S&P Global Inc. (NYSE:SPGI) Q3 2018 Earnings Conference Call - Final Transcript

Oct 25, 2018 • 08:30 am ET


S&P Global Inc. (NYSE:SPGI) Q3 2018 Earnings Conference Call - Final Transcript


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Good morning, and welcome to Standard & Poor's Global Third Quarter 2018 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. (Operator Instructions)

I would now like to introduce Mr. Chip Merritt, Senior Vice President of Investor Relations for S&P Global. Sir, you may begin.

Chip Merritt

Good morning, and thanks for joining us for S&P Global's earnings call. Presenting on this morning's call are Doug Peterson, President and CEO, and Ewout Steenbergen, Executive Vice President and Chief Financial Officer.

This morning, we issued a news release with our third quarter 2018 results. If you need a copy of the release and financial schedules, they can be downloaded at investor.spglobal.com.

(Foward-Looking Cautionary Statement)

We're aware that we do 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 Jason Feuchtwanger at 212-438-1247.

At this time, I would like to turn the call over to Doug Peterson. Doug?

Doug Peterson

Thank you, Chip.

Good morning and welcome to today's earnings call. The benefit of our diverse portfolio of exceptional businesses was evident this quarter as we were able to overcome a decline in global bond issuance and deliver revenue growth, margin improvement and EPS gains. We continue to believe that the fundamental drivers of long-term issuance remain strong, namely global GDP growth and the solid debt maturity pipeline.

However, we have always cautioned that there will be months or quarters when issuance weakens enough to cause a decline in ratings revenue. It happened this quarter. The negative impact on issuance from US tax reforms, combined with economic uncertainty from Brexit, trade negotiations, emerging market concerns and rising rates resulted in a 7% decline in global issuance and a 5% decline in ratings revenue. Yet, despite these headwinds, the company delivered great financial results.

For me the most important highlight from the quarter was a significant improvement in adjusted operating profit margin. This is a testament to the continued efforts across the company to emphasize top line growth while installing lean processes and automation projects. We're working to increase the level of financial discipline across the company and raise the technology acumen of every employee, not just software engineers, and this effort is paying off.

In addition, Market Intelligence and S&P Dow Jones Indices, each achieved 10% revenue growth. Our revenue growth, margin improvement and lower rate from US tax reforms combined to generate adjusted diluted EPS growth of 23%. We generated $1.4 billion in free cash flow year-to-date, excluding certain items, an increase of 24% over the first nine months of last year.

The $1 billion ASR that we began in March was completed well and we're initiating a new $500 million ASR over the next