S&P Global Inc.

Good morning and welcome to S&P Global's second quarter 2023 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 Second Quarter 2023 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 Edouard Tavernier, President of S&P Global Mobility. We issued a press release with our results earlier today. In addition, we have posted a supplemental slide deck with additional information on our results and guidance. If you need a copy of the release and financial schedules or the supplemental deck, 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. Additional information concerning these risks and uncertainties can be found in our Forms 10-K and 10-Q filed with the U.S. Securities and Exchange Commission. In today's earnings release and during the conference call, we're providing non-GAAP 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 financial measures calculated in accordance with GAAP that correspond to the non-GAAP measures we're providing, and the earnings release and the supplemental deck contain reconciliations of such GAAP and non-GAAP measures. 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 are 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 release. At this time, I would like to turn the call over to Doug Peterson. Doug?

Thank you, Mark. As we look at this quarter's highlights, I want to remind you that the financial metrics we'll be discussing today refer to the non-GAAP adjusted metrics unless explicitly noted otherwise. We're pleased to report 7% revenue growth in the second quarter, excluding the impact of engineering solutions in all periods. We saw acceleration in revenue growth in market intelligence, ratings, and indices, while growth remained in the high single digits for both commodity insights and mobility. As you will recall, we took decisive action to protect margins beginning in the second quarter of last year, and lapping those actions led to a modest contraction in adjusted operating margins year over year. Our continued focus on delivering profitable growth and prudently managing our capital allocation combined to drive double-digit growth in adjusted earnings per share this quarter. We expect positive revenue growth in all divisions for the remainder of the year, as well as continued double-digit adjusted EPS growth. In addition to strong financial results, we remain focused on executing our long-term strategy with an emphasis on innovation. We continue to drive rapid advancement in our AI initiatives We'll talk more about the guiding principles behind our AI strategy in a moment, but we already have a number of internal initiatives and pilot programs. Additionally, in May, we launched a conversational AI assistant called ChatIQ on Capital IQ Pro Labs for internal testing. We'll have more to say about ChatIQ as we get closer to a formal launch to external customers, but it's the first example of how Kensho will deploy LLM-based technology across S&P Global. We're also very excited about some of the developments in our conversations with the largest participants in the private markets. We have an active and incredibly productive dialogue with private equity and private credit customers. We're currently exploring many ways that we can work together to apply our expertise in ratings, analytics, and pricing across the credit markets. We'll have more specifics to share here as well as this dialogue develops into commercial opportunities. We're seeing some early but encouraging signs of stabilization in the macro environment, which leads to a modest improvement to the macro outlook, helping to inform our financial guidance. Lastly, illustrating our commitment to discipline stewardship of the business, we completed the divestiture of engineering solutions in the second quarter. We continue to align our goals and operations against the five strategic pillars we introduced at Investor Day. First, I want to provide an update on what we're seeing and hearing from our customers. We've mentioned over the last couple of quarters that we've seen some lengthening of the sales cycle, which we believe was driven by customer sensitivity around spending. Our cross-sell efforts are also creating larger contracts, which take longer to close. While sales cycles remain a bit longer than normal, we've started to see some stabilization and customer conversations have been very constructive. We continue to see very high customer retention rates and contract expansions, evidenced by the 8% growth in subscription revenue across our five divisions. The value of our largest and most well-known products, those key brands and benchmarks that the markets rely on, is being recognized by our customers in a challenging and sometimes confusing macro environment. Customers are also emphasizing many of the same strategic priorities that we are, namely private markets, climate, energy transition, and AI. This is evidence in the 40% growth in energy transition revenue we saw in our Commodity Insights Division in the second quarter. As customers navigate a market with higher interest rates, geopolitical uncertainty, and rapidly evolving technology, we hear they trust S&P Global and they want to do more with us. We've worked hard to build that trust, and we're as confident as we've ever been in the long-term growth of the company. Related to ratings, global build issuance returned a positive growth, increasing 8% year-over-year in the second quarter. We began to see some signs of stabilizing interest rates among central banks. While we did see some likely event-driven issuance in the second quarter ahead of the debt ceiling events in the United States, We're also seeing more economists, including our own, expecting only one or two more rate hikes from major central banks over the remainder of 2023. Overall, issuance saw a higher proportion of refinancing activity, with issuers tracking market conditions closely. We expect those pockets of issuance to become more frequent as the market adjusts to the new normal of higher for longer. We're pleased with the strength we saw in corporate issuance, with both high yield and investment grade issuance increasing notably year over year, though the high yield growth is coming off of a very low comparison. This strength is offset somewhat by a softer environment for bank loans and structured finance. Importantly, rating withdrawals, which are a measure of churn in ratings, are down this year. That illustrates the strength of the S&P brand and the increasing value of a rating in an uncertain credit environment. Next, I'd like to focus on our strategic priority to grow and innovate. The June release of updates and enhancements of Capital IQ Pro was one of the largest and most significant in years. We completely reinvented Ratings Direct on Capital IQ Pro and launched loan pricing and analytics as well. Customers have already shown an incredibly positive reaction to the enhancements on Capital IQ Pro, and these new features have contributed to key competitive displacements and enhanced our competitive positioning. In Commodity Insights, we also launched the first offering of base shipping rates incorporating alternative fuel pricing. This is significant, as we expect the maritime sector's use of alternative fuels, including liquid natural gas, to grow significantly in the coming years. Our Sustainable One team launched a new nature and biodiversity risk dataset, assessing nature-related impacts and dependencies across the company's operations. This assessment can be applied across the asset, company, and portfolio level, which gives our corporate and investor customers a greater ability to quantify both dependency and impact on location-specific ecosystems. As we introduced last quarter, our vitality revenue metric consists of revenue derived from our new or substantially enhanced products. We're pleased that in the second quarter, vitality revenue held steady at 11% of total revenue. I'm both pleased and impressed that the top four contributors to our vitality revenue in the quarter came from four different divisions, clearly demonstrating that our commitment to innovation and growth spans the entire organization. Turning now to a topic that I know is on everyone's mind, artificial intelligence. I wanted to provide some color on S&P Global's key advantages and the guiding principles that will govern our use and implementation of AI, both internally and within our products. We're thrilled with the progress that our teams have made building, testing, and implementing tools in various use cases across the organization. While Kensho gives us an incredible advantage in this arena, it isn't our only one. The data sets we have, large, proprietary, and truly differentiated, create a remarkable advantage for S&P Global as well. Our trusted brands also allow us to have conversations with industry partners, technology infrastructure providers, and customers with credibility. We, through our brands, are known and trusted, and we know that trust will play a huge role in the success of any AI-based products that come to market in the coming years. As we more fully embrace the technological advances of our era, we need to make sure we do so with prudence and discipline. Particularly given the investment necessary to develop AI-driven tools, we want to take each step with a keen focus on creating customer value rather than simply creating tools because the technology exists. We will allocate the necessary capital to these new projects based on our confidence in the strategic and financial impact on the company. While Kensho is deeply engaged in AI research within S&P Global, we want to make sure we aren't dogmatic in our approach. We'll leverage leading technology regardless of whether it was developed at Kensho, developed elsewhere within the divisions, or comes via vendor or partner. Lastly, We want to continue our practice of aggressively defending and protecting our intellectual property and our data. We have safeguards and restrictions embedded in our contracts that ensure third parties and customers cannot independently monetize or build commercial products with our data without our consent and our economic participation. We're committed to transparency with our shareholders and will provide regular updates on our new product launches as they take place. We'll move fast and we'll also make the necessary investments in time and resources to ensure success. Shifting now to how we lead and inspire. During the second quarter, we further demonstrated our commitment to transparency and accountability through the publication of our annual sustainability impact report and TCFD report. We also published for the first time our annual diversity, equity and inclusion report, highlighting our commitment to building more diverse, equitable and inclusive company and world. We're honored that so many respected organizations have recognized the efforts that we have made to build a company that always pursues excellence. As you can see on the slide, we've received recognition not just for our efforts in sustainability and equality, but also in our governance and board oversight and our civic contributions. I've never been more proud to be part of S&P Global. Of course, disciplined leadership means delivering on our ongoing operational and financial outcomes. We're pleased with the strong execution across all divisions this quarter. We saw positive revenue growth in all of our divisions in the second quarter, including accelerating revenue growth in market intelligence, ratings, and indices. While our trailing 12-month margins have contracted 90 basis points year over year, we expect that trend to improve as we progress through this year and lap the issuance headwinds we saw through most of last year. With half of the year behind us, we still see many of the same macroeconomic factors impacting our business through the remainder of the year. While we no longer expect a technical recession globally, we do expect headwinds to persist from an economic slowdown, primarily in financial services and markets. We expect to continue to benefit from secular trends, though near-term volatility can impact different parts of the business in different ways. While these market expectations are mostly unchanged from the first half, we wanted to reiterate our confidence in the multi-year financial targets we put out for the divisions, and for the Consolidated Company and Investor Day. As you know, our ratings, financial results, and guidance are closely tied to billed issuance, and for 2023, we now expect billed issuance to be up approximately 4% to 8% for the full year, up one point from our prior expectation. Our latest ratings research group forecast calls for a decline in global market issuance, though also slightly improved from last quarter. As a reminder, market issuance can differ materially from build issuance, with divergence this year driven by declines in unrated debt and sovereign and international public finance, which don't impact build issuance. We have completed our July 2023 global refinancing study, and you can see one of the reasons for our optimism for our ratings business over the next several years. There's over $8 trillion of debt rated by S&P Global maturing through 2026 and nearly $13 trillion maturing through 2028. This, in addition to assumed improvements in the macro environment over the next few years, gives us great confidence in our ability to drive profitable multi-year growth and ratings. And now, I'd like to turn the call over to Avout Steenbergen, who is going to provide additional insights into our financial performance and outlook.