S&P Global Inc. — FY2021 Form 10-K
Reporting period: Year ended December 31, 2021; filed February 8, 2022. This is an annual report, not a standalone fourth-quarter earnings report. S&P Global provides ratings, benchmarks, analytics and data through Ratings, Market Intelligence, Platts and Indices.
Financial performance
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $8.297 billion | $7.442 billion | +11% |
| Operating profit | $4.221 billion | $3.617 billion | +17% |
| Operating margin | 51% | 49% | +2 percentage points |
| Net income attributable to S&P Global | $3.024 billion | $2.339 billion | +29% |
| Diluted EPS | $12.51 | $9.66 | +29% |
| Cash provided by operating activities | $3.598 billion | $3.567 billion | +1% |
| Free cash flow, company-defined non-GAAP | $3.336 billion | $3.297 billion | +1% |
Revenue grew across all four segments. Ratings revenue was $4.097 billion (+14%) and operating profit $2.629 billion (+18%); Market Intelligence revenue was $2.247 billion (+7%) and operating profit $703 million (+19%); Platts revenue was $950 million (+8%) and operating profit $517 million (+13%); Indices revenue was $1.149 billion (+16%) and operating profit $798 million (+20%). Ratings growth reflected higher bank-loan and structured-finance activity; Indices benefited from higher ETF and mutual-fund assets under management.
Cash, cash equivalents and restricted cash totaled $6.505 billion at year-end, up from $4.122 billion. Long-term debt was $4.114 billion, versus $4.110 billion; no commercial paper or revolving-credit borrowings were outstanding. Current assets were $8.810 billion and current liabilities $3.815 billion. The $1.5 billion revolving facility matures in 2026. Management said cash, operating cash flow and available credit were expected to cover 2022 operating and recurring cash needs.
Material changes and unusual items
- Operating profit included $249 million of IHS Markit merger costs in 2021, compared with $24 million in 2020. Management said operating profit increased 15% excluding specified year-over-year impacts from merger costs and other impairment, severance and amortization items.
- 2020 included a $279 million loss on extinguishment of debt; there was no such charge in 2021. This materially affects the reported net-income comparison.
- 2021 cash used in financing fell to $1.013 billion from $2.166 billion, mainly because the company made no cash-funded share repurchases in 2021. Dividends paid rose to $743 million from $645 million.
- Indices’ average ETF assets under management increased 44% to $2.419 trillion; ending ETF assets rose 40% to $2.796 trillion.
Merger, outlook and risks
- The IHS Markit merger remained pending at year-end, with completion expected in the first quarter of 2022, subject to closing conditions and regulatory approvals. The announced stock consideration was 0.2838 S&P Global shares per eligible IHS Markit share.
- Related regulatory divestitures included IHS Markit pricing businesses to News Corp. for $1.15 billion, IHS Markit’s Base Chemicals business for $295 million, and S&P Global’s CUSIP Global Services business to FactSet for $1.925 billion. S&P Global also committed to divest LCD and related indices. Transactions remained conditional.
- Management’s 2022 priorities included integration, achieving first-year merger synergy targets, and investment in ESG, energy transition, China, private markets, credit and risk management, and index products. The filing provides no clear consolidated numeric revenue or EPS guidance.
- After closing, S&P Global expected to raise up to $6 billion in new senior notes, in part to refinance debt, and anticipated expanding its credit facility by $500 million. The Board said it would revisit dividend policy after the merger; the declared quarterly dividend was $0.77 per share.
- Key risks include merger approval, divestiture execution, integration costs and realization of synergies; market-dependent ratings and index revenues; COVID-19 and economic volatility; cybersecurity and data protection; competition and customer spending; and regulatory, litigation and reputational exposure.
- Other notable exposures include a $3.429 billion redeemable noncontrolling interest in the S&P Dow Jones Indices joint venture, whose redemption value depends on future performance, and ongoing legal/regulatory matters. Ratings had accrued for potential SEC penalties under active discussions; the filing did not state the amount. A separate VIX-related SEC settlement required a previously reserved $9 million penalty. The company also disclosed Australian lawsuits concerning pre-financial-crisis ratings.
COVID-19 did not have a material adverse effect on reported 2021 or 2020 results, according to management, but its future impact remained uncertain. The financial statements received an unqualified audit opinion, and management and the auditor reported effective internal control over financial reporting.
Important facts for investors to verify
- Whether the merger and each required divestiture closed on the expected terms and timetable, and the final financing, integration costs and synergy targets.
- Whether the 2021 revenue and margin trajectory is sustainable, particularly given Ratings’ issuance sensitivity and Indices’ exposure to asset levels and trading activity.
- The effect of the $249 million merger expense and the prior-year $279 million debt-extinguishment charge when comparing reported earnings.
- Debt issuance and refinancing plans, post-merger liquidity and dividend policy, and any change in share repurchase activity.
- Developments in the SEC inquiry, Australian litigation, other regulatory proceedings, and the valuation or potential redemption of the Indices noncontrolling interest.