S&P Global Inc.

Good morning and welcome to S&P Global's fourth quarter and full year 2022 earnings conference call. I'd like to inform you that this call is being recorded for broadcast. All participants are in a listen-only mode. We will open the conference to questions and answers after the presentation and instructions will follow at that time. To access the webcast and slides, go to investor.spglobal.com. If you need any additional technical assistance, please press star zero and I will assist you momentarily. I would now like to introduce Mr. Mark Grant, Senior Vice President of Investor Relations for S&P Global. Sir, you may begin.

Good morning, and thank you for joining today's S&P Global fourth quarter and full year 2022 earnings call. Presenting on today's call are Doug Peterson, President and Chief Executive Officer, and Avout Steenbergen, Executive Vice President and Chief Financial Officer. For the Q&A portion of today's call, we will also be joined by Adam Kanzler, President of S&P Global Market Intelligence, and Martina Chung, President of S&P Global Ratings. We issued a press release with our results earlier today. If you need a copy of the release and financial schedules, they can be downloaded at investor.spglobal.com. The matters discussed in today's conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections, estimates, and descriptions of future events. Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. A discussion of these risks and uncertainties can be found in our Forms 10-K, 10-Q, and other periodic reports filed with the U.S. Securities and Exchange Commission. In today's earnings release and during the conference call, we're providing non-gap adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the company's operating performance between periods and to view the company's business from the same perspective as management. The earnings release contains exhibits that reconcile the difference between the non-GAAP measures and the comparable financial measures calculated in accordance with US GAAP. I would also like to call your attention to a specific European regulation. Any investor who has or expects to obtain ownership of 5% or more of S&P Global should contact Investor Relations to better understand the potential impact of this legislation on the investor and the company. We're aware that we have some media representatives with us on the call, However, this call is intended for investors, and we would ask that questions from the media be directed to our media relations team, whose contact information can be found in the press release. At this time, I would like to turn the call over to Doug Peterson. Doug?

Thank you, Mark. Welcome to everyone joining today's earnings call. We're looking forward to a very exciting and innovative year at S&P Global. As we shared with you at Investor Day, we're accelerating the pace of innovation and taking advantage of all we have to drive profitable growth over the next three to five years. In 2022, we built on our incredible history at S&P Global to position the company to create significant value for our customers, our people, and our shareholders in 2023. 2022 is a year of resilience, decisive action, and discipline. As we look at our financial highlights, I want to remind you that the financial metrics that we'll be discussing today refer to non-GAAP adjusted metrics for the current period and for 2023 adjusted guidance. and non-GAAP pro forma adjusted metrics in the year-ago period, unless explicitly called out as GAAP. Adjusted results also exclude the contribution from previously divested businesses in all periods. Adjusted revenue decreased 4% or 3% on a constant currency basis. As everyone on this call knows, we saw dramatic decreases in debt issuance, which drove the decline in our revenue and earnings. But what you would not be able to tell from the headline revenue growth rate is that our businesses become far more diversified and resilient. While we saw a 26% decrease in our ratings revenue, the vast majority of that decrease was offset by a 6% growth in our other businesses. That growth came despite FX headwinds, an unstable macroeconomic environment, and the suspension of our commercial operations in Russia. We also took decisive action to preserve margins in 2022. Despite significant inflation throughout the year, we're able to keep our adjusted expenses relatively flat year over year due to outperformance on our cost synergies and management actions around incentive compensation, discretionary spending, and the timing and prioritization of strategic investments. Our teams have a lot to be proud of. and we've done a remarkable job setting the company up for a strong 2023. We introduced our initial guidance today, which includes 4-6% revenue growth and a 10-12% EPS growth. Importantly, we're not moving engineering solutions to discontinued operations, so both of these figures include the half-year contribution we expect from engineering solutions in 2023. Excluding the impact of engineering solutions, we would have expected revenue growth to be approximately 6% to 8%. Amongst the impactful accomplishments in 2022, we completed our merger with IHS Market and took important steps to optimize both our operations and portfolio of businesses. We optimized our capital structure as well, lowering our average cost of debt at fixed rates, protecting our earnings from further interest rate volatility. We introduced a bold strategic vision on Investor Day, powering global markets, and outlined our key growth priorities for the next few years. We're looking forward to updating our investors on our progress against those initiatives as we move forward. We also continue to shape the secular transition from active to passive asset management, and just last month celebrated the 30th anniversary of the first index-based ETF, which was based on our S&P 500 index. As we look to the strategic initiatives we had at the beginning of 2022, it's clear that we continue to make great strides. We outperform our original 2022 cost synergy targets by more than 20%, generating $276 million in cost synergies, fully realized in 2022. compared to our original target of $210 to $240 million. We successfully integrated our major infrastructure software systems, including what our ERP vendor told us was the fastest integration ever for a company of our size. We continued to drive commercial momentum, generating nearly 7,000 Synergy cross-sell referrals post-merger. We also made great progress with our strategic investments and our transformational initiative to optimize our technology spend, Lastly, we continued our relentless focus on making sure S&P Global remains a destination of choice for our people and candidates. Our internal people survey indicated 90% or more of our employees endorse our culture and our efforts in diversity. We continued to invest for long-term growth in 2022. We made several small acquisitions to bolster and round out our offerings in private market solutions, as well as sustainability and energy transition. We also had several important new product launches and upgrades that will drive customer value and financial performance in 2023 and beyond. We took steps to optimize the portfolio of businesses at SAP Global. We made several merger-related divestitures that were required by regulators. but we also decided to divest the engineering solutions division and announced an agreement to sell the business to KKR. These decisions help position S&P Global in growth markets where we can leverage our strengths across the entire business. As always, we will continue to be disciplined stewards of the business and periodically review the portfolio of assets to determine the optimal structure at any given time. Shifting to our financial performance, the largest macro contributor to our 2022 results has been the sharp decrease in global debt issuance, which continued to deteriorate as we moved through 2022. For the full year, we saw a 28% decrease in global-rated issuance, or a 31% decrease when including the impact of leveraged loans. This is particularly noticeable in high-yield issuance, which decreased 77% from the extraordinarily high levels we saw in 2021. The issuance environment certainly impacted our financials in 2022, but we were pleased with the execution from the teams across the company despite those challenges. As I mentioned previously, our aggregate financial results provide clear evidence of our commitment to disciplined execution. Excluding the ratings business, revenue growth would have been 6% in 2022, and adjusted operating margin would have expanded by approximately 200 basis points. Eval will discuss the fourth quarter financials in a moment. Each of our divisions performed admirably in 2022. We saw positive revenue growth in four of our six divisions and constant currency growth in five of our six divisions. We believe the strength and discipline shown in 2022 sets us up for a return to positive overall revenue growth and margin expansion in 2023. We continue to deliver impressive results in Sustainable One. In 2022, we grew ESG and climate revenue by 50% year-over-year to more than $200 million. As we outlined at Investor Day, and as you'll see in the appendix, we've updated our methodology beginning in 2023 to include all of our sustainability and energy transition products, and we'll be disclosing sustainability and energy transition revenues rather than just ESG revenue going forward. Under the new methodology, we generated $247 million in 2022, and we expect growth of more than 30% from that base in 2023. We ended 2022 with ESG ETF AUM reaching $40 billion. That growth is particularly impressive when you consider it is the net impact of an 18% increase in AUM from net flows, and a 14% reduction AUM from price depreciation, resulting in 4% net growth year over year. We continue to launch new indices based on climate or sustainability factors in 2022, including the new S&P BMV Green Social and Sustainable Target Duration Bond Index, We also launched new products in market intelligence, commodity insights, and mobility. Within ratings, we completed 133 sustainable financing opinions, 33 green evaluations, and 100 second-party opinions. At the core of our sustainability efforts are the corporate sustainability assessments. These remain a key differentiator versus our competitors as they enable us to collect an enormous amount of data directly from corporations around the world. For the methodology year that ends in March 2023, we have already increased CSA survey participation in more than 2900 companies representing a 30% growth year over year. We expect more than 3000 companies to participate by the end of March. The company also continued to advance its own industry-leading practices in sustainability. We issued our 11th Annual Sustainability Impact Report and 4th Annual TCFD Report. We launched $1.25 billion in sustainability-linked notes and adopted the sustainability-linked bond framework. We ensured the long-term funding for the S&P Global Foundation via a one-time grant of $200 million. And our efforts continue to receive recognition from several leading third parties. I'd now like to shift the presentation to our outlook for 2023. The latest global refinancing study was issued earlier this month. The total amount of global debt maturing in this study is $11.1 trillion over the next five years. This is actually up 3% from the study a year ago and up 7% from last year's study when looking out over the full nine years. Importantly, this shows us how the maturities have evolved over the next few years. while 2023 expected maturities have unsurprisingly decreased over the course of 2022. If we look at maturities in the years 2025 to 2027, we see a 12% increase from last year's study. That increase jumps to 23% looking at maturities in 2027 to 2029. The bottom line is that there is a very healthy pipeline of debt maturities coming over the next several years. Now, looking at total-rated debt outstanding, we continue to see a compound growth rate of 5% and a continued year-over-year increase in total debt outstanding on a constant currency basis. Historically, outstanding debt usually gets refinanced, and we don't see any reason why this decades-long trend would change. After marked declines in issuance in 2022, our ratings research group anticipates that issuance will return to positive growth in 2023. The forecast calls for issuance gains of 8.5% for non-financials, 3% for financial services, 5% for U.S. public finance, and a decrease in structured finance of 7%. Please note that this is an issuance forecast, not a revenue forecast, and does not include leveraged loans. Our financial results and guidance are more closely tied to build issuance, which can differ materially from market issuance as we have described in recent quarters. For 2023, we expect build issuance to be up approximately 2% to 6% for the full year. Now let's move to the latest view from our economists. They're forecasting global GDP growth of 2.2% in 2023. While GDP growth is expected to be positive, we also expect it to be a story of two halves. Right now, we're assuming a mild recession in the first half, followed by stabilization in the second half. Each year, we carefully assess the external factors facing the company. This slide depicts those that we think are most important going into 2023. There are a number of potential positive impacts this year and potential headwinds, many of which we've outlined on this slide. There are also a number of factors that could impact our business positively or negatively or different ways in different parts of the business. Volatility in the equities and commodities markets is a great example, as it can be a headwind to certain parts of our business while serving as a tailwind to global trading services and commodity insights and exchange-traded derivatives in our indices business. While we certainly aren't immune to the macroeconomic environment, we're confident that investing for growth in these times of uncertainty and through the cycle is the right way to create long-term shareholder value. While others may give in to the temptation to hunker down, we want to make sure that we're aggressively taking the steps to position SP Global for years of profitable growth. That's why I'm so excited to finish my prepared marks on this slide. We're optimizing our technology spend for growth. We're leveraging the most powerful platforms available to make sure our product development teams can rapidly bring new features and products to market. We recently announced a long-term strategic partnership with Amazon AWS to further the technology vision we laid out for you at Investor Day. This agreement allows us to consolidate contracts and drive long-term savings through a collaborative relationship with one of the world's most innovative technology companies. Kensho continues to be a key contributor to culture of innovation within S&P Global We have a bold vision for how to leverage the newest breakthroughs in machine learning and artificial intelligence, and not only make those technologies available to our customers, but truly embed them throughout the organization to drive growth and efficiency. I visited Kensho's offices last fall and was impressed to see the work that Kensho's R&D team had been doing with respect to large language models and their transformative potential. Since then, Kensho has made significant progress on models that leverage unique data across the enterprise with the potential to power innovation using AI and machine learning to accelerate product and technology agendas across all of S&P Global. This is very exciting. We will also continue to make strategic organic investments in areas like private markets and sustainability and energy transition, and will selectively pursue opportunistic acquisitions that enhance our growth and innovation. As we begin reporting our vitality revenue this year, we will continue our long practice of transparency and accountability. It is truly an exciting time to be at S&P Global. And now, I'd like to turn the call over to Ewout Steenbergen, who is going to provide additional insights into our financial performance and outlook. Ewout?