10-QPeriod: Q1 FY2023

S&P Global Inc. Quarterly Report for Q1 Ended Mar 31, 2023

Filed April 27, 2023For Securities:SPGI

Summary

S&P Global Inc. reported a mixed financial performance for the first quarter of 2023. Revenue saw a significant increase of 32% year-over-year to $3.16 billion, largely driven by the full integration of IHS Markit following the 2022 merger and growth in subscription-based offerings across its Market Intelligence and Commodity Insights segments. However, operating profit declined by 40% to $1.14 billion. This decrease was primarily due to a substantial gain on dispositions recorded in the prior year's quarter, higher amortization expenses related to intangible assets from acquisitions, and increased merger and integration costs. Diluted earnings per share also decreased significantly to $2.47 from $4.47 in the same period last year. The company continues to execute strategic initiatives, including the planned divestiture of its Engineering Solutions business, which is expected to close in the second quarter of 2023, with proceeds anticipated for share repurchases. Despite the drop in operating profit, S&P Global maintained a strong liquidity position with increased cash flow from operations and a disciplined approach to capital allocation, including share repurchases and dividend payments.

Financial Highlights

52 data points
Beta

Revenue

$3.16B

65.6% Gross Margin

Net Income

$795.00M

25.2% Net Margin

EPS (Diluted)

$2.47

Total Assets

$62.02B

Cash & Equivalents

$1.41B

Free Cash Flow

$594.00M

Financial Statements
Beta
Revenue$3.16B
Cost of Revenue$1.09B
Gross Profit$2.07B
SG&A Expenses$705.00M
Operating Expenses$2.08B
Operating Income$1.14B
Interest Expense$85.00M
Net Income$795.00M
EPS (Basic)$2.47
EPS (Diluted)$2.47
Shares Outstanding (Basic)321.30M
Shares Outstanding (Diluted)322.10M

Key Highlights

  • 1Revenue increased by 32% to $3.16 billion, largely attributed to the integration of IHS Markit and growth in subscription services.
  • 2Operating profit decreased by 40% to $1.14 billion, impacted by a large gain on dispositions in the prior year and increased amortization expenses.
  • 3Diluted Earnings Per Share (EPS) declined to $2.47 from $4.47 year-over-year.
  • 4The company is proceeding with the divestiture of its Engineering Solutions business, expected to close in Q2 2023, with proceeds earmarked for share repurchases.
  • 5Free cash flow generation improved significantly, increasing by $337 million to $488 million.
  • 6Share repurchases in Q1 2023 were significantly lower than in Q1 2022, amounting to $500 million compared to $7 billion.
  • 7The Ratings segment experienced a 5% revenue decrease, primarily due to lower bank loan ratings and a decline in new entity credit ratings.

Frequently Asked Questions

The 32% increase in revenue to $3.16 billion was primarily driven by the full integration of IHS Markit following the 2022 merger. Additionally, growth in subscription-based services across the Market Intelligence segment and strong performance in market data and insights products within the Commodity Insights segment contributed to the rise.

The operating profit saw a 40% decrease to $1.14 billion primarily because the first quarter of 2022 included a substantial gain on dispositions ($1.344 billion from the sale of CGS). The current quarter also faced higher amortization expenses related to intangible assets acquired in the IHS Markit merger and ongoing merger and integration costs. When adjusted for these items, operating profit saw a notable increase.

S&P Global returned capital to shareholders through dividends and share repurchases. The company declared a quarterly common stock dividend of $0.90 per share. Share repurchases in the first quarter of 2023 were significantly lower than the prior year, with $500 million spent compared to $7 billion in Q1 2022. The company has $25.7 million shares remaining available under its current repurchase program.

S&P Global entered into an agreement to sell its Engineering Solutions business for $975 million in cash, with an anticipated after-tax proceed of approximately $750 million. This divestiture is expected to close in the second quarter of 2023 and the proceeds are intended to be used for share repurchases.