S&p Global Inc. · NYSE:SPGI
S&p Global — McGraw Hill Financial — Investor Day (March 2014)
137 slides from S&p Global's investor day presentation, Mar 18, 2014
Slide 1: McGraw Hill Financial: Essential Intelligence
>) McGRAW HILL FINANCIAL Essential Intelligence
Slide 2: Welcome
Welcome Chip Merritt Vice President, Investor Relations March 18
Slide 3: Welcome to the Inaugural McGraw Hill Financial Investor Day
2 Welcome to the Inaugural McGraw Hill Financial 2
Slide 4: Comparison of Adjusted Information to US GAAP Information
3 Comparison of Adjusted Information to US 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
Slide 5: Safe Harbor Statement
4 “Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995 We caution readers not to place undue reliance on forward - looking statements. • worldwide economic, financial, political and regulatory conditions; • currency and foreign exchange volatility; • the effect of compe
Slide 6: EU Regulation Affecting Investors in Credit Rating Agencies
5 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 Standard & Poor’s Credit Market Services Europe Limited, Standard & Poor’s Credi
Slide 7: McGraw Hill Financial Investor Day – Agenda
6 McGraw Hill Financial Investor Day – Agenda Time Session Speaker 1:00 pm Introduction Chip Merritt , Vice President, Investor Relations 1:05 pm Welcome Remarks & Overview Doug Peterson , President and Chief Executive Officer 1:25 pm Platts Larry Neal , President, Platts 1:40 pm S&P Dow Jones Indic
Slide 8: MHFI Investor Day – Product Showcase
7 MHFI Investor Day – Product Showcase SPICE®: access to proprietary index and constituent data Portfolio Risk Solution: risk and real - time scenario analytics for multi - asset class portfolios S&P Capital IQ Platform (featuring credit analytics ): company and market information and robust analyti
Slide 9: McGraw Hill Financial
>) McGRAW HILL FINANCIAL Essential Intelligence
Slide 10: Creating Growth & Driving Performance
Creating Growth & Driving Performance Doug Peterson President and Chief Executive Officer
Slide 11: Agenda
10 Agenda McGraw Hill Financial: An Exceptional Company 1 2 Creating Growth & Driving Performance
Slide 12: Three Years of Exceptional Growth, Profits and Shareholder Returns
11 Three Years of Exceptional Growth, Profits and Shareholder Returns • Completed the divestiture of Education, Broadcasting and AviationWeek for $2.7B • Returned $4.4B cash to shareholders, through share buy - backs and dividends • Achieved $175M in cost savings, exceeding initial target • Continue
Slide 13: Accelerated Revenue Growth
12 Accelerated Revenue Growth 2.9% 3.6% -6.3% 2011 2010 2009 9.6% 12.5% 8.6% 2013 2012 2011 Total MHP revenue as originally reported
Slide 14: Delivered Exceptional Shareholder Returns
13 Delivered Exceptional Shareholder Returns 2011 2013 Change Revenue $6,246M $4,875M - 22% Operating Profit + $1,498M $1,602M +7% Operating Margin + 24% 33% +9pts EPS + $2.91 $3.33 +14% CapEx $277M* $117M - 58% 70% 100% 130% 160% 190% 220% Jan '11 Dec '11 Dec '12 Dec '13 MHFI Share Price and Total
Slide 15: Returned Significant Cash to Shareholders
14 Returned Significant Cash to Shareholders Dividends & Share Repurchases $1,297M 2013 2012 $1,279M 2011 $1,796M Share Repurchases Dividends Includes Special Dividend
Slide 16: Mission and Vision
15 Mission MHFI: Essential Intelligence Vision To be the leading provider of ratings, benchmarks and analytics in the global capital, commodity and corporate markets Promoting sustainable growth by bringing transparency and independent insights to our customers and the markets they serve Core Values
Slide 17: An Exceptional Investment Opportunity
16 An Exceptional Investment Opportunity UNPARALLED ANALYTICS TRULY GLOBAL COMPELLING FINANCIAL ADVANTAGES LEADING BRANDS 16
Slide 18: A Leading Provider of Ratings, Benchmarks, Analytics & Research
17 A Leading Provider of Ratings, Benchmarks, Analytics & Research Premier provider of high quality data, analytical tools and ratings information Foremost index provider Principal provider of commodity price assessments and information Primary quality benchmark provider with deep auto expertise Lea
Slide 19: Unique Analytics that are Valued by Our Customers
18 Unique Analytics that are Valued by Our Customers
Slide 20: A Truly Global Company
19 A Truly Global Company North America Headcount 5,900 Revenue $ 3.1B 29 Countries 94 Global Offices EMEA Headcount 1,800 Revenue $ 1.2B Asia Pacific Headcount 8,800 Revenue $ 0.5B Latin America Headcount 500 Revenue $ 0.1B ~17,000 Employees 19
Slide 21: Compelling Financial Advantages
20 Compelling Financial Advantages • Well positioned in growth markets • Substantial recurring revenue through subscriptions • High margins • Minimal reinvestment and working capital requirements • Low asset intensity • Strong free cash flow generation 20
Slide 22: Agenda
21 2 Agenda Creating Growth & Driving Performance 1 McGraw Hill Financial: An Exceptional Company
Slide 23: Growth & Performance Goals: 2014-2016
22 Growth & Performance Goals: 2014 - 2016 Creating Growth & Driving Performance • Setting annual growth goals: – Mid to high single - digit revenue growth – Sustained margin expansion – Mid teens EPS growth – ~$1B per year free cash flow • Maintaining disciplined capital allocation: – Continue to p
Slide 24: Continued Growth with Significant Recurring Revenue
23 Continued Growth with Significant Recurring Revenue 39% 61% MHFI Revenue 2014 - 16 2013 $4,875M 2012 $4,450M 2011 $3,954M Revenue by Business Model Non - Subscription / Transaction Subscription / Recurring Mid to High Single - Digit Growth 2013 +11% CAGR
Slide 25: Secular Market Trends Position MHFI for Sustained Growth
24 Secular Market Trends Position MHFI for Sustained Growth Significant debt maturities will lead to strengthened issuance Major refinancing required for infrastructure Capital markets in emerging countries continue to develop Increased investor sophistication requires real - time data and analytics
Slide 26: A New Model for MHFI Growth
25 A New Model for MHFI Growth Core Growth New Products Disruptive Innovation International Expansion Existing New New Existing Markets Products
Slide 27: Active Management to Deliver Performance
26 A more interrelated company focused on: Operational Excellence Customer Engagement Great Talent Active Management to Deliver Performance Operationally Integrated Holding Company Strategy & Oversight Active Management
Slide 28: Operational Excellence: Distinctive, Interrelated Capabilities
27 Operational Excellence: Distinctive, Interrelated Capabilities Acquire Data • Mine • Translate • Integrate Analyze • Analytics • Benchmarks • Editorial Innovate • Product Development • Models Distribute • Customer Solutions • Service Key Enablers Technology Risk Management Global Support Network
Slide 29: Customer Engagement: Diverse Customer Set
28 Customer Engagement: Diverse Customer Set Revenue by Customer Segment 18% 14% 5% 19% 44% 2013 Public Sector Investment Management Financial Institutions & Banks Corporates Investment Banks & Private Equity
Slide 30: Customer Engagement: Strong Outreach
29 Customer Engagement: Strong Outreach 29
Slide 31: Great Talent: Foundational to Driving Performance
30 Great Talent: Foundational to Driving Performance 30
Slide 32: Growth & Performance Across Our Businesses
31 Growth & Performance Across Our Businesses & Creating Growth Driving Performance
Slide 33: McGraw Hill Financial
>) McGRAW HILL FINANCIAL Essential Intelligence
Slide 34: Platts
Platts Larry Neal President, Platts
Slide 35: Platts: Bringing Transparency to the World's Commodity Markets
34 Platts is Focused on Bringing Transparency to the World’s Commodity Markets Platts Key Facts • A leading provider of benchmark price assessments, news, analysis and analytics covering five major commodity sectors – petroleum, petrochemicals, power, metals and agriculture • Publishes 12,000+ daily
Slide 36: Physical Commodity Market Prices are Often Opaque
35 Physical Commodity Market Prices are Often Opaque: Price Discovery is Critical for the Supply Chain to Manage Costs and Reduce Risks Refine Produce Distribute PETROLEUM Similar Supply Chains Exist Around All Commodities • Commodity buyers / sellers use price assessments as a reference point to ne
Slide 37: Platts Publishes More Than 12,000 Daily Prices
36 Platts Publishes More Than 12,000 Daily Prices to Support the Physical Commodity Market Flows and the World’s Supply Chains Integrated Oil Major Airline Refinery Manufacturer Utilities Mining Company Steel Mill Processors Producers End Users Oil Exporters Oil Importers
Slide 38: Platts Serves Over 10,000 Customers
37 Platts Serves Over 10,000 Customers in More than 170 Countries Sao Paulo Pittsburgh New York Toronto London Geneva Moscow Dubai Singapore Hong Kong Tokyo Beijing Shanghai Sydney Platts Office 2013 Revenue Split by Region: US – 40 % International – 60% Buenos Aires Houston Denver Melbourne New Yor
Slide 39: Commodity Markets Evolve in Use of Price Mechanisms
38 Commodity Markets have Evolved in their Use of Different Price Mechanisms Market Players Coalesce Around One or Two Benchmarks with Futures Settled Against One Pricing Mechanism Use of Price • Used to negotiate contracts • Bi - lateral contracts use floating prices linked to a benchmark index • U
Slide 40: Each Commodity Market has Evolved at its own Pace
39 Each Commodity Market has Evolved at its own Pace Steel Petchem Iron Ore Coal Agriculture Base Metals Power Petroleum Natural Gas 0.1x 0.3x 10x 50x Steel Iron Ore Petroleum Natural Gas Pricing Mechanism Evolution by Commodity Ratio of Financial Derivatives vs. Underlying Physical Market Value Ref
Slide 41: Platts' Strategy: Elevating Price Assessments to Benchmarks
40 2013 Market Data Feeds Real-time Information Newsletters / Reports Conferences, Consulting, Other Platts ’ Strategy is Focused on Elevating Price Assessments to Benchmark Prices Across Physical Commodity Markets Market Data Feeds • Price data feeds serving front, middle and back office Real - tim
Slide 42: Platts Delivering Double-digit Growth
41 2013 Metals & Agriculture Petrochemicals Power & Gas Petroleum Platts Has Been Delivering Double - digit Growth, with Strong Growth Across All Commodity Sectors Historical Performance Revenue Breakdown 2012 2013 2011 $ 419 M $ 550 M $ 489 M +15% CAGR Revenue Revenue is ~90 % subscription based wi
Slide 43: Platts Benefited from Growth and Globalization of Commodity Markets
42 Platts has Benefited from Strong Fundamental Growth and Globalization of Commodity Markets Sources: BP, ICE & CME (NYMEX), WSA Physical Commodity Market Drivers Commodity Futures Contracts (M) 2000 2013 342.9 86.5 Natural Gas Crude Oil Global Energy Consumption 1990 2012 3.4% CAGR 2.1% CAGR Globa
Slide 44: Platts Sees Significant Opportunities for Growth
43 Platts Sees Significant Opportunities for Growth Creating Growth & Driving Performance • Establishing Platts headquarters in London strengthens its position to support global markets • Developing world - class price reporting systems and data operations • Actively engaging regulators and policy m
Slide 45: S&P Dow Jones Indices
S&P Dow Jones Indices Alex Matturri Chief Executive Officer, S&P Dow Jones Indices
Slide 46: The World's Leading Index Provider
45 The World’s Leading Index Provider S&P Dow Jones Indices has over 115 years of experience constructing innovative and transparent solutions that span asset classes, geographies , and investment strategies The S&P 500 is the world’s most followed stock market index with in benchmarked assets and i
Slide 47: Recognized Around the World for Index Innovation
46 Recognized Around the World for Index Innovation ETF Index Provider of the Year in Asia – 2014 Index Provider of the Year in Asia – 2013 Best Index Provider 2014 & 2013 Best Index Provider The Americas Structured Products Awards 2013 Index Provider 2014 & 2013 Index Innovator of the Year, Europe
Slide 48: Clients Worldwide
47 Clients in 69 Countries , 18 Offices Worldwide , and Over 300 Client - Dedicated Professionals with Local Index U nderstanding BM&FBOVESPA BMV Mexico City MILA S. Brunswick New York Toronto TMX CBOE CME Johannesburg Madrid Paris London Munich Moscow MICEX - RTS Dubai BSE NSE Mumbai Singapore Hong
Slide 49: Business Model
48 Business Model Description ETFs and Mutual Funds Fees on assets invested in products linked to S&P Dow Jones Indices OTC Derivatives & Structured Products Fixed or variable annual and per - issue fees or blanket fees for OTC derivatives and structured products Listed Derivatives Royalties based o
Slide 50: Double-Digit Growth, Solid Margins, Diverse Revenue Streams
49 $493M $388M $323M 60% 59% 2013 56% * 2012 2011 Double - Digit Growth, Solid Margins, and Diverse Revenue Streams Historical Performance Revenue Breakdown Adjusted Operating Margin Revenue** * Adjusted operating profit decreased due to a $26 million non - cash impairment charge ** Organic revenue
Slide 51: Strong Underlying Growth in Passive Investing
50 Strong Underlying Growth in Passive Investing Passive Funds Taking Share from Active Index ETFs Index Mutual Funds Active Mutual Funds Source: Strategic Insight Simfund , Wells Fargo Securities, LLC Strong Growth in ETP Industry Assets Global ETP AUM +27 % CAGR Source: BlackRock ETP Landscape 3%
Slide 52: S&P Dow Jones Indices Growth Strategy
51 S&P Dow Jones Indices Growth Strategy Strengthen position as one of the world’s largest providers of financial market indices with strong brands across all asset classes Creating Growth & Driving Performance • Grow revenue with core clients, including key global exchanges • Diversify portfolio of
Slide 53: McGraw Hill Financial
>) McGRAW HILL FINANCIAL Essential Intelligence
Slide 54: J.D. Power
J.D. Power Fin O’Neill President, J.D. Power
Slide 55: Visibility, Impact and Value of the J.D. Power Brand
54 Visibility, Impact and the Value of the J.D. Power Brand Continues to Grow • Great Awareness – 80% consumer brand awareness in the US – More than 2 billion print ad impressions; appears in 200,000 commercials every year • Trusted Brand – A leader in global marketing information services for 46 ye
Slide 56: Visibility, Impact and Value of the J.D. Power Brand
55 Visibility, Impact and the Value of the J.D. Power Brand Continues to Grow • Core Industries – Focus on automotive, financial services and insurance industries • Global Scale and Reach – Research coverage in over 16 countries, with 12 offices globally – MHFI’s largest operation in China • Benchma
Slide 57: Value Proposition
56 Value Proposition Research Syndicated Benchmarks Independent industry research and benchmark studies of quality and customer satisfaction Ad Claims Brand licensing for syndicated study award recipients Proprietary and Tracking Client - commissioned research to understand drivers of customer exper
Slide 58: J.D. Power has Delivered Profitable Growth
57 Historical Performance J.D. Power has Delivered Profitable Growth Revenue Breakdown Diversified Financial Services & Insurance Automotive 2013 $ 265 M 2012 $ 256 M 2011 $ 239 M +5% CAGR Revenue 2013
Slide 59: Increasingly Global Footprint
58 J.D. Power has an Increasingly Global Footprint with More than 40% of Revenue Generated Outside of the US Sao Paulo Mexico City Toronto Troy Munich Singapore Shanghai Tokyo Beijing Market Coverage J.D. Power Office 2013 Revenue Split by Region: US – 59% International – 41% Bangkok Orange Westlake
Slide 60: Global Automotive Market Forecast to See Steady Growth
59 The Global Automotive Market is Forecast to See Steady Growth, with the Industry’s Center of Gravity Moving East Global New Light Vehicle Unit Sales (M) Market Dynamics Source: LMC Automotive Forecasting 18 17 17 16 14 12 35 33 29 24 19 17 2020 2018 2016 2014 2012 2010 • Record global sales in 20
Slide 61: China Represents One of J.D. Power's Best Growth Opportunities
60 China Represents One of J.D. Power’s Best Opportunities for Growth with Strong Performance and No Box Around the Brand • Consistent , profitable double - digit growth – Syndicated and proprietary research – Product and retail performance improvement • Well positioned for growth – Global credibili
Slide 62: J.D. Power is Investing in Growth
61 J.D. Power is Investing in Growth and Strengthening the Core Business Creating Growth & Driving Performance • Strengthen and scale automotive benchmarks globally • Invest in PIN growth • Extend into new automotive segments and adjacencies in China • Deepen financial services and insurance benchma
Slide 63: McGraw Hill Financial
>) McGRAW HILL FINANCIAL Essential Intelligence
Slide 64: S&P Capital IQ
S&P Capital IQ Lou Eccleston President, S&P Capital IQ
Slide 65: S&P Capital IQ Timeline
64 S&P Capital IQ Timeline 2014 Laun ch & Brand • Launch new capabilities • Kick - off global branding initiative • Re - tool Equity Research 2011 2012 Acquire & Create • T hree capability driven acquisitions • Created global “Talent Centers” • Created IQLanguage Organize & Establish • Merged multip
Slide 66: Simplified Model: Business Lines Selling to 5 Market Segments
65 S&P CAPITAL IQ MARKET SEGMENTS Simplified Model: 3 Business Lines Selling to 5 Market Segments Investment Management Financial Institutions Investment Banking / Private Equity Corporates Wealth Management • S&P Capital IQ Desktop • Portfolio Risk • Compustat • Consolidated Feeds S&P Capital IQ De
Slide 67: Revenue by Business Lines and Market Segments
66 Investment Management Financial Institutions Investment Banking / Private Equity Corporates Wealth Management Revenue by Business Lines and Market S egments S&P CAPITAL IQ MARKET SEGMENTS 36% 32% 22% 5 % 5 % Note: Market Segment data reflects 2013 Actuals S&P Capital IQ Desktop & Enterprise Solut
Slide 68: We Play in a Large & Fragmented Market
67 We Play in a Large & Fragmented Market Note: Top 10 Competitors includes: S&P Capital IQ, Bloomberg , FactSet , IDC, Moody’s , Morningstar, MSCI, SIX Financial Information, SunGard & Thomson Reuters $18.2B Off - Trading Floor Market by Segment All Others 43% Top 10 Competitors (Includes S&P Capit
Slide 69: Revenue Growth
68 Revenue Growth S&P Capital IQ Markets Intelligence 2012 $ 1,031 M $ 1,124 M 2011 2013 S&P Credit Solutions S&P Capital IQ Desktop & Enterprise Solutions $ 1,170 M Historical Performance ’11 - ’13 CAGR 6 % 9 % - 7% +7% CAGR
Slide 70: 2014 Growth & Performance Initiatives: Markets Intelligence
69 2014 Growth & Performance Initiatives • Increase sales resources in Global Markets Intelligence to drive AUM growth • Expand Leveraged Commentary & Data into new asset classes • Re - tool Equity Research Services S&P Capital IQ Markets Intelligence Invest & Re - Tool
Slide 71: 2014 Growth & Performance Initiatives: Credit Solutions
70 2014 Growth & Performance Initiatives • Dedicated product and IT resources • Focused business development • Integrated product team to create integrated solutions • Transparent auditability for more efficient regulatory management S&P Credit Solutions Leverage Unique IP & Assets
Slide 72: 2014 Growth & Performance Initiatives: Desktop & Enterprise
71 2014 Growth & Performance Initiatives • Deliver solutions to manage, monitor & analyze “Big Data” • Provide the ability to align and integrate risk, credit & portfolio management • Offer multi - asset class solutions • New innovative real - time integrated feeds that lower the cost of ownership •
Slide 73: Evolving the Experience: IQLanguage
72 We are Evolving the Experience… • Slices through “Big Data” using advanced visualization • Delivers rich desktop experience that fits in your pocket • Hastens speed to market through a services - oriented technology platform A proprietary application design approach that: “ IQLanguage ”
Slide 74: Leveraging Data Franchise for Technology-enabled Differentiation
73 …Leveraging Our Rich Data Franchise to Fuel Technology - enabled Differentiation R esearch, collaboration & presentation tools that leverage the latest technologies combined with all the features of S&P Capital IQ P roprietary credit models seamlessly integrated into the S&P Capital IQ desktop At
Slide 75: Focusing on Creating Growth & Driving Performance
74 Focusing on Creating Growth & Driving Performance Creating Growth & Driving Performance • Leverage acquired capabilities and talent to develop innovative solutions • Expand our existing position in Europe, Asia Pacific and Latin American markets • Drive monetization of Ratings data • Launch IQLan
Slide 76: McGraw Hill Financial
>) McGRAW HILL FINANCIAL Essential Intelligence
Slide 77: Standard & Poor's Ratings Services
Standard & Poor's Ratings Services Neeraj Sahai President, Standard & Poor’s Ratings Services
Slide 78: Standard & Poor's Ratings Services: Great Business
77 Strong Track Record Robust Platform Secular Tailwinds Standard & Poor’s Ratings Services: Great Business • Revenue momentum and mix • Improving productivity • Diversified earnings stream • Innovation • Higher demand for ratings • Low rates driving refinancing and new issuance • Deleveraging drivi
Slide 79: Broad and Deep Analytic Coverage
78 Broad and Deep Analytic Coverage • Industrials • Utilities • Project Finance • Banks • Broker / Dealers • Finance Companies • Others • Bond • Health • Life • Property / Casualty • Reinsurance / Specialty • International Public Finance • Public Finance ( US) • Sovereigns • ABCP • ABS • CDO • CMBS
Slide 80: Global Footprint
79 Global Footprint: 1,400+ Analysts in 25 Countries Serving Clients Worldwide Brazil Mexico Canada United States Germany Singapore Taiwan Japan Local Partner Standard & Poor’s Office Thailand (TRIS) CRISIL Russia Argentina South Africa Poland Italy Israel Spain France U.K. Sweden UAE Turkey Malaysi
Slide 81: Highly Experienced and Trained Professionals
80 Highly Experienced and Trained Professionals Ryan Tsang • Managing Director and Analytical Manager, Financial Institutions Ratings • Based in Hong Kong • 14 years at Standard & Poor’s • Master of Accountancy Moritz Kraemer • Chief Rating Officer, Sovereigns • Based in Frankfurt • 13 years at Stan
Slide 82: Innovative Apps Provide S&P's View on Credit Market Developments
81 Credit Scenario Builders • Create and compare illustrative rating scenarios based on your parameters and Standard & Poor’s ratings methodology and assumptions Global Aging Data • View the aging impact on public finances of 50 countries • Apply various scenarios • Compare a country to emerging eco
Slide 83: Revenue Momentum
82 Revenue Momentum 44% 43% 41% 2013 $2,274M $2,034M 2012 2011 $1,767M Adjusted Operating Profit Margin CRISIL, Other* Structured Finance Governments Financial Institutions Corporates *Other includes intersegment royalty, TRC, and adjustments +13% CAGR Historical Performance
Slide 84: Revenue Mix
83 Revenue Mix 50% 2008 $1,583 M 9% 27% 12% 20% 31% 2007 $2,138 M 6% 44% 2013 $2,274 M 11% 14% 9% 16% 9% 15% 27% Revenue 2007 - 2013 CRISIL, Other* Structured Finance Governments Financial Institutions Corporates *Other includes intersegment royalty, TRC, and adjustments Note: Details may not sum du
Slide 85: Improving Productivity
84 2011 2012 2013 Operating Profit Margin 1 (adjusted) 42.2% 43.5% 44.9% Revenue per Employee 1 ($K) $520.0 $607.5 $674.6 Adjusted Operating Profit per Employee 1 ($K) $219.3 $264.2 $303.2 Improving Productivity (1) Excludes CRISIL
Slide 86: Diversified Earnings Stream
85 Diversified Earnings Stream Structured Finance Governments Financial Institutions Corporates 2013 $5,506 B 15% 24% 27% 34% 2008 $4,599 B 20% 22% 36% 22% 2007 $6,863 B 41% 14% 28% 16% 51% 70% 54% 49% 30% 46% $2,138 M Non - Transaction Transaction 2013 $2,274 M 2008 $1,583 M 2007 40% 49% 47% 60% 51
Slide 87: Higher Demand for Ratings
86 Higher Demand for Ratings • From 2011 to 2014, investors reported using ratings almost twice as much as they had previously for: – Fundamental analysis of securities – Initial screening tool – Compliance with capital adequacy requirements – Selection of asset allocation • S&P’s investor survey in
Slide 88: Low Rates Driving Refinancing and New Issuance
87 Low Rates Driving Refinancing and New Issuance 2013 598 2012 450 2008 201 Americas Asia Pacific Europe 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 100 bps 50 bps 0 bps 2014 2012 2010 2008 250 bps 200 bps 150 bps Credit Default Swaps (right) 10 - Year Treasury Note (left) Source: Standard & Poor’s, Fe
Slide 89: Deleveraging Driving Structured Finance and Loan Syndications
88 Deleveraging Driving Structured Finance and Loan Syndications 10 15 20 25 30 35 40 45 2012 2011 2010 2009 2008 2007 U.S. Europe 2013 $374B 2012 $300B 2011 $196B 2010 $211B RMBS CMBS CDO ABS Source: Standard & Poor’s, bank balance sheets, Harrison Scott Publications, Thomson Reuters Note: Structur
Slide 90: Standard & Poor's Ratings Services Growth & Performance Strategy
89 Standard & Poor’s Ratings Services Growth & Performance Strategy Leverage position as one of the world’s leading providers of independent credit ratings and analysis Creating Growth & Driving Performance • Strengthen the franchise globally through service excellence and thought leadership • Conti
Slide 91: CRISIL
CRISIL Roopa Kudva Managing Director & Chief Executive Officer, CRISIL
Slide 92: CRISIL: Who We Are
91 CRISIL: Who We Are • India’s largest credit rating agency with deep market penetration: from small enterprises to India’s largest corporations • India’s largest independent research house: providing analyses and benchmarks on economy, capital markets, industries and companies • The largest provid
Slide 93: Growth Accelerated After Acquisition by MHFI
92 Growth Accelerated After Acquisition by MHFI Revenue ($M) Market Capitalization ($M) MHFI Acquires 51% Stake MHFI Increases Stake to 68% CAGR +32% CAGR +38% 82 106 110 136 172 181 189 50 21 2013 2012 2011 2010 2009 2008 2007 2006 2005 959 1,171 1,384 1,259 692 365 676 336 97 2013 2012 2011 2010 2
Slide 94: A Diversified Analytical Platform
93 A Diversified Analytical Platform Offerings Customers Ratings • Credit rating of bonds and other capital market debt instruments • 1,200 top Indian corporates and financial institutions • Credit rating of bank loans • 15,000 borrowers from banks • SME ratings: simple credit assessment • 50,000 sm
Slide 95: Growing International Presence and Revenue
94 Growing International Presence and Revenue CRISIL Research Centers CRISIL Office CRISIL International Revenue: 2003 – 1% | 2011 – 56% | 2013 – 63% CRISIL Global Presence & Revenue Mix USA UK Poland India Argentina Singapore China
Slide 96: Strong Revenue Growth
95 Strong Revenue Growth $189M $181M $172M 2011 2012 2013 As Reported, Indian Rupee USD Equivalent +16% CAGR ₹ 10,000M ₹ 11,500M 2011 ₹ 8,500M 2012 2013 +5% CAGR Historical Revenue Performance
Slide 97: Underlying Indian Macroeconomic Drivers Position CRISIL for Growth
96 Underlying Indian Macroeconomic Drivers Position CRISIL for Growth 3 rd largest economy in GDP (PPP) terms - larger than Japan, Germany and Russia Large infrastructure funding from the bond market (~$ 110B over next 5 years) Under - developed corporate bond market, with significant room to expand
Slide 98: Driving Continued Growth & Performance in CRISIL
97 Driving Continued Growth & Performance in CRISIL Creating Growth & Driving Performance • Enhance suite of grading products, and move customers from grading products → SME ratings → bank loan ratings → bond ratings • Increase penetration presence amongst “next - tier” banks and corporate customers
Slide 99: McGraw Hill Financial
>) McGRAW HILL FINANCIAL Essential Intelligence
Slide 100: Legal Update
Legal Update Ken Vittor Executive Vice President and General Counsel
Slide 101: Significant Progress; Legal Risks are Manageable
100 Significant Progress ; We Believe Legal Risks are Manageable The Majority of Lawsuits Generally Fall into Five Categories 1. Lawsuits by purchasers asserting “underwriter” claims under federal securities laws • Nine dismissed on motions to dismiss: Courts ruled rating agencies are not “ underwri
Slide 102: Latest Developments: Department of Justice
101 Latest Developments: Department of Justice Overview • On February 4, 2013, the DOJ filed a civil lawsuit against S&P alleging violations of federal law in connection with certain ratings issued by S&P in 2004 - 07 and S&P’s representations about its independence and objectivity during that time
Slide 103: Latest Developments: State Attorneys General
102 Latest Developments: State Attorneys General Overview • 19 States and the District of Columbia have filed lawsuits against McGraw Hill and S&P; of these, 17 cases have been consolidated in a federal multi - district litigation before Judge Furman in New York • These cases are being brought under
Slide 104: Consistent Record of Dismissals
103 Consistent Record of Dismissals Noteworthy Litigation Record • 36 cases have been dismissed in their entirety on motions to dismiss • All dismissals appealed to higher courts — 13 in total — have been affirmed • 11 cases have been withdrawn Court Rulings Confirm it is Difficult to Challenge Rati
Slide 105: Financial Performance & Outlook
Financial Performance & Outlook Jack Callahan Executive Vice President and Chief Financial Officer
Slide 106: Recap: Growth & Performance Goals for 2014-2016
105 Recap: Growth & Performance Goals for 2014 - 2016 Creating Growth & Driving Performance • Setting annual growth goals: – Mid to high single - digit revenue growth – Sustained margin expansion – Mid teens EPS growth – ~$1B per year free cash flow • Maintaining disciplined capital allocation: – Co
Slide 107: Evaluating Strategic Alternatives for McGraw Hill Construction
106 • Provides essential data, news, insights, and intelligence to better inform North American construction professionals’ decisions – ~$170M in annual revenue – stand - alone operating margins of ~20 % • Shifting mix from print to data & analytics • C ompletes MHFI portfolio rationalization Evalua
Slide 108: Continue Strong Revenue Growth
107 Continue Strong Revenue Growth MHFI Revenue 2013 $4,875M 2012 $4,450M 2011 $3,954M 2011 - 2013 CAGR by Business 2014 Guidance: Mid Single - Digit 2014 - 2016 Goal: Mid to High Single - Digit -5% 5% 7% 13% 15% 24% McGraw Hill Construction JD Power S&P Dow Jones Indices S&P Capital IQ Standard & P
Slide 109: Focus on Sustained Margin Expansion
108 2013 33 % 2012 31 % 2011 28 % 2014 Guidance >100 BPS Focus on Sustained Margin Expansion Adjusted Operating Margin 2014 Guidance: >100 BPS 2014 - 2016 Goal: Sustained Margin Expansion 108
Slide 110: Introducing Productivity Target
109 Real Estate Procurement Restructuring Other Technology Leverage Data Acquisition Costs Corporate / Stranded Introducing Productivity Target 2014 - 2016 Cost Reduction Initiatives >$ 100M
Slide 111: Reducing Unallocated Expense
110 Initiatives ~ 5% Corporate Center ~45% Shared Costs ~ 35% Excess Real Estate ~ 15% ~ $173M 2013 $203M ~ $30M 2011 $173M * Adjusted Unallocated Expense Adjusted Unallocated Breakdown Example: Reducing Unallocated Expense * As originally reported Stranded Costs 2013
Slide 112: Maintain Double-Digit EPS Growth
111 Maintain Double - Digit EPS Growth 2014 Guidance $3.75 - $3.85 2013 $3.33 2012 $2.75 2011 $2.09 Annual Adjusted Diluted EPS +26% CAGR 2014 Guidance: +13% to 16% 2014 - 2016 Goal: Mid Teens Growth 111
Slide 113: Strong Cash Flow Enables Financial Flexibility
112 2014 Guidance ~$1,000M 2013 $624M 2012 $626M 2011 $809M CapEx $92M $97M $117M ~$125M Strong Cash Flow Enables Financial Flexibility Free Cash Flow 2014 Guidance: ~$1,000M 2014 - 2016 Goal: ~$ 1,000M 112
Slide 114: Balance Sheet Strength Continues to Build
113 Cash Debt $799M $1,265M $1,198M $1,560M $761M $864M 2012 2011 2013 Debt / EBITDA 1.0x 0.8x 0.5x Year - End Debt & Cash Positions Balance Sheet Strength Continues to Build
Slide 115: A Disciplined Approach for Capital Allocation Decisions
114 A Disciplined Approach for Capital A llocation D ecisions Capital Use Principles 1 Organic Growth Fund high - return initiatives 2 Value Creating Acquisitions Pursue targets aligned with strategic and financial criteria 3 Dividends Maintain track record of annual dividend increases 4 Increase /
Slide 116: Investments to Expand the Portfolio (2011–2013)
115 Investments to Expand the Portfolio (2011 – 2013) S&P Dow Jones Indices S&P Capital IQ Platts Standard & Poor’s Ratings Services S&P GSCI ®
Slide 117: Significant Cash Returned to Shareholders
116 2013 $1,297M 2012 $1,279M 2011 $1,796M 2010 $548M Share Repurchases Dividends Dividends & Share Repurchases Includes Special Dividend Significant Cash Returned to Shareholders
Slide 118: In Summary: Creating Growth and Driving Performance
117 In Summary: Creating Growth and Driving Performance 2014 - 2016 Goals • M id to high single - digit revenue growth • Sustained margin expansion aided by productivity initiatives • Mid teens EPS growth • ~$1B free cash flow provides significant financial flexibility & Creating Growth Driving Perf
Slide 119: McGraw Hill Financial
>) McGRAW HILL FINANCIAL Essential Intelligence
Slide 120: Replay Options
Replay Options Video Webcast : Replay available for one year Go to http://investor.mhfi.com Telephone : Replay available through April 18, 2014 Domestic: (800) 945 - 2458 International: (203) 369 - 3946 No password required
Slide 121: McGraw Hill Financial
a& McGRAW HILL @d FINANCIAL Essential Intelligence
Slide 122: About McGraw Hill Financial
McGraw Hill Financial promotes sustainable global growth by bringing transparency and independent insights to capital, commodity and corporate markets About McGraw Hill Financial (MHFI): MHFI’s Markets and Customers: MHFI is a leading financial intelligence company serving Corporates, investment man
Slide 123: McGraw Hill Financial Revenue 2011-2013
2011-2013 Revenue ($M) +11% CAGR $4,875 $4,450 $3,954 2011 2012 2013 2013 Revenue Breakdown 24% 39% S&P Capital IQ Non-Subscription / 46% Transaction S&P Ratings 10% 2013 S&P DJ 2013 Revenue by Indices Revenue by Type Business 61% Subscription / 9% Recurring J.D. Power & McGraw Hill 11% Construction
Slide 124: About Standard & Poor's Ratings Services
Standard & Poor’s Ratings Services helps investors and market participants assess credit risk through ratings, research and analytics About Standard & Poor’s Facts: Ratings Services (S&P): Better than 150 years helping investors and issuers make more informed Standard & Poor’s Ratings decisions Serv
Slide 125: Our Track Record
OUR TRACK RECORD Standard & Poor’s and its predecessor organizations have been in business for more than 150 years. As one of the world’s leading providers of independent credit risk research and benchmarks, we publish more than a million credit ratings. Of all corporate sector “investment grade” ra
Slide 126: About S&P Capital IQ
S&P Capital IQ leverages multi-asset class data, research, and analytics to investors around the world About S&P Capital IQ: Key Products and Services: S&P Capital IQ off ers a competitive Three business lines advantage to clients seeking to gain S&P Capital IQ Desktop & Enterprise Solutions sharp m
Slide 127: S&P Capital IQ Revenue 2011-2013
2011-2013 Revenue ($M) +7% CAGR $1,124 $1,170 $1,031 2011 2012 2013 2013 Revenue Breakdown 9% 5% S&P Capital IQ 5% Wealth Management Corporates Markets Intelligence 36% Investment 22% Management Investment 30% Banking 2013 S&P Credit 2013 Solutions 61% Revenue by Revenue by Desktop & Segment Product
Slide 128: About S&P Dow Jones Indices
S&P Dow Jones Indices’ world renown benchmarks serve as the basis for more than $1.99 trillion of indexed based assets About S&P Dow Jones Key Products and Services: Indices (S&PDJI): S&PDJI global benchmarks cover a wide range of asset classes including: The world’s leading provider Equities, fixed
Slide 129: S&P Dow Jones Indices Revenue 2011-2013
2011-2013 Revenue ($M) +24%* CAGR $493 $388 $323 2011 2012 2013 * 8% organic growth, which excludes revenue from Dow Jones Indices. 2013 Revenue Breakdown OTC Derivatives and Structured Products Listed Derivatives ETFs and 2013 Mutual Funds Data & Custom Indices Growth Opportunities: Grow revenue wi
Slide 130: About Platts
Platts is a leading global provider of commodity price assessments and information About Platts: Key Products and Services: A leading independent provider Real-Time News and Market Alerts: News, market commentary, and of energy, petrochemicals, benchmark assessments off er up-to-the-minute market in
Slide 131: Platts Revenue 2011-2013
2011-2013 Revenue ($M) +15% CAGR $550 $489 $419 2011 2012 2013 2013 Revenue Breakdown Petrochemicals Events/Consulting Power & Gas Subscriptions/ Licenses Newsletters/ Metal & 2013 Analysis 2013 Agriculture Revenue by Revenue by Commodity Product Petroleum Real-time Information Growth Opportunities:
Slide 132: About J.D. Power
J.D. Power off ers industry benchmarks and consumer satisfaction research for a diversified group of industries and markets around the world About J.D. Power: Key Products and Services: J.D. Power is a leader in global Research: Independent industry-wide research and syndicated benchmark marketing i
Slide 133: J.D. Power Revenue 2011-2013
2011-2013 Revenue ($M) +5% CAGR $256 $265 $239 2011 2012 2013 2013 Revenue Breakdown by Industry Financial Services & Insurance 2013 Automotive Diversified Growth Opportunities: Enhance the Core Automotive Business Leverage Automotive Market Position to Grow Financial Services and Insurance Accelera
Slide 134: About CRISIL
CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services About CRISIL: Key Products and Services: India’s largest credit rating agency Ratings: Credit rating of bonds and other capital market debt instruments, with deep market penetration: ratings of b
Slide 135: CRISIL Revenue 2011-2013
2011-2013 Revenue ($M) +5% CAGR $189 $181 $172 2011 2012 2013 Growth Opportunities: Ratings: Enhance suite of grading products, and move customers from grading products SME ratings bank loan ratings bond ratings Global Off shoring: Increase penetration presence amongst “next-tier” banks and corporat
Slide 136: About McGraw Hill Construction
McGraw Hill Construction provides essential data, news, insights, and intelligence to better inform construction professionals’ decisions and strengthen their market position About McGraw Hill Key Products and Services: Construction (MHC): MHC delivers a broad range of industry-leading data, analyti
Slide 137: McGraw Hill Construction Revenue 2011-2013
2011-2013 Revenue ($M) -5% CAGR $192 $180 $173 2011 2012 2013 2013 Revenue Breakdown by Product Type Analytics Data 2013 Vertical News Growth Opportunities: Enhance value selling with differentiated functionality and industry-leading data to address competitive pressure from low-cost, good enough pr