Saturday, December 5, 2020
Financial Results News

S&P Global Revenue Increased 14% In Second Quarter

S&P Global (NYSE: SPGI) today reported second quarter 2020 results with revenue of $1,943 million, an increase of 14% compared to the same period last year.  Net income increased 43% to $792 million and diluted earnings per share increased 46% to $3.28 primarily due to revenue growth in S&P Global Ratings and reduced expenses from COVID-19 related management actions.

Adjusted net income increased 37% to $822 million and adjusted diluted earnings per share increased 40% to $3.40 primarily due to revenue growth in S&P Global Ratings and reduced expenses across the Company from COVID-19 related management actions. The adjustments in the second quarter of 2020 were associated with restructurings in Corporate, a gain on a divestment, as well as deal-related amortization and Kensho retention-related expenses.

Profit Margin: The Company’s operating profit margin increased 920 basis points to 56.9% and the adjusted operating profit margin increased 740 basis points to 58.7% primarily due to revenue growth in S&P Global Ratings and reduced expenses due to management actions in response to COVID-19.

Return of Capital:  No new share repurchases were made in the second quarter while our existing ASR program was in place.  On July 27, this ASR program was completed.  During the second quarter, the Company paid $162 million in dividends.  During the first half of 2020, the Company has returned $1.47 billion to shareholders consisting of $1.15 billion in share repurchases and $323 million in dividends.

Ratings:  Revenue increased 26% to $1,006 million in the second quarter primarily due to strong global investment-grade issuance, including record quarterly U.S. investment-grade issuance.  Transaction revenue increased 48% to $624 million due primarily to an increase in global bond issuance partially offset by decreased bank loan rating activity.  Non-transaction revenue increased 1% to $382 million. 

Operating profit increased 51% to $693 million and the operating profit margin improved 1,150 basis points to 68.9% compared to the second quarter of 2019.  Adjusted operating profit increased 47% to $695 million and the adjusted operating profit margin improved 1,020 basis points to 69.1%.

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 $240 million in the second quarter of 2020 due primarily to a 20% increase in exchange-traded derivative fees and a 6% gain in data and custom subscriptions.

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.  However, quarter-ending ETF AUM associated with our indices was $1,616 billion, a 6% increase from 2Q 2019.

Operating profit increased 5% to $171 million and the operating profit margin increased 220 basis points to 71.4%.  Adjusted operating profit increased 5% to $172 million and the adjusted operating profit margin improved 210 basis points to 71.9%.  Operating profit attributable to the Company increased 5% to $125 million.  Adjusted operating profit attributable to the Company increased 5% to $126 million.

Market Intelligence:  Revenue increased 6% to $516 million in the second quarter of 2020 with growth in Data Management Solutions, Credit Risk Solutions, and Desktop as well as the addition of 451 Research.  Quarterly operating profit increased 16% to $159 million and the operating profit margin improved 280 basis points to 30.8% as increased revenue outpaced modestly higher expenses.  Adjusted operating profit increased 13% to $177 million and adjusted operating profit margin improved 220 basis points to 34.4%.

Platts:  Revenue increased 2% to $217 million with growth in both the core subscription business and Global Trading Services.  Quarterly operating profit increased 12% to $124 million and the operating profit margin increased 500 basis points to 57.3% due to revenue growth and lower expenses.  Adjusted operating profit increased 9% to $127 million and adjusted operating profit margin increased 400 basis points to 58.3%.

Corporate Unallocated Expense:  This expense decreased from $58 million in the prior period to $42 million in the second quarter of 2020 due primarily to a reduction in restructuring expenses versus the prior period.  Adjusted Corporate Unallocated expense declined from $35 million in the prior period to $30 million due primarily to lower rental expense from a reduction in the Company’s real estate footprint and lower professional fees, partially offset by a contribution to the S&P Global Foundation made in 2020.

Provision for Income Taxes:  The Company’s effective tax rate decreased to 21.7% in the second quarter of 2020 compared to 23.0% in the same period last year and the Company’s adjusted effective tax rate decreased to 21.7% in the second quarter of 2020 compared to 23.1% in the same period last year.   Both declines were due primarily to the successful resolution of tax examinations in various jurisdictions.

Balance Sheet and Cash Flow:  Cash, cash equivalents, and restricted cash at the end of the second quarter were $2.7 billion. In the first six months of 2020, cash provided by operating activities was $1,617 million, cash used for investing activities was $186 million, and cash used for financing activities was $1,610 million.  Free cash flow in the first six months of 2020 was $1,507 million, an increase of $602 million from the same period in 2019, primarily due to an increase in net income and the timing of U.S. federal estimated tax payments.

Outlook:  Due to the uncertainties associated with COVID-19, S&P Global has analyzed several scenarios that are contingent on the depth and duration of the COVID-19 pandemic and its resulting impact on economic and market-specific drivers that may impact the Company’s businesses.  This quarter,  S&P Global has disclosed two specific scenarios as part of its second quarter 2020 earnings materials, with the “late 3Q recovery” being the baseline scenario at this point in time and the basis for the following revised guidance.  GAAP diluted EPS guidance is increased from a range of $9.50 to $9.70 to a new range of $10.25 to $10.45.  Adjusted diluted EPS guidance is increased from a range of $9.95 to $10.15 to a new range of $10.75 to $10.95. 

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