10-QPeriod: Q2 FY2022

S&P Global Inc. Quarterly Report for Q2 Ended Jun 30, 2022

Filed August 3, 2022For Securities:SPGI

Summary

S&P Global Inc. (SPGI) reported a significant increase in revenue for the three and six months ended June 30, 2022, driven primarily by the acquisition of IHS Markit completed in February 2022. Revenue for the three months increased by 42% to $2.99 billion, and for the six months by 31% to $5.38 billion, compared to the prior year periods. Despite the substantial revenue growth, diluted earnings per share (EPS) attributable to S&P Global Inc. common shareholders decreased by 13% for the three months to $2.86, though it increased by 12% for the six months to $7.17. This divergence is largely attributable to significant merger-related expenses, higher amortization of intangible assets, and the recognition of substantial gains from divestitures in the current period, which masked the underlying operational performance. The company also saw a significant increase in debt, largely due to the IHS Markit acquisition, which led to a considerable rise in interest expenses. Key strategic initiatives for the company include integrating the IHS Markit acquisition, focusing on growth areas like ESG and energy transition, and enhancing digital capabilities. While the company executed substantial divestitures to meet regulatory requirements for the merger, the overall financial picture reflects the immediate costs and complexities associated with integrating a large acquisition alongside ongoing market dynamics.

Financial Highlights

54 data points
Beta

Revenue

$2.99B

66.4% Gross Margin

Net Income

$972.00M

32.5% Net Margin

EPS (Diluted)

$2.86

Total Assets

$64.32B

Cash & Equivalents

$3.57B

Free Cash Flow

$454.00M

Financial Statements
Beta
Revenue$2.99B
Cost of Revenue$1.01B
Gross Profit$1.99B
SG&A Expenses$768.00M
Operating Expenses$2.08B
Operating Income$1.48B
Interest Expense$90.00M
Net Income$972.00M
EPS (Basic)$2.87
EPS (Diluted)$2.86
Shares Outstanding (Basic)338.00M
Shares Outstanding (Diluted)339.30M

Key Highlights

  • 1Revenue surged by 42% (three months) and 31% (six months) year-over-year, largely driven by the acquisition of IHS Markit.
  • 2Diluted EPS decreased by 13% for the quarter but increased by 12% for the six-month period, impacted by merger-related expenses and divestiture gains.
  • 3Significant increases in operating-related expenses (90% for three months, 67% for six months) and selling & general expenses (103% for three months, 133% for six months) were primarily due to merger integration costs and higher compensation.
  • 4Amortization of intangible assets rose dramatically due to the IHS Markit acquisition, contributing to a significant increase in total expenses.
  • 5The company completed several material divestitures (CUSIP Global Services, LCD, Base Chemicals, OPIS) as part of regulatory approvals for the IHS Markit merger, recognizing substantial gains on some sales.
  • 6Total debt increased significantly from $4.11 billion to $10.78 billion, largely due to debt assumed as part of the IHS Markit acquisition and subsequent new debt issuances.
  • 7Share repurchases amounted to $8.5 billion in the first six months of 2022, a substantial increase compared to no cash repurchases in the prior year period.

Frequently Asked Questions

The acquisition of IHS Markit, completed on February 28, 2022, was the primary driver of the significant revenue increase in the reported periods. Revenue for the three and six months ended June 30, 2022, rose by 42% and 31%, respectively. However, the acquisition also led to substantial merger-related costs, increased amortization of intangible assets, and a significant rise in debt levels, which negatively impacted profitability and increased interest expenses.

S&P Global completed the sale of several businesses (CUSIP Global Services, LCD, Base Chemicals, OPIS) as conditions for the IHS Markit merger approval. These divestitures resulted in significant gains on some sales, notably a pre-tax gain of $1.344 billion from the sale of CUSIP Global Services and $518 million from the sale of LCD. While these gains boosted reported earnings in the current period, the ongoing revenue streams from these divested businesses are now absent.

Total debt more than doubled from $4.11 billion at the end of 2021 to $10.78 billion by June 30, 2022. This increase is mainly due to assuming IHS Markit's debt and issuing new debt to fund the acquisition. Consequently, net interest expense also rose substantially, from $32 million in Q2 2021 to $90 million in Q2 2022, and from $63 million in H1 2021 to $147 million in H1 2022. Investors should monitor the company's debt management and interest coverage ratios going forward.

Diluted EPS attributable to S&P Global Inc. common shareholders decreased by 13% to $2.86 for the three months ended June 30, 2022, compared to $3.30 in the prior year. However, for the six months ended June 30, 2022, diluted EPS increased by 12% to $7.17 from $6.42 in the prior year. The quarterly decrease is largely due to merger-related expenses, increased amortization, and other costs, which offset the revenue gains. The six-month increase reflects a more normalized view, still influenced by merger impacts but also benefiting from the substantial divestiture gains.