10-QPeriod: Q1 FY2015

S&P Global Inc. Quarterly Report for Q1 Ended Mar 31, 2015

Filed April 28, 2015For Securities:SPGI

Summary

S&P Global Inc. (formerly McGraw Hill Financial, Inc.) reported solid revenue and profit growth for the first quarter of 2015 compared to the same period in 2014. Revenue increased by 6% to $1.27 billion, driven by strong performance across its key segments, particularly S&P Ratings and S&P Capital IQ. Operating profit saw a significant jump of 19% to $501 million, reflecting improved operational efficiency and the benefit of certain legal settlement recoveries. The company also demonstrated a healthy increase in diluted earnings per share from continuing operations, up 26% to $1.10. Management highlighted strategic priorities focused on creating growth through customer engagement and innovation, and driving performance through operational excellence. The company maintained a strong liquidity position, although cash and equivalents decreased due to the payment of significant legal and regulatory settlements. Key drivers for revenue growth included an increase in transaction revenue at S&P Ratings from corporate bond ratings and U.S. public finance, and growth at S&P Capital IQ driven by higher average contract values. While the company faced some headwinds from foreign exchange rates, the overall financial results indicate a positive trajectory for the business.

Financial Highlights

51 data points
Beta

Revenue

$1.27B

67.8% Gross Margin

Net Income

$303.00M

23.8% Net Margin

EPS (Diluted)

$1.10

Total Assets

$5.45B

Cash & Equivalents

$1.18B

Free Cash Flow

-$1.35B

Financial Statements
Beta
Revenue$1.27B
Cost of Revenue$410.00M
Gross Profit$863.00M
SG&A Expenses$329.00M
Operating Expenses$772.00M
Operating Income$501.00M
Interest Expense$16.00M
Net Income$303.00M
EPS (Basic)$1.11
EPS (Diluted)$1.10
Shares Outstanding (Basic)273.50M
Shares Outstanding (Diluted)276.30M

Key Highlights

  • 1Total revenue increased 6% to $1.27 billion for the three months ended March 31, 2015, compared to $1.19 billion in the prior year.
  • 2Operating profit rose 19% to $501 million, indicating improved operational efficiency and margin expansion.
  • 3Diluted earnings per share from continuing operations grew by 26% to $1.10.
  • 4S&P Ratings segment revenue increased 6%, driven by strong corporate bond and public finance ratings, while S&P Capital IQ revenue grew 6% due to higher contract values.
  • 5The company utilized its commercial paper program and credit facility, borrowing $190 million and $175 million respectively, primarily to fund legal and regulatory settlements.
  • 6Dividends per common share increased to $0.33 from $0.30.
  • 7The company's share repurchase program continued, with 1.1 million shares bought back for $110 million in the quarter.

Frequently Asked Questions

The primary drivers of the revenue increase were growth in non-subscription/transaction revenue at S&P Ratings, stemming from increased corporate bond ratings and U.S. public finance revenues, and growth at S&P Capital IQ due to higher average contract values and improved customer retention.

Total expenses decreased slightly by 1% to $772 million. Operating-related expenses increased modestly, but selling and general expenses decreased by 4%, largely due to restructuring actions and legal settlement recoveries at S&P Ratings, which more than offset increased costs in other areas. This expense management, coupled with revenue growth, led to a significant 19% increase in operating profit.

As of March 31, 2015, the company had total debt of $1.164 billion, with $365 million classified as short-term debt. The company utilized its commercial paper program and credit facility to borrow $190 million and $175 million, respectively, largely to fund legal and regulatory settlements. Despite a decrease in cash and equivalents from the prior quarter, primarily due to these settlements, the company stated it maintains a strong financial position and expects its cash, operating cash flows, and credit facility to be sufficient for its needs.

Yes, the company is involved in various legal and regulatory matters, including financial crisis litigation, SEC compliance, and proceedings in Italy related to ratings activities. While the company believes it has meritorious defenses, the outcomes are uncertain and could potentially have a material adverse effect on its financial condition, cash flows, business, or competitive position. Specific proceedings mentioned include financial crisis litigation, SEC investigations, an Italian court proceeding concerning sovereign debt ratings, and a Parmalat litigation.