NEW YORK, Oct. 25, 2018 /PRNewswire/ -- S&P Global (NYSE: SPGI) today reported third quarter 2018 results with revenue of $1,546 million, an increase of 2% compared to the same period last year.  On an organic basis and excluding the unfavorable impact from foreign exchange, revenue also increased 2%.

Net income increased 20% to $495 million and diluted earnings per share increased 22% to $1.95 as a result of revenue growth, operating leverage, and U.S. tax reform.  Adjusted net income increased 21% to $536 million and adjusted diluted earnings per share increased 23% to $2.11. The adjustments in the third quarter of 2018 were for lease impairments, restructuring, a reduction in the provisional tax expense related to U.S. tax reform, deal-related amortization, and Kensho retention related expenses.

"The benefit of our diverse portfolio of exceptional businesses was evident this quarter as we were able to overcome a decline in global bond issuance and deliver revenue growth, margin improvement, and EPS gains," said Douglas L. Peterson, President and Chief Executive Officer of S&P Global.  "We continue to build the Company with innovative product launches, margin-enhancing technology projects, and investments in unique data, analytics and content augmented through technology."

Margin: The Company's operating profit margin increased 260 basis points to 46% due to a combination of revenue growth and reduced expenses. The adjusted operating profit margin increased 380 basis points to 50%.

Return of Capital: During the third quarter, the Company returned $126 million to shareholders in dividends and completed the $1 billion accelerated share repurchase (ASR) agreement initiated during the first quarter.  Beginning later this month, the Company expects to initiate a new $500 million ASR that will conclude no later than early February of 2019.

Ratings:  Revenue declined 5% to $700 million in the third quarter.  Transaction revenue decreased 12% to $328 million due to debt issuance reductions and lower bank loan ratings activity.  Financial Services was the only sector that grew in the quarter. Non-transaction revenue increased 1% to $372 million due to growth in fees associated with surveillance and inter-segment royalties partially offset by lower Rating Evaluation Service activity.

U.S. revenue decreased 6% and international revenue declined 4% with gains in EMEA offset by declines in Asia-Pacific, Latin America, and Canada.  International represented 43% of third quarter revenue.

Operating profit increased 6% to $395 million and the operating profit margin improved 580 basis points to 56% compared to the third quarter of 2017 as expense reductions related to lower incentives, productivity improvements, and a $15 million restructuring expense in the prior period more than offset the decline in revenue.  Adjusted operating profit increased 1% to $396 million and the adjusted operating profit margin improved 370 basis points to 57%.

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

Revenue increased 10% to $205 million in the third quarter of 2018 due primarily to an 11% increase in asset-linked fees.  Revenue from ETFs is the largest component of asset-linked fees, and average ETF AUM associated with the Company's indices increased 23%.  Revenue associated with data and custom subscriptions also contributed by increasing 12%.

Operating profit increased 13% to $134 million and the operating profit margin improved 190 basis points to 65% due to revenue growth and operating leverage.  Adjusted operating profit increased 13% to $136 million and the adjusted operating profit margin improved 190 basis points to 66%.  Operating profit attributable to the Company increased 15% to $98 million.  Adjusted operating profit attributable to the Company increased 15% to $100 million.

Market Intelligence:  Revenue increased 10% to $464 million in the third quarter of 2018 with more than 10% growth in Risk Services and Data Management Solutions and mid-single digit organic growth in Desktop.  Quarterly operating profit increased 20% to $148 million.  The operating profit margin improved 260 basis points to 32% as revenue gains outpaced expenses.  Adjusted operating profit increased 20% to $168 million.  Adjusted operating profit margin improved 300 basis points to 36%.

Platts:  Revenue increased 5% to $204 million with growth in the core subscription business partially offset by a decline in Global Trading Services due to reduced trading volumes in certain commodity products.  Quarterly operating profit increased 16% to $98 million and the operating profit margin increased 450 basis points to 48% due to revenue growth and reduced expenses.  Adjusted operating profit increased 15% to $102 million and adjusted operating profit margin improved 440 basis points to 50%.

Corporate Unallocated:  Corporate Unallocated includes corporate center revenue and non-allocated corporate expenses. Corporate Unallocated operating loss increased 39% to $71 million due to Kensho expenses including retention-related expenses. Corporate Unallocated adjusted operating loss decreased 25% to $35 million due to a reduction in excess real estate costs, IT spend, and professional fees.

Provision for Income Taxes:  U.S. tax reform has had an immediate and meaningful impact on the Company's effective tax rate.  The Company's effective tax rates in the third quarters of 2018 and 2017 were 20.4% and 27.3%, respectively.  The Company's adjusted effective tax rate decreased to 21.9% in the third quarter of 2018 compared to 27.9% in the same period last year.

Balance Sheet and Cash Flow:  Cash, cash equivalents, and restricted cash at the end of the third quarter were $2.2 billion. In the first nine months of 2018, cash provided by operating activities was $1,401 million, cash used for investing activities was $346 million, and cash used for financing activities was $1,579 million.  Free cash flow was $1,197 million, an increase of $140 million from the same period in 2017 primarily due to an increase in net income from revenue growth, improved cash collections on accounts receivable, and lower tax payments.  Free cash flow, excluding the after tax payment of legal settlements, was $1,404 million.

Outlook:  The Company is tightening its GAAP diluted EPS guidance from a range of $7.75 to $7.90 to a new range of $7.77 to $7.87 and its adjusted diluted EPS guidance from a range of $8.45 to $8.60 to a new range of $8.50 to $8.60.

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

Conference Call/Webcast Details:  The Company's senior management will review the third quarter 2018 earnings results on a conference call scheduled for today, October 25, at 8:30 a.m. EDT.  Additional information presented on the conference call may be made available on the Company's Investor Relations Website at http://investor.spglobal.com.

The Webcast will be available live and in replay at http://investor.spglobal.com/CustomPage/Index?KeyGenPage=1073751596&event=21244.  (Please copy and paste URL into Web browser.)

Telephone access is available. U.S. participants may call (888) 391-6568; international participants may call +1 (415) 228-4733 (long distance charges will apply). The passcode is "S&P Global" and the conference leader is Douglas Peterson. A recorded telephone replay will be available approximately two hours after the meeting concludes and will remain available until November 25, 2018. U.S. participants may call (888) 566-0569; international participants may call +1 (203) 369-3066 (long distance charges will apply). No passcode is required.

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

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

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

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

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

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

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Contact:
Investor Relations:
Chip Merritt
Senior Vice President, Investor Relations
(212) 438-4321 (office)
chip.merritt@spglobal.com

News Media:
Jason Feuchtwanger
Director, Corporate Media Relations
(212) 438-1247 (office)
jason.feuchtwanger@spglobal.com