S&p Global Inc. · NYSE:SPGI
S&p Global — McGraw Hill Financial — Investor Day (March 2014)
60 slides from S&p Global's investor day presentation, Mar 18, 2014
Slide 1: Welcome
0 Welcome March 18 Chip Merritt Vice President, Investor Relations
Slide 2: Comparison of Adjusted Information to US GAAP Information
Welcome to the Inaugural McGraw Hill Financial 2 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 meani
Slide 3: Safe Harbor Statement
“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995 This presentation contains forward‐looking statements, including without limitation statements relating to our businesses and our prospects, new products, sales, expenses, tax rates, cash flows, and operating and capi
Slide 4: McGraw Hill Financial Investor Day – Agenda
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 Indices Al
Slide 5: Creating Growth & Driving Performance
8 Creating Growth & Driving Performance Doug Peterson President and Chief Executive Officer
Slide 6: Three Years of Exceptional Growth, Profits and Shareholder Returns
Agenda McGraw Hill Financial: An Exceptional Company 1 Creating Growth & Driving Performance 2 10 Three Years of Exceptional Growth, Profits and Shareholder Returns Growth & Value Plan (GVP) 2011‐2013 • Completed the divestiture of Education, Broadcasting and AviationWeek for $2.7B • Returned $4.4B
Slide 7: Accelerated Revenue Growth Delivered Exceptional Shareholder Returns
Accelerated Revenue Growth 12.5% 3.6% 2.9% 9.6% 8.6% ‐6.3% 2009 2010 2011 2011 2012 2013 Total MHP revenue as originally reported 12 Delivered Exceptional Shareholder Returns 2011 2013 Change MHFI Share Price and Total Shareholder Return 01/01/2011 to 12/31/2013 Revenue $6,246M $4,875M ‐22% 220% Tot
Slide 8: Returned Significant Cash to Shareholders
Returned Significant Cash to Shareholders Dividends & Share Repurchases Dividends $1,796M Share Repurchases $1,279M $1,297M Includes Special Dividend 2011 2012 2013 14 MHFI: Essential Intelligence Vision Mission To be the leading provider of ratings, Promoting sustainable growth by benchmarks and an
Slide 9: An Exceptional Investment Opportunity
An Exceptional Investment Opportunity LEADING BRANDS UNPARALLED ANALYTICS COMPELLING TRULY GLOBAL FINANCIAL ADVANTAGES 16 A Leading Provider of Ratings, Benchmarks, Analytics & Research Leading rating agency Premier provider of high quality data, analytical tools and ratings information Foremost ind
Slide 10: A Truly Global Company
Unique Analytics that are Valued by Our Customers 18 A Truly Global Company North America Headcount 5,900 Revenue $ 3.1B EMEA Headcount 1,800 Revenue $ 1.2B Asia Pacific Headcount 8,800 Revenue $ 0.5B Latin America Headcount 500 ~17,000 Employees Revenue $ 0.1B 29 Countries 94 Global Offices 19
Slide 11: Compelling Financial Advantages
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 Agenda McGraw Hill Financial: An Exceptional Co
Slide 12: Growth & Performance Goals: 2014-2016
Growth & Performance Goals: 2014‐2016 Creating Growth & Driving Performance • Setting annual growth goals: • Shifting from a holding company to – Mid to high single‐digit revenue growth an active management model – Sustained margin expansion – Mid teens EPS growth • Completing portfolio rationalizat
Slide 13: Secular Market Trends Position MHFI for Sustained Growth
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 Asse
Slide 14: Active Management to Deliver Performance
Active Management to Deliver Performance Holding Strategy Active Operationally Company & Oversight Integrated Management A more interrelated company focused on: Operational Customer Great Excellence Engagement Talent 26 Operational Excellence: Distinctive, Interrelated Capabilities Acquire Data Anal
Slide 15: Customer Engagement: Diverse Customer Set
Customer Engagement: Diverse Customer Set Revenue by Customer Segment 5% 14% Corporates Investment Management 44% 18% 2013 Financial Institutions & Banks Investment Banks & Private Equity Public Sector 19% 28 Customer Engagement: Strong Outreach 29
Slide 16: Great Talent: Foundational to Driving Performance
Great Talent: Foundational to Driving Performance 30 Growth & Performance Across Our Businesses Creating Growth & Driving Performance 31
Slide 17: Platts
32 Platts Larry Neal President, Platts
Slide 18: Platts is Focused on Bringing Transparency to Commodity Markets
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 pr
Slide 19: Platts Serves Over 10,000 Customers in More than 170 Countries
Platts Publishes More Than 12,000 Daily Prices to Support the Physical Commodity Market Flows and the World’s Supply Chains Oil Exporters Oil Importers Producers Processors End Users Integrated Oil Major Mining Company Steel Mill Utilities Refinery Manufacturer Airline 36 Platts Serves Over 10,000 C
Slide 20: Each Commodity Market has Evolved at its own Pace
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 Reference Price Price Benchmark Cash Settled Futures • Bi‐lateral contracts use Use of • Used to settle futures contracts
Slide 21: Platts' Strategy: Elevating Price Assessments to Benchmarks
Platts’ Strategy is Focused on Elevating Price Assessments to Benchmark Prices Across Physical Commodity Markets Revenue Breakdown Market Data Feeds • Price data feeds serving front, middle and back office Real‐time Information • Market news & commentary, live global bids / offers and intra‐day spot
Slide 22: Platts has Benefited from Strong Fundamental Growth
Platts has Benefited from Strong Fundamental Growth and Globalization of Commodity Markets Price Volatility (2012 $ Equiv.) Commodity Futures Contracts (M) $100 342.9 Physical Natural Gas Power Coal Commodity 86.5 Market 1970 2012 2000 2013 Drivers Agriculture Metals Petchems Cap Crude Oil Prices Cr
Slide 23: S&P Dow Jones Indices: The World's Leading Index Provider
S&P Dow Jones Indices Alex Matturri Chief Executive Officer, S&P Dow Jones Indices 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 i
Slide 24: Recognized Around the World for Index Innovation
Recognized Around the World for Index Innovation The Americas Structured Products ETF Index Provider of Awards 2013 the Year in Asia – 2014 Index Provider of the Best Index Provider Index Provider Year in Asia – 2013 2014 & 2013 2014 & 2013 Best Index Provider Best Index Provider Index Innovation In
Slide 25: Business Model: Double-Digit Growth, Solid Margins
Business Model Description ETFs and Mutual Funds Fees on assets invested in products linked to S&P Dow Jones Indices OTC Derivatives & Structured Fixed or variable annual and per‐issue fees or blanket fees for OTC Products derivatives and structured products Listed Royalties based on trading volumes
Slide 26: Strong Underlying Growth in Passive Investing
Strong Underlying Growth in Passive Investing Passive Funds Taking Strong Growth in ETP Growth Across Regions Share from Active ETP Industry Assets Global ETP AUM 2013 2003‐2013 $2,401B ETP AUM CAGR +27% CAGR 88% 74% Americas $1,772B +27% 9% 13% $218B 3% 13% EMEA $461B +37% 2003 2013 2003 2013 Activ
Slide 27: J.D. Power
52 J.D. Power Fin O’Neill President, J.D. Power
Slide 28: Visibility, Impact and Value of the J.D. Power Brand
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 years
Slide 29: J.D. Power has Delivered Profitable Growth
Diversified Business Model: Helps Clients Measure, Understand and Improve Drivers of Growth and Profitability Value Proposition Independent industry research and benchmark studies Syndicated Benchmarks of quality and customer satisfaction Research Ad Claims Brand licensing for syndicated study award
Slide 30: J.D. Power Global Footprint and Automotive Market Forecast
J.D. Power has an Increasingly Global Footprint with More than 40% of Revenue Generated Outside of the US Munich Beijing Westlake Village Troy Toronto Orange Tokyo Shanghai Mexico City Bangkok Singapore Sao Paulo J.D. Power Office Market Coverage 2013 Revenue Split by Region: US – 59% International
Slide 31: China Represents One of J.D. Power's Best Opportunities
China Represents One of J.D. Power’s Best Opportunities for Growth with Strong Performance and No Box Around the Brand Historical Performance • Consistent, profitable double‐digit growth – Syndicated and proprietary research +33% – Product and retail performance CAGR improvement • Well positioned fo
Slide 32: S&P Capital IQ
62 S&P Capital IQ Lou Eccleston President, S&P Capital IQ
Slide 33: S&P Capital IQ Timeline
S&P Capital IQ Timeline 2011 2012 2013 2014 Launch & Brand Build & Rationalize • Launch new capabilities Acquire & Create • Simplified business model • Kick‐off global Organize & Establish • Three capability • Built new solutions branding initiative & capabilities • Re‐tool Equity • Merged multiple
Slide 34: Revenue by Business Lines and Market Segments
Revenue by Business Lines and Market Segments S&P Capital IQ Desktop S&P Credit S&P Capital IQ & Enterprise Solutions Solutions Markets Intelligence 61% of Revenue 30% of Revenue 9% of Revenue S&P CAPITAL IQ MARKET SEGMENTS Investment Investment Financial Banking / Wealth Management Institutions Pri
Slide 35: Revenue Growth and 2014 Initiatives
Revenue Growth Historical Performance +7% CAGR ’11‐’13 CAGR $1,124M $1,170M $1,031M S&P Capital IQ Markets ‐7% Intelligence S&P Credit Solutions 6% S&P Capital IQ Desktop & Enterprise Solutions 9% 2011 2012 2013 68 2014 Growth & Performance Initiatives S&P Capital IQ Markets Intelligence Invest & Re
Slide 36: 2014 Growth & Performance Initiatives
2014 Growth & Performance Initiatives S&P Credit Solutions Leverage Unique IP & Assets • Dedicated product and IT resources • Focused business development • Integrated product team to create integrated solutions • Transparent auditability for more efficient regulatory management 70 2014 Growth & Per
Slide 37: Evolving the Experience: IQLanguage
We are Evolving the Experience… “IQLanguage” A proprietary application design approach that: • 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 72 …Leveraging O
Slide 38: Focusing on Creating Growth & Driving Performance
Focusing on Creating Growth & Driving Performance Creating Growth & Driving Performance • Leverage acquired capabilities and talent to • Drive operational efficiencies through develop innovative solutions improved performance management • Expand our existing position in Europe, Asia • Execute on cri
Slide 39: Standard & Poor's Ratings Services: Great Business
Standard & Poor's Ratings Services Neeraj Sahai President, Standard & Poor’s Ratings Services Standard & Poor’s Ratings Services: Great Business Robust Strong Track Secular Platform Record Tailwinds • Broad and deep • Revenue momentum • Higher demand analytic coverage and mix for ratings • Global fo
Slide 40: Broad and Deep Analytic Coverage
Broad and Deep Analytic Coverage Corporate Financial Insurance Government Structured Finance Ratings Institutions Ratings Companies Ratings Securities Ratings Ratings 49,700 59,000 7,200 918,800 90,000 • Industrials • Banks • Bond • International • ABCP • Utilities • Broker / Dealers • Health Public
Slide 41: Highly Experienced and Trained Professionals
Highly Experienced and Trained Professionals Beth Ann Bovino Moritz Kraemer Ryan Tsang • US Chief Economist • Chief Rating Officer, • Managing Director and • Based in New York Sovereigns Analytical Manager, Financial • 10 years at Standard & Poor’s • Based in Frankfurt Institutions Ratings • Recentl
Slide 42: Revenue Momentum and Revenue Mix
Revenue Momentum Historical Performance +13% CAGR 43% 44% $2,274M 41% $2,034M $1,767M 2011 2012 2013 Corporates Governments CRISIL, Other* Financial Institutions Structured Finance Adjusted Operating Profit Margin *Other includes intersegment royalty, TRC, and adjustments 82 Revenue Mix Revenue 2007
Slide 43: Improving Productivity and Diversified Earnings Stream
Improving Productivity 2011 2012 2013 Operating Profit Margin1 (adjusted) 42.2% 43.5% 44.9% Revenue per Employee1 ($K) $520.0 $607.5 $674.6 Adjusted Operating Profit per Employee1 ($K) $219.3 $264.2 $303.2 (1) Excludes CRISIL 84 Diversified Earnings Stream Issuance Mix Fee Type Diversification $2,13
Slide 44: Higher Demand for Ratings; Low Rates Driving Issuance
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 indic
Slide 45: Deleveraging Driving Structured Finance and Loan Syndications
Deleveraging Driving Structured Finance and Loan Syndications Balance Sheet Leverage US Structured Total Syndicated Loan Multiples of Selected US Finance Issuance New Issuance and European Banks By Asset Class Leverage Multiple; x $374B $2,133B 45 $2,047B $1,851B 40 $300B 35 1,002 1,364 $211B $196B
Slide 46: CRISIL: Who We Are
CRISIL Roopa Kudva Managing Director & Chief Executive Officer, CRISIL CRISIL: Who We Are •India’s largest credit rating agency with deep market penetration: from small enterprises to India’s largest corporations •India’s largest independent research house: providing analyses and benchmarks on econo
Slide 47: Growth Accelerated After Acquisition by MHFI
Growth Accelerated After Acquisition by MHFI MHFI Acquires CAGR MHFI Increases 51% Stake Stake to 68% +32% Revenue 172 181 189 106 110 136 ($M) 21 50 82 2005 2006 2007 2008 2009 2010 2011 2012 2013 CAGR Market Capitalization +38% 1,171 1,384 1,259 ($M) 676 692 959 97 336 365 2005 2006 2007 2008 2009
Slide 48: Growing International Presence and Strong Revenue Growth
Growing International Presence and Revenue CRISIL Global Presence & Revenue Mix Poland UK USA China India Singapore CRISIL Office CRISIL Research Centers Argentina CRISIL International Revenue: 2003 – 1% | 2011 – 56% | 2013 – 63% 94 Strong Revenue Growth Historical Revenue Performance As Reported, I
Slide 49: Indian Macroeconomic Drivers Position CRISIL for Growth
Underlying Indian Macroeconomic Drivers Position CRISIL for Growth 3rd 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 Untapp
Slide 50: Legal Update
98 Legal Update Ken Vittor Executive Vice President and General Counsel
Slide 51: Significant Progress; Legal Risks are Manageable
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 “underwriters”
Slide 52: State Attorneys General and Consistent Record of Dismissals
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 each
Slide 53: Financial Performance & Outlook
Financial Performance & Outlook Jack Callahan Executive Vice President and Chief Financial Officer Recap: Growth & Performance Goals for 2014‐2016 Creating Growth & Driving Performance • Setting annual growth goals: • Shifting from a holding company to – Mid to high single‐digit revenue growth an ac
Slide 54: Strategic Alternatives for McGraw Hill Construction; Revenue Growth
Evaluating Strategic Alternatives for McGraw Hill Construction 26% Media/Print 42% • Provides essential data, news, insights, and intelligence to better inform North American construction professionals’ decisions – ~$170M in annual revenue 74% – stand‐alone operating margins of ~20% Data/Analytics 5
Slide 55: Sustained Margin Expansion and Productivity Target
Focus on Sustained Margin Expansion Adjusted Operating Margin >100 BPS 33% 31% 28% 2011 2012 2013 2014 Guidance 2014 Guidance: >100 BPS 2014‐2016 Goal: Sustained Margin Expansion 108 Introducing Productivity Target 2014‐2016 Cost Reduction Initiatives Other Corporate / Stranded Restructuring Data Ac
Slide 56: Reducing Unallocated Expense; Double-Digit EPS Growth
Example: Reducing Unallocated Expense Adjusted Unallocated Expense Adjusted Unallocated Breakdown $203M Initiatives Excess Real Stranded $173M* ~$30M Costs ~5% Estate ~15% ~$173M ~45% 2013 ~35% Shared Costs Corporate 2011 2013 Center * As originally reported 110 Maintain Double‐Digit EPS Growth Annu
Slide 57: Strong Cash Flow and Balance Sheet Strength
Strong Cash Flow Enables Financial Flexibility Free Cash Flow ~$1,000M $809M $626M $624M 2011 2012 2013 2014 Guidance CapEx $92M $97M $117M ~$125M 2014 Guidance: ~$1,000M 2014‐2016 Goal: ~$1,000M 112 Balance Sheet Strength Continues to Build Year‐End Debt & Cash Positions $1,560M $1,265M $1,198M $86
Slide 58: A Disciplined Approach for Capital Allocation Decisions
A Disciplined Approach for Capital Allocation Decisions Capital Use Principles 1 Organic Growth Fund high‐return initiatives Value Creating 2 Acquisitions Pursue targets aligned with strategic and financial criteria 3 Dividends Maintain track record of annual dividend increases Increase / Decrease 4
Slide 59: Significant Cash Returned to Shareholders; Summary
Significant Cash Returned to Shareholders Dividends & Share Repurchases $1,796M $1,279M $1,297M Includes Special $548M Dividend 2010 2011 2012 2013 Dividends Share Repurchases 116 In Summary: Creating Growth and Driving Performance 2014‐2016 Goals Creating • Mid to high single‐ digit revenue growth
Slide 60: Replay Options
118 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 Replay Options