S&P Global Inc. · NYSE:SPGI
S&P Global — Q1 2019 Earnings Presentation
49 slides from S&P Global's earnings presentation, May 2, 2019
Slide 1: 1Q 2019 Earnings Conference Call
1Q 2019 Earnings Conference Call Doug Peterson President and CEO Ewout Steenbergen Executive Vice President and CFO Chip Merritt Senior Vice President, Investor Relations May 2, 2019
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, which express management’s current views concerning future events, trends,
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 Standard & Poor’s Credit Market Services Europe Limited, Standard & Poor’s Credit
Slide 5: Doug Peterson
Doug Peterson President and Chief Executive Officer “The markets have come a long way since the depths of December.” — Doug Peterson
Slide 6: Subscriptions businesses lead 1Q growth
Subscriptions businesses lead 1Q growth • Market Intelligence led all segments with 8% organic revenue growth • Achieved a 40 basis-point improvement in adjusted operating profit margin • Reduced average diluted shares outstanding by 6 million shares • Delivered 5% adjusted diluted EPS growth • Gene
Slide 7: Adjusted diluted EPS increased 5%
Adjusted diluted EPS increased 5% 1Q 2019 1Q 2018 Change Revenue $1,571 $1,567 — Adjusted operating profit $743 $735 +1% Adjusted operating profit margin 47.3% 46.9% +40 bps Trailing four-quarters adjusted 48.9% 46.6% +230 bps segment operating profit margin Average diluted shares outstanding 248.3
Slide 8: Market Intelligence's data feeds business continues to demonstrate strong growth
Market Intelligence's data feeds business continues to demonstrate strong growth Alternative Data Market Intelligence Data Feed Revenue * 40% Packages Driving Growth 11% CAGR Growth in number of 150 data packages, TTM Machine-readable transcripts Panjiva shipping data 19% ($ in millions) 100 SNL ass
Slide 9: Global bond issuance decreased 3%
Global bond issuance* decreased 3% – including bank loan volumes, issuance declined 13% United States* Europe* Asia* 580 486 538 462 444 451 441 503 434 427 496 393 372 407 303 1Q18 2Q18 3Q18 4Q18 1Q19 1Q18 2Q18 3Q18 4Q18 1Q19 1Q18 2Q18 3Q18 4Q18 1Q19 7% decrease YOY in 1Q 9% decrease YOY in 1Q 12%
Slide 10: Change in U.S. tax law related to repatriation impacted debt issuance
Change in U.S. tax law related to repatriation impacted debt issuance – global cash balances declining Data for the 50 companies with the most cash overseas at the end of 2017 Number of As a percent of Period-end companies that Debt Issuance U.S. investment- global cash issued debt grade issuance ba
Slide 11: Latest 2019 global bond issuance forecast to decrease <1%
Latest 2019 global bond issuance forecast to decrease <1%, excluding Int'l. Public Finance $7,000 Forecast $6,000 $5,000 Nonfinancial $4,000 Financial Services Structured Finance* $3,000 U.S. Public Finance $2,000 International Public Finance $1,000 $0 2014 2015 2016 2017 2018 2019 ($ in billions) *
Slide 12: Global new leveraged loan volume remains light
Global new leveraged loan volume remains light Total Global New Leverage Loan Volume* $300 $250 $200 (26%) $150 $100 $50 $0 1Q 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 1Q19 ($ in billions) Period Ending * Excludes repricing and amend-to-extend volume 12
Slide 13: Outflows from U.S. loan funds dampens demand for new loans
Outflows from U.S. loan funds dampens demand for new loans Weekly U.S. Loan Fund Flows* $1 $0 ($ in Billions) -$1 -$2 -$3 -$4 1Q 4 /18 /5/ 18 6 /18 6/ 19 / 6 /19 7/ 19 0/ 19 0/ 19 /1 2 2/2 /1 2 /2 /2 /1 11 1 1 1 2 3 4 Source: Lipper * Based on funds that report weekly 13
Slide 14: 1Q 2019 bank loan ratings revenue trails prior period
1Q 2019 bank loan ratings revenue trails prior period $400 $350 4Q $300 $250 3Q $200 2Q $150 $100 1Q $50 1Q 1Q $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (revenue, $ in millions) 14
Slide 15: Powering the Markets of the Future
Powering Evolve and Grow the Pursue Growth via the Markets Core Business Adjacencies of the Future Develop Foundational Capabilities Global Customer Innovation Technology Operational People Orientation Excellence 15
Slide 16: S&P Global launched domestic credit-rating business in China
On March 26, S&P Global officially launched our domestic credit-rating business in China Global 16
Slide 17: ESG at S&P Global
ESG at S&P Global Customer Orientation Ratings Indices (Fixed Income) (Equity / Passive) ESG Evaluations ESG indices Green Bond Evaluations ESG Data Factory Thematics/SDG Indices Green Bond Indices Public- and private- company data Market Intelligence Asset-level data Platts (Corporates, Equity, Fix
Slide 18: S&P Dow Jones Indices introduced new S&P DJI ESG Scores
S&P Dow Jones Indices introduced new Customer S&P DJI ESG Scores Orientation S&P DJI will launch a global family of ESG indices based on its widely tracked regional and country-specific large and mid-cap benchmarks S&P DJI ESG Score for Index Inclusion 18
Slide 19: S&P Dow Jones Indices launches ESG Index based on S&P 500
S&P Dow Jones Indices launches ESG Index ® based on Iconic S&P 500 Customer Orientation • Leading with the S&P 500® as the first index based on the S&P DJI ESG scoring methodology • Expect to license the S&P 500® ESG Index and its upcoming global family of ESG indices to a range of financial service
Slide 20: S&P Global Ratings launches ESG Evaluations
S&P Global Ratings launches Customer ESG Evaluations Orientation • Our ESG Evaluation is a cross-sector, relative analysis of an entity’s ability to operate successfully in the future and optimize long-term stakeholder value in light of its natural and social environment and the quality of its gover
Slide 21: Creating new products and nurturing existing benchmarks
Creating new products and nurturing Innovation Customer existing benchmarks Orientation New Enhanced S&P DJI First Platts Platts launched launched benchmarks announced assessments of Global endorsed under change to Low Sulfur SmallCap EU Benchmark Dated Brent Marine Fuel Select Indices Regulation be
Slide 22: Platts new price assessments building momentum
Platts new price assessments building Innovation momentum JKM trading volume via ICE Black Sea Wheat trading 200 volume via CME 166 400 150 311 300 100 90 200 49 50 100 75 24 34 13 1 2 3 0 0 14 015 016 017 018 018 019 0 17 0 18 1 8 1 9 2 0 2 2 2 2 2 2 2 2 20 20 1 Q 1 Q 1Q 1Q Thousands of lots traded
Slide 23: Ewout Steenbergen
Ewout Steenbergen Executive Vice President, Chief Financial Officer 23
Slide 24: Lower adjusted corporate unallocated, tax rate, and shares drove 5% adjusted diluted EPS growth
Lower adjusted corporate unallocated, tax rate, and shares drove 5% adjusted diluted EPS growth 1Q 2019 1Q 2018 Change Revenue $1,571 $1,567 — Organic revenue $1,561 $1,565 — Adjusted Corporate Unallocated ($32) ($46) +30% Adjusted total expense $828 $832 (1%) Adjusted operating profit $743 $735 +1%
Slide 25: Stock option exercise activity picked up in the quarter
Stock option exercise activity picked up in the quarter, lowering 1Q 2019 effective tax rate EPS Impact 1Q 2Q 3Q 4Q 2017 $0.04 $0.02 $0.14 $0.08 2018 $0.04 $0.01 $0.01 $0.08 2019 $0.07 FASB Accounting Standard requirement to record the tax effect related to share- based payments at settlement (or ex
Slide 26: Movements in foreign exchange rates reduced 1Q 2019 revenue
Movements in foreign exchange rates reduced 1Q 2019 revenue Favorable Market Ratings Platts Indices (Unfavorable) Intelligence Revenue ($12) ($2) – – Adj. operating profit ($2) $3 $2 $1 Adj. EPS ($0.01) $0.01 $0.01 – ($ in millions, except per share data) Key factors mitigating impact of currency ch
Slide 27: 1Q 2019: Non-GAAP adjustments
1Q 2019: Non-GAAP adjustments Pre-tax expense excluded to arrive at adjusted results 1Q 2019 Non-cash expense for U.S. pension partial risk transfer ($113) Kensho retention-related expenses ($7) Deal-related amortization ($32) Total ($152) ($ in millions) 27
Slide 28: Creating shareholder value: the path forward
Creating shareholder value: the path forward 1 Fuel Revenue Momentum Deliver EBITA Enhancement 2 4 Return Capital to Shareholders Drive Financial Leverage 3 28
Slide 29: Market Intelligence delivers strongest results in the quarter
Market Intelligence delivers strongest results in the quarter 1Q 2019 vs. 1Q 2018 Ratings Market Platts Indices Intelligence Reported revenue (7)% +10% +5% +2% Organic revenue (7)% +8% +5% +2% Adjusted operating (11)% +27% +4% +1% profit 1Q 2019 adjusted 52.3% 33.8% 47.4% 69.5% operating profit marg
Slide 30: Capital position remains solid
Capital position remains solid 1Q 2019 4Q 2018 Cash and cash equivalents (A) $1,436 $1,958 Short- and long-term debt $3,663 $3,662 Adjusted gross leverage (B) $6,264 $6,249 Adjusted gross leverage to adjusted 1.9x * 1.9x EBITDA ($ in millions) • Utilized $644 million of cash for share repurchases in
Slide 31: Seasonally low free cash flow with incentive compensation payments in 1Q
Seasonally low free cash flow with incentive compensation payments in 1Q each year 1Q 2019 1Q 2018 Cash provided by operating activities $293 $360 Capital expenditures (20) (33) Net distributions to noncontrolling interest holders (18) (50) Free cash flow $255 $277 Settlement of prior-year tax audit
Slide 32: Market Intelligence: Strong subscription growth and exceptional margin expansion
Market Intelligence: Strong subscription growth and exceptional margin expansion 1Q 2019 1Q 2018 Change Revenue $482 $439 +10% Adjusted segment operating profit $163 $128 +27% Adjusted segment operating profit 33.8% 29.2% +460 bps margin Trailing four-quarters adjusted 35.2% 31.7% +350 bps segment o
Slide 33: Market Intelligence: Strong revenue growth across the board
Market Intelligence: Strong revenue growth across the board Revenue $500 $482 $439 $8 $450 $1 $400 $138 +11% $124 $350 Desktop $300 $91 +11% Data Management $82 $250 Solutions $200 Credit Risk $150 Solutions $233 $246 +6% $100 Acquisitions $50 $0 ($ in millions) 1Q 2018 1Q 2019 Details may not sum t
Slide 34: Ratings: Bank loan ratings declines impacted revenue and adjusted profit
Ratings: Bank loan ratings declines impacted revenue and adjusted profit 1Q 2019 1Q 2018 Change Revenue $696 $748 (7)% Adjusted segment operating profit $364 $408 (11)% Adjusted segment operating profit 52.3% 54.7% (240 bps) margin Trailing four-quarters adjusted 55.4% 54.0% +140 bps segment operati
Slide 35: Ratings: Transaction revenue decline reflects lower bank loan rating activity
Ratings: Transaction revenue decline reflects lower bank loan rating activity 1Q 2019 1Q 2018 Change Non-transaction $365 $380 (4%) Transaction $331 $368 (10%) ($ in millions) 1Q 2019 HIGHLIGHTS: • Non-transaction revenue decreased primarily due to foreign exchange, lower Rating Evaluation Service a
Slide 36: Ratings: Non-transaction products have been a steady source of revenue
Ratings: Non-transaction products have been a steady source of revenue Ratings Non-Transaction Revenue $400 1Q19 $300 $200 $100 $0 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 1Q19 ($ in millions) 36
Slide 37: Ratings: Declines in most markets during quarter
Ratings: Declines in most markets during quarter Revenue $800 $748 $696 $700 $88 $83 (5%) $49 $600 $52 +6% $76 Corporates $61 (19%) $500 $116 $113 (2%) Financial Services $400 Structured $300 Governments $200 $419 $386 (8%) CRISIL, Other* $100 $0 1Q 2018 1Q 2019 ($ in millions) *Other includes inter
Slide 38: S&P Dow Jones Indices: Growth reduced by lower exchange-traded derivative activity
S&P Dow Jones Indices: Growth was reduced by lower exchange-traded derivative activity 1Q 2019 1Q 2018 Change Revenue $217 $212 +2% Adjusted segment operating profit $151 $150 +1% SPGI share of Adj. Seg. Op. Profit* $111 $110 +1% Adjusted segment operating profit 69.5% 70.5% (100 bps) margin Trailin
Slide 39: SPDJI: Asset-Linked Fees and Data & Custom Subscriptions deliver strong growth
SPDJI: Asset-Linked Fees and Data & Custom Subscriptions deliver strong growth $250 Revenue $212 $217 $200 $31 $40 +28% $50 $34 (32%) Asset-Linked Fees $150 Exchange-Traded Derivatives $100 Data & Custom $131 $143 +9% Subscriptions $50 $0 ($ in millions) 1Q 2018 1Q 2019 39
Slide 40: S&P Dow Jones Indices: Net inflows and market appreciation drove AUM increase
S&P Dow Jones Indices: Net inflows and market appreciation drove quarter-ending AUM increase Asset-Linked Fees: • Sequentially, since 12/31/18, ETF market appreciation was $162 Quarter-Ending ETF AUM billion and ETF net inflows associated --- $51 --- with our indices totaled $2 billion --- $95 • Qua
Slide 41: Sector investing has become more popular
Sector investing has become more popular Products linked to S&P DJI sectors and industries ($ in billions) ($ in billions) Source: S&P Dow Jones Indices, as of December 31, 2018. Past performance is no guarantee of future results. Chart is provided for illustrative purposes. 41
Slide 42: S&P Dow Jones Indices: Exchange-traded derivatives volume decreased
S&P Dow Jones Indices: Exchange-traded derivatives volume decreased from volatile 1Q18 Key Contracts (in thousands) Key Contracts (in thousands) (Average Daily Volume) (Average Daily Volume) 4,000 1,500 3,000 1,000 2,000 500 1,000 0 0 1Q 2018 1Q 2019 1Q 2018 1Q 2019 S&P 500 Index Options CME Equity
Slide 43: Platts: Delivered steady revenue growth
Platts: Delivered steady revenue growth 1Q 2019 1Q 2018 Change Revenue $207 $196 +5% Adjusted segment operating profit $98 $95 +4% Adjusted segment operating profit 47.4% 48.0% (60 bps) margin Trailing four-quarters adjusted 48.9% 46.3% +260 bps segment operating profit margin ($ in millions) 1Q 201
Slide 44: Platts: All commodity groups delivered low to mid single-digit revenue growth
Platts: All commodity groups delivered low to mid single-digit revenue growth Revenue $207 $196 $200 $15 +2% $14 $11 +5% $10 $36 +3% $150 $35 Petroleum Power & Gas $100 Petrochemicals $136 $144 +6% Metals & Ag $50 $0 1Q 2018 1Q 2019 ($ in millions) Details may not sum to total due to rounding 44
Slide 45: 2019 investments predominantly in Market Intelligence
2019 investments predominantly in Market Intelligence Planned Investment Spending Market Intelligence ~50% Ratings ~15% Platts ~5% Kensho ~30% We expect investment spending in Market Intelligence to build as the year progresses 45
Slide 46: 2019 GAAP guidance lowered to reflect U.S. pension partial risk transfer
2019 GAAP guidance lowered to reflect U.S. pension partial risk transfer Initial GAAP New GAAP Revenue Mid single-digit Mid single-digit increase increase Corporate Unallocated expense $205 - $215 million $205 - $215 million Deal-related amortization N.A. N.A. Operating profit margin 46.6% - 47.6% 4
Slide 47: 2019 initial adjusted guidance unchanged
2019 initial adjusted guidance unchanged Adjusted Revenue Mid single-digit increase Corporate Unallocated expense $155 - $165 million Deal-related amortization $120 - $125 million Kensho retention plans $20 - $25 million Operating profit margin 48.8% - 49.8% Interest expense $145 - $150 million Tax
Slide 48: 1Q 2019 Earnings Conference Call
1Q 2019 Earnings Conference Call Doug Peterson President and CEO Ewout Steenbergen Executive Vice President and CFO Chip Merritt Senior Vice President, Investor Relations May 2, 2019
Slide 49: 1Q 2019 Earnings Conference Call replay options
1Q 2019 Earnings Conference Call Doug Peterson REPLAY OPTIONS President and CEO Internet: Replay available for one year Ewout Steenbergen Go to http://investor.spglobal.com Executive Vice President and CFO Telephone: Replay available through June 1, 2019 Chip Merritt Domestic: 866-352-7720 Senior Vi