Q2 2022 S&P Global Inc Earnings Call

Good morning, and welcome to S&P Global's second quarter 2022 earnings Conference call.

Like to inform you that this call is being recorded for broadcast all participants are in a listen only mode.

We'll open the conference to questions and answers after the presentation and instructions will follow at that time.

Access the webcast and slides go to Investor Dod S P global Dot com.

If you need any additional technical assistance. Please press star zero and I will assist you momentarily.

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

Good morning, and thank you for joining today's S&P global second quarter 2022 earnings call.

Presenting on today's call are Doug Peterson, President and Chief Executive Officer, and <unk>, Steenbergen, Executive Vice President and Chief Financial Officer.

We issued a press release with our results earlier today.

A copy of the release and financial schedules, they can be downloaded at investor Dot S. P Global Dot com.

The matters discussed in today's conference call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095, including projections estimates and descriptions of future events.

Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward looking statements a.

A discussion of these risks and uncertainties can be found in our forms 10-K, 10-Q and other periodic reports filed with the U S Securities and Exchange Commission.

In today's earnings release and during the conference call, we're providing adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the corporation's operating performance between periods and to view the corporation's business from the same perspective as management.

The earnings release contains exhibits that reconcile the difference between the non-GAAP measures and the comparable financial measures calculated in accordance with U S. GAAP.

I would also like to call your attention to a European regulation.

Any investor who has or expects to obtain ownership of 5% or more of S&P global should contact investor relations to better understand the potential impact of this legislation on the investor and the company.

We're aware that we have some media representatives with us on the call. However, this call is intended for investors and we would ask that questions from the media be directed to our media relations team, whose contact information can be found in the press release at this time I would like to turn the call over to Doug Peterson Doug.

Thank you Mark welcome to today's second quarter earnings call.

Our second quarter results demonstrate the combined efforts of our truly incredible team. After our first 100 days as a combined company, it's clearer than ever that after the merger S&P global as stronger more resilient more diversified and better positioned than ever we're maintaining fiscal and operational discipline and controlling what can be controlled.

Which is allowing us to post aggregate results in a challenging issuance environment. It would have been inconceivable prior to the merger let.

Let me start with our financial highlights.

As a reminder, the adjusted financial metrics will be discussing today refer to non-GAAP adjusted metrics in the current period and non-GAAP pro forma adjusted metrics in the year ago period.

Revenue decreased 5% year over year with growth in five of our six divisions, providing significant ballast against a 26% decrease in ratings revenue recurring.

Recurring revenue increased 5% year over year, representing 81% of revenue in the quarter adjusted.

Expenses only increased 1% as continued investment in inflation pressures on compensation and technology were almost entirely offset by cost synergies in the quarter.

We are reinstating our guidance, which reflects the challenging macroeconomic environment, though we will be able to offset some of the EPS impact is Eva will discuss in a moment.

Importantly, our updated guidance calls for smaller than 2% decrease in adjusted EPS at the midpoint illustrating the resilience of the businesses and the positive impact of our capital allocation strategy.

I'd also like to share a few other highlights from the second quarter as I mentioned, we're now more than 100 days past the merger close our post merger integration efforts are proceeding on schedule, but very importantly, we're outperforming on both cost and revenue synergies momentum continues on product development with several areas of innovation that will.

Highlights for you on today's call, we see benefits from market volatility in parts of our businesses and we're able to accelerate our share repurchase efforts relative to our original plan with $8 $5 billion near completion at an average share price below $360. We expect to launch an additional $2 $5 billion ASR in the coming weeks.

Which we expect to complete in October with the final $1 billion to be completed by year end.

We've already seen remarkable progress in our integration efforts in a relatively short period I am pleased with our progress in integrating our commercial and marketing teams. We've recorded more than 2000 cross sell referrals across the divisions.

We're also ahead of expectations on our cost synergies, realizing approximately $80 million year to date and exiting the quarter at an annualized run rate of more than $260 million.

Beyond the transactional milestones related to the merger like the necessary divestitures. We've also reached multiple operational milestones, we've standardized business practices invested in culture and training and establish leadership teams multiple layers deep across the enterprise, we're moving fast on our office integration plan and consolidated.

10 of our office locations around the world lowering our real estate costs, we completed our major New York City consolidation and are on track to complete our London consolidation in the fourth quarter.

When we announced the merger we highlighted our expectation that the combined company would be more agile innovative and entrepreneurial and we've seen that in initiatives such as the data Lake Hackathon led by Ken shows head of AI research and teams of data scientists machine learning Engineers and software developers. These teams spent two days exploring how to best leverage.

Ken show tools and other technologies to drive value from the data Lake datasets and we're thrilled with what these teams have found in just two days. In addition to finding ways to cancel solutions can add commercial value to unstructured data sets across the data Lake we identified new datasets for training Henshall scribe nerd link and extract more than.

Doubling current training datasets in some cases, we also identified datasets to improve S&P global's country risk assessments and found compelling new ways to classify and improved data for ESG. This hackathon enabled us to better realize the full capabilities of our combined datasets.

We also relaunched the cross divisional S&P Global Research Council with new leadership in membership to reflect the expertise and our combined company following the merger.

This council consists of both research and operational leaders with a core mandate to drive customer value and greater insights for markets. One of the first actions of the council was to align on key research teams that have the greatest potential for large scale disruption and have a meaningful impact on the success of our customers.

We will be leveraging the full capabilities across the company and engaging meaningfully with customers and other stakeholders across industry and regulatory bodies, there's incredible demand for insights and thought leadership on topics like energy security climate technology, and digital disruptions supply chains in capital markets, we have unique datasets and in.

Sites in all of these areas and we see the research Council as a way to make sure that our insights are most impactful for our customers and drive innovation within S&P global.

That focus on accelerating innovation was on full display in the second quarter, we launched exciting new products from commodity insights, including a new basin level methane intensity calculation product for 19 U S. Natural gas production areas, we're using satellite imagery and data models trained in house to significantly disrupt what is historically.

Quickly been a very manual process using data extracted from self reported EPA Forbes.

We also launched carbon intensity measures for all six crude grades in the global Brent benchmark in mobility, we saw commercial success from our new auto credit insights product to help deliver insights to financial customers, serving the automotive credit space.

In engineering solutions, we continued to make progress building out our new software platform and if two successful proof of concept engagements in market now.

We continue to innovate and market intelligence as well, making new datasets available via feeds in introducing new products like P. V. Our source, which is a diligence platform aimed at helping clients get ahead of the compliance challenges of an ever changing regulatory landscape.

Now to recap the financial results for the second quarter revenue decreased 5% to $2.97 billion. Our adjusted operating profit decreased 10% to $1 $4 billion. Our adjusted pro forma operating profit margin decreased approximately 280 basis points to 47% as both profits.

And margins were negatively impacted by the decrease in ratings transaction revenue and the expense growth I mentioned earlier.

Importantly, our non ratings businesses in aggregate posted strong growth in the quarter, increasing revenue by 7% year over year.

As you know, we measure and track adjusted segment operating profit margin on a trailing 12 month basis, which was 46, 1% as of the second quarter through.

Through strong and disciplined execution and prudent capital allocation, we were able to offset much of the earnings impact of the issuance environment posting fully diluted EPS of $2.81, representing a 7% decrease year over year.

Looking across the six divisions I'm pleased to report positive growth across five of our divisions with ratings executing very well in an extraordinarily difficult issuance environment.

Our more diversified portfolio of products provides many opportunities to thrive in uncertain markets and we saw double digit revenue growth and multiple product lines. As a result within our indices business. We continued to see remarkable strength in our exchange traded derivatives, which grew more than 60% year over year as well as our C. D S indices.

<unk>, which increased 40%.

Search and market intelligence.

In the second quarter, we celebrated the second anniversary of the S&P global marketplace customers continue to come to S&P global as a trusted source for differentiated data around ESG fundamentals machine readable text and workflow tools like our workbench, we've seen explosive growth in the marketplace since launch and in the last year.

Only 30% increase in the content and solutions available, 75% growth in deals closed and more than 200% growth in engagement as measured by page views.

Now turning to issuance.

During the second quarter global issuance decreased 37% year over year deteriorating further from what we saw last quarter in the U S rated issuance in aggregate decreased 34% European rated issuance decreased 45% and in Asia rated issuance declined 32%.

We saw sharp declines in high yield, which was down nearly 80% year over year in Asia and was down more than 80% in the U S and Europe .

Interestingly. This is the first time that I can recall seeing declines in every category in every region since I've been doing earnings calls.

We've included additional details on the sub components of issuance by region in the slide deck.

Each year S&P Dow Jones indices conducts a survey of assets as depicted in this slide asset levels and actively managed funds that benchmark against our indices increased 38% to 12.8 trillion as of the end of 2021.

Assets in passive funds invested in products indexed to our indices increased 32% to 9.9 trillion dollars.

Numerous indices support the 9.9 trillion dollars, including the S&P 500, the largest was seven trillion dollars in assets, we've seen strong growth in factor in sector indices as well as many of our ESG and climate related indices.

While the S&P 500 still accounts for the majority of AUM. We continued to see strong demand for that historic index among asset managers, we saw even faster growth among our other indices in 2021, evidenced by the fact that the S&P 500 accounted for 71% of indexed a U M in 2021 day.

One from 72% in 2020.

Well this is historical AUM as of December 2021, we're very excited about what this slide will look like in the years to come as we integrate IHS market indices like I box and Itraxx and drove commercial innovation and fixed income and cross asset indices.

We delivered extraordinary growth in our ESG initiatives this quarter ESG revenue growth accelerated on both reported and organic basis in the second quarter growing 66% year over year to reach nearly $52 million.

We continue to introduce new ESG related products and product enhancements at a rapid pace in the second quarter. We saw the launch of multiple ESG and sustainability related Etfs based on our indices and we ended the second quarter with AUM and ESG etf's growing 16% year over year to approximately 30 billion.

Our indices and commodity insights teams continued their collaboration and launched the S&P battery metals index.

Within ratings, we completed 20, ESG evaluations and 34 sustainable financing opinions driven by strong demand for second party opinions.

Lastly, we hosted the S&P global sustainable one summit with events in several major cities around the world, bringing together leaders from various stakeholder groups to discuss the future of sustainability.

Now turning to our outlook.

Twice a year, we update our global refinancing study, but given the issuance environment. We wanted to provide a bit more color. This quarter. Specifically there are two impacts to highlight as investors look at total global debt outstanding the two impacts our average time to maturity and FX rates.

When we look at global corporate bond maturities, we see a similar phenomenon to what we have witnessed historically over the next three years, we see a decrease in near term maturities as refinancing pushed those maturity dates out we've witnessed this phenomenon in the July update each year. So we aren't surprised by it will.

While total global debt maturing over the next three years is down significantly from six months ago. It is important to note that debt maturing over the next 10 years is not down significantly and it starts to increase over the next three to five years, we expect 'twenty 'twenty four and 'twenty twenty-five refinancing activity to start next year.

This is particularly true for total debt outstanding on an FX adjusted basis with the strengthening of the U S. Dollar since January foreign denominated debt is lower by 1% when converted to U S. Dollars at July rates. This slide shows total global debt rated by S&P global of all maturities on a constant.

Currency basis, which increased 2% if measured at January FX rates.

While we don't expect a significant rebound in issuance in the back half of this year. This demonstrates that over the long term the public debt markets remained very healthy and have a strong history of resilience. They also reinforce our view that the issuance headwinds we're seeing in the market now will likely moderate if not reverse in the future now for issuance outlook.

S&P global ratings researches updated its bond issuance forecast for the year to reflect the decrease in the second quarter and more conservative assumptions around the back half.

Global market issuance is now expected to decline approximately 16% year over year within a range of down 9% to down 24% in 2022.

This forecast implies an approximate 21% decline in the second half compared to the 11% decline seen in the first half.

Non financials are expected to see a 30% decrease in issuance, partially tempered by a smaller roughly 10% decrease in financial services issuance.

U S public finance and structured finance are expected to soften by 12, and 14%, respectively and international public finance is expected to be roughly flat as a reminder, the global debt issuance forecast is a product of the S&P global ratings research team and reflects market issuance, including unrated issuance.

We wanted to take the opportunity to explain the different categories of issuance that we discussed from time to time. The most frequently cited forecast is out of our S&P global ratings research team, which I just outlined but a ratings revenue is more closely tied to S&P build issuance, which is a subset of market issuance build issuance includes leveraged loans, which.

Are not included in the market issuance forecast. It does not however include debt from unrated categories, such as medium term notes and most domestic debt from China, nor would our build issuance include international public finance.

While there are other nuances as well these differences in aggregate bridged the gap between our market issuance forecast and the assumptions for build issuance that underpins our ratings revenue guidance for the year.

As Eva will outline our ratings revenue guidance assumes a 30% to 45% decrease in build issuance.

Looking beyond issuance, we see a number of secular trends that stand to benefit the company. Both this year and beyond our exports and commodity insights expect oil prices and volatility to remain above historical norms for some time. This volatility often creates more demand among customers for price assessments and benchmarks as well as our data and insights.

Our mobility team also expects light vehicle sales to increase next year and beyond returning to levels more in line with pre pandemic production by 2025 as volumes continue to grow we expect to see tailwind in our mobility segment across multiple product lines, including carfax and automotive mastermind.

As we evaluate the remainder of this year. However, we wanted to discuss some of the assumptions that underpin our outlook as we noted in June when we suspended guidance, we have seen a deterioration several economic indicators over the course of the second quarter we.

We expect slightly lower GDP growth higher inflation, and the lower debt issuance environment to impact not only our businesses, but our customers as well as a belt will discuss in a moment, we're seeing inflationary pressure on our costs with approximately 70% of our expenses tied to head count that pressures showing up most in our compensation.

<unk> costs.

As a reminder, this is not meant to be a comprehensive list of all metrics that inform our outlook, but we wanted to help investors understand the changes in some of the assumptions that we make about the global economy, when formulating guidance well.

While we're not discussing 2023 or beyond on today's call. We're pleased to announce that Investor day that we expect to hold on December 1st in New York City. We're looking forward to sharing with you. Some preliminary views on 2023 as well as a more holistic update on our strategy positioning and medium term financial targets at that time.

Before handing it over to Dave out I'd like to reiterate how pleased we are with the progress we're making on integration and the clear proof points, we see reinforcing the industrial logic of the merger and the resilience of our businesses. We have a world class team and appreciate the hard work and dedication of our people in every area across the firm.

Our teams continue to execute incredibly well evidenced by our early outperformance on synergies and we believe we're positioning the company to accelerate growth expand margins and deliver innovation in the years to come with that I'll turn it over to Eva to walk through the results and guidance a vote.

Your Doc with five of our six divisions once again posting revenue growth. We continue to see evidence that we are a stronger more resilient company.

Doug highlighted the headline financial results I will take a moment to cover a few other items as Doug mentioned, the adjusted financial metrics that we will be discussing today refer to non-GAAP adjusted metrics for the current period and non-GAAP pro forma adjusted metrics in the year ago period unless explicitly.

Called out as GAAP adjusted results also exclude the contribution from divested businesses in all periods.

Adjusted corporate unallocated expenses declined from a year ago cost based synergies as well as a combination of reduced incentive and French cost as well as the release of certain accruals. Our net interest expense increased 3% as we increased growth debt, partially offset by lower error rates do.

Two refinancings.

The decrease in the adjusted effective tax rate was primarily due to the post merger change in the mix of income by jurisdiction as.

As most are aware, we exclude the impact of certain items from our adjusted diluted EPS number among dose items in the second quarter or $220 million in merger related expenses, the details of which can be found in the appendix.

We generated adjusted free cash flow, excluding certain items of $924 million, we remain committed to returning the majority of this cash flow to shareholders through dividends and share repurchases year to date as Doug mentioned, we have repurchased eight and a half billion dollars and shares and we expect to allow.

Owing to an additional $2 $5 billion in the coming weeks, we expect that two and a half billion dollars will be completed in October with the final $1 billion to be completed by year end.

We note that the U S. Dollar has strengthened against many foreign currencies year to date, and we have seen a corresponding impact on both our revenue and expenses approximately three fourth of our international revenue was invoiced in U S dollars, which provides some protection to revenue against FX volatility.

In addition to the natural hedges that exist due to the global footprint of our people. We have an active hedging program in place that further mitigates the ultimate impact on our earnings year to date, we have seen an unfavorable revenue impact due to the strengthening of the U S dollar against the Euro and British pound exposure.

<unk> saw a favorable impact due to FX movements against those same currencies and the Indian rupee.

Turning to expenses as we have demonstrated in the past we are committed to a prudent management of the P&L and shareholder capital. This year, we have already taken decisive actions to protect margins, where we can while still preserving our investments to drive future growth.

Actions taken include a reduction in incentive accruals pull forward and synergies adjustments to the timing of select investments pulsing selective hiring limiting consulting spend in some areas.

We remain committed to our strategic investments, which are key to the growth of our business. These include investments in our people innovation infrastructure and our ability to execute merger related integration and synergies.

Looking at the year over year change in expenses. This quarter were clearly seeing the impact of inflation, most notably in compensation expenses. We're also seeing higher cloud and to unit cost as we highlighted last quarter as well even with those headwinds the decisive actions I outlined together with our access.

The ration of synergies and favorable FX have allowed us to keep expenses relatively flat year over year.

Now I would like to provide an update on our synergy progress in the second quarter, we have achieved $80 million in cumulative cost synergies and our current annualized run rate is $260 million through the combined efforts of our teams across the divisions and corporate were very pleased to see.

We're outperforming our initial timeline on both revenue and cost synergies year to date, the cumulative integration and cost to achieve synergies through the end of the second quarter is $540 million. Our teams have been diligent and disciplined and have pulled forward some of the synergies we previously identified.

<unk> without materially impacting our ability to drive growth and revenue synergies. We have previously said that we expect to realize in 2022, approximately 35% to 40% of the $600 million in cost synergies, we're targeting through 2024, we're still operating in an uncertain environment. So.

We're not changing the expected range for 2022, we're confident that we are more likely to come out at the higher end of that 35% to 40% target range.

Now, let's turn to the fishing results and begin with market intelligence market intelligence delivered revenue growth of 7% with growth across all product lines, we want to emphasize the increased resilience and stickiness of most of our revenue and a more diversified portfolio of products in our deficient Paul.

Merger to highlight this improvement we note that in market intelligence recurring revenue, which includes variable recurring revenue accounted for 96% of total revenue this quarter slightly higher compared to the same period last year expenses increased 6%, primarily due to increases in compensation.

Expense cloud spent an outset surfaces offset by cost synergies and lower incentive compensation market intelligence remains the biggest driver of cost synergies from the merger and the synergy outperformance. We have seen year to date segment operating profit increased 8% and the segment operating profit margin increased 40.

Basis points, the 33% on a trailing 12 month basis adjusted segment operating profit margin of 32%.

You can see on the slide our operating profits from the Austin joint venture that complements the operations of our market Intelligence Division. The JV contributed $25 million and adjusted operating profit to the company because the JV is a 50% owned joint venture operating independent of the company.

We do not include the financial results of ultra in the market Intelligence Division.

Looking across market intelligence, there was solid growth in each category and on a pro forma basis desktop revenue grew 6% data and advisory solutions revenue grew 9% enterprise solutions revenue grew 2% and credit and risk solutions revenue grew 10%.

For enterprise solutions, we continue to see headwinds in several of our volume driven products that rely on the equity and debt capital markets activity and the variable subscription terms, excluding the impact of these volume driven products growth across market intelligence would have been approximately 8% year over year in the quarter.

We expect those volume driven headwinds to persist through the rest of the year. While we are pleased with the outperformance of credit and risk solutions in the first half we're lapping some difficult comps in the second half and expect revenue growth to decelerate in that part of the business.

Ratings faced continued difficult market conditions this quarter with revenue declining 26% year over year expenses decreased 6%, primarily driven by disciplined expense management, including lower incentive expenses as well as lower occupancy cost and favorable FX, partially offset that.

Increased salary and fringe expenses entity and he spent this resulted in a 35% decrease in segment operating profit and 850 basis points decrease in segment operating profit margin on a trailing 12 month basis adjusted segment operating profit margin was 59 point to 8%.

Non transaction revenue increased 2% on a constant currency basis and decreased 1% as reported primarily due to lower initial credit ratings and ratings evaluation surfaces revenues, partially offset by increases in crystal and annual fees transaction revenue decreased to 40.

4% of the continued soft issuance already discussed.

This slide depicts ratings revenue by its end markets the largest contributor to the decrease in ratings revenue were a 39% decrease in corporates and a 20% decrease in structured finance driven predominantly by structured credits. In addition financial services decreased 9% government.

<unk> decreased 15% in the Crystal and other category increased 14%.

And now turning to commodity insights revenue increased 4%. However that growth was impacted significantly by the suspension of commercial activity in Russia, and Belarus, and other impacts of the Russia, Ukraine conflict adjusting for the impact of that conflict revenues would have grown approximately.

7% compared to prior year.

With an annualized run rate basis. This conflict is expected to impact <unk> revenue and operating income by approximately $52 million and $51 million respectively for this quarter, 90% of commodity insights revenues were classified as recurring expenses increased four.

Percent, primarily due to salary and fringe and increase in <unk> expense, partially offset by realization of merger related synergies segment operating profit increased 3% and the segment operating profit margin decreased 40 basis points to 44% the trailing 12 month adjusted set.

<unk> operating profit margin was 43, 3%.

Looking across the commodity insights business categories price assessments grew 5% compared to prior year driven by strong subscription growth for market data offerings and continued commercial momentum. We're also saw strong performance from advisory and transactional services and energy and resources data and insights.

Both growing 4%, respectively upstream data and insights increased marginally with second quarter 2022, representing a third consecutive quarter of ACP growth when adjusting for the impact of Russia.

And our mobility deficient revenue increased 7% year over year, driven primarily by strength in planning solutions and used car offerings for this quarter, 78% of mobility revenues were classified as recurring expenses grew 5% blend increases in head count and advertising.

<unk>, which were somewhat offset by a reduction in brokerage data and office costs and incentive compensation. This resulted in a 9% growth in adjusted operating profit and 90 basis points of margin expansion year over year on a trailing 12 month basis. The adjusted segment operating profit margin was.

39, 5%.

Dealer revenue increased 10% year over year, driven by strong performance from car fix and very high dealer retention as well as growth in new stores growth in manufacturing was 3% year over year, driven by demand for supply chain products amongst suppliers DAU growth was tempered by relatively flat or.

Original equipment manufacturer or OEM spend of marketing initiatives powered by mobility products.

<unk> and other increased 3%, primarily driven by continued strength in our insurance underwriting products than part by slowing consumer activity and persistent low volumes across outdoor sales.

S&P Dow Jones indices delivered another strong quarter of revenue growth of 12% year over year, primarily due to gains in ETD volumes for this quarter, 83% of industry revenues were classified as recurring during the quarter expenses increased 1% due to increased technology and T. <unk>.

Segment operating profit increased 16% and the segment operating profit margin increased 290 basis points to 71, 9% on a trailing 12 month basis. The adjusted segment operating profit margin was 68, 6%.

Once again every category increased revenue this quarter asset linked fees were up 5% primarily from a U N driven gains in mutual funds and Etfs exchange traded derivative revenue increased to 64% on increased trading volumes across key contracts, including the more than six.

60% increase in S&P 500 index options volume.

Data and custom subscriptions increased 6% driven by new business activities.

Over the past year ETF AUM net inflows were $231 billion in market depreciation totaled $352 billion. This resulted in quarter ending ETF AUM of two and a half trillion dollars, which is a 5% decrease compared to one year ago.

ETF revenue is based on average AUM, which increased 5% year over year.

Revenue tends to lag changes in asset prices, which helped to drive outperformance. This quarter. However, we expect asset linked fees the decrease in the back half of this year.

Sequentially versus the end of the first quarter ETF net inflows associated with our indices totaled $6 billion in market depreciation totaled $436 billion.

Within our engineering solutions deficient, we saw 3% revenue growth driven primarily by growth in non subscription offerings, most notably the boiler pressure vessel code or BPC, which was lost released in August of 2021 for this quarter, 93% of engineering solutions.

Revenues were classified as recurring.

Adjusted expenses increased 5% driven by investment in product development and increased royalties. This resulted in a 7% decline in segment operating profit and 300 basis points contraction to margin on a trailing 12 month basis. The adjusted segment operating profit margin was 19 four.

<unk>.

Subscription revenue in engineering solutions increased 2% year over year, while non subscription revenue increased 10% over the same periods as you look toward next quarter for engineering solutions. It will be important to remember we'll lap the August 2021 publication of the BPC, which tip.

<unk> contributes approximately $8 million in the third quarter of off years, but it's not published in even years.

Now moving to our guidance and this slide depicts our new GAAP guidance.

And this slide depicts our reinstated 'twenty to 'twenty two adjusted pro forma guidance for revenue. We now expect a low to mid single digit decrease year over year, reflecting the issuance environment, partially offset by the strength, we're seeing in our non ratings businesses. We now expect corporates in L. A.

<unk> expense between 70, and $80 million approximately $15 million lower than our previous guidance on lower forecasted incentive compensation.

This drives our expectation for adjusted operating margins between $45 three a 45, 8% as declines in high margin ratings revenue disproportionately impacts margins to the downside. This year, we wanted to emphasize the margin expansion, we expect to see elsewhere in the business in aggregate.

Within our five non ratings deficient, we expect approximately 180 basis points of operating margin expansion this year.

Interest expense is expected in the range of $360 million to $370 million in line with our most recent guidance, we expect capital expenditures of approximately $165 million and free cash flow, excluding certain items in a range of 4.1 to $4 $2 billion.

The following slides illustrates our guidance by deficient, we now expect adjusted revenue growth and adjusted operating profit margin in the following ranges for market intelligence, we expect revenue growth in the mid single digit range and margins in the low thirties for ratings. We now expect revenue declines in the low to mid <unk>.

Twenties range and margins in the mid to high Fifty's for commodity insights, we expect revenue growth in the mid single digit range and margins in the mid Forty's for mobility, we expect revenue growth in the high single digit range and margins in the high Thirty's for indices, we expect revenue growth in the low to mid single.

Digit range and margins in the mid to high sixties for engineering solutions, we expect low single digit revenue growth and margins in the mid teens.

In closing this quarter provides further proof of the resiliency of our business our ability to outperform in synergies speaks volumes on the focus and discipline of the teams we have at S&P global dose teams combined with a phenomenal set of truly differentiated products and capabilities position us well to drive profitable growth.

In the years to go in.

And with that let me turn the call back over to Mark for your questions.

Thank you gave out for those on the line. If you would like to ask a question. Please press star one and record your name to cancel or withdraw your question simply press star to please limit yourself to one question and one follow up in order to allow time for other callers during today's Q&A session.

Operator, we will now take our first question.

Thank you our first question is from Ashish.

You May go with RBC capital.

Yeah.

Alright. Thanks for taking my question I was just wondering for the issuance guidance would it be possible for you to provide some color around how we should think about toward Bush's fourth quarter momentum in the back half of the year. Thanks.

Hi, Ashish. This is this is Doug. Thanks for the question. Let me just give you a first of all some overall view of what we've given you today, we provided you with information.

Starting with our ratings credit research team and then gave you some new.

Disclosure about how we look at the difference between that research report and what we call our build issuance.

Issuance assumptions.

We see right now at the beginning of the of the third quarter was actually quite weak one month doesn't make a quarter, but at the beginning of July there was issuance of high yield loans and high yield debt was down overall in the high Eighty's low 90% range.

Hum.

Great issuance was up actually for the month, but the quarter is off to a what I'd say, there's still a pretty weak start.

Answering your question specifically.

That's very helpful color and then on the cost synergies, obviously pretty strong.

Execution on that right, but almost.

260.

Revenue achieved in the quarter.

Yeah.

This time, you expect to achieve at the high end of that 40% range being realized by 2022, but I was also wondering if you could provide any color on how we should think about that run rate of cost synergies exiting 2022.

Ashish. Good morning. This is shar. This is <unk>, so 40% or 600 million. So we expect that the airport in year 2020 to approximately $240 million benefit from cost synergies. We think that's phenomenal. That's we're already having that pace of execution and integration of our organization.

Patients, we don't have a precise number for you in terms of the run rate exit, but you should expect that that there's a significant amount of both the 240 million because obviously the more we execute this yard the better we are positioned for 2023. So I can't give you a precise number on that but that will be a number significantly.

North of that $240 million.

That's very helpful color. Thanks.

Thanks Ashish.

Thank you. Our next question is from.

You May go with Barclays. You May go ahead.

Thank you good morning, guys.

My first question was just you know broadly on guidance.

You said that the non ratings businesses should have offset the ratings weakness, but I think in the guidance somebody you pretty much lowered some of the non ratings businesses at least at the lower end. So can you just talk about you know that that gap and perhaps your lab.

Doug.

Taken in this attempted.

Guidance today.

And one off good morning, Yes, we have always said that our businesses are very resilient, but of course, they are not immune to external environment. So there is some slight impact you're seeing in terms of for example, the index business your assumption for the second half of the year rich that assets under.

<unk> will remain flat from the June 30th points. So that will have an impact on the on the index business. So there are several of those are another example is the Russia impact on commodity insights, but overall these impacts are relatively minimal and modest. So let me give you a few other data points with respect.

The assumptions that have gone into the guidance. So as already mentioned build issuance negative 37% and then for new market depreciation flat to June 30th level exchange traded derivatives, we expect those to be up about 10% from the second half of 2021.

That is lower growth than you have seen in the first half of the year and the reason is that the comps become more difficult, but also when there is a period of extended volatility we expect derivative trading to taper off at some point and then the Brent oil price to remain in.

Range bound until end of the year, having said that if you look at the overall performance of the company. We're actually really pleased with the outlook for five of our six of the patients are expected to perform very well to be very strong expenses to be more or less flat year over year would you think.

It really if a normal little outcome in a high inflationary environment, and then margins excluding rate ratings to be up for the full year 180 basis points. So overall, we think these are actually really strong outlook for the company is taking.

Taking aside of course, the market impact for ratings.

Got it and then maybe if I can ask you a similar question on the margin front I mean, you talked about obviously you know a lot of the cost synergies being ahead of schedule etcetera, but I think you've sort of taken the margin outlook down mostly so is that is that just maybe being conservative about.

The run the run rate doesn't kick in for a while I guess.

Well, we are seeing a lot of dynamics in the overall expenses of the company. We have pointed at some inflationary pressure on compensation until my power procurement elements and other parts of the company, but we are in the very fortunate position that we have so many levers as a company, particularly the law.

Or that are being given to us due to the merger with respect to the cost synergies.

The implication of roles that we can eliminate the full year benefits in terms of synergies in procurement and sourcing area. Some of the consolidation of real estate and many other areas plus the decisive management actions, we're taking at the at this moment, so being flat with expenses.

As I just said in this environment, we think it's a very strong outcome and the non ratings businesses, we're achieving about 200 million or north of $200 million of margin expansion in the second quarter, and we think 180 basis points margin expansion for the full year would be a very strong outcome and would position us very well.

For 2023.

Okay got it thank you.

Thanks Manav.

Thank you. Our next question is from Alex Kramm with UBS you May go ahead.

Yeah, Hey, good morning, everyone, just falling up on Manav margin question here for a little bit maybe this is nitpicking, but if I look at two of the segments commodity insights and mobility.

It's basically leave your adjusted revenue growth.

Forecast unchanged from the prior guidance, but the margins are actually lower so with everything you just changed and it said it does seem like some costs are higher so maybe you can flesh it out specifically to those two segments because I'm not sure why the margins would be would be lower if the revenue is unchanged.

Alex at visa are really small changes and movements on the revenue line and with respect to the expense line for those two segments, which could drive that for example, you're just staying within the range on revenues, but just having a slight adjustment.

With respect to the expected margins for for that segment. So let me take as an example commodity insights as we have highlighted this is the segment, where we have some impact of the Russian situation, but then that was offset by very positive momentum commercially in the commodities insights.

Businesses. So we can offset a part of it and as a result, you see a little bit of impact on revenue and margins and that is being reflected in those in those changes, but overall I wouldn't I wouldn't read too much into it. These are just really minor impacts that we're seeing on those on both businesses.

Okay helpful. Thank you and then just second just on the market intelligence side I'm, hoping that you can give us a little bit more color around the.

Commercial success, you're having so far what am I, asking specifically is I've had some client conversation and it sounds like for at least for some clients you're not really integrating the sales force, yes, and they are the operating basically of two organizations until next year. So I don't know if those are one offs or is this representative of the whole book of business, but.

I would've expected with all the planning that basically youre going to be operating as one company and so maybe just flush out what's been done and why maybe we're hearing that it's not fully integrated quite yet.

Yeah, Alex Thanks for that and we're actually fully integrated [laughter].

Market intelligence is the division that is absolutely. The furthest ahead on that we have done full training of all of the products across the two divisions. We have seen the ability to now go out with joint planning for all customers across the financial services and the market intelligence to prior segments, we have a lot of early wins.

With clients as well as with products a couple of examples.

Some of the early wins have come by moving more and more datasets from financial services into what we talked about earlier on the call. The marketplace. We've also seen some early wins on selling products, which would have been traditionally financial service products into the corporate client base of market intelligence and then we have some new products, which have.

Also been launched we talked about one of them. The P V R, which is responsive to some new SEC.

The rules, which are coming out later this year, so that must be anecdotal I'm not sure you were speaking with but we are really excited about the integration and the speed that we were able to develop a cross sell we mentioned that we have over 2000 cross sell of ideas and leads and we're following up on those are very very quickly and as you saw were also ahead.

Our our prior assumptions about how we'd be doing with our with synergies. So this is one of the areas that I think we're actually doing the desktop.

Okay very good thank you.

Thanks, Alex.

Thank you. The next question is from Toni Kaplan with Morgan Stanley You May go ahead.

Perfect. Thanks wanted to ask another one on synergies it looks like you're making really great progress on the cost side on the revenue side. It makes sense that it all take a longer time just given the.

Need to create new products, but I guess are you where you thought you'd be on the revenue synergy side or is it taking longer than you now do you still feel good about the.

The 'twenty 'twenty four target there.

Yeah, Thanks, Tony well I feel actually really positive about that.

The projections that we have on the revenue synergies, it's something that we've always known that would take a while to understand the customers to be able to integrate datasets to have a fully integrated sales force, but to have the ability to already be running at a $15 million run rate, which which we announced this quarter for me is ahead of what.

We would've thought we would've been we still haven't changed the view that a lot of the revenue synergies will be more back ended in the next two to three years.

But the but the early projections as early progress is excellent.

That sounds great and then.

Just on market intelligence, the enterprise solutions piece, only up 2% year over year I just wanted to clarify is this the legacy IHS solutions business.

It used to be comprised of enterprise software and managed services I just I wasn't as familiar I guess with the volume based offerings that are in there, which is driving maybe they're slow down just any.

Color on that yet.

Thanks, Tony Yeah, you're right about what's it comprised of that of that solutions group. It includes I P O as well, but there's a portion of the revenues in that business, which come from Ipos and as you know the IPO market has been incredibly weak and so that's the main the main issue, which has seen a slowdown of growth, but the underlying business is doing quite well.

Delivering software we're delivering solutions. This is one of the areas, where we've seen some of the early wins on being able to position products, which traditionally has been sold to financial services into the corporate sector. So off to a great start, but having some impact from the very very weak capital markets, an IPO positioning.

Makes sense. Thank you. Thanks.

Thanks, Tony.

Thank you. Our next question is from Hamzah <unk>.

With Jefferies you May go ahead.

Hey, Good morning, Mike My question is on the non transactional side of the ratings business.

You could just comment on you know how stable is that business through the cycle and what are your sort of assumptions there for the balance of the year.

Good morning, Hamzah I'm of course, I won't give you. Some further insights on that as you know trends non transaction revenue.

Buckets of different elements and they are all pointing in the same direction. So let me give you a little bit further insight in what we're expecting here. So what is looking strong ish annual fees as well as threshold. So we would expect those to continue to do well for the remainder of the year.

Or in line or what you have seen for the second quarter and that will be offset by some impact of FX ratings evaluation services, which is more linked to M&A and initial credit ratings, which is also down so I think best to expect a low single digit decline for non transaction revenue.

But that is of course in the bigger scheme for ratings, providing some offset to instability for the transaction revenue declines.

Got it very helpful and just my follow up is just on the industry side of the business I think the FCC was was looking at weather indices business shows should be treated as an investment advisor versus geared up publishers is there anything I guess on the regular regular.

Terry front.

On the industry side there.

You're looking at or that investors should be cracking or is this just not ready material. Thank you.

Yeah Hamzah as you know our business has already run as if we're regulated and we are regulated in some jurisdictions like the European jurisdiction under what's called the BMR.

He says he has a request for comment out about four about index providers. We will file a response as you know there's a long term trend from active to passive it's an industry that has very low cost independents a lot of transparency, we have a very strong performance over the last 65 years, and we will obviously high.

All of that in our response to the SEC, but as of now. This is just a request for comment there's nothing related to it. It is any regulatory proposals and we were not surprised given the size of the growth of the index industry.

Got it thank you.

Thanks Hamzah.

Thank you. Our next question is from Jeff Silber with BMO capital markets. You May go ahead.

Thanks, So much I'm looking at slide 23, where you have your economic assumptions.

You're forecasting obviously slower growth in real GDP, but not really forecasting a recession. We can argue what the definition of a recession is later, but let me play Devil's advocate, let's assume that the U S and more importantly, the global economy might be going into a recession in the second half of this year, what would be the impact on your different business segments.

Let me start and then I'm going to hand, it over to Eva out to give you some more color, but first of all we have the the assumptions that you saw on slide 23, we have seen a significant slowdown in growth in the United States, the eurozone and globally in China being one of those markets, which has also seen some substantial slow down.

Given their current policies.

This is also been matched with a higher inflation each of our businesses have different types of impact in this scenario with the ratings business you've already seen is being directly impacted already by the by the increasing inflation by the weak issuance environment by the uncertainty in the markets. If you looked at our commodity insight business.

We could see some growth in the volatility from the higher into of higher cost of oil, which you saw here we have projected that the crude price will be at $106 a range thats much higher than it had been in prior years that leads to some increase in interest in trading informed.

Asian for risk information and then the overall energy industry does quite well and that positioning so we could see some benefits from that of our other businesses market intelligence should see some benefits from people interested in our information and data about the risk environment, but at the same time.

If our customers start going under stress, we might have to think about how we negotiate with them to accompany them in there and if they have difficult times.

I'm going to hand, it over to Eva to Mitchell a bit more about indices impact as well as the other businesses.

Jeff of course immediately thinking at the more market sensitive businesses ratings transaction revenue.

A U N fees in the index business, but offset by of course, a higher ETD volumes.

And as Doug mentioned before the capital markets platform business in the enterprise solutions part of market intelligence, but you're all set is that we are seeing all the parts of the business is doing well wouldn't be higher higher volatility for.

For example, global trading services and commodity inside just to mention one area on top of it we are again, having the opportunity to take further actions you could say to some extent, we're already executing on our downturn playbook at this moment and taking those actions for the second half of this year and that.

Is to protect our margins and we kind of course pull those levers even harder I would like to point out that actually the merger. It gives us a very good basis and strong benefits to you with a more insurance environment and future the resiliency of the business the higher level of recurring revenue.

We're having the diversification benefits and then also of course, all the synergies that we can achieve and that which gives us levers in terms of offsetting an environment that we think is a clear benefit and is a differentiator for us compared to many others.

Okay. That's really helpful. If I could shift back to the ratings business, we saw a pretty large bond sale yesterday from from Apple.

I don't know if they were a frequent issuer and I don't know if you were involved is that will impact your transactional revenues, but more importantly, they.

They seem to be a pretty good time or of the market do you think that might be a bellwether that will see other companies come to market that we might not have expected a few weeks ago.

Yeah, Jeff we've we've actually seen pretty strong issuance from the from the investment grade sector, a lot of those large issuers, especially the financial institutions tend to be on frequent issuer programs.

Where we really see the biggest impact on the on the downdraft of issuances in the non investment grade the high yield sector are you looking at the single B or Triple C. Double b sectors. So theres been very low formation of Clo's. In fact, we've seen the retail sector have a withdrawals from risk position.

And so we've seen a decrease in funding for clothes.

So they're the real the real part of the issuance curve, which we're not seeing any life at all it's really the high yield sector.

But on the on the on the investment grade there has been a lot of activity. We've seen in particular financial institutions very active and then people like Apple you've seen here, but but the real story, we need to look deeper across all of the different segments and it's the high yield sector, both for loans and and bonds that we've seen the biggest weakness.

Okay really helpful. Thanks, so much.

Thanks, Jeff.

Thank you. Our next question is from Faiza <unk> with Deutsche Bank You May go ahead.

Yes, hi, Thank you and good morning, I was hoping to follow up on the revenue synergies and curious if you could give us some examples of areas.

Areas, where youre seeing the most traction at this point.

Yeah. So first of all we're as I said earlier, we're really excited that we're off to such a fast start on the on the cross sell and so the initial opportunities have are on cross sell and the two biggest areas. We've we've seen in.

The growth is in the market intelligence business, it's been with the sales of what had traditionally been financial services products. For example, our products, which are used for investor relations teams.

And finding the corporate segment, which market intelligence had a lot of penetration with being able to open that door and bring those types of products to the corporate sector in the commodity insights world, we see a lot of opportunities for data and research products, which were coming from the Anr side from IHS market that are now being marketed to the traditional <unk>.

<unk> clients or benchmark clients and so we've seen a lot of a lot of upside there a third area would be within the index business. As you know we brought the IHS markets fixed income index business over and there's a lot of opportunities. These are not necessarily in our run rate yet, but they are in our pipeline are really.

To ESG indices that will be on fixed income indices. So that's a big theme that we havent seen as Troy the revenue coming in yet, but a lot of interest in that but those are those would be the three largest areas. So far.

Great. Thanks, and then just a follow up on the underwriting side of the business you were just talking about high yield and I'm curious as we look at your Refinancings study you know assuming the volatility either that'd be get into 2020 three and I know you said you won't comment on 'twenty, two 'twenty three but I just wanted to get.

You know just a holistic view around how you think about you know the high yield market normalizing from here.

Yeah, the the high yield market, we look at it in a few ways one of them is obviously, there's a large.

Mounted firepower of capital that's available for the private equity and the sponsor industry, we estimate that that's well north of the trillion dollar somewhere around one three to one four trillion dollars of capital to be deployed.

We also look at the M&A pipeline the M&A pipeline right now there's a lot of deals to be completed, but they're actually taking a lot of time. So there's a slow realization of M&A, which has already been announced but not completed so that's another one of the levers we look at quite closely and then theres going to be a refinancing requirement there'll be.

Start coming in over which relates to 'twenty 'twenty three 'twenty 'twenty four 2025.

Traditionally we've seen some of that pull forward into earlier times as people look at how the interest rate market is playing out what their growth prospects are etcetera, but those would be the key factors. We're looking at the what's happening with with rates, what's happening with the private equity industry with M&A with refinancing and then just generally speaking as you know I mentioned.

Earlier to one of the other answers, there's kind of a risk off approach, especially from the retail and the wealth management sectors. They have not been participating.

Participating in the formation of new Clo's and in fact had been withdrawing.

Withdrawing their liquidity from the high yield products. So we think that we will start seeing people go back into that when theres, some more uncertainty instability in the markets as well.

Great. Thank you so much.

Thanks Faiza.

Thank you. Our next question is from Andrew Nicholas with William Blair You May go ahead.

Hi, Good morning. This is actually Trevor Romeo in for Andrew. Thank you. So much for taking the questions just two quick ones for me.

First of all the the ESG revenue growth of 66% in the quarter.

Encouraging to see that accelerate even further just wondering if there's anything in the current environment, that's kind of boosting that yesterday growth above trend or if there's kind of any evidence that.

Even higher growth rates might be sustainable over a over a longer period of time.

Good morning, So let me give you a little bit more color on the year's G growth, which is of course phenomenal and we're very happy because we have been guiding to a 46% CAGR for multiyear periods and to be coming in at this kind of a level of growth or 66% is of course, a really great.

So a couple of underlying elements, where we're seeing nice growth in commodity insights that's broken by clean energy technology energy transition activities as well as new price assessments around ESG also market intelligence doing well, particularly around climate and the true cost.

The offerings and the ESG data sales.

We looked at the English business, we have been investing a lot in new ESG indices and that there's also clearly starting to pay off and then in ratings, although coming from a small base, we see some positive momentum and second party opinion. So good momentum, we're clearly investing in it there's a lot of market demand and.

And we would expect that positive momentum to continue.

Yeah.

That's great. Thanks, and then maybe a somewhat related follow up.

Placement reduction act that's been proposed out there.

Pretty significant climate investments in tax credits for the the clean energy industry. So would you see something like that but actually where to get past kind of having any demand on either the commodity.

Our insights business, where the ESG business.

It's something that's still obviously in discussion in Washington, generally speaking infrastructure bills something like this which is gonna be geared towards the climate sector could see some benefit as it does the financing gets into the market, but this could take a while before we really started seeing it layer into the market.

Okay understood. Thank you very much.

Thanks Trevor.

Thank you. The next question is from Craig Huber with Huber Research Partners you May go ahead.

Great. Thank you my first question on commodity insights.

I'm curious in the second quarter what percent of the revenues there were fossil fuel based about by the end customer and then.

On the same volumes or when do you guys expecting peak oil use globally, then I have a follow up.

On the first question about the fossil fuel based I don't I don't have the answer well, we will have to get back to you on that but just remember that across the business a large part of our complex relates to it relates to energy.

But in addition, we've seen some great opportunities to increase our knowledge across the group as an example, we issued a special study on copper, which even though copper isn't a fossil fuel copper is going to be necessary component for the energy transition. So we'll have to get back to you to the answer on the fossil fuel question.

And then also can you talk a little bit about the market tell each area that the health of the of your customers. There right now given the market volatility with a sales pipeline looking like.

Talk about that please thank you.

Yeah, the commodity insights business actually despite knowing that the price of oil is quite high is a is a healthy pipeline right now there's a lot of demand for information as I mentioned the special copper study. We've done we have been deploying a whole new set of energy transition products. So even if there's been some concern in some of the tradition.

All areas are some of the.

Consumers of oil and gas it might have a little bit more stress on the overall market is still very robust with the energy industry itself in a strong position. The commodity industries are looking for a lot of new insights and information and data and then we're being able to find new opportunities to mix and match our data across the entire company is an example.

We've launched some new indices.

The index business, which relate to our commodities data. So we're finding a lot of opportunities across the company to mix and match products, we see a strong strong growth pipeline.

Great. Thanks, Doug.

Yeah.

Thanks.

Thanks, Craig.

Thank you. Our next question is from Owen Lau with Oppenheimer You May go ahead.

Good morning, and thank you for taking my questions could you. Please give us an update on your ability to pass through some of the inflation that we cost to their customers through a weak pricing in each segment. Thank you.

Hello, everyone. Let me give you some further insights on that so why do we think about pricing. We always first to start to think about the value we generate for our customers. So that's the starting point and as you know our products are very valuable they are important particularly in a current environment with.

High volatility lot of economic uncertainty our research our data sets our insights on the consumption of it even higher in the current periods of times and then we also know our baseball jokes itself are very valuable for our customers. So that is always the starting point before we start to think about pricing.

Obviously in a high inflationary environment, it's fair to consider passing the one part of our cost price increases to our customers, if that's appropriate and balanced in relation to what I've said before and we were doing that selectively so think about custom and data subscriptions and index. They are we have.

Made some changes and also we have made a list price change in the ratings business now starting on August for our show Mitch ear change also put your ratings are fish. So Joel a couple of examples but always in the context of finding the right balance for the company and thinking about the health of the company.

Tension levels in the interest of our customers from a medium to long term perspective.

Got it that's helpful.

And then on the dealer revenue in your mobility segment I think he was quite strong up 10% year over year.

Could you. Please talk about maybe the drive up that strain from Carfax and also the sustainability of this growth and then more broadly could you. Please also talk about the retention rate of the mobility business. Thank you.

Yeah I think so this is a business that is benefiting tremendously from all of the disruption in the supply chain in the automotive manufacturing sector. The dealers right now are really in a high need for information about the used car sector, which is where the most moving is going they're working very closely with the manufacturers and Oems.

On programs about about.

Providing discounts providing incentives for new car sales. So the dealers right now are in the middle of a very high demand a low product environment and so card facts has been benefiting across the board. So all the <unk> businesses as well as automotive mastermind.

There were a couple of new products that were launched one that's called it's.

It's called an IQ spelled E Y E cube product, which provides a balance between the manufacturing and the and the dealer segment.

To look at how incentives and discounts are provided so this is an area where car facts has been tremendously benefit benefited by this difficult environment and it's really the dealers that have the highest demand.

Got it thank you very much yeah. Thanks Owen.

Thank you. The next question is from Jeff Miller with Baird. You May go ahead.

Yeah. Thank you.

See that you have your third straight quarter of upstream data P. C V growth adjusted for Russia, Ukraine.

I guess my question is it continuing to accelerate or can you just give us any sense of the order of the magnitude of the growth in that business. Given obviously revenue is lagging.

And in fact this is the third consecutive quarter that we are seeing ACC growth in the upstream business of course, it's impacted by the Russia situation. So think about it more in the revenue growth of around three 5%. If you exclude that that's worth shot impact for the quarter itself.

Core revenues in the upstream business. So I would call a turnaround. This is a business that had a very difficult period or for the last few years, that's coming out of it in a very strong way literally the overall situation in the energy markets are helping distribution ish the levels of Capex that are going into this industry are.

So very very positive momentum and we would expect that also to continue in the near future. Okay, and then Eva I get that Youre, saying the adjustments in terms of segment margin guidance are small I get that.

I guess are the adjustments driven by the pricing or the inflationary pressure that you're seeing or is there also some.

Reallocation of corporate costs because of the lower revenue outlook in the ratings segment that get absorbed into those other segments. Thank you.

No changes with respect to financial reporting allocations and so on actually allocations are coming down because of the synergies of course also helped by the management actions that we highlighted and so what you were seeing edge actually it really is.

Very mixed set of reasons why this is happening in the different businesses. So I was speaking about your assumptions for example in the index business with respect to the U N level staying flat in our assumption.

For the second half of the or the impact of Russia in commodity insights offset by strong commercial momentum show a very different set of reasons for each of the segments, but I think overall these impacts are relatively small I think the main area of course that you are seeing is the impact of the outlook.

For ratings, where we are not assuming any improvement in the issuance environment for the second half of the year compared to what we've seen in the more regions in the more recent past, but five of our six divisions from our perspective, performing very well quite resilient are seeing good healthy revenue growth and full.

Margin expansion and we think margin expansion in this environment is actually a really positive that we can deliver to our shareholders.

Okay. Thank you.

Thank you. The next question is from George Tong with Goldman Sachs. You May go.

Yeah.

Hi, Thanks, Good morning, I wanted to go back to your issuance outlook, you're forecasting a 30% to 45% decline in build issuance for this year can you clarify if your updated guidance assumes that issuance trends will mirror.

Performance, we've seen in June and July or if you're assuming issuance over the remaining five months will be similar to the first seven months of the year effectively calling a bottoming in issuance performance.

Our year to date.

Yeah, George the second half of the year's assumption is that it's similar to June and July if you actually look at any year. The second half of the year is always has lower level of issuance in the first half of the year. If you think about it you've got the summer months in there you've got July and August which are always quite slow and then you've got some holidays towards the end of the year in the U S market, which were also quite slow.

So we're expecting that there will be the issuance level will be similar to what it's been the last couple of months.

Okay and is that on an absolute dollar basis of issuance or is that seasonally adjusted looking at year over year growth.

Trends.

Both.

Okay got it and then as a follow up maybe going back to the commodity insights you're calling for mid single digit growth and and that outlook was unchanged from your prior outlook you.

You mentioned, Russia of course, being a headwind, but can you talk about other moving pieces in the business I would have expected to come out of the in fact potentially the benefit more from some of the.

Commodity prices we've seen.

George So it would be look at the underlying components and the sales activity, we're actually seeing record sales levels over the last few quarters for commodity insights clearly highlighting the benefits of the combined business. We are now having the benefit of our art.

Commodity prices to date net net that's a good situation for our for our customers and the benefits we're seeing from some of the revenue synergies, although it's early and the numbers are low.

There's clearly a benefit and then of course on top of that also the focus on energy transition, which leads to additional investments and we have of course, an incredible level of expertise around that that we can help our our customer so across the board in each of the categories. If it is advisory and transactional if this upstream.

<unk> price assessments and D. A resource data and insights I think all of that is looking very positive. Yes. There is a little bit of the impact of Russia, a 10 month over impact this year, because that impact started more or less in March and you will see a little bit of impact for two months at next year, then we won't.

Lapping that and then I think all the underlying drivers of positive momentum.

Continue.

Got it thank you.

Thanks George.

Thank you. Our next question is from Shlomo Rosenbaum with Stifel. You May go ahead.

Hi, Thank you I cut out a little bit and so I'm not sure. If you addressed this in prior discussions but in the mobility segment.

Oh, it's very strong demand in carfax because of used cars in the like Oh, If you would see if we start to see some improvement in supply chain.

You know over the next year or so do you expect that we're going to see a little bit of a balancing out and some of the other areas. We will do better or do you expect that we're gonna start to see you know just not seeing the same kind of growth that we saw beforehand.

In terms of carfax.

Yeah. Thanks, Shlomo, we think that this mobility segment has a mini has a very high growth trajectory ahead of it. If you look at a couple of different factors. One that I described earlier relates to the used car environment, where right now there's very low production of new automobile new automobiles, which is taking place which means that.

There is a need for dealers to have product. They don't have product right now so when they get it they can sell it they can sell it at premium they need the data and the analytics or whether it's from auto on the automotive mastermind towards the cortex products. So there's a high demand right now for that and the dealers.

<unk> approach to working with customers is not going to go away even as the global production starts coming back and there's going to be a revolution, taking place and in the transmission system such a move towards electric vehicles. So the dealer approach is going to stay quite important we think the manufacturing approach could actually benefit from much higher growth of <unk>.

Production.

You see that we think that the global production will start continuing to increase over the next few years going up even up to 9% in 2023 in the slide that we produced a theres another area, which we think has some opportunities for growth, which is financials and we've been producing some new products for the financial sector, we talked.

One of them earlier, which has some credit information for the insurance industry as well as the financial services industry on the automotive sector. So across the board. We think this is a segment, which is going through a lot of change a theres a lot of disruption taking place and it's an opportunity for us to be at the middle of that to provide the data and the insights and analytics the dealers.

And our manufacturers and financial institutions need to make informed decisions.

Okay, Great and then.

You know, there's just maybe a housekeeping one but what was the ending share count not the average share count in the quarter, but kind of the ending share count and should we expect there to be very different next quarter in terms of your kind of finishing up the ASR is just trying to figure out make sure where we start modeling the share count appropriately.

Slo-mo, we we put a specific slides in the appendix to help you with your question and where you can see the decline of the overall share count over the period of this year. So we started with 360 <unk> sorry.

Sorry, 356 million of combined shares after the issuance of shares for the IHS Markit shareholders that has come down.

Two 339 million and most recently, we expect about 5 million of shares to be delivered as a true up for the eight and a half billion ASR that will be end of June then we will enter into the new two and a half billion ASR upfront delivery if that would be.

Something like $6 million of share of shelf somewhere later.

This dish a month, we will have an adult also taken out so you could say about 25% of the shares that were issued with the IHS market have already been been removed in the periods of six months.

Is phenomenal and then of course, we get the true up of the new ASR of two and a half a billion and a share so there'll be delivered $41 million at the end of the year. So that is the decline, but more details you can find the independent chauffeur slides to help you and all your colleagues with the modeling.

Thank you.

Thanks Shlomo.

Thank you. The next question is from Andrew Steinman with J P. Morgan you May go ahead, Hi, I just wanted to go back to slide 31 market intelligence, where we're desktop which is where I want to focus it was up.

Six 6% and and you did mention you know strong new sales and renewals I know this is an area where you're adding content.

And and data to cap IQ a pro I just wanted to know how much of this is kind of market driven versus your kind of product upgrade driven and do you expect momentum in your desktop business in the second half of the year.

Good morning, Andrew we are very pleased with the trends, we're seeing with respect to desktop furbish stable business growing in a steady way we see good commercial momentum we see good user satisfaction levels and that is translating in high retention nice growth off annually.

<unk> contract value pick up or price increases based on the enterprise approach. We are doing with respect to our contracts and then also user count that you do such Oh. The products is going up satisfaction level also better think about page loads that are growing much faster than we had in the in the past.

So overall, we like what we're seeing in desktop growing nicely steadily and and good commercial momentum and great customer satisfaction around it. Thank you I appreciate it.

Yeah.

Thanks, Andrew.

Thank you we will take our final question from Russell Quelch with Redburn.

Okay.

Yes.

Yeah, I think you're driving me on I appreciate it.

To be on the cover and catch up can you just lay out your priorities of use of excess capital should we be expecting all tons in the second half of this year and if we should.

Areas do you believe you'll light in terms of data and product suite.

So I would say this in the following way and by the way. Thank you for joining the call and thank you for initiating coverage on S&P global.

We are looking at continued return of capital we have our specific targets with respect to our capital management philosophy, and we will continue to execute on that we're very happy that we will continue with the 12 billion share buyback despite lowering our adjusted free cash flow for the full year.

We have sufficient ability to complete the 12 billion and then we will continue with with returning capital to our shareholders next year with at least 85% of free cash flow. We have no plans with respect to large M&A at this moment, maybe some small tuck in bolt ons, where we can find some now.

Nice additions to our propositions think about ESG, but otherwise no changes with respect to the plants the philosophy and the targets. We will continue on the path that you used to see from us.

I think I'll leave it at that thanks for your call it much.

Thanks, Russell well as we close the call I want to thank everyone again for joining us for your questions and for your support.

As I said at the beginning of the call. It's incredible to see that within just five months, how much stronger and resilient. We are as a new company with S&P global nitrogen market, we have a very robust integration integration management office in place we call. It the I M O.

Partnering with all of the businesses together with a new management team to create value and to ensure that we can create this unified vision to deliver S&P global none of the progress would be possible without the commitment and really hard work of our people they've done a fantastic job and I do want to thank them again for their.

Effort as they've been working for over a year and a half two years to get ready for this deal and now the last five months to really make sure it's moving along.

I'm really pleased that all of us have come together to do such a great job. So far and we want to continue to deliver I hope that everyone has an enjoyable summer and want to thank everybody for joining the call today. Thank you very much.

That concludes this morning's call a PDF version of the presenters presenter slides is available now for downloading from Investor Dot S. P Global dotcom.

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