S&P Global Inc.

Good morning and welcome to S&P Global's first quarter 2024 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 first quarter 2024 earnings call. Presenting on today's call are Doug Peterson, President and Chief Executive Officer, and Chris Craig, Interim 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. 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 contains reconciliations of such GAAP and non-GAAP measures. The financial metrics we'll be discussing today refer to non-GAAP adjusted metrics unless explicitly noted otherwise. I would also like to call your attention to certain European regulations. 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. S&P Global is off to a tremendous start for 2024. Total revenue increased 14%, excluding the divestiture of engineering solutions. Transaction revenue in our ratings division drove much of the upside, but importantly, subscription revenue across the entire company increased 8% year over year as well. Strong growth across the enterprise contributed to quarterly revenue of nearly $3.5 billion. representing the highest quarterly revenue we've ever generated in the history of our company. Execution was its theme in the first quarter, and our efforts to capture market opportunities, combined with discipline on the expense side, led to more than 350 basis points of adjusted operating margin expansion year over year and adjusted EPS growth of 27%. In addition to the stellar financial results in the first quarter, we continued to demonstrate our leadership across global markets. Capital markets were vibrant in the first quarter, and customers turned to S&P Global to help power their investment, funding, and trading activities. Equity markets saw strong volumes from both IPOs and M&A, and we saw the highest level of debt issuance since 2021. As the globe grapples with the future of energy security and energy transition, it's no coincidence that this conversation took place on the stage of S&P Global's Sarah Week Conference and other S&P events around the world. As we power global markets in equity, fixed income, commodities, derivatives, and in many industrial verticals, our innovation drives customer value. We'll continue to innovate and invest in our leading data, technology, and workflow tools to drive growth. And we'll highlight some of that innovation today. As we look to the five strategic pillars we outlined for you at our investor day, we're pleased with the progress we've made across the board. While that fifth pillar of execute and deliver is on full display this quarter with the strength of our financial results, We continue to invest in customer relationships, innovation, technology, and our people. Beginning with our customers, we saw nearly $1 trillion of billed issuance in the first quarter. This represents the dollar value of debt issued by our customers, for which they actively sought out a rating from S&P Global. Issuers know that an S&P Global rating provides a credible, trusted, and objective measure of their credit risk, and they know that we have the capacity even in a very active market, to fully meet their needs. When we look at the broader financial services landscape, we're certainly not back to what we would consider normal levels in the capital markets overall, but we did see improvement. With the macro and geopolitical uncertainty still facing our customers through this year, we continue to hear some concern about the back half, and many market participants are still carefully evaluating expenses for 2024. All of this is consistent with what we shared in February regarding our expectation that ratings would see a stronger first half than second half, while market intelligence would likely start to see improvements in the growth rates in the back half. Energy customers from all of our divisions and from around the globe converged once again in Houston, Texas for our annual Sarah Week conference. We're thrilled that customers, partners, regulators, government officials, and global thought leaders view S&P Global Sarah Week as the premier event of the year. Customer engagement remains vital for S&P Global, and in the first quarter, we had well over 100,000 calls and meetings with customers, in addition to the thousands of meaningful interactions our ratings colleagues had with fixed income investors. Billed issuance increased 45% year over year in the first quarter. Tight spreads and stabilizing risk appetite in the market created favorable conditions for issuers. We saw investment grade, high yield, and bank loan volumes all increase as issuers took full advantage to raise debt early in the year. We do expect much of this strength was pulled forward from later in 2024, reinforcing our continued view of a stronger first half than second half in issuance volumes. The strength in billed issuance in the quarter also underscored the importance and advantages of a robust public debt market. We saw tremendous growth over the last two years in private debt markets, but we began to see early signs of some of that debt being refinanced in the public markets in the first quarter. While this private to public refinancing activity only represented a low single digit percent of billed issuance, we've heard from customers that they're saving up to 150 to 200 basis points in their interest rates by refinancing the public markets. We expect the private markets to play an important role going forward as well. We're working with major private debt partners to deliver risk analytical solutions. Private markets revenue in our ratings division increased 30% year over year in the first quarter. Turning to vitality. We're pleased to see that our Vitality Index continues to account for 10% of our total revenue, despite the fact that several strong and fast-growing products matured out of Vitality Index at the end of 2023. As we've called out in the past, this index is meant to highlight the contributions from new or enhanced products. So as products mature, they will no longer be part of the Vitality Index, even if they continue to grow rapidly. Key contributors from our pricing valuations and reference data, as well as several thematic and factor based indices matured out of the vitality index at the end of the year. We remain committed to that 10% target is a steady stream of new innovation takes the place of any products that graduate from the index. That was the case this quarter is products that contributed roughly $80 million of revenue to the vitality index in the first quarter of 2023 we're no longer in the vitality index this quarter. We expect the vitality index to increase as a percent of total revenue as we progress through the remainder of the year. Turning to some examples of that innovation, in the first quarter, our Commodity Insights team launched a new food and agriculture commodities dashboard, providing a comprehensive view on commodity data, as well as new reports and research on energy. Additionally, we launched new price assessments for renewable energy, as well as new benchmark prices for the Middle East and Asia. Our energy transition and climate products continue to show rapid growth, nearly 30% year-over-year in the first quarter, supported by the continued innovation in price assessments, new and enhanced data sets, and crucial insight solutions. We also introduced an exciting innovation in market intelligence. We have spoken at length about the tools and data sets available through our market intelligence marketplace, but in the first quarter, we introduced what we are calling blueprints, These blueprints are packages of data sets and tools combined based on specific customer personas and workflows, such as private markets performance analytics. We introduced the first five blueprints in the first quarter with plans to add more in the coming months. These intuitive combinations allow customers to easily discover how our data and tools can work together to facilitate analytics and workflows in new ways. We're also pleased to see early results from the enterprise AI initiatives we outlined for you last quarter. By elevating artificial intelligence to a position of enterprise-wide strategic focus, we're accelerating the development of new tools, deploying common capabilities across multiple divisions, and increasing the value we create for our customers and our shareholders. With our in-house expertise, we've developed tools to help market participants benchmark performance of large language models, specifically for business and finance use cases. The S&P AI Benchmarks by Kensho is a project informed by our world-class data and industry expertise. The questions in our benchmark are designed to assess the ability of large language models to understand and solve realistic finance problems, and each question has been verified by an experienced domain expert. Lastly, we introduced a remarkable tool we call S&P Spark Assist. This is a co-pilot platform developed jointly between Kensho and our other internal technology teams. We're deploying this platform throughout the organization to improve productivity, facilitate more rapid innovation, and reduce the time necessary to accomplish many routine tasks. Because of our proprietary data, the tools and expertise developed through Kensho and the remarkable technologists we have working throughout S&P Global, we were able to develop S&P Spark Assist chat interface without relying on a third-party vendor. As a result, We're delivering the power of generative AI to our people in an easy to use platform at the cost of less than $1 per user per month. We're incredibly excited about what this tool can do for our people, and we'll provide more details around use cases and productivity as we progress through the year. Turning to our financial results, Chris will walk through the first quarter results in more detail in a moment, but we have had an incredible start to 2024. With strong growth across every division, we continue to balance the need to invest for future growth with the opportunity to deliver margin expansion and earnings growth this year. Revenue grew double digits as reported, but excluding the impact from the engineering solutions divestiture, revenue increased an impressive 14%. Trailing 12-month margins improved 170 basis points to nearly 47%. Now I'll turn to Chris Craig, our interim CFO, to review the financial results. Chris, welcome to the call. Over to you.