S&p Global Inc. · NYSE:SPGI
S&p Global — The McGraw-Hill Companies — Q2 2011 Earnings Presentation
35 slides from S&p Global's earnings presentation, Jul 28, 2011
Slide 1: 2Q 2011 Earnings Call
2Q 2011 Earnings Call July 28, 2011 Presenters: Harold McGraw III Chairman, President and CEO Jack Callahan Executive Vice President and CFO Donald S. Rubin Senior Vice President, Investor Relations Donald S. Rubin Senior Vice President, Investor Relations The McGraw-Hill Companies
Slide 2: Comparison of Adjusted Information to U.S. GAAP Information
Comparison of Adjusted Information to U.S. GAAP Information This presentation includes adjusted revenue and free cash flow information. This information is provided to enable investors to make meaningful comparisons of the Company’s operating performance between periods and to view the Company’s bus
Slide 3: MHP: Solid start in 2011
Harold McGraw III Chairman, President and CEO The McGraw-Hill Companies MHP: Solid start in 2011 As Reported 2Q 2011 2Q 2010 Change Diluted EPS $0.68 $0.61 11.9% Revenue $1.6 billion $1.5 billion 7.2% As Reported 1H 2011 1H 2010 Change Diluted EPS $1.07 $0.94 14.4% Revenue $2.9 billion $2.7 billion
Slide 4: Promising outlook for second half of 2011
Promising outlook for second half of 2011 Now expect to achieve the top end of 2011 diluted earnings per share guidance of $2.79 to $2.89 6 Growing faster and unlocking shareholder value MHP is allocating resources to support the best opportunities in growing global markets Process is well along • C
Slide 5: Measuring effective capital allocation
Strategic review: Focus on higher growth global brands The portfolio review process: • Multiple work streams • Everything is being scrutinized • We expect to continue this process with a number of significant actions in the second half Evaluating organization and G&A costs to ensure we are nimble an
Slide 6: Milestones in the strategic review: Plan to sell Broadcasting Group
Milestones in the strategic review: Plan to sell Broadcasting Group Strong response from financial and non- financial buyers Sale of Broadcasting—a window into the review process • Lacks scale • Cyclical • Ad-based • Limited growth prospects 10 Committed to returning capital to shareholders $10.4 bi
Slide 7: Legal concerns continue to abate
Legal concerns continue to abate Latest count on S&P’s legal front • 21 lawsuits have been dismissed in their entirety • 9 lawsuits have been voluntarily withdrawn • 5 dismissals by lower courts have been affirmed by higher courts Significant victory for S&P in subprime litigation • Recent ruling by
Slide 8: The regulatory front: Affirmation of objectivity
The regulatory front: Affirmation of objectivity Recent criticism in Europe of S&P’s sovereign ratings and calls by some politicians to place new limits on rating agencies These suggestions are being sharply criticized “Eurozone politicians and the European Central Bank should thank S&P for telling
Slide 9: McGraw-Hill Financial: On the right track
McGraw-Hill Financial: On the right track As Reported 2Q 2011 2Q 2010 Change Revenue $333.4 million $ 293.6 million 13.5% Operating Profit $97.8 million $83.4 million 17.3% Operating Margin 29.3% 28.4% As Reported 1H 2011 1H 2010 Change Revenue $657.4 million $572.5 million 14.8% Operating Margin 29
Slide 10: McGraw-Hill Financial: Making progress
McGraw-Hill Financial: Making progress Integrating the businesses Building scale in core franchises Leveraging the market position 18 New and innovative data and analytic offerings S&P Indices, Compustat, and Capital IQ collaborated to create the S&P Fundamental Data Package • Based on integration o
Slide 11: Capital IQ Consensus: An enhanced and unique offering
Capital IQ Consensus: An enhanced and unique offering Capital IQ Consensus • Now includes the industry’s first aggregate estimates tied directly to share counts for S&P 500 companies • Features daily reporting on trends and outliers during earnings season 20 2011 outlook for McGraw-Hill Financial Ex
Slide 12: Outstanding 2Q at Standard & Poor's
McGraw-Hill Financial Standard & Poor’s McGraw-Hill Education McGraw-Hill Information & Media Outstanding 2Q at Standard & Poor’s Key trends: • Surging new issue volume • Booming bank loan market • Low interest rates • Investor demand for yield • Strong refinancing activity • Decline in public finan
Slide 13: The outlook for S&P
The outlook for S&P As Reported 2Q 2011 2Q 2010 Change Revenue $480.3 million $405.0 million 18.6% Operating Profit $212.7 million $181.4 million 17.3% Operating Margin 44.3% 44.8% As Reported 1H 2011 1H 2010 Change Revenue $923.2 million $806.3 million 14.5% 24 Challenging expense comparisons in 2Q
Slide 14: Expense comparisons ease in second half 2011
Expense comparisons ease in second half 2011 2Q: Challenging expense comparisons due to increase in compensation and regulatory costs Second-half comparisons will be helped by more even distribution of increases during the year • Most of the incremental compliance costs occurred in the second half o
Slide 15: Key factors in second-half outlook for S&P
Key factors in second-half outlook for S&P Corporations continue to borrow for expansion even as earnings remain strong and cash builds on the balance sheet Low default rate expectations and low yields on less risky debt should keep investors interested in high- yield and leveraged loan markets for
Slide 16: Unrealized potential in refinancing market
Unrealized potential in refinancing market New study issued by S&P shows healthy new issue pipeline continues through 2015 • S&P estimates $8 trillion in debt will mature from the second quarter of 2011 through the end of 2015 • 2012: More than $2 trillion of corporate debt will mature Global Corpor
Slide 17: The outlook now for Standard & Poor's
The outlook now for Standard & Poor’s Summary • A solid first-half performance • Sustained top- and bottom-line growth in the second half despite market volatility 32 McGraw-Hill Financial Standard & Poor’s McGraw-Hill Education McGraw-Hill Information & Media
Slide 18: School Education Group: 2Q results affected by delays in ordering
School Education Group: 2Q results affected by delays in ordering Delays in ordering affected both state new adoption and open territory revenue • Potential sales shifted from 2Q into 3Q and, possibly, into 4Q 2011 2Q comparisons also affected by the School Education Group’s strong 2010 results in t
Slide 19: McGraw-Hill Education: 2Q 2011 results
McGraw-Hill Education: 2Q 2011 results School Education Group’s 2Q revenue declined 10.1% Higher Education, Professional and International Group’s revenue increased 1.8% Digital products and services grew at a double digit rate in a seasonally slow quarter 36 Outlook for 2011 el-hi market Greater cl
Slide 20: Outlook for 2011 el-hi market
Outlook for 2011 el-hi market State new adoption market could match or surpass last year’s $850 million to $875 million level Total el-hi market could be flat or up modestly in 2011 State budgets remain under pressure • Indications that state cuts will impact higher education more than K–12 • States
Slide 21: Gaining traction with digital investments
Gaining traction with digital investments Texas adopted our digital cloud-based K-12 science program—McGraw-Hill Cinch Learning • Students can access content on any tablet, computer, or mobile device Strong double-digit increase in 2Q sales of digital products and services in higher education 40 Dig
Slide 22: Adding new talent, products by acquisition
Adding new talent, products by acquisition The talent of Tegrity, an Israeli software firm • Created market leading lecture capture service for higher education • Played a key role in development of McGraw-Hill Campus –Service will be used this fall at more than 100 higher education institutions –Fi
Slide 23: 2011 outlook for McGraw-Hill Education
2011 outlook for McGraw-Hill Education In 3Q, McGraw-Hill is in an excellent position to benefit from trends: • El-hi market –Will benefit from orders delayed from 2Q, particularly from Texas • Higher education and professional markets –Adoptions of digital products and services will continue to gro
Slide 24: Double-digit growth at Business-to-Business Group in 2Q
Double-digit growth at Business-to-Business Group in 2Q As Reported 2Q 2011 2Q 2010 Change Revenue $222.2 million $198.9 million 11.7% 2Q: 11.7% increase in revenue offset a 6.0% decline at Broadcasting 46 Information & Media: Sustainable growth in 2Q As Reported 2Q 2011 2Q 2010 Change Revenue $246.
Slide 25: Business-to-Business Group: Subscriptions digitally delivered
Business-to-Business Group: Subscriptions digitally delivered Now primarily a subscription business delivered digitally • More than 70% of Group’s revenue is digital –Result of investment in capabilities that support new product development and revenue streams More than 60% of the Group’s revenue co
Slide 26: Broadcasting Group: Single-digit decrease in 2Q revenue
Broadcasting Group: Single-digit decrease in 2Q revenue As Reported 2Q 2011 2Q 2010 Change Revenue $23.8 million $25.3 million (6.0%) Key factor: • Decrease in political advertising in a non-election year 50 2011 outlook for Information & Media Summary: • Operating margin: Sustainable improvement •
Slide 27: 2011 outlook for The McGraw-Hill Companies
2011 outlook for The McGraw-Hill Companies Businesses are performing well Solid first half Promising outlook for second half 2011 EPS guidance: Expect earnings per diluted share at the top end of $2.79 to $2.89 range 52 Jack Callahan Executive Vice President and Chief Financial Officer The McGraw-Hi
Slide 28: 2011: Solid revenue growth in 2Q
2011: Solid revenue growth in 2Q Solid organic revenue growth Benefited from acquisitions completed in the past 12 months • Accelerated revenue growth by approximately 140 basis points • Profit impact was modestly dilutive Foreign exchange positively impacted revenue by $24 million, or 160 basis poi
Slide 29: Outlook for corporate expenses
Outlook for corporate expenses 2Q 2011: $44 million, an increase of $6.6 million compared to the prior year 1H 2011: $78.4 million, an increase of 6.9% compared to the prior year • Driven by increased compensation due to timing of accruals as well as improved operating results 2011: Continue to expe
Slide 30: Effective tax rate
Effective tax rate 2Q 2011: 36.4%, flat versus 2010 2011: Expect full-year effective tax rate to remain in the same range 58 Net income attributable to noncontrolling interests 2Q 2011: $4.7 million, largely driven by CRISIL 59
Slide 31: Capital allocation in 1H 2011
Capital allocation in 1H 2011 Spent $426 million on acquisitions and share repurchases • $126 million on acquisitions • $300 million for share repurchases 2011 acquisitions add to Platts’ growing platform 1Q: BENTEK Energy (natural gas market) July 1: Steel Business Briefing Group (iron ore market)
Slide 32: A decline in diluted weighted average shares outstanding (WASO)
A decline in diluted weighted average shares outstanding (WASO) 2Q 2011: 309.2 million shares • 4.0 million decrease from prior year • 0.4 million decrease from 1Q 2011 Decline is primarily due to share repurchases, which more than offset equity related awards 62 2011: Another year of strong cash fl
Slide 33: A well-capitalized company
A well-capitalized company Net cash and short-term investments: • As of June 30, 2011: $1.3 billion Cash and short-term investments: Declined $223 million from year end 2010, primarily due to share repurchases and acquisitions Gross debt: Approximately $1.2 billion • Comprised of long-term unsecured
Slide 34: The outlook for prepublication amortization
The outlook for prepublication amortization 2011: Expected to be approximately $210 million, a $36 million decline from 2010 • Reflects the recent reduced level of investment 66 The outlook for capital expenditures 2011: Still expect up to $150 million • Driven in part by increased digital and techn
Slide 35: 2Q 2011 Earnings Call
2Q 2011 Earnings Call July 28, 2011 Presenters: Harold McGraw III Chairman, President and CEO Jack Callahan Executive Vice President and CFO Donald S. Rubin Senior Vice President, Investor Relations NOTE: A replay of this webcast will be available approximately two hours after the end of the call fr
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