S&P Global Inc. · NYSE:SPGI
S&P Global — Q2 2019 Earnings Presentation
43 slides from S&P Global's earnings presentation, Aug 1, 2019
Slide 1: 2Q 2019 Earnings Conference Call
2Q 2019 Earnings Conference Call Doug Peterson President and CEO Ewout Steenbergen Executive Vice President and CFO Chip Merritt Senior Vice President, Investor Relations August 1, 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 S&P Global Ratins Europe Limited which is registered and regulated as a CRA with t
Slide 5: Doug Peterson
Doug Peterson President and Chief Executive Officer
Slide 6: Delivered strong 2Q results and exciting new product launches
Delivered strong 2Q results and exciting new product launches • All four divisions delivered revenue growth, and adjusted operating profit margin expansion • Revenue growth and productivity initiatives progress result in significant margin improvement • Delivered 12% adjusted diluted EPS growth • Ra
Slide 7: Revenue surpasses $1.7 billion and adjusted diluted EPS increased 12%
Revenue surpasses $1.7 billion and adjusted diluted EPS increased 12% 2Q 2019 2Q 2018 Change Revenue $1,704 $1,609 +6% Adjusted operating profit $874 $790 +11% Adjusted operating profit margin 51.3% 49.1% +220 bps Trailing four-quarters adjusted 49.5% 47.2% +230 bps segment operating profit margin A
Slide 8: Global bond issuance decreased 3%, including bank loans issuance declined 13%
Global bond issuance* decreased 3% – including bank loan volumes, issuance declined 13% United States* Europe* Asia* 580 476 483 558 460 445 439 446 496 522 411 406 371 406 301 2Q18 3Q18 4Q18 1Q19 2Q19 2Q18 3Q18 4Q18 1Q19 2Q19 2Q18 3Q18 4Q18 1Q19 2Q19 4% decrease YOY in 2Q 12% decrease YOY in 2Q 10%
Slide 9: 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 10: Global bond issuance forecast to increase 1.4% excluding International Public Finance
Global bond issuance forecast to increase 1.4% excluding International 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) * Excl
Slide 11: Investor demand for leveraged loans fades with dovish Federal Reserve tone
Investor demand for leveraged loans fades with dovish Federal Reserve tone Bank Loan Ratings Revenue $400 $350 4Q $300 $250 3Q $200 $150 2Q $100 2Q $50 1Q 1Q 1Q $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (revenue, $ in millions) 11
Slide 12: 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 12
Slide 13: Ratings publishes inaugural credit ratings in domestic Chinese bond market
Ratings publishes inaugural credit ratings in domestic Chinese bond market Global 13
Slide 14: Ratings issues its first ESG Evaluations
Ratings issues its first ESG Evaluations Innovation 14
Slide 15: S&P Dow Jones Indices Annual Survey of Assets
S&P Dow Jones Indices Annual Survey of Assets Customer Orientation $12.5 trillion in assets globally track indices managed by S&P Dow Jones Indices - $7.7 trillion benchmarked - $4.8 trillion indexed via investment products (unchanged vs. 12/31/17) Index Investment Product Highlights S&P 500 Additio
Slide 16: S&P Dow Jones Indices continues to advance ESG opportunity
S&P Dow Jones Indices continues to advance ESG opportunity Customer Orientation • In May, 22 new indices were added to the ESG index family with ESG versions of well-known country and regional benchmarks including: ▪ S&P Global 1200 ESG ▪ S&P/ASX 200 ESG ▪ S&P Japan 500 ESG • In June, DWS launched X
Slide 17: Micro E-mini futures launched on CME to make trading more accessible
Micro E-mini futures launched on CME to make trading more accessible Customer Orientation • The new Micro E-mini futures are based on four prominent indices including the S&P 500® and the Dow Jones Industrial Average® • Recently dubbed the most successful launch in CME Group's history, with 2.6 mill
Slide 18: Creating new products and nurturing existing benchmarks
Creating new products and nurturing Innovation existing benchmarks Global New Enhanced S&P Dow Adding 0.5% Platts launched Adding Japan Jones Indices Sulfur Marine prices for U.S. Korea Marker in launched eight Fuel derivatives crude delivered LNG to Platts new sector to Platts into Europe eWindow i
Slide 19: Ewout Steenbergen
Ewout Steenbergen Executive Vice President, Chief Financial Officer 19
Slide 20: Revenue growth and productivity improvements yield 12% adjusted diluted EPS growth
Revenue growth and productivity improvements yield 12% adjusted diluted EPS growth 2Q 2019 2Q 2018 Change Revenue $1,704 $1,609 +6% Organic revenue $1,702 $1,609 +6% Adjusted Corporate Unallocated* ($35) ($39) +10% Adjusted total expense $830 $819 +1% Adjusted operating profit $874 $790 +11% Adjuste
Slide 21: Stock option exercise activity had modest positive impact on 2Q 2019 effective tax rate
Stock option exercise activity had modest positive impact on 2Q 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 $0.02 FASB Accounting Standard requirement to record the tax effect related to share- based payments at settlement (or e
Slide 22: Movements in foreign exchange rates had a negligible impact on adjusted EPS
Movements in foreign exchange rates had a negligible impact on adjusted EPS Favorable Market Ratings Platts Indices (Unfavorable) Intelligence Revenue ($10) ($1) – – Adjusted operating profit ($11) $9 $4 $1 Adjusted EPS ($0.03) $0.03 $0.01 – ($ in millions, except per share data) Key factors mitigat
Slide 23: 2Q 2019: Non-GAAP adjustments
2Q 2019: Non-GAAP adjustments Pre-tax expense excluded to arrive at adjusted results 2Q 2019 Restructuring primarily in Ratings and Corporate ($20) Lease impairment ($5) Kensho retention-related expenses ($5) Deal-related amortization ($31) Total ($61) ($ in millions) 23
Slide 24: 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 24
Slide 25: All four businesses delivered revenue growth and margin improvement
All four businesses delivered revenue growth and margin improvement 2Q 2019 vs. 2Q 2018 Ratings Market Platts Indices Intelligence Reported revenue +3% +8% +4% +14% Organic revenue +3% +8% +4% +14% Adjusted operating profit +5% +14% +9% +19% 2Q 2019 adjusted 58.3% 34.3% 52.1% 69.6% operating profit
Slide 26: Capital position remains solid
Capital position remains solid 2Q 2019 4Q 2018 Cash and cash equivalents (A) $1,920 $1,958 Short- and long-term debt $3,664 $3,662 Adjusted gross debt to adjusted EBITDA (B) 1.9x 1.9x Gross debt to EBITDA (C) 1.1x 1.2x ($ in millions) (A) Cash and cash equivalents includes restricted cash (B) Adjust
Slide 27: YTD free cash flow, excluding certain items, up $98 million YTD
YTD free cash flow, excluding certain items, up $98 million YTD 2Q 2019 YTD 2Q 2018 YTD Cash provided by operating activities $1,010 $903 Capital expenditures (46) (60) Net distributions to noncontrolling interest holders (59) (78) Free cash flow $905 $765 Settlement of prior-year tax audits 50 71 A
Slide 28: Ratings: Strong U.S. high-yield bond issuance was the highlight of the quarter
Ratings: Strong U.S. high-yield bond issuance was the highlight of the quarter 2Q 2019 2Q 2018 Change Revenue $801 $775 +3% Adjusted segment operating profit $467 $443 +5% Adjusted segment operating profit 58.3% 57.1% +120 bps margin Trailing four-quarters adjusted 55.7% 55.0% +70 bps segment operat
Slide 29: Ratings: Transaction revenue fuels 2Q growth
Ratings: Transaction revenue fuels 2Q growth 2Q 2019 2Q 2018 Change Non-transaction $372 $378 (1%) Transaction $429 $397 8% ($ in millions) 2Q 2019 HIGHLIGHTS: • Non-transaction revenue decreased $6 million due to a change in foreign exchange rates • Transaction revenue increased as debt rating acti
Slide 30: 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 2Q19 $300 $200 $100 $0 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 1Q19 ($ in millions) Line in chart illustrates the linear trend between 1Q 2013 and 2Q 2019 30
Slide 31: Ratings: Corporates led 2Q revenue growth
Ratings: Corporates led 2Q revenue growth Revenue $801 $800 $775 $84 (7%) $90 $700 $59 +4% $57 $600 $82 (6%) Corporates $87 $500 $117 +3% $114 Financial Services $400 Structured $300 +7% Governments $427 $458 $200 CRISIL, Other* $100 $0 2Q 2018 2Q 2019 ($ in millions) *Other includes intersegment ro
Slide 32: Market Intelligence: Strong subscription growth and exceptional margin expansion
Market Intelligence: Strong subscription growth and exceptional margin expansion 2Q 2019 2Q 2018 Change Revenue $487 $449 +8% Adjusted segment operating profit $167 $146 +14% Adjusted segment operating profit 34.3% 32.5% +180 bps margin Trailing four-quarters adjusted 35.6% 31.8% +380 bps segment op
Slide 33: Market Intelligence: Data Management Solutions and Credit Risk Solutions led growth
Market Intelligence: Data Management Solutions and Credit Risk Solutions led growth Revenue $500 $487 $449 $7 $450 $3 $400 $140 +12% $126 $350 Desktop $300 $96 +15% Data Management $83 $250 Solutions $200 Credit Risk $150 Solutions $237 $244 +3% $100 Acquisitions $50 $0 ($ in millions) 2Q 2018 2Q 20
Slide 34: 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 2Q 2019 2Q 2018 Change Revenue $235 $207 +14% Adjusted segment operating profit $164 $138 +19% SPGI share of Adj. Seg. Op. Profit* $120 $101 +19% Adjusted segment operating profit 69.6% 66.8% +280 bps margin Trailing four-
Slide 35: S&P Dow Jones Indices: Asset-Linked Fees and Data & Custom Subscriptions delivered strong growth
S&P Dow Jones Indices: Asset-Linked Fees and Data & Custom Subscriptions delivered strong growth $300 Revenue $250 $235 $207 $40 +21% $200 Asset-Linked Fees $34 $36 (6%) $150 $38 Exchange-Traded Derivatives $100 Data & Custom $159 +18% Subscriptions $135 $50 $0 ($ in millions) 2Q 2018 2Q 2019 35
Slide 36: 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: Quarter-Ending ETF AUM • Quarter-ending ETF AUM associated with our indices was $1,521 billion, a $69 --- 10% increase from Q2 2018 --- $70 --- • 2Q average ETF AUM associated with our ind
Slide 37: S&P Dow Jones Indices: Exchange-traded derivatives volume increased modestly in 2Q
S&P Dow Jones Indices: Exchange-traded derivatives volume increased modestly in 2Q 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 2Q 2018 2Q 2019 2Q 2018 2Q 2019 S&P 500 Index Options CME Equity Complex
Slide 38: Platts: Significant margin improvement
Platts: Significant margin improvement 2Q 2019 2Q 2018 Change Revenue $213 $205 +4% Adjusted segment operating profit $111 $102 +9% Adjusted segment operating profit 52.1% 49.9% +220 bps margin Trailing four-quarters adjusted 49.5% 46.9% +260 bps segment operating profit margin ($ in millions) 2Q 20
Slide 39: Platts: Power & Gas growth primarily the result of increased adoption of our LNG benchmark
Platts: Power & Gas growth primarily the result of increased adoption of our LNG benchmark Revenue $213 $205 +3% $200 $16 $16 $11 (1%) $11 $37 $39 +7% $150 Petroleum Power & Gas $100 Petrochemicals $147 +4% $141 Metals & Ag $50 $0 2Q 2018 2Q 2019 ($ in millions) Details may not sum to total due to r
Slide 40: 2019 GAAP diluted EPS guidance increased
2019 GAAP diluted EPS guidance increased Previous GAAP New GAAP Revenue Mid single-digit Mid single-digit increase increase Corporate Unallocated expense $205 - $215 million $210 - $220 million Deal-related amortization N.A. N.A. Operating profit margin 46.6% - 47.6% 46.3% - 47.3% Interest expense,
Slide 41: 2019 adjusted diluted EPS guidance increased and range tightened
2019 adjusted diluted EPS guidance increased and range tightened Previous Adjusted New Adjusted Revenue Mid single-digit Mid single-digit increase increase Corporate Unallocated expense $155 - $165 million $145 - $155 million Deal-related amortization $120 - $125 million $120 - $125 million Kensho r
Slide 42: 2Q 2019 Earnings Conference Call
2Q 2019 Earnings Conference Call Doug Peterson President and CEO Ewout Steenbergen Executive Vice President and CFO Chip Merritt Senior Vice President, Investor Relations August 1, 2019
Slide 43: 2Q 2019 Earnings Conference Call
2Q 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 September 1, 2019 Chip Merritt Domestic: 800-945-9371 Seni