Slide 1: 4Q and Full-Year 2015 Earnings Call
4Q and Full-Year 2015 Earnings Call February 4, 2016 Doug Peterson President and CEO Jack Callahan Executive Vice President and CFO Chip Merritt Vice President, Investor Relations McGraw Hill Financial | 4Q 2015 Earnings Conference Call/Webcast Comparison of Adjusted Information to U.S. GAAP Informa
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, which express management’s current views concerning future events, trends,
Slide 3: 2015 Overview
Doug Peterson President and Chief Executive Officer McGraw Hill Financial | 4Q 2015 Earnings Conference Call/Webcast 5 2015 Overview McGraw Hill Financial | 4Q 2015 Earnings Conference Call/Webcast 6 3
Slide 4: Excellent Earnings Growth Resulting from Increased Revenue and Margin Improvement
Excellent Earnings Growth Resulting from Increased Revenue and Margin Improvement ($ in millions) 2015 2014 Change Revenue $5,313 $5,051 +5%* Total Adj. Expenses $3,260 $3,236 +1% Adj. Operating Profit $2,053 $1,815 +13% Adj. Operating Margin 38.7% 35.9% +280 bps Adjusted Diluted EPS $4.53 $3.88 +17
Slide 5: Continued Double-Digit Adjusted Earnings Growth
Continued Double-Digit Adjusted Earnings Growth Annual Adjusted Diluted EPS $4.53 +22% CAGR $3.88 $3.22 $2.65 $2.03 2011* 2012 2013 2014 2015 McGraw-Hill Education and McGraw-Hill Construction reclassified to discontinued operations in 2013 and 2014 respectively * Adjusted EPS excludes gain on dives
Slide 6: 4Q 2015 Overview
Recent Accomplishments • Consolidated Company headquarters into downtown NYC • Generated over $1.2 billion in free cash flow (excluding legal and regulatory settlements and insurance recoveries) • Returned $1.3 billion in share repurchases and dividends • Successfully issued debt into market after 8
Slide 7: Company Finishes 2015 with Solid Fourth Quarter Earnings
Company Finishes 2015 with Solid Fourth Quarter Earnings ($ in millions) 4Q 2015 4Q 2014 Change Revenue $1,374 $1,290 +7%* Adj. Operating Profit $478 $444 +8% Adj. Operating Margin 34.8% 34.5% +30 bps Adjusted Diluted EPS $1.04 $0.95 +9% * Organic revenue increased 1%. Organic revenue, on a constant
Slide 8: S&P Capital IQ and SNL – 4Q: SNL Leads S&P Capital IQ Growth
S&P Capital IQ and SNL – 4Q: SNL Leads S&P Capital IQ Growth S&P Capital IQ S&P Capital IQ Desktop Global Risk Markets & Enterprise Solutions Services Intelligence Desktop & Enterprise SNL 4Q Revenue 4Q Revenue 4Q Revenue 4Q Revenue +5% +4% +9% +14%* +10%* Growth led by low-teens RatingsXpress®
Slide 9: Standard & Poor’s Ratings Services: Weak Issuance Reduces Transaction Revenue
Standard & Poor’s Ratings Services: Weak Issuance Reduces Transaction Revenue ($ in millions) 4Q 2015 4Q 2014 Change Non-transaction $331 $330 Flat Transaction $247 $288 (14%) 4Q 2015 highlights: • Non-transaction revenue increased 4% excluding forex, with strength in Rating Evaluation Service and C
Slide 10: Q4 2015 Global Bond Issuance Declined 26% with Weakness in Every Market
Q4 2015 Global Bond Issuance Declined 26% with Weakness in Every Market Issuance by Region ($ in billions) ‐22% $521 $405 ‐8% ‐47% $318 $291 $268 $143 ‐46% $72 $39 U.S. EMEA Asia Americas Ex‐U.S. 4Q14 4Q15 All figures exclude sovereign issuance McGraw Hill Financial | 4Q 2015 Earnings Conference Cal
Slide 11: S&P Dow Jones Indices: 4Q 2015 Key Products
S&P Dow Jones Indices: 4Q 2015 Key Products • Exchange-Traded Funds ‒ Exchange-traded products industry inflows set a record of $351 billion ‒ AUM based on S&P DJI indices increased 9% sequentially from 3Q15 to $815 billion but decreased 2% below peak levels at year-end 2014 of $832 billion ‒ 233 ne
Slide 12: Platts: Delivered 4Q Growth In a Difficult Market Environment
Platts: Delivered 4Q Growth In a Difficult Market Environment • Many of our upstream petroleum, natural gas and mining customers are pressured by low commodity prices • Platts delivered high single-digit revenue growth in this challenging environment • The core subscription business delivered high-s
Slide 13: 2016 Economic Outlook
2016 Economic Outlook • Major central bank moves in December may have disappointed or unnerved markets, but monetary policy continues to provide a tailwind to economic expansion • Recent stock market moves probably overstate the likelihood of a slump in global growth this year • S&P’s economists exp
Slide 14: 2016 – Important Areas of Focus
2016 – Important Areas of Focus • Delivering Financial Performance: ‒ Revenue guidance of mid-to-high single-digit growth ‒ Newly defined adjusted diluted EPS guidance of $5.00 to $5.15 (excluding deal-related amortization) ‒ Free cash flow guidance of approximately $1.3 billion ‒ Complete sale of J
Slide 15: Financial Highlights — Key Areas
Financial Highlights — Key Areas • Consolidated income statements results • Impact from deal-related amortization and realignment of key performance metrics for 2016 • Adjustments to Q4 earnings • Balance sheet, free cash flow, and return of capital results • 2014–2016 productivity and SNL integrati
Slide 16: 2015: Portfolio Strength Delivers Growth; Productivity Initiatives Limit Expense Growth
2015: Portfolio Strength Delivers Growth; Productivity Initiatives Limit Expense Growth ($ in millions, except earnings per share) 2015 2014 Change Revenue $5,313 $5,051 +5%* Total expense 3,260 3,236 +1% Operating profit $2,053 $1,815 +13% Operating profit margin 38.7% 35.9% +280 bps Tax rate 30.5%
Slide 17: Key Performance Profit Metrics will Exclude Deal-Related Amortization Expense
Key Performance Profit Metrics will Exclude Deal-Related Amortization Expense ($ in millions) 4Q 2015 4Q 2014 % change Adj. diluted EPS $1.04 $0.95 +9% Excluding deal-related amortization of: $27 $12 Adj. diluted EPS $1.12 $0.98 +14% ($ in millions) 2015 2014 % change Adj. diluted EPS $4.53 $3.88 +1
Slide 18: Strong Operating Free Cash Flow in 2015 Achieves Guidance of >$1.1 Billion
Strong Operating Free Cash Flow in 2015 Achieves Guidance of >$1.1 Billion* ($ in millions) Year-End 2015 Cash and cash equivalents $1,481 Short-term debt $143 Long-term debt $3,468 ($ in millions, except earnings per share) 2015 2014 Cash provided by operating activities $195 $1,209 Capital expendi
Slide 19: Approximately 80% of the $140 Million Productivity Initiatives were Completed by Year-End 2015
Approximately 80% of the $140 Million Productivity Initiatives were Completed by Year-End 2015 2014-2016 Cost Reduction Adjusted Operating Initiatives Margin * 39.9% +570 36.9% bps ~$140M 34.2% 2013 2014 2015 * Excluding impact of deal-related amortization of $51 million in 2013, $48 million in 2014
Slide 20: S&P Capital IQ + SNL: Increase in Anticipated Synergies; 2016 Guidance
S&P Capital IQ + SNL: Increase in Anticipated Synergies Previous “Outside In” Target Refined “Inside” Target ~$100 ~$70 Revenue Cost Synergy Cost Synergy Revenue Total by 2019 by 2018 Synergy by 2019 by 2019 More than one-third anticipated in 2016 39 McGraw Hill Financial | 4Q 2015 Earnings Conferen
Slide 21: 4Q and Full-Year 2015 Earnings Call
4Q and Full-Year 2015 Earnings Call February 4, 2016 Doug Peterson President and CEO Jack Callahan Executive Vice President and CFO Chip Merritt Vice President, Investor Relations McGraw Hill Financial | 4Q 2015 Earnings Conference Call/Webcast 4Q and Full-Year 2015 Earnings Call February 4, 2016 RE