The operator introduces the S&P Global's Third Quarter 2023 Earnings Conference Call and informs participants that it will be recorded. Mark Grant, Senior Vice President of Investor Relations, introduces the presenters and provides information on accessing the webcast and slides. He also mentions that the call may contain forward-looking statements and provides a disclaimer.

The company is providing information to investors to help them make comparisons and understand the business from management's perspective. The earnings release contains both GAAP and non-GAAP measures, with reconciliations provided. Investors who own 5% or more of the company should contact Investor Relations due to European regulations. The call is intended for investors, not media. The third quarter saw 11% revenue growth and margin expansion despite challenges in the previous year. Adjusted EPS increased 10% and the company is raising its guidance.

In the third quarter, S&P Global saw strong financial results due to continued innovation and execution. The company has launched a significant number of new products and features, and their Vitality Index has reached 12% of total revenue. Progress has also been made on AI initiatives, and the company remains focused on their 5 strategic pillars. Sales cycles have been consistent and conversations with customers are leading to larger deals. S&P Global is viewed as a trusted strategic partner by customers, particularly in times of market volatility. Revenue growth has accelerated in the private markets and sustainability and energy transition areas.

Despite the current uncertainty and volatility in the markets, S&P Global remains optimistic about long-term growth. This is supported by the strong third quarter performance in global billed issuance and the improvement in their relative position in CLOs. Additionally, the company's Vitality revenue, which consists of revenue from new or enhanced products, saw a significant acceleration in growth. While the largest contributors to this revenue remained unchanged, there are promising signs of growth among smaller products, particularly in the private markets.

In the third quarter, the company launched new products that demonstrate strong collaboration between divisions. These include data sets from the Mobility division on the Market Intelligence Marketplace and a new unified platform called Platts Connect. These products also showcase the company's early integration of AI capabilities. The company also introduced Entity Insights, which brings data from Sustainable1 to their network and regulatory solutions. An update was also provided on the development of ChatIQ, a generative AI product. The company is accelerating their sustainability and energy transition products.

The company believes they are well-positioned to succeed in the evolving market for climate and energy transition solutions. They have a robust data set, including sustainability data on thousands of companies and real asset level data on emissions and climate hazards. Customers are looking for help with risk management, energy transition strategies, and sustainability reporting. The company has solutions for various industries and recently launched a comprehensive Sustainability Starter Pack to assist companies in developing sustainability strategies and complying with disclosure requirements.

S&P Global is confident in its ability to provide comprehensive data offerings in the areas of sustainability, energy transition, and other vital areas. They will continue to innovate and expand their product offerings to meet customer needs. The company has seen strong revenue growth in these areas and remains committed to creating value for shareholders. Despite some economic factors, secular trends are expected to continue supporting the company's growth.

S&P Global remains committed to delivering value despite geopolitical uncertainty and regulatory changes. They have tightened their expectations for billed issuance growth and have seen positive market issuance growth for the full year. All five divisions saw accelerated growth and revenue and margins outperformed expectations. Adjusted earnings per share increased 10% and excluding Engineering Solutions, revenue growth was 11%.

In the third quarter, the company saw growth across all divisions, with Ratings division outperforming due to increased issuance activity in the high-yield and bank loan markets. Adjusted margins and share count were also improved, and the company plans to continue reducing share count with a new share repurchase program. Revenue was also driven by strong demand for sustainability and energy transition products, and the Private Market Solutions division saw significant growth in revenue from private market software solutions and valuation offerings.

In the third quarter, Vitality revenue increased by 22%, representing 12% of total revenue. Cost synergies and expense optimization efforts offset most of the year-over-year expense growth. The company expects to complete its cost synergy program by year-end with a run rate of $600 million. Market Intelligence revenue increased by 8%, driven by growth in Data & Advisory Solutions and Enterprise Solutions. The company remains confident in its balance between expense management and investing in new products, with expected adjusted margin expansion for the full year.

In the third quarter, the Desktop, Data & Advisory Solutions, and Enterprise Solutions divisions all saw growth, with Desktop growing by 5% and the other two divisions growing by 9%. Credit & Risk Solutions also saw strong sales and growth in credit analytics. Adjusted expenses increased by 9%, leading to a 6% increase in operating profit and a 60 basis point decrease in operating margin. However, margins have improved over the past 12 months. The company expects continued revenue growth in the fourth quarter, thanks to new products and cross-selling efforts. In the Ratings division, revenue increased by 20%, but this was partially due to a one-time catch-up in nontransaction revenue. Excluding this, Ratings would have grown by 17%. Transaction revenue grew by 34%, driven by bank loan and high-yield issuance.

Nontransaction revenue for the company increased by 13%, primarily due to an increase in annual fees and growth in Ratings Evaluation Service activity and at CRISIL. Adjusted expenses also increased by 18%, resulting in a 22% increase in operating profit and a 70 basis points increase in operating margin. The company has tightened its billed issuance growth assumption for 2023 to 5% to 7%, reflecting the outperformance in the third quarter and lower expectations for investment-grade issuance in the fourth quarter. Ratings revenue guidance has been increased by 100 basis points, with expected growth of 6% to 8% for the full year. Commodity Insights saw revenue growth of 11%, driven by double-digit growth in Price Assessments and Energy & Resources Data & Insights. Upstream data and insights grew by 2%, while Price Assessments and Energy & Resources Data & Insights grew by 12% and 10%, respectively.

The company has seen strong commercial growth in its subscription offerings for both business lines. Advisory & Transactional Services revenue increased by 33%, driven by strong trading volumes and performance in advisory revenue. Commodity Insights saw a 17% increase in operating profit and a 260 basis point improvement in operating margin, driven by strong secular trends and demand for benchmarks, data, and insights. The Mobility division also saw a 10% increase in revenue, with double-digit growth in the dealer segment and continued growth in new business in other segments. Dealer revenue was up 30% due to price realization and new store growth, while manufacturing and financials and other segments also saw increases in revenue.

Adjusted expenses for the company increased by 10%, leading to a 10% increase in adjusted operating profit and a 20 basis point contraction in operating margin. The company expects strong growth in used car subscription products and continued benefits from increased incentive spend on new vehicles. Revenue for S&P Dow Jones Indices increased by 6%, driven by gains in exchange-traded derivative volumes and asset-linked fees. Expenses for Indices increased by 9%, resulting in a 5% increase in operating profit and a 90 basis point decrease in operating margin. There is no change to the revenue outlook for Indices.

The company is increasing its margin guidance for the division due to cost discipline and outperformance. Economists are forecasting global GDP growth of 3.1% in 2023, with subdued growth and higher inflation and energy prices. The company is narrowing its revenue growth expectations and maintaining its operating profit margin guidance. They have also provided detailed guidance on expenses and a reduction in the adjusted effective tax rate.

The company had a strong performance in the third quarter, leading to an increase in their full year guidance. Revenue and margin guidance for each division was also provided. The company is pleased with their progress on cost synergy and growth initiatives, and expects a strong finish to 2023. The first question on the earnings call was about the strong billed issuance momentum in September, and the company's president provided positive comments on the overall third quarter performance and a potential weakness in IGB for the fourth quarter. She also mentioned a strong pipeline for high-yield and bank loans and initial thoughts on the refi wall and share pipeline for 2024.

In the third quarter, there was a 150% growth in high yield issuances compared to the previous year, and a 50% increase in year-to-date rated issuance. Refinancing activity in high yields is expected to continue into next year. Bank loan volumes were down year-over-year, but there was a lot of amend and extend activity. The company is monitoring factors such as refinancing walls and geopolitical uncertainty for future projections. M&A has been down this year, but is expected to pick up in the next year. CP balances are high, which could lead to more fixed income issuances. The company will provide more information on 2024 projections in February.

During the quarterly earnings call, the company's CEO commented on the increase in corporate cash balances and the resulting need for issuance. The next question was about the margins for the MI division, and the company acknowledged that there is room for improvement. They expect margins to improve in the next quarter due to management actions and continued investment in growth. Another question asked about the company's share gains in particular Ratings categories, to which the CFO responded that the company's billed issuance was ahead of industry data and they have seen some notable share gains.

Martina Cheung responds to a question about the differences between market issuance and billed issuance. She explains that the billed issuance data in Q3 was strong due to a mix of factors, including high yield and leverage loan issuers tapping the market at different times. Cheung also mentions the success and growth in investments made in structured finance, infrastructure, and other areas. The next question is from Faiza Alwy, who asks Ewout Steenbergen about expenses in the fourth quarter and how they will look in 2024 now that the company has completed its synergies. Steenbergen notes that expenses have been volatile due to the pandemic, but this year they have been more stable.

The speaker discusses the expense growth and margin expansion in various sectors of the company, including Commodity Insights and Ratings, Mobility, and Indices. They also mention the potential for expenses to decrease in the fourth quarter in order to meet their guidance. The speaker then addresses a question about the IHS Markit acquisition and explains that they are focused on optimizing the business and potentially making changes in the future.

The speaker discusses the progress of integration and merger within the company, highlighting the consolidation of products as an opportunity for growth. They mention plans to invest in areas such as sustainability, private markets, and reference pricing. The questioner asks about the contribution of M&A revenues to various sectors in the third quarter.

During the Investor Day held nearly a year ago, S&P Global laid out its new vision and 5 pillars for managing the business and allocating capital. The company is on track to meet its targets for revenue growth and margins, and has ambitious plans for new products and services. S&P Global feels confident about its direction and has received positive reception for its focus on important market trends.

The company is confident about achieving their targets after almost a year. They are excited about their prospects. In the context of private credit market, the company has seen increased demand for fund ratings and structured credit, which aligns with their expectations. They are also seeing growth in new products and the Vitality Index.

The speaker responds to a question about the company's growth and attributes it to the merger, strategic investments in sustainability and other areas, and the use of AI in their products. They also mention the Vitality Index as a unique metric to measure their innovation and state that their gen AI features are still under development.

During a recent earnings call, the company discussed their revenue growth in Market Intelligence and the impact of gen AI, but stated it was too early to see the full effects. They also mentioned that they narrowed their guidance for revenue growth in Market Intelligence, but the midpoint remained unchanged at 7%, indicating stabilizing trends in their sustainability and energy transition business. The company also highlighted strong sales momentum and a growing ACV book, as well as revenue synergies and improving comps. They expect further acceleration of Market Intelligence growth in the fourth quarter.

Ewout Steenbergen, of IHS, reported that the company is close to reaching their target of $600 million in cost synergies and will no longer discuss cost synergies once this goal is achieved. They will continue to look for efficiency and productivity opportunities in the future. In terms of revenue synergies, they have made significant progress, reaching $112 million in run rate. They are on track to reach their 5-year goal of $350 million, with a focus on cross-selling and new product launches. Overall, Steenbergen is confident in the company's progress and future prospects.

Martina Cheung, responding to a question from Seth Weber, discusses the reacceleration of the sustainability and energy transition business in the third quarter. She notes strong growth across all divisions, with inflows into core climate and sustainability indices, Mobility energy transition products, and FPOs in Ratings. She emphasizes that the long-term drivers and needs in this business have not changed, and S&P Global has the best and most comprehensive offerings in this area.

Commodity Insights is a leader in energy transition analytics and advisory, and with the recent merger, they are launching products that bring together unique and fantastic IP from different divisions. One example is the real asset data, which combines data from Mobility, Commodity Insights, Market Intelligence, and Sustainable1, and will be a powerhouse in providing specific emissions, biodiversity, and nature data at the real asset level. In the Q3 earnings call, it was mentioned that there has been strength in the private market and iLEVEL, driven by the rapid transformation of the private markets over the last 25 years. This includes a diversification of asset classes and types of investors, leading to a higher demand for data and analytics in this area.

The speaker discusses the growth of their Indices business and mentions new product launches in the last quarter. They anticipate further growth in this area and mention a pipeline of new products, but do not specify which areas they will focus on.

The speaker discusses the changes happening in the asset management industry and the company's strengths in this area. They mention the shift from active to passive investing and the launch of new products related to sustainability, climate, and energy transition. They also highlight the opportunities in multi-asset class and credit indices, as well as the interest in risk management and trading strategies.

In paragraph 31, the speaker discusses the company's strong growth in various areas, including climate, multi-asset class, factors, fixed income, and exchange-traded derivatives. They also mention their partnerships with CBOE and CME and their development of new products. The speaker then hands it over to Ewout to provide more details on the numbers. Ewout explains that AUM fees and levels are correlated, but there may be discrepancies due to other categories such as mutual funds and insurance funds. They also mention a trend of mix shift towards flagship ETFs in a risk-off market.

Adam Parrington asks Martina Cheung about the strong September issuance trends and whether it is a start of an improving trend or indicative of companies rushing to get financing before further rate increases. Cheung mentions that September was higher than expected and some of it may have been pulled forward from Q4. She also discusses other factors that may impact the trend, such as issuers pulling forward from 2024 and geopolitical uncertainties. She also mentions the positive flow of funds into fixed income funds as a good indicator. Jeff Meuler then asks about an improving relative position in CLOs.

In response to a question about retaining capacity and headcount, Martina Cheung discusses the improvement in sub-asset classes in structured finance and the importance of talent and expertise. She also mentions the growth in the asset class driven by private credit issuers and the team's strong execution in this area. Ewout Steenbergen adds that the lower effective tax rate in the quarter is due to new guidance on foreign tax credits. The final question from Heather Balsky is about the drivers for maintaining growth in the Commodity Insights business.

Doug Peterson, CEO of S&P Global, explains that the company's commodity prices have a significant impact on the growth of their business. They have recently launched a new platform, Platts Connect, which combines their traditional oil and gas services with ENR from IHS Markit. This allows them to better serve their traditional markets and also expand into new commodities and energy sources related to energy transition. S&P Global also benefits from synergies across their other businesses, such as S1 and Market Intelligence, which provide new data sets for their services. Overall, the company is well-positioned to meet the increasing demand for transparency and comparability in the markets.

The speaker discusses the importance of high-quality data and its delivery for their business. They express satisfaction with the progress of their merger with IHS Markit and mention recent product launches. The speaker thanks those involved and concludes the call.

This summary was generated with AI and may contain some inaccuracies.