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

Good morning, and welcome to S&P Global's 2023 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 2 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 2023 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 2022 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 2023 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 permits. Substantially similar questions may be summarized in groups 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 non-GAAP adjusted financial metrics. These metrics are 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 that of management. The earnings releases for Q4 2022 and Q1 2023 contain financial metrics calculated in accordance with GAAP that are comparable to the non-GAAP metrics included in today's presentation as well as reconciliations of such GAAP and non-GAAP metrics. The company's earnings releases are available on our Investor Relations website. 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. 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 differ materially from the results anticipated in these forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those anticipated in the forward-looking statements is included in the cautionary statements contained in our most recent annual report on Form 10-K and our most recent Form 10-Q, each filed with the SEC. I would also like to call your attention to a European regulation. Any investor who has or expects to obtain 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 the questions from the media be directed to Ola Fadahunsi at +1 (322) 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 2022 performance and how we're positioned for profitable growth in the future. Then our Chairman, Dick Thornburgh, will conduct the business of the meeting. I'll come back after that to take your questions. Now turning to last year's performance. S&P Global proved once again its resilience in a challenging macroeconomic environment. For example, we made considerable progress on our transformative merger with IHS Markit. We consolidated office space, standardized business practices, generated thousands of cross-sell referrals and optimized our capital structure, lowering our average cost of debt at fixed rates. In addition, last year, 4 of our 6 divisions produced non-GAAP pro forma adjusted revenue growth. The diversification of our business portfolio helped to counterbalance a steep decline in revenue from S&P Global Ratings last year. And even in a difficult macro environment, we never stopped investing in organic growth, technology and innovation to deliver the next generation of exciting new products. The resilience and discipline we demonstrated last year build on an incredible legacy of our company and position us to create significant value for our customers, our people and our shareholders in 2023 and beyond. As we've said, for 2023, we expect non-GAAP adjusted diluted earnings per share in the range of $12.35 to $12.55. This compares to the non-GAAP pro forma adjusted EPS of $11.19 we produced last year, which implies 11% growth if we achieve the midpoint of our guidance. One of the keys to our growth is a clear, compelling strategic focus: Powering Global Markets. This strategic framework has five pillars. The first is customer at the core. I've been on the road meeting customers over the last year, and they're excited about the products we're creating, thanks to the merger with IHS Markit. As I've said, we continue to invest in innovation to serve our customers in new and innovative ways. The second pillar is grow and innovate. Across S&P Global, there's tremendous opportunity for organic growth from thematic indices and bond valuations to aftermarket research and mobility forecasts. And there are very promising opportunities in transformational areas, such as sustainability in private markets. The third area is expand the power of data and technology. Here, we're shifting the mix of our technology spend to provide even more value to our customers. Kensho is a great example of our focus on using technology to accelerate innovation and speed up time to market of S&P Global's product offerings. Kensho builds artificial intelligence solutions that unlock the critical insights hidden in unstructured data and powers many workflows across the enterprise. The fourth pillar is lead and inspire. We've been very focused on creating a sense of belonging in our company, where people feel engaged, inspired to do great things and are connected to our purpose. We continue to invest in initiatives that attract, retain, develop and care for our people. And finally, execute and deliver. Our teams continue to be disciplined in their approach to executing our strategy. That means running the company efficiently, making strategic investments, pursuing a disciplined capital allocation approach and creating an excellent culture. All these elements come together to help us capitalize on the exciting growth opportunities in each of our markets. We expressed our confidence in doing just that with the mid-term financial targets we announced during Investor Day last year. As we said then, we expect by 2025 or 2026 to achieve the following: 7% to 9% annual organic revenue growth; an adjusted operating margin in the range of 48% to 50%; and low- to mid-teens annual adjusted diluted earnings per share growth. We also expect to continue returning at least 85% of adjusted free cash flow to shareholders through dividends and share buybacks. Even with an uncertain global economy this year, we're looking forward to the months and years ahead with a great deal of optimism. So as I wrap up, I want to thank our people for the excellent work they continue to do. They've been through a lot of change over the last few years. They've handled our merger, market uncertainty, the pandemic and more with a tremendous amount of professionalism, talent and dedication. I also want to recognize our Board of Directors. We have an all-star Board. The diversity of their expertise, perspectives and backgrounds is of incredible value to me and our company. And I thank our shareholders for your continued support. Now I'll turn it over to Tasha to open the business portion of our meeting. Thank you. Tasha?

Thanks, Doug. We will now begin the business portion of today's meeting. Please be advised that we have certified lists of shareholders of record as of the close of business on March 13, 2023, who are entitled to vote at this Annual Shareholder Meeting. Such lists are available for inspection by any shareholder using a 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 records of the annual meeting. The Board of Directors has designated a representative of Computershare Trust Company to act as inspector of election for the annual meeting. Harold Murphy, a representative of Computershare Trust Company, is available in virtual attendance today. Mr. Murphy has been duly sworn in and his 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 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 would 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, as Doug mentioned, whose expertise, global perspective, diversity and leadership are a tremendous source of pride for the corporation. In addition to Doug, who opened the meeting and is a director as well as President and CEO, I would like to introduce the 11 independent directors who will stand for election today, along with Doug and me: Marco Alverà, Chief Executive Officer, Tree Energy Solutions; Jacques Esculier, former Chairman and CEO, WABCO Holdings Inc.; Gay Huey Evans, former 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 CEO, The Bank of New York Mellon; Lord Ian Livingston, former 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; 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 recent appointments of Greg Washington and our four new directors joining following our merger with IHS Markit, Jacques, Gay Huey, Bob and Debby, have further strengthened our talented Board and demonstrate our ongoing commitment to bring leaders of diverse backgrounds, perspectives and experience into the boardroom. We will now proceed to the formal business of our annual meeting, the purpose of which is to: one, elect 13 directors; two, approve on an advisory basis the executive compensation program for the company's named officers; three, vote on an advisory basis on the frequency on which the company conducts an Advisory Board vote on the executive compensation program for the company's named executives; four, to ratify the selection of Ernst & Young LLP as our independent auditor for 2023; and fifth, take up any other business matter that may properly come before this meeting. It is now 8:14 a.m. Eastern Daylight Time on May 3, 2023, and 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 clicking on the Vote tab 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, Harold Murphy, will provide his 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 Peterson at the end of the formal portion of today's meeting. First item to be voted upon is the election of 13 directors, among whom I am included. The names of the 13 directors nominated for election are: Marco Alverà, Jacques Esculier, Gay Huey Evans, William D. Green, Stephanie C. Hill, Rebecca Jacoby, Robert P. Kelly, Ian Paul Livingston, Deborah D. McWhinney, Maria R. Morris, Douglas L. Peterson, 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 shareholder questions related to this proposal.

Since there is 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 proposal to vote on an advisory basis on the frequency on which the company conducts an advisory vote on 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.