S&P Global Inc. · NYSE:SPGI
S&P Global — Q3 2020 Earnings Presentation
42 slides from S&P Global's earnings presentation, Oct 27, 2020
Slide 1: 3Q 2020 Earnings Conference Call
3Q 2020 Earnings Conference Call Doug Peterson President and CEO Ewout Steenbergen Executive Vice President and CFO Chip Merritt Senior Vice President, Investor Relations October 27, 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, which express management’s current vi
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: S&P Global continues to perform well in the current environment
S&P Global continues to perform well in the current environment Financial highlights: • All four businesses delivered revenue growth • Near doubling of U.S. high-yield issuance helped Ratings deliver the strongest segment revenue growth • Increased 2020 guidance for adjusted diluted EPS by $0.50 to
Slide 7: Solid revenue growth and margin expansion continued in 3Q
Solid revenue growth and margin expansion continued in 3Q 3Q 2020 3Q 2019 Change Revenue $1,846 $1,689 +9% Adjusted operating profit $976 $877 +11% Adjusted operating profit margin 52.9% 51.9% +100 bps Trailing four-quarters adjusted 53.8% 50.1% +370 bps segment operating profit margin Average dilut
Slide 8: Global bond issuance increased 7%
Global bond issuance* increased 7% – including bank loan volumes, issuance increased 4% United States* Europe* Asia* 695 954 613 582 569 547 506 745 655 401 603 570 362 340 335 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 9% increase YOY in 3Q 8% decline YOY in 3Q 19% i
Slide 9: Bank loan rating revenue decreased 28% in 3Q 2020
Bank loan rating revenue decreased 28% in 3Q 2020 Bank Loan Ratings Revenue $400 $350 4Q $300 4Q $250 $200 3Q $150 3Q $58 2Q 2Q $45 $100 $50 1Q 1Q $87 $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (revenue, $ in millions) 9
Slide 10: Growth in total global corporate debt outstanding YTD exceeds 4-year annual average
Growth in total global corporate debt outstanding YTD exceeds 4-year annual average Increased $1,247 billion Global Debt Outstanding YTD $22,000 Average annual increase of $884 billion $20,000 $18,000 $16,000 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 9/30/20 ($ in billions) Debt Outstanding Note:
Slide 11: Duration of U.S. investment-grade and high-yield bonds diverge in 2020
Duration of U.S. investment-grade and high-yield bonds diverge in 2020 U.S. Investment-Grade U.S. High-Yield 14 12 10 (Average, years) 8 6 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* Source: S&P Global Ratings Research * 9/30/20 YTD
Slide 12: Decrease to 2021 maturities suggests minor pull-forward
Decrease to 2021 maturities over the last nine months suggests minor pull-forward Global Corporate Maturities (Financial and Nonfinancial) $2,500 $2,000 $1,500 $1,000 $500 $0 2021 2022 2023 2024 2025 ($ in billions) As of 7/1/19 As of 1/1/2020 As of 10/1/2020 12
Slide 13: Recently launched ESG products gaining momentum
Recently launched ESG products gaining momentum ESG Highlights Research Evaluation Data Analytics & Tools Benchmarks s • 61 ESG evaluations • 7 deals closed for the • Quarter ending ESG • Platts launched the first completed or in recently launched ETF AUM of $9.5 European price process during the S&
Slide 14: Product launches and innovation continued during the quarter
Product launches and innovation continued during the quarter New data sets and capabilities - Launched ProSpread™ to automate extraction of data - Added 10 million European private companies to SME coverage - Initiated Snowflake collaboration for cloud delivery of data feeds - Released Beta version
Slide 15: 2021 Outlook
2021 Outlook S&P Global 15
Slide 16: 2021 global issuance forecast to decline 3% excluding IPF
After two strong years of global issuance, 2021 forecast to decline 3% excluding IPF $9,000 Forecast $8,000 $7,000 $6,000 $5,000 Nonfinancial Financial Services Structured Finance* $4,000 U.S. Public Finance International Public Finance $3,000 $2,000 $1,000 $0 2014 2015 2016 2017 2018 2019 2020F 202
Slide 17: S&P Global economists forecast 2021 global GDP to increase 5.3%
S&P Global economists forecast 2021 global GDP to increase 5.3% • Global recovery forecast in 2021 • COVID-19 will weigh on economic growth until a treatment is widely available • Half of the jobs lost in the U.S. have been recovered while the remaining won't likely fully recover until 2023 S&P Real
Slide 18: We continue to monitor the macroeconomic and geopolitical landscape
We continue to monitor the macroeconomic and geopolitical landscape for risks and contingencies COVID-19 & Geopolitical Macroeconomic Ongoing impact from the Public sector economic support pandemic on business activity, through fiscal stimulus and impacted by the timing of central bank liquidity pro
Slide 19: Ewout Steenbergen
Ewout Steenbergen Executive Vice President, Chief Financial Officer 19
Slide 20: Revenue growth outpaced expense growth resulting in 16% adjusted diluted EPS growth
Revenue growth outpaced expense growth resulting in 16% adjusted diluted EPS growth 3Q 2020 3Q 2019 Change Revenue $1,846 $1,689 +9% Organic revenue $1,829 $1,685 +9% Adjusted corp unallocated expense $32 $33 (5%) Adjusted total expense $870 $813 +7% Adjusted operating profit $976 $877 +11% Adjusted
Slide 21: Foreign exchange rates had a $0.04 favorable impact on adjusted EPS
Movements in foreign exchange rates had a $0.04 favorable impact on adjusted EPS Favorable Market Ratings Platts Indices (Unfavorable) Intelligence Revenue $6 $1 – – Adjusted operating profit $10 $5 $1 $1 Adjusted EPS $0.03 $0.01 – – ($ in millions, except per share data) Key factors mitigating impa
Slide 22: 3Q 2020: Non-GAAP adjustments
3Q 2020: Non-GAAP adjustments Pre-tax items excluded to arrive at adjusted results 3Q 2020 Loss on extinguishment of debt ($279) Gain on dispositions $8 Technology-related impairment ($5) Kensho retention-related expenses ($2) Deal-related amortization ($32) Total ($311) ($ in millions) 22
Slide 23: All four businesses delivered revenue growth
All four businesses delivered revenue growth 3Q 2020 vs. 3Q 2019 Ratings Market Platts Indices Intelligence Reported revenue +13% +9% +5% +1% Organic revenue +12% +7% +5% +1% Adjusted operating profit +16% +14% +10% (7)% 3Q 2020 adjusted 61.8% 33.8% 55.7% 65.2% operating profit margin Adjusted opera
Slide 24: Recent refinancing extended average tenor and lowered interest expense
S&P Global: Recent refinancing extended average tenor and lowered interest expense Total Debt: Annual Bond Interest Expense: Increased ~$200 million Decreased $26 million $4.0 $4.1 $156 $130 Pre Post Pre Post Weighted Average Cost of Debt: Weighted Average Tenor1: Decreased 79 basis points Increased
Slide 25: Solid cash position and leverage consistent with target
Solid cash position and leverage consistent with target 3Q 2020 4Q 2019 Cash and cash equivalents (A) $3,168 $2,886 Short- and long-term debt $4,110 $3,948 Adjusted gross debt to adjusted EBITDA 1.8x (B) 2.0x Gross debt to EBITDA 1.0x (C) 1.1x ($ in millions) (A) Cash and cash equivalents includes r
Slide 26: Free cash flow, excluding certain items, up $593 million YTD
Free cash flow, excluding certain items, up $593 million YTD 3Q 2020 3Q 2019 Cash provided by operating activities $2,426 $1,772 Capital expenditures (43) (77) Net distributions to noncontrolling interest holders (143) (100) Free cash flow $2,240 $1,595 Settlement of prior-year tax audits — 51 After
Slide 27: Ratings: Strong issuance resulted in double-digit revenue growth
Ratings: Strong issuance, particularly U.S. high- yield, resulted in double-digit revenue growth 3Q 2020 3Q 2019 Change Revenue $894 $789 +13% Adjusted segment operating profit $552 $477 +16% Adjusted segment operating profit 61.8% 60.5% +130 bps margin Trailing four-quarters adjusted 63.4% 57.4% +6
Slide 28: Ratings: Near doubling of U.S. high-yield issuance drives transaction revenue
Ratings: Near doubling of U.S. high-yield issuance drives gains in transaction revenue 3Q 2020 3Q 2019 Change Non-transaction $404 $387 4% Transaction $490 $402 22% ($ in millions) 3Q 2020 HIGHLIGHTS: • Non-transaction revenue increased primarily due to fees associated with surveillance, frequent is
Slide 29: Ratings: Corporates and governments led 3Q revenue growth
Ratings: Corporates and governments led 3Q revenue growth Structured Revenue Revenue $894 $77 $789 $93 +2% $74 $3 $3 $81 +35% $11 $16 $91 $60 $77 +4% $4 $10 $74 $133 +6% CRISIL, Other* Governments $126 $23 $27 Structured Financial Services Corporates $510 +16% $439 $28 $28 3Q 2019 3Q 2020 ($ in mill
Slide 30: S&P Dow Jones Indices: Revenue grew modestly and adjusted operating profit declined
S&P Dow Jones Indices: Revenue grew modestly and adjusted operating profit declined 3Q 2020 3Q 2019 Change Revenue $234 $232 +1% Adjusted segment operating profit $153 $163 (7)% SPGI share of Adj. Seg. Op. Profit* $112 $120 (7)% Adjusted segment operating profit 65.2% 70.3% (510 bps) margin Trailing
Slide 31: S&P Dow Jones Indices: Modest revenue growth in asset-linked fees and subscriptions
S&P Dow Jones Indices: Modest revenue growth in asset-linked fees and subscriptions Revenue $232 $234 $42 $43 +3% $38 $35 (7%) Data & Custom Subscriptions Exchange-Traded Derivatives Asset-Linked Fees $152 $156 +2% 3Q 2019 3Q 2020 ($ in millions) 31
Slide 32: S&P Dow Jones Indices: Net inflows and price appreciation drove AUM gain
S&P Dow Jones Indices: Net inflows and price appreciation drove gain in quarter-ending AUM Asset-Linked Fees: • Quarter-ending ETF AUM associated with our indices was $1,727 billion, an 11% increase from 3Q 2019 Quarter Ending ETF AUM • 3Q average ETF AUM associated with $92 $1,727 $84 ---- our indi
Slide 33: S&P Dow Jones Indices: ETD volumes mixed
S&P Dow Jones Indices: ETD volumes mixed with declines at CBOE and growth at CME Key Contracts Key Contracts (Average Daily Volume in Thousands) (Average Daily Volume in Thousands) 6,000 1,500 4,000 1,000 2,000 500 0 0 3Q 2019 3Q 2020 3Q 2019 3Q 2020 S&P 500 Index Options CME Equity Complex VIX Futu
Slide 34: Market Intelligence: Revenue increased high single-digit
Market Intelligence: Revenue increased high single-digit 3Q 2020 3Q 2019 Change Revenue $530 $488 +9% Adjusted segment operating profit $179 $157 +14% Adjusted segment operating profit 33.8% 32.2% +160 bps margin Trailing four-quarters adjusted 32.9% 33.0% (10 bps) segment operating profit margin ($
Slide 35: Market Intelligence: Growth across all categories
Market Intelligence: Growth across all categories Revenue $530 $488 $10 $3 $158 +11% $142 $104 +12% Acquisitions/divestitures $93 Credit Risk Solutions Data Management Solutions Desktop +3% $249 $258 3Q 2019 3Q 2020 ($ in millions) Acquisitions revenue primarily from 451 Research, divestitures inclu
Slide 36: Platts: Growth continued amid industry headwinds from low commodity prices
Platts: Growth continued amid industry headwinds from low commodity prices 3Q 2020 3Q 2019 Change Revenue $222 $212 +5% Adjusted segment operating profit $124 $112 +10% Adjusted segment operating profit 55.7% 52.9% +280 bps margin Trailing four-quarters adjusted 54.9% 51.9% +300 bps segment operatin
Slide 37: Platts: Fastest growth in Metal & Agriculture and Petrochemicals
Platts: Fastest growth in Metal & Agriculture and Petrochemicals Revenue $222 $212 $18 +12% $16 $1 $12 +7% $11 $41 +2% $40 Acquisitions & Divestitures Metals & Ag Petrochemicals Power & Gas +5% Petroleum $144 $151 3Q 2019 3Q 2020 ($ in millions) Acquisitions include Live Rice Index and Enerdata. Div
Slide 38: Establishing new $120 million productivity program
Establishing new $120 million productivity program to be completed in 2-3 years Real Estate ~$50 million – Optimization of real estate footprint – More aggressive approach to contract Procurement ~$30 million negotiations – Improve governance of contract consolidations to increase bargaining power T
Slide 39: 2020 GAAP diluted EPS guidance increased
2020 GAAP diluted EPS guidance increased Previous GAAP New GAAP Mid to high single- High single-digit Revenue digit increase increase Corporate Unallocated expense $180 - $190 million $170 - $180 million Operating profit margin 49.5% - 50.5% 50.5% - 51.5% Interest expense, net $145 - $150 million $4
Slide 40: 2020 adjusted diluted EPS guidance increased again
2020 adjusted diluted EPS guidance increased again Previous Adjusted New Adjusted Mid to high single- High single-digit Revenue digit increase increase Corporate Unallocated expense $135 - $145 million $125 - $135 million Deal-related amortization $125 - $130 million $125 - $130 million Kensho reten
Slide 41: 3Q 2020 Earnings Conference Call Questions & Answers
3Q 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 October 27, 2020
Slide 42: 3Q 2020 Earnings Conference Call
3Q 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 November 27, 2020 Domestic: 800-867-1927 Chip Merritt Inte