S&P Global Q1 2024 Earnings Call Transcript

Participants

Corporate Executives

• Mark Grant, Senior Vice President, Investor Relations
• Douglas L. Peterson, President and Chief Executive Officer
• Christopher Craig, Interim Chief Financial Officer
• Adam Kansler, President, S&P Global Market Intelligence
• Martina L. Cheung, President, S&P Global Ratings

Analysts

• Toni Kaplan, Morgan Stanley
• Manav Patnaik, Barclays PLC
• Heather Balsky, Bank of America Co.
• Faiza Alwy, Deutsche Bank Aktiengesellschaft
• Andrew Steinerman, J.P. Morgan
• Alex Kramm, UBS Group AG
• Ashish Sabadra, RBC Capital Markets
• Jeff Silber, BMO Capital Markets
• Scott Wurtzel, Wolfe Research
• Shlomo Rosenbaum, Stifel Nicolaus
• Craig Huber, Huber Research Partners
• Jeff Meuler, Robert W. Baird and Company
• Russell Quelch, Redburn Partners
• George Tong, The Goldman Sachs Group, Inc.
• Owen Lau, Oppenheimer and Company

Presentation

[Operator]

Good morning, and welcome S&P Global's First Quarter 2024 Earnings Conference Call. I'd like to inform you that this call is being recorded for broadcast. [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, Senior Vice President, Investor Relations at S&P Global]

Good morning, and thank you for joining today's S&P Global first quarter 2024 earnings call. Presenting on today's call are Doug Peterson, President and Chief Executive Officer; and Chris Craig, Interim Chief Financial Officer. For the Q&A portion of today's call, we will also be joined by Adam Kansler, President of S&P Global Market Intelligence; and 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 contains reconciliations of such GAAP and non-GAAP measures. The financial metrics we'll be discussing today refer to non-GAAP adjusted metrics unless explicitly noted otherwise.

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 are 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?

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thank you, Mark. S&P Global is off to a tremendous start for 2024. Total revenue increased 14% excluding the divestiture of Engineering Solutions. Transaction revenue in our ratings division drove much of the upside, but importantly, subscription revenue across the entire Company increased 8% year-over-year as well. Strong growth across the enterprise contributed to quarterly revenue of nearly $3.5 billion, representing the highest quarterly revenue we've ever generated in the history of our Company. Execution was its theme in the first quarter, and our efforts to capture market opportunities combined with discipline on the expense side led to more than 350 basis points of adjusted operating margin expansion year-over-year, and adjusted EPS growth is 27%.

In addition to the stellar financial results in the first quarter, we continued to demonstrate our leadership across global markets. Capital markets were vibrant in the first quarter, and customers turned to S&P Global to help power their investment, funding and trading activities. Equity markets saw strong volumes from both IPOs and M&A, and we saw the highest level of debt issuance since 2021.

As the globe grapples with the future of energy security and energy transition, it's no coincidence that this conversation took place on the stage of S&P Global CERAWeek Conference and other S&P events around the world. As we power global markets in equity, fixed income, commodities, derivatives and in many industrial verticals, our innovation drives customer value. We'll continue to innovate and invest in our leading data technology and workflow tools to drive growth, and we'll highlight some of that innovation today.

As we look to the five strategic pillars we outlined for you at our Investor Day, we're pleased with the progress we've made across the board. While that fifth pillar of execute and deliver is on full display this quarter with the strength of our financial results, we continue to invest in customer relationships, innovation, technology and our people.

Beginning with our customers, we saw nearly $1 trillion of build issuance in the first quarter. This represents the dollar value of debt issued by our customers, for which they actively sought out a rating from S&P Global. Issuers know that an S&P Global rating provides a credible, trusted and objective measure of their credit risk. And they know that we have the capacity even in a very active market to fully meet their needs.

When we look at the broader financial services landscape, we're certainly not back to what we would consider normal levels in the capital markets overall, but we did see improvement. With the macro and geopolitical uncertainties still facing our customers through this year, we continue to hear some concern about the back half, and many market participants are still carefully evaluating expenses for 2024. All of this is consistent with what we shared in February regarding our expectation that ratings would see a stronger first half than second half, while market intelligence would likely start to see improvements in the growth rates in the back half.

Energy customers from all of our divisions and from around the globe converged once again in Houston, Texas for our Annual CERAWeek Conference. We're thrilled that customers, partners, regulators, government officials and global thought leaders view S& P Global CERAWeek

As the premier event of the year. Customer engagement remains vital for S&P Global. And in the first quarter we had well over 100,000 calls and meetings with customers, in addition to the thousands of meaningful interactions our ratings colleagues had with fixed income investors.

Billed issuance increased 45% year-over-year in the first quarter. Tight spreads and stabilizing risk appetite in the market created favorable conditions for issuers. We saw Investment-grade high yield in bank loan volumes all increased as issuers took full advantage to raise debt early in the year. We do expect much of this strength was pull forward from later in 2024, reinforcing our continued view of a stronger first half than second half in issuance volumes.

The strength in billed issuance in the quarter also underscored the importance and advantages of a robust public debt market. We saw tremendous growth over the last two years in private debt markets, but we began to see early signs of some of that debt being refinanced in the public markets in the first quarter. While this private to public refinancing activity only represented a low single-digit percent of billed issuance, we've heard from customers that they're saving up to 150 to 200 basis points in their interest rates by refinancing the public markets. We expect the private markets to play an important role going forward as well. We're working with major private debt partners to deliver risk analytical solutions. Private markets revenue in our ratings division increased 30% year-over-year in the first quarter.

Turning to Vitality. We're pleased to see that our Vitality Index continues to account for 10% of our total revenue despite the fact that several strong and fast-growing products matured out of Vitality Index at the end of 2023. As we've called out in the past, this index is meant to highlight the contributions from new or enhanced products. So as products mature, they will no longer be part of the Vitality Index even if they continue to grow rapidly.

Key contributors from our pricing, valuations and reference data, as well as several thematic and factor-based indices matured out of the Vitality Index at the end of the year. We remain committed to that 10% target as a steady stream of new innovation takes the place of any products that graduate from the index. That was the case this quarter as products that contributed roughly $80 million of revenue to the Vitality Index in the first quarter of 2023 were no longer in the Vitality Index this quarter. We expect the Vitality Index to increase as a percent of total revenue as we progress through the remainder of the year.

Turning to some examples of that innovation. In the first quarter, our Commodity Insights team launched a new food and agriculture commodities dashboard, providing a comprehensive view on commodity data as well as new reports and research on energy. Additionally, we launched new price assessments for renewable energy, as well as new benchmark prices for the Middle East and Asia. Our energy transition and climate products continue to show rapid growth, nearly 30% year-over-year in the first quarter, supported by the continued innovation and price assessments, new and enhanced datasets and crucial insight solutions.

We also introduced an exciting innovation in Market Intelligence. We have spoken at length about the tools and datasets available through our Market Intelligence marketplace. But in the first quarter, we introduced what we are calling blueprints. These blueprints are packages of datasets and tools combined based on specific customer personas and workflows, such as private markets performance analytics. We introduced the first five blueprints in the first quarter with plans to add more in the coming months. These intuitive combinations allow customers to easily discover how our data and tools can work together to facilitate analytics and workflows in new ways.

We're also pleased to see early results from the enterprise AI initiatives we outlined for you last quarter. By elevating artificial intelligence to a position of enterprise-wide strategic focus, we're accelerating the development of new tools, deploying common capabilities across multiple divisions, and increasing the value we create for our customers and our shareholders.

With our in-house expertise, we've developed tools to help market participants benchmark performance of large language models specifically for business and finance use cases. The S&P AI benchmarks by Kensho is a project informed by our world-class data and industry expertise. The questions in our benchmark are designed to assess the ability of large language models to understand and solve realistic finance problems, and each question has been verified by an experienced domain expert.

Lastly, we introduced a remarkable tool we call S&P Spark Assist. This is a co-pilot platform developed jointly between Kensho and our other internal technology teams. We're deploying this platform throughout the organization to improve productivity, facilitate more rapid innovation, and reduce the time necessary to accomplish many routine tasks. Because of our proprietary data, the tools and expertise developed through Kensho and the remarkable technologists we have working throughout S&P Global, we were able to develop S&P Spark Assist chat interface without relying on a third-party vendor. As a result, we're delivering the power of generative AI to our people in an easy to use platform at the cost of less than $1 per user per month. We're incredibly excited about what this tool can do for our people, and we'll provide more details around use cases and productivity as we progress through the year.

Turning to our financial results, Chris will walk through the first quarter results in more detail in a moment, but we have had an incredible start to 2024. With strong growth across every division, we continue to balance the need to invest for future growth with the opportunity to deliver margin expansion and earnings growth this year. Revenue grew double digits as reported. But excluding the impact from the Engineering Solutions divestiture, revenue increased in impressive 14%. Trailing 12- month margins improved 170 basis points to nearly 47%.

Now I'll turn to Chris Craig, our Interim CFO, to review the financial results. Chris, welcome to the call. Over to you.

[Christopher Craig, Interim Chief Financial Officer at S&P Global]

Thank you, Doug. 2024 got off to a strong start as we saw three of five divisions achieve double-digit growth. As Doug mentioned, reported revenue grew 10% in the first quarter and excluding the impact of the Engineering Solutions divestiture, revenue growth was 14%. Adjusted expenses grew by only 3% year-over-year as we continued to focus on disciplined execution and benefiting from the Engineering solutions divestiture. Strong growth and solid execution combined to deliver more than 350 basis points of adjusted margin expansion in the quarter. With our commitment to capital returns over the last 12 months, we've reduced the fully diluted share count by 3% year-over-year. This led to adjusted earnings per share increasing by 27% year-over-year to $4.01.

Now turning to strategic investment areas. Sustainability and energy transition revenue grew 15% to $78 million in the quarter, driven by strong demand for commodity insights, energy transition products, and benchmark offerings, as well as EV transition-related consulting in Mobility. We are continuing to invest in our energy transition offerings, where we see opportunities across our divisions.

Moving to Private Market Solutions, revenue increased by 16% year-over-year to $116 million. Growth was driven by debt and bank loan ratings as well as continued strength in ilevel and other private market solutions within Market Intelligence. We continued to build momentum in our revenue synergies and are ahead of schedule toward our $350 million target.

We exited the first quarter with an annualized run rate of $184 million. During the first quarter alone, we recognized $56 million in revenue synergies. While the majority of this was from cross sell initiatives, we are beginning to gain traction with new products as well. As of the end of Q1, we have launched 25 new products through our revenue synergy initiatives, and we plan to launch more than 15 additional synergy products by the end of 2024.

Turning to our divisions, Market Intelligence revenue increased 7% in the first quarter with all business lines growing in the mid-to-high single-digit range. Desktop grew 5% as we continued to focus on speed, performance improvements and the introduction of new content and capabilities, including the expansion of our collection of premium broker research providers within aftermarket research.

Data and Advisory Solutions grew 7%, driven by expanded coverage and continued investment in high-growth areas of our company information and analytics and market data and valuation product offerings. Enterprise Solutions benefited from an increase in issuance volumes in the debt and equity capital markets and grew over 8% in the quarter. Credit and Risk solutions grew 6%, supported by strong new sales and price realization, particularly for ratings express subscriptions.

We saw solid growth in Market Intelligence in Q1 that was in line with our expectations and consistent with what we signaled on our fourth quarter earnings call. Adjusted expenses increased 6% year-over-year, primarily due to an increase in compensation expense, cloud cost and royalties, partially offset by a reduction in outside services expense. Operating profit increased 9% and the operating margin increased 70 basis points to 32.7%. Trailing 12-month margins expanded 50 basis points to 33.1%.

Now turning to ratings. As Doug mentioned earlier, we saw issuers take advantage of favorable financing conditions which led to strong refinancing and opportunistic issuance in the first quarter. Ratings revenue increased 29% year-over-year exceeding our internal expectations. Transaction revenue grew by 54% in the first quarter as heightened refinancing activity increased bank loan and high-yield issuance. Non-transaction revenue increased 8%, primarily due to an increase in annual fee revenue and strong demand for our rating and valuation service and issuer credit rating products.

Adjusted expenses increased 9%, driven by higher compensation, including incentives, as well as increased T&E expense as our commercial and analytical teams were actively meeting with issuers to help drive the strong growth we saw in the quarter. This resulted in a 43% increase in operating profit and a 640 basis point increase in operating margin to 64.7%. For the trailing 12 months, ratings margins expanded 290 basis points to 58.5%.

And now turning to Commodity Insights, revenue increased 10% following the fourth consecutive quarter of double-digit growth in both price assessments and energy and resources, data and insights. Price assessments and energy and resources, data and insights grew 14% and 12%, respectively. We continue to see commercial momentum across both business lines as our established benchmark data and insights products have driven customer conversations about our emerging offerings.

Advisory and transactional services revenue grew 10%, driven by strong trading volumes across key sectors and global trading services and an excellent turnout at our premier global energy conference, CERAWeek. Upstream data and insights revenue grew by 2% year-over-year, benefiting from demand for our carbon emissions monitoring offerings as well as improvement in retention rates. The business line continues to prioritize growth in its subscription base. Adjusted expenses increased 7% due to higher compensation cost and ongoing investment in growth initiatives. Operating profit for Commodity Insights increased 13%, and operating margin improved by 110 basis points to 47.2%. The trailing 12-month margin increased by 120 basis points to 46.4%.

Now turning to Mobility. Revenue increased 8% year-over-year. The dealer segment marked its fifth consecutive quarter of double-digit growth, and we also saw solid performance from our financials and other business line. Dealer revenue increased 12% year-over-year, driven by new business growth in products such as new car listings and Carfax for life, as well as the addition of Market Scan. Manufacturing declined by 3%, driven by a decrease in one-time transactional revenue, particularly in our recall and marketing businesses, which was partially offset by growth in subscription sales. It is important to understand that revenue from recall products will fluctuate based on the level of activity in any given period.

Financials and other increased 12% as the business line benefited from strong underwriting volumes and price increases. Adjusted expenses increased 10% due to both planned investments and strategic growth initiatives and the full quarter impact of the Market Scan acquisition. While this resulted in a 100 basis points of margin contraction to 38.1% for the quarter and a 70 basis point reduction to 38.6% for the trailing 12 months, operating profit for Mobility increased by 5% year-over-year.

Now turning to S&P Dow Jones Indices. Revenue increased 14%, primarily due to strong growth in asset-linked fees, which benefited from higher AUM and continued strength in exchange traded derivative revenue. Revenue associated with asset-linked fees was up an impressive 16% in the first quarter. This was driven by higher ETF and mutual fund AUM benefiting from both market appreciation and net inflows. We also saw an increase in revenue for OTC products.

Exchange traded derivatives revenue grew 12%, primarily driven by strong volumes in SPX products and price realization. Data and custom subscriptions increased 6% year-over-year, driven by new business growth in end of day contracts. Expenses increased 9% year-over-year primarily due to increased investments in strategic growth initiatives, as well as an increase in compensation expense. Indices operating profit increased 15% and operating margin expanded 110 basis points to 72.9%. On a trailing 12-month basis, margins expanded by 30 basis points to 69.3%.

In the aggregate, our businesses demonstrated exceptional revenue and margin growth, while at the same time permitting us to invest in our strategic growth initiatives during the quarter, giving us a strong start to 2024.

And with that, I will now turn it back to Doug to discuss our outlook for the remainder of the year. Doug?

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thank you, Chris. We've updated our outlook reflecting our economist view of the most important economic and market factors that will impact 2024, as well as the outperformance against our internal estimates during the first quarter. Our financial guidance assumes global GDP growth of 3.2%, U.S. inflation of 2.8%, and an average price for Brent crude of $85 per barrel. All three of these figures are slightly higher than we originally assumed in our outlook in February. Additionally, our original macroeconomic view included the base case assumption for three rate cuts by the U.S. Fed, beginning no earlier than June.

As we've seen over the last three months, market expectations around interest rates have shifted, and while our economists have not formally updated the number of rate cuts in their base case scenario, our financial guidance now assumes fewer than three rate cuts in 2024. We're increasing our billed issuance forecast for 2024 by approximately 3 percentage points to a range of 6% to 10%. As we noted last quarter, our initial outlook for 2024 assumed a stronger first half of the year for issuance. Even with that assumption, the first quarter outperformed our expectations, though we believe much of that outperformance was pulled forward as issuers look to take advantage of very favorable market conditions. All of these factors impact our new full year guidance, calling for higher growth and stronger margins.

This slide illustrates our current guidance for GAAP results. For our adjusted guidance, we are now expecting revenue growth in the range of 6% to 8%, reflecting the outperformance and ratings in indices in the first quarter, partially offset by slightly softer expectations for issuance in the second half of the year. Exclude the impact of 2023 divestitures, we expect revenue growth to be slightly more than one percentage point higher than reported revenue growth. We also now expect to deliver stronger margins in 2024, with margin expansion in the range of 100 to 150 basis points compared to our prior guidance of approximately 100 basis points.

We're taking a balanced approach to reinvesting for future growth while still expanding margins and remain on track to achieve the Investor Day targets from 2022. We now expect to deliver adjusted EPS for the full year in the range of $13.85 to $14.10, which represents a 11% growth at the midpoint. This represents a $0.10 increase from our prior range, driven by the increased revenue and profitability outlook for the year. We're also increasing our outlook for adjusted free cash flow, excluding certain items by $100 million despite modestly higher expected capex. Higher expected net income and disciplined management of working capital, both contribute to the higher expected cash flow for the year.

Moving to our division outlook. We're reiterating our revenue growth expectations for Market Intelligence, Commodity Insights and Mobility, and we're increasing the growth outlook for ratings and indices based on the strength in the first quarter. We're also raising the margin outlook for indices to reflect the very strong performance year-to-date. While margins were also very strong in our ratings division in the first quarter, we're reiterating the range for full year margins, which implies approximately 150 basis points of margin expansion at the midpoint. Since much of the revenue outperformance in Q1 likely came from pull forward, our full year guidance assumes year-over-year declines in ratings transaction revenue in the fourth quarter as we begin to have much stronger comps from last year. As a result, we expect margins to be softer in the back half of the year than in the first half in ratings.

With that, I'd like to invite Adam Kansler, President of S&P Global Market Intelligence; and Martina Cheung, President of S&P Global Ratings and Executive Lead for sustainable one to join us. I'll turn the call back over to Mark for your questions. Thank you.

Questions and Answers

[Mark Grant, Senior Vice President, Investor Relations at S&P Global]

Thank you, Doug. [Operator Instructions] Operator, we will now take our first question.

[Operator]

Thank you. Our first question comes from Toni Kaplan with Morgan Stanley. You may proceed.

[Toni Kaplan, Analyst at Morgan Stanley]

Thank you so much. I wanted to focus on Market Intelligence. We've heard some negative commentary from others in the market, which made it sound like this past quarter was particularly challenging. So I wanted to see if that was your experience as well. And also if the large investment bank consolidation impact was in this quarter or if it hasn't hit yet? And then I know you're talking about Market Intelligence being better in the back half, and so wanted to just flesh out what gives you the confidence that that happens? Thanks.

[Adam Kansler, President, S&P Global Market Intelligence at S&P Global]

Hi, Toni, it's Adam. Thank you for the question. So, yes, we're seeing many of the things that others are seeing in our markets, particularly for our financial services customers. We're seeing that particularly in the smallest of those customers and that's probably comparable to what some others are seeing, but for us that's really where the concentrations are. The specific consolidation that you're talking about in terms of the overall scale of our division, it's not something that impacts us in a material way, that some of that has already been absorbed, some will continue to come, but all of that has been anticipated by us in the guidance and the view that we've given you forward.

We do view what's going on in the market today is very much a cyclical headwind, but the secular tailwinds that we see in our businesses, particularly in our core areas of focus, like private markets, the expansion of our desktop, you see some of the improvements in the investment we've made over the last two years, that gives us a lot of confidence in achieving our long-term goals and the continued growth of the business, confidence in what we've explained we expect to do for the current year and in delivering against the longer range Investor Day targets that we set out in 2022.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thank you, Toni.

[Operator]

Thank you. Our next question comes from Manav Patnaik with Barclays. Your line is open.

[Manav Patnaik, Analyst at Barclays]

Thank you. I just wanted to ask on Market Intelligence as well. Just in terms of the strategy going forward, obviously tough budget environment, competitors are probably sharpening their pencils too. Can you help us with the strategy there? And also kind of tied to that is the -- when does Visible Alpha close? How should we think about the contribution and also the divestiture that you were planning, like what else is in there?

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Okay. Thanks, Manav, and thank you for the question. Let me just start with the last piece Visible Alpha, we do expect that transaction to close here in the second quarter. We're quite excited about it. I think it's an important part of one of our strategic areas, which is the continued expansion and improvement in quality of the Cap IQ Pro set of solutions that we offer to the market. As we highlighted, I think really as far back as Investor Day, we have a few core areas of focus that we do think will continue to grow, and that really shapes our strategic focus. Those are in areas like private markets, sustainability, the supply chain, the expansion of our desktop, the ability to deliver our data and solutions to customers in as easy a way as possible. These are things that our largest customers are looking for as they go through consolidations of vendors. That's where the scale and breadth of services that we're able to offer through Market Intelligence and, of course, across the broader S&P Global enterprise really has impact. We'll be laser focused on that strategy.

And as you've seen, when we announced at our last call, we'll look at those businesses where we see underperformance or lack of strategic fit, and we'll make decisions on those and where we see opportunities to acquire unique assets that are high growth or have particular proprietary value, companies like Visible Alpha, the one you mentioned. We're quite excited to get that integrated. We're going to take advantage of our position and our opportunity to bring them into the business. So thanks again, Manav.

[Mark Grant, Senior Vice President, Investor Relations at S&P Global]

Thanks, Manav.

[Operator]

Thank you. Our next question comes from Heather Balsky with Bank of America. Your line is open.

[Heather Balsky, Analyst at Bank of America]

Hi. Thank you for taking my question. I'd love to hear more about how -- you talked about a pull forward in issuance into the first quarter. Can you just talk a little bit about on a regular basis, how much visibility do you have as you look three quarters out? And how do you think about taking some level of conservatism, given we're in an election year, there's an uncertain rate environment. Just how are you positioning yourself with regards to the guidance given what you saw in the first quarter? Thanks.

[Martina L. Cheung, President, S&P Global Ratings at S&P Global]

Hi, Heather, it's Martina. Thanks very much for the question. So we look at a variety of factors to give us a good sense for issuance pipeline. In the immediate time frame, typically we would look at 180-day pipelines, for example, as well as more near term, but also throughout as much as you can next nine to 12 months. Those factors, macro factors, GDP, inflation rates, geopolitical factors, which of course, is something we're paying very close attention to this year. But we also, look, as we've mentioned in the past, obviously at the maturity walls, the pace of refinancing as well as growth and investor interest in different asset classes, such as private markets, sustainable finance, structured finance, infrastructure, etc. So those factors give us a very good sense at any point in time for where we are with respect to the year.

If you look at what we saw in Q1 of this year in terms of billed issuance, we saw a very high volume of refinancing of maturity walls in high yield and bank loans, about two thirds overall of the issuance activity that we saw was related to refinancing. That was a combination of heavy refinancing of '24, but we also saw some '25 and '26 refinancing in the quarter as well. So that's really the key area of our performance from an issuance standpoint in Q1, and we would expect that refinancing activity to continue in bank loan and high yield through the second quarter and then taper off a little bit, largely because we've been hearing consistently even since before our last call that high yields and bank loan issuers, as well as to some extent investment grade issuers, are wanting to really get ahead of any volatility they see in the back half of the year and take advantage of the relative market stability and favorable spreads that we're seeing at this time.

Now in investment grade, a very strong quarter, but we think a lot of that investment grade issuance is pulled forward from the second half of the year. There were a handful of several large M&A deals there as well, but not enough volume for us to really change our view for investment grade issuance for the rest of the year. So I hope that helps, and happy to take any more questions on issuance.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thank you, Heather.

[Operator]

Thank you. Our next question comes from Faiza Alwy with Deutsche bank. Your line is open.

[Faiza Alwy, Analyst at Deutsche Bank Aktiengesellschaft]

Yes. Hi. Good morning. Thank you so much. Wanted to follow up on the ratings and maybe more on the margin front. So while you're increasing the revenue outlook, you haven't increased margins, so I'm curious if it's mix of business or any investment or how we should think about the margin performance through the rest of the year? Thank you.

[Martina L. Cheung, President, S&P Global Ratings at S&P Global]

Hi. Thanks for the question. Well, as you know, we've said numerous times in the past we're solving for long term sustainable margin in the ratings business, and we are very disciplined stewards of capital in the business. So our guidance for the year which we reiterated at 57.5 to 58.5 [Phonetic] as Doug said in his remarks, at the midpoint represents about 150 basis points of margin expansion year-over-year. We can do a lot with the base that we have. So the reason why I say that is because we have this incredible blockbuster quarter from an issuance standpoint without having to add tremendous amounts of additional staff to meet that need, and that is really I think reinforcement of the capacity preservation strategy that we initiated a couple of years ago. So we're very pleased with how we're operating from an expense management, capacity management standpoint and very comfortable with the margin range that we have right now as it relates to the full year.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thank you, Faiza.

[Operator]

Thank you. Our next question comes from Andrew Steinerman with J.P. Morgan. Your line is open.

[Andrew Steinerman, Analyst at J.P. Morgan]

Hi, Martina, it's Andrew. I just wanted to ask you a little bit about issuance pull forward. You just -- you're talking so much about it, entry year, kind of second half pull forward to first half. Just broadly, aren't we still in the midst of a pretty large issuance recovery after the big declines of '22?

[Martina L. Cheung, President, S&P Global Ratings at S&P Global]

Hi, Andrew. Thanks very much for the question. I would say a couple of things. So the context on a lot of my commentary on intra year, I would say I'd lean more on the investment grade side where we think we saw 2H pull forward. I think we did see pull forward of '25 and '26 maturities. For example, on the refinancing front for high yield and bank loans. So a little bit of a mix there between the spec rate asset class and the investment grade asset class.

I think to your broader point. Yes, we are and continue to be in the midst of recovery, notwithstanding the very steep growth rates, for example, in high yield and investment grade, we're still not seeing the issue in volumes back to anything close to what we might have characterized as market highs, for example, in the past, or even market averages that we might have seen in the past. So there's still room to go here throughout the next several years. This is something that we've commented on since '22, believing that it was going to take some years to come back to it. But of course, the maturity walls themselves are quite a large factor here. And on the spec grade alpha classes, high yield and BLR, jointly we've got about 1.1 [Phonetic] trillion in maturities still outstanding for us in '25 and '26. So we're monitoring very closely and tightly the indicators that would give us a sense for the pace and timing of those maturities.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thank you, Andrew.

[Operator]

Thank you. Our next question comes from Alex Kramm with UBS. Your line is open.

[Alex Kramm, Analyst at UBS Group]

Yes. Hey, good morning, everyone. Just another one on the margin actually, but more on the outlook for the full Company and nice to see the margin outlook being raised. But just wondering, is this just a business mix driven upside or is there anything else going on in stock? I'm asking particularly since you mentioned execution in your prepared remarks. So just wondering, is this just execution on the sales and revenue side? Or following last year's, I guess disappointments a couple of times, if you take a little bit of a harder look at the cost base and where you can be more efficient. Thanks.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thank you, Alex. Well, as you know, we run the Company with an approach to budgeting and management, where we always start the year with a positive jaw, that's just our philosophy. We look and see how we're going to do in our core business as we go out to see our customers. We understand what we can build as a forward-looking pipeline, forward-looking expectations for the market. We then ourselves say, what would be the expense level that we want to have to support that growth? On top of that, we then come back and say, how much can we afford to invest?

As you saw in this quarter, our expenses grew 3%. That's a result of very, very strong execution coming out of 2023. We're ensuring that we can have very clear tracking of all of our expenses. It's just part of our philosophy of how we run the Company. Going forward for the rest of the year, you see that we're going to continue that approach, but we think that this is part of the way we manage the Company. We're always looking at being very tight on understanding our revenue sources and then moving forward to have a tight approach to our expenses. Thanks, Alex.

[Operator]

Thank you. Our next question comes from Ashish Sabadra with RBC Capital Markets. Your line is open.

[Ashish Sabadra, Analyst at RBC Capital Markets]

Thanks for taking my question. I just wanted to drill down further on Market Intelligence, both the recurring variable and the subscription growth. We've seen some really strong 13% growth in recurring variable the last two quarters. How should we think about those tailwinds there? And is that mostly contributed from IP and WS so going forward. And then on the subscription side, the 6% growth that moderated a bit, but how should we think about those momentum as we go through the year? Thanks.

[Adam Kansler, President, S&P Global Market Intelligence at S&P Global]

Thanks Ashish for the question. So we watch our recurring revenue growth very carefully in this quarter, more than 7% growth in our recurring revenue. Some of that comes from volumes in our businesses that are affected by capital markets volumes. Over the years, we've sought to actually temper that a bit, using more fixed contracts. Our customers in most of those markets prefer it, and for us it adds a little bit more stability and regular growth to the business. Quarter-to-quarter, we'll see some variation in those numbers, but we do expect our recurring revenue, our subscription revenue to continue to grow in line with our full year guidance for the division. Thanks again.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thanks, Ashish.

[Operator]

Thank you. Our next question comes from Jeff Silber with BMO Capital Markets. Your line is open.

[Jeff Silber, Analyst at BMO Capital Markets]

Thank you so much. Just wanted to continue with the ratings questions. I think you said that billed issuance was up 45% year-over-year in the quarter, but ratings revenue was only up 29%. I know in prior quarters they've been much tighter in terms of the correlation. Can you explain what happened this quarter? Why the difference?

[Martina L. Cheung, President, S&P Global Ratings at S&P Global]

Yeah. Hi, Jeff, it's Martina. Thanks for the question. So, to your point, billed issuance was up 54, sorry, 45%. But transaction revenue which is the revenue portion or revenue category, that is most closely correlated to billed issuances up 54%. So it grew faster than billed issuance in the quarter. Overall revenue growth of 29% represented both the transaction revenue growth of 54% and the non-transaction revenue growth of 8%. So really just the evening out of performance across those two to get to the 29% growth.

Perhaps, I will just comment briefly on the non-transaction growth drivers. We were quite pleased with the performance in the quarter. We had continued strengths in res with a lot of companies looking for scenarios around their capital stocks. We saw some new ICR issuance in the quarter and had strong performance on the surveillance book and fee programs. Thanks for the question.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thanks, Jeff.

[Operator]

Thank you. Our next question comes from Scott Wurtzel with Wolfe Research. Your line is open.

[Scott Wurtzel, Analyst at Wolfe Research]

Hey, good morning, guys. Wanted to ask just on the revenue synergies here. I mean, it looks like it was a pretty strong quarter, recognizing $56 million and then the run rate being pretty impressive here. And in the context of you guys talking about recognizing 45% of synergies in 2024, wondering how we should think about that number now that we seem to be tracking ahead there? And also just kind of wondering what's really resonating on the synergy side here. Thank you.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thanks, Scott. Let me start, then I'll hand it over to Adam. When it comes to our tracking of the revenue synergies, it's something that we look at every quarter. We look at them. We actually looked at it with our executive committee earlier this week. We have a combination of cross sell as well as new products. We've been quite successful with cross sell. It's been the most important aspect of what we've been doing. As you know, we have a target of $350 million into the '25, '26, and we're already running ahead of our expectations for that, especially because of cross sell.

When it comes to new products, we've been successful with many right out of the box with indices with, for example, fixed income indices. We have a fixed income VIX that we've come up with. We have a set of fixed income products that we build around ESG. We've also had multi-asset class products. But I think in Market Intelligence, we've also seen a lot of really, really strong synergies. So let me ask Adam to supplement the answer. Thank you.

[Adam Kansler, President, S&P Global Market Intelligence at S&P Global]

Thanks, Doug. And thanks, Scott. Hi, it's Adam. We're very excited about our synergy progress. We've got 15 more new products that will come to market in 2024. The combination of businesses, the strength that we have in the marketplace, the receptivity of our customers to what a combined offering can do, that's all been a tremendous uplift and I think has given us the path to achieve the revenue synergy targets that we outlined.

I think what's most exciting for me and most exciting for our customers are the new products, where we're able to integrate new data sets into workflow solutions or give customers in private markets the ability to immediately look at public company comparables, the ability to put our fixed income capabilities into our desktop. These are all things that roll out over the course of 2024. As Doug mentioned, the cross sell has given us such early wind in ourselves to achieve the synergy targets we set out, as we start to roll out new products into the back half of this year or even more excited about what that will look like as we exit the year.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thanks, Scott.

[Operator]

Thank you. Our next question comes from Shlomo Rosenbaum with Stifel. Your line is open.

[Shlomo Rosenbaum, Analyst at Stifel Nicolaus]

Hi. Thank you very much for taking the question. Hey, Doug, maybe you could talk a little bit about -- touch on both Market Intelligence and Mobility. Just talk about the sales cycles which you're hearing from your on the ground guys. Sequentially from last quarter and then also year-over-year, and has there been any change in the competitive landscape with some of the new products you've put in there? if you can kind of touch on those ideas, I'd appreciate it.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Okay, great. Well, first of all, we've been out seeing our customers as we mentioned in the prepared remarks. We've been announcing customers everywhere we can. We've been around the globe. I myself have been traveling extensively this year, seeing customers. As you know, in the financial services market there's been a little bit of a slowdown in sales cycles. We've talked about that in the past, which we've seen. It just takes a little bit longer to close some transactions. You've heard about that from us before.

In the Mobility business, there's a massive transformation taking place in the entire industry. If you think about it, you see that there's this electric vehicle transformation that's taking place. And what we've seen is that, whether you're an OEM, you're a supplier, you're a dealer, you need data and analytics to understand what is happening in the market, and we provide that no matter what the sales cycle is, no matter what's happening in the industry.

In addition to that, we're providing new products for dealers, for OEMs, for them to be able to make much more informed decisions. So, as you've seen, the amount of EVs have started to stack up in ports and on dealers lots. It's something that we can provide them much more information. The manufacturers can use that information to make decisions about how they're going to look at incentives going forward. So it's a very close dialogue, very good relationship with all sets of clients in every industry around the globe, and we're able to pivot very quickly to provide them the kind of data and analytics they need to make decisions. Thanks, Shlomo.

[Operator]

Thank you. Our next question comes from Craig Huber with Huber Research Partners. Your line is open.

[Craig Huber, Analyst at Huber Research Partners]

Great. Thank you. On your AI investments, obviously you do know to enhance the products you have, but also improve the ongoing efficiency of the Company, which is already at a high level, and so I'm curious as you guys think out over the next couple of years, your internal investment spending behind AI, you've been able to do it so far within your technology budget, not a huge increase where it puts downward pressure on your margins near term. I'm just curious, do you think you can continue to head going forward here?

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thank you, Craig. As you know, when we've been looking at our artificial intelligence roadmap, it's something that we've been very explicit about going back many, many years. This isn't something new for us. It started with our acquisition of Kensho six years ago. We since then have come up with a very structured approach to AI, which starts with a vision and a strategy. We've recently set in place a leadership team that's led by a chief digital solutions officer and a chief artificial intelligence officer for the entire organization. We have governance over that, and the governance includes looking very cautiously and carefully at budget.

We've already been absorbing AI expenses in our budget for the last six years. We're very conscious that rolling out an AI program is not inexpensive. It requires us to have that kind of discipline. And we're also tracking our successes, and we've had a lot of successes when it comes to new products, which we're getting ready to roll out. We're looking at how we can have more productivity. We hope that over time the productivity can be returned partially through margin, but also be using as a way to reinvest in innovation and growth. So overall, I think the message you should take is that we have a very structured approach to AI. It's an open ecosystem. We can take advantage of all of the AI developments happening anywhere with any large language models coming out from anybody. And we're also protecting our data in a way that we can ensure that our intellectual property is not being used by others to build great AI products that we're going to do that ourselves. So overall, we're very pleased with our progress so far. And we will really appreciate. We continue to -- we'll continue to bring you a lot of our progress over time. So thanks, Craig. Thanks for that.

[Operator]

Thank you. Our next question comes from Jeff Meuler with Baird. Your line is open.

[Jeff Meuler, Analyst at Robert W. Baird and Company]

Yeah. Thank you. So, questions on Market Intelligence. I think you kind of heard the angst coming into the quarter from investors, given the peer results. Adam, I was just hoping you can maybe highlight some of the MI businesses that are maybe more unique to S&P and how they're doing? Or maybe highlight any businesses that have already gone through some pretty significant cyclical headwinds, like the IPR [Phonetic] book building business or whatever, they just help with investor confidence regarding what's assumed over the remainder of the year through the cyclical challenges. Thanks.

[Adam Kansler, President, S&P Global Market Intelligence at S&P Global]

Yeah. Thanks, Jeff. Appreciate the question. We do have a number of unique solutions and a pretty diversified set of solutions to the marketplace. So you do see dislocations in the market or volatility affecting parts of our business differently than other parts of the business. You mentioned some of our capital markets platforms. Obviously, in the last quarter those saw quite a lot of resilience. We saw very strong markets, particularly in credit and debt markets. Equity markets, I think are still a little bit slower to recover and we'll see what happens through the balance of the year.

Some of our unique offerings really are around alternative assets in the loan marketplace and private markets. These are places where our workflow solutions, our valuations capability, reference data. We saw that across the firm in other divisions as well. Those are areas that continue to build and areas where we see large secular growth. Those are somewhat unique offerings for us, given our market position in some of those businesses.

Across our data and reference data, pricing, valuations, those are in pretty steady demand, so they're less subject to the activity in the marketplace quarter-to-quarter, and that's where we see some of the stability and the general growth. What's really unique about the S&P Global offering is the scale and breadth that we can deliver to a customer. It's really being able to service them across a portfolio, from discovery and research, foreign investment to processing the investment, monitoring it, valuing it, keeping it in a workflow tool. That set of solutions and the efficiencies we can drive through it, I think that's the biggest part of our value proposition, and particularly our larger customers as they look to consolidate relationships that gives us a bit of an advantage there. Thanks again for the question, Jeff.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thanks, Jeff.

[Operator]

Thank you. Our next question comes from Russell Quelch with Redburn Atlantic. Your line is open.

[Russell Quelch, Analyst at Redburn Partners]

Yeah. Hi, Doug. Another really good quarter in Commodity Insights. So I was wondering if you could share what drove the 14% growth in price assessments in the first quarter? Is that maybe new product related? Any early feedback on Platts Connect? Is that helping drive more cross selling? And perhaps is there upside risk for guidance here? I mean, obviously you've upgraded gardens on some of the sort of transactional base revenue segments. But this is maybe a higher quality revenue line. So is there upside risk here?

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Yeah. Thank you for that, Russell. When you look at Commodity Insights, we've continued to advance incredibly well. We've had -- this is one of the home runs when it comes to the integration of the ENR business and the Platts business. We've very quickly been able to bring together products like price assessments. Cross sell has been strong. If you think about being able to sell ENR products to Platts clients as well as selling Platts clients, ENR clients. So that was right out of the gate, a very strong approach.

But we've also seen a demand, high demand for energy transition. And we're at the sweet spot of energy transition. This relates to products like oil and gas, what are all of the different substitutes. It's also carbon intensity of oil and gas products. It goes into renewables, looking at what's happening with the renewable space. We also have a whole set of new clean energy and alternative energy products and services. As you know, we've been launching an additional set of products related to metals and mining as well as Ag.

So across the board, we've seen very strong results. We also had a strong quarter for CCERAWeek, which is CERAWeek is a conference that took place in Houston a few weeks ago. It's the place to be for anybody that wants to understand what's happening in the energy space. So across the board it's just been very, very strong this year.

We do expect that later in the year we're going to have tougher comps. So we looked at that very carefully, was we're setting our guidance last year our third and fourth quarter, especially our fourth quarter was quite strong. So we do get towards the end of the year, and we do have a tougher comp. But overall the Commodity Insights business is doing incredibly well. It's a broad-based business and then something like what you mentioned, Platts Connect has been one of the examples of a really early win and something that we're very pleased with, and you'll see more coming from Platts Connect over the next few quarters. Thanks, Russell. Thanks for the question.

[Operator]

Thank you. Our next question comes from George Tong with Goldman Sachs. Your line is open.

[George Tong, Analyst at The Goldman Sachs Group]

Hi. Thanks. Good morning. In your updated indices guidance, can you talk about how much of the growth comes from flows versus market performance, and what you're seeing from a pricing and mix perspective from customers?

[Mark Grant, Senior Vice President, Investor Relations at S&P Global]

Hey, George, this is Mark. The updated guidance on indices is really driven just by strength across that business, but just giving you the underlying assumptions for the full year guide, we're expecting the S&P 500 to be essentially flat from 331 through the end of the year. The guidance assumes modest growth in the ETD volumes, and then we are expecting that subscription line to accelerate a little bit as we progress through the full year.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thanks, George.

[Operator]

Thank you. Our last question comes from Owen Lau with the Oppenheimer. Your line is open.

[Owen Lau, Analyst at Oppenheimer and Company]

Good morning, and thank you for taking my question. So just a quick follow up on Commodity Insights, and there are lots of conversation about commodities trading growing on U.S. customers and the prices grow and things like that. How much does this volatility contribute to your business this year? And if this kind of volatility subside, how do you see the sustainability of your growth? Thanks.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thanks, Owen. Yeah, we think that volatility is something that helps drive more people to try to understand what's happening in the markets. But as we've seen over time, the volatility doesn't seem to go away. There's always something else that comes up to create interest in the area. We do think that there are some very important long-term secular trends related to the business, which our energy transition I mentioned earlier. Energy transition is a topic that is on everybody's minds, especially when you go outside of the United states. I've been traveling this year, and I can't have a conversation anywhere I go without having discussion about energy transition, and what are not just the impacts that we see the benefit of the Commodity Insights business, but also those that benefit businesses like the ratings business and Market Intelligence because those are moving also over into how do you finance energy transition questions well, which crosses into our other divisions.

Finally, with Commodity Insights, you can recall that this business is principally a subscription-based business, and so we can see over time the subscription flow, where we're seeing the growth coming from the new customers coming into the portfolio. There's something that I say all the time, that every single company is an energy company. It doesn't matter what you do, you're an energy company. And so we also see an expanding set of new clients that aren't necessarily traditional energy companies that are needing the solutions we have so they can manage their own energy footprint. So, Owen, thank you very much for that.

And I think you are the last call. So let me give a couple of closing remarks. I really want to thank everyone today for being on this call and for your excellent questions as usual. This was a great quarter and we're really pleased with the results, and we think this validates our strategy, but it also showcases our execution.

As I mentioned, I've been very busy traveling around the world this year, speaking with customers across all of our businesses and from every industry. And in those meetings, we're hearing that the themes that we have, that we have the strength in this franchise are those that the customers need going forward, and that includes things like energy transition and private markets and supply chain and credit and risk, but it also includes artificial intelligence, and I'm pleased that we've been able to roll out in our road map many, many new capabilities and products and services to protect our IP, but also to take a leadership position in AI.

I want to thank Martina and Adam for providing their perspectives today on this call. And I also want to thank our people across the Company, as usual, for a fantastic quarter. And again, thank all of you for joining the call today and hope you have a great day. Thank you very much.

[Operator]

[Operator Closing Remarks]