S&P GLOBAL Q1 Revenue Up 32% – primarily due to the inclusion of IHS Markit businesses | BIIA.com | Business Information Industry Association

Strong execution drives positive year-over-year reported revenue growth
Accelerating innovation evidenced by two new commercially available AI-powered Kensho products
Company is providing GAAP guidance and affirming non-GAAP adjusted revenue growth, operating margin, and EPS guidance
$500 million ASR executed, with additional $1 billion ASR expected to launch in coming weeks
Divestiture of Engineering Solutions expected to close on May 2, 2023

S&P Global (NYSE: SPGI) today reported first quarter 2023 results with reported revenue of $3.16 billion, an increase of 32% compared to the same period last year, primarily due to the inclusion of IHS Markit businesses, partially offset by declines in Ratings revenue.

GAAP net income decreased 36% to $795 million and GAAP diluted earnings per share decreased 45% to $2.47 primarily due to the gain on sale of CUSIP in the first quarter of 2022, and the increase in shares outstanding as a result of the merger with HIS Markit. Revenue increased 3% compared to pro forma revenue from the first quarter of 2022, or 4% on a constant-currency basis. Adjusted net income remained relatively unchanged at $1,013 million compared to non-GAAP pro forma adjusted net income. Adjusted diluted earnings per share increased 9% to $3.15 compared to non-GAAP pro forma adjusted diluted earnings per share primarily due to an 8% decrease in pro forma fully diluted shares outstanding. Currency positively impacted adjusted diluted EPS by $0.03. The largest non-core adjustments to earnings in the first quarter of 2023 were for integration costs and lease impairments.

“We continued to invest during the first quarter to meet the needs of customers while driving our growth and innovation,” said Douglas L. Peterson, President and Chief Executive Officer of S&P Global. “We have powerful competitive advantages in differentiated data and proprietary technology, and we are excited to see new products coming to market at an accelerated pace, while our broader team continues to execute and deliver strong financial results.”

The Company also released two additional AI-Powered products in the first quarter – Kensho Classify and Kensho Extract. Both are commercially available now through the S&P Global Marketplace.

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 4,300 basis points to 36.2% due to the gain on the sale of CUSIP in the first quarter of 2022, as well as the inclusion of IHS Markit, and declines in Ratings revenue. Adjusted operating profit margin increased 100 basis points to 46.2% compared to non-GAAP pro forma adjusted operating profit margin primarily due to revenue growth and merger-related cost synergies.

Return of Capital: In 2023, through the first quarter, the Company returned $790 million to shareholders through a combination of $500 million in the form of an accelerated share repurchase (ASR) agreement and $290 million in cash dividends. The Company expects to launch an additional $1 billion ASR in the coming weeks, utilizing proceeds from the expected divestiture of Engineering Solutions and cash on hand.

Market Intelligence: Reported revenue increased 47% to $1.07 billion in the first quarter of 2023 driven primarily by the inclusion of IHS Markit revenue, and increased 5% compared to pro forma revenue led by growth in Data & Advisory Solutions, as well as Credit & Risk Solutions. Reported operating profit decreased to $229 million from the prior year and by $1.24 billion compared to pro forma results in the year-ago period, with operating profit margin decreasing 18,330 basis points to 21.4% due to the inclusion of IHS Markit, and a gain on the sale of CUSIP in the year-ago period. Adjusted operating profit increased 16% to $343 million compared to non-GAAP pro forma adjusted operating profit and adjusted operating profit margin increased 300 basis points to 32.0% compared to non-GAAP pro forma adjusted operating profit margin driven by revenue growth, merger-related cost synergies, and lower occupancy costs, partially offset by increases in compensation expense, cloud spend, and T&E expense.

Ratings: Reported revenue decreased 5% to $824 million in the first quarter of 2023. Transaction revenue decreased 6% to $379 million compared to pro forma revenue. Transaction revenue was negatively impacted by a year-over-year decrease in debt issuance. Non-transaction revenue decreased 4% to $445 million compared to pro forma revenue 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 7% to $477 million from prior year and decreased 6% compared to pro forma operating profit. Operating profit margin decreased 110 basis points to 57.8% compared to the first quarter of 2022. Adjusted operating profit decreased 6% to $480 million compared to non-GAAP pro forma adjusted operating profit, and adjusted operating profit margin decreased 80 basis points to 58.3% compared to non-GAAP pro forma adjusted operating profit margin. Lower margins were driven by decreased revenue and higher compensation expense, partially offset by lower occupancy costs and outside services expenses.

Commodity Insights: Reported revenue increased 40% to $508 million compared to the first quarter of 2022, primarily driven by the inclusion of IHS Markit, and increased 9% compared to pro forma revenue driven primarily by Advisory & Transactional Services, as well as strength in Price Assessments and Energy & Resources Data & Insights. Reported operating profit increased 18% to $187 million compared to the prior year and increased 15% to $187 million compared to pro forma operating profit while operating profit margin decreased 680 basis points to 36.7% compared to the prior year primarily due to the inclusion of IHS Markit. Adjusted operating profit increased 17% to $234 million compared to non-GAAP pro forma adjusted operating profit and adjusted operating profit margin increased 310 basis points to 46.1% compared to non-GAAP pro forma adjusted operating profit margin.

Margins were driven by increased revenue and merger-related synergies, partially offset by higher event costs from the annual CERAWeek conference.

Mobility: Reported revenue was $358 million in the first quarter of 2023 and increased 212% compared to the first quarter of 2022. Reported revenue increased 10% to $358 million in the first quarter of 2023 compared to pro forma revenue with growth driven by continued new business growth in CARFAX, strong recall activity, and growth within our Planning Solutions products. Reported operating profit in the first quarter was $64 million and operating profit margin was 18.0%, and increased 19% compared to pro forma operating profit. Adjusted operating profit increased 14% to $140 million compared to non-GAAP pro forma adjusted operating profit and adjusted operating profit margin increased 130 basis points to 39.1% compared to non-GAAP pro forma adjusted operating profit margin. Revenue growth combined with lower incentive compensation expense 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 6% to $341 million in the first quarter of 2023, primarily due to the inclusion of HIS Markit and increased 1% compared to pro forma revenue driven by strong growth in exchange-traded derivatives, mostly offset by declines in asset-linked fees. Reported operating profit increased 6% to $238 million and increased 7% compared to pro forma operating profit.

Operating profit margin increased 30 basis points to 69.7%. Adjusted operating profit increased 4% to $245 million compared to non-GAAP pro forma adjusted operating profit. Adjusted operating profit margin improved 250 basis points to 71.8% compared to non-GAAP pro forma adjusted operating profit margin, driven by a 7% yea-rover-year decrease in adjusted expenses due to merger-related synergies, lower bad debt expense, and the timing of discretionary spend, partially offset by continued strategic investments. Operating profit attributable to the Company increased 8% to $177 million. Adjusted pro forma operating profit attributable to the Company increased 5% to $184 million.

Engineering Solutions: Reported revenue was $100 million in the first quarter of 2023 and increased 202% compared to the first quarter of 2022. Reported revenue increased 2% compared to pro forma revenue in the year-ago period, with subscription growth partially offset 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 first quarter was $14 million and operating profit margin was 14.6%. Adjusted operating profit decreased 10% to $16 million compared to non-GAAP pro forma adjusted operating profit and adjusted operating profit margin decreased 210 basis points to 16.2% compared to non-GAAP pro forma adjusted operating profit margin, with margin declines driven by increased personnel costs and the timing of royalty expenses.

Update on Timing of Divestiture: As previously announced, the Company has entered into an agreement with KKR to divest the Engineering Solutions division. The Company now expects that divestiture to close on May 2, 2023. Both GAAP and adjusted financial guidance for 2023 now reflects that expectation. Original guidance assumed a close date of June 30, 2023.

Corporate Unallocated Expense: Reported Corporate Unallocated Expense of $79 million compares to $512 million of reported Corporate Unallocated Expense in the prior period, and $178 million of pro forma Corporate Unallocated Expense. Adjusted Corporate Unallocated Expense was $26 million in the first quarter of 2023 compared to non-GAAP pro forma adjusted corporate unallocated expense of $21 million in the first quarter of 2022. Adjusted Corporate Unallocated Expense increased from a year ago, driven by lower benefit from corporate actions and increased Kensho investments.