify a fee for services which is typically not fixed. The variable fee istypically paid monthly in arrears. Recurring variable revenue is based on, among other factors, the number of trades processed, assets undermanagement or the number of positions we value. Many of these contracts do not have a maturity date while the remainder have an initial termranging from one to five years.
Non-recurring revenueRevenue that relates to certain software license sales and the associated consulting revenue.
Other Non-IFRS Measures
Adjusted EBITDAis defined as profit for the period from continuing operations before income taxes, net finance costs, depreciation andamortisation on fixed assets and intangible assets (including acquisition related intangible assets), acquisition related items, exceptional items,share-based compensation and net other gains or losses 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 EBITDAis 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 relateditems, exceptional items, share-based compensation, net other gains or losses and unwind of discount, less the tax effect of these adjustmentsand excluding Adjusted Earnings attributable to non-controlling interests.
Adjusted EPS diluted is defined as Adjusted Earnings divided by the weighted average number of shares issued and outstanding, diluted.
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minesdata,
poolsintelligence,
surfacesinformation,
enablestransparency,buildsplatforms,
providesaccess,
scalesvolume,
extendsnetworks,& transforms business.