S&p Global Inc. · NYSE:SPGI
S&p Global — Q3 2018 Earnings Presentation
43 slides from S&p Global's earnings presentation, Oct 25, 2018
Slide 1: 3Q 2018 Earnings Conference Call
3Q 2018 Earnings Conference Call Doug Peterson President and CEO Ewout Steenbergen Executive Vice President and CFO Chip Merritt Senior Vice President, Investor Relations October 25, 2018
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 benefit of our diverse portfolio of exceptional businesses was evident this quarter as we were able to overcome a decline in global bond issuance and deliver revenue growth, margin improvement, and EPS gains.” - Doug Peterson
Slide 6: Great 3Q financial results – highlights include
Great 3Q financial results – highlights include • Generated strong margin improvement in every business • Achieved 10% revenue growth at Market Intelligence and SPDJI • Delivered 23% adjusted diluted EPS growth • Reported $1.404 billion in free cash flow YTD, excluding certain items – a 24% increase
Slide 7: Adjusted operating profit margin improvement and U.S. tax reform generated EPS gains
Adjusted operating profit margin improvement and U.S. tax reform generated EPS gains 3Q 2018 3Q 2017 Change Revenue $1,546 $1,513 +2% Organic revenue $1,534 $1,513 +1% Adjusted operating profit $767 $692 +11% Adjusted operating profit margin 49.6% 45.8% +380 bps Average diluted shares outstanding 25
Slide 8: Global issuance decreased 7% vs 3Q17 as corporate weakness exceeded structured strength
Global issuance* decreased 7% vs 3Q17 as corporate weakness exceeded structured strength United States* Europe* Asia* 622 502 579 576 479 459 538 441 455 485 404 405 365 308 329 3Q17 4Q17 1Q18 2Q18 3Q18 3Q17 4Q17 1Q18 2Q18 3Q18 3Q17 4Q17 1Q18 2Q18 3Q18 16% decrease YOY in 3Q 18% increase YOY in 3Q 9
Slide 9: 3Q18 global issuance healthy despite decline versus 3Q17
3Q18 global issuance healthy despite decline versus 3Q17 Total Global Issuance 2,000 1,500 3Q18 ($ in millions) 1,000 500 0 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 Period Ending * Excludes sovereign issuance Sources: Thomson Financial and Harrison Scott Publications 9
Slide 10: U.S. investment-grade: Majority of issuance is routine, not opportunistic
U.S. investment-grade: Majority of issuance is routine, not opportunistic General Corporate Purposes/Other Refinancing M&A/LBO Buyback/Dividend $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 2012 2013 2014 2015 2016 2017 Sept YTD ($, billions) 10
Slide 11: U.S. high-yield: Majority of bond issuance is routine, not opportunistic
U.S. high-yield: Majority of bond issuance is routine, not opportunistic General Corporate Purposes/Other Refinancing M&A/LBO Buyback/Dividend $400 $300 $200 $100 $0 2012 2013 2014 2015 2016 2017 Sept YTD ($ in billions) 11
Slide 12: Initial 2019 global issuance forecast, excluding International Public finance, increase <1%
Initial 2019 global issuance forecast, excluding International Public finance, increase <1% $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 13: U.S. LBO financing shifts from bonds to loans
U.S. LBO financing shifts from bonds to loans U.S. high-yield bond issuance backing LBOs $20 $15 $10 $5 $0 2010 2011 2012 2013 2014 2015 2016 2017 Sept YTD ($ in billions) U.S. loan originations backing LBOs $100 $80 $60 $40 $20 $0 2010 2011 2012 2013 2014 2015 2016 2017 Sept YTD ($ in billions) 13
Slide 14: Bank loan ratings revenue moderates with $73 million in 3Q 2018
Bank loan ratings revenue moderates with $73 million in 3Q 2018 $400 $350 $300 $250 3Q $200 $150 2Q $100 $50 1Q 1Q $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 (revenue, $ in millions) 14
Slide 15: Loans underlying major U.S. structured finance sectors support structured issuance growth
Loans underlying major U.S. structured finance sectors support structured issuance growth Outstanding Loans Underlying Major U.S. Structured Finance Sectors* $21,000 28% Outstanding Loans (Billions) 26% $20,000 Percent Securitized 24% $19,000 22% 20% $18,000 18% $17,000 16% 14% $16,000 12% $15,000 1
Slide 16: Creating new products and investing in unique content and technologies
Creating new products and investing in unique content and technologies Platts launched World's largest Acquired Additional assessments of pension fund remaining stake investments in two U.S. crudes selects SPDJI in Trucost from new delivered in indices as ESG CME technologies Europe benchmark 16
Slide 17: ETF AUM associated with our indices surpasses $1.5 trillion
ETF AUM associated with our indices surpasses $1.5 trillion >20% CAGR Since Year-End 2012 17
Slide 18: Ewout Steenbergen
Ewout Steenbergen Executive Vice President, Chief Financial Officer 18
Slide 19: Margin improvement and lower tax rate generate 23% adjusted diluted EPS growth
Margin improvement and lower tax rate generate 23% adjusted diluted EPS growth 3Q 2018 3Q 2017 Change Revenue $1,546 $1,513 +2% Organic revenue $1,534 $1,513 +1% Adjusted Corporate Unallocated (A) ($35) ($48) +25% Adjusted total expense $779 $821 (5%) Adjusted operating profit $767 $692 +11% Adjuste
Slide 20: Stock-based compensation tax benefit lags 3Q17 as fewer stock options were exercised
Stock-based compensation tax benefit lags 3Q17 as fewer stock options were exercised EPS Impact 1Q 2Q 3Q 4Q 2017 $0.04 $0.02 $0.14 $0.08 2018 $0.04 $0.01 $0.01 FASB Accounting Standard requirement to record the tax effect related to share- based payments at settlement (or expiration) through the inc
Slide 21: Changes in foreign exchange rates improve 3Q 2018 adjusted EPS
Changes in foreign exchange rates improve 3Q 2018 adjusted EPS S&P Dow Favorable Market Ratings Platts Jones (Unfavorable) Intelligence Indices Revenue ($3) – – – Adj. operating profit $10 $7 $1 – Adj. EPS $0.03 $0.02 – – ($ in millions) Key factors mitigating impact of currency changes • Approximat
Slide 22: 3Q 2018: Non-GAAP adjustments to operating profit
3Q 2018: Non-GAAP adjustments to operating profit Pre-tax expense excluded to arrive at adjusted results 3Q 2018 Lease impairments ($11) Restructuring in Corporate and Market Intelligence ($9) Kensho retention-related expenses ($11) Deal-related amortization ($33) Total ($63) Details may not sum to
Slide 23: Productivity efforts drive substantial adjusted operating profit margin improvement
Productivity efforts drive substantial adjusted operating profit margin improvement 3Q 2018 vs. 3Q 2017 Market S&P Dow Ratings Intelligence Platts Jones Indices Reported revenue (5)% +10% +5% +10% Organic revenue (5)% +9% +5% +10% Adjusted operating +1% +20% +15% +13% profit 3Q 2018 adjusted 56.5% 3
Slide 24: Ratings: Margin gains continue despite issuance decline
Ratings: Margin gains continue despite issuance decline 3Q 2018 3Q 2017 Change Revenue $700 $739 (5)% Adjusted segment operating profit $396 $391 +1% Adjusted segment operating profit 56.5% 52.8% +370 bps margin Trailing four-quarters adjusted 55.9% 51.6% +430 bps segment operating profit margin ($
Slide 25: Ratings: Transaction revenue decline reflects soft issuance and difficult comparison
Ratings: Transaction revenue decline reflects soft issuance and difficult comparison 3Q 2018 3Q 2017 Change Non-transaction $372 $367 1% Transaction $328 $372 (12)% ($ in millions) 3Q 2018 HIGHLIGHTS: • Non-transaction revenue increased due to growth in fees associated with surveillance and frequent
Slide 26: Ratings: Non-transaction revenue has been a steady source of growth
Ratings: Non-transaction revenue has been a steady source of growth Ratings' Non-Transaction Revenue 400 3Q18 300 ($ in Millions) 200 100 0 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 26
Slide 27: Ratings: Decline in most markets partially offset by growth in Financial Services
Ratings: Decline in most markets partially offset by growth in Financial Services Revenue $800 $739 $700 $700 $87 0% $87 $600 $55 (13%) $48 $81 (1%) Corporates $80 $500 $104 +21% Financial Services $400 $126 Structured $300 (13%) Governments $200 $412 $360 CRISIL, Other* $100 $0 3Q 2017 3Q 2018 ($ i
Slide 28: Market Intelligence: Delivered double-digit revenue growth
Market Intelligence: Delivered double-digit revenue growth 3Q 2018 3Q 2017 Change Revenue $464 $422 +10% Adjusted segment operating profit $168 $140 +20% Adjusted segment operating profit 36.3% 33.3% +300 bps margin Trailing four-quarters adjusted 33.0% 31.7% +130 bps segment operating profit margin
Slide 29: Market Intelligence: Risk Services and Data Management Solutions led growth
Market Intelligence: Risk Services and Data Management Solutions led growth Revenue $500 $464 $450 $422 $5 $400 +13% $135 $350 $119 Desktop $300 +11% $86 Data Management $250 $77 Solutions $200 Risk Services $150 +6% $226 $239 Acquisitions $100 $50 $0 ($ in millions) 3Q 2017 3Q 2018 Details may not
Slide 30: Market Intelligence: Business highlights
Market Intelligence: Business highlights • Integrating Trucost into Market Intelligence and expanding ESG coverage • Added Panjiva content to the Xpressfeed platform • We continue to develop the Market Intelligence platform: – Released latest version with significant content, feature, and performanc
Slide 31: S&P Dow Jones Indices: Double-digit revenue and adjusted operating profit growth
S&P Dow Jones Indices: Double-digit revenue and adjusted operating profit growth 3Q 2018 3Q 2017 Change Revenue $205 $187 +10% Adjusted segment operating profit $136 $120 +13% SPGI share of Adj. Seg. Op. Profit* $100 $87 +15% Adjusted segment operating profit 66.2% 64.3% +190 bps margin Trailing fou
Slide 32: SPDJI: Strong revenue growth driven by Asset-Linked Fees and Data & Custom Subscriptions
SPDJI: Strong revenue growth driven by Asset- Linked Fees and Data & Custom Subscriptions $250 Revenue $205 $200 $187 +12% $41 $36 Asset-Linked Fees $150 +2% $33 $33 Exchange-Traded Derivatives $100 +11% Data & Custom $118 $131 Subscriptions $50 $0 ($ in millions) 3Q 2017 3Q 2018 32
Slide 33: S&P Dow Jones Indices: ETF AUM associated with our indices surpasses $1.5 trillion
S&P Dow Jones Indices: ETF AUM associated with our indices surpasses $1.5 trillion Asset-Linked Fees: • 3Q average ETF AUM associated with our indices increased 23% YOY • Industry net inflows into exchange-traded funds were $113 billion in 3Q Quarter Ending ETF AUM $1,505 • Quarter ending ETF AUM as
Slide 34: S&P Dow Jones Indices: Exchange-traded derivatives volume mixed
S&P Dow Jones Indices: Exchange-traded derivatives volume mixed 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 3Q 2017 3Q 2018 3Q 2017 3Q 2018 S&P 500 Index Options CME Equity Complex VIX Futures & O
Slide 35: Platts: Delivered steady revenue and margin growth
Platts: Delivered steady revenue and margin growth 3Q 2018 3Q 2017 Change Revenue $204 $193 +5% Adjusted segment operating profit $102 $89 +15% Adjusted segment operating profit 50.3% 45.9% +440 bps margin Trailing four-quarters adjusted 48.0% 47.3% +70 bps segment operating profit margin ($ in mill
Slide 36: Platts: Global Trading Services revenue reaches highest level since 3Q17
Platts: Global Trading Services revenue reaches highest level since 3Q17 Global Trading Services Revenue $20 $15 $10 $5 $0 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 ($ in millions) 36
Slide 37: Platts: Superior growth outside of Petroleum market further diversifies revenue base
Platts: Superior growth outside of Petroleum market further diversifies revenue base Revenue $204 $193 $200 +8% $15 $14 $11 $180 $10 +8% $160 +8% $36 $34 $140 Petroleum $120 $100 Power & Gas $80 +4% Petrochemicals $136 $142 $60 Metals & Ag $40 $20 $0 3Q 2017 3Q 2018 ($ in millions) Details may not s
Slide 38: Capital position remains solid: Cash balance building after funding $1 billion ASR
Capital position remains solid: Cash balance building after funding $1 billion ASR 3Q 2018 4Q 2017 Cash and cash equivalents (A) $2,203 $2,779 Short- and long-term debt $3,661 $3,569 Adjusted gross leverage (B) $6,123 $5,893 Adjusted gross leverage to adjusted 1.9x 1.9x EBITDA ($ in millions) • 1Q 2
Slide 39: Free cash flow, excluding certain items, up 24% YTD
Free cash flow, excluding certain items, up 24% YTD 3Q 2018 YTD 3Q 2017 YTD Cash provided by operating activities $1,401 $1,203 Capital expenditures (88) (77) Distributions to noncontrolling interest holders (116) (69) Free cash flow $1,197 $1,057 Tax on gain from sale of SPSE and CMA — 67 After-tax
Slide 40: 2018 GAAP guidance
2018 GAAP guidance Previous GAAP New GAAP Revenue Mid single-digit Mid single-digit increase increase Corporate unallocated(A)(B) ($190 - $205 million) ($210 - $225 million) Deal-related amortization N.A. N.A. Operating profit margin 44% - 45% 44% - 45% Interest expense $135 - $140 million $135 - $1
Slide 41: 2018 adjusted guidance
2018 adjusted guidance Previous Adjusted New Adjusted Revenue Mid single-digit Mid single-digit increase increase Corporate Unallocated(A)(B) ($160 - $170 million) ($155 - $165 million) Deal-related amortization $125 - $130 million $125 - $130 million Kensho retention plans & integration $30 - $35 m
Slide 42: 3Q 2018 Earnings Conference Call
3Q 2018 Earnings Conference Call Doug Peterson President and CEO Ewout Steenbergen Executive Vice President and CFO Chip Merritt Vice President, Investor Relations October 25, 2018
Slide 43: 3Q 2018 Earnings Conference Call – Replay Options
3Q 2018 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 November 25, 2018 Chip Merritt Domestic: 888-566-0569 Seni