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BlackRock High Income Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: June 25, 2012 05:16PM
BlackRock High Income (HIS) filed Quarterly Report for the period ended 2012-05-31.
Highlight of Business Operations:We sell our offerings primarily through subscriptions, which tend to generate recurring revenue and cash flow for us. Our subscriptions are usually for one-year periods and we have historically seen high renewal rates. Subscriptions are generally paid in full within one or two months after the subscription period commences; as a result, the timing of our cash flows generally precedes the recognition of revenue and income.
Second quarter 2012 revenue increased 20% compared to the second quarter of 2011, and our year-to-date 2012 revenue increased 18% compared to the same period of 2011. The table below displays the percentage point change in revenue due to organic, acquisitive, and foreign currency factors when comparing the three and six months ended May 31, 2012 to the three and six months ended May 31, 2011.
The 6% organic revenue growth for the six months ended May 31, 2012 was also due to the strength of the subscription-based business. The subscription-based business increased 8% organically, while the non-subscription businesses had mixed results. We saw sequential improvement in non-subscription organic revenue from the first quarter to the second quarter of 2012 and expect further improvement in the second half of the year.
Relative to the 16% subscription revenue growth for the six months of 2012, approximately 8% is due to organic growth. The non-subscription portion of our business decreased 3% organically during the six months. Part of the decrease is due to the fact that our non-subscription business, including enterprise software license sales, tends to have more volatility from quarter to quarter based on deal size, transaction timing, and events. For example, in the first quarter of 2012, we decided not to hold a chemical event because it was both unprofitable and non-strategic to us. In the second quarter of 2012, we held a new chemical conference (WPC) and had a successful IHS CERAWeek. For these reasons, we typically evaluate our non-subscription performance on a full-year basis.
As of May 31, 2012, we had cash and cash equivalents of $268 million, of which approximately $220 million is currently held by our foreign subsidiaries. The cash held by our foreign subsidiaries is not available to fund domestic operations, as we have deemed the earnings of those subsidiaries to be indefinitely reinvested. We also had $844 million of debt as of May 31, 2012, which has contributed to an increase in interest expense in 2012, and which will continue to result in increased interest expense for the near future. We have generated strong cash flows from operations over the last few years. On a trailing twelve-month basis, our conversion of Adjusted EBITDA to free cash flow was 73% after excluding the one-time pension deficit funding described below. Because of our cash, debt, and cash flow positions, as well as the additional financing that we secured in October 2011, we believe we will have sufficient cash to meet our working capital and capital expenditure needs.