Yahoo Finance S&P Global Inc (SPGI) Q1 2024 Earnings Call Transcript Highlights: Strong Growth and ...
Total Revenue: Increased 14% year-over-year, reaching nearly $3.5 billion.
Adjusted Operating Margin: Expanded by more than 350 basis points year-over-year.
Adjusted EPS: Grew 27% year-over-year.
Billed Issuance: Grew 45% year-over-year in the first quarter.
Private Markets Revenue: In Ratings division, increased 30% year-over-year.
Vitality Index: Continued to account for 10% of total revenue.
Adjusted Expenses: Grew by only 3% year-over-year.
Trailing 12-Month Margins: Improved 170 basis points to nearly 47%.
Adjusted Earnings Per Share: Increased by 27% year-over-year to $4.01.
Sustainability & Energy Transition Revenue: Grew 15% to $78 million in the quarter.
Private Market Solutions Revenue: Increased by 16% year-over-year to $116 million.
Market Intelligence Revenue: Increased 7% in the first quarter.
Ratings Revenue: Increased 29% year-over-year.
Commodity Insights Revenue: Increased 10% year-over-year.
Mobility Revenue: Increased 8% year-over-year.
S&P Dow Jones Indices Revenue: Increased 14% primarily due to strong growth in asset-linked fees.
Release Date: April 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: I wanted to focus on Market Intelligence. We've heard some negative commentary from others in the market, which made it sound like this past quarter was particularly challenging. So I wanted to see if that was your experience as well. And also if the large investment bank consolidation impact was in this quarter or if it hasn't hit yet. And then I know you're talking about Market Intelligence being better in the back half. And so wanted to just flesh out what gives you the confidence that, that happens. A: Adam J. Kansler, President of S&P Global Market Intelligence, responded that the division is seeing cyclical headwinds, particularly among smaller financial services customers, similar to market observations. He noted that the impact of investment bank consolidations is not materially affecting the division and is accounted for in their guidance. Kansler expressed confidence in the division's growth due to secular tailwinds in core focus areas like private markets and desktop expansion, supported by investments made over the last two years.
Q: I just wanted to ask on Market Intelligence as well. Just in terms of the strategy going forward, obviously, tough budget environment. Competitors are probably sharpening their pencils, too. Just can you help us with the strategy there? And also kind of tied to that is the -- when does Visible Alpha close? How should we think about the contribution and also the divestiture that you were planning? Like what else is in there? A: Adam J. Kansler explained that the acquisition of Visible Alpha is expected to close in the second quarter and is seen as a strategic enhancement to their Cap IQ Pro solutions. He highlighted core strategic focus areas including private markets, sustainability, and desktop expansion. Kansler emphasized the importance of delivering integrated data solutions to customers, which is a competitive advantage in vendor consolidation scenarios.
Q: I'd love to hear more about how -- you talked about a pull-forward in issuance into the first quarter. Can you just talk a little bit about, on a regular basis, how much visibility do you have as you look 3 quarters out? And how do you think about taking some level of conservatism? Given we're in an election year, there's an uncertain rate environment, just how are you positioning yourself with regards to the guidance, given what you saw in the first quarter? A: Martina L. Cheung, President of S&P Global Ratings, detailed that they utilize a variety of macro and market indicators to forecast issuance volumes, focusing on factors like GDP, inflation, and geopolitical events. She noted that Q1 saw significant refinancing activity, which they anticipate will continue into Q2 but may taper off later, influenced by market stability and favorable conditions.
Q: Wanted to follow up on Ratings and maybe more on the margin front. So while you're increasing the revenue outlook, margins -- you haven't increased margins. So I'm curious if it's mix of business or any investment, sort of how we should think about the margin performance through the rest of the year. A: Martina L. Cheung explained that the guidance for Ratings margins remains unchanged despite revenue growth, as they aim for sustainable long-term margins. She emphasized the effectiveness of their capacity management strategy, which allows them to handle increased issuance volumes without significantly expanding staff.
Q: Just another one on the margin actually, but more on the outlook for the full company. And nice to see the margin outlook being raised. But just wondering, is this just a business mix-driven upside? Or is there anything else going on and such? And I'm asking particularly since you mentioned execution in your prepared remarks. So just wondering, is this just execution on the sales and revenue side? Or following last year's, I guess, disappointments a couple of times, if you take a little bit of a harder look at the cost base and where you can be more efficient. A: Douglas L. Peterson, President, CEO & Executive Director of S&P Global, highlighted the company's disciplined approach to budgeting and expense management, which underpins their positive margin outlook. He noted that the 3% expense growth in Q1 reflects strong execution and a commitment to maintaining a tight control on costs while supporting growth.
Q: I just wanted to drill down further on Market Intelligence, both the recurring variable and the subscription growth. We've seen some really strong 13% growth in recurring variable the last 2 quarters. How should we think about those tailwinds there? And is that mostly contributed from Ipreo and WSO going forward? And then on the subscription side, the 6% growth, that moderated a bit. But how should we think about those momentum as we get -- go through the year? A: Adam J. Kansler addressed the performance of Market Intelligence, noting that recurring revenue growth is carefully monitored and expected to align with full-year guidance for the division. He explained that they are managing the mix of fixed and variable contracts to stabilize growth and meet customer preferences, which contributes to the overall health of recurring revenues.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
