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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ___________________________________________________
FORM 10-Q
  ___________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2020

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
 ___________________________________________________
IHS MARKIT LTD.
(Exact name of registrant as specified in its charter) 
 ___________________________________________________
Bermuda001-3649598-1166311
(State or Other Jurisdiction of Incorporation or Organization)(Commission File Number)(IRS Employer Identification Number)

4th Floor, Ropemaker Place
25 Ropemaker Street
London, England
EC2Y 9LY
(Address of Principal Executive Offices)

+44 20 7260 2000
(Registrant’s telephone number, including area code)
 ___________________________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Shares, $0.01 par value per shareINFONew York Stock Exchange
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.      Yes      No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes      No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 



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Large accelerated filer    ☒    Accelerated filer    
Non-accelerated filer    ☐    Smaller reporting company    
        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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes    No
As of August 31, 2020, there were 398,358,566 Common Shares outstanding (excluding 25,219,470 outstanding common shares held by the Markit Group Holdings Limited Employee Benefit Trust).


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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q 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 qualified personnel; our ability to satisfy our debt obligations and our other ongoing business obligations; the occurrence of any catastrophic events, including acts of terrorism or outbreak of war or hostilities; and risks related to public health and safety issues, including the COVID-19 pandemic, on our operations and the operations of our customers and suppliers. 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 our 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.
2

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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 Quarterly Report on Form 10-Q 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 quarterly report on Form 10-Q 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.
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PART I.   FINANCIAL INFORMATION
Item 1.Financial Statements
IHS MARKIT LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except par value)
As ofAs of
 August 31, 2020November 30, 2019
 (Unaudited)(Audited)
Assets
Current assets:
Cash and cash equivalents$156.8 $111.5 
Accounts receivable, net859.7 890.7 
Deferred subscription costs81.7 72.1 
Assets held for sale 115.3 
Other current assets127.8 118.2 
Total current assets1,226.0 1,307.8 
Non-current assets:
Property and equipment, net703.7 658.2 
Operating lease right-of-use assets, net333.7  
Intangible assets, net3,941.3 4,169.0 
Goodwill9,908.5 9,836.3 
Deferred income taxes17.8 17.8 
Other102.6 98.1 
Total non-current assets15,007.6 14,779.4 
Total assets$16,233.6 $16,087.2 
Liabilities and equity
Current liabilities:
Short-term debt$251.1 $251.1 
Accounts payable22.8 59.7 
Accrued compensation147.4 215.2 
Other accrued expenses437.3 479.1 
Income tax payable25.4 58.5 
Deferred revenue887.2 879.7 
Operating lease liabilities67.1  
Liabilities held for sale 25.9 
Total current liabilities1,838.3 1,969.2 
Long-term debt, net4,707.6 4,874.4 
Deferred income taxes660.4 667.2 
Operating lease liabilities310.5  
Other liabilities109.9 145.5 
Commitments and contingencies
Redeemable noncontrolling interests14.0 15.1 
Shareholders' equity:
Common shares, $0.01 par value, 3,000.0 authorized, 480.1 and 476.3 issued, and 398.4 and 398.3 outstanding at August 31, 2020 and November 30, 2019, respectively4.8 4.8 
Additional paid-in capital7,787.9 7,769.4 
Treasury shares, at cost: 81.7 and 78.0 at August 31, 2020 and November 30, 2019, respectively(2,852.1)(2,391.8)
Retained earnings3,759.7 3,295.0 
Accumulated other comprehensive loss(107.4)(261.6)
Total shareholders' equity8,592.9 8,415.8 
Total liabilities and equity$16,233.6 $16,087.2 
See accompanying notes.

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IHS MARKIT LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions, except for per-share amounts)
 
 Three months ended August 31,Nine months ended August 31,
 2020201920202019
Revenue$1,073.2 $1,112.3 $3,180.6 $3,294.2 
Operating expenses:
Cost of revenue385.6 419.7 1,189.7 1,247.5 
Selling, general and administrative258.7 295.4 833.0 889.0 
Depreciation and amortization147.6 144.7 442.3 431.0 
Restructuring and impairment charges12.1 1.1 97.9 11.0 
Acquisition-related costs8.7 23.4 16.2 67.6 
Other income, net(0.7)(114.8)(374.7)(108.4)
Total operating expenses812.0 769.5 2,204.4 2,537.7 
Operating income261.2 342.8 976.2 756.5 
Interest income0.2 0.6 0.8 1.6 
Interest expense(57.7)(63.2)(178.9)(195.9)
Net periodic pension and postretirement expense (0.2)(30.4)(0.7)
Non-operating expense, net(57.5)(62.8)(208.5)(195.0)
Income from continuing operations before income taxes and equity in loss of equity method investees203.7 280.0 767.7 561.5 
Provision for income taxes(39.9)(240.6)(48.9)(263.9)
Equity in loss of equity method investees(0.1)(0.2)(0.3)(0.5)
Net income163.7 39.2 718.5 297.1 
Net (income) loss attributable to noncontrolling interest(0.8)0.9 1.1 2.5 
Net income attributable to IHS Markit Ltd.$162.9 $40.1 $719.6 $299.6 
Basic earnings per share attributable to IHS Markit Ltd.$0.41 $0.10 $1.81 $0.75 
Weighted average shares used in computing basic earnings per share397.8 401.2 396.8 399.9 
Diluted earnings per share attributable to IHS Markit Ltd.$0.41 $0.10 $1.79 $0.73 
Weighted average shares used in computing diluted earnings per share401.1 410.9 401.8 409.4 

See accompanying notes.

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IHS MARKIT LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in millions)

 Three months ended August 31,Nine months ended August 31,
 2020201920202019
Net income$163.7 $39.2 $718.5 $297.1 
Other comprehensive income (loss), net of tax:
Net hedging activities (1)
1.5 (0.7)1.9 (4.1)
Net pension liability adjustment (2)
  15.6  
Foreign currency translation adjustment303.3 (115.6)136.7 (155.6)
Total other comprehensive income (loss)304.8 (116.3)154.2 (159.7)
Comprehensive income (loss)$468.5 $(77.1)$872.7 $137.4 
Comprehensive (income) loss attributable to noncontrolling interest(0.8)0.9 1.1 2.5 
Comprehensive income (loss) attributable to IHS Markit Ltd.$467.7 $(76.2)$873.8 $139.9 
(1) Net of tax (expense) benefit of $(0.3) million, $0.1 million, $(0.4) million, and $0.9 million for the three and nine months ended August 31, 2020, and August 31, 2019, respectively.
(2) Net of tax expense of $5.0 million for the nine months ended August 31, 2020.


See accompanying notes.
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IHS MARKIT LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
 Nine months ended August 31,
 20202019
Operating activities:
Net income$718.5 $297.1 
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization442.3 431.0 
Stock-based compensation expense209.8 167.3 
Gain on sale of assets(370.5)(113.0)
Payments for acquisition-related performance compensation(75.9) 
Net periodic pension and postretirement expense30.4 0.7 
Undistributed earnings of affiliates, net0.6 0.2 
Pension and postretirement contributions(33.2)(1.1)
Deferred income taxes(10.9)109.9 
Change in assets and liabilities:
Accounts receivable, net32.0 (17.5)
Other current assets(61.2)(52.7)
Accounts payable(39.0)(14.5)
Accrued expenses(55.8)10.2 
Income tax(42.1)106.6 
Deferred revenue6.8 39.0 
Other liabilities48.7 62.4 
Net cash provided by operating activities800.5 1,025.6 
Investing activities:
Capital expenditures on property and equipment(211.8)(199.9)
Acquisitions of businesses, net of cash acquired(4.7)(128.4)
Payments to acquire cost- and equity-method investments(8.6)(6.9)
Proceeds from sale of assets470.0 159.2 
Change in other assets(2.0)(2.4)
Settlements of forward contracts12.7 (28.1)
Net cash provided by (used in) investing activities255.6 (206.5)
Financing activities:
Proceeds from borrowings539.1 1,984.9 
Repayment of borrowings(712.8)(2,613.0)
Payment of debt issuance costs (12.3)
Proceeds from noncontrolling interests 12.5 
Contingent consideration payments (2.2)
Dividends paid(203.0) 
Repurchases of common shares(750.0)(200.0)
Proceeds from the exercise of employee stock options217.3 134.1 
Payments related to tax withholding for stock-based compensation(117.6)(65.9)
Net cash used in financing activities(1,027.0)(761.9)
Foreign exchange impact on cash balance16.2 (53.1)
Net increase in cash and cash equivalents45.3 4.1 
Cash and cash equivalents at the beginning of the period111.5 120.0 
Cash and cash equivalents at the end of the period$156.8 $124.1 

See accompanying notes.
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IHS MARKIT LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited, in millions)
Common SharesAdditional
Paid-In
Capital
Accumulated Other
Comprehensive
Loss
Total Shareholders’ EquityRedeemable Noncontrolling Interests
 Shares OutstandingAmountTreasury
Shares
Retained
Earnings
Balance at November 30, 2018 (Audited)397.1 $4.7 $7,680.4 $(2,108.8)$2,743.1 $(298.9)$8,020.5 $5.9 
Adjustment to opening retained earnings related to adoption of ASC Topic 606    56.0  56.0  
Share-based award activity1.7 0.1 8.5 (18.0)(2.4) (11.8) 
Option exercises0.9  23.7    23.7  
Net income (loss)    109.7  109.7 (0.7)
Issuance of noncontrolling interests       12.5 
Other comprehensive income     134.2 134.2  
Balance at February 28, 2019399.7 $4.8 $7,712.6 $(2,126.8)$2,906.4 $(164.7)$8,332.3 $17.7 
Share-based award activity0.2  0.5 50.5 (1.4) 49.6  
Option exercises1.2  32.3    32.3  
Net income (loss)    149.8  149.8 (0.9)
Other comprehensive loss     (177.6)(177.6) 
Balance at May 31, 2019401.1 $4.8 $7,745.4 $(2,076.3)$3,054.8 $(342.3)$8,386.4 $16.8 
Repurchases of common shares(3.1)  (200.0)  (200.0) 
Share-based award activity  (79.3)124.8 (0.2) 45.3  
Option exercises3.0  79.5    79.5  
Net income (loss)    40.1  40.1 (0.9)
Other comprehensive loss     (116.3)(116.3) 
Balance at August 31, 2019401.0 $4.8 $7,745.6 $(2,151.5)$3,094.7 $(458.6)$8,235.0 $15.9 

Common SharesAdditional
Paid-In
Capital
Accumulated Other
Comprehensive
Loss
Total Shareholders’ EquityRedeemable Noncontrolling Interests
 Shares OutstandingAmountTreasury
Shares
Retained
Earnings
Balance at November 30, 2019 (Audited)398.3 $4.8 $7,769.4 $(2,391.8)$3,295.0 $(261.6)$8,415.8 $15.1 
Repurchases of common shares(6.5)  (500.0)  (500.0) 
Share-based award activity2.2  (175.8)134.3 $(21.6) (63.1) 
Option exercises4.9  130.9    130.9  
Dividends and dividend equivalents    (69.0) (69.0) 
Net income (loss)    485.0  485.0 (1.0)
Other comprehensive loss     (30.6)(30.6) 
Balance at February 29, 2020398.9 $4.8 $7,724.5 $(2,757.5)$3,689.4 $(292.2)$8,369.0 $14.1 
Repurchases of common shares(4.0)  (250.0)  (250.0) 
Share-based award activity0.2  (10.9)85.6 (14.5) 60.2  
Option exercises1.7  46.3    46.3  
Dividends and dividend equivalents    (68.8) (68.8) 
Net income (loss)    71.7  71.7 (0.9)
Other comprehensive loss     (120.0)(120.0) 
Balance at May 31, 2020396.8 $4.8 $7,759.9 $(2,921.9)$3,677.8 $(412.2)$8,108.4 $13.2 
Share-based award activity  (12.1)69.8 (12.1) 45.6  
Option exercises1.6  40.1    40.1  
Dividends and dividend equivalents    (68.9) (68.9) 
Net income    162.9  162.9 0.8 
Other comprehensive income    304.8 304.8  
Balance at August 31, 2020398.4 $4.8 $7,787.9 $(2,852.1)$3,759.7 $(107.4)$8,592.9 $14.0 

See accompanying notes.
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IHS MARKIT LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1.Basis of Presentation and Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements of IHS Markit have been prepared on substantially the same basis as our annual consolidated financial statements and should be read in conjunction with our Annual Report on Form 10-K for the year ended November 30, 2019. In our opinion, these condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented, and such adjustments are of a normal, recurring nature.

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, CERAWeek, an annual energy conference, is typically held in the second quarter of each year; however, this event was cancelled in 2020 due to the COVID-19 pandemic. 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 2019.

The preparation of financial statements in conformity with U.S. GAAP requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well the reported amounts of revenue and expense during the reporting period. We have considered the impact of the COVID-19 pandemic in determining our estimates. Actual results could differ from those estimates.

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, which requires that lease assets and lease liabilities be recognized on the balance sheet, and that key information about leasing arrangements be disclosed. In July 2018, the FASB issued ASU 2018-11, which provides targeted improvements to ASU 2016-02 by providing an additional optional transition method and a lessor practical expedient for lease and nonlease components. These standards have been codified in the FASB’s Accounting Standards Codification (“ASC”) Topic 842, “Leases.”

We adopted the standard in the first quarter of our fiscal year 2020 using the modified retrospective transition method applied to our lease contracts as of the adoption date. We elected to use the transition relief package of practical expedients, but we did not elect to use the hindsight practical expedient in determining a lease term and impairment of the right-of-use (“ROU”) assets at the adoption date. We did not apply the lease accounting recognition requirements to leases with a term of one year or less.

We utilize operating leases for our various workplaces worldwide, and we also utilize operating leases for our data centers. These leases have remaining terms ranging from one to 12 years, many of which include renewal and early termination options. As of August 31, 2020, we have not considered extension and early termination options in our calculation of the ROU assets and lease liabilities because we do not believe that it is reasonably certain that we will exercise those options. We do not have any significant finance leases.

We determine if an arrangement is a lease at inception. We consider any contract where there is an identified asset that we have the right to control in determining whether the contract contains a lease. ROU assets represent our right to use the underlying assets for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As our operating leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available on the commencement date in determining the present value of lease payments. We calculate our incremental borrowing rates by extrapolating our current unsecured bond portfolio across the maturity ladder and adjusting the resultant corporate rate for the estimated spread for a secured borrowing and for foreign currencies, as appropriate. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Operating lease transactions are included in operating lease right-of-use assets, net, and current and non-current operating lease liabilities in the condensed consolidated balance sheets.

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The following table shows the cumulative effect of the changes made to the December 1, 2019 consolidated balance sheet for the adoption of ASC Topic 842 related to lease contracts that were in effect at the time of adoption (in millions):
November 30, 2019Adjustments due to adoption of ASC Topic 842December 1, 2019
Other current assets$3.4 $(3.4)$ 
Operating lease right-of-use assets, net$ $380.7 $380.7 
Other accrued expenses$(9.6)$9.6 $ 
Operating lease liabilities, current$ $(