S&P Global Inc. (NYSE:SPGI) Q3 2023 Earnings Call Transcript

S&P Global Inc. (NYSE:SPGI) Q3 2023 Earnings Call Transcript November 2, 2023

S&P Global Inc. beats earnings expectations. Reported EPS is $3.21, expectations were $3.05.

Operator: Good morning, and welcome to S&P Global’s Third Quarter 2023 Earnings Conference Call. I’d like to inform you that this call is being recorded for broadcast. All participants are in a listen-only mode. We will open the conference to questions and answers after the presentation and instruction will follow at that time. To access the webcast and slides, go to investor.spglobal.com. [Operator Instructions] I would now like to introduce Mr. Mark Grant, Senior Vice President of Investor Relations for S&P Global. Sir, you may begin.

Mark Grant: Good morning, and thank you for joining today’s S&P Global third quarter 2023 earnings call. Presenting on today’s call are Doug Peterson, President and Chief Executive Officer; and Ewout Steenbergen, Executive Vice President and Chief Financial Officer. For the Q&A portion of today’s call, we will also be joined by Martina Cheung, President of S&P Global Ratings. We issued a press release with our results earlier today. In addition, we have posted a supplemental slide deck with additional information on our results and guidance. If you need a copy of the release and financial schedules or the supplemental deck, they can be downloaded at investor.spglobal.com. The matters discussed in today’s conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections, estimates and descriptions of future events.

Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. Additional information concerning these risks and uncertainties can be found in our Forms 10-K and 10-Q filed with the U.S. Securities and Exchange Commission. In today’s earnings release and during the conference call, we’re providing non-GAAP adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the company’s operating performance between periods and to view the company’s business from the same perspective as management. The earnings release contains financial measures calculated in accordance with GAAP that corresponds to the non-GAAP measures we’re providing.

And the earnings release and the supplemental deck contain reconciliations of such GAAP and non-GAAP measures. I would also like to call your attention to certain European regulations. Any investor who has or expects to obtain ownership of 5% or more of S&P Global should contact Investor Relations to better understand the potential impact of this legislation on the investor and the company. We’re aware that we have some media representatives with us on the call. However, this call is intended for investors, and we would ask that questions from the media be directed to our Media Relations team, whose contact information can be found in the release. At this time, I would like to turn the call over to Doug Peterson. Doug?

Doug Peterson: Thank you, Mark. As we look at this quarter’s highlights, I want to remind you that the financial metrics we’ll be discussing today refer to non-GAAP adjusted metrics unless explicitly noted otherwise. We’re pleased to report 11% revenue growth in the third quarter, excluding the impact of Engineering Solutions. We saw acceleration in revenue growth in every division this quarter. As we discussed last quarter, we took decisive action to protect margins in the second and third quarters last year. And while lapping that impact contributed to our expense growth this quarter, we’re pleased to see margins expand approximately 100 basis points despite that headwind. Adjusted EPS increased 10% year-over-year, and we’re raising our adjusted EPS guidance by approximately $0.10 at the midpoint to reflect the better-than-expected results through the third quarter.

Strong financial results like these come as a result of continued innovation and execution, and we’re excited about the rapid pace of product launches coming from S&P Global this quarter. We’ll be discussing a few of them on the call, but I encourage you to look through the releases available in our online press center to get a better sense of the sheer volume of new products and features we’ve introduced this quarter. We’ve seen acceleration in each of the strategic growth areas we’ve been reporting since our Investor Day. We also saw our Vitality Index reached 12% of total revenue in the quarter as new products continue to generate value for both customers and shareholders. We also made progress on our AI initiatives, which I’ll touch on briefly today, but we plan to provide a more holistic update on our progress next quarter.

We continue to align our goals and operations against the 5 strategic pillars we introduced at Investor Day. I’m thrilled with what our team was able to deliver for our customers this quarter. As we lean into our customer conversations and continue to provide innovative solutions to the problems that most need solving, our customers are increasingly viewing S&P Global as a trusted strategic partner. In the third quarter, sales cycles were consistent with the longer cycle we’ve seen in the last few quarters, though we’re encouraged that these conversations with customers are often leading to larger deals. In times of market volatility, uncertainty or change, the global markets has learned to count on S&P Global for differentiated data, powerful workflow tools, important insights and unrivaled benchmarks.

We’re seeing confirmation of our strategic emphasis on private markets as well as sustainability and energy transition as revenue growth accelerated meaningfully in both those areas this quarter. As we continue to engage with customers, we hear clear indications of long-term optimism despite the near-term uncertainty and volatility in the markets. Our conversations with financial institutions, corporates and others generally revolve around interest rates in the short term with everyone interested in identifying peak interest rates. Large maturity walls along with other factors contribute to our optimism about the multiyear growth trajectory for S&P Global. Related to Ratings, global billed issuance saw a very strong third quarter with 21% growth year-over-year.

With credit spreads tightening through the third quarter, issuers were more comfortable coming to the market, though refinancing activity continues to drive the majority of issuance. We also saw better-than-expected activity in bank loans particularly around amend and extend transactions, which we expect to continue in the fourth quarter, though perhaps not to the same extent. We also saw our relative position CLOs improve again in the third quarter, marking a continuation of the trend we’ve seen all year. Vitality revenue is another area of accelerating growth for S&P Global this quarter. Our Vitality revenue metric consists of revenue derived from new or enhanced products. These innovative products contributed 12% of revenue in the third quarter and grew a combined 22% year-over-year, a significant acceleration from the 14% growth last quarter.

You’ll notice that the largest contributors to our Vitality revenue are unchanged from last quarter. While products can and will move out of the Vitality Index over time as they mature, it’s encouraging to see growth from these products remain steady and resilient. We’re also encouraged by the early signs of growth and traction among many of the smaller products that will likely scale to be the top contributors in the coming quarters and years, including the trends we see in private markets for more transparency in valuation and benchmark products. I’d like to turn to some of those new product launches now. We’re seeing strong cross-divisional collaboration driving new ideas with much of that innovation now turning to generally available products.

In the third quarter, we introduced multiple data sets from our Mobility division to our Market Intelligence Marketplace, making crucial vehicle forecast and registration data available via both Xpressfeed and Snowflake. We also launched a new single unified platform that marks the product integration of both Platts and IHS Connect. The new platform is called Platts Connect and allows customers access to a comprehensive range of products, benchmarks, data and insights from one easy-to-use interface on desktop and mobile. These 2 products, Mobility and Marketplace and Platts Connect, also highlight 2 of our early opportunities to integrate new AI capabilities. In the coming months and quarters, we’ll be introducing intelligent search and other AI-powered functionality that we’re currently developing and testing within Marketplace and Platts Connect.

We’ll have more details on that as we get closer to launching those new features. We also introduced Entity Insights in the third quarter, which brings data from Sustainable1 to our network and regulatory solutions to power KYC third-party risk management and vendor management within a single workflow tool, leveraging data for 27 million global entities. I also want to provide an update on our development of ChatIQ. As we’ve shared with you, ChatIQ is a generative AI product developed jointly between Kensho and our Market Intelligence team. During the third quarter, we had a new beta release that we continue to test internally, but this is a step function improvement over our last internal release. Given our strategic focus, I wanted to provide a bit more detail on the acceleration of our sustainability and energy transition products as we expected in the third quarter.

Customer needs have evolved away from ESG scores and moved towards climate and energy transition. We believe we are uniquely visioned to win in this market. When we talk to customers, we hear clear trends. Customers don’t just need a set of opaque scores. They’re building internal sustainability frameworks, and they need high-quality raw data. With Trucost, we have what we believe to be the most robust and comprehensive climate data set in the world. We also offer detailed sustainability data on 17,000 companies, including approximately 3,500 that provide robust granular data through our corporate sustainability assessment survey. Companies are seeking to operationalize the risk management around climate, and we have the largest set of real asset level data available with emissions data and climate hazards mapped to 1.6 million physical assets.

We also hear consistently from customers that they need help with energy transition, including developing and executing a viable energy transition strategy. We have solutions that cater to customers in different industries, including our automotive value chain carbon accounting solution and the power evaluator solution for energy transition strategies within the crucial power utility sector. We see this customer need across all industries. So this quarter, we also launched the Sustainability Starter Pack. This is a comprehensive solution to help companies start from scratch or from wherever they may be as they develop sustainability strategies. We help them assess materiality, measure greenhouse gas emissions and develop the reports necessary to comply with disclosure requirements and stakeholder demands.

Customers need help generating things like a TCFD report and measuring things like greenhouse gas emissions. They need help benchmarking their own progress against peers, and they need help managing the transition to renewable energy sources. We’re confident that S&P Global is unparalleled in its ability to provide both the breadth and the depth of offerings necessary to adequately cover all these areas. We’re continually increasing the data that we make available through Xpressfeed, and we’re pleased to be adding data sets around net zero commitments and biodiversity before year-end. Clearly, we’re meeting customers at their point of need, and that’s showing up in our results. Trucost revenue growth accelerated to 55% year-over-year. Energy transition continues to grow nearly 40%.

And our total sustainability and energy transition revenue growth accelerated to 36% year-over-year in the third quarter. While we’re very encouraged by these results, we will not rest on our laurels. We remain committed to accelerating product leadership in this vital area and look forward to many new exciting products to come in future quarters and years. Of course, our commitment to innovation and customer value also powers our ability to generate value for our shareholders. This is an incredible quarter of accelerating growth. We also continue to demonstrate discipline around expenses as margin expansion in the third quarter helped keep trailing 12-month margins relatively flat year-over-year. Trailing 12-month margins improved sequentially from the second quarter, and we expect margins for the full year to expand more than 100 basis points based on the midpoint of our guidance as Ewout will explain in more detail.

The economic factors facing the company are largely unchanged as we look to the final few months of 2023. Secular trends continue to serve as strong tailwinds for the company, while cyclical trends can impact different parts of the business in different ways. Despite increased geopolitical uncertainty and evolving regulatory landscape around things like sustainability and continued uncertainty around the timing of the capital markets recovery, S&P Global remains committed to delivering value in all market conditions. Turning to the conditions of the debt markets. We’re tightening the range of our expectations for billed issuance as we now expect growth of 5% to 7% compared to our prior expectations of 4% to 8%. As we’ve discussed previously, we introduced the billed issuance reporting metric this year as well as a full year forecast to provide context for the issuance assumptions embedded in our Ratings revenue guidance.

Billed issuance remains the issuance metric most tightly correlated with our transaction revenue in Ratings. Our latest forecast from the Ratings Research Group now calls for positive market issuance growth for the full year, up from last quarter’s expectation for a full year decline. As a reminder, market issuance can differ materially from billed issuance with divergence this year driven by declines in unrated debt and sovereign in international public finance, which don’t impact billed issuance. And now I’d like to turn the call over to Ewout Steenbergen to go through more details around our financial results and outlook. Ewout?

Ewout Steenbergen: Thank you, Doug. As a reminder, the financial metrics that we will be discussing today refer to non-GAAP adjusted metrics unless explicitly noted otherwise. This was an exciting quarter for S&P Global as we saw growth accelerate across all 5 of our divisions, and revenue and margins both outperformed our internal expectations. Adjusted earnings per share increased 10% year-over-year. While reported revenue grew 8%, this actually understates the accomplishments of the team during the third quarter because excluding Engineering Solutions and the small tuck-ins done earlier this year, revenue growth was an impressive 11%. We also expanded adjusted margins by 100 basis points and reduced our fully diluted share count by 4% year-over-year.

As you saw in the press release earlier this morning, we plan to continue share count reduction with the launch of an incremental $1.3 billion accelerated share repurchase program in the coming weeks. Revenue in the quarter was driven by growth across all divisions, led by outperformance in our Ratings division, which benefited from elevated issuance activity in the high-yield and bank loan markets. While the environment remains unpredictable for the debt markets, we saw stronger issuance volume throughout the third quarter than we expected, particularly in September. Adjusted expenses were up 6% year-over-year, while the adjusted operating income increased 10%. Acceleration is further demonstrated by our strategic growth initiatives. Sustainability and energy transition revenue grew 36% to $78 million in the quarter, driven by strong demand in climate and physical risk products and our energy transition products.

As Doug highlighted earlier, we’re fulfilling our customer needs for raw data and reporting capabilities around sustainability and energy transition, and this is evident by the third quarter growth. This acceleration reconfirms our continued optimism around the long-term potential of this important part of our growth. Moving to Private Market Solutions. We saw revenue increase by 18% year-over-year to $109 million, driven by strong growth in Market Intelligence private market software solutions, including iLEVEL and a return to strong growth in Ratings private market revenue as bond issuance and private credit estimate activity both improved in the quarter. We’re also encouraged by the demand we’re seeing in our private market valuation and benchmark offerings.

Vitality revenue, which is the revenue generated by innovation through new or enhanced products from across the organization, was $369 million in the third quarter, representing a 22% increase compared to prior year. Importantly, Vitality revenue represented 12% of our total revenue in the quarter, making it the third consecutive quarter of improvement in our Vitality Index score. Now turning to synergies. In the third quarter of 2023, we recognized $149 million of expense savings due to cost synergies, and our annualized run rate exiting the quarter was $588 million. We expect to complete our cost synergy program by year-end with a run rate of approximately $600 million. We continue to make progress on our revenue synergies as well with $25 million in synergies achieved in the third quarter and an annualized run rate of $112 million.

Turning to expense growth. We are pleased to see that our efforts to optimize our portfolio and deliver cost synergies offset most of the year-over-year expense growth in the third quarter. Our total expenses increased less than 6% year-over-year, though we continue to see some inflationary pressure on compensation expense. Due to the decisive expense actions we took last year, the reset of incentive compensation this year continues to contribute meaningfully to expense growth, though we do not expect any further headwinds from this going forward. We are confident that we continue to strike the appropriate balance between disciplined expense management and investing in our business as evidenced by the volume of new products coming to the market this year and our expectation to deliver more than 100 basis points of adjusted margin expansion for the full year at the midpoint of our guidance range.

Now let’s turn to the division results. Market Intelligence revenue increased 8%, driven by strong growth in Data & Advisory Solutions and Enterprise Solutions. Desktop grew 5% in the third quarter, driven by strong subscription growth as ACV growth continued to outpace revenue growth, partially offset by modest softness in onetime sales. Renewal rates continue to remain strong in the mid- to high 90s range. Data & Advisory Solutions and Enterprise Solutions each grew by 9% in the quarter, benefiting from double-digit growth in subscription-based offerings. Credit & Risk Solutions continues to see strong new sales for RatingsXpress and RatingsDirect products as well as continued double-digit growth in credit analytics. Adjusted expenses increased 9% year-over-year, primarily due to compensation expense.

Operating profit increased 6%, and the operating margin decreased 60 basis points to 33.3%. On a trailing 12-month basis, margins improved 140 basis points. As we progress through the fourth quarter, we expect continued acceleration in revenue growth as we move into the most favorable comparison quarter for the year. Furthermore, we see the business continuing to benefit from the launch of new products and monetization of cross-sell referrals as part of the division’s overall revenue synergy program. As a result, we are tightening our full year guidance for revenue growth by 100 basis points to a range of 6.5% to 7.5% while reaffirming our full year margin outlook. Now turning to Ratings. In the third quarter, we saw continued improvements in issuance activity, particularly due to refinancing in the bank loan and high-yield markets.

Revenue increased 20% year-over-year, well above our internal expectations. However, growth was helped by a $19 million cumulative catch-up for customers’ self-reported commercial paper issuance in nontransaction revenue, which primarily benefited structured finance. Excluding this impact, Ratings would have grown approximately 17% in the third quarter. Transaction revenue grew 34% in the third quarter, driven primarily by growth in bank loan and high-yield issuance. Nontransaction revenue increased 13%, primarily due to an increase in annual fees, which includes the catch-up revenue I mentioned previously as well as growth in Ratings Evaluation Service activity and at CRISIL. Excluding the impact of the catch-up revenue, nontransaction revenue would have grown approximately 8%.

Adjusted expenses increased 18%, primarily due to the write-down of incentive compensation expense in the year-ago period. This resulted in a 22% increase in operating profit and a 70 basis points increase in operating margin to 56.6%. On a trailing 12-month basis, margins are still impacted by the relatively low margins in the fourth quarter of last year. As Doug mentioned, we’re tightening our billed issuance growth assumption for 2023 to 5% to 7%. This reflects the outperformance we saw in the third quarter, but also reflects our slightly lower expectation for investment-grade issuance in the fourth quarter relative to our prior forecast. While we expect continued growth in nontransaction, we still see headwinds in issuer credit ratings revenue as fewer new issuers come to the market.

As a result, we are increasing Ratings revenue guidance range by 100 basis points, now expecting growth of 6% to 8% for the full year and reiterating our margin guidance. And now turning to Commodity Insights. Revenue growth increased 11% following a second consecutive quarter of double-digit growth in both Price Assessments and Energy & Resources Data & Insights. Upstream data and insights increased approximately 2% year-over-year, benefiting from better-than-expected demand for both content and software as well as slightly improved retention rates. The business line continues to prioritize growth in its subscription base. Price Assessments and Energy & Resources Data & Insights grew 12% and 10%, respectively. Growth was driven by continued strength in our benchmark data and insights products.

We also continue to see strong commercial momentum in our subscription offerings for both business lines. Advisory & Transactional Services revenue grew 33%, driven by strong trading volumes across all sectors in Global Trading Services and strong performance in advisory revenue in the quarter. The business line continues to benefit from market-driven volumes, but we’re also seeing positive results in key areas of strategic investment, including energy transition. Adjusted expenses increased 6%. Operating profit for Commodity Insights increased 17%, and the operating margin improved 260 basis points to 48.4%. Trailing 12-month margins improved 240 basis points. We continue to see Commodity Insights benefit from strong secular trends around energy transition and sustainability and demand for benchmarks, data and insights.

Following this quarter’s strong performance, we are raising the low end and tightening Commodity Insights overall revenue guidance range, now expecting growth of 8.5% to 9.5% for the full year. There’s no change to our margin guidance. In our Mobility division, revenue increased 10% year-over-year. The team continues to execute well with the third consecutive quarter of double-digit growth in the dealer segment and continued growth in new business in the manufacturing and financials and other segments. Dealer revenue increased 30% year-over-year, driven by the continued benefit of price realization within the last year and new store growth, particularly in CARFAX for Life and used car subscription products as well as the addition of Market Scan.

Manufacturing grew 4% year-over-year, driven by elevated recall activity and continued strength in marketing solutions. Financials and other increased 9% as the business line continues to see healthy underwriting volumes and a favorable pricing environment similar to last quarter. Adjusted expenses increased 10%, driven primarily by increased incentive compensation expense, but also due to the inorganic contribution to expenses from the Market Scan acquisition. This resulted in a 10% increase in adjusted operating profit and 20 basis points of operating margin contraction year-over-year. Trailing 12-month margins have contracted 100 basis points. We expect continued strong growth in used car subscription products as we progress through the fourth quarter.

We also expect Mobility to continue to benefit from dealerships and OEMs increasing their incentive spend on new vehicles as affordability is hampered by rising rates. As a result, we are narrowing our guidance for revenue growth to a range of 9% to 10% for the full year. There is no change to our margin guidance. Now turning to S&P Dow Jones Indices. Revenue increased 6%, primarily due to gains in exchange-traded derivative volumes and asset-linked fees. We’re very pleased to see asset-linked fees return to positive revenue growth in the third quarter. Revenues were up 4% year-over-year, driven by higher ETF AUM, which benefits from both market depreciation and net inflows but was partially offset by mix shift into lower-priced products, continuing the pattern from last quarter.

Exchange-traded derivative volume increased 18%, primarily driven by an approximately 20% increase in S&P 500 Index options volume. Data & Custom Subscriptions increased 2% year-over-year, driven by continued strength in end-of-day contract growth. During the quarter, expenses increased 9% year-over-year, with the majority of the increase driven by the write-down of incentive compensation in the year-ago period. Operating profit in Indices increased 5%, and the operating margin decreased 90 basis points to 69.4%. Trailing 12-month margins have contracted 80 basis points. There’s no change to our revenue outlook for Indices. However, as a result of the continued cost discipline and outperformance year-to-date, we’re increasing our margin guidance for the division to a range of 68% to 69% for the full year.

Now let’s move to the latest views from our economists, who are forecasting global GDP growth of 3.1% in 2023. While outlooks vary somewhat by region, our economists are forecasting a period of subdued global growth fueled by higher-for-longer rates with a soft landing base case assumption as we move through the first half of next year. We continue to expect inflation to remain above the target rates of central banks and energy commodity prices such as crude oil to remain above the historical averages as well. For the full year, we assume Brent crude will average approximately $84 per barrel, slightly higher than our last estimate as we expect Brent grew to average $88 in the fourth quarter. Now let’s turn to our guidance. This slide represents our GAAP guidance for headline metrics.

Adjusted guidance for the company reflects the results through the third quarter as well as our most recent views on the macroeconomic environment and market conditions. We’re narrowing our expectations for total revenue growth to a range of 4.5% to 5.5% for the full year to reflect the changes discussed earlier on our divisional revenue outlook. Furthermore, we are maintaining our operating profit margin guidance of 45.5% to 46.5% with the expectation that we will achieve full year margins close to the midpoint of the range. We have provided the granular guidance on corporate and allocated expense, deal-related amortization, interest expense and tax rate in the supplemental deck posted to our IR site. This includes a 50 basis point reduction in our adjusted effective tax rate to a range of 20.5% to 21.5%.

As a result of this quarter’s strong performance and our expectations for the remainder of the year, we’re increasing and tightening our full year adjusted diluted EPS guidance to a range of $12.50 to $12.60. The final slides in this deck illustrate our revenue and margin guidance by division, reflecting the drivers that I mentioned previously. In conclusion, our business has demonstrated exceptional growth across divisions this quarter, while we continue to manage expenses prudently. Furthermore, I’m pleased with the progress being made across our cost synergy initiatives and growth across revenue synergies as we see more and more new products coming to the market that would have been impossible without the merger. The teams have done a truly excellent job executing on our key strategic initiatives while still driving profitable growth across all divisions this quarter, and we look forward to delivering a strong finish to 2023.

And with that, I would like to invite Martina Cheung, President of S&P Global Ratings and Executive Lead for Sustainable1, to join us. And we’ll turn the call back over to Mark for your questions.

Mark Grant: Thank you, Ewout. [Operator Instructions] Operator, we will now take our first question.

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Q&A Session

Operator: Our first question comes from Ashish Sabadra with RBC Capital Markets. Your line is open.

Ashish Sabadra: Really strong billed issuance momentum in September of 35%. There was a comment around IGB potentially weak in the fourth quarter. But just wondering if you can comment on the strength that you saw in high-yield and bank loans in the third quarter for the rest of the year? And also, if you can talk about any initial color on the refi wall and share pipeline for ’24.

Martina Cheung: Thanks very much for the question. It’s Martina here. Yes, very pleased with Q3 overall. As you have seen, our billed issuance was up 21% and a very, very strong September. In high yields, we were very pleased to see it was about 150% growth in issuance overall year-over-year in the quarter, and high yields year-to-date is up about 50% rated issuance in the market. We see strong refi activity there in Q3 and looking to see more of that as we go forward, certainly into next year. It’s — Q3 marked, I think, a notable point in terms of issuers willing to come back and tap the market for high yields. And then on bank loans, as we said before, we didn’t have heroic assumptions on bank loan volumes for this year. Overall, while we saw an increase in Q3 year-over-year, we’re still down year-over-year, year-to-date in bank loan issuance.

There, we saw a lot of refinancing. Interestingly, a very strong trend this year that we saw in Q3 and are monitoring closely going forward is a lot of amend to extend activity — or amend and extend activity rather in the bank loan space. And that’s been a boost in that area from an issuance standpoint. For ’24, obviously, we’re not commenting yet for ’24. We’ll certainly give more on that in February. But the factors that we’re watching closely, refinancing walls are very healthy. Our last midyear report on refinancing showed the 5-year total’s up about 11%. And between now and ’26, we see about $8 trillion in refinancing. So that’s something that we watch closely, and that’s a very robust growth in that area. But we also are looking at usual factors, the macroeconomic factors, certainly heightened geopolitical uncertainty.

M&A has not been great this year. As we’ve seen, it’s been down by quite a bit this year. So we’re looking to see that come back in next year as well. And just the other point that I would make on — as we’re looking ahead in the next several quarters is that CP balances or commercial paper balances are quite high. So that could lead to some issuance if we see corporates transitioning from CP to fixed income. And we’ve commented in the past that we continue to see corporate cash balances at pre-pandemic levels, which we think will continue to boost the need for issuance as well.

Operator: Our next question comes from Manav Patnaik with Barclays.

Manav Patnaik: I just wanted to focus on the MI margins, if I could. I mean, I understand trailing 12 months, it’s up. But just the low 30s, how should we think about that going forward? And I would think that the synergies, the combination that there should be a lot of upside there, but perhaps just a lower relative growth and maybe it’s an investment area. But just any thoughts on cost control and margin improvement there going forward would be helpful.

Ewout Steenbergen: A couple of comments on this. First, if we look back at last year, we took very decisive actions in terms of pulling back expenses when the market turns more south in the second and the third quarter in several areas, among which also incentive compensation. So we have some difficult comps for this year. Having said that, number two, point number two, we acknowledge that MI can do better with margins. And we’re seeing several opportunities to expand margins as we have also guidance for the full year and implicitly for the fourth quarter. So that brings me to my third point is that we expect margins actually to improve significantly beginning with the next quarter due to the easier compare but also due to several management actions that we are putting in place, including tight management of headcount and other expenses, while we still continue to invest in growth and other strategic initiatives.

Operator: Our next question comes from Toni Kaplan with Morgan Stanley. Your line is open.

Toni Kaplan: This one’s for Martina. Your billed issuance was markedly ahead of our industry data during the quarter. And so I was hoping you could discuss if you’ve seen any notable share gains in particular Ratings categories this year? And just any color around share gains.

Martina Cheung: Thanks, Toni, for the question. I give a couple of comments on this. Certainly, we would look at the differences between market issuance and billed issuance. And I think Doug and Ewout cover that routinely in terms of how to assess our performance specifically. For us, the billed issuance data in Q3 was strong for a number of reasons. Firstly, it’s a bit of a mix question. So high yield, more bank loans, less frequent issuer compared year-over-year, which is just a function of when the high-yield and leverage loan issuers tap the market. I would also say we’re extremely pleased with the progress and momentum that we have in a number of asset classes. When we talked to you last year at Investor Day, we said we were making investments in structured finance.

We were making investments in infrastructure. We had acquired Shades of Green and making investment in SPO. And we’ve seen really robust performance in all of those areas, which we had tagged and very, very pleased to see those results.

Operator: Our next question comes from Faiza Alwy with Deutsche Bank. Your line is open.

Faiza Alwy: Ewout, I wanted to follow up on your comments around expenses. Can you help us think through expenses in the fourth quarter? And more importantly, as we look ahead to 2024, some of the — now that you’re at the end of the road in terms of synergies, how should we think about expenses in 2024 just generally across the business?

Ewout Steenbergen: Yes, of course. First of all, I would like to comment that if we think about expenses, we have a very volatile comp in 2022. So it has moved around a lot in the quarters last year due to the good reason that we put back very hard, and we’re very on top of expense management when we had the difficult markets last year. This year, actually, our trends are far more stable. So year-over-year, there is a lot of noise, but I think this year actually from a pattern perspective looks much better. I think if you look at corrected expenses actually and if you take out Engineering Solutions, we are having expense growth that is below revenue growth. So we’re seeing nice healthy margin expense — margin expansion if you correct for those same items, particularly for Engineering Solutions.

We’re very happy to see how expenses and margins have developed in Commodity Insights. You have seen some very nice margin expansion there as well as if we think about incentive compensation swing year-over-year, if you would correct for that, actually we’re looking at quite modest expense growth in Ratings, Mobility and Indices as well. For the full year, we are expecting for this full year 2023 expense growth in the low single-digit level. So implicitly, if you then would look at the fourth quarter, expenses should be down in a low single-digit level in order to get to that overall guidance range.

Operator: Our next question comes from Alex Kramm with UBS. Your line is open.

Alex Kramm: Just coming back to the Market Intelligence discussion from earlier. It’s a question that I’ve asked a couple of times since you’ve done this deal. But part of our thesis on the IHS Markit acquisition was that, that’s a business on the market financial side that had been cobbled together by a lot of acquisitions over many, many, many years. And I think we’re kind of hoping that you get in there with your S&P Global viewpoint and say like what businesses make sense or do not and maybe make this a leaner and meaner machine. So just wondering to what degree that’s an effort that you guys are focused on right now? And maybe anything that you’ve seen where you echo that, that there may be some things to do and the business could still look a little bit different in the future or if you’re very happy with the business portfolio today?