S&P Global Inc. · NYSE:SPGI
S&P Global — Q4 2019 Earnings Presentation
52 slides from S&P Global's earnings presentation, Feb 6, 2020
Slide 1: 4Q and Full-Year 2019 Earnings Conference Call
4Q and Full-Year 2019 Earnings Conference Call Doug Peterson President and CEO Ewout Steenbergen Executive Vice President and CFO Chip Merritt Senior Vice President, Investor Relations February 6, 2020
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: Key 2019 achievements
Key 2019 achievements Solid financial results while increasing investments: • Delivered 7% revenue growth and 12% adjusted diluted EPS growth • Generated margin improvement in every business • Reported $2.6 billion in free cash flow, excluding certain items • Returned $1.8 billion through share repu
Slide 6: Delivered solid financial results in 2019
Delivered solid financial results in 2019 2019 2018 Change Revenue $6,699 $6,258 +7% Organic revenue $6,669 $6,226 +7% Adjusted operating profit $3,360 $3,052 +10% Adjusted operating profit margin 50.2% 48.8% +140 bps Average diluted shares outstanding 246.9 253.2 (6.2) Adjusted diluted EPS $9.53 $8
Slide 7: Every business delivered revenue growth and margin improvement in 2019
Every business delivered revenue growth and margin improvement in 2019 2019 vs. 2018 Market S&P Dow Ratings Intelligence Platts Jones Indices Reported revenue +8% +7% +4% +10% Organic revenue +8% +7% +4% +10% Adjusted operating +10% +7% +6% +12% profit 2019 adjusted 57.2% 34.2% 50.2% 69.2% operating
Slide 8: Succession of solid revenue growth and exceptional adjusted operating margin expansion
Succession of solid revenue growth and exceptional adjusted operating margin expansion Reported Revenue Adjusted Operating 6% CAGR Profit Margin $8,000 +1,050 Basis Points $7,000 $6,699 60% $6,063$6,258 50.2% $6,000 $5,313$5,661 50% 46.5% 48.8% 42.4% $5,000 39.7% 40% $4,000 30% $3,000 20% $2,000 $1,
Slide 9: Adjusted diluted EPS growth continued in 2019
Adjusted diluted EPS growth continued in 2019 Adjusted Diluted Earnings Per Share 19% CAGR $10.00 $9.53 $8.50 $8.00 $6.89 $6.00 $5.35 $4.69 $4.00 $2.00 $0.00 2015 2016 2017 2018 2019 9
Slide 10: 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 10
Slide 11: Numerous new product launches in 2019
Numerous new product launches in 2019 • Ratings in Chinese domestic bond market - 6 ratings • Ratings ESG Evaluations - 6 evaluations • S&P 500 ESG Index - $450 million in ETF AUM • Micro E-mini futures - 44 million contracts traded at CME • Low Sulfur Marine Fuel prices - 667,000 contracts traded a
Slide 12: 2019 investments in ESG, benchmarks, data and analytics
2019 investments in ESG, benchmarks, data and analytics Acquired Streamlined unique pricing, Bolstered ESG operations with data and capability several analytics divestitures capabilities SPIAS * * Subject to regulatory approval 12
Slide 13: Operational excellence enhanced by successful implementation of automation projects in 2019
Operational excellence enhanced by successful implementation of automation projects in 2019 Key projects include: • Scribe - 7,500 conference call transcripts created • Robotic Process Automation - 247,000 human hours saved • Ownership Data Extraction - 2,700 documents automated • Company Descriptio
Slide 14: 2019 global issuance increased 6%
2019 global issuance increased 6% Global Issuance: 2019 versus 2018 5,000 +12% 2018 4,000 2019 $ (Billions) 3,000 2,000 (9%) 1,000 (23%) +51% +21% 0 IG HY U.S. Public Structured LL* * Leveraged loan new issuance only, repricing and extensions are excluded 14
Slide 15: Global 2019 total high-yield issuance and leveraged loan volume near 10-year average
Global* 2019 total high-yield issuance and leveraged loan volume near 10-year average $1,200 $1,100 $1,000 10-year $900 average $800 $700 $600 $500 $400 $300 $200 $100 $0 1Q 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 High-Yield Issuance Leveraged loan Volume ($ in billions) * Data only availa
Slide 16: Percentage of leveraged loan volume rated by S&P Global Ratings sets new high in Europe
Percentage of leveraged loan volume rated by S&P Global Ratings sets new high in Europe United States Europe $700B 89% 100% $160B 92% 100% $600B $140B $48080% $120B 80% $500B $100B $91 $400B 60% 60% $80B $300B 40% 40% $60B $200B $40B 20% 20% $100B $20B $0B 0% $0B 0% 20 20 20 20 20 20 20 20 20 20 20
Slide 17: Index business continues to be bolstered by industry trend from active to passive investing
Index business continues to be bolstered by industry trend from active to passive investing Source: ICI 2009 through 2018 17
Slide 18: ETF AUM associated with our indices increased with market gains and inflows
ETF AUM associated with our indices increased with market gains and inflows 17% CAGR Since Year-End 2013 18
Slide 19: 2020 Outlook
2020 Outlook S&P Global
Slide 20: Our economists expect 2020 global GDP growth of 3.3%
Our economists expect 2020 global GDP growth of 3.3%, slightly higher than 2019 ▪ U.S. – Consumer spending will enable continued growth ▪ Eurozone – Indicators suggest that the economy is bottoming out ▪ China – Technology and trade tensions hamper growth S&P Real GDP Forecast 8% Forecast as of Dece
Slide 21: Latest global refinancing study shows continued increase in global corporate debt maturities
Latest global refinancing study shows continued increase in global corporate debt maturities 2019 study totaled $10.6 trillion 2020 study totaled $10.8 trillion Global Corporate Global Corporate High- Debt Maturities Yield Debt Maturities $3.0 $800 $2.5 $600 $2.0 $1.5 $400 $1.0 $200 $0.5 $0.0 $0 201
Slide 22: Global issuance forecast to increase 4% in 2020
Global issuance forecast to increase 4% in 2020 and 5% excluding International Public Finance $8,000 Forecast $7,000 $6,000 Nonfinancial $5,000 Financial Services $4,000 Structured Finance* $3,000 U.S. Public Finance International Public $2,000 Finance $1,000 $0 2014 2015 2016 2017 2018 2019 2020 ($
Slide 23: 2020 key strategic initiatives
2020 key strategic initiatives • Bring additional transparency and independent analytics to Chinese capital markets with Ratings and Market Intelligence programs • Expand Platts and Ratings capabilities in Asia Global • Continue MI platform development & client migration • Enable Ratings content dis
Slide 24: 2020 key strategic initiatives
2020 key strategic initiatives • Complete cloud-first strategy • Implement numerous Kensho projects including the launch Technology OmniSearch on the Market Intelligence Desktop • Utilize technolgy to improve our customers' experience • Expand data ingestion, linking and processing success Operation
Slide 25: Ewout Steenbergen
Ewout Steenbergen Executive Vice President, Chief Financial Officer 25
Slide 26: Revenue growth and buybacks result in 14% adjusted diluted EPS growth
Revenue growth and buybacks result in 14% adjusted diluted EPS growth 4Q 2019 4Q 2018 Change Revenue $1,735 $1,536 +13% Organic revenue $1,733 $1,528 +13% Adjusted Corporate Unallocated (A) ($45) ($35) (27%) Adjusted total expense $869 $775 +12% Adjusted operating profit $866 $761 +14% Adjusted oper
Slide 27: 4Q 2019: Non-GAAP adjustments to pre-tax income
4Q 2019: Non-GAAP adjustments to pre-tax income Pre-tax expense excluded to arrive at adjusted results 4Q 2019 Premium over face value for bonds retired early ($57) Restructuring in Market Intelligence and Corporate ($11) Acquisition-related costs ($4) Kensho retention-related expenses ($4) Deal-rel
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: Revenue gains, productivity efforts and growth investments impact margins
Revenue gains, productivity efforts and growth investments impact margins 4Q 2019 vs. 4Q 2018 Market S&P Dow Ratings Intelligence Platts Jones Indices Reported revenue +24% +5% +1% +9% Organic revenue +24% +6% +2% +9% Adjusted operating +29% (6)% +6% +10% profit 4Q 2019 adjusted 57.7% 34.4% 50.4% 67
Slide 30: 2019 headcount up primarily due to insourcing technology centers in India
2019 headcount up primarily due to insourcing technology centers in India Market S&P Dow Ratings* Intelligence Platts Jones Corporate Total Indices 2017 7,205 10,331 1,265 530 1,093 20,424 2018 7,099 11,033 1,323 498 1,206 21,159 2019 7,464 11,383 1,532 626 1,534 22,539 Headcount changes in 2019 wer
Slide 31: Invested $100 million in 2019 to help fuel additional future growth
Invested $100 million in 2019 to help fuel additional future growth, ramping to ~$150 million in 2020 2019 Investments $150 2020 Investments Global Global 40 ▪ Domestic ratings in China • Domestic ratings in China ▪ Market Intelligence China initiative $102 • Market Intelligence China initiative ▪ P
Slide 32: Well on track to meet ~$100 million, 3-year cost reduction program
Well on track to meet ~$100 million, 3-year cost reduction program Target annual run-rate savings 2018 to 2020 Run-rate savings achieved in two years Productivity improvements across support functions $45-55m $63m across support and real estate functions and real estate $85m Productivity improvement
Slide 33: Solid cash position and leverage consistent with target
Solid cash position and leverage consistent with target 4Q 2019 4Q 2018 Cash and cash equivalents (A) $2,886 $1,958 Short- and long-term debt $3,948 $3,662 Adjusted gross debt to adjusted 2.0x (B) 1.9x EBITDA Gross debt to EBITDA 1.1x (C) 1.2x ($ in millions) (A) Cash and cash equivalents includes r
Slide 34: Free cash flow, excluding certain items, increased 29%
Free cash flow, excluding certain items, increased 29% 2019 2018 Cash provided by operating activities $2,776 $2,064 Capital expenditures (115) (113) Distributions to noncontrolling interest holders, net (143) (154) Free cash flow $2,518 $1,797 Settlement of prior-year tax audits 51 73 Tax on gain f
Slide 35: Ratings: Strong issuance and favorable comparison led to 24% revenue increase
Ratings: Strong issuance and favorable comparison led to 24% revenue increase 4Q 2019 4Q 2018 Change Revenue $820 $661 +24% Adjusted segment operating profit $473 $367 +29% Adjusted segment operating profit 57.7% 55.5% +220 bps margin Trailing four-quarters adjusted 57.2% 56.0% +120 bps segment oper
Slide 36: Ratings: Transaction revenue buoyed by strong bond ratings
Ratings: Transaction revenue buoyed by strong bond ratings from increased issuance 4Q 2019 4Q 2018 Change Non-transaction $391 $384 2% Transaction $429 $277 55% ($ in millions) 4Q 2019 HIGHLIGHTS: • Non-transaction revenue increased primarily due to fees associated with surveillance and intersegment
Slide 37: Ratings: Strong bond issuance boosted 4Q19 revenue
Ratings: Strong bond issuance boosted 4Q19 revenue Revenue Structured Revenue $820 $99 $800 $83 (1%) $3 $700 $661 $70 +43% $80 $18 $4 Corporates $600 $84 $99 +24% $12 $17 $49 Financial $122 $9 Services $500 $80 +30% $33 Structured $400 $95 $27 Governments $300 +26% CRISIL, $200 $445 $28 $29 Other* $
Slide 38: S&P Dow Jones Indices: Strong growth in revenue and adjusted operating profit
S&P Dow Jones Indices: Strong growth in revenue and adjusted operating profit 4Q 2019 4Q 2018 Change Revenue $233 $215 +9% Adjusted segment operating profit $158 $144 +10% SPGI share of Adj. Seg. Op. Profit* $116 $106 +9% Adjusted segment operating profit 67.8% 67.1% +70 bps margin Trailing four-qua
Slide 39: S&P Dow Jones Indices: Asset-linked fees led revenue growth
S&P Dow Jones Indices: Asset-linked fees led revenue growth Revenue $250 $233 $215 $43 +4% $200 $41 $31 (35%) Asset-Linked Fees $150 $48 Exchange-Traded Derivatives $100 $159 +27% Data & Custom $126 Subscriptions $50 $0 ($ in millions) 4Q 2018 4Q 2019 39
Slide 40: S&P Dow Jones Indices: Decreased volatility reduced exchange-traded derivative volume
S&P Dow Jones Indices: Decreased volatility reduced exchange-traded derivative volume Key Contracts Key Contracts (Average Daily Volume in Thousands) (Average Daily Volume in Thousands) 1,500 4,000 3,000 1,000 2,000 500 1,000 0 0 4Q 2018 4Q 2019 4Q 2018 4Q 2019 S&P 500 Index Options CME Equity Compl
Slide 41: Market Intelligence: Investment activity increased in 4Q19
Market Intelligence: Investment activity increased in 4Q19 4Q 2019 4Q 2018 Change Revenue $502 $478 +5% Adjusted segment operating profit $172 $184 (6)% Adjusted segment operating profit 34.4% 38.5% (410 bps) margin Trailing four-quarters adjusted 34.2% 34.1% +10 bps segment operating profit margin
Slide 42: Market Intelligence: Investment spending weighed on 2019 margin expansion
Market Intelligence: Investment spending weighed on 2019 margin expansion Adjusted Operating Profit Margin 40% 30% 20% 38.5% 35.9% 33.8% 34.3% 34.3% 34.4% 32.5% 29.2% 10% 0% 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 42
Slide 43: Market Intelligence: Data Management Solutions & Credit Risk Solutions led growth
Market Intelligence: Data Management Solutions & Credit Risk Solutions led growth Revenue $502 $500 $478 $3 $5 $450 $149 +10% $400 $135 Desktop $350 Data Management $300 $90 $99 11% Solutions $250 Credit Risk $200 Solutions $150 $248 $251 +1% Acquisitions/ $100 divestitures $50 $0 ($ in millions) 4Q
Slide 44: Platts: Revenue growth impacted by divestiture and sanctions
Platts: Revenue growth impacted by divestiture and sanctions 4Q 2019 4Q 2018 Change Revenue $213 $210 +1% Adjusted segment operating profit $107 $101 +6% Adjusted segment operating profit 50.4% 48.2% +220 bps margin Trailing four-quarters adjusted 50.2% 49.1% +110 bps segment operating profit margin
Slide 45: Platts: Metals & Agriculture and Power & Gas led growth
Platts: Metals & Agriculture and Power & Gas led growth Revenue $213 $210 $3 $16 +7% $200 $15 $11 $11 0% $38 $40 +5% Petroleum $150 Power & Gas Petrochemicals $100 +2% Metals & Ag $144 $146 $50 Acquisitions & Divestitures $0 4Q 2018 4Q 2019 ($ in millions) Acquisitions include Live Rice Index and En
Slide 46: Changing IT allocation methodology in 2020
Changing IT allocation methodology in 2020 • To more accurately reflect usage, a new method for allocating IT costs to the businesses was implemented at the beginning of 2020 • A recast version of our 2018-2019 quarterly results will be released in March • The expected impact on the businesses in 20
Slide 47: Investor Day aspirational targets – meaningful progress achieved
Investor Day aspirational targets – meaningful progress achieved in second year of program Medium-term Outlook 2019 Performance Organic revenue growth Mid to high single-digit 4 of 4 businesses Adjusted EPS growth Low double-digit 12% FCF* return to shareholders ≥ 75% 70% Adjusted operating profit m
Slide 48: Kensho capabilities embedded throughout the Company
Kensho capabilities embedded throughout the Company with a robust pipeline of projects Automation Reduced Time Enhanced to Market Capabilities ▪ Omnisearch – Access data on MI platform via search and topical machine-learning ▪ Entity linking – Reduces cost and time to acquire, maintain and bring new
Slide 49: 2020 GAAP guidance
2020 GAAP guidance GAAP Revenue Mid to high single-digit increase Corporate Unallocated expense $190 - $200 million * Deal-related amortization N.A. Operating profit margin 48.5% - 49.5% Interest expense, net $135 - $140 million Tax rate 22.0% - 23.5% Diluted EPS $10.00 - $10.20 Capital expenditures
Slide 50: 2020 adjusted guidance
2020 adjusted guidance Adjusted Revenue Mid to high single-digit increase Corporate Unallocated expense $150 - $160 million Deal-related amortization $115- $120 million Kensho retention plans $10 - $15 million Operating profit margin 50.3% - 51.3% Interest expense, net $135 - $140 million Tax rate 2
Slide 51: 4Q and Full-Year 2019 Earnings Conference Call Q&A
4Q and Full-Year 2019 Earnings Conference Call Q&A Doug Peterson President and CEO Ewout Steenbergen Executive Vice President and CFO Chip Merritt Senior Vice President, Investor Relations February 6, 2020
Slide 52: 4Q and Full-Year 2019 Earnings Conference Call replay options
4Q and Full-Year 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 March 4, 2020 Chip Merritt Domestic: 800-925