The operator welcomes participants to S&P Global's Second Quarter 2024 Earnings Conference Call, which is being recorded. Mark Grant, Senior Vice President of Investor Relations, introduces the presenters and mentions the availability of the webcast and slides. He also reminds listeners that the call may contain forward-looking statements and provides information on where to access the company's financial information.

The company provided information on its operating performance and financial metrics, including non-GAAP measures. They also mentioned European regulations and directed media questions to their Media Relations team. The CEO then discussed the company's strong first half of 2024, with accelerated revenue growth, margin expansion, and record-high adjusted EPS. They saw significant growth in transaction revenue and subscription products, despite industry challenges, and achieved margin expansion and EPS growth through market demand and expense control.

S&P Global has been focusing on developing its leaders and product innovation. They have made significant enhancements to their CapIQ Pro release and have launched new benchmarks and commodity insights. The company is also optimizing its portfolio by closing deals and divesting certain businesses. In terms of revenue, S&P Global saw growth in both public and private markets, with private market revenue increasing by 70% year-over-year. They have also achieved nearly $200 million in annualized run rate revenue synergies from their merger with IHS Market. Despite market headwinds, S&P Global's diverse customer base and product portfolio have helped them maintain stable financial performance.

Despite slightly lower renewal rates in market intelligence, the company's overall financial impact was expected and included in their initial guidance. The company's ability to align product innovation with customer needs was demonstrated by the growth in revenue from private market solutions and sustainability and energy transition offerings. Billed issuance increased by 54% year-over-year, driven by tight credit spreads and improvement in macroeconomic indicators. The second half of the year is expected to be softer in terms of billed issuance and transaction revenue, but the company's base case assumes a modest decline in the fourth quarter. In the second quarter, newer enhanced products generated $375 million in revenue for the company's Vitality division.

In the second quarter, S&P Global reported that 11% of their revenue came from their Vitality Index, which is an improvement from the previous quarter. The key contributors to this growth were CARFAX listings and the CARFAX Banking and Insurance Group, as well as products from their Commodity Insights Division and Sustainable Bonds from Ratings. S&P Global is committed to maintaining their Vitality Index at or above 10% and is seeing success through their innovative use of generative AI, such as the ChatAI platform on Platts Connect. Commodity Insights also introduced new benchmark Price Assessments for beef and poultry.

In the second quarter, the company has made significant strides in its agriculture commodities and energy transition offerings. They have also enhanced their global integrated energy model and developed internal tools, including the S&P Spark Assist platform, which has already been adopted by 14,000 employees. This platform promotes collaboration and allows for quick development of new applications using GenAI models. The company believes this approach will lead to faster innovation and avoids being tied to a single vendor. Additionally, the June release of CapIQ Pro has brought valuable enhancements to the platform, strengthening their competitive position and providing value to customers.

The paragraph discusses the integration of fixed income data from IHS Market into the CapIQ Pro platform, as well as the improvements made to charting and visualization capabilities through the Chart IQ acquisition. It also mentions the introduction of transcript summarization, which was built organically and is based on technology developed by Kensho. The acquisition of Visible Alpha, which provides detailed financial models and consensus estimates, is also highlighted as a key accomplishment. S&P Global's reputation and partnerships in the financial markets are expected to drive further growth for Visible Alpha in various industries.

The company has seen a 5% increase in contributing brokers and has generated over 150 sales leads and closed 10 deals. They plan to leverage the Visible Alpha Platform and S&P Global's datasets to create unique content. The CEO will be retiring in November and Martina Cheung will become the 11th CEO. The succession plan has been successful and the current CEO will stay on as an advisor until the end of 2025. The company has had strong growth in all divisions and has maintained expense discipline.

The company saw a significant increase in revenue and operating margin in the second quarter of 2024, with three out of five divisions experiencing double-digit growth. The interim CFO, Chris Craig, reported a 14% increase in revenue and a 30% increase in adjusted diluted earnings per share. The company also saw growth in strategic investment areas, including Sustainability and Energy Transition and Private Market Solutions. The company's revenue synergies reached an annualized run rate of $199 million.

In the second quarter, the company recognized $54 million in revenue synergies, with Market Intelligence revenue increasing by 7%. The growth was impacted by softness in the financial services end market, but the company is focused on improving performance and introducing new content and capabilities. Enterprise solutions saw strong growth due to increased activity in equity and debt capital markets, and Credit and risk solutions also grew. Adjusted expenses increased, but operating profit and margin also increased. In the Ratings division, there was exceptional revenue growth of 33%, driven by increased bank loan and bond issuance.

Non-transaction revenue for the company increased by 9%, driven by an increase in annual fee revenue and new mandates from high-yield issuers. Operating profit and margin also saw significant increases. In the Commodity Insights segment, revenue grew by 12%, with strong performance in all business lines and double-digit growth in Price Assessments and Energy and Resources Data and Insights. Advisory and Transactional services had a 32% increase in revenue, driven by strong trading volumes and consulting activity. Upstream Data and Insights saw a 5% increase in revenue, and the company expects low single-digit growth for the full year. Adjusted expenses increased by 8% due to higher compensation costs, investments in growth initiatives, and the acquisition of World Hydrogen Leaders.

The paragraph discusses the financial performance of three business lines within the company: Commodity Insights, Mobility, and S&P Dow Jones indices. Commodity Insights saw a 16% increase in operating profit and a 170 basis point improvement in operating margin. Mobility's revenue increased by 8%, driven by growth in dealer revenue and a decline in manufacturing revenue. S&P Dow Jones indices saw a 12% increase in revenue, primarily due to strong growth in asset-linked fees and data and custom subscriptions. The global ETF market also saw record inflows, indicating potential for future growth.

Expenses increased by 4% due to investments and incentive compensation, while operating profit and margin saw significant growth. The company saw strength across all business segments, with market factors and investments driving growth. The company is pleased with the profitable growth and is raising its financial outlook for the year due to an increase in build issuance forecasts. The company also presented a new study on debt financing to provide more clarity for analysts and investors.

The company is comparing the amount of debt set to mature in the next few years and is confident in the long-term strength of their business. They have raised their guidance for the full year, with expected revenue growth and improved margins. The revenue guidance for Market Intelligence remains unchanged, with the addition of Visible Alpha and loss of revenue from the divestiture of Fincentric.

Visible Alpha and Fincentric are reported in different business lines, which will lead to different performance in the second half of the year. The Ratings Business is expected to perform well, but the second half may be softer due to normal seasonality and pull forward. Commodity insights revenue guidance remains unchanged, while the recall business has been abnormally soft and the revenue growth for the remainder of the year is more predictable. The indices division has seen significant outperformance and the revenue growth guidance has been raised. The guidance assumes flat market levels from the end of June.

The company's margin outlook for Market Intelligence is expected to be modestly dilutive in 2024 due to offsetting revenue impacts from Visible Alpha and Fincentric. The margin guidance for Ratings has been raised, while Commodity Insights' margin guidance remains unchanged. Mobility's margins are expected to be slightly lower due to softer revenue from the recall business. The company plans to continue investing in Indices for future growth. The call was then turned over to Mark for questions. The first question was about the pipeline and sales cycle trend for Market Intelligence, as well as the future of the Desktop business.

The speaker mentions that the softness in the banking and investment industry was expected due to the elimination of seats and interest rate spikes. However, there are signs of improvement such as a return of M&A and strong debt and equity markets. The company has enterprise contracts that are not negotiated by seat and they plan to bring more data to discussions of vendor consolidation. They have enhanced their technology and products, such as Visible Alpha, which has seen an increase in users. The speaker also mentions growth in the Enterprise Solutions segment, driven by improvements in the capital markets. Overall, there are various aspects to Market Intelligence.

In the paragraph, the speaker mentions that the company has reiterated their guidance and is focused on their capital allocation model. They believe that the recent transactions of acquiring Visible Alpha and divesting Fincentric were valuable for the company. The modeling shows that Visible Alpha will add 1% of growth while Fincentric will take away 1% of growth, but they are in different segments. The company is also looking at other opportunities for consolidation and discussions with different organizations. They believe that their data and analytics give them strength across the entire platform.

Martina Cheung, Senior Vice President at S&P Global, discusses the company's strong growth in the first half of the year. They have seen growth in all categories, but particularly in high yield and bank loan ratings. Investment grade has seen a slight tapering off after a strong first quarter. Some sub-asset classes, such as CLOs and data center securitizations, are expected to have a strong year. Overall, S&P Global has a diverse portfolio of services, including market intelligence, financial services, and sustainability platforms, which make them relevant to many discussions about data relationships. Martina's colleague, Mark Grant, clarifies that the percentage points impact they are discussing is on market intelligence revenue growth, not the company as a whole.

The speaker discusses the trends in the index business, including the continued shift from active to passive investing and the increase in flows to U.S. equities. They also mention new partnerships and innovation in different asset classes, such as fixed income and mid-cap. Overall, they expect to see continued growth in the asset linked fees for the rest of the year.

The company is pleased with their success in strategic investments and plans to continue investing in new products, services, and areas such as private markets, Sustainability & Energy Transition, and artificial intelligence. They believe these investments are crucial for maintaining loyal customers and generating positive pricing. While not all investments are successful, the company has a strong track record in this area.

The speaker thanks the questioner and introduces Toni Kaplan from Morgan Stanley. Toni asks about S&P's position in the AI market and their use of proprietary data. The speaker explains their early start with the acquisition of Kensho and their vision for AI in decision-making. They have a system in place for governance and training and have created an open architecture model called S&P Spark Assist. This allows them to use various models and they have recently launched Chat AI and transcript summaries on CapIQ Pro.

Martina Cheung, head of Ratings at Market Intelligence, discusses the potential for GenAI to improve quality, efficiency, and time to market for the company's core business. She gives an example of a tool that helps CLO credit analysts with complex documentation and mentions the work being done to build a GenAI interface on RatingsDirect and CapIQ Pro. Douglas Peterson, CEO of S&P Global, adds that the cyclical nature of the business has led to both non-subscription and recurring variable revenues increasing by double digits in the current quarter.

The speaker discusses the cyclical elements in their business and mentions that they have already factored in their expectations into the guidance they gave. They mention growth in the Enterprise Solutions sub segment, driven by non-subscription revenue such as lending solutions and regulatory and compliance. They also mention that they will be closely monitoring interest rates and M&A activity, which has been relatively weak but shows some signs of improvement. The speaker also notes that there is a lot of pent-up capital and potential for exits in the private equity sector.

The company is seeing strong revenue synergy from both cross-selling and new product development. They have launched over 21 products in Market Intelligence and 9 in Commodity Insights, with a pipeline for 15 more. They have also successfully launched a new approach to providing custom indices in their Indices division. The cross-selling has been more impactful than expected, thanks to the power of the S&P Global brand and their diverse relationships.

The speaker discusses the success of S&P Global's corporate business, government, and financial services clients. They mention the addition of bond prices and new products, such as ChatAI, as part of their synergy opportunities. They also address the trend of private deals being refinanced in the public markets and note that there have been some interesting trends in the two quarters.

The speaker discusses the growth in private and public markets in the second quarter and how it aligns with their overall strategy. They also address a competitor's higher growth guidance and explain that they do not plan with competitors in mind. They feel confident in their own strategy and the various factors contributing to their over performance.

The company has seen strong market demand and has been able to meet it with specific strategies and preserved capacity. The growth rate for the year reflects key drivers such as avoiding Q4, tougher comps, and strong performance in strategic areas. The company expects a modest decline in Q4 but overall feels good about the growth. Three months ago, the company expected improvements in Market Intelligence revenue growth in the second half of the year, but the guidance for the full year remains flat due to the first half of the year.

Doug Peterson, CEO of S&P Global, believes that it is still possible for the company to see growth, despite challenges in the market. He mentions potential tailwinds such as rate changes and M&A activity, but emphasizes that the company's guidance is based on realistic expectations. When asked about the MI (Market Intelligence) segment, Peterson does not disclose ACV (annual contract value) growth, but highlights the strong sales pipeline and opportunities for cross-selling. He also mentions the potential of Visible Alpha, a recent acquisition, to drive growth in the future. Overall, Peterson is confident in the company's ability to continue growing, especially in the Credit & Risk Solutions segment.

The speaker is pleased with the company's progress and the synergies they have achieved. They do not use ASV as a metric for reporting. One question was raised about Mobility, but the speaker assures that the sales growth and vitality products are doing well. The segment margin guidance was lowered, but this was due to the recall products which have high margins. The speaker declines to provide specific guidance for the third and fourth quarters, but does mention a decline in issuance in the fourth quarter.

The speaker addresses the growth of Commodity Insights, stating that it has had a strong run and is an important area for global markets. They mention the launch of new products and the strong performance of advisory and transaction services, which grew 32% in the quarter. However, they do not expect this level of growth to continue and have guided to a more blended level of growth for the rest of the year.

During the Q&A portion of the earnings call, Surinder Thind from Jefferies asked about the visibility and forecast for the rest of the year. Douglas Peterson, the current CEO, responded by saying that they have a good view on the pipeline for the rest of the year. They gather information from analysts, bankers, and market conditions to make their projections. Peterson also congratulated Martina Cheung, the next CEO of S&P Global, and mentioned that the transition is going well. More information about the transition will be provided in the next earnings call.

The speaker thanks the company's employees for their hard work and highlights their successful initiatives in energy transition, sustainability, and generative AI. They also mention progress on merger synergies and encourage everyone to take some time off over the summer. The call is concluded and replays will be available on the company's website.

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