10-QPeriod: Q1 FY2018

S&P Global Inc. Quarterly Report for Q1 Ended Mar 31, 2018

Filed April 26, 2018For Securities:SPGI

Summary

S&P Global Inc. (SPGI) reported a strong first quarter for 2018, with an 8% increase in revenue to $1.57 billion and an 11% rise in operating profit to $711 million, compared to the same period in 2017. This growth was broad-based across all segments, driven by increases in subscription and non-transaction revenues, as well as asset-linked fees and sales usage-based royalties. Diluted earnings per share saw a significant increase of 26% to $1.93. The company also actively returned capital to shareholders, with a substantial increase in share repurchases, including a $1 billion accelerated share repurchase program. Despite a substantial decrease in cash and cash equivalents due to these financing activities, S&P Global maintained a strong financial position. The adoption of new revenue recognition standards (ASC 606) had a minimal impact on current period results, with a slight increase in revenue.

Financial Highlights

52 data points
Beta

Revenue

$1.57B

72.6% Gross Margin

Net Income

$491.00M

31.3% Net Margin

EPS (Diluted)

$1.93

Total Assets

$8.50B

Cash & Equivalents

$1.76B

Free Cash Flow

$360.00M

Financial Statements
Beta
Revenue$1.57B
Cost of Revenue$430.00M
Gross Profit$1.14B
SG&A Expenses$381.00M
Operating Expenses$856.00M
Operating Income$711.00M
Interest Expense$34.00M
Net Income$491.00M
EPS (Basic)$1.94
EPS (Diluted)$1.93
Shares Outstanding (Basic)252.40M
Shares Outstanding (Diluted)254.40M

Key Highlights

  • 1Revenue increased by 8% year-over-year to $1.57 billion, driven by growth across all segments, particularly in Indices and Market Intelligence.
  • 2Operating profit grew by 11% to $711 million, showcasing improved operational leverage and margin expansion.
  • 3Diluted Earnings Per Share (EPS) rose by 26% to $1.93, indicating enhanced profitability for shareholders.
  • 4The company significantly increased its share repurchase activity, spending $1.1 billion in Q1 2018, including a $1 billion accelerated share repurchase (ASR) agreement, demonstrating a commitment to returning capital to shareholders.
  • 5S&P Global Ratings saw a 5% revenue increase, with non-transaction revenue up 11% driven by surveillance fees and entity credit ratings, while transaction revenue slightly declined.
  • 6Market Intelligence revenue grew 9%, primarily due to increases in Market Intelligence Desktop and RatingsXpress® subscriptions.
  • 7The company adopted new revenue recognition standard ASC 606 on January 1, 2018, which had a modest positive impact on revenue recognition.
  • 8Despite increased share repurchases and dividend payments, operating cash flow remained robust, increasing slightly to $360 million.

Frequently Asked Questions

Revenue growth was broad-based across all segments, with notable contributions from S&P Dow Jones Indices (Indices) driven by higher volumes for exchange-traded derivatives and increased assets under management for ETFs, and from S&P Global Market Intelligence (Market Intelligence) due to strong annualized contract value growth in its key products like Market Intelligence Desktop.

S&P Global adopted ASC 606, 'Revenue from Contracts with Customers,' on January 1, 2018. While it resulted in a small net increase to opening retained earnings and a modest $3 million increase in revenue for the first quarter of 2018, its overall impact on the current period's financial statements was not material, and prior year amounts were not restated.

The company generated strong operating cash flow but significantly increased its use of cash for financing activities, primarily through share repurchases ($1.1 billion in Q1 2018, including a $1 billion ASR program) and dividends. This led to a substantial decrease in cash and cash equivalents from $2.78 billion at the end of 2017 to $1.76 billion at the end of Q1 2018. Despite this reduction, the company states it maintains a strong financial position and expects its cash flow from operations and existing credit facility to be sufficient for its needs.

Yes, S&P Global completed several acquisitions during the first quarter of 2018 that were not material to the consolidated financial statements. These included Kensho Technologies Inc. (announced in April but likely in progress), Panjiva, Inc. (by Market Intelligence), and Pragmatix Services Private Limited (by CRISIL within the Ratings segment).