Q2 2020 S&P Global Inc Earnings Call

At this time, I would like to turn the call over to Doug Peterson Doug. Thank you chip. Good morning. And welcome to today's earnings call. I'm going to begin by talking about our second quarter for Life highlights, but I want to take a moment to express my gratitude for people at S&P Global for their dedication and commitment and is extremely challenging times. I'm very proud of our teams and their resilience long as we enter the second half of the year that none of us could have predicted has to be Global or people remain focused on supporting each other our customers and our communities through this ongoing pandemic wage is still largely all working from home. We've developed plans to return to the office in a way that best suits our business and our employees when conditions permit because we're fortunate enough to be able to work remotely and continue to deliver the highest value to our customers will only move forward with these plans. We're comfortable and confident in our ability to support all of our employees and clients in a safe environment more to khong

How we were doing this?

Highlights a surgeon liquidity driven Bond issuance resulted in exceptional second-quarter results Not only was the performance of the ratings business strong all four divisions delivered Revenue to just wage operating profit growth during our first quarter earnings call. We explain the expense controls. We were putting in place to prudently manage through the pandemic these efforts resulted in a 3% decline in total adjusted expenses during the second quarter and demonstrate the company's ability to reduce costs of difficult environment the combination of Revenue growth cost reduction and reduction of shares outstanding resulted in adjusted diluted EPS growth of 40%

I would also like to share some additional highlights from the second quarter most importantly the company continued to successfully operate despite to the covid-19 pandemic. We completed the $100,000 productivity program that we initiated an investor day in May of 2018 and achieved a run rate of $120 in savings and about what provide more details on that during his remarks as well as review our increased twenty twenty guidance. We also continued our investment growth initiatives and launched several new products all share information on these in a moment. We introduced a new internal initiative over the next few months. We will re-imagine and design the future of our workplace focusing on technology to transform how we serve our customers where we offer and how we work.

During these unprecedented times our goal first and foremost to support our people and our communities to help our employees. We have increased benefits and introduce flexible work schedules help them juggle hectic home lives and work. We've also introduced programs to elevate employees understanding of racial adjustments. Our efforts were diversity extend to our supply chain and Business Park where we strive to partner with minority women veteran and lgbtq businesses. We do not tolerate any discrimination as to be Global and are taking the time to listen and learn from each other and ensure that we were part of the solution and are Advocates of change in April. We added a question to our MPS survey asking our customers how we were supporting them during the covid-19 offer. Our customers have expressed overwhelmingly positive feedback acknowledging The increased frequency and availability of our research and insights related to covid-19 Via weekly calls wage.

The doors and robust online content similarly visitors across all our public websites have expressed a strong appetite for insights and research during the first half of the year. We have reached record levels of website visitors time spent on our site and content consumed in our thought leadership pieces webinars and virtual events in line with our commitment to give back and support our communities. The company was also able to make an additional six million dollar contribution to the S&P Global foundation in Q2 in 2020. The foundation is scheduled to make at least $11 in contributions to support organizations in line with covid-19 relief racial equity and social justice economic inclusion, environmental sustainability gender equality and other organizations supporting own communities are Foundation grants during the covid-19 pandemic have been used to help organizations connect half a million people to local nutritious food distribution the United States distribute PPL.

kids to volleyball families and

Any locations in Brazil and to feed 1 million people hot meals across parts of India to recap the financial results from second-quarter revenue increased 14% to 1.9 billion dollars are just an operating profit increased 31% and our adjusted operating profit margin increased 740 basis points to 58.7% As you know, we measure and track adjusted operating profit margin on the trailing forequarter basis, which increased 410 basis points to 53.6% in addition shares outstanding to 52% over the past year contributing to the 40% increase in adjusted diluted eps.

Now let me begin with our second-quarter financial.

One of the strengths of S&P Global is the resilience of our business model in 2019 over 70% of our Revenue came from either subscriptions from the non transaction course of our ratings business or fake acid link feed primarily an embassy in addition much of the transaction-based revenue and ratings is driven by the refinancing of debt as it reaches maturity on a known and predictable schedule.

Another strength of our company is the wide range of sectors that we serve in addition to financial institutions. We serve numerous Industries including utilities technology integrated Oil & Gas was government and because of this diversity of Revenue no one industry and certainly No One customer represents a majority of our business. In fact, non-financial corporate and Industrial categories represent almost 60% of our Revenue.

Each quarter we highlight a few key drivers toward business and important projects underway this quarter. Let's start with the ratings issue in strength during the second quarter Global Bond issuance increased 36% If we also include bank loan ratings volume total corporations increased 31% the u.s. Led the way with quarterly records for both investment-grade and high-yield issues, is poured into the market to enhance their cash positions while it's not unusual for large Banks to tap the bond market several times during the quarter. It's unusual for corporates to do so, however between the 3rd of March and the end of June they're over fifty corporations that came to the market with multiple Bond offerings.

What was also interesting was the way the companies approached issue? Some came straight to the market some tap the revolvers and then several weeks later turned out their debt with new issues and repaid the revolvers as you see on the flight and finally some companies are frequent issuers of commercial paper turned the bond market with new debt as the commercial paper Market experienced a period of rate volatility.

Turning to the data in the aggregate increased 57% is investment-grade increased 135% higher yield increased 115% Finance increase 9% and structured Finance decreased 56% with large declines in every asset class European Bond issuance increased 36% as investment wage increase 63% high-yield decreased 28% and structured Finance decreased 21% due to declines across every asset class except ABS in Asia Bond issuance, increased 16% overall and readings issued three new domestic ratings in China as China recovers from the pandemic lockdowns are ending and we have reopened are Chinese offices off line prospects continues to grow meeting clients in person should help to advance the business.

as mentioned

You can see how corporations Drew down these revolvers in March and April and on the right-hand side of the slide. You see the dramatic increase of issuers during the quarter was over $500 compared to 300 last year's.

One of the first questions investors ask Whenever there was a strong quarter of issuance is how much of this was pull Ford because of the unprecedented level of issuance. We thought we would try to address this with some data off this slide. We analyzed upcoming maturity data from different points in time as you can see the upcoming maturities in the second half of this year and the next few years have not changed much in the past six months off. So despite the flurry of issuance of the last few months. There doesn't appear to have been much poor port activity.

Next we look at the total amount of global debt outstanding as you can see it's been growing every year by an average of $884 billion dollars or approximately 5% in the first six months of this year the amount of global data outstanding increased by $781 billion dollars clearly a significant increase. So we conclude that the level pulford activity Is Not Unusual instead. We have a surgeon assurance that is created an uptick in the growth of total Global corporate debt bank loan rating activity is not captured in issuance data. However, since it's an important element of ratings revenues, we like to disclose bank loan rating Revenue each quarter in the second quarter it decreased 47% from the prior. 245 million dollars higher Bonds were clearly the preferred option package is Discord.

ESG was a major emphasis across the company and we continue to strengthen our footprint in ratings. 15g evaluations were completed or in-progress during the quarter and eighty years. We also completed three green evaluations during the quarter was seventy-nine to date in addition. We launched the S&P Global ESG scores based on the same data that we acquired this year true costs climate date has been integrated into portfolio analytics enabling investment professionals to analyze ESG factors for an enhanced portfolio views the true cost smells and may the competitiveness dataset was launched on her data Marketplace the data set covers 1490 assets owned by more than 500 public and private companies located in several countries.

Indices etsa, um continues to climb reaching six point six billion dollars at the end of June and plats launched three new daily spot price assessments for the US Post consumer pet bottle Bales adding transparency to the trade of recycled material in addition Platts analytics scenario planning service SPS and world energy demand have been gaining traction with annual contract value growth of over seventy percent at the end of the second quarter compared to a year ago FPS underpinned by the mark-up in world energy demand offers clients of view of the medium and long-term trajectories of energy and commodity markets as well as insights into the interconnected nature of Market fundamental technology package policy consumer preferences, this comprehensive service gives access to the data and tools needed to respond to the risks and opportunities presented in the energy transition class has been operating in the energy job.

Station space for over fifteen years was valuable analytics in the form of price assessments news.

And analytical Services across a variety of environmental markets and related commodities.

We think that the launch of S&P Global ESG scores is a significant milestone for the company. These scores are based on twenty years of Sam data this dataset. We provide include sustainability suck it have an impact on a company's business value drivers including growth profitability Capital efficiency and risk exposure for more than seven thousand companies a qualitative screen evaluates a company that wants to critical sustainability issues that may arise during the year and full data history dating back to 2013.

The scores are available data feeds and can be found on the data Marketplace that we describe to you last quarter. In fact, these scores have quickly become most sought-after data sets on our data Marketplace wage a sample of the data for industrial companies depicted on the right side of the slide with the total ESG score in the top row and the scoring components underneath

I'm particularly pleased with all the distractions that are employees face during this pandemic. They continue to innovate and launch new products. Let me highlight just a few of these machine-readable filings by marketing agency is a new data offering. It applies cleansing parsing techniques to generate machine readable text extracted from SEC regulatory violence. This might be of interest to many of you are indices businesses partner with IHS markit to create multi asset class indices will use the S&P 500 in IHS markets. I box Bond indices and CDX and I took credit indices to construct new multi-asset benchmarks in the first phase of the collaboration. The companies are working to design a liquid multi asset allocation strategy as she continued to ramp up our Chinese operations. We launched the first Mandarin language release of greetings 360 as part of the broader efforts of contributing to the digitalization of commodity markets classes in, Georgia.

Apis for two important data sets the world Refinery database and Platts oil inventory Plus work with selected clients and development phase of these apis these new apis Thursday beginning of a multi-year effort to provide fundamental commodity insights and data from our highly valued analytical services to direct machine consumption in customer back-end systems and quantitative model.

Lastly I want to share the kids shows now making its entity linking capability available to our customers. It's called control link and it's a machine learning model which minimizes the time it takes to onboard new data sets and organized entity data. We've even seen clients used can't really to manage data in their CRM systems.

There's just one more new product launch. I want to feature it's called risk age small and medium-sized Enterprises account for approximately 90% of global businesses financials for many of these companies how easy or difficult to find risk age offers credit information are more than fifty million global companies. We did significant SME coverage risk age reports allow the streamlining of counterparty credit risk assessment by helping uncover risk and deterioration in payment Behavior clients can now access it detailed company credit risk profile that contains relative performance benchmarks and insightful commentary month in addition to company profiles a risk age score and probability of default, Terry, we offer Paces which allows identification of an entities trade payment behavior and potential liquidity risks based on a statistical model and Max limit a framework the recommends maximum exposure limits by incorporating multiple risk Dimensions use a risk appetite and macroeconomic element.

each

Here S&P Dow Jones indices releases the annual survey of assets this chart depicts the highlights of that survey for 2018 accent levels and actively managed funds that Benchmark against our industry wage increase to 21% to nine point three trillion dollars Assets in passive funds invested in products index or indices increased 33% to 6.4 trillion dollars off numerous indices underlie the 6.4 trillion, including the S&P 500 the largest with four point six trillion dollars in assets other categories include smart beta and fixed-income, both increased nesg which increased 37% to eleven billion dollars in 2019. We anticipate that new ESG products launched by u v s e w s State Street and Blackbob will create further growth in this category next. I would like to provide additional information around our outlook for 2020.

Let me start with her issuance Outlook the correlation between GDP and issuance has been upended by the surgeon liquidity driven issuance after central banks initiated on purchase programs to support Market loss this windfall initial. It says results in our expectations for a 5% increase in global issue, excluding International Public Finance versus the decline of 10% in our previous forecast wage. The fastest growing area is non-financial Corporate which we expect to increase 20% the weakest areas structured Finance, which we expect to contract 30%

Early this month or Economist updated their Global GDP forecast due to a deeper downturn than initially anticipated in Emerging Markets notably in India the forecast now calls for three months 80% contraction to Global GDP in 2020, the effects of extended lockdowns unemployment. The consumer confidence also means the recovery will take longer than previously expected in 2021 to 2023 with a permanent loss own output. We continue to maintain a close watch on the macroeconomic and other factors that impact our business. We're going to press it into a Jeep times and there's a great deal of uncertainty of our ability to predict how geopolitical and macroeconomic forces might react and behave in terms of very little historic precedent. We continue to monitor the developments in global to call in economics. And hope to gain better visibility and Clarity into their impact on the global business climate and our companies. We get further into the year now now turn the call over to a vote Steenburgen wage.

Going to provide additional insights into our financial performance and Outlook about thank you and good morning to all of you on the call. Let me start with our second-quarter financial results with their corporate the highlights of strong revenue and adjusted earnings per share growth. I will take a moment to cover a few other items or some of the segments have a difference between reported and organic Revenue growth in aggregate. They are the same as 14% But just a total expenses declined 3% This is the result of our productivity program, but also due to the management actions we have taken in response to covid-19 is included a hiring freeze reductions in lower advertising and promotions and reduced use of outside Professional Services. However, the increase in spending in growth initiatives continued

adjust

Operating profit margin improved 740 basis points based on strong Revenue growth and lower expenses. You're just as effective tax rate impact to 21.7% Do you primarily to the successful resolution of tax examinations in various jurisdictions?

During the quarter changes in foreign exchange rates at a positive impact on adjusted EPS of two sets. The only meaningful impact wasn't ratings were revenue of negatively impacted by seven million dollars.

The normal adjustments this quarter collectively generated a pre-tax loss of $39. They included six million dollars in restructuring charges in corporate office and a UK pension adjustment 1 million dollars in gains from the disposition of an IR web hosting business in Market intelligence two million dollars for cash retention related expenses, and thirty two million dollars in Deal related amortization.

This quarter old Ford officiants delivered increased revenue and adjusted operating profit with the ratings delivering tremendous gains on the trailing fourth quarter basis adjusted operating profit margin increased for all the Visions except Market intelligence where a large portion of our investment spending is taking place or provide Kolb on the individual business results in a moment.

Now turning to the balance sheet our balance sheet has low leverage and ample liquidity. We have cash and cash equivalents of two point seven billion dollars death of 4 billion Down syndrome full capacity of one point two billion dollars and no commercial paper outstanding our debt ratios declined slightly versus the end of last year's in light of the attractive new issue rate. We may undertake an opportunistic refinancing of a portion of our bond debt during the third quarter subject markets conditions and board approval.

Free cash flow excluding certain items reach one and a half billion dollars in the first half of this year an increase of 551 million dollars over the prior year. Thursday. No new sheriff purchases were made in the second quarter. Well, our existing program was in place on July 27th. This is our program was completed with the average price of shares purchased under this program was approximately $292 per share over not presuming share repurchases at 6, Stein. Our board of directors may consider a potential resumption of our share repurchase program later in the year off.

including the

Just completed share repurchases those with 1.15 billion dollars in the first half of 2020 in addition 323 million dollars of dividends may have been paid so far this year this activity along with anticipated dividends in the second half of the Year amount to approximately 66% of or anticipated free cash flow for the year.

Now let's turn to the deficient results raises Revenue increased 26% and excluding the acquisition of the ESG ratings business from robecosam and crystals office position of Greenwich Associates. Organic Revenue increased 25% This Revenue growth was driven by the increase in issuance already discussed adjusted wage has declined 5% excluding changes in foreign exchange rates expenses to client 2% due primarily to management actions and the insourcing of it resources that we offer our fourth quarter or an Explorer this resulted in a 47% increase in there just the segment operating profits and a 1020 basis-point increasing just a segment operating profit. Margin on the training for quarter basis adjust the segment operating profit margin increased 660 basis points to 68.

3.1%

film transaction Revenue increased 1% transaction Revenue increased 48% due to very strong bond investment-grade issuance globally and high-yield issuance off partially offset by weakness and structured finance and decreased bank loan rating activity.

It's like a big ratings Revenue by its end markets the largest contributor to the increase in ratings revenue of the 38% increase in corporates in addition Financial Services Revenue increased 24% structured Finance decreased 21% government increased 24% and the Crystal and other category increased 8% on the right side of the slide. You can see the changes in Revenue within Structured Products. The largest decreases were in AVS and cmbs

Joining to Jones indices the segments delivered 2% Revenue growth due primarily to games in exchange-traded derivatives, excluding a non-recurring benefit of approximately eleven million dollars in the second quarter of 2019 primarily from contract renegotiations. Revenue would have increased 7% in the second quarter. We reported a 5% Improvement in the just expenses due primarily to management actions 5% adjusted segment operating profit growth and it'll just south of operating profit margin of 71.9% an increase of 210 basis points on the trailing forequarter basis. You're just a second off waiting profit margin increased one hundred and fifty basis points to 70.2%

Revenue growth left by exchange traded derivatives during the quarter as it linked fees decreased 4% due primarily to a non-recurring benefits of approximately eleven million dollars in the second quarter of 2019 exchange-traded derivative Revenue increased 20% on growth in trading folios data and custom subscriptions wage increase 6% due to an increase in end of day and real time.

Our innocence division over the past year ETF net inflows were $102 billion dollars and Market declines or seven billion dollars. This was soldered in quarter ton of one point six trillion dollars, which is 6% higher compared to one year ago. I want to make a clear distinction between efforts wage and quarter ending. Our revenue is based on average which increased 2% year-over-year. We disclose quarter ending figures because faith and market gains and losses are best depicted using quarter and figures shown in the waterfall chart on the right.

Sequentially versus the first quarter of 2020 ETF net inflows associated with our indices those Seventeen billion dollars while Market appreciation thousand two hundred and fifty four billion dollars industry inflows into exchange-traded funds were $195 billion dollars in the second quarter the category with a large gains was fixed income flows into Equity Funds were $59 billion dollars. I also want to point out that in funds tracking our faith as a potential new economies Composite Index have passed 1 billion dollars increasing 9 volts year to date.

Activity at the CBOE declined in the second quarter, but as a P 500 Index options activity declining 90% and fixed Futures and options activity declining 65% This was in contrast to increased activity at the where the equity complex volume increased 60% The majority of the gain at the CME was due to the successful launch of the micro emini S&P 500 futures excluding this product the volume at 2%

Market intelligence delivered reported Revenue growth of 6% and organic growth of 5% The covid-19 pandemic has lengthened sales Cycles wage driving record usage particularly in the market intelligence desktop panjiva 451 research and LCD.

Expenses increased 3% due primarily to Acquisitions increased head count in the second half of 2019 and investment spending partially offset by management team much of the investment spending is on projects that are becoming more visible to you including the lounge of data Marketplace last quarter and risk gauge for the life of me space this quarter.

Just a segment operating profit increased 13% and you adjusted segment operating profit margin increased 220 basis points to 34.4% off on the trading for quarter basis or just the segment operating profit margin declined 100 basis points to 32.4%

Looking across the market intelligence components desktop Revenue grew 4% excluding Acquisitions and divestments for Access desktop users. Grew 7% off data Management Solutions Revenue grew 5% and credit Risk Solutions Revenue grew 8% We continue to expect revenue for both of these categories to grow high single-digit this year.

And I'll turn into Flats reported Revenue increased 2% and almond organic basis adjusting for the sale of Rick data Revenue increased 3% with course Corrections in global trading Services. Both growing 4% the impact from the covid-19 pandemic resulted in a three million dollar declined to almost zero in conference Revenue this quarter you have probably never heard of discuss the conference business because it has annual revenue of only about ten million dollars. However became of covid-19 the business largely evaporated during the quarter steps are being taken to shift some of the business too virtual conferences.

The recession has also reduced oil prices putting enormous pressure on many of our customers. This has resulted in bankruptcy filings by 45 South Asian and production and oil service first year today many of them are our customers but slow part of our Revenue. This will impact us in the future.

Adjusted expenses decreased 7% due to the nature of Rick data and management actions adjust the segment operating profit margin increased 406 Sports to 58.3% The trailing forequarter adjusted segment operating profit margin increased 240 basis points to 54.2%

Lost quarter Ducks shared with you some initial success we had with Ken show and our Market on clothes process can show has enabled Flats to accelerate the assessment process and improve efficiencies or flat surprising reporters. Well adding significant Time Savings and analytical value for our customers ten markets with a total of 35 that are no control Power words. This has reduced the time between the market close and Publishing by an average of 70% which has already produced internal productivity gains our editorial team.

our efforts

To discover the commercial value of faster assessments and developed analytics offering in collaboration with our customers are ongoing.

Role in each of the categories was three to four percent during the quarter.

Hello. I'm pleased to share that the one hundred million dollar productivity program that we announced at our investor day in May of 2018 has been achieved. In fact, we exceeded the original thoughts and delivered 120 million dollars in productivity savings. Some of the key areas of improvement were in standardizing and centralizing processes, utilizing our 2008 routine activities reducing our real estate Footprints and consolidating data centers. That being said given what we have experienced through the covid-19. Wage virtual work and digital acceleration. We know there will be a change to how and where we work in our prior guidance. We had assumed 15% of our discretion life savings from the impact of covid-19 would be permanent in nature as we more holistically analyze all the potential opportunities that have been eliminated over the past.

Several months were framing a new productivity program of at least one hundred million dollars that will introduce later this year.

Covid-19 had a meaningful impact on our business on this slightly attempt to disclose the impact on revenue and expenses in each segment compared to our first quarter Baseline scenario the guidance as we have mentioned earlier in the cold. There was a search of liquidity driven issuance that increased ratings Revenue during the second quarter by 170 to 190 million dollars. That was a modest improvement in our innocence business as ETF levels improved quicker than anticipated the impact on Revenue off. Our other businesses was in line with previous guidance. However, I want to remind you that in our subscription businesses any customer bankruptcies or cancellations that this year generally will not have a full impact on our Revenue until 2021.

Woman expense impact the management actions taken would do expenses by an additional 10 million dollars in the second order above our previous guidance collectives. There was about sixty cents EPS benefits from these items in the second quarter. If you didn't combine this with an improved outlook for the second half of this year of about 26, we're increasing our 2020 adjusted diluted EPS guidance by eighty cents per share.

Los cordially introduced three scenarios with different time frames for when the economy will begin to recover the Baseline scenario was based on the latest third quarter recovery this scenario Renee's our Baseline and has been updated with our latest forecast. In addition. We have updated the late fourth-quarter recovery scenario. If you these as the key metrics which would impact Revenue in various parts of our company and are derived from various forecasts from our economic credit oil and other markets Specialists across as a p Global page of the inputs for these scenarios can be found on our divisional research and analytical platforms and our source accordingly in addition to our two items that we are providing you with at this time to give additional color for the scenarios. The first is global issue and scrolled in the Baseline the 5% increase in global issuance relates to Market issues dead.

excluding International

Click Finance under this scenario built investment-grade issuance growth is forecast to increase double digits or high-yield is expected to be up in the high single-digit range. The second is exchange-traded derivative volume growth. The Baseline of approximately 20% assumes elevated levels in the first half of this year followed by a low single-digit increases in the second half, but we are not predicting when the pandemic will end. We're using the late third-quarter recovery scenario as our Base Line and the base wage our new guidance. We think that it is important for our investors that we make a good faith attempt to provide appropriately framed forward-looking information.

Despite our resilience and financial strength. We are not immune to structural risks arising from covid-19. He's include risks to the macroeconomic environment to bond and crafts markets to equity markets and two oil markets. You could see a drop in bond issuance weakness in new sales or subscription renewals or further drops in a whole bunch. The many risks that could arise were staying close to the trends the longer the pandemic continues the Creator the risks.

It's like the pics the scenarios with the typical guidance line items. We normally disclose the Baseline column is our new 2020 Gap guidance.

This slide depicts. Our adjusted figures the third column is our new 2020 adjusted guidance based on the revised late third-quarter recovery scenario. Now with our new adjusted guidance, we increase our Revenue guidance to a mid to high single-digit increase corporate and allocated expense has been increased by Twenty million dollars up to range of 135 to 145 million dollars due to increased incentive compensation accruals and the contribution to the sap Global Foundation operating margin is increased to a range of 51 and 1/2 to 52 and a half percent interest expense net includes both interest income and interest expense. It has been reduced by five million dollars due to our cross-currency swap derivatives partially offset by lower interest income received on our cash balances.

The tax rate has been reduced due to the impact from Equity compensation these items result in a new adjusted diluted EPS guidance range of $10.75 to $10.95. Our expectations for free cash flow are arranged of 2.7 to two point eight billion dollars.

In conclusion. I'm very proud of the outstanding performance and execution that our team has delivered during this exceptional quarter the financial results that we have delivered year-to-date dead straight the resiliency of our businesses and the commitment of our leadership to control expenses and to apply the highest Professional Standards in managing the company through this. But we'll continue to navigate through uncertainty remain committed to provide transparency for our investors to deliver in Central Intelligence for our customers and to support sustainable development in our communities, and with that. Let me turn the call back over to chip for your questions. Thank you. Just a couple of instructions for our phone participants to indicate that you would like to ask a question, please press star one and record your name to cancel or withdraw your question simply press start to please leave yourself to two questions in order to allow time for other callers.

During today's Q&A session if you've been listening through a speaker phone.

But would now like to ask a question. We ask that your list your handset prior to pressing * 1 and remain on the handset until your question has been answered this once you're better sound quality operator will not take our first question.

Thank you. The first question comes from Tony Kaplan with Morgan Stanley. You may now ask your question. Thank you. Congratulations on the corridor. I wanted to ask about the ratings marja, you know, they're incredibly strong in the corridor business make you rethink the high fifties over the medium-term that you've mentioned previously. Just given the operating leverage that seems to me that exists in the business and just if you could give some color on the sustainability of the margins going forward. Thanks.

Good morning, Tony and thank you for your recognition of of our results indeed. We are of course pleased to see the margins by ratings growing up so much now on the trailing fourth quarter basis at 63% level we have decided not at this moment to make any changes with respect to our aspirational margin targets because we think this is not the right time to do that given the external environment by the way, that's applicable for all of our divisions. And what you should expect for Ratings is that margin should be somewhere around that 60% level for the full year. That's the best expectation. What we could do is we're going to work on this new product if the program where we will provide you more details later this year and most likely we could attach new expiration of margin targets wage to that same to that same moment and introduce that to you and and the other analysts and investors so not at this moment, but around that 60% off.

Is the best expectation for Ratings margins for this year?

That's great and and the re-imagined workplace program that you mentioned in the early comments is that program expected to result in cost-savings. Is it related to that productivity program or is it different and maybe it's just a reallocation of expenses. So just wanted to get a little bit more color on what that means and if it's part of that whole program as well. Thanks. Yes. Yes, absolutely and let me first explain a bit more about this re-imagined because that is an aspirational program to define the future of our operating but also the way how we are going to work how we're going to interact make decisions how we're going to accelerate our digital transformation where we can find Talent around the globe and of course also lead to a reduction in physical footprints that will lead as a consequence to some expense savings is the expectation and we're going to roll that up in our new product issue.

So if you think about our new productivity program the key elements of that will be a reduction in real estate given that most likely will be more in a mix of took off work and working at the office a reduction in travel. There will be probably a more permanent element to our travel reduction reduction in travel expenses with some food or a clean up of some older technology infrastructure and also will go after some of our procurement spend in in the company. So those are the key elements. So you're right that some of the outcomes from Project reimagine will be an input for the new productivity program.

That's great. Thanks a lot. Congratulations again.

Thanks, Tony. Our next question comes from with Barclays. Your line is now open.

Thank you. Good morning. Gentlemen, my first question was just you know around you know, in your examinations. You have a $40 oil price range and just in that context. I just wanted to know what the current environment look like and just some more color on you know, what you think. This could be a little bit worse than would be so and fifteen $16, but you know a big range just curious and how we should think about the impact. Yeah.

Hi amount of this is Doug. I'm actually pleased that you asked the question because we're looking right now at a price of oil in the range of $35 to $40. It might be a little bit above that right now. He's in the last few days. That oil is in $40 range. Clearly. There have been a lot of impacts on the in the industry overall from the from the Dip the major dip that it took earlier this year. There have been bankruptcy filings by 45 and P companies to date so far this year. We see also on the other hand. There's some people that are starting to enter the market to pick up that capacity. So we're seeing more m&a and stressed activity taking place in the in the in the business. What we have seen is we mentioned last quarter is that the sales cycle has lengthened, uh, we at the very beginning we obviously had a hard time able to reach our customers and everybody's working at home both on our side of the customer's side. But there has in the in the meantime though. We've seen incredible engagement across all of our businesses in the specially Platz. Yep.

Able to put all of our regular Seminars the different organizations that we meet with we will put all this online the amount of people and the number of engagements were having has increased dramatically in some cases up over two hundred three hundred percent of people attending our webinars and going to our our our website traffic. So we see a lot of Engagement to customers but we do expect it's a very difficult volatile environment, even though we do feel that the price of oil settling in the $40 range is going to be beneficial.

Got it. And you know you guys identified, you know, a lot of great new innovation maybe just to pick on one the risk age product, you know, the whole SME space private companies based off sounds like it's something that you know, every company out there talks about and want to get in and I was hoping you could just help filter out maybe a little bit. You know, what target market you going off? What is that landscape or competitive that look like is it feels like, you know, everyone has some solution like this coming up.

Yeah, so the risk age is something that we had identified a couple of years ago meeting with our customers. We heard this need for Thursday are faster independent information about suppliers about the supply chain. It's also credit. It's it's limits its credit Etc. The things that have talked about with risk age. And so we've designed risk age so that it's a consistent approach with a consistent model that's used globally. As you saw now it's over fifty million companies with data that comes from multiple sources around the globe, but then it's applied in a way that's consistent and we're able to deliver this now with this fifty million companies into a company into a a company's workflow whether it needs a bank or it's a large Global buyer of different parts and services et cetera. So we see this as an area where companies need more faster considering

data so that they can make decisions about their supply chain and

It's a space that we were very pleased that we could get into quickly. We've got multiple sources of data. We have a great partner that we've been building this with and then we can build it off of the back of our technology for our delivery as well as a credit models that are time-tested. So we're very pleased that we're getting into this space and you should see more to come.

Got it. Thank you. Thanks.

Our next question comes from Alex cramp do UPS your line is no open.

Yeah, hey, hello, everyone going to the to the ratings business. Of course here. You did a good job addressing, you know, the pool for question that people always ask some of the damage on the maturity still going up that'll spending on up obviously. Also just that the algorithm grow through issuance is alive, but at the same time, I think you also said, you know off the debt raised here was the quiddity reasons though. I think companies are generally flush with cash. So is there anything that you can point to that gives us a better confidence level that you know that algorithm is alive and there's not going to be, you know, maybe a lower level of issuance in the last next couple of years just because companies are so flush and they don't really need to refi some of the maturities that are coming up next month.

Alex this is Doug. Let me take that one. So first of all, when we look at the issuance as you can see, we put a lot of analytics in this time and clearly there was a a rush to the market for Quality. There was no company that wasn't looking out to have a strong liquidity position as we entered what people were fearing was it going to be a major recession? And so we saw that issue that Russ get cash and some companies obviously are spending that cash. They're they're going to continue to need to fill their coffers with new cash because they're spending it. There's also many who are booked out in the markets right now. They're they're looking at what they're going to do with the cash later on as the as the pandemic starts to resolve itself will see if companies are going to use that additional cash to age either do m&a deals if they're going to use it to invest in their in their operations. Are they going to use it to repay debt? We don't quite know yet exactly where that's going to what's we're companies are dead.

Come out of this because there is going to be some excess liquidity you saw in the charts that we provided today that there were three hundred typically about 300 issuers in a quarter and this quarter there were five hundred issuers that went to the market showing the companies were going to the market to raise liquidity now clearly this is because this is our Core Business we're watching this very carefully. We're staying in touch with issuers with investors with investment Banks to see what kind of a pipeline we think is going to be coming forward. But but even so given the that we are in a very unusual environment was very low interest rates month with the potential recession that could go on longer than originally expected. We think that it's hard to actually predict what the behaviors going to be of companies and we do see those still all over the next couple of years. One of the other slides we showed you a very potential healthy pipeline of issuance, which will be based off of maturities of debt schedule that are coming up and all the new debt that was just recently wage.

Is going to go into that maturity skin.

As well. So if you look at this quarter-by-quarter, we expect there's always going to be volatility. If you look at it over the long run. We see a healthy potential pipeline of all the maturities coming forward.

Okay, helpful. Thank you. And then just shifting gears quickly, you know, you mentioned a couple of times now that in in some of the other businesses Mark intelligence and plats, you know sales tax are getting late is bankruptcies and that we should be careful as we think about all model as this may have Delayed Reaction any in terms of the numbers from coming through. So any any early look up maybe it's just about the bass and and twenty Twenty-One as what that impact or negative impact may be as sensitive cuz of some of those sales cycles and bankruptcies.

Alex this is let me take that that question. It's very hard to give you a precise indication of this where we are in our subscription businesses plots and Market intelligence. That's what we're seeing from a sales an impact on the book of business actually slightly better than the guidance. We provide it to you a quarter ago. So that's encouraging to see that may impact is less severe than we expected. Although still worse than what we thought at the beginning of the year. What is happening in a subscription business is that the full effect you see the following years because then you see 12 months of impact from your subscription Revenue in the following year. So it will have some muted effect, but overall slightly better than what we thought a quarter ago.

Okay. Thank you.

Our next question comes from Craig Huber Uber research Partners your line is now open.

Yes, good morning. My first question Doug maybe you could just talk on the second half of the year what your thoughts are on the high-yield issuance versus bank loans, which is sort of Outlook there to move. It will start their police. Yeah, the the outlook for the rest of the year for high-yield issuance. I think of it in two different segments one segment is the recently dead downgraded companies that have been Triple B and are now BB companies and we see a lot of potential robust issuance. They're the the FED is continuing to support the area. We have to see if those companies still need the cash if they're going to be going to the market but that's that was an area that in the as you know in the second quarter was a quite robust part of the issuance. There's another part of yield which would be the deeper risk credits, which are those that are in the deeper level. The single bees the Triple C companies. We expect that. There's going to be a decline the second.

Of those areas and bank loan readings have also were expecting that. There's going to be a decline in the second half of the year as well. The pipeline is not that strong even though interest rates are low birth spreads are continue to be high recently the spreads for the single be we're over seven hundred basis points Triple C word over a thousand basis points. Typically, the recent recently rates have been more on the four hundred level instead of 700 and 800 versus a thousand. So rates are still spreads are still high. So we're expecting a decrease in issue. It's over all the one question mark being about the BB sector itself that has seen a lot of robust issuance recently.

And my second question Doug, maybe the investment.

Great outlook for the second half of the year after the robust second-quarter police. Are you expecting a material dip it in the juncture like the third quarter for example, not necessarily the third quarter. It's nice, but we're expecting that. The issuance of investment-grade will not be as robust as it was during the first half of the year.

But still up for the second half you don't mind me asking. What is your thought on that? Well the total amount in our forecast is up about 5% for the for the year and what we look at the we look at the total investment grade for the for the entire year. We if you look at the entire year, we're up. It's going to be up about 20% But when you parse that out to look at what was in the first half was the second half that ends up being at a a few percent maybe five percent in the second half of the year, but it's but it's flat to up 5% is what the expectations are.

Great. Thank you.

Next question is from Jeff silver with BMO Capital markets. Your line is not open. Thanks so much. Wanted to shift gears with that. We've got a fairly big election coming up about three months or so, you know, it looks more and more likely that we might have a regime change down in Washington not only in the white house, but potentially in Congress as well. Are you hearing anything that could impact your business and I'm specifically focused on, you know potential movement against some issue or pay on the ratings. Thanks.

Sorry, I was just speaking with my commute. So first of all, we are we're watching obviously election very closely to see what we could what could change in Washington and we stay very close to what are some of the topics which are discussed in the policy areas. We don't expect that there is going to be a robust discussion about about issue or pay model or about about the ratings business. There's already been a a lot of work that's been happening around that the last few years. And so if it is we expect that it would be something that would take a while. It would have to go through the SEC and have to go through Thursday. We're members or we are active in our relationship with Regulators of policymakers with others and we would expect it would we could be part of that dialogue? Finally what I'd say is that if you look at the performance of our ratings business and I don't mean from the point of view of financial performance, I mean ratings performance themselves, the way ratings have performed we have made a fantastic amount of investing.

For the last ten years in the in the ratings methodology in our in our how we see this playing out and we're seeing very high quality performance right now and and we're hoping that the month it's also recognized the quality of our of our ratings performance during this period and that that doesn't end up leading to a lot of noise. Anyway, we watch very carefully what could happen in Washington, but so far nothing Thursday, we we are are very concerned about are doing a lot of specific work on. Okay, great. That's good to hear my my follow-up questions regarding Capital allocation specific band share repurchase. I think he said the the board could consider resuming a share of purchase later this year. I'm not going to ask you to speak for the board. But what do you think they might be looking for to determine that decision?

Yeah, this is a vault. Let me take that let me take that question. Of course. We cannot anticipate such a decision at this point in time. And as you said we cannot really preempt the board wage clearly the decision lost quarter not to enter into a new buyback program was purely driven by the external environment because if you look at our balance sheets the quality of our assets our liquidity position the performance of the company all of that of course points to a very strong situation. So none of that page, of course an argument in such a decision. It's really driven by the external environment what we're seeing in the world around us, but I would like to re-emphasize that is notes change with respect to our long-term capital philosophy and targets so that 75% return Target remains in place. So this is really more a short-term consideration or management and the board wage.

Okay, appreciate the call it thanks so much.

Thank you.

Our next question comes from Missouri with Jeffries. Your lot is not working.

Good morning. Thank you. You you touched a lot on ESG across your various segments. Could you maybe frame for us? Just you know, how big yes G revenue is today. I think you did it on on the analyst day a while back. Just curious how how big that is. What the growth rate there is how did you think about that gaining critical mass over time?

Good morning, and in the second quarter approximately 15 million of revenue for ESG across the whole company that corresponds with home with about 25% growth year-over-year. We're still committed to 40% Greg are in the middle longer-term. The reason why we are not there yet is that we are introduced several New Year's Jeep products as we also mentioned to George the prepared remarks think about the new data and scores product for Market intelligence. Think about the collaboration. We have talked with several managers like State Street BlackRock UBS with respect to ETFs. So all of that is under development and therefore expected the girl will go up in the future but fifteen million revenue for e r g was booked in the second quarter.

Got it. Thank you. My follow-up question is around, you know going away potentially. Could you maybe talk about implications of that? Clearly? There's a direct application with you know tax rate, but but but historically with tax reform it had been a headwind for you and you had you know, specific slides on that previously wage and and so more interested in what you think the indirect impact could be on bond issuance and and and any thoughts there. Thank you.

Yeah, and I appreciate that you all asking this question from a holistic perspective because indeed the impact for the company is more than the direct tax rates the impact on the overall economy that will do for the company is as important. So we are of course monitoring very closely what is happening in this respect but it is premature to speculate what will be the outcome. There's a lot I can say is ultimately tax rates should be become attractive from a geopolitical competitive perspective for for any country because it may stimulate business activities create an attractive investment climates create jobs and ultimately ensure a strong economy. And when we have a strong economy that is ultimately good for our company. So that is obviously the most important with any tax code and any changes to a tax code in the future.

Thank you.

Next question comes from George talk with Goldman Sachs. Your lot is not open Hai. Thanks. Good morning. You mentioned that investment in the second half of the Year won't be as robust as the first half of that. You mentioned a plot 5% Could you talk about whether that reflects diminishing marginal benefits from the Fed Credit facilities that are supporting elevated investment-grade issuance or each simply seeing system and for liquidity pre-funding by corporates. Yeah. It's it's interesting you ask about the federal quality program because when you look at the federal liquidity program, this was a this was a fantastic way that the the Fed was and the government is able to show their support for the economy at a time when there was so much uncertainty and in the corporate bond primary markets and secondary markets facilities. It's $750 billion dollars of potential authorities. They have they've only actually used $12 of that Authority as of last week. I'm not sure if they've done any more this week and South

It's it's interesting the way that that provided so much back-to-back stop and support for the economy. Just having the number out there knowing the FED could use this what's been much more important for the FED has been their home a paycheck Protection Program. That's used that that's been uh, The Lending facilities that are out there that can be forgiven. So the the actual bond market itself has been supported by the promise of the FED, but the FED has not been that active in direct Bond purchases. We do think that having that five Firepower of up to $750 is very valuable for the market. The FED has used it to purchase a little bit of ABS a little bit of money markets and a little bit of the funding markets and they've been involved with other Global player Global central banks offer support the dollar with swap facilities and things like that. Anyway to your question, then we think that the investment-grade issuance is going to be driven more. So by the needs of companies than wage.

Then what's going to happen the market and we?

One of the things I have what's going to happen with the FED what I think will be interesting to see there was the evolution of rates if they stay as low as they are and if spread stays as low they are that will be one of the other factors that may induce some companies to go back to Market to raise more debt.

Got it. That's very helpful. And then there's a follow-up. Can you provide details on what segment Revenue growth expectations are embedded in your updated for year 2020 guidance?

Yes, of course. If you look at the guidance we provided and you compare it with the guidance from one quarter ago. We are seeing improvements in the revenue out Loop in all of our Ford officiants. We have indicated on the one page in our slide deck page forty-three that for the second quarter the Home Improvement for ratings in quite a meaningful way, but also in the index business based on the higher assets under management levels, but no impact for marketing intelligence and plants and that's more a bit due to the fact that you see impacts in those subscription businesses, but we expect for the next 2 quarters also.

Compared to a lost guidance also for Market intelligence and plants. So an improvement in Revenue outlook for all four divisions. There is of course an offset wage is a part of the expense saves are related to Performance correlation. So think about incentive compensation for about composition commissions. So if Iraq was higher sales or higher than of course the expense saves on that element are going to be lower but that's for for a good reason the discretionary expense savings based on money management specific decisions and actions. We actually expect throughout perform the guidance. We provided to you last quarter.

Got it. Thank you.

Next question comes from Andrew Nicholas with William Blair your lot is now open.

Like morning, this is actually Trevor Romeo on for Andrew. Thank you for taking the questions. First one just on Market intelligence. Now. We have a full quarter of the code in packed behind us off. Just wondering if you could update us on the competitive environment there. You've seen any evidence of customers consolidating vendors or switching for more expensive data providers since the beginning of the pandemic or any other competitive changes that you've mentioned.

We haven't seen anything by the way, welcome Trevor. We haven't seen any major trends of customer consolidation or any any kind of move across too young to move to new customers. Clearly. I mean to move to New service providers clearly. It's a very competitive market but the covid-19 packed hasn't really had any impact on that. What we have seen though is Faith in our own case. We're seeing a very high level of Engagement with our customers. We were able to move quickly almost immediately to our own ability to work from home and then the way we work with our desktop as well the ability to push out enhancements new products new Services things like you've heard us talk about Marketplace. All of these have allowed us to continue to engage with our customers at a higher level than in the package. So competitive wise we think that we are being we're very competitive that we were able to get into our customers to allow them to work from home very quickly, but when it comes to competitive factors off

Clearly there's people out.

Looking but we haven't seen any major. It's sort of consolidation. We do see a tough competitive environment. We also see customers that themselves have some suffering and struggling with their own businesses and potential asking for changes to their contracts or the sales cycle of slowed down. So some of those impacts we've talked about in the past we continue to see but we haven't heard this theme about customers consolidated.

Okay, great. Thank you. That's helpful. And then one quick one on margins, maybe I think you've talked in the past about gradually kind of Shifting employees to lower-cost Regions over time as a driver of margin payment. Just wondering if you think the pandemic and this exclusively virtual working environment. We have you know gives you the confidence or the ability to accelerate that Trend going forward. I don't think I heard that mentioned as part of what could go into the new productivity program. So I was just curious to think if you want to continue that effort. Thank you. Yeah, that's that's a great Point. Although I would like to say that our talent strategy is first and foremost based on trying to find the best staff the best colleagues in different locations around the world. That is the the main purpose and of course in a more virtual environment that is opening up the room of possibilities because of the less need to be physically wage.

Together at least all the time going forward. So who that mean to finding a more colleagues in the future at lower-cost locations? Yes, possibly that might be the case and having a special in higher-cost locations. Yes, that would definitely be the be possible. But again, I think we start not with our talent strategy from a cost perspective start with what are the skills and capabilities and background that we need to build this company out in the future and to be as successful as possible.

Okay. Thank you very much.

Next question comes from Owen LA with Oppenheimer your line is now open. Thank you. Good morning and congrats on this recorder. Can you please provide a bit more color foundation on the twenty cents improved second half hour. Look on slide. Forty-three is the manager front by the issuance Outlook voice and the other expense assumptions you want to go out. Thank you.

Yeah, it's a combination of of all of that and let me try to explain this in the following way first because we need to be very clear about what is the ref the reference is the guidance that we provided lost quarter if we take that into account so The Late third-quarter Late third-quarter recovery Baseline scenario that we provide to you last quarter. Then we are looking at revenues that come in at a higher level than we expected at that time again ratings for obvious reasons Home Market intelligence and plants as I explained because of the lower impact on the book of business than we anticipated before and also the index business looks a bit better.

And if you look on the expenses and we provided.

View 180 million of expense savings lost. I'm in fact, there are two underlying components. We have the performance related expenses. So those are the ones that are correlated with sales and 3rd Avenues think about this end of conversation permissions, skills-based royalties, obviously the savings there are lower because we have higher revenues but then we have a part of the expense. These are the discretionary expenses with respect to hiring travel consultants and so on and there we expect to outperform. So if you get that all together net-net, we expect to be better by Twenty cents in terms of outlook for the second half of the year, but we are overcoming in that twenty cents. In fact lower savings on those performance related elements like Faribault composition and commission. So in fact, it's a net number the growth number in terms of outperformance is a bit higher wage.

Okay, that's right. Yeah. Yeah. Yeah. I think that's very helpful. And then could you please give us an update on China? There's still lots of geopolitical tensions that you mentioned, but during the quarter, I think one of your competitors and at least two other financial institutions, I got the approval to operate a fully owned business in China. It would be great if you can provide you a better view on that. Thank you.

How you doing? This is Doug. Yeah, first of all as you've heard from us all along. We're very pleased with our progress in China and despite covid-19 to have our people work from home. We continue to engage very well with the market as you know, we've reported three more ratings that we published since the last time we reported we have a great team on the ground. We've been building a market niche market share of of voice and Market. We have a lot of people that are attending our webinars et cetera, but what's really important is that the overall Market continues to develop we've remained engaged with The Regulators with issuers with investors having one of our other competitors in the market we think is going to help develop the market for the type of research and Analysis that foreign rating agencies in chalk on the ground are going to be doing the the rating agency which also received a license. It's a more limited license than ours, but we welcome having another rating agency that's going to be using um,

Global oriented criteria to the market and and so we continue to be committed to China. We think in the long run. It is a very large bond market. We're also pleased and encouraged the discussion that we continue to have with the Chinese Regulators about reform of the financial markets overall. So China is still there. It's really important for us. We're pleased that we're there than where the first thousand and we're also pleased that the competition is starting to open up.

That's it for me. Thank you. Thank you.

Was question comes from Judas. Oh cool with JPMorgan your line is now open.

Hi, good morning. Thank you. I want to ask a question on Market intelligent you guys mentioned that the covid-19 pandemic learn from the sales cycle, but also drove record usage. And so we talked about like earlier in the Q&A, but in terms of that record usage, I was wondering if you could elaborate a little bit on to what you owe that record usage and perhaps whether whether it can and how long that might last and perhaps around outside the color with just how your contracts are structured in Market intelligence so that you can best monetize if we are looking at maybe more of a secular greater usage of those platforms.

Yes, of course you and welcome to the welcome to the call. If you look at usage. Let me give you an example the data feeds business. So the client's interest in the data fees business is at an all-time high and we measure that for example with respect to downloads of data feeds at this at this moment so long that is a great example of where we see usage being very high. We measure usage on our desktop products and we see that the do search numbers being also at a very high level so clearly at this time. We see usage across the board in Market Intelligence being very high that is not immediately translating in wage benefits because the sales process has been lengthened at those discussions take a longer period of time for obvious reasons, but the way how we look at it is this is Jeff.

Be positive because if we can contribute and help our customers in this period of time and we can prove even more the benefits of our products. Ultimately. There are only going to be good things came out of that. So overall we're very pleased what we see from an overall interaction with our customers and and usage perspective and Market intelligence.

Understood just one other question when it comes to ratings. Obviously. We're all hoping that we don't see a major second wave and this is not an elongated recession, but if we did go into a longer period of economic Challenge, and we saw more defaults and bankruptcies, what would can you review with us? What would happen to your Revenue base? I'm thinking in terms of restructuring perhaps new ratings wage when when companies emerged from bankruptcy, and obviously there's a liquidation scenarios to to think through as well. Thank you.

Yeah, you know it's it's an interesting question because whenever there is a downturn we always have said that one of the most important drivers of our of our of our offices GDP growth and clearly the last four months have been completely different. It's it's not your typical cycle where we've seen GDP slow down and we saw this huge increase in issuance wage. But at the same time when you do see a down cycle, you see that sometimes companies going to bankruptcy. Sometimes there's restructurings, but once a bond is a bond, it doesn't go away unless it's a true Liquidation in the bond. Is it disappears when you see companies that get taken over right now, we're expecting that. There's we seeing a pipeline of m&a activity and health care and in oil and gas in particular some of the oil and gas in the activity is actually distressed everything activity and because of that we expect that once somebody draws down there revolver or has a a bank loan.

Complete the deal that they're going to go.

Back to the markets, uh, or they're going to actually restructure the debt directly. So we see that once debt is debt. It continues to stay dead. Even if it's shrunk through a restructuring and um, so what we really look at is is the number of issuers the number of issuance what the banks are seeing their pipelines GDP growth industry growth et cetera. And even in a downturn there's many times. They've got a lot of different types of debt instruments the final thing. I'd say related to structured Finance structured Finance as although you've seen it very very low in the last four months. The the structure activity has been down overall, you know, 42% globally in the last quarter and in the US was down 56% In fact in there were some asset class there was not even one issue instead of cmbs transaction. So that's where we've seen the activity of a very weak structured Finance cycle, but we think after a while financial institutions core birth

Etc going to start wanting to manage their balance sheets and we believe that there will be a recovery at some point again of structured Finance as well. It's a really critical Corporate Finance asset management asset-liability management tool. So again, even though it's been incredibly weak recently. We do think eventually structured Finance also starts recovering again.

Thanks, and thank you for that warm. Welcome to the call as well. Thanks Judah.

We will now take our final question from Kevin mcvea with Credit Suisse your lot is not open.

Great. Thank you so much. Hey, I want to give us a sense of where we are in the kencho evolution across the Enterprise. I guess, you know, I know there's going to be outsized impact on both the revenue and expenditure for sure way to think about where it is in the integration across SMA.

yeah, it's a great question Kevin and I always want to speak about kensho with a lot of enthusiasm because overall it has been a an acquisition for the company that is working in a very positive way is really helping as a catalyst for Innovation and change within within the company and what you're hearing every call is that we are giving you a couple of examples of work and she always helping if it is in the data Marketplace if it is with the entity linking if it is in the market on close with with plaits only search we have several things going on in the ratings business and there are many many examples working show is is helping the company what we have also keeping track of is the overall benefit and contribution of those initiatives and what we said our end and we've recently refreshed that again is that the overall net present value of all those initiatives that are in Flight the net present

Debts really justify the overall acquisition price. We paid for Ken show a bit.

For two years ago. So very positive development and I give you another example at the end you can show index the new economy index but we mentioned that exceeded assets by over 1 billion dollars right now so many initiatives and what we really like is all the Visions take advantage of having this capability within the company.

It's helpful. And then just one quick follow-up, you know on the corporate east side. Is there any way you need you folks track anything around allocation towards m&a or buyback is a proxy for you know, the outlook for IG and maybe some of the other parts of the debts. Cuz we think about the back half of this year.

Well, those are clearly some of the factors that we look at for understanding what the pipeline is its its ability of our of our teams to understand what are the needs of different companies terms of our own Capital allocation models there in the name models as well as very important for us to stay close to what the financial institutions the debt Capital markets desks on on banks are seeing and how long they I believe the evolution is going to be of debt. And so they're these are many of the different tools we use to try to forecast what issuance is going to be. We also look very very closely at interest rates and interest rates down and spreads not just both of them and as we've recently seen some investment-grade companies issuing debt as low as one and half percent for seven to ten your debt and we haven't seen debt that long time just one other, um interest rate story recently is you know, mortgage Bonds were I mean mortgages were down to the lowest rate. They've ever been well below 3% some mortgages even below to

2% and so interest rates, uh, what corporations are doing with their cash what financial institutions are doing to manage your balance sheet what governments and municipalities are doing how people looking at the balance sheets when it comes to understanding the way that my use structured Structured Products, etc. Those are all the different factors we look at to come up with our forecasts and to also allocate resources across the ratings. So with that I want to thank everyone for joining the call today. And and first of all, it's been great to see that the company performs. So well that this quarter and and I want to thank all of you on the call for supporting the company the analysts who are on the call today for publishing your research and opinions and for the excellent questions today, but, you know since our last call covid-19 and the risks that it poses to our health and our economy's it's still is dominating the airwaves and corporate and government planning discussions. And there's front-line health-care workers out there. They're battling the coronavirus. Yes.

Every day and I've been watching and listening with great. Hope to the epidemiologist the pharmaceutical companies Public Health officials and watching how they develop vaccines and treatments that we know will eventually allow our communities to return to social contact and our office work and travel, but I want to final I want to end the call by thinking again the employees of S&P Global you've been dedicated you've been committed and you've been you've been persevering during the pandemic and you've continued to support each other and the markets and despite the volatility the uncertainty and the risk you're off a fantastic job. I don't want to thank you and thank you again everyone for joining the call today.

That concludes this morning to call a PDF.

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