- Total revenue for Q1 2019 was US$1.571 million
- Market Intelligence revenue increased 10% to US$482 million
- Rating revenue declined by 7% to US$696 million
S&P Global (NYSE: SPGI) reported first quarter 2019 results with revenue of $1,571 million, essentially unchanged compared to the same period last year. On an organic basis, and excluding the unfavorable impact from foreign exchange, revenue increased 1%.
Net income decreased 16% to $410 million and diluted earnings per share decreased 14% to $1.65 as gains from a lower tax rate and lower share count were more than offset by a $113 million pre-tax, non-cash charge associated with the frozen U.S. defined benefit pension plan due to a partial pension risk transfer to an insurance company.
“The markets have come a long way since the depths of December as they began to stabilize in the second week of January,” said Douglas L. Peterson, President and Chief Executive Officer of S&P Global. “We don’t let market disruptions interfere with our business plans. During the quarter we continued to execute on our strategic investments – fueling new product launches, technology projects, and improved productivity across the Company as we continue to Power the Markets of the Future.”
The Company has added to its suite of ESG products with two important launches. S&P Dow Jones Indices (S&P DJI) is launching a global family of ESG indices utilizing S&P DJI ESG scores. Based upon the iconic S&P 500®, the first to launch was the S&P 500® ESG Index. In addition, S&P Global Ratings launched ESG Evaluations – a cross-sector, relative analysis of an entity’s ability to operate successfully in the future and optimize long-term stakeholder value in light of its natural and social environment and the quality of its governance.
Profit Margin: The Company’s operating profit margin decreased 40 basis points to 44.9% primarily due our investment in artificial intelligence and analytics through the acquisition of Kensho in April 2018. The adjusted operating profit margin increased 40 basis points to 47.3% primarily due to the 460 basis point improvement at S&P Global Market Intelligence and because the first quarter of 2018 included a $20 million contribution to the S&P Global Foundation.
Market Intelligence: Revenue increased 10% to $482 million in the first quarter of 2019 with more than 10% growth in both Credit Risk Solutions and Data Management Solutions and high single-digit growth in Desktop. Quarterly operating profit increased 31% to $145 million. The operating profit margin improved 490 basis points to 30.0% as revenue gains outpaced expenses. Adjusted operating profit increased 27% to $163 million. Adjusted operating profit margin improved 460 basis points to 33.8%.
Ratings: Revenue decreased 7% to $696 million in the first quarter. Transaction revenue decreased 10% to $331 million due primarily to lower bank loan ratings activity. Non-transaction revenue decreased 4% to $365 million primarily due to foreign exchange rates, lower Rating Evaluation Service activity and CRISIL, partially offset by increased inter-segment royalties from Market Intelligence.
U.S. revenue decreased 6%. International revenue declined 9% with gains in Asia-Pacific and Canada more than offset by declines in EMEA and Latin America. International represented 43% of first quarter revenue.
Operating profit decreased 11% to $363 million and the operating profit margin declined 240 basis points to 52.2% compared to the first quarter of 2018 due to lower revenue. Adjusted operating profit decreased 11% to $364 million and the adjusted operating profit margin declined 240 basis points to 52.3%.
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% noncontrolling interest is removed in net income attributable to noncontrolling interests.
Revenue increased 2% to $217 million in the first quarter of 2019 due primarily to a 9% gain in asset-linked fees and a 28% increase in Data & Custom Subscriptions, partially offset by a 32% decline in exchange-traded derivative fees.
Asset-linked fees include fees associated with ETFs, mutual funds, and certain over-the-counter derivatives. Revenue from ETFs is the largest component of asset-linked fees, and average ETF AUM associated with the Company’s indices increased 2% year-over-year.
Operating profit increased 1% to $149 million and the operating profit margin decreased 110 basis points to 68.8% with a less favorable revenue mix due to the decline in exchange-traded derivative fees. Adjusted operating profit increased 1% to $151 million and the adjusted operating profit margin declined 100 basis points to 69.5%. Operating profit attributable to the Company was unchanged at $109 million. Adjusted operating profit attributable to the Company increased 1% to $111 million.
Platts: Revenue increased 5% to $207 million with growth in both the core subscription business and Global Trading Services. Quarterly operating profit increased 5% to $94 million and the operating profit margin was unchanged at 45.7%. Adjusted operating profit increased 4% to $98 million and adjusted operating profit margin decreased 60 basis points to 47.4%.
Corporate Unallocated: Corporate Unallocated includes non-allocated corporate expenses. This category was unchanged at $46 million as the addition of Kensho expenses, including retention-related expenses, were offset by a $20 million contribution to the S&P Global Foundation in the prior period. Adjusted Corporate Unallocated improved 30% to $32 million as the $20 million contribution to the S&P Global Foundation in the prior period did not recur.
Source: S&P Earnings Release