S&P Global Reports 4th Quarter And Full-Year 2017 Results

NEW YORK, Feb. 6, 2018 /PRNewswire/ -- S&P Global (NYSE: SPGI) today reported fourth quarter and full-year 2017 results.  The Company reported fourth quarter 2017 revenue of $1.59 billion, an increase of 14% compared to the same period last year.  On an organic basis, fourth quarter revenue also increased 14% with growth in every business segment.

Fourth quarter net income decreased 51% to $263 million and diluted earnings per share declined 50% to $1.02 with net gains from business divestitures bolstering fourth quarter of 2016 results and a charge associated with U.S. tax reform in the fourth quarter of 2017.  Adjusted net income for the quarter increased 42% to $474 million due to very strong revenue growth, continued productivity improvements, and a lower effective tax rate.  Adjusted diluted earnings per share increased 44% to $1.85 aided by a 2% reduction in diluted shares outstanding.  Pre-tax adjustments in the fourth quarter of 2017 totaled $124 million and included a legal reserve, lease exit charges, restructuring, and a pension-related charge.  In addition, the Company incurred $149 million of tax expense due to U.S. tax reform, primarily associated with the deemed repatriation of foreign earnings, which was partially offset by a $21 million tax benefit related to prior year divestitures.

For the full year, revenue increased 7% to $6.06 billion.  On an organic basis, full-year revenue increased 13%.  2017 net income decreased 29% to $1.50 billion and diluted earnings per share decreased 27% to $5.78.  2017 adjusted net income increased 26% to $1.78 billion and adjusted diluted earnings per share increased 29% to $6.89.

"S&P Global had an exceptional performance in 2017.  At the beginning of 2017, we set out enterprise goals to deliver financial performance, improve operational excellence, enhance leadership and accountability, and thoughtfully deploy capital.  Our employees around the world did a stellar job of helping us to achieve these goals," said Douglas L. Peterson, President and Chief Executive Officer of S&P Global.  He added, "In 2018, I expect additional progress as we continue to invest in new technologies, new products, new productivity initiatives, and new partnerships."

Profit Margin: For the full year, the Company's operating profit margin declined by 1,650 basis points to 43% due to net gains from business divestitures in 2016.  The adjusted operating profit margin improved by more than 275 basis points for the fourth year in a row, increasing 420 basis points to 47% in 2017 as the Company achieved solid revenue growth and successfully delivered productivity improvements.

Return of Capital:  For the full year, the Company returned $1.4 billion to shareholders with $1.0 billion in share repurchases and $421 million in dividends.  Share repurchases were the primary reason for the greater than 2% reduction in diluted shares outstanding during 2017.  During the fourth quarter, the Company received 0.5 million shares as a true-up from its third quarter accelerated share repurchase (ASR) program and repurchased an additional 0.9 million shares. In 2018, consistent with its capital management philosophy, the Company anticipates continuing its share repurchase program, subject to market conditions.

Dividend:  On February 2, 2018, the Board of Directors of S&P Global approved the regular quarterly cash dividend on the Company's common stock.  The quarterly dividend will increase 22% from $0.41 to $0.50 per share. The dividend will be payable on March 12, 2018, to shareholders of record on February 26, 2018.  The new annualized dividend rate is $2.00 per share and has increased at an average compound annual growth rate of 9.8% since 1974. The Company has paid a dividend each year since 1937 and is one of fewer than 25 companies in the S&P 500 that has increased its dividend annually for at least the last 45 years.

U.S. Tax Reform:  U.S. tax reform has two significant impacts on the Company.  First, it results in a net one-time charge of $149 million that was recorded in the fourth quarter of 2017.  This charge includes a $173 million tax expense from the deemed repatriation of foreign earnings, offset by a $24 million benefit from the revaluation of net deferred tax liabilities at the lower enacted corporate rate.  Second, we anticipate a significant reduction of our effective tax rate to a range of 21% to 22.5% in 2018 resulting in approximately $200 million of additional free cash flow.  As a result of U.S. tax reform, the Company is implementing a dividend increase that is considerably larger than in the past and investing further in our communities through a $20 million contribution to the S&P Global Foundation.

Ratings:

4th Quarter, 2017: Revenue increased 20% to $789 million.  Transaction revenue increased 29% to $401 million during the quarter primarily from corporate bonds, structured products, and a modest gain in bank loans.  Non-transaction revenue increased 12% to $388 million in the fourth quarter primarily due to growth in fees associated with surveillance, short-term debt including commercial paper, and entity ratings.

Operating profit increased 45% to $374 million and operating profit margin increased 820 basis points to 47% in the quarter primarily driven by exceptional revenue growth, and meaningful productivity improvements.  Adjusted operating profit improved 40% to $439 million and adjusted operating profit margin improved 810 basis points to 56% in the quarter.

2017:  Revenue increased 18% to $2.99 billion.  Operating profit increased 21% to $1.52 billion and operating profit margin improved 120 basis points to 51%.  Adjusted operating profit increased 27% to $1.61 billion compared to 2016 and adjusted operating profit margin improved 400 basis points to 54%. 

Market and Commodities Intelligence:

4th Quarter, 2017:  Revenue increased 7% to $637 million in the fourth quarter of 2017.  Excluding revenue from divestitures, organic revenue growth was 8%.  Operating profit decreased 61% to $208 million and operating profit margin declined 565 basis points to 33% primarily due to net gains from business divestitures in the fourth quarter of 2016.  Adjusted operating profit increased 13% to $233 million and adjusted operating profit margin improved 200 basis points to 37% due to divestitures, strength at both Market Intelligence and Platts, and the successful completion of the $100 million Market Intelligence synergy program.  

Market Intelligence revenue increased 8% in the fourth quarter to $440 million.  Organic revenue improved 10% to $440 million in the fourth quarter with growth in Desktop, Risk Services, and Data Management Solutions.

Platts revenue increased 5% to $197 million in the fourth quarter due to mid single-digit revenue growth in core subscriptions partially offset by declines in Global Trading Services revenue.

2017:  Full-year Market and Commodities Intelligence revenue decreased 5% to $2.45 billion due to divestitures.  Adjusting revenue for several acquisitions and divestitures, organic revenue growth was 8%.  Operating profit decreased 56% to $793 million and operating profit margin decreased 3,810 basis points to 32% due to net gains from business divestitures in 2016.  Adjusted operating profit grew 4% to $913 million and adjusted operating profit margin improved 310 basis points to 37% due primarily to divestitures, solid organic revenue growth, and the completion of the $100 million Market Intelligence synergy program.

Full-year Market Intelligence revenue increased 1% to $1.68 billion and organic revenue grew 9% to $1.68 billion.

Full-year Platts revenue increased 9% to $774 million and organic revenue, excluding 2016 acquisitions, grew 5% to $744 million.

S&P Dow Jones Indices:

S&P Dow Jones Indices LLC is a majority owned subsidiary.  The consolidated results are included in S&P Global's income statement and the portion related to the 27% noncontrolling interest is removed in net income attributable to noncontrolling interests.

A new industry record for yearly inflows into exchange-traded products of $633 billion was set in 2017 substantially exceeding the previous record of $378 billion reached in 2016.  2017 end of year ETF AUM associated with our indices reached a new record as well at $1.3 trillion.  This surpassed the $1.0 trillion total at the end of 2016 and the prior quarterly record of $1.2 trillion set on September 30, 2017.

4th Quarter, 2017:  Revenue increased 12% to $191 million in the fourth quarter of 2017.  Revenue increased primarily due to AUM growth in ETFs and derivatives trading activity.  Average AUM in exchange-traded funds based on S&P DJI's indices was $1.3 trillion in the quarter, an increase of 34% versus the fourth quarter of 2016.

Operating profit increased 15% to $119 million and operating profit margin increased 150 basis points to 62% on stronger revenue.  Operating profit attributable to the Company increased 14% to $87 million.  Adjusted operating profit increased 16% to $122 million.  Adjusted operating profit margin increased 210 basis points to 64%.  Adjusted operating profit attributable to the Company increased 15% to $90 million.

2017:  Revenue increased 15% to $733 million and operating profit increased 14% to $471 million.   Operating profit margin decreased 20 basis points to 64% due primarily to the acquisition of Trucost.  Operating profit attributable to the Company increased 14% to $344 million.  Adjusted operating profit increased 14% to $478 million.  Adjusted operating profit margin decreased 10 basis points to 65%.   Adjusted operating profit attributable to the Company increased 14% to $351 million.

Unallocated Expense:

4th Quarter, 2017:  Unallocated expense includes corporate center functions and certain non-performance related items such as excess real estate.  Unallocated expense increased 114% to $73 million primarily due to lease exit charges.  Adjusted unallocated expense increased 19% to $41 million in the fourth quarter primarily due to performance related costs and Company-wide IT projects.

2017: Full-year 2017 unallocated expense increased 40% to $178 million primarily due to lease exit charges.  Full-year 2017 adjusted unallocated expense increased 9% to $141 million primarily due to performance related costs and Company-wide IT projects.

Provision for Income Taxes:  The Company's effective tax rates in 2017 and 2016 were  33.4% and 30.1%, respectively.  The adjusted effective tax rates in 2017 and 2016 were 28.9% and 32.1%, respectively.  The decrease in the 2017 adjusted effective tax rate was primarily due to the recognition of excess tax benefits associated with stock-based compensation in the statement of income.

Balance Sheet and Cash Flow:  Cash and cash equivalents at the end of the fourth quarter were $2.8 billion, of which approximately $2.1 billion was held outside the United States.  For full-year 2017, cash provided by operating activities was $2.02 billion.  Free cash flow was $1.78 billion, an increase of $453 million from 2016.  Free cash flow, excluding tax on gains from divestitures and the after-tax payments associated with legal and regulatory settlements and insurance recoveries, was $1.85 billion, an increase of $273 million over 2016.

Outlook:  The Company is introducing 2018 guidance with reported revenue expected to increase mid single-digits.  On a U.S. GAAP basis, diluted EPS is expected to be $8.15 to $8.30 and adjusted diluted EPS is expected to be $8.45 to $8.60.  Adjusted diluted EPS excludes amortization of intangibles related to acquisitions.  Free cash flow excluding certain items is expected to be approximately $2.3 billion.

Comparison of Adjusted Information to U.S. GAAP Information:  The Company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). The Company also refers to and presents certain additional non-GAAP financial measures, within the meaning of Regulation G under the Securities Exchange Act of 1934. These measures are: adjusted diluted earnings per share, adjusted net income, adjusted operating profit and margin, organic revenue, adjusted unallocated expense, adjusted effective tax rates, adjusted diluted EPS guidance, free cash flow and free cash flow excluding certain items. The Company has included reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with GAAP on Exhibits 5, 8, 9 and 10. The Company's non-GAAP measures include adjustments that reflect how management views our businesses. The Company believes these non-GAAP financial measures provide useful supplemental information that, in the case of non-GAAP financial measures other than free cash flow and free cash flow excluding certain items, enables investors to better compare the Company's performance across periods, and management also uses these measures internally to assess the operating performance of its business, to assess performance for employee compensation purposes and to decide how to allocate resources. The Company believes that the presentation of free cash flow and free cash flow excluding certain items allows investors to evaluate the cash generated from our underlying operations in a manner similar to the method used by management and that such measures are useful in evaluating the cash available to us to prepay debt, make strategic acquisitions and investments, and repurchase stock. However, investors should not consider any of these non-GAAP measures in isolation from, or as a substitute for, the financial information that the Company reports.

Conference Call/Webcast Details:  The Company's senior management will review the fourth quarter 2017 earnings results on a conference call scheduled for today, February 6, at 8:30 a.m. ET.  Additional information presented on the conference call may be made available on the Company's Investor Relations Website at http://investor.spglobal.com.

The Webcast will be available live and in replay at http://investor.spglobal.com/CustomPage/Index?KeyGenPage=1073751596&event=19874.  (Please copy and paste URL into Web browser.)

Telephone access is available. U.S. participants may call (888) 391-6568; international participants may call +1 (415) 228-4733 (long distance charges will apply). The passcode is "S&P Global" and the conference leader is Douglas Peterson. A recorded telephone replay will be available approximately two hours after the meeting concludes and will remain available until March 5, 2018. U.S. participants may call (866) 429-0569; international participants may call +1 (203) 369-0911 (long distance charges will apply). No passcode is required.

Forward-Looking Statements:  This press release contains "forward-looking statements," as defined in the Private Securities Litigation Reform Act of 1995.  These statements, which express management's current views concerning future events, trends, contingencies or results, appear at various places in this report and use words like "anticipate," "assume," "believe," "continue," "estimate," "expect," "forecast," "future," "intend," "plan," "potential," "predict," "project," "strategy," "target" and similar terms, and future or conditional tense verbs like "could," "may," "might," "should," "will" and "would." For example, management may use forward-looking statements when addressing topics such as: the outcome of contingencies; future actions by regulators; changes in the Company's business strategies and methods of generating revenue; the development and performance of the Company's services and products; the expected impact of acquisitions and dispositions; the Company's effective tax rates; and the Company's cost structure, dividend policy, cash flows or liquidity.

Forward-looking statements are subject to inherent risks and uncertainties. Factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements include, among other things:

• worldwide economic, political and regulatory conditions, including conditions that may result from legislative, regulatory and policy changes associated with the current U.S. administration or the United Kingdom's withdrawal from the European Union;
• the rapidly evolving regulatory environment, in Europe, the United States and elsewhere, affecting Ratings, Market and Commodities Intelligence and Indices, including new and amended regulations and the Company's compliance therewith;
• the Company's ability to maintain adequate physical, technical and administrative safeguards to protect the security of confidential information and data, and the potential for unauthorized access to our systems or a system or network disruption that results in improper disclosure of confidential information or data, regulatory penalties and remedial costs;
• our ability to make acquisitions and dispositions and successfully integrate the businesses we acquire;
• the outcome of litigation, government and regulatory proceedings, investigations and inquiries;
• the health of debt and equity markets, including credit quality and spreads, the level of liquidity and future debt issuances;
• the demand and market for credit ratings in and across the sectors and geographies where the Company operates;
• concerns in the marketplace affecting the Company's credibility or otherwise affecting market perceptions of the integrity or utility of independent credit ratings;
• the effect of competitive products and pricing, including the level of success of new product developments and global expansion;
• consolidation in the Company's end-customer markets;
• the impact of customer cost-cutting pressures, including in the financial services industry and commodities markets;
• a decline in the demand for credit risk management tools by financial institutions;
• the level of merger and acquisition activity in the United States and abroad;
• the volatility of the energy marketplace and the health of the commodities markets;
• our ability to attract, incentivize and retain key employees;
• our ability to adjust to changes in European and United Kingdom markets as the United Kingdom leaves the European Union, and the impact of the United Kingdom's departure on our credit rating activities and other European and United Kingdom offerings;
• the Company's ability to successfully recover should it experience a disaster or other business continuity problem from a hurricane, flood, earthquake, terrorist attack, pandemic, security breach, cyber-attack, power loss, telecommunications failure or other natural or man-made event;
• changes in applicable tax or accounting requirements, including the impact of recent tax reform in the U.S.;
• the level of the Company's future cash flows and capital investments;
• the impact on the Company's revenue and net income caused by fluctuations in foreign currency exchange rates; and
• the Company's exposure to potential criminal sanctions or civil penalties if it fails to comply with foreign and U.S. laws and regulations that are applicable in the domestic and international jurisdictions in which it operates, including sanctions laws relating to countries such as Iran, Russia, Sudan and Syria, anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act of 2010, and local laws prohibiting corrupt payments to government officials, as well as import and export restrictions.

The factors noted above are not exhaustive. The Company and its subsidiaries operate in a dynamic business environment in which new risks emerge frequently. Accordingly, the Company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the dates on which they are made. The Company undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date on which it is made, except as required by applicable law. Further information about the Company's businesses, including information about factors that could materially affect its results of operations and financial condition, is contained in the Company's filings with the SEC, including Item 1a, Risk Factors, in the Annual Report on Form 10-K.

About S&P Global
S&P Global is a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. The Company's divisions include S&P Global Ratings, S&P Global Market Intelligence, S&P Dow Jones Indices and S&P Global Platts. S&P Global has approximately 20,000 employees in 31 countries. For more information visit www.spglobal.com.

Investor Relations:  http://investor.spglobal.com

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Contact:

Investor Relations:
Chip Merritt
Vice President, Investor Relations
(212) 438-4321 (office)
[email protected]

News Media:
Jason Feuchtwanger
Director, Corporate Media Relations
(212) 438-1247 (office)
[email protected]

SOURCE S&P Global