S&P Global Inc Earnings - Q1 2025 Analysis
Positives
- Revenue increased by 9% in Q1, following the sixth consecutive quarter of double-digit growth in energy and resource data and insight.
- Revenue from Data, Analytics, and Insights products accelerated on both a reported and an organic basis in Q1 to 7% and 4% YoY, respectively.
- The company delivered a strong start to 2025 with solid growth in every division and 9% organic constant currency revenue growth for the company.
- The company exited Q1 with run rate revenue synergies of $311 million and is ahead of pace to achieve its target of $350 million by 2026.
- The company saw a significant increase in engagement with its platforms in Q1.
Q&A Highlights - Q1 2025
Analyst asked about the rationale behind the decision to spin off the Market Intelligence business and the implications for RemainCo, including any potential data sets that may be licensed from the spun entity.
Martina L. Cheung explained that the decision to spin off the Market Intelligence business was made after a deep and rigorous assessment, including multiple rounds of dialogue with the board of directors and external advisors. The tax-free spin is the best path forward for long-term shareholder value. While they have not yet determined which datasets they will license, they are currently focused on business as usual while the process is running in the background.
Analyst asked about Market Intelligence's ability to accelerate revenue and the confidence in that acceleration, as well as any updates on customer feedback and end markets.
Martina L. Cheung stated that Market Intelligence had a good start to the year, with stable retention rates, strong sales pipelines, and ACV faster than revenue, which indicates a strong business going forward. They also have confidence in acceleration due to lapping 2024 early year cancels and a stronger second half compared to the first half of the year. Additionally, they have made improvements to the sales team's alignment with customers, resulting in positive feedback and several large deals closed with investment banks and commercial banks.
Analyst asked about the share count implied in the 2025 guidance and if it has changed since February.
Eric W. Aboaf explained that the share count can be calculated by starting with the current share count, factoring in the buybacks at reasonable price expectations, and then calculating the share count for the quarters and the rest of the year.
Analyst asked about M&A ambitions going forward and the company's focus on high-quality organic growth opportunities.
Martina L. Cheung reiterated that the company has no intention of transformative M&A and is focused on organic growth opportunities within each division. However, they would consider tuck-in acquisitions that are attractive for core businesses or strategic growth teams.
Analyst asked about the cost base and how the company thinks about it holistically.
Eric W. Aboaf explained that the company has systemic efforts underway, such as removing silos, simplifying operations, and using Gen-AI for productivity. They also have a plan to continue refining their cost-cutting initiatives for next year and beyond.
Analyst asked about the Commodity Insights end markets and whether the company is expecting any pressure from tariffs or the trade war within that segment.
Martina L. Cheung, Chief Financial Officer, responded that the company has seen strong growth in Commodity Insights and has benefited across businesses due to its unique data. The company has launched new price assessments in areas such as biofuels and ag, and the energy transition and sustainability parts of the business have shown particular strength. The company has also launched innovative products, such as a product that integrates climate risk analytics onto ag data, to provide unique and differentiated insights. The company is closely monitoring the impact of tariffs and trade wars on its customers, but is not directly impacted by them.
Analyst asked about the reason for the decision to spin off the Mobility business.
Martina L. Cheung, Chief Financial Officer, explained that the decision to spin off the Mobility business has been in the works for some time and that the company has done a rigorous and deep analysis of the situation. The company believes that the plan to do a tax-free spin is the best opportunity for long-term shareholder value, as it allows Mobility to pursue its profitable growth trajectory and allows S&P Global to focus on its four core divisions and align with its strategy.
Analyst asked about the company's strategy to bridge the flat build business, specifically the 0% to 4% Ratings revenue growth, and how it's impacting the sale of OSTTRA.
The company has widened the revenue guidance range to 0% to 4% for Ratings, which contemplates the possible variety of ways in which billed issuance could shape up. The path back to the wider range of 0% to 4% is informed by the company's expectations for the non-transaction side, which is expected to grow around the mid-single-digit range. The company has also announced the sale of OSTTRA, which will bring in proceeds of about $1.4 billion on an after-tax net basis and is expected to close sometime this fall. The company expects to use the proceeds for additional buybacks in the latter part of the year.
Analyst asked about the impact of the current market conditions on the company's conversations with customers and how it's expected to trend going forward.
The company sees pressures in reduced imports and potential for lower actual manufacturing in some cases, which could put downward pressure on existing inventories and upward pressure on prices. The company expects budget pressures in dialogue with OEM manufacturing clients, but is reasonably insulated from those impacts due to its subscription-based business model. However, the company is engaged with helping its manufacturer clients navigate the journey and sees potential benefits for the used car market, which could benefit from higher prices for new cars and lower inventory for new cars. The company is paying close attention to the market conditions and sees some pressure on its end customers, but is not directly impacted at this point.
Analyst asked about the impact of a sustained period of lower oil and energy prices on Commodity Insights growth and how it may be different from the last period of lower energy prices in 2020.
Martina L. Cheung, Chief Executive Officer of S&P Global, explained that the company's business doesn't move directly in line with the price of commodities. Instead, they charge a license or subscription fee for the use of their price assessments, regardless of the actual commodity price. While a sustained period of lower prices could have some impact, such as bankruptcies or shutdowns, the company doesn't expect massive upside or downside from the expected price range of 70s.
