S&P Global Inc. · NYSE:SPGI
S&P Global — Q1 2021 Earnings Presentation
47 slides from S&P Global's earnings presentation, Apr 29, 2021
Slide 1: 1Q 2021 Earnings Conference Call
1Q 2021 Earnings Conference Call Doug Peterson President and CEO Ewout Steenbergen Executive Vice President and CFO Chip Merritt Senior Vice President, Investor Relations April 29, 2021
Slide 2: 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 merger (the “Merger”) between
Slide 3: Disclaimer regarding announcement of S&P Global and IHS Markit merger agreement
Disclaimer regarding announcement of S&P Global and IHS Markit's definitive merger agreement S&P Global announced on March 11, 2021 that its shareholders overwhelmingly voted to approve the Company's proposed transaction with IHS Markit at a special meeting of the Company's shareholders. Approximate
Slide 4: 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 5: 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 6: Doug Peterson
Doug Peterson President and Chief Executive Officer 6
Slide 7: Great start to 2021 with exceptional 1Q financial results
Great start to 2021 with exceptional 1Q financial results Financial highlights: • Revenue increased 13% with growth in all four segments • Surge in leveraged loans, high-yield issuance, and structured finance helped Ratings deliver the strongest segment results • Productivity programs and lower T&E
Slide 8: Merger update: Paths to closing the transaction
Merger update: Paths to closing the transaction S-4 and shareholder approvals • S-4 became effective 1/22/21 • Shareholder votes overwhelmingly passed at both SPGI and INFO on 3/11/21 Required regulatory approvals Canada, European Union, Taiwan, United States, United Kingdom Pre-close integration pl
Slide 9: Exceptional 1Q financial results
Exceptional 1Q financial results 1Q 2021 1Q 2020 Change Revenue $2,016 $1,786 +13% Adjusted operating profit $1,162 $948 +23% Adjusted operating profit margin 57.6% 53.1% +450 bps Trailing four-quarters adjusted 54.5% 51.5% +300 bps segment operating profit margin Average diluted shares outstanding
Slide 10: Global bond issuance increased 9%
Global bond issuance* increased 9% United States* Europe* Asia* 958 716 537 622 637 775 495 573 587 745 674 404 546 338 304 1Q20 2Q20 3Q20 4Q20 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 4% increase YOY in 1Q 23% increase YOY in 1Q 11% increase YOY in 1Q • Investment-grade decreased 17%
Slide 11: Bank loan rating revenue surged in 1Q 2021 increasing 70%
Bank loan rating revenue surged in 1Q 2021 increasing 70% over 1Q 2020 Bank Loan Ratings Revenue $400 $350 4Q $300 $286 4Q $250 4Q $200 3Q $148 $150 3Q 3Q 2Q 2Q $100 $50 1Q 1Q $0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 (revenue, $ in millions) 11
Slide 12: Combined global high-yield issuance and leveraged loan volume achieved quarterly record
Combined global* high-yield issuance and leveraged loan volume achieved quarterly record $500 $465 $400 $300 2018-2020 quarterly $200 average $100 $0 1Q 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 High-Yield Issuance Leveraged loan Volume ($ in billions) * Data only available fo
Slide 13: 1Q 2021 surge led by refinancing and M&A/LBO activity
1Q 2021 surge led by refinancing and M&A/LBO activity Global Leveraged Loans and High-Yield* $500 $400 $300 $200 $100 $0 1Q 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 General Corporate Purposes/Other Refinancing M&A/LBO Buyback/Dividend ($ in billions) * Data only available for
Slide 14: 1Q 2021 CLO new issuance volume was double the prior-year quarter
1Q 2021 CLO new issuance volume was double the prior-year quarter CLO New Issuance Volume $50 $40 $30 $20 $10 $0 1Q 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 U.S. EU ($ in billions) * Data only available for U.S. and Europe Source: LCD, an offering of S&P Global Market Intelli
Slide 15: Our ratings in 2020 were valuable indicators of creditworthiness and default risk
Our ratings in 2020 were valuable indicators of creditworthiness and relative default risk • During the COVID-19-led Global Corporate Default Rates global recession, our 50% corporate ratings performed 40% as designed 30% • No S&P rated investment- grade issuer defaulted in 2020 20% 10% • Defaults w
Slide 16: Substantial progress on ESG market initiatives with 1Q revenue of $21 million
Substantial progress on ESG market initiatives with 1Q revenue of $21 million Research Evaluation Data Analytics & Tools Benchmarks s • 18 ESG evaluations • Released an additional • 1Q 2021 ending ESG • Launched Voluntary completed in 1Q21 400 ESG data points on ETF AUM of $22.9 Carbon Credit applic
Slide 17: Launched new S&P Global ESG brand
Launched new S&P Global ESG brand 17
Slide 18: Product launches and innovation continued during the quarter
Product launches and innovation continued during the quarter New data sets and capabilities - Launched Kensho NERD (Named Entity Recognition and Disambiguation) the first entity extraction system on the market specifically optimized for business-related documents - Launched the S&P MAESTRO 5 Index -
Slide 19: 2021 Outlook
2021 Outlook S&P Global 19
Slide 20: After two strong years of global issuance, 2021 forecast to decrease 2%
After two strong years of global issuance, 2021 forecast to decrease 2% $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 $0 2014 2015 2016 2017 2018 2019 2020 2021F ($ in billi
Slide 21: S&P Global economists forecast 2021 global GDP to increase 5.5%
S&P Global economists forecast 2021 global GDP to increase 5.5% • Global recovery forecast in 2021 to continue in 2022 • Impacted by pace of vaccinations and the spread of virus variants • Orderly reflation viewed as a positive development for the economy and credit S&P Real GDP Forecast 10% 8.0% 8%
Slide 22: Ewout Steenbergen
Ewout Steenbergen Executive Vice President, Chief Financial Officer 22
Slide 23: Exceptional financial results with revenue growth exceeding expense growth
Exceptional financial results with revenue growth dramatically exceeding expense growth 1Q 2021 1Q 2020 Change Revenue $2,016 $1,786 +13% Organic revenue $2,008 $1,781 +13% Adjusted corp unallocated expense $28 $30 (6%) Adjusted total expense $855 $839 +2% Adjusted operating profit $1,162 $948 +23%
Slide 24: Foreign exchange had a $0.03 favorable impact on adjusted EPS
Movements in foreign exchange rates had a $0.03 favorable impact on adjusted EPS Favorable Market Ratings Platts Indices (Unfavorable) Intelligence Revenue $17 $2 – – Adjusted operating profit $9 $1 $1 – Adjusted EPS $0.03 – – – ($ in millions, except per share data) Key factors mitigating impact of
Slide 25: 1Q 2021: Non-GAAP adjustments
1Q 2021: Non-GAAP adjustments Pre-tax items excluded to arrive at adjusted results 1Q 2021 IHS Markit merger-related costs: - Transaction costs (to complete the transaction) ($9) - Integration costs (to operationalize the integration) ($40) - Costs-to-achieve (to enable expense and revenue synergies
Slide 26: All four businesses delivered revenue and adjusted operating profit growth
All four businesses delivered revenue and adjusted operating profit growth 1Q 2021 vs. 1Q 2020 Ratings Market Platts Indices Intelligence Reported revenue +23% +4% +5% +4% Organic revenue +23% +4% +5% +4% Adjusted operating profit +32% +13% +15% +5% 1Q 2021 adjusted 67.5% 33.5% 58.1% 71.3% operating
Slide 27: Cash position temporarily elevated and leverage consistent with target
Cash position temporarily elevated and leverage consistent with target 1Q 2021 4Q 2020 Cash and cash equivalents (A) $4,518 $4,122 Short- and long-term debt $4,111 $4,110 Adjusted gross debt to adjusted EBITDA 1.8x (B) 1.9x Gross debt to EBITDA 1.0x (C) 1.0x ($ in millions) We entered into the first
Slide 28: Free cash flow, excluding certain items, increased $100 million
Free cash flow, excluding certain items, increased $100 million versus prior period 1Q 2021 1Q 2020 Cash provided by operating activities $768 $680 Capital expenditures (18) (11) Net distributions to noncontrolling interest holders (69) (51) Free cash flow $681 $618 IHS Markit merger costs 37 — Free
Slide 29: Ratings: Surge in high-yield, leveraged loans and structured finance
Ratings: Surge in high-yield, leveraged loans and structured finance triggered revenue growth 1Q 2021 1Q 2020 Change Revenue* $1,017 $825 +23% Adjusted segment operating profit $686 $521 +32% Adjusted segment operating profit 67.5% 63.1% +440 bps margin Trailing four-quarters adjusted 63.6% 60.2% +3
Slide 30: Ratings: Transaction and non-transaction revenue growth
Ratings: Both transaction and non-transaction contributed to revenue growth 1Q 2021 1Q 2020 Change Non-transaction $435 $395 10% Transaction $582 $430 35% ($ in millions) 1Q 2021 HIGHLIGHTS: • Non-transaction revenue increased primarily due to growth at CRISIL, fees associated with surveillance, as
Slide 31: Ratings: Meaningful growth in every major category
Ratings: Meaningful growth in every major category Structured Finance Revenue Revenue $1,017 $8 $101 +8% $2 $92 $825 $72 +18% $17 $2 $75 $85 $101 +34% $3 $7 $61 $12 Acquisitions/divestitures $75 $141 +10% CRISIL, Other* $9 Governments $128 $46 Structured Finance Financial Services $27 Corporates $60
Slide 32: S&P Dow Jones Indices: Revenue grew modestly
S&P Dow Jones Indices: Revenue grew modestly with very difficult ETD comparison 1Q 2021 1Q 2020 Change Revenue $270 $259 +4% Adjusted segment operating profit $192 $183 +5% SPGI share of Adj. Seg. Op. Profit* $141 $134 +5% Adjusted segment operating profit 71.3% 70.6% +70 bps margin Trailing four-qu
Slide 33: S&P Dow Jones Indices: Asset-linked fees growth offset by exchange-traded derivatives
S&P Dow Jones Indices: Asset-linked fees growth substantially offset by exchange-traded derivatives Revenue $259 $270 $46 +1% $46 $41 (24%) $54 Data & Custom Subscriptions Exchange-Traded Derivatives Asset-Linked Fees $183 +15% $159 1Q 2020 1Q 2021 ($ in millions) 33
Slide 34: S&P Dow Jones Indices: AUM above $2 trillion
S&P Dow Jones Indices: Price appreciation and net inflows pushed AUM above $2 trillion Asset-Linked Fees: • Quarter-ending ETF AUM associated with our indices was $2.2 trillion, a 65% increase from 1Q 2020 Quarter Ending ETF AUM $749 $2,214 • 1Q average ETF AUM associated with ---- our indices incre
Slide 35: S&P Dow Jones Indices: ETD volumes decreased
S&P Dow Jones Indices: ETD volumes decreased versus very active 1Q 2020 Key Contracts Key Contracts (Average Daily Volume in Thousands) (Average Daily Volume in Thousands) 2,000 8,000 1,500 6,000 1,000 4,000 500 2,000 0 0 1Q 2020 1Q 2021 1Q 2020 1Q 2021 S&P 500 Index Options CME Equity Complex VIX F
Slide 36: Market Intelligence: Revenue increased mid single-digit
Market Intelligence: Revenue increased mid single-digit 1Q 2021 1Q 2020 Change Revenue $539 $519 +4% Adjusted segment operating profit $181 $160 +13% Adjusted segment operating profit 33.5% 30.9% +260 bps margin Trailing four-quarters adjusted 33.1% 31.9% +120 bps segment operating profit margin ($
Slide 37: Market Intelligence: Growth across all categories
Market Intelligence: Growth across all categories Revenue $539 $519 $0 $3 $161 +6% $152 $100 $109 +9% Acquisitions/divestitures Credit Risk Solutions Data Management Solutions Desktop +2% $264 $269 1Q 2020 1Q 2021 ($ in millions) Divestitures include SPIAS and the IR web hosting business. Details ma
Slide 38: Platts: Steady growth continued
Platts: Steady growth continued 1Q 2021 1Q 2020 Change Revenue $225 $215 +5% Adjusted segment operating profit $131 $114 +15% Adjusted segment operating profit 58.1% 52.9% +520 bps margin Trailing four-quarters adjusted 56.0% 53.2% +280 bps segment operating profit margin ($ in millions) 1Q 2021 HIG
Slide 39: Platts: Every category delivered growth
Platts: Every category delivered growth Revenue Added Shipping as $225 a new category $215 +10% $11 $10 $13 +21% $11 $16 $17 +9% $42 $43 +4% Shipping Petrochemicals Metals & Agriculture Natural Gas, Power & Renewables Petroleum $137 $141 +3% 1Q 2020 1Q 2021 ($ in millions) Details may not sum to tot
Slide 40: 2021 GAAP guidance
2021 GAAP guidance We are not providing 2021 GAAP guidance because, given the inherent uncertainty around the merger, management cannot reliably predict all of the necessary components of GAAP measures. 40
Slide 41: 2021 adjusted diluted EPS guidance increased
2021 adjusted diluted EPS guidance increased Previous Adjusted New Adjusted Revenue Mid single-digit Mid single-digit increase increase Corporate Unallocated expense $140 - $150 million $140 - $150 million Deal-related amortization $95 - $100 million $95 - $100 million Operating profit margin 53.8%
Slide 42: 1Q 2021 Earnings Conference Call: Questions & Answers
1Q 2021 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 29, 2021
Slide 43: Appendix
Appendix S&P Global
Slide 44: Trailing four quarters adjusted operating profit margin (Q1 2021 - Q2 2020)
Trailing four quarters adjusted operating profit margin (Q1 2021 - Q2 2020) Trailing four Q1 2021 Q4 2020 Q3 2020 Q2 2020 quarters Ratings Revenue $ 1,017 $ 881 $ 894 $ 1,006 $ 3,798 Adjusted operating profit $ 686 $ 481 $ 552 $ 695 $ 2,414 Trailing four quarters adjusted 63.6 % operating profit mar
Slide 45: Trailing four quarters adjusted operating profit margin (Q1 2020 - Q2 2019)
Trailing four quarters adjusted operating profit margin (Q1 2020 - Q2 2019) Trailing four Q1 2020 Q4 2019 Q3 2019 Q2 2019 quarters Ratings Revenue $ 825 $ 820 $ 789 $ 801 $ 3,235 Adjusted operating profit $ 521 $ 478 $ 477 $ 472 $ 1,948 Trailing four quarters adjusted 60.2 % operating profit margin
Slide 46: Platts: Historical quarterly revenue by category
Platts: Historical quarterly revenue by category 1Q20 2Q20 3Q20 4Q20 Shipping $10 $10 $10 $10 Petrochemicals $11 $11 $12 $12 Metals and Agriculture $16 $16 $17 $16 Natural Gas, Power and Renewables $42 $42 $42 $45 Petroleum $137 $138 $141 $140 ($ in millions) 46
Slide 47: 1Q 2021 Earnings Conference Call replay options
1Q 2021 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, 2021 Domestic: 800-947-2123 Chip Merritt Internati