S&P Global Inc. — FY2022 Form 10-K
Reporting period: Year ended December 31, 2022. This is an annual filing, not a standalone fourth-quarter report; the supplied filing text does not provide a complete Q4 income statement or cash-flow summary. Amounts are in U.S. dollars unless noted.
Business context and reporting period
S&P Global provides credit ratings, benchmarks, data, analytics and workflow solutions. Its six reportable segments are Market Intelligence, Ratings, Commodity Insights, Mobility, Indices and Engineering Solutions.
The February 28, 2022 acquisition of IHS Markit for approximately $43.5 billion materially changed the company’s scale and business mix. FY2022 includes IHS Markit results only from the acquisition date; FY2021 does not include the acquired businesses. The comparison is therefore not fully like-for-like. The company also sold several businesses during 2022 as required for merger approval.
Key financial metrics
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Revenue | $11.181 billion | $8.297 billion | +35% |
| Operating profit | $4.944 billion | $4.221 billion | +17% |
| Operating margin | 44% | 51% | Down 7 percentage points |
| Net income | $3.522 billion | $3.263 billion | +8% |
| Net income attributable to S&P Global | $3.248 billion | $3.024 billion | +7% |
| Diluted EPS | $10.20 | $12.51 | −18% |
| Cash from operating activities | $2.603 billion | $3.598 billion | −28% |
| Free cash flow (non-GAAP) | $2.244 billion | $3.336 billion | −33% |
Revenue growth primarily reflects the IHS Markit acquisition; foreign exchange reduced growth by 2 percentage points. Subscription revenue was $6.201 billion, or 55% of revenue, compared with $3.255 billion, or 39%, in 2021. Ratings revenue fell 26%, largely as debt issuance volumes declined; Market Intelligence, Commodity Insights and Indices revenue increased, with acquired Mobility and Engineering Solutions contributing for part of the year.
Operating profit included a $1.898 billion gain on dispositions. Management reported operating profit growth of 12% excluding the specified impact of disposition gains and higher merger, amortization, severance and other charges. FY2022 also included $619 million of IHS Markit merger costs, $289 million of employee severance charges and a $200 million S&P Foundation grant. Amortization of acquired intangibles rose to $905 million from $96 million. The effective tax rate increased to 25.1% from 21.6%, primarily due to tax on merger-related divestitures.
Cash and cash equivalents were $1.286 billion at year-end, down from $6.497 billion. Total debt was $10.956 billion, including $226 million of short-term debt, versus $4.114 billion in 2021. Current assets were $5.667 billion and current liabilities were $5.999 billion. The company had $188 million of commercial paper outstanding and access to a $2.0 billion revolving credit facility, which matures in 2026.
Cash provided by investing activities was $3.628 billion, mainly reflecting proceeds from business sales. Financing activities used $11.326 billion, including $12.004 billion of cash share repurchases and $1.024 billion of dividends paid. The 2022 dividend was $3.32 per share; the Board approved a quarterly dividend of $0.90 per share in January 2023.
Material changes and unusual items
- The company completed the IHS Markit merger and reorganized from four to six reportable segments. The acquired business contributed $3.799 billion of revenue and $659 million of operating profit from the acquisition date through year-end.
- Dispositions generated a reported $1.898 billion pre-tax gain. Notable sales included CUSIP Global Services, LCD and a related family of leveraged-loan indices; OPIS and Base Chemicals were also sold.
- Debt increased substantially following the merger and related financing. The company issued $5.5 billion of senior notes in March 2022 and assumed IHS Markit debt.
- Diluted weighted-average shares increased to 318.5 million from 241.8 million, helping explain why diluted EPS declined despite higher attributable net income.
- The S&P Dow Jones Indices redeemable noncontrolling interest was valued at $3.267 billion. The company may be required to buy minority interests at fair value under specified redemption rights.
Outlook, management commentary and risks
Management said cash on hand, operating cash flow and credit-facility availability should meet operating and recurring cash needs in the short term and foreseeable future, and anticipated adequate resources for 2023 obligations and strategy. The filing describes 2023 priorities—including organic growth, margin targets and merger synergies—but provides no specific consolidated numerical earnings or revenue guidance in the supplied text.
On January 14, 2023, the company agreed to sell Engineering Solutions to a KKR-affiliated buyer for $975 million in cash, subject to customary adjustments and closing conditions. It expected approximately $750 million of after-tax proceeds, intended for share repurchases, and anticipated closing by the end of Q2 2023.
Key risks include integration costs and execution of anticipated merger synergies; sensitivity of Ratings to debt issuance and capital-market conditions; exposure to market levels and trading activity in Indices; cybersecurity, data privacy and reliance on third-party and cloud providers; regulatory and litigation exposure; competition and customer spending pressure; and inflation, compensation and technology costs. The company suspended commercial operations in Russia and Belarus in March 2022; management said the impact had not been material to results to date.
Contingencies include Australian lawsuits relating to pre-financial-crisis collateralized debt obligations; the company said it could not assure that significant payments would not be required. In November 2022, Ratings settled an SEC investigation concerning a 2017 residential mortgage-backed securities rating, agreeing to a $2.5 million penalty already reserved. The filing does not provide a clear estimate of potential losses for the Australian matters. Auditors issued unqualified opinions on the financial statements and internal controls; management reported no material weaknesses.
Most important facts for investors to verify
- How much of reported revenue and operating-profit growth is sustainable on a comparable, organic basis after the partial-year IHS Markit consolidation and 2022 divestitures?
- Whether merger integration costs, acquired-intangible amortization and planned synergies develop as expected, and whether 2023 guidance is available in subsequent company disclosures.
- Debt repayment capacity and refinancing exposure, given year-end debt of $10.956 billion, cash of $1.286 billion and substantial maturities thereafter.
- Actual closing proceeds and use of proceeds from the Engineering Solutions sale, along with the effect of planned repurchases on shares outstanding and leverage.
- Developments in the Australian litigation, regulatory matters, the Indices minority-interest redemption obligation and other contingencies.