S&P Global Inc. (SPGI) Earnings Call Transcript & Summary

Good morning, and welcome to S&P Global's 2022 Annual Shareholders' Meeting. I'd like to inform you that this meeting is being webcast. [Operator Instructions] The meeting is being recorded and will be available for replay about 24 hours after the end of this meeting from S&P Global's website. To access the virtual annual meeting, including the webcast and slides, go to www.spglobal.com/proxy and click on the link for the virtual annual meeting online. Please follow the instructions to join as a shareholder or as a guest. I'd now like to introduce Tasha Matharu, Corporate Secretary of S&P Global. Ms. Matharu, you may begin.

Good morning. My name is Tasha Matharu, and I'm the Corporate Secretary of S&P Global. It is my pleasure to welcome you to our 2022 Annual Meeting of Shareholders. Before passing the meeting over to our President and Chief Executive Officer, Doug Peterson, who will provide an update on the company's accomplishments in 2021 and prospects for continued growth, I'm going to briefly address some of the virtual meeting logistics and provide some introductory remarks regarding the information presented during today's meeting. This year's annual meeting is being held in a virtual-only format over the Internet by live webcast and with no in-person meeting. The format of today's virtual-only meeting has been designed to ensure that shareholders are afforded the same rights and opportunities to participate as they would have had at an in-person meeting, including with respect to asking questions. We very much welcome questions from shareholders. [Operator Instructions] In the interest of a productive and orderly meeting, please consult the 2022 Annual Meeting Rules of Conduct available under the Documents section of the virtual meeting center screen for guidelines and additional information regarding the process for submitting questions online. We appreciate your participation and courtesy in observing these rules of conduct. During the business portion of the annual meeting led by our Chairman, Richard Thornburgh, shareholder questions will be limited to questions specifically pertaining to the proposals being considered at that particular time. After the formal portion of the meeting is adjourned, further time will be provided to address other shareholder questions during a general question-and-answer session, led by our President and CEO, Doug Peterson. We will answer as many questions that comply with the posted rules of conduct as time commits. Substantially, similar questions may be summarized and grouped together to provide a single response. And we reserve the right to exclude questions that are not relevant to the business of the meeting or otherwise inappropriate. In today's presentation, we may provide adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the corporation's operating performance between periods and to view the corporation's business from the same perspective as that of management. The earnings releases for Q4 2021 and Q1 2022 and related current reports contain exhibits that reconcile the non-GAAP measures and comparable financial measures calculated in accordance with U.S. GAAP. Before we begin the formal part of today's meeting, let me provide certain cautionary remarks about forward-looking statements that may be made during this annual meeting and during our CEO Doug Peterson's remarks. Except for historical information, the matters discussed during today's meeting 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 materially differ from the results anticipated in these forward-looking statements. We direct listeners and the audience to the cautionary statements contained in our periodic reports filed with the United States Securities and Exchange Commission. I would also like to call your attention to a 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 do have some media representatives with us on the call. However, this call is intended for investors. And we would request that questions from the media be directed to Ola Fadahunsi at +1 (332) 210-9935. With that, let me turn the meeting over to our President and Chief Executive Officer, Doug Peterson. Doug?

Thank you, Tasha, and hello to everyone on the webcast. Thank you for joining us and for your continued support of our company. This morning, I want to briefly review our strong 2021 performance and discuss how our recently completed merger with IHS Markit positions us very well to achieve continued success. Then our Chairman, Dick Thornburgh, will conduct the business of the meeting. I'll come back after that to take your questions. First, I want to recognize three great directors, Bill Amelio, Monique Leroux and Kurt Schmoke, who informed us that they will be retiring from the Board and not standing for reelection at this meeting. Their leadership expertise and advice have been tremendously valuable to me, the Board and our shareholders. We thank Bill, Monique and Kurt for their outstanding service to our company. I also want to extend a warm welcome to our newest directors. A month after we held last year's annual meeting, the company appointed Greg Washington. In addition, Jacques Esculier, Gay Huey Evans, Bob Kelly and Debby McWhinney, who are serving on the IHS Markit Board, joined us as directors. They all bring tremendous experiences and skills. And we're very pleased to have them with us today. Turning to last year's performance. We produced another year of exceptional revenue and earnings growth. We delivered 12% organic revenue growth and a 17% increase in adjusted diluted earnings per share. All four businesses contributed with growth in both revenue and adjusted operating profit margin. I'm proud of the way our 35,000-plus people have continued to step up to support each other, our customers, the markets and their communities. I thank them for everything they do. Now as satisfying as last year's performance was, the most compelling part of the S&P Global story has yet to be written. The most exciting chapters are just starting to be created. We closed our transformative merger with IHS Markit earlier this year. And I'm pleased to report we're off to a very fast start, operating as one unified company. We've said before, the more we get to know about IHS Markit, the more excited we are. Now that we've been together for 2 months, I'm as confident as ever. I'm incredibly optimistic because we have the people, the technologies and the capabilities to realize our vision to power the markets of the future. Our company is better positioned than it ever has been to serve our current customers and markets while expanding into large, growing and ever-evolving addressable markets. These fast-growing markets have needs for information and insights for benchmarks and analytics. We have unparalleled data assets, leading indices across multiple asset classes, climate ESG and energy transition data and analytics, global supply chain solutions, expertise in private markets and the expanding risk area and innovations across data science, AI and machine learning. In essence, the merger has enabled a new era of essential intelligence. The scale and structure of our company today creates true enterprise advantages. And it enhances our ability to drive per share accretion over time. As we've said, we expect to achieve $600 million in cost synergies and $350 million in revenue synergies over the next several years. The strength of our company is evident in our financial performance in a challenging macroeconomic environment. As we announced yesterday during our first quarter earnings call, adjusted pro forma revenue increased 2% and adjusted pro forma diluted EPS increased $0.01 year-over-year despite sharp decreases in debt issuance. Our ability to drive growth in both revenue and adjusted pro forma earnings per share in a quarter like this would have been far more difficult before a merger with IHS Markit. The strength, stability and diversity of our business gives us great confidence to invest for future growth and look with great optimism to the years ahead. Another way to demonstrate the confidence we have in our business is through a robust capital return program. Shortly after we closed, we announced our intent to repurchase $12 billion of S&P Global common stock through accelerated share repurchases this year with the first $7 billion ASR launched shortly after the close. In addition, the Board approved a 10.4% increase in the regular quarterly cash dividend. The quarterly dividend will increase from $0.77 to $0.85 per share in the second quarter of this year. Altogether, we expect to return at least 85% of free cash flow between dividends and share repurchases. The long-term strength of our company can be most clearly seen when you look at not just our financial performance but at other factors as well. Consider our progress on environmental, social and governance issues. For example, we've increased our environmental transparency and disclosures. We established a $2 billion senior unsecured revolving credit facility tied to our science-based target goals, one of the first sustainability-linked banking facilities in the U.S. media and information services sector. As part of the refinancing and new financing activities post merger, we also issued $1.25 billion of sustainability-linked notes, again the first in our sector. We increased the representation of women across the company and continue to focus on diversifying our workforce. The S&P Global Foundation increased its grant-making by 30% to $15 million to organizations that support COVID-19 relief, diversity, economic inclusion and environmental sustainability. And as I mentioned earlier, we've added five new directors to our Board over the last year, adding fresh perspectives and experience to enhance our governance. As much as our company has excelled, the world continues to wrestle with challenging events in a changing risk landscape. The Russia-Ukraine conflict, high inflation and the lingering effects of COVID could create headwinds for a still-fragile economic recovery this year. These are all issues we'll continue to monitor closely and respond to quickly as appropriate. These external factors, however, don't diminish the confidence we have in the future of S&P Global because we have the talent, technology and capabilities to succeed. With that, I want to close by thanking our shareholders, our people and all our stakeholders for their valued partnership. Now I'll turn it over to Tasha to open the business portion of our meeting.

Thanks, Doug. We will now begin the business portion of today's annual meeting. Please be advised that we have certified lists of the shareholders of record as of the close of business on March 7, 2022, who are entitled to vote at this Annual Shareholders' Meeting. Such lists are available for inspection by any shareholder using the link provided under the Documents section of the virtual meeting center screen. Copies of the notice of meeting, proxy materials, annual report, rules of conduct and affidavit of mailing relating to this annual meeting are also available by link under the Documents section of the virtual meeting center screen. The affidavits will also be filed with the records of the annual meeting. The Board of Directors has designated a representative of Computershare Trust Company to act as inspector of elections at the annual meeting. Elizabeth Waterhouse, a representative of Computershare Trust Company, is available in virtual attendance today. Ms. Waterhouse has been duly sworn in, and her oath will also be filed with the records of the annual meeting. In addition, shares of common stock representing approximately more than a majority of the votes entitled to be cast at this annual meeting are represented either in person or by proxy. Mr. Chairman, the annual meeting has been duly convened, a quorum is present and the business of the annual meeting may proceed. Ladies and gentlemen, I'll now pass the business portion of today's meeting over to our Chairman, Mr. Richard Thornburgh.

Thank you, Tasha, and good morning. My name is Richard Thornburgh, Chairman of S&P Global. With a quorum present, I call the meeting to order. Before we begin the formal part of today's meeting, I'd like to introduce you to your directors, all of whom are present on the line and in virtual attendance today. We have an outstanding Board whose expertise, global perspective, diversity and leadership are a tremendous source of pride for the corporation. In addition to Doug Peterson, who opened the meeting and is a director as well as President and Chief Executive Officer, I would like to introduce the 12 independent directors who will stand for election today, along with Doug and me: Marco Alverà, former Chief Executive of Snam; Jacques Esculier, former Chairman and CEO, WABCO Holdings Inc.; Gay Huey Evans, Chairman, London Metal Exchange; Bill Green, former Chief Executive Officer and Chairman, Accenture; Stephanie Hill, Executive Vice President, Rotary and Mission Systems of Lockheed Martin; Rebecca Jacoby, former Senior Vice President, Operations of Cisco Systems; Bob Kelly, former Chairman and Chief Executive Officer, The Bank of New York Mellon; Lord Ian Livingston, Non-Executive Director and Chairman, Currys plc; Debby McWhinney, former Chief Executive Officer of Global Enterprise Payments, Citigroup Inc.; Maria Morris, former Executive Vice President, Global Employee Benefits of MetLife; Ed Rust, former Chairman and Chief Executive Officer and Chairman Emeritus, State Farm; Greg Washington, President of George Mason University. It is clear we have a world-class Board. All of our directors have broad experience, excellent judgment and take their fiduciary responsibilities very seriously. The appointment of Greg Washington and our four new directors joining following our merger with IHS Markit, Jacques, Gay Huey, Bob Kelly and Debby, have further strengthened our talented Board and demonstrate our ongoing commitment to bring the leaders of diverse backgrounds, perspectives and experiences into the boardroom. At this time, I want to echo Doug's remarks about Kurt, Monique and Bill Amelio, all of whom are retiring from the Board today. On behalf of the entire Board, I want to thank Kurt, Monique and Bill for their distinguished service, innumerable contributions to this company over the past years and in help in creating a strong Board culture. They have served the company and our shareholders with extraordinary integrity and commitment, and they will be dearly missed. We will now proceed to the formal business of our annual meeting, the purpose of which is to: one, elect 14 directors; two, approve on an advisory basis the executive compensation program for the company's named executive officers; three, to ratify the selection of Ernst & Young LLP as our independent auditor for 2022; and take up any other business matter that may properly come before this meeting. It is now 11:17 a.m. Eastern Daylight Savings Time on May 4, 2022. The polls have been open for voting on all matters. All shareholders who are entitled to vote and who joined today's virtual meeting using their 15-digit control number have the ability to vote online. If you have already voted, your vote is being counted, and there is no need to vote again. If you have not yet voted or if you want to change your previously cast vote, please do so by selecting the Cast Your Vote link on the virtual meeting website. This link will be available until we announce the closing of the polls after the presentation of all matters for shareholder consideration. Please remember that if you have already sent in a proxy or voted by telephone or over the Internet, it is not necessary to vote again. Once the polls close, the inspector of election will provide her preliminary report. As a reminder, please note that time will be provided for specific questions relating to each of the proposals as they are introduced. Further, time will then be provided to shareholders wishing to ask other questions during a general question-and-answer session, led by Doug at the end of the formal portion of today's meeting. First item to be voted upon is the election of the 14 directors, among whom I am included. The names of the 14 directors nominated for election are: Marco Alverà, Jacques Esculier, Gay Huey Evans, William D. Green, Stephanie C. Hill, Rebecca Jacoby, Robert P. Kelly, Lord Ian Paul Livingston, Deborah D. McWhinney, Maria R. Morris, Douglas L. Peterson, Edward B. Rust, Jr., Richard E. Thornburgh, Gregory Washington. We will now take a moment to confirm whether there are any questions or comments regarding the election of these 14 directors.

Mr. Chairman, there are no questions related to this proposal.

Since there is no question -- no further discussion on this proposal, I declare the voting closed on this item. The second item to be voted upon is the proposal to approve on an advisory basis the executive compensation program for the company's named executive officers. We will now take a moment to confirm whether there are any questions or comments relating to this item.

Mr. Chairman, there are no shareholder questions related to this proposal.

Since there is no further discussion on this proposal, I declare the voting closed on this item. The third item to be voted upon is the ratification of the selection of Ernst & Young LLP as the company's independent auditor for 2022. Ken Marshall and Jennifer Jackson, the partners of Ernst & Young responsible for the S&P Global account, are on the line and in virtual attendance at today's meeting and are available for questions. We will now take a moment to confirm whether there are any questions or comments relating to this item.

Mr. Chairman, there are no shareholder questions related to this proposal.

This is the last proposal before shareholders for approval at the annual meeting. Since no questions or comments have been submitted on this proposal, I will now proceed with the closing of the voting polls. The polls are about to close. So if you have not yet voted, please do so now. [Voting]

Since everyone has had the opportunity to vote, it is now 11:20 Eastern Daylight Time, and the polls are closed effective immediately. This concludes the voting on all formal business items. Any votes cast online during the annual meeting will be taken into account by the inspector of election in the final tally of votes. However, they are not expected to change the outcome of today's results. The preliminary tally of votes by the inspector of election shows that: one, the 14 persons nominated as directors of S&P Global Inc. have been elected; two, the proposal to approve on an advisory basis the executive compensation program for the company's named executive officers has been approved; third, the ratification of the selection of Ernst & Young LLP as the company's independent auditor for 2022 has been approved. The certificate of the inspector of election will be filed with the records of the meeting and final results will be available on or before May 10 in a Form 8-K filing. There being no further business, the formal part of our annual meeting has concluded. I now declare the meeting adjourned. Before passing the meeting over to Doug Peterson, let me take a moment to thank our shareholders for their continued support. The number of shares voted and the support demonstrated for the slate of directors is very much appreciated. Doug will now lead a general question-and-answer session to address any other shareholder questions or comments relevant to the business of today's meeting. Doug?

Thank you, Dick. We will now open the meeting to questions. Tasha?

Thanks, Doug. In a few minutes or so that remain, we will now proceed to answer as many questions as possible submitted in accordance with the Annual Meeting Rules of Conduct. At this time, I can confirm that we do not have any pre-submitted questions via the Corporate Secretary mailbox or the IR mailbox. We also have not received any questions submitted over the course of this meeting.

Since there are no questions or comments, we thank you for being a part of this meeting and for your support of S&P Global. Let me add that if there are any additional questions or if your question wasn't answered in full, we encourage you to reach out to our Corporate Secretary or Investor Relations team directly. Their contact information is available on our Investor Relations website, and it's in our proxy statement. We value your feedback. Thank you very much.

That concludes this morning's call. A PDF version of the presenter slides is available for downloading from investor.spglobal.com. A replay of this call will be available within 24 hours. The replay will be maintained on S&P Global's website for 12 months from today. On behalf of S&P Global, we thank you for participating, and wish you a good day.