10-QPeriod: Q1 FY2014

S&P Global Inc. Quarterly Report for Q1 Ended Mar 31, 2014

Filed April 29, 2014For Securities:SPGI

Summary

S&P Global Inc. (formerly McGraw Hill Financial, Inc.) reported solid financial performance for the first quarter of 2014, with a notable increase in revenue and operating profit compared to the same period in the prior year. Revenue grew 5% to $1,236 million, primarily driven by growth in subscription/non-transaction revenue across its core segments, particularly S&P Dow Jones Indices and S&P Capital IQ. Operating profit saw a substantial 55% increase to $430 million, reflecting improved operational efficiencies and the favorable impact of revenue growth. The company's strategic initiatives, including portfolio rationalization and a focus on core intelligence businesses, appear to be yielding positive results. The divestiture of McGraw Hill Education in the prior year significantly impacted the prior-year's net income due to a large gain, making the year-over-year net income comparison less direct. However, income from continuing operations increased by a strong 58% to $275 million, demonstrating the underlying strength of the ongoing business segments. The company also continued its commitment to shareholder returns through dividends and share repurchases.

Financial Highlights

50 data points
Beta

Revenue

$1.20B

66.9% Gross Margin

Net Income

$248.00M

20.7% Net Margin

EPS (Diluted)

$0.89

Total Assets

$6.01B

Cash & Equivalents

$1.53B

Free Cash Flow

$114.00M

Financial Statements
Beta
Revenue$1.20B
Cost of Revenue$396.00M
Gross Profit$800.00M
SG&A Expenses$347.00M
Operating Expenses$776.00M
Operating Income$420.00M
Interest Expense$14.00M
Net Income$248.00M
EPS (Basic)$0.91
EPS (Diluted)$0.89
Shares Outstanding (Basic)271.80M
Shares Outstanding (Diluted)277.20M

Key Highlights

  • 1Revenue increased by 5% to $1,236 million for the three months ended March 31, 2014, compared to $1,181 million in the prior year.
  • 2Operating profit surged by 55% to $430 million, up from $278 million in the same period last year, indicating improved operational leverage.
  • 3Income from continuing operations grew by 58% to $275 million, highlighting the strength of the core business segments.
  • 4S&P Dow Jones Indices showed strong growth with an 18% increase in revenue and a 43% increase in operating profit, driven by higher ETF assets under management and derivative volumes.
  • 5S&P Capital IQ reported a 4% revenue increase and a 6% operating profit increase, supported by growth in desktop solutions and RatingsXpress.
  • 6The company returned capital to shareholders, with dividends declared per common share increasing to $0.30 from $0.28 in the prior year.
  • 7Share repurchases continued, with $164 million utilized in the first quarter of 2014 under the new 50 million share repurchase program.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in subscription/non-transaction revenue. This was fueled by continued demand for Platts' proprietary content, growth at S&P Capital IQ from increased average contract values, and growth in non-issuance related revenue for corporate ratings. S&P Dow Jones Indices also saw revenue growth due to higher assets under management for ETFs and increased derivative volumes.

The divestiture of McGraw Hill Education in March 2013 resulted in a significant after-tax gain of $612 million recorded in discontinued operations for the first quarter of 2013. This large gain inflated the prior-year's total net income to $735 million, making the year-over-year comparison of net income appear as a significant decrease ($248 million in Q1 2014). However, income from continuing operations, which excludes this one-time gain, shows a substantial increase, indicating underlying business improvement.

The company aims to be the leading provider of essential intelligence to global capital and commodities markets. Its strategy focuses on serving customers with innovative solutions, leveraging its strong brands, and operating as a dynamic global company. Key priorities include enhancing analytical quality through technology and data, strengthening customer engagement, and developing high-performing talent. The company is also evaluating strategic alternatives for its McGraw Hill Construction business within the C&C segment as part of its portfolio rationalization.

S&P Global Inc. is committed to returning capital to shareholders. This includes increasing its quarterly common stock dividend and actively repurchasing shares under its authorized programs. The company views share repurchases as a way to return value to shareholders, offset dilution from stock-based compensation, and utilize excess cash generated from operations.