IHS MARKIT LTD.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is intended to help the reader understand the
financial condition and results of operations of IHS Markit Ltd. ("IHS Markit ,"
"we," "us," or "our") as of and for the periods presented. The following
discussion should be read in conjunction with our 2019 Annual Report on Form
10-K and the Condensed Consolidated Financial Statements and accompanying notes
included in this
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Quarterly Report on Form 10-Q. References to 2020 are to our fiscal year 2020,
which began on
Executive Summary
Business Overview
We are a world leader in critical information, analytics, and solutions for the major industries and markets that drive economies worldwide. We deliver next-generation information, analytics, and solutions to customers in business, finance, and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. We have more than 50,000 business and government customers, including 80 percent of the Fortune Global 500 and the world's leading financial institutions. Headquartered inLondon , we are committed to sustainable, profitable growth.
To best serve our customers, we are organized into the following four industry-focused segments:
• Financial Services, which includes our financial Information, Solutions,
and Processing product offerings;
• Transportation, which includes our Automotive and Maritime & Trade product
offerings;
• Resources, which includes our Upstream, Downstream, Power, Chemical, and
Agricultural product offerings;
• Consolidated Markets & Solutions, which includes our Product Design;
Economics & Country Risk ("ECR"), and Technology, Media, & Telecom ("TMT")
benchmarking product offerings.
We believe that this sales and operating model helps our customers do business with us by providing a cohesive, consistent, and effective product, sales, and marketing approach by segment.
On
Our recurring fixed revenue and recurring variable revenue represented
approximately 88 percent of our total revenue for the three months ended
For the first quarter of 2020, we focused our efforts on the following actions:
• Increase in geographic, product, and customer penetration. We believe
there are continued opportunities to add new customers and to increase the
use of our products and services by existing customers. We plan to add new
customers and build our relationships with existing customers by
leveraging our existing sales channels, broad product portfolio, global
footprint, and industry expertise to anticipate and respond to the
changing demands of our end markets.
• Introduce innovative offerings and enhancements. In recent years, we have
launched several new product offerings addressing a wide array of customer
needs, and we expect to continue to innovate using our existing data sets
and industry expertise, converting core information to higher value
advanced analytics. Our investment priorities are primarily in energy,
automotive, and financial services, and we intend to continue to invest
across our business to increase our customer value proposition.
• Balance capital allocation. We will continue to manage to our capital
policy target leverage ratio, and intend to return 50 to 75 percent of our
annual capital capacity to shareholders through share repurchases and a
quarterly dividend. We will continue to evaluate the long-term potential
and strategic fit of our asset portfolio, and we will also continue to
evaluate potential mergers and acquisitions, focused primarily on targeted
transactions in our core end markets that will allow us to continue to
build out our strategic position.
We are carefully monitoring the COVID-19 pandemic and the resulting length and
depth of the economic impacts on our financial condition and results of
operations. In early March 2020 , we cancelled all of our large customer events
scheduled for the second quarter of 2020. We estimated the cancellation of those
events will reduce non-recurring revenue by approximately $50 million . We are
also experiencing pressure from an economic slowdown, from significantly lower
oil prices and related decrease in capital expenditure spending, and a near-term
shock to consumer spending impacting our automotive customers. We are closely
following developments related to oil markets worldwide, which have seen a sharp
decrease in the price of oil in recent weeks. A number of our small- and
mid-size oil and gas customers will be negatively impacted by this development,
which may result in a decrease in the amount of products and services they may
purchase from us, particularly in our Resources
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Upstream product offerings. The economic slowdown and decrease in consumer spending pressures are also causing a near-term disruption in the car-buying process, which is impacting our North American automotive dealer customers in a manner that is not representative of a typical cyclical downturn. We are anticipating incremental adverse revenue impacts from the current environment in our Resources segment (primarily related to our Upstream product offerings) and our Transportation segment (primarily as a result of an anticipated decline in consumer automotive spending and related impact to our automotive dealer customers). We also believe that there will be some level of revenue weakness within Financial Services, particularly with our Solutions product offerings, due to longer software sales cycles and lower volumes in our issuer services business. As a result of the anticipated adverse revenue impacts, we are implementing cost reduction efforts to partially offset the revenue decline. Such cost reduction efforts will include both fixed and variable costs across all areas of our business. Key Performance Indicators We believe that revenue growth, Adjusted EBITDA (both in dollars and margin), and free cash flow are key financial measures of our success. Adjusted EBITDA and free cash flow are financial measures that are not prepared in accordance withU.S. generally accepted accounting principles ("non-GAAP"). Revenue growth. We review year-over-year revenue growth in our segments as a key measure of our success in addressing customer needs. We measure revenue growth in terms of organic, acquisitive, and foreign currency impacts. We define these components as follows:
• Organic - We define organic revenue growth as total revenue growth from
continuing operations for all factors other than acquisitions and
foreign currency movements. We drive this type of revenue growth through
value realization (pricing), expanding wallet share of existing
customers through up-selling and cross-selling efforts, securing newcustomer business, and the sale of new or enhanced product offerings.
• Acquisitive - We define acquisitive revenue as the revenue generated
from acquired products and services from the date of acquisition to the
first anniversary date of that acquisition. This type of growth comes as
a result of our strategy to purchase, integrate, and leverage the value
of assets we acquire. We also include the impact of divestitures in this
metric.
• Foreign currency - We define the foreign currency impact on revenue as
the difference between current revenue at current exchange rates and
current revenue at the corresponding prior period exchange rates. Due to
the significance of revenue transacted in foreign currencies, we believe
that it is important to measure the impact of foreign currency movements
on revenue.
In addition to measuring and reporting revenue by segment, we also measure and
report revenue by transaction type. Understanding revenue by transaction type
helps us identify and address broad changes in product mix. We summarize our
transaction type revenue into the following three categories:
• Recurring fixed revenue represents revenue generated from contracts
specifying a relatively fixed fee for services delivered over the life
of the contract. The initial term of these contracts is typically annual
(with some longer-term arrangements) and non-cancellable for the term of
the subscription. The fixed fee is typically paid annually or more
periodically in advance, and may contain provisions for minimum monthly
payments. These contracts typically consist of subscriptions to our
various information offerings and software maintenance, which provide
continuous access to our platforms and associated data over the contract
term. Subscription revenue is usually recognized ratably over the
contract term or, for term-based software license arrangements, annually
on renewal.
• Recurring variable revenue represents revenue from contracts thatspecify a fee for services, which is typically not fixed. The variable
fee is usually 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. Most of these
contracts have an initial term ranging from one to five years, with
auto-renewal periods thereafter. Recurring variable revenue was derived
entirely from the Financial Services segment for all periods presented.
• Non-recurring revenue represents consulting, services, single-document
product sales, perpetual license sales and associated services,
conferences and events, and advertising. Our non-recurring products and
services are an important part of our business because they complement
our recurring business in creating strong and comprehensive customer
relationships.
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Non-GAAP measures. We use non-GAAP financial measures such as EBITDA, Adjusted EBITDA, and free cash flow in our operational and financial decision-making. We believe that such measures allow us to focus on what we deem to be more reliable indicators of ongoing operating performance (Adjusted EBITDA) and our ability to generate cash flow from operations (free cash flow). We also believe that investors may find these non-GAAP financial measures useful for the same reasons, although we caution readers that non-GAAP financial measures are not a substitute forU.S. GAAP financial measures or disclosures. None of these non-GAAP financial measures are recognized terms underU.S. GAAP and do not purport to be an alternative to net income or operating cash flow as an indicator of operating performance or any otherU.S. GAAP measure. Throughout this MD&A, we provide reconciliations of these non-GAAP financial measures to the most directly comparableU.S. GAAP measures. • EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA are used by securities analysts, investors, and other interested parties to assess
our operating performance. For example, a measure similar to Adjusted
EBITDA is required by the lenders under our revolving credit agreement.
We define EBITDA as net income plus or minus net interest, plus
provision for income taxes, depreciation, and amortization. Our
definition of Adjusted EBITDA further excludes primarily non-cash items
and other items that we do not consider to be useful in assessing our
operating performance (e.g., stock-based compensation expense,
restructuring charges, acquisition-related costs and performance
compensation, exceptional litigation, net other gains and losses,
pension mark-to-market, settlement, and other expense, the impact of
joint ventures and noncontrolling interests, and discontinued
operations).
• Free Cash Flow. We define free cash flow as net cash provided byoperating activities less payments for acquisition-related performance
compensation and capital expenditures.
Non-GAAP measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies comparable to us, many of which present non-GAAP measures when reporting their results. These measures can be useful in evaluating our performance against our peer companies because we believe the measures provide users with valuable insight into key components ofU.S. GAAP financial disclosures. For example, a company with higherU.S. GAAP net income may not be as appealing to investors if its net income is more heavily comprised of gains on asset sales. Likewise, excluding the effects of interest income and expense moderates the impact of a company's capital structure on its performance. However, non-GAAP measures have limitations as an analytical tool. Because not all companies use identical calculations, our presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. They are not presentations made in accordance withU.S. GAAP, are not measures of financial condition or liquidity, and should not be considered as an alternative to profit or loss for the period determined in accordance withU.S. GAAP or operating cash flows determined in accordance withU.S. GAAP. As a result, these performance measures should not be considered in isolation from, or as a substitute analysis for, results of operations as determined in accordance withU.S. GAAP.
Global Operations
Approximately 40 percent of our revenue is transacted outside ofthe United States ; however, only about 20 percent of our revenue is transacted in currencies other than theU.S. dollar. As a result, a strengtheningU.S. dollar relative to certain currencies has historically resulted in a negative impact on our revenue; conversely, a weakeningU.S. dollar has historically resulted in a positive impact on our revenue. Our largest foreign currency exposures for revenue are the British Pound, Euro, and Canadian Dollar.
Results of Operations
Total Revenue
Revenue for the three months endedFebruary 29, 2020 , increased 3 percent, compared to the three months endedFebruary 28, 2019 . The table below displays the percentage change in revenue due to organic, acquisitive, and foreign currency factors when comparing the three months endedFebruary 29, 2020 to the three months endedFebruary 28, 2019 . Change in Total Revenue Foreign Organic Acquisitive Currency First quarter 2020 vs. First quarter 2019 6 % (2 )% - % We saw solid organic revenue growth in our Transportation and Financial Services segments for the three months endedFebruary 29, 2020 , compared to the three months endedFebruary 28, 2019 . 23
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Acquisitive revenue growth for the three months endedFebruary 29, 2020 , compared to the three months endedFebruary 28, 2019 , was primarily due to the A&D divestiture and sale of our TMT market intelligence assets, partially offset by the Agribusiness acquisition. Foreign currency had a negligible effect on revenue growth for the three months endedFebruary 29, 2020 , compared to the three months endedFebruary 28, 2019 . Due to the extent of our global operations, foreign currency movements could positively or negatively affect our results in the future.
Revenue by Segment
Three months ended February 29/28, Percentage
(In millions, except percentages) 2020 2019 Change
Revenue:
Financial Services $ 436.0 $ 409.2 7 %
Transportation 297.2 288.1 3 %
Resources 225.6 216.8 4 %
CMS 122.0 132.3 (8 )%
Total revenue $ 1,080.8 $ 1,046.4 3 %
The percentage change in revenue for each segment was due to the factors described in the following table.
Increase in revenue
First quarter 2020 vs. First quarter 2019
Foreign
Organic Acquisitive Currency
Financial Services 7 % - % - %
Transportation 9 % (6 )% - %
Resources 1 % 3 % - %
CMS 3 % (10 )% - %
Financial Services revenue for the three months ended February 29, 2020 ,
compared to the three months ended February 28, 2019 , increased organically from
strength across our Information, Solutions, and Processing product offerings.
Within our Information product offerings, organic revenue growth was led by our
core pricing, valuation, equities, and indices offerings, as well as our
advisory solutions. Within our Solutions product offerings, organic revenue
growth was led by our WSO, issuer services (particularly serving equity and
municipal issuances), and private capital markets offerings. Within our
Processing product offerings, organic revenue growth was led by derivative
processing activity.
Transportation revenue for the three months ended February 29, 2020 , compared to
the three months ended February 28, 2019 , continued to experience strong organic
growth, led by used and new car product offerings. Non-recurring organic revenue
growth was down slightly for the three months ended February 29, 2020 ,
reflecting lower recall and digital marketing revenues. Our automotive product
offerings continue to provide the largest contribution to Transportation revenue
growth, as our diversification in used and new car product offerings continues
to provide balanced opportunities for growth. As a result of COVID-19 and the
current economic environment, we anticipate a slowdown in the organic growth
profile for Transportation over the near term.
Resources revenue for the three months ended February 29, 2020 , compared to the
three months ended February 28, 2019 , experienced positive organic revenue
growth, with 1 percent recurring revenue growth and 2 percent non-recurring
revenue growth. Our Resources annual contract value ("ACV"), which represents
the annualized value of recurring revenue contracts, grew at a 3 percent rate on
a trailing annual basis. We expect that the cancellation of our annual CERAWeek
event in the second quarter of 2020 will result in an organic revenue decline in
our second quarter 2020 results. Additionally, as a result of COVID-19 and the
current economic environment, we anticipate a further slowing in organic revenue
growth for Resources over the near term.
CMS revenue for the three months ended
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Revenue by Transaction Type
Three months ended February 29/28, Percentage change
(in millions, except percentages) 2020 2019 Total Organic
Revenue:
Recurring fixed $ 804.1 $ 767.2 5 % 7 %
Recurring variable 146.8 136.0 8 % 8 %
Non-recurring 129.9 143.2 (9 )% (5 )%
Total revenue $ 1,080.8 $ 1,046.4 3 % 6 %
As a percent of total revenue:
Recurring fixed 74 % 73 %
Recurring variable 14 % 13 %
Non-recurring 12 % 14 %
Recurring fixed revenue organic growth increased 7 percent for the three months
ended February 29, 2020 , compared to the three months ended February 28, 2019 ,
largely due to contributions from our Transportation and Financial Services
recurring offerings, with slight organic growth in Resources and CMS. Recurring
variable revenue was composed entirely of Financial Services revenue.
The non-recurring organic revenue decline for the three months ended
February 29, 2020 , compared to the three months ended February 28, 2019 , was
primarily due to Solutions software product offerings within the Financial
Services segment. We anticipate that the cancellation of our large customer
events in the second quarter of 2020 will negatively impact organic revenue by
$50 million and result in organic revenue decline in our non-recurring revenue
in the second quarter of 2020.
As a result of COVID-19 and the current economic environment, we anticipate a
slowdown in the recurring organic revenue growth profile in the near term and
expect nonrecurring organic revenue growth to continue its negative trend.
Operating Expenses
The following table shows our operating expenses and the associated percentages of revenue.
Three months ended February 29/28, Percentage
(In millions, except percentages) 2020 2019 Change
Operating expenses:
Cost of revenue $ 415.8 $ 399.8 4 %
SG&A expense 316.2 300.3 5 %Total cost of revenue and SG&A expense $ 732.0 $
700.1 5 %
Depreciation and amortization expense $ 145.3 $
142.3 2 %
As a percent of revenue:
Total cost of revenue and SG&A expense 68 % 67 %
Depreciation and amortization expense 13 % 14 %
Cost of Revenue and SG&A Expense
In managing our business, we evaluate our costs by type (e.g., salaries and
benefits, facilities, IT) rather than by income statement classification. The
increases in absolute total cost of revenue and SG&A expense, as well as the
increase as a percentage of revenue, were primarily due to higher stock-based
compensation expense, as further discussed below.
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Within our cost of revenue and SG&A expense, stock-based compensation expense increased by approximately$23 million for the three months endedFebruary 29, 2020 compared to the three months endedFebruary 28, 2019 , which was largely due to our higher share price and related employer tax impacts associated with the exercise of stock options.
Depreciation and Amortization Expense
For the three months endedFebruary 29, 2020 , compared to the three months endedFebruary 28, 2019 , depreciation and amortization expense increased slightly on an absolute basis primarily because of capitalized software development investments. As a percentage, depreciation and amortization expense declined primarily because of continued organic revenue growth.
Acquisition-Related Costs
Please refer to Note 8 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for a discussion of costs associated with our integration and other acquisition-related activities. During the three months endedFebruary 29, 2020 , we recorded approximately$0.9 million of direct and incremental costs associated with acquisition and divestiture activities.
Segment Adjusted EBITDA
Three months ended February 29/28, Percentage
(In millions, except percentages) 2020 2019 Change
Adjusted EBITDA:
Financial Services $ 205.4 $ 183.2 12 %
Transportation 118.0 114.3 3 %
Resources 90.2 93.2 (3 )%
CMS 29.4 29.4 - %
Shared services (11.4 ) (12.0 )
Total Adjusted EBITDA $ 431.6 $ 408.1 6 %
As a percent of segment revenue:
Financial Services 47 % 45 %
Transportation 40 % 40 %
Resources 40 % 43 %
CMS 24 % 22 %
For the three months ended February 29, 2020 , compared to the three months ended
February 28, 2019 , Adjusted EBITDA increased primarily due to the leverage in
our business model, as incremental revenue drives higher margins, partially
offset by the sale of our A&D business line. We continue to focus our efforts on
organic revenue growth and cost management to improve overall margins. Financial
Services segment Adjusted EBITDA and associated margin continued to increase
because of organic revenue growth. The increase in Adjusted EBITDA for the
Transportation segment was due to organic revenue growth, partially offset by
the divestiture of the A&D business line, which also negatively impacted margin
expansion. Resources Adjusted EBITDA and associated margin decreased due to the
slowdown in organic revenue growth.
Provision for Income Taxes
Our effective tax rate is estimated based upon the effective tax rate expected to be applicable for the full year.
Our effective tax rate for the three months endedFebruary 29, 2020 was 1 percent, compared to negative 1 percent for the three months endedFebruary 28, 2019 . The low 2020 tax rate is primarily due to excess tax benefits on stock-based compensation of approximately$64 million and the tax-efficient divestiture of the A&D business line (U.K. share sales are exempt from tax) of approximately$29 million . The negative 2019 tax rate is primarily due to tax benefits associated with excess tax benefits on stock-based compensation of approximately$12 million and change in partnership basis related to intangible assets of approximately$7 million . 26
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EBITDA and Adjusted EBITDA (non-GAAP measures)
The following table provides reconciliations of our net income to EBITDA and Adjusted EBITDA for the three months endedFebruary 29, 2020 andFebruary 28, 2019 . Three months ended February 29/28, Percentage (In millions, except percentages) 2020 2019 Change
Net income attributable to
109.7 342 %
Interest income (0.4 ) (0.4 )
Interest expense 61.2 66.9
Provision (benefit) for income taxes 4.3 (0.9 )
Depreciation 51.1 46.6
Amortization 94.2 95.7
EBITDA $ 695.4 $ 317.6 119 %
Stock-based compensation expense 82.6 59.7
Restructuring charges 4.5 8.2
Acquisition-related costs 0.7 7.5
Acquisition-related performance compensation 0.2 15.3
Loss on debt extinguishment - 0.2
Gain on sale of assets (372.3 ) -
Pension mark-to-market and settlement
expense 21.2 -
Share of joint venture results not attributable to Adjusted EBITDA 0.3
0.1
Adjusted EBITDA attributable to noncontrolling interest (1.0 ) (0.5 ) Adjusted EBITDA $ 431.6 $ 408.1 6 % Adjusted EBITDA as a percentage of revenue 39.9 %
39.0 %
Our Adjusted EBITDA margin performance for the three months endedFebruary 29, 2020 , compared to the three months endedFebruary 28, 2019 , increased primarily because of margin flow-through on our organic revenue growth, as well as our continued cost management efforts. We expect to continue to drive margin improvement, albeit from lower revenue growth and tighter cost management activities as a result of COVID-19 and the current economic environment. These near-term pressures may adversely affect our ability to grow Adjusted EBITDA and margins as quickly as anticipated in the near term.
Financial Condition
(In millions, except As of
2020 2019 Dollar change Percentage change
Accounts receivable,
net $ 979.7 $ 890.7 $ 89.0 10 %
Accrued compensation $ 84.5 $ 215.2 $ (130.7 ) (61 )%
Deferred revenue $ 1,029.7 $ 879.7 $ 150.0 17 %
The increases in accounts receivable and deferred revenue were due to increased
billing activity in 2020. Accrued compensation decreased primarily due to the
2019 bonus payout made in the first quarter of 2020, partially offset by the
current year accrual.
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Liquidity and Capital Resources
As ofFebruary 29, 2020 , we had cash and cash equivalents of$143.9 million . Our principal sources of liquidity include cash generated by operating activities, cash and cash equivalents on the balance sheet, and amounts available under a revolving credit facility. We had approximately$5.21 billion of debt as ofFebruary 29, 2020 , consisting primarily of$323.0 of revolving facility debt and$4.68 billion of senior notes. As ofFebruary 29, 2020 , we had approximately$927.0 million available under our revolving credit facility. Our interest expense for the three months endedFebruary 29, 2020 , compared to the three months endedFebruary 28, 2019 , decreased primarily because of a lower debt balance compared to the prior year. Our Board of Directors approved a quarterly cash dividend of$0.17 per share during the first quarter of 2020, which resulted in a$67.7 million cash payout inFebruary 2020 . Our Board of Directors has authorized a share repurchase program of up to$2.5 billion ofIHS Markit common shares throughNovember 30, 2021 , to be funded using our existing cash, cash equivalents, marketable securities, and future cash flows, or through the incurrence of short- or long-term indebtedness, at management's discretion. This repurchase program does not obligate us to repurchase any set dollar amount or number of shares and may be modified, suspended, or terminated at any time without prior notice. Under this program, we are authorized to repurchase our common shares on the open market from time to time, in privately negotiated transactions, or through accelerated share repurchase agreements, subject to availability of common shares, price, market conditions, alternative uses of capital, and applicable regulatory requirements, at management's discretion. InDecember 2019 , we entered into an ASR to repurchase$500 million under this authorization, and inMarch 2020 , we entered into an ASR to repurchase$250 million under this authorization. Our Board of Directors has separately authorized, subject to applicable regulatory requirements, the repurchase of our common shares surrendered by employees in an amount equal to the exercise price, if applicable, and statutory tax liability associated with the vesting of their equity awards, for which we pay the statutory tax on behalf of the employee and forgo receipt of the exercise price of the award from the employee, if applicable. Such repurchases have been authorized in addition to the share repurchase program described above. Based on our cash, debt, and cash flow positions, we believe that we will have sufficient liquidity to meet our ongoing working capital and capital expenditure needs. Our future capital requirements will depend on many factors, including the number and magnitude of future acquisitions, amount of share repurchases and dividends, the need for additional facilities or facility improvements, the timing and extent of spending to support product development efforts, information technology infrastructure investments, investments in our internal business applications, and the continued market acceptance of our offerings. We could be required, or could elect, to seek additional funding through public or private equity or debt financings; however, additional funds may not be available on terms acceptable to us. Given current market conditions as a result of COVID-19, we are focused on maintaining high levels of liquidity and capital structure flexibility. We maintain a solid balance sheet, investor grade rating, a well-positioned debt maturity ladder, and a strong diversified bank group.
Cash Flows
Three months ended February 29/28,
(In millions, except percentages) 2020 2019 Dollar change Percentage change
Net cash provided by operating
activities $ 119.5 $ 188.0 $ (68.5 ) (36 )%
Net cash provided by (used in)
investing activities $ 387.0 $ (68.8 ) $ 455.8 (663 )%
Net cash used in financing
activities $ (462.1 ) $ (111.9 ) $ (350.2 ) 313 %
The decrease in net cash provided by operating activities was primarily due to
The increase in net cash provided by investing activities was primarily due to the sale of the A&D business line.
The increase in net cash used in financing activities is primarily due to the$500 million in share repurchases and our dividend payout, partially offset by increased proceeds from stock option exercises. 28
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Free Cash Flow (non-GAAP measure)
The following table reconciles our non-GAAP free cash flow measure to net cash provided by operating activities.
Three months ended February 29/28,
(In millions, except percentages) 2020 2019 Dollar change Percentage change
Net cash provided by operating
activities $ 119.5 $ 188.0
Payments for acquisition-related
performance compensation 75.9 -
Capital expenditures on property
and equipment (78.0 ) (63.2 )
Free cash flow $ 117.4 $ 124.8 $ (7.4 ) (6 )%
The decrease in free cash flow was primarily due to higher capital expenditure
activity, partially offset by higher net cash provided by operating activities
through continuing operational improvements. The payments for
acquisition-related performance compensation are associated with the exercise of
put provisions by aM equity interest holders, as further described in Note 2.
Our free cash flow has historically been positive due to the robust cash
generation attributes of our business model, and we expect that it will continue
to be a significant source of funding for our business strategy of growth
through organic and acquisitive means.
Credit Facility and Other Debt
Please refer to Note 6 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for a discussion of the current status of our debt arrangements. Share Repurchase Programs
Please refer to Note 13 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q and to Part II, Item 2 in this Quarterly Report on Form 10-Q for a discussion of our share repurchase programs.
Off-Balance Sheet Transactions
We have no off-balance sheet transactions.
Critical Accounting Policies
Our management makes a number of significant estimates, assumptions, and judgments in the preparation of our financial statements. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates" in our 2019 Annual Report on Form 10-K for a discussion of the estimates and judgments necessary in our accounting for revenue recognition, business combinations, goodwill and other intangible assets, income taxes, and stock-based compensation.
Recent Accounting Pronouncements
Please refer to Note 1 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements and their anticipated effect on our business.
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