Q4 2022 S&P Global Inc Earnings Call

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[music].

Good morning, and welcome to S&P Global's fourth quarter and full year 2022 earnings conference call.

Inform you that this call is being recorded for broadcast all participants are in a listen only mode. We will open the conference to questions and answers after the presentation and instructions will follow at that time.

To access the webcast and slides go to Investor <unk> S. P Global Dotcom if.

If you need any additional technical assistance. Please press star Zero and I was just you will materially.

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 fourth quarter and full year 2022 earnings call presenting on today's call are Doug Peterson, President and Chief Executive Officer.

<unk> Steenbergen executive Vice President and Chief Financial Officer.

For the Q&A portion of today's call. We will also be joined by Adam Cansler, President of S&P Global market intelligence, and Martina Cheung President of S&P Global ratings.

We issued a press release with our results earlier today, if you need a copy of the release and financial schedules. They can be downloaded at investor Dot SP 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.

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.

<unk> 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 non-GAAP adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the company's operating performance between periods and to view the companys 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 specific 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 everyone. Joining today's earnings call. We're looking forward to a very exciting and innovative ear at S&P global as we shared with you at Investor Day, we're accelerating the pace of innovation and taking advantage of all we have to drive profitable growth over the next three to five years in.

In 2022, we built an incredible history at S&P global to position the company to create significant value for our customers our people and our shareholders in 2023.

2022 was a year of resilience decisive action and disciplined as we look at our financial highlights I want to remind you that the financial metrics that we will be discussing today refer to non-GAAP adjusted metrics for the current period and for 2023 adjusted guidance 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 previously divested businesses in all periods.

Adjusted revenue decreased 4% or 3% on a constant currency basis.

Everyone on this call knows we saw dramatic decreases in debt issuance, which drove the decline in our revenue and earnings.

But what you would not be able to tell from the headline revenue growth rate is that our business has become far more diversified and resilient.

We saw 26% decrease in our ratings revenue the vast majority of that decrease was offset by a 6% growth in our other businesses that growth came despite FX headwinds and then stable macroeconomic environment and the suspension of our commercial operations in Russia.

We also took decisive action to preserve margins in 2022 <unk>.

Despite significant inflation throughout the year, we're able to keep our adjusted expenses relatively flat year over year due to outperformance of our cost synergies and management actions around incentive compensation discretionary spending and the timing and prioritization of strategic investments.

Our teams have a lot to be proud of and we've done a remarkable job setting the company up for a strong 2023.

We introduced our initial guidance today, which includes 4% to 6% revenue growth and a 10% to 12% EPS growth importantly, we're not moving engineering solutions to discontinued operations. So both of these figures include the half year contribution we expect from engineering solutions in 2023.

Excluding the impact of engineering solutions, we would've expected revenue growth to be approximately 6% to 8%.

Amongst impactful accomplishments in 2022, we completed our merger with IHS Markit and took important steps to optimize both our operations and portfolio of businesses, we optimized our capital structure as well lowering our average cost of debt at fixed rates protecting our earnings from further interest rate volatility.

We introduced a bold strategic vision of our Investor day power in global markets and outlined our key growth priorities for the next few years, we're looking forward to updating our investors on our progress against those initiatives as we move forward.

We also continue to shape the secular transition from active to passive asset management and just last month celebrating the 30th anniversary of the first index based Etfs, which is based on our S&P 500 index.

As we look to the strategic initiatives, we have at the beginning of 2022, it's clear that we continue to make great strides we outperformed our original 2022 cost synergy targets by more than 20% generating $276 million in cost synergies fully realized in 2022 compared to our original target of 200.

$10 million to $240 million.

We successfully integrated our major infrastructure software systems, including what our ERP vendor told US was the fastest integration ever for a company of our size.

We continue to drive commercial momentum generating nearly 7000 synergy cross sell referrals post merger. We also made great progress with our strategic investments and our transformational initiative to optimize our technology spend lastly, we continued our relentless focus on making sure S&P global remains a destination of choice.

This for people and candidates our internal people survey indicated 90% or more of our employees endorse our culture and our efforts and diversity.

We continued to invest for long term growth in 2022 made several small acquisitions to bolster and round out our offerings in private market solutions as well as sustainability and energy transition. We also had several important new product launches and upgrades that will drive customer value and financial performance in 2023 and beyond.

We took steps to optimize the portfolio of businesses at S&P Global we made several merger related divestitures that were required by regulators, but we also decided to divest engineering solutions Division and announced an agreement to sell the business to KKR. These.

These decisions help position S&P global and growth markets, where we can leverage our strengths across the entire business.

As always we will continue to be disciplined stewards of the business and periodically review the portfolio of assets to determine the optimal structure at any given time.

Shifting to our financial performance the largest macro contributor to our 2022 results has been the sharp decrease in global debt issuance, which continued to deteriorate as we move through 2022.

For the full year, we saw 28% decrease in global rated issuance or 31% decrease when including the impact of leveraged loans.

This is particularly noticeable in high yield issuance, which decreased 77% from the extraordinarily high levels. We saw in 2021.

The issuance environment, certainly impacted our financials in 2022, but we were pleased with the execution from the teams across the company. Despite those challenges.

As I mentioned previously our aggregate financial results provide clear evidence of our commitment to disciplined execution. Excluding the ratings business revenue growth would have been 6% in 2022 and adjusted operating margin would have expanded by approximately 200 basis points Eva will discuss the fourth quarter financials in a moment.

Each of our divisions performed admirably in 2022, we saw positive revenue growth in four of our six divisions and constant currency growth in five of our six divisions. We believe the strength and discipline shown in 2022 sets us up for a return to positive overall revenue growth and margin expansion in 2023.

We continued to deliver impressive results in sustainable one in 2022 we grew ESG and climate revenue by 50% year over year to more than $200 million.

As we outlined at Investor day, and as you'll see in the appendix we've updated our methodology beginning in 2023 to include all of our sustainability and energy transition products, and we will be disclosing sustainability and energy transition revenues, rather than just ESG revenue going forward.

Under the new methodology, we generated $247 million in 2022, and we expect growth of more than 30% from that base in 2023.

We ended 2022 with ESG ETF, a U M, reaching $40 billion that growth is particularly impressive when you consider it is the net impact of an 18% increase in AUM from net flows and a 14% reduction in AUM from price depreciation, resulting in 4% net growth year over year.

We continue to launch new indices based on climate or sustainability factors in 2022, including the new S&P B N V Green, social and sustainable target duration Bond index. We also launched new products in market intelligence commodity insights mobility within ratings, we completed a 133 sustainable financing opinions.

Thirty-three green evaluations and 102nd party opinions.

At the core of our sustainability efforts are the corporate sustainability assessments. These remain a key differentiator versus our competitors as they enable us to collect an enormous amount of data directly from corporations around the world.

For the methodology year that ends in March 2023 we have already increased CSA survey participation of more than 2900 companies, representing a 30% growth year over year, we expect more than 3000 companies to participate by the end of March.

The company also continued to advance its own industry, leading practices and sustainability, we issued our 11th annual sustainability impact report and fourth annual T. Cfd report, we launched one point to $5 billion in sustainability linked notes and adopted the sustainability linked bond framework.

We ensured the long term funding for the S&P Global Foundation deal. The one time grant of $200 million and our efforts continue to receive recognition from several leading third parties.

I'd now like to shift the presentation to our outlook for 2023.

The latest global refinancing study was issued earlier this month the total amount of global debt maturing in this study is 11.1 trillion dollars over the next five years. This is actually up 3% from the study a year ago and up 7% from last year's study when looking out over the fall buying years importantly.

Importantly, this shows is how the maturities have evolved over the next few years, while 20 twenty-three expected maturities at Unsurprisingly decreased over the course of 2022, if we look at maturities in years 2025 to 2027, we see a 12% increase from last year's study that increased jumps to 23% looking at maturities in <unk>.

27 to 2029, the Bottomline is that Theres, a very healthy pipeline of debt maturities coming over the next several years.

Now looking at total rated debt outstanding we continue to see a compound growth rate of 5% and a continued year over year increase in total debt outstanding on a constant currency basis, historically outstanding that usually gets refinanced and we don't see any reason why this decades long trend would change.

After mark declines in issuance in 2022, our ratings research group anticipates that issuance will returned to positive growth in 2023.

The forecast calls for issuance gains of $8 five per cent for non financials three per cent for financial services, 5% for U S public finance and a decrease in structured finance of 7%. Please note that this is an issuance forecast not a revenue forecast and does not include leverage loans, our financial results and guidance.

More closely tied to build issuance, which can differ materially from market issuances. We've described in recent quarters for 2023 we expect build issuance to be up approximately 2% to 6% for the full year.

Now, let's move to the latest view from our economists Theyre forecasting global GDP growth of two 2% in 2023, while GDP growth is expected to be positive. We also expect it to be a story of two halves right. Now we are assuming a mild recession in the first half followed by stabilization in the second half.

Each year, we carefully assess the external factors facing the company. This slide depicts those that we think are most important going into 2023. There are a number of potential positive impacts this year and potential headwinds many of which we've outlined on this slide.

So a number of factors that could impact our business positively or negatively or different ways in different parts of the business volatility in the equities and commodities markets is a great example, as it can be a headwind to certain parts of our business, while serving as a tailwind to global trading services and commodity insights and exchange traded derivatives in our indices business.

Well, we certainly aren't immune to the macroeconomic environment, we're confident in investing for growth in these times of uncertainty and through the cycle is the right way to create long term shareholder value.

While others may give into the temptation to hunker down we want to make sure that we're aggressively taking the steps to position S&P global for years of profitable growth. That's why I'm. So excited to finish my prepared box on this slide.

We're optimizing our technology spend for growth, we're leveraging most powerful platforms available to make sure our product development teams can rapidly bring new features and products to market.

We recently announced a long term strategic partnership with Amazon AWS to further technology vision, we laid out for you at Investor Day.

This agreement allows us to consolidate contracts and drive long term savings through a collaborative relationship with one of the world's most innovative technology companies.

Ken show continues to be a key contributor the culture of innovation within S&P Global we have a bold vision for how to leverage the newest breakthroughs in machine learning artificial intelligence and not only make those technologies available to our customers, but truly embed them throughout the organization to drive growth and efficiency.

I visited 10 shows offices last fall and was impressed to see the work that Ken chose R&D team had been doing with respect to large language models and their transformative potential.

Since then <unk> made significant progress on models that leverage unique data across the enterprise with the potential to power innovation, using AI and machine learning to accelerate product and technology changes across all of S&P Global this is very exciting.

We will also continue to make strategic organic investments in areas like private markets and sustainability and energy transition and we will selectively pursue opportunistic acquisitions that enhance our growth and innovation.

As we begin reporting our vitality revenue. This year, we will continue our long practice of transparency and accountability.

It is truly an exciting time to be at S&P global and now I'd like to turn the call over to <unk> Steenbergen, who is going to provide additional insights into our financial performance and outlook Eva.

Thank you Doug the adjusted financial metrics that we will be discussing today refer to non-GAAP adjusted metrics for the current period and for our 2023 adjusted guidance 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 preferred.

<unk> divested businesses in all periods, let me start with our fourth quarter financial results adjusted revenue decreased 6% to $2 $9 billion, largely driven by a challenging issuance environment and macroeconomic conditions, excluding ratings fourth quarter revenue would have increased 4% year over year.

Adjusted corporate and allocated expenses improved from a year ago, driven by a combination of synergies and reduced incentive costs.

<unk> expenses were roughly flat for the full year, demonstrating strong expense discipline across the company for the fourth quarter expenses decreased 4% compared to prior year adjusted operating profit margin contracted by 160 basis points to 41, 2%, primarily driven by revenue declines in.

Ratings, excluding ratings adjusted margins would have improved more than 280 basis points year over year. Our adjusted net interest expense increased 9% driven by higher total debt levels, partially offset by lower efforts cost of debt adjusted effective tax rate was up modestly but right around.

The midpoint of the guidance range, we provided for the full year, we exclude the impact of certain items from our adjusted diluted EPS number among dose items in the fourth quarter or approximately $175 million and merger related expenses the details of which can be found in the appendix.

We generated adjusted free cash flow, excluding certain items of $1 $4 billion in the fourth quarter. In 2022, we completed our $12 billion accelerated share repurchase program with final share delivery executed earlier this week.

Turning to expenses as I noted, we manage to keep adjusted expenses roughly flat for 2022, despite the high inflationary environment I'm pleased to report, we acted decisively and delivered more than $400 million in expense reductions for the full year actions taken include pull forward in synergies a reduction in incentive.

<unk> accruals adjustments to the timing of certain investments selective hiring and limiting consulting spend in some areas.

Looking more closely at the largest contributor to dose expense savings I would like to provide an update on our synergy progress specifically in 2022, we have achieved $276 million in cumulative cost synergies and our annualized run rate exiting the fourth quarter was $422 million.

Representing 70% of target's after only 10 months, we continued to make progress on our revenue synergies with $19 million in cumulative synergies achieved and an annualized run rate of $34 million, the cumulative integration and cost to achieve synergies through the end of the fourth quarter is 807 million.

For 2023, we expect to achieve cost synergies and revenue synergies of approximately $510 million and $60 million, respectively were originally targeted 80% of cost synergies in 2023, but with the outperformance in 2022, we're now targeting 85%.

Of the $600 million target. We're also originally expected 50% of our revenue synergies in 2024, but with the divestiture of engineering solutions. We now expect approximately 45%, though the full target of $350 million is unchanged.

Now, let's turn to the deficient results markets intelligence revenue increased 3% with strong growth in data and advisory solutions offset by slower growth in desktop and declines in enterprise solutions adjusted expenses decreased 2%. This quarter driven by continued realization of cost synergies lower incentive compensation.

<unk> and real estate spend segment operating profit increased 16% and the segment operating profit margin increased 360 basis points to 31, 4% on a trailing 12 month basis adjusted segment operating profit margin was 31, 8%.

Looking across our market intelligence, there was growth in most categories and on a pro forma basis desktop revenue grew 3% data and advisory solutions revenue grew 7% enterprise solutions revenue was down 4% in credit and risk solutions revenue grew 4% for desktop we continued to see strong.

Demand for our subscription offerings like capital IQ overall desktop growth was below our expectations due primarily to the impact of some one time sales from products reported in our desktop line for enterprise solutions softness in our capital markets for home based products continue to weigh in on the business.

Lunch performance as revenue decreased 4%. This was partially offset by strength in private markets software solutions.

Now turning to ratings ratings continued to face difficult market conditions. This quarter as issuance volumes remained muted with revenue decreasing 29% year over year transaction revenue show slight improvement sequentially, but decreased 51% compared to the prior year on continued softness in issuance.

Non transaction revenue decreased 6% on a reported basis or 3% on a constant currency basis, primarily due to lower initial issuer credit ratings and rating evaluation services, partially offset by increases in Crystal as a reminder, ICR and rest revenue are historically correlated.

With the relative strength of the issuance environment and M&A activity, respectively, and the declines we're seeing here are purely indicative of dose market conditions in the fourth quarter surveillance of frequent issuer fees increased year over year on a constant currency basis adjusted expenses decreased 13% primarily due.

Written by disciplined expense management, and lower incentive expenses, partially offset by increased salary expense. This resulted in a 40% decrease in segment operating profit and a 910 basis points decrease in segment operating profit margin to 48% on a trailing 12 month basis.

Adjusted segment operating profit margin was 55, 9%.

Now looking at ratings revenue bites end markets. The largest contributor was the well documented decline in issuance, partially offset by 6% growth in crystal and other revenue.

And now turning to commodity insights revenue increased 4% driven by solid performance across all business lines. However that growth was impacted by a $13 million headwind due to the Russia, Ukraine conflict and a 4 million dollar commercial settlement in the fourth quarter of 2021, excluding the impact of Russia.

Green and this commercial settlement commodity insights would have grown approximately 8% year over year in the fourth quarter. It's important to note we suspended commercial operations in Russia in March of 2022. Therefore, the first quarter of 2023 is the last remaining period that we will see a material in.

<unk> in the year over year growth rates.

Adjusted expenses were roughly flat for the quarter, primarily due to higher compensation and increase in <unk> expense and bad debt provision, partially offset by merger related synergies lower consulting spend in advertising and promotion costs segment operating profit increased 10% and the segment operating profit.

Margin increased 230 basis points to 44, 6% the trailing 12 month adjusted segment operating profit margin was 44, 3%.

Looking across the commodity insights business categories price assessments grew 5% compared to prior year, driven by continued commercial momentum and strong subscription growth for market data offerings, particularly in gas and power and liquefied natural gas energy and resources data and insights grew 4%.

In the quarter driven by continued strength in gas power and renewables advisory and transactional surfaces increased 3% in the quarter as we saw higher demand from energy transition advisory solutions, partially offset by revenues generated from a 2021 event that wasn't repeated in the fourth quarter of 2020.

Two moving to upstream I'm pleased to report the business line grew 4% in the fourth quarter, while upstream ACP has had good momentum ex Russia. The revenue growth. This quarter was primarily driven by upfront revenue recognition of certain software products that are not recurring we expect upstream growth and.

The low single digit range for 2023.

In our mobility division revenue increased 9% year over year, driven primarily by strong and broad based performance across the dealer manufacturing and financials adjusted expenses increased 15% in the fourth quarter driven by increases in head count versus a year ago period timing of advertising spend and cloud.

Expenses, we expect expense growth to moderate in 2023. This resulted in a 2% decrease in adjusted operating profit of 380 basis points of margin compression year over year on a trailing 12 month basis. The adjusted segment operating profit margin was 39%.

Dealer revenue increased 9% year over year, driven by strong demand for car <unk> subscription products manufacturing grew 8% year over year, driven by strength in pork automotive solutions and the conclusion of several major recalled deals financials and other increased 10% primarily driven by continued strength in our.

The insurance underwriting volumes and new business.

Turning to S&P, Dow Jones indices revenue increased 4% year over year as growth in exchange traded derivatives offset declines in asset linked fees revenue during the quarter adjusted expenses increased 8% and so wasn't uptake in onetime outside surface suspense and continued strategic investments partially offset by decrease.

This was in compensation and other discretionary areas segment operating profit increased 2% and the segment operating profit margin decreased 140 basis points to 62, 2% on a trailing 12 month basis. The adjusted segment operating profit margin was 68, 4%.

Asset linked fees were down 2%, primarily driven by lower AUM in Etfs exchange traded derivatives revenue increased 34% on increased trading volumes across key contracts, including a more than 70% increase in S&P 500 index options volume.

Ada and custom subscriptions increased 6% driven by new business activities and price realization.

Over the past year market depreciation totaled $506 billion E. G. F. <unk> net inflows were $157 billion and this was sold it in quarter ending ETF AUM of $2 six trillion dollars, which is a 12% decrease compared to one year ago, our average ETF AUM.

Decreased 8% year over year.

Engineering solutions revenue declined 4% in the quarter, driven primarily by the negative impact of the timing of the boiler pressure vessel code or BPC, which was lost released in August of 2021, adjusted expenses increased 5% due to planned investment spend offset by favorable <unk>.

Thanks.

Before moving to guidance I wanted to highlight some of the key drivers of our expected 2023 results and our deep tie in with the core messages. We delivered at our Investor Day S&P Global is all about growth 2023 will be a year of growth across the company driven by customer growth product enhancements.

Revenue synergies and strategic initiatives will continue to invest in our people and you'll see the annual reset of our incentive compensation targets. We'll also continue to invest in technology as we drive innovation and position the company for accelerating growth in order to help investors see and assess the positive impact of these investments.

<unk> will begin disclosing a few new metrics with our first quarter 2023 results, including our vitality revenue, which is the revenue generated by innovation, either new or enhanced products from across the organization.

Also disclosed a revenue generated from products in our two key strategic investment areas private markets as well as sustainability and energy transition.

In addition to these new disclosures will begin a regular cadence of inter quarter disclosure to help investors measure performance of market observable products, we'll begin disclosing ETD full use and the year over year growth rates of built issuance on a monthly basis in arrears. Starting later this.

When we will disclose to January 2023 data. In addition to the monthly disclosures I just outlined will also disclose build issuance volumes on a quarterly basis broken out between investment grade and high yield we know that in a full adele and potentially uncertain market transparency and accountability.

A more important than ever and S&P global maintains its commitment to best in class disclosure and reporting for our shareholders.

Now moving to guidance as noted in our press release due to the pending divestiture of engineering solutions will not be providing GAAP guidance at this time.

And this slide depicts our initial 2023 adjusted guidance for revenue, we expect 4% to 6% growth, reflecting our continued belief of our mouths recession in the first half of 2023, and then some economic strengthening in the back half of the year, excluding the impact of the divestiture.

Engineering solutions, we expect revenue growth to be between 6% to 8%, we expect corporate unallocated expense of $140 million to $150 million the year over year growth is driven in part by a reset of incentive compensation and the expectation of approximately $10 million to $20 million and stranded costs.

From engineering solutions, both divestiture, we expect to expand operating margin to the range of 45, and a half to 46, 5% diluted EPS, which excludes deal related amortization of $12 35 to $12.55, which is an 11% year over year.

The increase from the midpoint adjusted free cash flow, excluding certain items is expected to be approximately 4.3 to $4 $4 billion. We continue to target a return of at least 85% of adjusted free cash flow to shareholders through dividends and buybacks will also plan to utilize the net after.

Tax proceeds from the engineering solutions divestiture for share repurchases as such our board has authorized a $3 $3 billion share buyback for 2023, which you plan to begin with a $500 million ASR, which we expect to allowance in the coming weeks Lastly, we expect a quarterly dividend.

With 90 cents per share.

The following slide illustrates our guidance by deficient beginning with market intelligence, we expect growth in the six and a half to eight 5% range and margins between 34 and 35% as we mentioned at our Investor Day. This is a skilled business, that's well positioned in growing markets, such as private markets and supply chain.

And we're confident in our ability to accelerate growth as we lapped the 2022 headwinds from protium driven businesses and FX in ratings, we expect revenue to grow between four and 6% with growth to be driven by volume and price and continued growth in non transaction revenue our assumption is for built issue.

She wants to be up between 2% and 6% in 2023 margin for ratings are expected to be between 56, and 57% and commodity insights. We expect revenue growth in the six and a half to eight 5% range and margins between 46 and 47%. We expect continued strength in commodity markets.

Generally and look forward to lapping the Russia impact after the first quarter similar to our market Intelligence Division, we expect commodity insights to see expense benefit from further realization of synergies in 2023.

In mobility, we expect revenue to grow between six and a half and eight 5% and margins between 39% and 40% driven by some normalization of ultra supply chain price realization, new business and new product adoption importantly, we expect expense growth to moderate as quickly and substantially from the outsized.

The increase in the fourth quarter, we expect expense growth to be below revenue growth in 2023.

In indices, we expect revenue to be flat to up 2% with margins of 66% to 67% as we indicated at our Investor day revenue from asset linked fees lacks movements in underlying asset prices. So the 2022 decline in the S&P five hundred's will negatively impact this year.

Revenue, we'll also lap the very strong comps in exchange traded derivatives.

Before I turn it over for Q&A I would like to take a moment to thank our people at S&P global the highlight of 2022 was the closing of our merger with IHS Markit, but what made it a highlight was the incredible dedication and execution demonstrated by our people we feel strong decisive action in the speech.

Of execution of our cost synergy plan, we delivered critical system integration or very fast timeline rationalized, our real estate footprint and at the same time continued our strategic investments 2022 truly was a year of transformation, but there was also a year of foundation we intend.

To build on that foundation and drive strong growth in 2023 and for the years to come and with that we'll have Adam and Martina join us and turn the call back over to Mark for your questions.

Thank you 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 comes from George Tong from Goldman Sachs. George Your line is open.

Hi, Thanks, good morning.

Do you expect 2% to 6% growth in build issuance in 2023 can you bridge your expectations for build issuance with guidance for readings revenue growth of 4% to 6%, including how you expect pricing in issuance mix to impact revenue.

Good morning, George This is Dave Alex Let me give you a couple of dose components. As you know we are always breaking out ratings revenue in two categories transactional and non transactional what you've seen the transactional category is a combination of price and volume and on the volume side. We have stated at two 6%.

ROE for build issuance and then if you think about non transaction. We continue to see expect to see growth in the annual fish also continued positive growth in ratings is to be expected and then ICR and rush, that's a bit on shortened because that depends very much on the overall economic environment. So those are some.

The components that will add up to that range of 4% to 6% revenue expectation for ratings in 2023, So I would say overall quite constructive after 2022.

Got it.

Market intelligence revenue growth decelerated in the quarter due to slower growth in desktop and declines in enterprise solutions can you elaborate on trends, you're seeing in desktop and enterprise and why do you believe performance may improve in 2023.

George This is Doug before I hand, it over to Adam I want to welcome Adam and Martina to the call today as you met our President's at the Investor Day on December 1st we're pleased to ask a couple of them to join us on each of the earnings call them today, it's gonna be Adam and Martina, but Adam over to you.

Thanks, George we're very confident in our dinner desktop business, but just that revenue in this quarter didn't perform how we expected, but let me give you a little bit of color on that financial services industry. Obviously under pressure you see that belt tightening now to some of the largest sell side banks and they were taking a cautious approach right now.

And we're not immune to that that said our core desktop offering continued to grow extremely well within that desktop revenue line you have certain products that are nonrecurring in nature consulting and advisory engagements tied to our desktop offering. These are the products that saw that impact in Q4, as we look out to 2023, we remain confident in our desk.

Top growth and we're excited about our forward competitive position, we saw active user growth up 9%. This year. This is great growth in a challenging year, an important driver for us as we renew and expand our relationships with our customers in 2023, we're delivering significant upgrades in the offering speeds increased dramatically new features being released you saw we announced our ECR.

To live on our desktop.

In 2023 fixed income and loan capabilities coming so while Q4 not quite the quarter. We expected. We're very confident excited about that growth forward I'll just spend two seconds on enterprise solutions. I know you asked about that as well understand that revenue line as really two separate components software solutions, our customers use for workflow complying.

The portfolio portfolio monitoring.

And a section for industry platforms that are really directly impacted by capital markets activity and volumes that first group performed really well this year and we expect that to continue to perform really well into 2023, there's a lot of those are double digit growth businesses. The.

The second bucket the industry platforms really impacted by significant drops in capital markets activity that saw a negative double digit impact in the current year.

When we look forward into 2023, we expect that negative impact to moderate as we lap those comparables and as markets stabilize. So we do have a very positive outlook for enterprise solutions as we go forward into 'twenty three.

Very helpful. Thank you.

Our next question comes from Andrew Steinman from J P. Morgan Andrew Your line is open.

Yes, Hi. This is a this is Alex Hess on for Andrew Steinman, maybe.

Maybe just start with the 2020 for revenue synergy target that was lowered modestly and I believe it was mentioned that that principally reflects engineering solutions, but with the focus at Investor day, having been on innovation can you maybe update us on where 2020 twos vitality index came in.

Net promoter score is tracking and sort of what gives you confidence that.

Maybe that that target remains pretty pretty achievable.

Oh.

Good morning, Alex Thanks for being on the on the call.

You asked a couple of questions. So let me walk through each of those 2020 for revenue synergies are slightly tune down due to the divestiture of engineering solutions, we had assumed a number or revenue synergies both in engineering solutions as well as in some of our other segments into collaboration.

With engineered solutions for example, commodity insights shares a number of customers together with engineering solutions.

We're not concerned about that at all because we are finding so many new revenue synergies across the company that we are still firmly committed to the 360 million number in total over the five year period, you also asking about in general the commercial momentum within within the company were actually really happy what we are.

There's a lot of innovation lot of new product development, a lot of really very strong customer interactions around all of that youre seeing that we hit our revenue target for ESG sustainability for 2022 and with respect to vitality. What we told you that we have.

<unk> targets to get to vitality over 10% over the next few years. So I'm actually very happy to report that we already got there in 2022 shell. Our fatality was just over 10% last year as another indication of the level of speed of innovation that we're increasing within the company.

Great. Thank you so much and then maybe to turn to your your your build build build issuance assumptions can you maybe walk us through the degree to which that is weighted to the back half of 2023 versus you know maybe maybe facing some steeper comparisons in January in the front half of this year.

Hi, Thanks for the question. Alex. This is my Tina we are consistent with our overall view for 2023, both for macroeconomic as well as market issuance not feeding into my belt issuance, we would see.

The chances for a mild recession in the first half with that with some recovery in the second half and so you could expect to see a little bit more softness.

In issuance in the first half followed by some recovery in the second half.

Thank you.

Thank you Alex.

Yeah.

Our next question comes from Toni Kaplan from Morgan Stanley Ms. Toni Your line is open.

So much I wanted to ask about multi asset class indices, I know, it's a really meaningful opportunity and you're investing a lot there and it seems like the market opportunity is really massive he is leading brands you know within index products and so my question is.

Right now to clients think that Theres, a need for multi asset class indices or will it be a matter of convincing them that it's better than having a combination of you know a separate equity and fixed income indices like a hybrid like us is being used now just what.

It makes multi asset class indices better than just waiting you know equity and fixed income indices.

Yeah. Thanks, Tony as you know the basis of the index business that we have is about transparency. Its independence, it's the ability for a client to understand exactly what's in the portfolio at any point in time, where we're especially seeing multi asset class demand is in the insurance industry. The insurance industry, which has many types of products.

Looking to multi asset class they use it for their use it for annuities they use it for wrappers.

And we're also seeing that bank structured product. Our guests are also looking at multi asset classes.

So we're seeing a lot of growth in this but you asked the question about what is the difference the differences that you can put together a single product, which meets the needs of the client and we're seeing that this is right now very high demand coming from those two industries as Etfs are built from the multi asset classes. Then you start getting trading around them. So we see the entire.

Ecosystem, starting to grow and it's also part of the trend what we see active to passive anyway. So I think it's very important you asked the question. It's one of our growth areas and across all of the index business. This is one that we're most excited about finally, because we have within S&P global now one of the leading franchises in <unk>.

It didn't come with eye box C Dx and Itraxx, we can actually produce these products on her own all in house.

Terrific and then.

And as a follow up wanted to ask about commodity insights growth I know long term sure thinking about 8% at the midpoint and like when I look back at charter legacy plots and and resources within IHS.

You know I guess platts wasn't really their resources on its own wasn't there in in sort of a normal market is it the sustainability part that's really going to drive it to that higher level of growth or I guess, what's the bridge to get from you know sort of like a normal mid single digit level.

Thanks.

Tony If you think about the overall market dynamics in the commodity markets. We think that's currently at those markers are very constructive for our customers and that is going to be helpful. Also for the growth of the business over the next few years well first 1.2.

To highlight this debt in 2022, we saw some headwinds from Russia from the Russia, Ukraine conflict and the fact that we stopped our commercial relationship with Russian customers.

Officially that headwind is going away going forward secondly, what we're seeing is that our customers are both focused on traditional energy resources and new energy resources. So we're benefiting from both French at the same time, where there's of course, a lot of activity going on with respect to the current mark.

Prices in terms of exploration and additional capital expenditures that we are seeing with our customers at the same time I'll also focus on energy transition and each help from us. So we are providing data insight research. It's faiza read all of that around energy transition.

Same time, so we believe this business has a lot of secular tailwind over the next few years. What we told you is that at the Investor day that we expect this business to grow into 7% to 9% range in 2002, five in 2026, and we think absolutely that is possible, we're very committed to hitting that number.

Yes.

Fantastic. Thanks.

Thanks, Tony.

Our next question comes from Alex Kramm from UBS, Alex Your line is open yeah.

Yeah, Hey, good morning, everyone. Maybe you can touch on the margin outlook, a little bit, but particularly interested in the in the quarterly seasonality or cadence I know in the past there's been some surprises here and there and some of the segments. So maybe if you can help us.

Between you know synergies coming in and maybe typical seasonality.

How we should be what would you would call out in particular as it relates to maybe the seasonality. We saw in 2022 I understand ratings, it's probably going to be driven a lot by issuance, but maybe in the other segments.

Anything to call out.

Alex a couple of items to think about first.

In terms of seasonality I realize that we are facing still high comps for the first quarter because the economy started to go more south from March of last year as well as the impact of the Russia. Ukraine conflict also started about in March So first quarter comps are still a bit high to chicken.

And to think about here is that we are now expecting as we also said during the Investor day, a mild recession in the first half of the year and then some economic strengthening in the back half of the year and the third element that I can say is you know that we are running a very tight ship with respect to expenses. So.

We are definitely starting this year, given the economic uncertainty and a very careful way and then we need to time. This right because the most important thing is that we're going to benefit once the market starts to turn when the GDP is growing up that we're starting to benefit from a growth perspective, we have a lot of growth investments in our plan for this year.

As you know so we have to time it right that they're going to make those investments at the right moments. So that we were going to be a large beneficiary once the market start to swing up again. So those are a couple of the elements you should think about in terms of timing for this year.

Okay Fair enough and then maybe just a follow up to the market intelligence question to Adam earlier, maybe you can be a little bit more specific what do you expect in the more capital market sensitive areas. I know there were some clearly some headwinds that you discussed earlier do you do you expect those businesses to be.

Kind of like flattish or do you expect couple markets activity to actually recover decently. So maybe you can just talk about that and if you. If you can tie that in with maybe the selling environment a little bit more on what you're seeing right now that would be helpful as well.

Yeah.

Okay. Thanks, Alex.

First part of the year, you still have pretty significant year on year Comparables because markets were still strong in the very early parts of 2022.

As we come through 2023, we do see some resilience in the early part of this year, but we do see a lot of cautiousness still in markets and you see aggregate activity levels as well as we do as we get towards the latter part of the year. Your year on year comparison starts to flatten out quite significantly and for us internally thinking about.

What we expect in the year, we budgeted modest increase in total activity across capital markets platforms, We'll obviously see how the year develops but we think that's the right call as we sit here today.

Okay.

Thanks, Alex.

Our next question comes from Jeff Silber from BMO capital markets, Jeff Your line is open.

Thanks, So much I wanted to dig a little bit further into your outlook for this year, you've talked about expecting a mild recession in the first half in recovery in the second half.

I know, it's early but we're about six weeks into the new year, and if anything economic growth seems to be better than expected.

That's the case, then we either avoid a recession or push it off a little bit where could we see the upside in your forecast.

Jeff the forecast the guidance, we're giving is middle of the road. It's management's best estimates. This is our best expectation for the market and for the full year at this point in time I can't give you a couple of underlying elements in terms of assumptions that have gone into our planning.

For example, with our market sensitive businesses think about the index business. If your assumption is flat equity markets. This year for the full year, you could say January looks a bit better and February so far is as well, but we're not changing our plan on a month to month basis. So on average we expect.

The markets to be flat, that's H D assumption doesn't have gone in to the index, our outlook as well as 20% declines in ETD volumes coming from elevated levels last year.

As well as flows to be more or less in line of what we have seen in previous years, and then with respect to all the market sensitive businesses. We already gave you some of the assumptions for for ratings. So that has gone into the plan. We think this is our best estimate at this point in time, given everything we know about the company and the markets.

Okay I appreciate the color let.

Let me switch gears and focus on AI, Doug I. Appreciate you addressing this issue obviously, it's a hot issue in the market today.

Seem to be ahead of the game with your purchase of can't show a number of years ago, where have you gotten the most traction there and what should we look forward going forward.

Yes.

Well. Thank you Jeff we're we're very pleased by the investment in weight and can show. In addition to investments we've made across the entire organization and decision sciences in AI and machine learning I recently spent some time with Ken show in Cambridge, and they were able to show me some of the R&D Theyre doing on large language models, which is something that's in the press.

Every day right now we're seeing that for the financial markets, we've been able to harness the data and the language that we already have an inside of the company to develop some very interesting products, but since Eva overseas can show I think I should hand, it over to him to finish the answer.

Jeff Let me first give you a number of data points in terms of what can show is exactly doing two day for the organization and its actually really mind blowing if you hear these numbers. So April the gold potential link has saved over 2 million hours ingesting data shared strategic data that's.

Pending data sets for our customers also link has at this moment.

Achieved 1 million unstructured private markets private entity data.

Our database into our platforms and connected to the market intelligence I D members of those of those entities. There are two other public schools extract inert that have enriched 73 million documents on the cap IQ Pro platform does ingest it turn.

And a half million investment research report only cap IQ pro platform and strive for which is our language speech to text modal is saving 250000 hours of men work per year for transcripts annual savings of approximately $9 million and the.

This can go on but those are some data points, sometimes it's not really understood what Ken shows exactly doing but it's really impressive and I hope you agree with me when did you hear those numbers, but now shifting to the future of potential because you are right 10 shows really switched bolt is natural language processing and everything that we're <unk>.

Reading today about large language models is exactly in that sweet spot. So essential is today already developing a financial language mobile Golphin L. M, which is strained on the S&P global data assets, it's very expensive to develop large language models. The cost of the compute is very high.

If you have stronger data sets higher quality data ships actually that's a differentiating factor. So we are fighting very significant compute time and cost. So to say also can chose develop something new that you can show Salford, which you see AI solution to enter the most complex financial number questions. You also can read about large.

English models actually not being so strong in math and we are working on the solution in this area as well. So if you just add it all up I think what Ken you can be doing for the company and we're just working on it's a it's very impressive and we're very pleased that we were so far ahead in acquiring this company already five years ago.

Alright, that's extremely helpful. Thanks, so much for the color.

Our next question comes from Craig Huber from Huber Research Partners. Your line is open.

Great. Good morning, My first question would focus a little bit if we could on the ratings outlook you have for build issuance. This year curious if you could give us a little further thought on your outlook for this year for high yield and for bank loans, maybe throw in cielo as if you would as well.

Yeah.

Hey, Craig Yeah, it's martijn here. Thanks for the question. So our outlook for this year is overall up two 5%.

The underlying factors or anything Johnson highlighted in his presentation, but eight 5% on corporate.

At 3% on an F. S U S public finance around 5% and we're projecting a decline in our in structured finance some thought about 7%, we don't break out our high yield and and bank loans that specifically, but what I can say is as you all know high yield in 2021.

So a really low year and so we see growth in high yield market is that this year.

I think on the on the bank loan and CLO is maybe what I can just touch on is the expectation.

<unk> for the research team underpinning that 7% decline in structured finance does reflect.

Some concern around the pipeline for cielo switch, which we characterize that our capture of the structured finance that.

Okay. Thank you and my follow up when you think about pricing throughout the portfolio.

Where should we expect pricing that might be higher this year than normal maybe a more normalized 3% to 4% price or what areas would you highlight the price might be come in ahead of that.

Okay.

Greg in General terms, we always start to think first about what we do for the customer the value we generate the good news is that most of our products are must have products with a very high contribution to our customers and obviously that is the first thing first element, we take into consideration when we start to.

About about pricing.

<unk>, obviously needs to reflect also our cost price cost price is going up given the higher inflationary environment. So we believe we have across the board depending on facts and circumstances customer relationships, depending on short term production in one area or another area, but in general we have an opportunity to pass on the higher.

Rice increases given the higher inflationary environment.

That's it thank you.

Thanks, Greg.

Our next question comes from visa.

Deutsche Bank your line is open.

Yes, hi, good morning.

My first question is I wanted to take advantage of my T now being on the call.

Martina.

It seems like the high yield market.

It really outperformed expectations. So far this year, it's only been a few weeks, but I think just today, we have you know.

New deal announced program, which is which is high yield and I think it's been surprising so give us.

Give us your view on has there just been surprising for you and how do you expect sort of the high yield market to evolve through the course of this year.

Yeah. Thanks, so much for the question look I mean as I as I mentioned in the last point 22 was well.

Just a really low base from which to compare so we absolutely do you expect to see a growth in high yield as it relates to our January and and this week, it's really too early to call. A we still have quite a few puts and.

On that in terms of the the macro variables out, but overall I would I would guide you to what we've been saying around our expectations are at first half second half how the macro factors playing to our to our overall issuance expectation and how that plays into our belt issuance trends.

Got it. Thank you and then secondly, a bigger picture question around revenue synergies.

You know you've talked about an 85 million run rate for 2023 give us some additional color on again sort of when or where you've seen synergies revenue synergies.

Take place.

Had the best result, and then how do we bridge sort of what's the next step to.

To get to that 350 million long term.

Faiza, let me start with a general answer and then I'll hand, it over to Ed for some additional color in market intelligence. So in general what we're seeing is very good activity from a cross sell perspective, we're speaking about 67, hundreds referrals or leaks that have already been Jen.

<unk>, both inside the patient and inter decision with very very positive conversion levels across the across the company. So what we're seeing in general is that customers are really happy to talk to us about what more we can bring to them. How we can add more value and the next phases of a course to start to focus on new product.

<unk>, so that will be the next wave of revenue synergies, but we feel we're definitely well on track ahead of the timing and the planning that we had or which Lee and I hand, it over to Adam for some additional color.

Thanks, It's a great question because this is probably the most exciting part of what happens in a merger and bringing together the set of capabilities that we now have.

In 2022, this was mostly about cross sell selling our products to expanded customer bases that gave us a good early start and then its first year, we were able to perform on that type of synergy realization as we move into 2023 as Dave described it really becomes about building new products that we're able to now deliver because of our combi.

<unk> set of capabilities already in 2023, I think five or more of our combined product capabilities are already generating revenue. We have over 20 in the pipeline and this is just didn't market intelligence alone. These are things like building, our sustainability data and capabilities into our workflow solutions expanding the capacity and.

<unk> of our desktop with fixed income and loans information, bringing together workflow solutions and incorporating much larger datasets for customers think about our private markets customer who also wants to look at public company Comparables are basic financial analysis. Those types of combined product offerings are what gives us a lot of confidence in our total.

<unk> revenue synergy targets over $300 million as we get out until later years and as I mentioned, the most exciting part of what we're doing.

Great. Thank you so much.

Our next question comes from Owen Lau from Oppenheimer. Your line is now open.

Hey, good morning, Thank you for taking my questions.

Could you please add more color on your partnership with AWS, three announced yesterday and I think it's also somehow related to how you will deploy can show in these partnership but how should we think about the incremental revenue and expense control opportunity here would be great. Thanks.

Oh and this is a relationship that we've had for many years and when we put together the two companies and had our merger we realize that both of US had already very strong relationships with AWS, we had been on a cloud switch for many years a few years ago before the pandemic I was visiting an acre of.

Data site, where we had hundreds and hundreds of servers and I said why do we have all these servers. So should we be in the business of of having server farms and we started a transition moving to AWS. So over the years, we've developed an incredible partnership with them and you saw yesterday the culmination of the merger, where we have come together to combine contracts to come up with.

The new approach to how we're going to run our day to day operations, but most exciting is the opportunity springs for strategic cooperation for developing new products for being able to serve customers with completely new opportunities. When we look at our datasets that we have some of the data that AWS has how we can bring those together to do.

Completely new innovation, we talked earlier about large language models. The other types of artificial intelligence and machine learning that are shaping markets of the future. We think that the two companies together can accelerate what we're already doing we see that AWS has for us been an incredible partner. We're pleased with this approach to a contract we just.

Sign the contract yesterday. In addition that we will follow up with some strategic aspects later on it's a follow up but you asked some questions about the financial aspects and I'll ask <unk> to answer that part.

Good morning, Owen if you think about the contractual agreements were having with AWS.

There's about a 1 billion dollar spent in total over the next five years.

To put it in perspective, we will continue with the multi cloud philosophy and in total according to our forecast, we would actually be spending more than $1 billion on cloud compute over the next couple of years. So this is not an increase in spend in total this is exactly in line or actually is our total cloud forecast, it's actually <unk>.

Higher than this particular number but what this brings to US is two very significant benefits to <unk> of course that by combining the S&P global and IHS Markit contracts at this moment in this new partnership with AWS, we will be able to generate very significant cost synergies as part.

The new contract and secondly, as Doug already said and this is actually more important from my perspective Easter strategic partnership because this will help to advance our technology innovation that we will be able to combine leading technologies and platforms and datasets of both companies will be able to add specific capabilities.

We are having on both sides, including you can show AI capabilities of course, and the most important that will end up with a really very incredible customer experience that we expect to enhance over the next few years.

Got it that's very helpful. And then the other one is on your investment in private markets. So what kind of angle or what kind of new solutions, you will be launching this year and I know youre going to provide more disclosures on rapidly with this year, but do you have any.

We target this year. Thank you.

Hi, it's Adam happy to take that so private markets continue to expand Youre seeing continued issuance of private debt, increasing regulatory pressures for disclosure needs to monitor report test and report against sustainability metrics manage large private equity and private credit portfolios.

That requires things like valuations reporting tools portfolio monitoring tools. These are all areas, where we already have a significant footprint and we're well positioned to deliver additional solutions to the market.

While you see in this year some tempering in fund raising I think everyone agrees. This is an asset class that will continue to grow and the types of solutions that I described workflow solutions regulatory reporting valuations portfolio monitoring all have significant room for continued growth.

And this is my Tina I'll, just add a little bit here from a ratings standpoint, so private markets as it does contribute quite a bit to our overall business, whether it's a in a syndicated loan sats Remy LBO activity et cetera, and we also obviously rate are the asset managers to appropriately.

Sponsors bdcs and and we do quite a bit of a credit analysis work to support multiple uses are in our in that sector.

We have good relationships with key players and we've been ramping up engagement over the last couple of years a lot of good dialogue a lot of interest in new opportunities.

What we saw in our in private that specifically in 2022 was a growth that was feel somewhat by by the closure of outside of the public markets and that we have heard a lot of interest from from customers.

With pent up demand looking to come out to the public markets, but overall, we see there is that there's a lot of opportunity here not just in a in does it send and activity coming back to the public markets, but I'll say, we're working very closely with all of our private market clients.

Got it thanks al.

So in.

Our next question comes from Stephanie more from Jefferies. Stephanie Your line is open.

Hi, Good morning, Thank you for the question.

I wanted to touch on the mobility business you know I think there's a lot of dynamics that are happening in 2023, whether it's a decline in used car prices increased production of new how do you view the business is going to back up this year just given all these dynamics I think in the <unk>.

<unk> has proven to be pretty resilient, but at the same time I think the benefit in this environment, but I'd love to get your thoughts if maybe that's not the right way to think about it or if it's another driver that we should be aware of thanks.

Yeah. Stephanie this is Doug when you look at the mobility business you have to think about all of the different capabilities that we have across the business and this starts with card facts that you mentioned there was a set of products on automotive mastermind Polk analytics.

What do you think about is it all the way from the Oems to the suppliers to the dealers to the insurance companies to the financial institutions that are financing the automotive sector. All of them are looking for data and analytics and we've seen an incredible digital transformation. That's taken place over the last three years with a lot of volatility in the automotive markets and all of this.

Is driven all of these different types of players to the mobility business for data for analytics for research for forecasting. In addition to that we see an incredible transformation taking place in the industry with electric vehicles and so electric vehicles is also introducing a new element, which is also bringing all of these types of people back to the markets for more.

Data and analytics, we've seen that we can benefit in different types of markets, depending on whether it's used cars, it's new cars, whether it's how our dealers can be working with incentives and so we believe that the market is that the business is very resilient depending on whatever the factors are we're watching very carefully and we actually use our own data to forecast our own business.

Yes.

Yeah.

Stephanie Let me give you in terms of some of the revenue drivers a little bit in addition to what Doug ship, so with the market normalization the higher inventory levels the prices for new and used cars that are coming down we see the following dynamics for for our revenue drivers.

The one and that will mean that margins for Oems and dealers, most likely will come down a bit having an impact on some of the retention levels, but on the other hand, we have the marketing of shield products that are being used and there will be a higher demand going forward for dose products. So you could say there is a kind of an offset in terms.

So if the new dynamics in the different revenue streams that we're having therefore, we're quite quite confidence that they're able to hit that six and a half to eight 5% growth level in the current automotive markets and the new dynamics that we're seeing.

Thank you and then just given the current market dynamic do you think that we could expect to see maybe a more of a more and the potential M&A activity as well as you know are there other opportunities that you kind of evaluate your current portfolio, so maybe divestitures or sales that might make sense.

Going forward, how would you kind of characterize those opportunities.

As you know we look at the key secular trends and drivers of value in the across all of the markets and you heard US talk about this on Investor day that relate to things like the changes that are taking place in capital markets.

The nationalization of financial markets private markets, which we've talked about sustainability and the shift from active to passive supply chain analytics that the approach to all companies looking at becoming digitized and how data and analytics play and so when we look across our portfolio. We look at what are those growth drivers for each of our businesses.

And as you know we could be opportunistic if we looked at something for some sort of a the opportunity to bring our business into the portfolio, but we also know that we are going to look over the long run and see what is the type of portfolio. We want to have are we the best owner of the business is do we have in the portfolio. So you should assume that we're going to.

With the discipline, we've always had when it comes to M&A.

Yeah.

Yeah.

Thank you so much.

Our next question comes from Manav Patnaik from Barclays. Your line is open.

Good morning. This is Brendan on for Manav, just wanted to ask on the ESG and climate transition revenue that you guys are reporting on which will be great.

So with all of you, including in that and then and what's driving your assumption for the growth in 2023.

Good morning. So if you look at the revenue that we have reported for 2022 under the old definition and inclusion for <unk> $209 million were adding three new categories and therefore, we new gold the new revenue base sustainability and energy transition you can find.

Details in the appendix of the slide deck, but the three main categories that we're adding as revenues from E. Six and that's coming from in the mobility business revenues with respect to energy transition for the commodities inside your business and then domestic sector coming from the index business. So those three categories, we are adding in.

And to the new definition that brings the baseline for 2000 $22 million to $247 million and then we expect to grow from there with a CAGR of about 34% over the next few years and our expectation is still that this will become an $800 million business by 2026.

Great. Thank you and then switching over just to the maturity walls I guess, just what what are you hearing from corporate treasurers I know, obviously, the 'twenty 'twenty four mm.

We expect to see pick up in the next couple of years, but you know they can they can still wait.

Wait a little longer if they want to but at the same time, you know we rates and spreads have kind of settled so just what are you hearing from treasurers on on that.

Hey, Brendan it's a it's Martina I can answer that question. So obviously as part of our our issuance. We look very closely at the maturity wall data its a little difficult to to figure out specifically.

The precise numbers around things like refinancing, which I think it goes to the heart of your question are we know historically much what gets labeled as general corporate purposes has been used for refinancing.

What I would say is we were seeing is that as you would've seen in our presentation about two two and a half trillion corporate debt a weighted by us maturing over the next six years 2023 still has about $1 eight trillion of maturities as of January 1st. So we expect our refinancing activity this year.

<unk> with any potential or any refinancing coming from 2020 four maturities.

We are you know a couple of the key points are in terms of what we hear.

We don't see.

Any indication saw deleveraging for example on a on a meaningful scale are we also are our are paying close attention to our to what we see in terms of inflation and interest rates are stabilizing somewhat.

Second part of the year so.

So come on propagandistic issuance, but it's it's a it's pretty uncertain as that as I had mentioned that earlier.

Alright, thank you.

Thanks Brendan.

Our next question comes from Jeff Mueller from Baird. Your line is open.

Thank you I think for Martina how closely our current resources within ratings aligned to recent volume trends, obviously theres been a lot of ebb and flow in volumes in recent years I guess, just wondering to what extent you have excess capacity and we see good incremental margins.

<unk> other than the incentive comp normalization with incremental revenues or.

Don't know if you're running tighter than it may appear given that maybe things were stretched and a couple of years ago. Thank you.

Thanks for the question, Jeff well, we strive to manage our business to absorb shocks and I mean, it would seem that we've maintained our analytical capacity over the last couple of years.

In some higher growth areas, we've invested a little more coffee ahead of a recovery that we're expecting later this year.

The market as you know needs are our research or insights around the ratings and the demand for this increased dramatically during the last couple of years with the uncertainty and the volatility.

We have that we've worked very hard to add to maintain our capacity for that as well as to anticipate increases in the latter part of this year and volumes are.

We have done some small changes in the past year or so as part of continuing to enhance our operating model and we're you know as I said during Investor day always prudent out with our expenses very disciplined around all the neighbors that we have whether its location strategy.

Teeny and of course, we have fad benefited substantially from the shared cost synergies with the merger.

And the last point I would make on this is like in any extreme scenario. We've clearly found in all of our options, but right now we are very comfortable with the levels that we have.

Okay. Thank you that's it for me thanks for the enhanced disclosure.

Okay.

Our next question comes from Ashish <unk> from RBC capital markets. Your line is open.

Thanks for taking my question I just wanted to I have two part question on the market intelligence posters on their credit and risk solution. There was a modest slow down there are there was a reference to financial risk analytics. I was wondering if you can talk about well how should we think about those trends going into 'twenty. Three and then my second question was just on the data and advice.

The solution that continues to be pretty strong and I was wondering if you can talk about how the combination of IHS and and F. N B data on global marketplace has been driving more customer.

Customer conversations on that front and also how the cloud distribution can potentially have the potential to study has the potential to further accelerate the growth in that business. Thanks.

Yes.

Ashish Thanks for the thanks for the question.

First of all did you take the credit risk solutions piece of the question. We mentioned F. All right. This is a business that is a large software deliver a had a large delivery in Q4 of 2021. So you have a year on year comparable that made Q4 of 2022 challenging quarters. So I think I think that's the thing.

Eight out called out earlier that you're referring to the underlying business remains very strong and this is our ratings direct ratings express capabilities and they continue continues to grow as it has historically and actually is a really exciting path forward as we move more and more capabilities into our corporate customers and in particular, they are our credit analytics.

Capabilities.

So quite excited about that forward second I think you asked about our data and advisory solutions. This is a broad set of data capabilities that we can bring to bear for our customers. Even just this morning I saw a large win with an Australian bank, where because of the combined set of data that we now have in the combined enterprise, we're able to respond to.

He brought rfps to satisfy needs of customers across a wide range of.

Applications and credit and risk management within their firms. So I do expect that to continue I think even as the synergies come more to the front and we're able to integrate those datasets together missile leading to an answer to your your cloud question I think as we integrate those datasets together more and more.

Increasing the scope of opportunity we have to even further accelerate and our data advisory businesses on.

On the cloud on many of our applications today already run in the cloud as they that highlighted in the description of the AWS relationship.

As a long standing relationship what we're about to do now is to launch the next phase and really complete that full cloud migration once all applications and our data capabilities are in the cloud and we've launched a full multi cloud capability across our datasets. This gives us the opportunity to be much more efficient in developing new products delivering those products.

Customers in the way that they want making available wide sets of data for the application of data science and artificial intelligence I really do you think this is a very important part of the continued acceleration in the broad scope of capabilities, we have within market intelligence and you'll see that reflected in that data advisory business and many of the other solutions that we deliver out to customers.

That's very helpful color. Thank you.

Alright, Thanks Ashish.

Our next question comes from Russell clutch from Redburn Russell Your line is open.

Yeah. Thanks, very much first question is on buybacks.

B to check when you but to the after tax capital from the engineered solution sale will that be considered part of the $3 3 billion permissible bought back for 2023 or would this be incremental to that.

That's included in the $3 3 billion Russell So how that build up is how you can take our free cash flow forecast and guidance for the XI are 85% of deaths deduct the dividends that we will pay out at 750 million net proceeds for engineering solutions and that brings you to the three.

3 billion capacity for buybacks for 2023.

Perfect. Thank you and my second question is probably komatsu bodies Komatsu.

The chart on Slide 15 shows maturities are all expected to be about $1 8 billion. If I could argue they're out for this year can you give us an idea of how big maturities was last year until 'twenty. Two so we can back out the impacts of maturity default expected growth and pricing of new issues.

Yeah. Thanks for the question Russell I don't have the 22.

Trading numbers that are in front of me.

There's maybe a way to let me know if this is helpful. 2022 we saw overall, a lower volume of maturities and now the reason why it's good you actually have to go back to years prior to that there was a ton of pull forward on an opportunistic are tapping into the market down in 2020 in 2021 because.

Rates were so low so.

Not sure if that's helpful for you, but that but the number you're seeing for 2023 and our charges $1 eight trillion as of the first of January of this year, where are we're anticipating that we think there is possibility for a little bit of pull forward from 'twenty four but we really have to see how the year plays out between the first and second half.

Okay, Yeah, sorry, <expletive> opinions and I am yes.

Just to check your answer that so the number 1.8, Judy I mean, excuse me higher than what you saw in 2022 are loving and what you said, but it is higher it what was executed to compare it to what was executed in 'twenty two with higher.

On refinancing and good luck.

Great stuff. Thanks.

Thanks Russell.

Our final question comes from Shlomo Rosenbaum from Stifel. Shlomo Your line is open.

Hi, This is Adam on for Shlomo what were the one time expenses are for indices and can you provide more color on the strategic investments and I've seen it I know you mentioned, the multi asset class and as he said earlier.

Talk about anything else beyond that.

And so if you look at the expenses for the index business in the fourth quarter, you should see that in the context of that this is a business that is investing in the context of driving faster future growth and one of those things that you see in the quarter, a some consulting spend to help the business.

With a very large transformation to move to more agile working environment to be much faster in terms of product development for much faster in terms of new entrepreneurialism initiatives and that's needed. So the investments in the quarter from a consulting perspective to make those changes also what you see.

Strategic investments in new product areas like multi asset class. That's also already discussed earlier, Nicole but also sustainability synaptics factors etcetera, so that should position the index business very well to deliver on the double digit revenue growth in 2025, and 2026 that we discussed during our.

Investor day with margins in the high 60 ish level. So.

Really I have to say I'm really impressed by the index business. They take very decisive actions, they're transforming their business and setting themselves up for <unk>.

Faster growth trajectory and the expenses you see in the fourth quarter, you should interpret in the context of that.

Got it Okay. My other questions were answered thank you.

Okay.

Well. Thank you everyone as I mentioned earlier, despite the challenging market conditions 2022 was a year of resilience a decisive action and investment for the future. We're really proud of all the accomplishments we had last year, especially the merger with IHS Markit and our bold new strategic vision powering global markets.

This is going to allow us to take advantage of secular trends that we've been mentioning throughout the call like energy transition in private markets and the need for analytics and insights in turbulent markets and we think we're very well positioned for growth in 2023 and beyond but the reason we're successful is because of the tremendous people that we have in this company and I want to.

Thank them again for all the work that they did throughout 2022 and all they're doing to help shape the future of S&P Global I also want to thank all of you that joined the call today for your excellent questions. We are very excited about our future and can't wait to share more with you throughout the year. So thank you for joining us today.

That concludes this morning's call a PDF version of the presenter slides is available now for downloading from Investor S peak level Dot com replays of the entire call will be available in about two hours. The webcast with audio insights will be maintained on S&P Global's website for one year.

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