S&p Global Inc. · NYSE:SPGI
S&p Global — Q1 2020 Earnings Presentation
49 slides from S&p Global's earnings presentation, Apr 28, 2020
Slide 1: 1Q 2020 Earnings Conference Call
1Q 2020 Earnings Conference Call Doug Peterson President and CEO Ewout Steenbergen Executive Vice President and CFO Chip Merritt Senior Vice President, Investor Relations April 28, 2020
Slide 2: Comparison of adjusted information to U.S. GAAP information
Comparison of adjusted information to U.S. GAAP information This presentation includes adjusted financial measures that are derived from the Company’s continuing operations. This non-GAAP information is provided in order to allow investors to make meaningful comparisons of the Company’s operating pe
Slide 3: Safe Harbor statement under the Private Securities Litigation Reform Act of 1995
“Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995 This presentation contains “forward-looking statements,” as defined in the Private Securities Litigation Reform Act of 1995. These statements, including statements about COVID-19 and the scenarios we are using to proj
Slide 4: EU regulation affecting investors in credit rating agencies
EU regulation affecting investors in credit rating agencies European Union Regulation 1060/2009 (as amended) applies to credit rating agencies (CRAs) registered in the European Union and therefore to the activities of S&P Global Ratings Europe Limited which is registered and regulated as a CRA with
Slide 5: Doug Peterson
Doug Peterson President and Chief Executive Officer 5
Slide 6: Strong first quarter financial results in a rapidly changing world
Strong first quarter financial results in a rapidly changing world Strong 1Q Results: • Revenue increased 14% and adjusted diluted EPS increased 29% • Solid balance sheet and ample liquidity Positioning for COVID-19 • Putting our people first drives our decision making • Continuing to actively engag
Slide 7: COVID-19 response select highlights
COVID-19 response select highlights: Helping our people and communities; engaging with governments and regulators Employees Communities Government & Regulators Putting our people first • Introduced free COVID-19 • Over 40 COVID-19 related • Early adopter of work from website with exclusive and inter
Slide 8: COVID-19: Continue to serve our clients
COVID-19: Continue to serve our clients Ensured continuity of surveillance and facilitated the issuance of over 2,000 ratings during the quarter Global Operations Centers remained fully operational and supported uninterrupted availability across product suite Market-on-Close process executed by staf
Slide 9: COVID-19: Continue to serve the market with research and analytics
COVID-19: Continue to serve the market with research and analytics SPGI COVID-19 coverage is in demand: • Connecting with customers and the markets is more critical than ever • Launched free COVID-19 website • Deep content and analysis developed and launched daily covering the financial and commodit
Slide 10: Revenue by business for the past 15 years
Revenue by business for the past 15 years S&P Global Ratings S&P Global Market Intelligence* 2,988 2,883 3,106 250 224 2,455 2,428 2,535 163 188 2,274 137 2,139 2,034 100 116 86 1,952 1,767 62 1,833 1,959 1,661 1,683 1,600 1,583 1,537 1,695 39 50 1,319 1,124 1,170 1,237 916 1,031 747 865 880 597 676
Slide 11: The company faces significant risks today
The company faces significant risks today Despite our resilience and financial strength, we are not immune to structural risks arising from COVID-19 which could impact our revenue from issuance, AUM, renewals and new product sales. These risks include: Macro Economic Environment: Bond and Credit Mar
Slide 12: Strong 1Q results driven by Ratings and Indices
Strong 1Q results driven by Ratings and Indices • All four divisions delivered revenue and adjusted operating profit growth • Significant margin improvement continued as revenue growth and productivity initiatives offset stepped-up investment spending • Delivered 29% adjusted diluted EPS growth • Co
Slide 13: Delivered strong revenue growth and margin expansion in 1Q
Delivered strong revenue growth and margin expansion in 1Q 1Q 2020 1Q 2019 Change Revenue $1,786 $1,571 +14% Adjusted operating profit $948 $743 +28% Adjusted operating profit margin 53.1% 47.3% +580 bps Trailing four-quarters adjusted 51.5% 48.9% +260 bps segment operating profit margin Average dil
Slide 14: Global bond issuance increased 11%
Global bond issuance* increased 11% – including bank loan volumes, issuance increased 10% United States* Europe* Asia* 724 571 596 509 521 578 564 494 495 540 426 395 361 365 337 1Q19 2Q19 3Q19 4Q19 1Q20 1Q19 2Q19 3Q19 4Q19 1Q20 1Q19 2Q19 3Q19 4Q19 1Q20 34% increase YOY in 1Q 14% decrease YOY in 1Q
Slide 15: Bank loan rating revenue increased 31% in 1Q 2020
Bank loan rating revenue increased 31% in 1Q 2020 Bank Loan Ratings Revenue $400 $350 4Q $300 4Q $250 $200 3Q $150 2Q $100 $50 1Q 1Q $87 $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (revenue, $ in millions) 15
Slide 16: Several new product launches recently initiated
Several new product launches recently initiated S&P GSCI Kensho ICE Connect Carbon Market Platts enabled powered by Emission Intelligence Platform MOC Platts Allowance Marketplace Index 16
Slide 17: S&P Global continues to strengthen its footprint in the ESG marketplace
S&P Global continues to strengthen its footprint in the ESG marketplace Progress Highlights Research Evaluation Data Analytics & Tools Benchmarks s • 65 ESG evaluations • Sustainable • $1.0bn in ESG ETF • World's first-to-market completed or in Development Goals net flows in 1Q for a hydrogen assess
Slide 18: 2020 Outlook
2020 Outlook S&P Global 18
Slide 19: Our economists expect 2020 global GDP to decline 2.4%
Our economists expect 2020 global GDP to decline 2.4% • Most countries have extended social distancing restrictions/lockdowns • Exit strategies appear to be more gradual than expected • The balance of risks remains on the downside, as much can change on the health, economic, and policy fronts S&P Re
Slide 20: 2020 Macro and market outlook
2020 Macro and market outlook $10-20/Bbl range in 2Q 2020 on massive stock accumulation 20
Slide 21: Ewout Steenbergen
Ewout Steenbergen Executive Vice President, Chief Financial Officer 21
Slide 22: Revenue growth and productivity improvements yield 29% adjusted diluted EPS growth
Revenue growth and productivity improvements yield 29% adjusted diluted EPS growth 1Q 2020 1Q 2019 Change Revenue $1,786 $1,571 +14% Organic revenue $1,773 $1,561 +14% Adjusted corp unallocated expense $30 $32 (5%) Adjusted total expense $838 $828 +1% Adjusted operating profit $948 $743 +28% Adjuste
Slide 23: Foreign exchange had a $0.06 favorable impact on adjusted EPS
Movements in foreign exchange rates had a $0.06 favorable impact on adjusted EPS Favorable Market Ratings Platts Indices (Unfavorable) Intelligence Revenue ($5) ($1) – – Adjusted operating profit $11 $3 $2 $1 Adjusted EPS $0.04 $0.01 $0.01 – ($ in millions, except per share data) Key factors mitigat
Slide 24: 1Q 2020: Non-GAAP adjustments
1Q 2020: Non-GAAP adjustments Pre-tax items excluded to arrive at adjusted results 1Q 2020 Restructuring in Corporate and MI ($9) Gain on disposition $7 Kensho retention-related expenses ($5) Deal-related amortization ($29) Total ($36) ($ in millions) 24
Slide 25: All four businesses delivered gains in revenue and adjusted operating profit
All four businesses delivered gains in revenue and adjusted operating profit 1Q 2020 vs. 1Q 2019 Ratings Market Platts Indices Intelligence Reported revenue +19% +8% +4% +20% Organic revenue +18% +7% +5% +20% Adjusted operating profit +41% +5% +11% +21% 1Q 2020 adjusted 63.1% 30.9% 52.9% 70.6% opera
Slide 26: Our balance sheet has low leverage and ample liquidity
Our balance sheet has low leverage and ample liquidity Ample Liquidity • Cash & Cash Equivalents: $2 billion • Revolver Capacity: $1.2 billion undrawn • No commercial paper outstanding • 2019 free cash flow conversion* of 75% • Q1 is typically the lowest FCF quarter in the year (~13% of total in pas
Slide 27: Capital position remains solid
Capital position remains solid 1Q 2020 4Q 2019 Cash and cash equivalents (A) $1,952 $2,886 Short- and long-term debt $3,949 $3,948 Adjusted gross debt to adjusted EBITDA 1.9x (B) 2.0x Gross debt to EBITDA 1.1x (C) 1.1x ($ in millions) (A) Cash and cash equivalents includes restricted cash (B) Adjust
Slide 28: Free cash flow, excluding certain items, up $312 million YTD
Free cash flow, excluding certain items, up $312 million YTD 1Q 2020 1Q 2019 Cash provided by operating activities $680 $293 Capital expenditures (11) (20) Net distributions to noncontrolling interest holders (51) (18) Free cash flow $618 $255 Settlement of prior-year tax audits — 50 After-tax legal
Slide 29: Ratings: Strong U.S. IG bond issuance led to double-digit revenue growth
Ratings: Strong U.S. IG bond issuance led to double-digit revenue growth vs weak 1Q19 1Q 2020 1Q 2019 Change Revenue $825 $696 +19% Adjusted segment operating profit $521 $369 +41% Adjusted segment operating profit 63.1% 53.0% +1,010 bps margin Trailing four-quarters adjusted 60.2% 56.2% +400 bps se
Slide 30: Ratings: Transaction revenue driven by very strong bond issuance
Ratings: Transaction revenue driven by very strong bond issuance 1Q 2020 1Q 2019 Change Non-transaction $393 $372 6% Transaction $432 $324 33% ($ in millions) 1Q 2020 HIGHLIGHTS: • Non-transaction revenue increased primarily due to fees associated with surveillance and Rating Evaluation Service • Tr
Slide 31: Ratings: Corporates led overall 1Q revenue growth
Ratings: Corporates led overall 1Q revenue growth Revenue Structured Revenue $825 $86 +3% $75 $696 $2 $61 +16% $12 $83 $61 $75 +23% $3 $52 $10 $9 $61 $128 +13% CRISIL, Other* $8 Governments $113 Structured $27 Financial Services $16 Corporates +23% $475 $386 $24 $24 1Q 2019 1Q 2020 ($ in millions) O
Slide 32: U.S. investment-grade: Majority of bond issuance is routine
U.S. investment-grade: Majority of bond issuance is routine General Corporate Purposes/Other Refinancing M&A/LBO Buyback/Dividend $1,500 $1,250 $1,000 $750 $500 $250 $0 2013 2014 2015 2016 2017 2018 2019 1Q ($, billions) 2020 32
Slide 33: U.S. high-yield: Majority of bond issuance is routine
U.S. high-yield: Majority of bond issuance is routine General Corporate Purposes/Other Refinancing M&A/LBO Buyback/Dividend $400 $350 $300 $250 $200 $150 $100 $50 $0 2013 2014 2015 2016 2017 2018 2019 1Q 2020 ($ in billions) 33
Slide 34: S&P Dow Jones Indices: Strong growth in revenue and adjusted operating profit
S&P Dow Jones Indices: Strong growth in revenue and adjusted operating profit 1Q 2020 1Q 2019 Change Revenue $259 $217 +20% Adjusted segment operating profit $183 $151 +21% SPGI share of Adj. Seg. Op. Profit* $134 $111 +21% Adjusted segment operating profit 70.6% 69.7% +90 bps margin Trailing four-q
Slide 35: S&P Dow Jones Indices: Strong revenue growth led by exchange-traded derivatives
S&P Dow Jones Indices: Strong revenue growth led by exchange-traded derivatives Revenue $259 $217 $46 +15% $40 $54 +59% $34 Data & Custom Subscriptions Exchange-Traded Derivatives Asset-Linked Fees +11% $143 $159 1Q 2019 1Q 2020 ($ in millions) 35
Slide 36: S&P Dow Jones Indices: Stock market decline reduced quarter-ending AUM
S&P Dow Jones Indices: Stock market decline reduced quarter-ending AUM Asset-Linked Fees: • Quarter-ending ETF AUM associated with our indices was $1,345 billion, an 8% decrease from 1Q 2019 Quarter Ending ETF AUM • 1Q average ETF AUM associated with $101 our indices increased 17% YOY $1,459 ---- --
Slide 37: S&P Dow Jones Indices: Significant growth in exchange-traded derivatives volume
S&P Dow Jones Indices: Significant growth in exchange-traded derivatives volume Key Contracts Key Contracts (Average Daily Volume in Thousands) (Average Daily Volume in Thousands) 8,000 1,500 6,000 1,000 4,000 500 2,000 0 0 1Q 2019 1Q 2020 1Q 2019 1Q 2020 S&P 500 Index Options CME Equity Complex VIX
Slide 38: Market Intelligence: Revenue increased high single-digit
Market Intelligence: Revenue increased high single-digit 1Q 2020 1Q 2019 Change Revenue $519 $482 +8% Adjusted segment operating profit $160 $153 +5% Adjusted segment operating profit 30.9% 31.7% (80 bps) margin Trailing four-quarters adjusted 31.9% 32.9% (100 bps) segment operating profit margin ($
Slide 39: Market Intelligence: Solid growth across all categories
Market Intelligence: Solid growth across all categories Revenue $519 $482 $11 $8 $152 +10% $138 +10% $100 Acquisitions/divestitures $91 Credit Risk Solutions Data Management Solutions Desktop +4% $246 $256 1Q 2019 1Q 2020 ($ in millions) Acquisitions revenue primarily from 451 Research, divestitures
Slide 40: Market Intelligence Marketplace launched
Market Intelligence Marketplace launched marketplace.spglobal.com 40
Slide 41: Platts: Steady growth contributed to margin expansion
Platts: Steady growth contributed to margin expansion 1Q 2020 1Q 2019 Change Revenue $215 $207 +4% Organic revenue $215 $205 +5% Adjusted segment operating profit $114 $103 +11% Adjusted segment operating profit 52.9% 49.7% +320 bps margin Trailing four-quarters adjusted 53.2% 51.2% +200 bps segment
Slide 42: Platts: Power & Gas and Metals and Agriculture lead growth
Platts: Power & Gas and Metals and Agriculture lead growth Revenue $215 $207 $0 +11% $2 $16 $15 $11 +4% $11 $41 +12% $36 Acquisitions & Divestitures Metals & Ag Petrochemicals Power & Gas Petroleum $142 $147 +4% 1Q 2019 1Q 2020 ($ in millions) Acquisitions include Live Rice Index and Enerdata. Dives
Slide 43: We are carefully managing the financial impact of economic slowdown
We are carefully managing the financial impact of economic slowdown Management Actions: • Global hiring freeze • Travel and entertainment expense freeze • Reduction in advertising and promotional spend from fewer events • Reduction in professional services • Incentive compensation and commissions de
Slide 44: 2020 scenario macro and market assumptions
2020 scenario macro and market assumptions Early 3Q Recovery Late 3Q Recovery Late 4Q Recovery (Baseline) Epidemiological Context Assume a U-shaped recovery in the second half; however, the path and severity of the COVID-19 pandemic will dictate when the rebound will start 2020 Macro Indicators U.S.
Slide 45: 2020 guidance scenarios contingent on timing of economic recovery
2020 guidance scenarios contingent on timing of economic recovery COVID-19 Impact Early 3Q Late 3Q Recovery* Late 4Q (in millions, except earnings per share) Recovery* (Baseline) Recovery* Original Diluted EPS Guidance** $10.40 - $10.60 $10.40 - $10.60 $10.40 - $10.60 COVID Impact to Revenue Ratings
Slide 46: Revised GAAP guidance is based on our Late 3Q Recovery scenario
Revised GAAP guidance is based on our "Late 3Q Recovery" scenario Previous Early 3Q Late 3Q Late 4Q Guidance Recovery * Recovery Recovery * (Baseline) * Mid to high single- Low to mid single- Low single-digit Revenue Flat year-over-year digit increase digit increase increase Corporate Unallocated ex
Slide 47: Revised adjusted guidance is based on our Late 3Q Recovery scenario
Revised adjusted guidance is based on our "Late 3Q Recovery" scenario Original Early 3Q Late 3Q Late 4Q Guidance Recovery * Recovery Recovery * (Baseline) * Mid to high single- Low to mid single- Low single-digit Revenue Flat year-over-year digit increase digit increase increase Corporate Unallocate
Slide 48: 1Q 2020 Earnings Conference Call: Questions & Answers
1Q 2020 Earnings Conference Call Questions & Answers Doug Peterson President and CEO Ewout Steenbergen Executive Vice President and CFO Chip Merritt Senior Vice President, Investor Relations April 28, 2020
Slide 49: 1Q 2020 Earnings Conference Call
1Q 2020 Earnings Conference Call Doug Peterson REPLAY OPTIONS President and CEO Internet: Replay available for one year Go to http://investor.spglobal.com Ewout Steenbergen Executive Vice President and CFO Telephone: Replay available through May 28, 2020 Domestic: 888-566-0671 Chip Merritt Internati