IHS Markit Revenues: How Does IHS Markit Make Money?

September 17th, 2019 by Trefis Team
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IHS Markit

IHS Markit  (NASDAQ:INFO) is an information services company that provides information, research, analytics, and technology to customers in major industries, financial markets, and governments. The company’s core competency lies in its ability to use its expertise to source and transform data into information and analytics that its customers use for their operational and strategic decisions. In this analysis, we take a look at how the company makes money.

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A Look At IHS Markit’s Key Business Segments

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1.Financial Services (37% of 2019E revenue): The segment provides pricing and reference data, indices, valuation and trading services, trade processing, enterprise software, and managed services to financial services companies.

2. Transportation (30%): provides analysis and forecasts of sales and production for various vehicles and automotive components. It also provides performance measurement and marketing tools for original equipment manufacturers (OEMs), dealers, and others.

3. Energy & Chemicals (20%): The segment includes the company’s Energy offerings, which provide information and expertise relating to the upstream, midstream, downstream sectors of the oil and gas industry as well as the power, gas, coal, renewables sectors.

4. Product Design & Other (17%): The segment includes the company’s Product Design offerings, Technology, Media & Telecom offerings, and Economics, and Country Risk offerings.

What Are The Alternatives?

  • Key competitors in the financial services space include Bloomberg, Thomson Reuters, and Factset.
  • In the energy space, the company competes with the likes of Wood Mackenzie and Rystad Energy.

What Is The Basis of Competition?

  • Companies in the information business compete based on pricing, timeliness, and quality (accuracy, completeness, and consistency) of data.
  • Ability to combine content, expertise, tools, technology, and research and analysis into complete solutions is also an added advantage.

IHS Markit’s Total Revenue has grown from $2.7 billion in 2016 to $4 billion in 2018 and is expected to grow to about $4.7 billion in 2 years

  • Revenue growth of about $700 million over two years to be driven by roughly equal contribution of $320 million from each of the (1) Transportation and (2) Financial Services divisions, with the rest coming from the other 2 divisions.
  • IHS-Markit has added $1.3 billion to its revenue over the last two years, driven primarily by the merger with Markit.
  • Increasing sales from the Financial Services and Transportation segment are likely to add another $700 million in revenue over the next two years.

(A) Revenue from Financial Services to increase to about $1.7 billion in the next two years, with its share of Total Revenue expected to be about 37% by 2020

  • Segment revenue increased from $0.4 billion in 2016 to $1.4 billion in 2018, driven primarily by the merger with Markit.
  • We expect revenue to grow by about 20% in the next two years, to about $1.7 billion in 2020, driven by the Index business and Ipreo, a financial services solutions and data provider that the company acquired in 2018.

(B) Revenue from Transportation to increase to about $1.5 billion in the next two years, with its share of Total Revenue expected to be about 31% by 2020

  • Segment revenue increased from $0.9 billion in 2016 to $1.2 billion in 2018, driven primarily by the company’s automotive product offerings.
  • We expect revenue to grow by over 25% in the next two years, to about $1.5 billion in 2020, driven by offerings such as CARFAX and CARPROOF — which cater to the growing used car market — and other solutions such as Vehicle Performance & Compliance (VPaC) Monitor, that enable automotive manufacturers to analyze the trade-offs between fuel economy, vehicle performance, and regulatory compliance.

(C) Revenue from Energy & Chemicals to increase to about $930 million in the next two years, with its share of Total Revenue expected to be about 20% by 2020

  • Segment revenue remained almost flat at levels of around $860 million between 2016 and 2018.
  • We expect revenue to grow by 6% in the next two years, to about $930 million in 2020, driven by potentially higher spending by energy companies.

(D) Revenue from Financial Services to increase to about $580 million in the next two years, with its share of Total Revenue expected to be about 12% by 2020

  • Segment revenue grew from around $530 million in 2016 to about $550 million in 2018, driven by the Product Design offerings as well as some growth in the Economics and Country Risk (ECR) and Technology, Media & Telecom (TMT) space.
  • We expect revenue to grow to about $580 million by 2020.

 

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