S&P Global Reports Third Quarter Results

Reported Revenue Increased 37% vs. Prior Year and Decreased 9% vs. Pro Forma Revenue; Adjusted Revenue Decreased 8% vs. Non-GAAP Pro Forma Adjusted Revenue

Commercial Success in Multiple Business Lines, Offset by a Continued Decline in Revenue Related to Debt Issuance

Diluted EPS Decreased 44% to $1.84 vs. 3Q21 and Decreased 19% vs. Pro Forma Diluted EPS; Adjusted Diluted EPS Decreased 4% to $2.93 vs. Non-GAAP Pro Forma Adjusted Diluted EPS

Reported Operating Profit Margin Decreased 2,210 Basis Points to 29.8% from Prior Year and Decreased 660 Basis Points to 29.8% from Pro Forma Operating Margin

Adjusted Operating Profit Margin Decreased 200 Basis Points to 46.0% compared to Non-GAAP Pro Forma Adjusted Operating Margin

Disciplined Expense Management and Synergies Driving Adjusted Margin Expansion in Most Divisions

Company is Updating GAAP Guidance and Non-GAAP Pro Forma Adjusted Guidance

Company has Deployed $11B Toward Share Repurchases YTD; on Track to Complete $12B ASR by Year-end

Company to Present Strategic Vision and Multi-Year Targets at Investor Day on December 1, 2022 in New York City

NEW YORK, Oct. 27, 2022 /PRNewswire/ -- S&P Global (NYSE:  SPGI) today reported third quarter 2022 results with reported revenue of $2.86 billion, an increase of 37% compared to the same period last year, primarily due to the inclusion of IHS Markit businesses, partially offset by declines in Ratings revenue. Continued execution drove growth across most of the Company's six divisions, while Ratings transaction revenue continues to be negatively impacted by a sharp year-over-year reduction in debt issuance. GAAP net income decreased 24% to $608 million and GAAP diluted earnings per share decreased 44% to $1.84 primarily due to the increase in shares outstanding as a result of the merger with IHS Markit. The Company plans to present strategic vision and multi-year targets at its previously announced Investor Day on December 1, 2022 in New York City. The event will be in-person by invitation, and webcast publicly.

"Our teams continue to serve the markets well and rally together in an uncertain external environment," said Douglas L. Peterson, President and Chief Executive Officer of S&P Global. "We have seen strong commercial success in multiple areas of the business and are on track with our merger integration program. We are actively monitoring the macroeconomic and geopolitical landscape to plan for multiple potential scenarios, while identifying the most promising areas for future growth." 

Adjusted revenue decreased 8% compared to non-GAAP pro forma adjusted revenue from the third quarter of 2021, or 6% on a constant-currency basis. Adjusted net income declined 11% to $968 million compared to non-GAAP pro forma adjusted net income and adjusted diluted earnings per share decreased 4% to $2.93 compared to non-GAAP pro forma adjusted diluted earnings per share primarily due to a 7% decrease in pro forma fully diluted shares outstanding. Currency positively impacted adjusted EPS by $0.03. The largest non-core adjustments to earnings in the third quarter of 2022 were for lease impairments and integration costs.

Important note on the presentation of financial results and guidance:  GAAP financials and guidance are presented to reflect the close of the merger with IHS Markit, and the inclusion of its financial results, as of March 1, 2022. Adjusted financial information, including adjustments to pro forma GAAP financial information and guidance are presented on a pro forma basis as if the merger had closed on January 1, 2021, to facilitate year-over-year comparisons. Non-GAAP pro forma adjusted financials also exclude the contribution of divested businesses from all presented periods.

Profit Margin:  The Company's reported operating profit margin decreased 2,210 basis points to 29.8% due to the inclusion of IHS Markit and costs associated with the merger. Adjusted operating profit margin decreased 200 basis points to 46.0% compared to non-GAAP pro forma adjusted operating profit margin primarily due to a decline in Ratings transaction revenue, as well as increases in technology and compensation expense. Margin impact was partially offset by lower incentive expenses and cost synergies.

Return of Capital:  In 2022, through the third quarter, the Company returned more than $11.7 billion to shareholders through a combination of $11 billion in the form of an accelerated share repurchase (ASR) agreement and $749 million in cash dividends. Year-to-date, the Company has completed 92% of its previously announced $12 billion ASR program, which the Company still expects to be completed by the end of the year. The remaining $1 billion of the ASR is expected to launch in December.

Market Intelligence:  Reported revenue increased 83% to $1.02 billion in the third quarter of 2022 driven primarily by the inclusion of IHS Markit revenue and increased 1% compared to pro forma revenue. Adjusted revenue increased 4% to $1.02 billion compared to non-GAAP pro forma adjusted revenue with growth across categories, led by strong growth in Credit & Risk Solutions as well as Data & Advisory Solutions. Reported operating profit decreased to $174 million from the prior year and by $35 million on a pro forma basis with operating profit margin decreasing 1,530 basis points to 17.1% due to the inclusion of IHS Markit. Adjusted operating profit increased 13% to $345 million compared to non-GAAP pro forma adjusted operating profit and adjusted operating profit margin increased 260 basis points to 33.9% compared to non-GAAP pro forma adjusted operating profit margin driven by revenue growth and the realization of merger-related cost synergies, partially offset by increases in compensation expense and cloud spend.

Ratings:  Reported revenue decreased 33% to $681 million in the third quarter of 2022. Transaction revenue decreased 56% to $244 million. Transaction revenue was negatively impacted by a year-over-year decrease in debt issuance across all categories. Non-transaction revenue decreased 6% to $437 million due primarily to lower initial Issuer Credit Rating (ICR) revenue, Rating Evaluation Services (RES) revenue, and unfavorable FX, partially offset by growth at CRISIL. Excluding FX, non-transaction revenue would have decreased 2% year-over-year.

Reported operating profit decreased 41% to $377 million from prior year and decreased 41% compared to pro forma operating profit. Operating profit margin decreased 800 basis points to 55.3% compared to the third quarter of 2021 due to the decrease in transaction revenue, partially offset by year-over-year declines in incentive compensation expense. Adjusted operating profit decreased 41% to $381 million compared to non-GAAP pro forma adjusted operating profit, and adjusted operating profit margin decreased 750 basis points to 55.9% compared to non-GAAP pro forma adjusted operating profit margin.

Commodity Insights:  Reported revenue increased 70% to $432 million compared to the third quarter of 2022, primarily driven by the inclusion of IHS Markit, and increased 5% compared to pro forma revenue driven by Price Assessments, and strong growth in Energy & Resources Data & Insights, offset by slight declines in Upstream Data & Insights and Advisory & Transaction Services. Adjusted revenue increased 5% to $432 million compared to non-GAAP pro forma adjusted revenue, driven by the same factors. Reported operating profit increased 4% to $141 million compared to the prior year and increased 1% to $141 million compared to pro forma operating profit while operating profit margin decreased 2,090 basis points to 32.6% compared to the prior year primarily due to the inclusion of IHS Markit. Adjusted operating profit increased 9% to $198 million compared to non-GAAP pro forma adjusted operating profit and adjusted operating profit margin increased 190 basis points to 45.8% compared to non-GAAP pro forma adjusted operating profit margin. The impact of the Russia/Ukraine conflict continues to be the most significant headwind to revenue and profit margins.

Mobility:  Reported revenue was $346 million in the third quarter of 2022 and increased 12% compared to pro forma revenue. Adjusted revenue increased 8% to $346 million in the third quarter of 2022 compared to non-GAAP pro forma adjusted revenue with growth driven by continued high retention rates and new business in CARFAX, as well as strength in our Planning Solutions and Financials offerings, partially offset by sales and marketing products. Reported operating profit in the third quarter was $90 million and operating profit margin was 25.9%, and increased 88% compared to pro forma operating profit. Adjusted operating profit increased 14% to $146 million compared to non-GAAP pro forma adjusted operating profit and adjusted operating profit margin increased 200 basis points to 42.4% compared to non-GAAP pro forma adjusted operating profit margin. Revenue growth combined with management actions and favorable FX to drive margin expansion, partially offset by software and cloud expense growth.

S&P Dow Jones Indices:  S&P Dow Jones Indices LLC is a majority-owned subsidiary. The consolidated results are included in S&P Global's income statement and the portion related to the 27% non-controlling interest is removed in net income attributable to non-controlling interests.

Reported revenue increased 12% to $334 million in the third quarter of 2022, primarily due to the inclusion of IHS Markit and increased 3% compared to pro forma revenue. Adjusted revenue increased 3% to $334 million in the third quarter of 2022 compared to non-GAAP pro forma adjusted revenue, driven by strong growth in exchange-traded derivatives, and Data & Custom Subscriptions, with growth partially offset by declines in asset-linked fees due to market valuations.

Reported operating profit increased 12% to $239 million and increased 10% compared to pro forma operating profit. Operating profit margin increased 20 basis points to 71.5%. Adjusted operating profit increased 5% to $234 million compared to non-GAAP pro forma adjusted operating profit. Adjusted operating profit margin improved 100 basis points to 70.3% compared to non-GAAP pro forma adjusted operating profit margin, driven by strong revenue growth, while adjusted expenses were held flat relative to the year-ago period. Operating profit attributable to the Company increased 13% to $175 million. Adjusted pro forma operating profit attributable to the Company increased 11% to $184 million.

Engineering Solutions:  Reported revenue was $95 million in the third quarter of 2022 and decreased 6% compared to pro forma revenue in the year-ago period. Adjusted revenue decreased 8% to $95 million in the third quarter of 2022 compared to non-GAAP pro forma adjusted revenue, with declines driven primarily by the absence of a Boiler Pressure Vessel Code (BPVC) release in 2022, as the most recent edition was released in 3Q21. Reported operating profit in the third quarter was $1 million and operating profit margin was 0.9%. Adjusted operating profit decreased 12% to $17 million compared to non-GAAP pro forma adjusted operating profit and adjusted operating profit margin decreased 80 basis points to 17.9% compared to non-GAAP pro forma adjusted operating profit margin, with expense declines driven by lower BPVC-related royalties, partially offset by increased royalties on other products and product development investment.

Corporate Unallocated Expense:  Reported Corporate Unallocated Expense of $175 million compares to $89 million of reported Corporate Unallocated Expense in the prior period, and $127 million of pro forma Corporate Unallocated Expense. Adjusted Corporate Unallocated Expense was $24 million in the third quarter of 2022 compared to non-GAAP pro forma adjusted unallocated expense of $36 million in the third quarter of 2021. Adjusted pro forma Corporate Unallocated Expense declined from a year ago, driven by a combination of synergies and reduced incentive costs. 

Provision for Income Taxes:  The Company's effective tax rate (excluding taxes in relation to earnings of unconsolidated subsidiaries) decreased to 17.6% in the third quarter of 2022 compared to 19.9% in the same period last year due to a post-merger change in the mix of income by jurisdiction. The adjusted effective tax rate (excluding taxes in relation to earnings of unconsolidated subsidiaries) increased to 20.5% compared to 19.9% in the same period last year, as the third quarter 2021 rate included a non-recurring benefit of prior period adjustments. The Company's effective tax rate may fluctuate from quarter to quarter due to the timing of discrete tax adjustments.

Balance Sheet and Cash Flow:  Cash, cash equivalents, and restricted cash at the end of the third quarter were $1.4 billion. In the first nine months of 2022, cash provided by operating activities was $1,490 million, cash provided by investing activities was $3,689 million, and cash used for financing activities was $10,128 million. Free cash flow in the first nine months of 2022 was $1,232 million, a decrease of $1,222 million compared to the same period in 2021 and non-GAAP pro forma adjusted free cash flow excluding certain items was $2,590 million.

Outlook:  The Company is updating both GAAP and non-GAAP pro forma adjusted guidance for 2022 to reflect the results of the third quarter, as well as our most recent views on the macro-economic and geopolitical environment. 2022 reported revenue is expected to increase more than 30%. GAAP diluted EPS is expected to be in a range of $9.75 to $9.90.

The Company is providing non-GAAP adjusted guidance on a pro forma basis that excludes merger expenses, and amortization of intangibles related to acquisitions. Non-GAAP pro forma adjusted guidance is provided to reflect expected financial results for the full year, as if the merger with IHS Markit (and associated divestitures) had been completed on January 1, 2021. Non-GAAP pro forma adjusted revenue is now expected to decline mid-single digits. Non-GAAP pro forma adjusted diluted EPS is expected in the range of $11.00 to $11.15. Non-GAAP pro forma adjusted free cash flow excluding certain items is expected to be approximately $4 billion.

Comparison of Adjusted Information to U.S. GAAP Information:  The Company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). Company financial results are also presented on an as-reported basis, and on a pro forma basis as if the merger had closed on January 1, 2021, for periods including fiscal year 2021, the three months ended September 30, 2021 and nine months ended September 30, 2022 and 2021; the pro forma basis agrees to the Company's previously filed unaudited pro forma combined condensed financial information presented in accordance with Article 11 of Regulation S-X. The Company also refers to and presents certain additional non-GAAP financial measures, within the meaning of Regulation G under the Securities Exchange Act of 1934. These measures are: adjusted revenue and non-GAAP pro forma adjusted revenue; adjusted net income and non-GAAP pro forma adjusted net income; adjusted operating profit and margin and non-GAAP pro forma adjusted operating profit and margin; adjusted Corporate Unallocated expense and non-GAAP pro forma adjusted Corporate Unallocated expense; non-GAAP pro forma adjusted other income, net; adjusted interest expense, net and non-GAAP pro forma adjusted interest expense, net; adjusted provision for income taxes and non-GAAP pro forma adjusted provision for income taxes; adjusted effective tax rates and non-GAAP pro forma adjusted effective tax rate; adjusted income before taxes on income and non-GAAP pro forma adjusted income before taxes on income; adjusted net income attributable to noncontrolling interests and non-GAAP pro forma adjusted net income attributable to noncontrolling interests; adjusted diluted EPS, non-GAAP pro forma adjusted diluted EPS and non-GAAP pro forma adjusted diluted EPS guidance; free cash flow and non-GAAP pro forma adjusted free cash flow excluding certain items; adjusted Indices net operating profit and non-GAAP pro forma adjusted Indices net operating profit; non-GAAP pro forma adjusted revenue guidance; non-GAAP pro forma adjusted free cash flow excluding certain items guidance. The Company has included reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP on Exhibits 5, 6, 7 and 8. Reconciliations of certain forward-looking non-GAAP financial measures to comparable GAAP measures are not available due to the challenges and impracticability with estimating some of the items. The Company is not able to provide reconciliations of such forward-looking non-GAAP financial measures because certain items required for such reconciliations are outside of the Company's control and/or cannot be reasonably predicted. Because of those challenges, reconciliations of such forward-looking non-GAAP financial measures are not available without unreasonable effort.

The Company's non-GAAP measures include adjustments that reflect how management views our businesses. The Company believes these non-GAAP financial measures provide useful supplemental information that, in the case of non-GAAP financial measures other than free cash flow and non-GAAP pro forma adjusted free cash flow excluding certain items, enables investors to better compare the Company's performance across periods, and management also uses these measures internally to assess the operating performance of its business, to assess performance for employee compensation purposes and to decide how to allocate resources. The Company believes that the presentation of free cash flow and non-GAAP pro forma adjusted free cash flow excluding certain items allows investors to evaluate the cash generated from our underlying operations in a manner similar to the method used by management and that such measures are useful in evaluating the cash available to us to prepay debt, make strategic acquisitions and investments, and repurchase stock. However, investors should not consider any of these non-GAAP measures in isolation from, or as a substitute for, the financial information that the Company reports.

Conference Call/Webcast Details:  The Company's senior management will review the third quarter 2022 earnings results on a conference call scheduled for today, October 27, at 8:30 a.m. EDT. Additional information presented on the conference call may be made available on the Company's Investor Relations Website at http://investor.spglobal.com.

The Webcast will be available live and in replay at http://investor.spglobal.com/Quarterly-Earnings. (Please copy and paste URL into Web browser.)

Telephone access is available. U.S. participants may call (888) 603-9623; international participants may call +1 (630) 395-0220 (long-distance charges will apply). The passcode is "S&P Global" and the conference leader is Douglas Peterson. A recorded telephone replay will be available approximately two hours after the meeting concludes and will remain available until November 27, 2022. U.S. participants may call (800) 839-4229; international participants may call +1 (203) 369-3034 (long-distance charges will apply). No passcode is required.

Forward-Looking Statements:  This press release contains "forward-looking statements," as defined in the Private Securities Litigation Reform Act of 1995. These statements, including statements about COVID-19 and the completed merger (the "Merger") between a subsidiary of the Company and IHS Markit Ltd. ("IHS Markit"), which express management's current views concerning future events, trends, contingencies or results, appear at various places in this press release and use words like "anticipate," "assume," "believe," "continue," "estimate," "expect," "forecast," "future," "intend," "plan," "potential," "predict," "project," "strategy," "target" and similar terms, and future or conditional tense verbs like "could," "may," "might," "should," "will" and "would." For example, management may use forward-looking statements when addressing topics such as: the outcome of contingencies; future actions by regulators; changes in the Company's business strategies and methods of generating revenue; the development and performance of the Company's services and products; the expected impact of acquisitions and dispositions; the Company's effective tax rates; and the Company's cost structure, dividend policy, cash flows or liquidity.

Forward-looking statements are subject to inherent risks and uncertainties. Factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements include, among other things:

• worldwide economic, financial, political, and regulatory conditions, and factors that contribute to uncertainty and volatility, natural and man-made disasters, civil unrest, pandemics (e.g., COVID-19), geopolitical uncertainty (including military conflict), and conditions that may result from legislative, regulatory, trade and policy changes;
• the ability of the Company to retain customers and to implement its plans, forecasts and other expectations with respect to IHS Markit's business and realize expected synergies;
• business disruption following the Merger;
• the Company's ability to meet expectations regarding the accounting and tax treatments of the Merger;
• the volatility and health of debt, equity, commodities and energy markets, including credit quality and spreads, the level of liquidity and future debt issuances, demand for investment products that track indices and assessments and trading volumes of certain exchange-traded derivatives;
• the demand and market for credit ratings in and across the sectors and geographies where the Company operates;
• the Company's ability to successfully recover should it experience a disaster or other business continuity problem from a hurricane, flood, earthquake, terrorist attack, pandemic, security breach, cyber attack, data breach, power loss, telecommunications failure or other natural or man-made event, including the ability to function remotely during long-term disruptions such as the ongoing COVID-19 pandemic;
• the Company's ability to maintain adequate physical, technical and administrative safeguards to protect the security of confidential information and data, and the potential for a system or network disruption that results in regulatory penalties and remedial costs or improper disclosure of confidential information or data;
• the outcome of litigation, government and regulatory proceedings, investigations and inquiries;
• concerns in the marketplace affecting the Company's credibility or otherwise affecting market perceptions of the integrity or utility of independent credit ratings, benchmarks and indices;
• the effect of competitive products and pricing, including the level of success of new product developments and global expansion;
• the Company's exposure to potential criminal sanctions or civil penalties for noncompliance with foreign and U.S. laws and regulations that are applicable in the domestic and international jurisdictions in which it operates, including sanctions laws relating to countries such as Iran, Russia, Sudan, Syria and Venezuela, anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act of 2010, and local laws prohibiting corrupt payments to government officials, as well as import and export restrictions;
• the continuously evolving regulatory environment, in Europe, the United States and elsewhere around the globe, affecting S&P Global Market Intelligence, S&P Global Ratings, S&P Global Commodity Insights, S&P Global Mobility, S&P Dow Jones Indices, S&P Global Engineering Solutions, and the products those business divisions offer including our ESG products, and the Company's compliance therewith;
• the Company's ability to make acquisitions and dispositions and successfully integrate the businesses we acquire;
• consolidation in the Company's end-customer markets;
• the introduction of competing products or technologies by other companies;
• the impact of customer cost-cutting pressures, including in the financial services industry and the commodities markets;
• a decline in the demand for credit risk management tools by financial institutions;
• the level of merger and acquisition activity in the United States and abroad;
• our ability to attract, incentivize and retain key employees, especially in today's competitive business environment;
• the level of the Company's future cash flows and capital investments;
• the impact on the Company's revenue and net income caused by fluctuations in foreign currency exchange rates; and
• the impact of changes in applicable tax or accounting requirements on the Company.

The factors noted above are not exhaustive. The Company and its subsidiaries operate in a dynamic business environment in which new risks emerge frequently. Accordingly, the Company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the dates on which they are made. The Company undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date on which it is made, except as required by applicable law. Further information about the Company's businesses, including information about factors that could materially affect its results of operations and financial condition, is contained in the Company's filings with the SEC, including Item 1A, Risk Factors, in our most recently filed Annual Report on Form 10-K.

About S&P Global

S&P Global (NYSE: SPGI) provides essential intelligence. We enable governments, businesses and individuals with the right data, expertise and connected technology so that they can make decisions with conviction. From helping our customers assess new investments to guiding them through ESG and energy transition across supply chains, we unlock new opportunities, solve challenges and accelerate progress for the world.

We are widely sought after by many of the world's leading organizations to provide credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity and automotive markets. With every one of our offerings, we help the world's leading organizations plan for tomorrow, today.

Investor Relations:  http://investor.spglobal.com

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SOURCE S&P Global