S&P Global Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Manav Patnaik - Barclays - Analyst : Thank you. Good morning. Martina, maybe I just want to focus broadly on the Market Intelligence segment. Just first, in terms of the portfolio, the two divestitures you already did, just curious on what we should expect in terms of if there's other areas in there that you wanted to clean up. And just to clarify, I think you talked about ACV and bookings and stuff being really good in the fourth quarter, but then in the prepared remarks that you still mentioned, there's a lot of desktop competition and pricing pressure. So was that ACV comment specific to a particular area within Market Intelligence? Just wanted to clarify that.

Question: Alex Kramm - UBS - Analyst : Good morning. Just to follow up on Market Intelligence, and hopefully I'm not asking the same question again, but on ACV growth, can you be more specific how much that ACV growth actually was and how much of revenue that typically encompasses? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 1:30PM, SPGI.N - Q4 2024 S&P Global Inc Earnings Call And then related to that, there's new management in that segment. You talked a little bit about the changes that you're doing on a company-wide basis, but can you maybe be specific in terms of what has happened so far in terms of any changes in go-to-market strategy? Any other things that have been implemented to maybe squeeze out that extra couple percent of growth that we're all hoping for?

Question: Faiza Alwy - Deutsche Bank Securities Inc. - Analyst : Yes. Hi. Thank you. So I wanted to ask about Ratings outlook. I think, Martina, you mentioned that you're being prudent. So curious around how much visibility do you have at this point? What are you expecting in terms of an M&A contribution? And maybe the best way to answer this is if you could give us any color with respect to quarterly cadence around revenue growth within the Ratings segment.

Question: Ashish Sabadra - RBC Capital Markets - Analyst : Thanks for taking my question. I wanted to focus on the margins. Margins are now -- the margin guidance are more at the higher end of the midterm guidance and was better than I think what we were expecting. You mentioned a disciplined approach to expense management, as well as balanced approach in investments and profitability more than MIN ratings. How should we think about the incremental margins going forward and not only for '25 but over the next several years? Thanks.

Question: Toni Kaplan - Morgan Stanley & Co. LLC - Analyst : Thanks so much. I wanted to go back to Market Intelligence as well. Martina, you said in the prepared remarks you're experiencing a highly competitive environment and elevated price sensitivity in MI. I was just hoping to get just a little bit more color on that, which -- are there specific areas of Market Intelligence seeing more competition than previously? I know it is always a competitive space. And are you seeing sort of startups or large vendors more competing on price or just coming into the market? Just anything on the competitive angle would be helpful and the pricing as well. Thanks.

Question: Jeff Silber - BMO Capital Markets - Analyst : Thank you so much. With all the, I guess, luster coming out of Washington, D.C., I just was wondering, can you talk a little bit about your exposure to US federal government as a client, specifically from a DOGE impact? And then more broadly, with some of the moves that the President has talked about or potentially talked about, what do you think the impacts could be on your business, for instance, increased tariffs in China? Christopher Craig - S&P Global Inc - Interim Chief Financial Officer, Senior Vice President, Chief Accounting Officer, Controller Hello, Jeff. Thanks for your question. First, our exposure -- to your first question, our exposure to the US government contracts is less than 1% of our consolidated revenue. And then just really looking at exchange rates, for 2025, we do expect variability in exchange rates that could impact revenue, but we do have natural hedges in place from the geographic distribution of our people, as well as an active hedging program to mitigate any EPS risk from foreign exchange rates. And just for modeling purposes, our guidance assumes that foreign exchange rates as of mid-January.

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Hi. Thanks. Good morning. You mentioned MI growth should gradually improve over the course of this year. And I know you talked about some of the recent strength you've seen in ACV performance. Can you elaborate on what you're seeing in the business and external environment that should drive accelerating MI growth over the course of the year?

Question: Andrew Steinerman - J.P. Morgan Securities LLC - Analyst : Hi, Martina. After a few years of big swigs and ratings revenues, '22 down, '24 up, do you feel like the Ratings revenue market has entered a period of kind of, let's call it, more regular growth over the next few years, kind of more in line with your medium-term targets for Ratings revenues? And specifically, when you mentioned that the M&A volumes are assumed for '25 to be more gradual of an improvement in billed issuance, could you just be more specific about those assumptions around M&A volumes in your billed issuance guide?

Question: Andrew Nicholas - William Blair & Company, L.L.C. (Research) - Analyst : Hi. Good morning. Thanks for taking my question. Martina, in your prepared remarks, I think I caught you saying that you'd lean more into practical AI applications in the coming quarters and years. And so I'm just curious, as capabilities on generative AI have evolved over the past 12 to 24 months, have your thoughts evolved in terms of the opportunities, threats, investment requirements on this front? And is it fair to say that as it relates to 2025 specifically, generative AI is maybe more an efficiency gain than a top-line driver? Or how would you kind of bifurcate the impact in 2025 specifically? Thank you.

Question: Peter Christiansen - Citi - Analyst : Good morning. Thanks for the question. Great to be part of the call. Martina, I'd like to talk about synergy realization. You seem to be executing really well there in terms of the degree of realization we see happening in '25, and if you could talk to how you see some of the elements of the Vitality Index or some of these AI products contributing to synergy realization and whether that could present an uplift to overall benefits there. Thank you.

Question: David Motemaden - Evercore ISI - Analyst : Hey, good morning. Thanks for squeezing me in here. I just had a follow-up question on Market Intelligence. Martina, you had mentioned some good competitive wins, no losses in the quarter within Market Intelligence, and that was done without the need to pull forward any from the first-quarter pipeline. I'm wondering if you could just talk a little bit about the pipeline and what you're seeing. It sounds like some execution you guys have been doing has been successful, but I'm wondering if you're seeing any signs of improvement in the external environment at all.

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : Hi. Good morning. Thank you for taking my question. Maybe a broader question for me on slide 7, Martina, you talk about elevating engagement with customers. As you get to know more customers and partners, is there anything you have learned from these conversations that you could do something differently to enhance the value of your products in the future? Thanks.

Question: Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc. - Analyst : Hi. Thank you for taking my question, also squeezing me in. Martina, I just want to ask you a little bit more about the Ratings issuance environment and just the visibility that you have to that. I know it's notoriously hard to do. And just given the change in administration in the US, the geopolitical environment, do you feel like you have better visibility than normal going into a year where things are recovering, or do you feel like it's less because of what's going on? And maybe you could just talk about what could put things in the debt issuance environment above your expectations versus below your expectations. And if there's specific areas, like maybe IPOs picking up, or just point us to a few things that we should look for as potential milestones one way or the other.

Question: Jason Haas - Wells Fargo Securities, LLC - Analyst : Hey. Good morning, and thanks for taking my question. And apologies in advance, I'm going to ask a two-parter here. So the first, there was a comment in the prepared remarks that you're now expecting, or you're now seeing the refi walls over the next three years to be down 1%. So I thought previously you had talked about the refi walls being pretty supportive for the next several years. So it's great that there's any change in expectations if you're expecting more -- maybe more subdued issuance over the next few years. And then I also wanted to follow up, I don't think it was asked yet, on the Mobility segment. The guidance for the 7% to 8.5% growth, I think it's pretty similar to your long-term targets, but 2024, my understanding was a little bit subdued because of a lack of recall activity. So I thought we might see the growth step up a bit this year. So maybe you didn't assume any recall activity, again, for this year, but I was curious if you'd comment on that as well. Thanks.

Question: Jeffrey Meuler - Robert W. Baird & Co., Inc. - Analyst : Yeah, thank you. Your Market Intelligence employee headcount growth has been, I guess, higher than I would have expected given the end market environment. I heard you stress that you'll be very disciplined on expense management there this year. But maybe more broadly, can you just address, is that, I guess, investment ahead of revenue? Is there a productivity opportunity that you're now getting after more aggressively? And then does the 35% to 37% still stand as an intermediate term margin target or anything that changes that on AI portfolio actions, market challenges, et cetera? Thank you. Christopher Craig - S&P Global Inc - Interim Chief Financial Officer, Senior Vice President, Chief Accounting Officer, Controller Hey, Jeff. Thanks for your question. First, the MI headcount increased about 6%, which is essentially in line with the revenue growth. Second, what you are seeing in there is through the acquisition of Visible Alpha. There were about 700 employees or so that came over with that acquisition. So that growth is actually in line with our expectations.

Question: Craig Huber - Huber Research Partners - Analyst : Thank you for taking the question. Martina, I'm curious, you said you spoke to a number, a lot of your customers when you first started up as CEO. Can you just give us a flavor of the optimism that you're hearing out there, how that may have changed? Obviously, we have a big change here in the administration in Washington, D.C. Can you just touch upon the policies that Trump is putting in place here and how you feel that that backdrop is favorable and negative parts of it, if they're already in your head? Thank you.

Question: Scott Wurtzel - Wolfe Research, LLC - Analyst : Good morning, guys. Thank you for taking my question. You mentioned some reinvestment on the Index side of the business, given where margins are now. Just wondering if you can share a little bit more color on your prioritization of investments there and where those dollars are going. Thanks.

Question: Russell Quelch - Redburn Atlantic - Analyst : Martina, thank you for squeezing me in. You talked about private credit being a major TAM opportunity in Ratings previously. Can you provide an update on where you are in terms of executing on this opportunity? Wondering if you can be specific, perhaps, around how much revenue private credit is contributing to Ratings right now. Any thoughts around sort of cadence of growth, new products you're working on here, conversations with the private credit houses would be useful. And perhaps just on a separate note, do you have any view on the TAM opportunity for the Ratings business that might come if Fannie and Freddie are privatized?