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, 2020 . 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, 2019 (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, 2020 and 2019 •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") and S&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 2020 2019 % Change 1 2020 2019 % Change 1 Revenue$ 1,846 $ 1,689 9%$ 5,575 $ 4,964 12% Operating profit 2$ 944 $ 891 6%$ 2,960 $ 2,408 23% Operating margin % 51 % 53 % 53 % 49 % Diluted earnings per share from net income$ 1.88 $ 2.50 (25)%$ 7.78 $ 6.40 22% 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, 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 for the three and nine months endedSeptember 30, 2019 includes a gain on dispositions related to the sale of RigData andStandard & Poor's Investment Advisory Services LLC ("SPIAS") of$27 million and$22 million , respectively. The nine months endedSeptember 30, 2019 includes employee severance charges of$20 million and a lease impairment charge of$5 million . Additionally, operating profit for the three and nine months endedSeptember 30, 2019 includes Kensho retention related expense of$6 million and$17 million , respectively. Operating profit also includes amortization of intangibles from acquisitions of$32 million and$29 million for the three months endedSeptember 30, 2020 and 2019, respectively, and$94 million and$92 million for the nine months endedSeptember 30, 2020 and 2019, respectively. 37 --------------------------------------------------------------------------------
Three Months
Revenue increased 9% driven by increases at all of our reportable segments. Revenue growth at Ratings was mainly driven by an increase in transaction revenue due to higher corporate bond ratings revenue, partially offset by a decrease in bank loan ratings revenue. Revenue growth at Market Intelligence was driven by annualized contract value 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 ("AUM") for ETFs and mutual funds, and an increase in data subscription revenue, partially offset by lower over-the-counter derivative revenue and exchange-traded derivative revenue. The revenue increase at Platts was primarily due to continued demand for market data and price assessment products. Foreign exchange rates had a favorable impact of less than 1 percentage point. Operating profit increased 6%, with a favorable impact from foreign exchange rates of 2 percentage points. Excluding the unfavorable impact of a higher gain on dispositions in 2019 of 5 percentage points primarily related to the sale of RigData and SPIAS, operating profit increased 11%. The increase was primarily due to revenue growth at all of our reportable segments combined with a decrease in travel and entertainment expenses from non-essential travel restrictions in response to the 2019 novel coronavirus ("COVID-19"), partially offset by an increase in incentive costs and higher compensation costs driven by annual merit increases and additional headcount.
Nine Months
Revenue increased 12% driven by increases at all of our reportable segments. Revenue growth at Ratings was mainly driven by an increase in transaction revenue due to higher corporate bond ratings revenue, partially offset by a decrease in bank loan ratings revenue. Revenue growth at Market Intelligence was driven by annualized contract value growth in Market Intelligence Desktop products,Credit Risk Solutions and Data Management Solutions. Revenue growth at Indices was due to higher exchange-traded derivatives trading volumes, higher AUM for ETFs and an increase in data subscription revenue. The revenue increase at Platts was primarily due to continued demand for market data and price assessment products. Foreign exchange rates had an unfavorable impact of less than 1 percentage point. Operating profit increased 23%, with a favorable impact from foreign exchange rates of 2 percentage points. Excluding the unfavorable impact of a higher gain on dispositions in 2019 of less than 1 percentage point primarily related to the sale of RigData and SPIAS and a technology-related impairment charge of less than 1 percentage point, partially offset by higher employee severance charges in 2019 of less than 1 percentage point, a lease impairment charge in 2019 of less than 1 percentage point and higher Kensho retention related expense in 2019 of less than 1 percentage point, operating profit increased 23%. The increase was primarily due to revenue growth at all of our reportable segments combined with a decrease in travel and entertainment expenses from non-essential travel restrictions in response to COVID-19, partially offset by an increase in incentive costs and higher compensation costs driven by annual merit increases and additional headcount. 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, 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. While we have modeled and updated the financial implications of a three month recovery scenario, factoring in data points from both internal and external economists and a range of observable market sources and incorporated the impact into our 2020 guidance expectations, the extent to which our results of operations may be impacted by the COVID-19 pandemic will depend largely on future developments, which are uncertain and cannot be accurately predicted.
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 2020, we will strive to deliver on our strategic priorities in the following key areas:
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Finance
•Meeting or exceeding revenue growth and EBITA margin targets and delivering on commitments to return capital to shareholders;
•Funding organic opportunities with continued productivity gains;
•Pursuing a disciplined acquisition, investment and partnership strategy to support our strategic initiatives; and
•Better serving our customers, employees, and the communities in which we operate through our commitment to corporate responsibility and sustainability.
Customer
•Continuing to drive excellence through our core business offerings;
•Delivering ESG, Small and Medium-sized Enterprise data and Marketplace solutions to market on schedule and with strong commercial traction;
•Modernizing and enhancing the delivery of our products across multiple channels (e.g., S&P Global Platform, MI Smart move, feeds, application programming interfaces);
•Providing a superior customer experience through the collective efforts of our divisions and functions; and
•Accelerating growth in non-
Operations
•Modernizing our workplace to improve end-user productivity and experience, enabling our employees to innovate and better serve our customers;
•Standardizing and simplifying our technology to best support and enable our divisions;
•Reducing our Cyber Security risk while augmenting process maturity and producing outcomes commensurate with our risk appetite;
•Maintaining our strong commitment to quality, utilizing shared data processes and capabilities; and
•Continuing to advance a strong Risk, Internal Control, and Compliance environment.
People
•Creating an inclusive performance-driven culture that drives employee engagement and aligns with our purpose of accelerating progress in the world;
•Promoting career mobility and attracting and retaining the best people; and
•Improving diversity in overall representation through talent acquisition, advancement and retention.
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. 39
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