The following Management's Discussion and Analysis ("MD&A") provides a narrative of the results of operations and financial condition ofS&P Global Inc. (together with its consolidated subsidiaries, "S&P Global ," the "Company," "we," "us" or "our") for the three and nine months endedSeptember 30, 2021 . The MD&A should be read in conjunction with the consolidated financial statements, accompanying notes and MD&A included in our Form 10-K for the year endedDecember 31, 2020 (our "Form 10-K"), which have been prepared in accordance with accounting principles generally accepted inthe United States of America ("U.S. GAAP"). The MD&A includes the following sections: •Overview •Results of Operations - Comparing the Three and Nine Months EndedSeptember 30, 2021 and 2020 •Liquidity and Capital Resources •Reconciliation of Non-GAAP Financial Information •Critical Accounting Estimates •Recently Issued or Adopted Accounting Standards •Forward-Looking Statements
OVERVIEW
We are a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. The capital markets include asset managers, investment banks, commercial banks, insurance companies, exchanges, trading firms and issuers; and the commodity markets include producers, traders and intermediaries within energy, petrochemicals, metals and agriculture. Our operations consist of four reportable segments:S&P Global Ratings ("Ratings"),S&P Global Market Intelligence ("Market Intelligence"),S&P Global Platts ("Platts") andS&P Dow Jones Indices ("Indices"). •Ratings is an independent provider of credit ratings, research, and analytics, offering investors and other market participants information, ratings and benchmarks. •Market Intelligence is a global provider of multi-asset-class data, research and analytical capabilities, which integrate cross-asset analytics and desktop services. •Platts is the leading independent provider of information and benchmark prices for the commodity and energy markets. •Indices is a global index provider maintaining a wide variety of valuation and index benchmarks for investment advisors, wealth managers and institutional investors. Key results for the periods endedSeptember 30 are as follows: (in millions, except per share amounts) Three Months Nine Months 2021 2020 % Change 1 2021 2020 % Change 1 Revenue$ 2,087 $ 1,846 13%$ 6,209 $ 5,575 11% Operating profit 2$ 1,083 $ 944 15%$ 3,317 $ 2,960 12% Operating margin % 52 % 51 % 53 % 53 % Diluted earnings per share from net income$ 3.30 $ 1.88 75%$ 9.72 $ 7.78 25% 1 % changes in the tables throughout the MD&A are calculated off of the actual number, not the rounded number presented. 2 Operating profit for the three months endedSeptember 30, 2021 includes IHS Markit merger costs of$54 million and a gain on disposition of$3 million . Operating profit for the nine months endedSeptember 30, 2021 includes IHS Markit merger costs of$153 million , a gain on dispositions of$5 million , a lease impairment of$3 million and Kensho retention related expense of$2 million . Operating profit for the three months endedSeptember 30, 2020 includes a gain on dispositions of$8 million , a technology-related impairment charge of$5 million and Kensho retention related expense of$2 million . Operating profit for the nine months endedSeptember 30, 2020 includes a gain on dispositions of$16 million , employee severance charges of$12 million , a technology-related impairment charge of$5 million and Kensho retention related expense of$10 million . Operating profit also includes amortization of intangibles from acquisitions of$21 million and$32 million for the three months endedSeptember 30, 2021 and 2020, respectively, and$74 million and$94 million for the nine months endedSeptember 30, 2021 and 2020, respectively. 29 --------------------------------------------------------------------------------
Three Months
Revenue increased 13% driven by increases at all of our reportable segments. Revenue growth at Ratings was driven by an increase in transaction revenue and non-transaction revenue. Transaction revenue increased due to higher bank loan ratings revenue and an increase in structured finance revenue, partially offset by a decrease in corporate bond ratings revenue. Non-transaction revenue increased primarily due to an increase in surveillance, entity credit ratings, revenue at our CRISIL subsidiary and higher Ratings Evaluation Service ("RES") revenue. Revenue growth at Market Intelligence was driven by subscription revenue growth in Market Intelligence Desktop products,Credit Risk Solutions and Data Management Solutions. Revenue growth at Indices was due to higher average levels of assets under management for ETFs and mutual funds. The revenue increase at Platts was primarily due to continued demand for market data and market insights products. Foreign exchange rates had a favorable impact of less than 1 percentage point. Operating profit increased 15%, with a favorable impact from foreign exchange rates of 1 percentage point. Excluding the unfavorable impact of IHS Markit merger costs in 2021 of 5 percentage points, partially offset by higher amortization of intangibles from acquisitions in 2020 of 1 percentage point and a technology-related impairment charge in 2020 of 1 percentage point, operating profit increased 18%. The increase was primarily due to revenue growth at all of our reportable segments, partially offset by higher incentive costs and an increase in compensation costs driven by additional headcount and annual merit increases. Nine Months Revenue increased 11% driven by increases at all of our reportable segments. Revenue growth at Ratings was driven by an increase in transaction revenue and non-transaction revenue. Transaction revenue increased due to higher bank loan ratings revenue and an increase in structured finance revenue, partially offset by a decrease in corporate bond ratings revenue. Non-transaction revenue increased primarily due to an increase in entity credit ratings, surveillance, higher RES revenue and an increase in revenue at our CRISIL subsidiary. Revenue growth at Market Intelligence was driven by subscription revenue growth inCredit Risk Solutions , Market Intelligence Desktop products and Data Management Solutions. Revenue growth at Indices was due to higher average levels of assets under management for ETFs and mutual funds, partially offset by lower exchange-traded derivative revenue. The revenue increase at Platts was primarily due to continued demand for market data and market insights products. Foreign exchange rates had a favorable impact of 1 percentage point. Operating profit increased 12%, with a favorable impact from foreign exchange rates of 1 percentage point. Excluding the unfavorable impact of IHS Markit merger costs in 2021 of 5 percentage points, partially offset by higher amortization of intangibles from acquisitions in 2020 of 1 percentage point, operating profit increased 16%. The increase was primarily due to revenue growth at all of our reportable segments combined with a decrease in occupancy costs and travel and entertainment expenses from non-essential travel restrictions in response to the 2019 novel coronavirus ("COVID-19"), partially offset by higher incentive costs and an increase in compensation costs driven by additional headcount and annual merit increases. We are closely monitoring the impact of the outbreak of COVID-19 on all aspects of our business. While COVID-19 did not have a material adverse effect on our reported results for the three and nine months endedSeptember 30, 2021 and 2020, we are unable to predict the ultimate impact that it may have on our business, future results of operations, financial position or cash flows.
Our Strategy
We are a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. Our purpose is to provide the intelligence that is essential for companies, governments and individuals to make decisions with conviction. We seek to deliver on this purpose in line with our core values of integrity, excellence and relevance.
In 2018, we announced the launch of Powering the Markets of the Future to provide a framework for our forward-looking business strategy. Through this framework, we seek to deliver an exceptional, differentiated customer experience by enhancing our foundational capabilities, evolving and growing our core businesses, and pursuing growth via adjacencies. In 2021, we will strive to deliver on our strategic priorities in the following key areas:
Finance
•Meeting or exceeding revenue growth and EBITA margin targets with particular
focus on accelerating growth in the greater
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•Funding organic opportunities and pursuing disciplined acquisitions, investments and partnerships to support our key growth areas;
•Taking a lead role in the market regarding ESG disclosures and achieving our stated environmental sustainability targets; and
•Executing against Integration Management Office ("IMO") and regulatory milestones; building trust and team cohesion with IHS Markit (NYSE:INFO) colleagues; laying groundwork to set the proforma organization up for successful realization of our synergy and strategic goals.
Customer
•Continuing to deliver our key initiatives to the market and building them through a customer-first lens;
•Prioritizing customer preferences, while enhancing and adjusting the delivery of our products across multiple channels such as feeds and APIs; and delivering on S&P Global Platform initiatives; •Incorporating a customer perspective in all divisions and functions, including the reimagining of our customer's work environments and how best to serve them; pursuing partnerships to meet customers where they are; and
•Nurturing and protecting the core franchise, while growing brand equity with the appropriate investments.
Operations
•Improving end-user productivity and experience by providing our employees with the tools and processes to better serve our customers;
•Reimagining our work environment by continuing to standardize our technology and encouraging employee participation in the reshaping of where we work, how we work and how we serve;
•Advancing our risk culture by maturing risk management & compliance processes and our cyber security posture; and
•Utilizing our innovation teams and latest technology to maintain our commitment to advancing our shared data processes and technical capabilities.
People
•Continuing to foster a people first environment, while maintaining existing levels of engagement;
•Encouraging career mobility through career coaching, while attracting and retaining the best people; and
•Improving diverse representation through talent acquisition, advancement and retention, while continuing to raise awareness of racial education.
There can be no assurance that we will achieve success in implementing any one or more of these strategies as a variety of factors could unfavorably impact operating results, including prolonged difficulties in the global credit markets and a change in the regulatory environment affecting our businesses. See Item 1A, Risk Factors in this Form 10-Q and our most recently filed Annual Report on Form 10-K. 31
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