Douglas L. Peterson
President and Chief Executive Officer at S&P Global
Thank you, Mark. Welcome to today's second quarter earnings call. Our second quarter results demonstrate the combined efforts of our truly incredible team. After our first 100 days as a combined company, it's clear than ever that after the merger, S&P Global is stronger, more resilient, more diversified and better positioned than ever. We're maintaining fiscal and operational discipline in controlling what can be controlled, which is allowing us to post aggregate results in a challenging issuance environment that would have been inconceivable prior to the merger. Let me start with our financial highlights. As a reminder, the adjusted financial metrics we'll be discussing today refer to non-GAAP adjusted metrics in the current period and non-GAAP pro forma adjusted metrics in the year-ago period. Revenue decreased 5% year-over-year with growth in five of our six divisions, providing significant ballast against the 26% decrease in Ratings revenue.
Recurring revenue increased 5% year-over-year, representing 81% of revenue in the quarter. Adjusted expenses only increased 1% as continued investment and inflation pressures on compensation and technology were almost entirely offset by cost synergies in the quarter. We're reinstating our guidance, which reflects the challenging macroeconomic environment, though we will be able to offset some of the EPS impact, as Ewout will discuss in a moment. Importantly, our updated guidance calls for a smaller than 2% decrease in adjusted EPS at the midpoint, illustrating the resilience of the businesses and the positive impact of our capital allocation strategy. I would also like to share a few other highlights from the second quarter. As I mentioned, we are now more than 100 days past the merger close. Our post-merger integration efforts are proceeding on schedule, but very importantly, we're outperforming on both cost and revenue synergies. Momentum continues on product development with several areas of innovation that we'll highlight for you on today's call.
We see benefits from market volatility in parts of our businesses, and we're able to accelerate our share repurchase efforts relative to our original plan with $8.5 billion near completion at an average share price below $360. We expect to launch an additional $2.5 billion ASR in the coming weeks, which we expect to complete in October, with the final $1 billion to be completed by year-end. We've already seen remarkable progress in our integration efforts in a relatively short period. I am pleased with our progress in integrating our commercial and marketing teams. We've recorded more than 2,000 cross-sell referrals across the divisions. We're also ahead of expectations on our cost synergies, realizing approximately $80 million year-to-date and exiting the quarter at an annualized run rate of more than $260 million. Beyond the transactional milestones related to the merger, like the necessary divestitures, we've also reached multiple operational milestones. We've standardized business practices, invested in culture and training and established leadership teams multiple layers deep across the enterprise. We're moving fast on our office integration plan and consolidated 10 of our office locations around the world, lowering our real estate costs. We completed our major New York City consolidation and are on track to complete our London consolidation in the fourth quarter.
When we announced the merger, we highlighted our expectation that the combined company would be more agile, innovative and entrepreneurial. And we've seen that in initiatives such as the Data Lake Hackathon led by Kensho's Head of AI Research and teams of data scientists, machine learning engineers and software developers. These teams spent two days exploring how to best leverage Kensho tools and other technologies to drive value from the Data Lake data sets, and we're thrilled with what these teams have found in just two days. In addition to finding ways that Kensho solutions can add commercial value to unstructured data sets across the Data Lake, we identified new data sets for training Kensho Scribe, NERD, Link and Extract, more than doubling current training data sets in some cases. We also identified data sets to improve S&P Global's country risk assessments and found compelling new ways to classify and improve data for ESG. This hackathon enabled us to better realize the full capabilities of our combined data sets. We also relaunched the cross-divisional S&P Global Research Council with new leadership and membership to reflect the expertise in our combined company following the merger. This council consists of both research and operational leaders with a core mandate to drive customer value and greater insights for markets. One of the first actions of the council was to align on key research themes that have the greatest potential for large-scale disruption and have a meaningful impact on the success of our customers.
We'll be leveraging the full capabilities across the company and engaging meaningfully with customers and other stakeholders across industry and regulatory bodies. There is incredible demand for insights and thought leadership on topics like energy security, climate, technology and digital disruptions, supply chains and capital markets. We have unique data sets and insights in all of these areas, and we see the Research Council as a way to make sure that our insights are most impactful for our customers and drive innovation within S&P Global. That focus on accelerating innovation was on full display in the second quarter. We launched exciting new products from Commodity Insights, including a new basin-level methane intensity calculation product for 19 U.S. natural gas production areas. We're using satellite imagery and data models trained in-house to significantly disrupt what has historically been a very manual process using data extracted from self-reported EPA forms. We also launched Carbon Intensity measures for all six crude grades in the global Brent benchmark. In Mobility, we saw commercial success from our new Auto Credit Insights product to help deliver insights to financial customers serving the automotive credit space.
In Engineering Solutions, we continued to make progress building out our new software platform and have two successful proof-of-concept engagements in market now. We continue to innovate in Market Intelligence as well, making new data sets available via feeds and introducing new products like PVR Source, which is a diligence platform aimed at helping clients get ahead of the compliance challenges of an ever-changing regulatory landscape. Now to recap the financial results for the second quarter. Revenue decreased 5% to $2.97 billion. Our adjusted operating profit decreased 10% to $1.4 billion. Our adjusted pro forma operating profit margin decreased approximately 280 basis points to 47% as both profits and margins were negatively impacted by the decrease in Ratings transaction revenue and the expense growth I mentioned earlier. Importantly, our non-Ratings businesses in aggregate posted strong growth in the quarter, increasing revenue by 7% year-over-year. As you know, we measure and track adjusted segment operating profit margin on a trailing 12-month basis, which was 46.1% as of the second quarter.
Through strong and disciplined execution and prudent capital allocation, we were able to offset much of the earnings impact of the issuance environment, posting fully diluted EPS of $2.81, representing a 7% decrease year-over-year. Looking across the six divisions, I'm pleased to report positive growth across five of our divisions with Ratings executing very well in an extraordinarily difficult issuance environment. Our more diversified portfolio of products provides many opportunities to thrive in uncertain markets, and we saw double-digit revenue growth in multiple product lines as a result. Within our Indices business, we continued to see remarkable strength in our exchange-traded derivatives, which grew more than 60% year-over-year as well as our CDS indices, which increased 40%. Uncertainty in the markets continues to spur demand for our thought leadership and insights and a consolidated platform on which to access information. Whether it's tracking market movements, company performance or supply chain constraints, our customers continue to come to us for help navigating uncertain waters. This helped drive 25% growth in aftermarket research in Market Intelligence.
In the second quarter, we celebrated the second anniversary of the S&P Global Marketplace. Customers continue to come to S&P Global as a trusted source for differentiated data around ESG, fundamentals, machine-readable text and workflow tools like our Workbench. We've seen explosive growth in the Marketplace since launch. And in the last year, a nearly 30% increase in the content and solutions available, 75% growth in deals closed and more than 200% growth in engagement as measured by page views. Now turning to issuance. During the second quarter, global issuance decreased 37% year-over-year, deteriorating further from what we saw last quarter. In the U.S., rated issuance in aggregate decreased 34%. European rated issuance decreased 45%. And in Asia, rated issuance declined 32%. We saw sharp declines in high yield, which was down nearly 80% year-over-year in Asia and was down more than 80% in the U.S. and Europe. Interestingly, this is the first time that I can recall seeing declines in every category and every region since I've been doing earnings calls. We've included additional details on the subcomponents of issuance by region in the slide deck. Each year, S&P Dow Jones Indices conducts a survey of assets, as depicted in this slide.
Asset levels and actively managed funds that benchmark against our indices increased 38% to $12.8 trillion as of the end of 2021. Assets and passive funds invested in products indexed to our indices increased 32% to $9.9 trillion. Numerous indices support the $9.9 trillion, including the S&P 500, the largest with $7 trillion in assets. We've seen strong growth in factor and sector indices as well as many of our ESG and climate-related indices. While the S&P 500 still accounts for the majority of AUM, we continued to see strong demand for that historic index among asset managers. We saw even faster growth among our other indices in 2021, evidenced by the fact that the S&P 500 accounted for 71% of indexed AUM in 2021, down from 72% in 2020. While this is historical AUM as of December 2021, we're very excited about what this slide will look like in the years to come as we integrate IHS Markit indices like iBoxx and iTraxx and drive commercial innovation in fixed income and cross-asset indices.
We delivered extraordinary growth in our ESG initiatives this quarter. ESG revenue growth accelerated on both a reported and organic basis in the second quarter, growing 66% year-over-year to reach nearly $52 million. We continue to introduce new ESG-related products and product enhancements at a rapid pace. In the second quarter, we saw the launch of multiple ESG- and sustainability-related ETFs based on our indices. And we ended the second quarter with AUM and ESG ETFs growing 16% year-over-year to approximately $30 billion. Our Indices and Commodity Insights teams continued their collaboration and launched the S&P Battery Metals Index. Within Ratings, we completed 20 ESG evaluations and 34 sustainable financing opinions driven by strong demand for second-party opinions. Lastly, we hosted the S&P Global Sustainable1 Summit with events in several major cities around the world, bringing together leaders from various stakeholder groups to discuss the future of sustainability. Now turning to our outlook. Twice a year, we update our global refinancing study. But given the issuance environment, we wanted to provide a bit more color this quarter. Specifically, there are two impacts to highlight as investors look at total global debt outstanding. The two impacts are average time to maturity and FX rates. When we look at global corporate bond maturities, we see a similar phenomenon to what we have witnessed historically.
Over the next three years, we see a decrease in near-term maturities as refinancing pushed those maturity dates out. We have witnessed this phenomena in the July update each year, so we aren't surprised by it. While total global debt maturing over the next three years is down significantly from six months ago, it's important to note that debt maturing over the next 10 years is not down significantly, and it starts to increase over the next three to five years. We expect 2024 and 2025 refinancing activity to start next year. This is particularly true for total debt outstanding on an FX-adjusted basis. With the strengthening of the U.S. dollar since January, foreign-denominated debt is lower by 1% when converted to U.S. dollars at July rates. This slide shows total global debt rated by S&P Global of all maturities on a constant currency basis, which increased 2% if measured at January FX rates. While we don't expect a significant rebound in issuance in the back half of this year, this demonstrates that over the long term, the public debt markets remain very healthy and have a strong history of resilience. They also reinforce our view that the issuance headwinds we're seeing in the market now will likely moderate, if not reverse in the future. Now for issuance outlook. S&P Global Ratings research has updated its bond issuance forecast for the year to reflect a decrease in the second quarter and more conservative assumptions around the back half. Global market issuance is now expected to decline approximately 16% year-over-year within a range of down 9% to down 24% in 2022. This forecast implies an approximate 21% decline in the second half compared to the 11% decline seen in the first half.
Non-financials are expected to see a 30% decrease in issuance, partially tempered by a smaller, roughly 10% decrease in financial services issuance. U.S. public finance and structured finance are expected to soften by 12% and 14%, respectively, and international public finance is expected to be roughly flat. As a reminder, the global debt issuance forecast is a product of the S&P Global Ratings research team and reflects market issuance, including unrated issuance. We wanted to take the opportunity to explain the different categories of issuance that we discuss from time to time. The most frequently cited forecast is out of our S&P Global Ratings research team, which I just outlined, but our Ratings revenue is more closely tied to S&P billed issuance, which is a subset of market issuance. Billed issuance includes leverage loans which are not included in the market issuance forecast. It does not, however, include debt from unrated categories such as medium-term notes and most domestic debt from China, nor would our billed issuance include international public finance. While there are other nuances as well, these differences in aggregate bridge the gap between our market issuance forecast and the assumption for billed issuance that underpins our Ratings revenue guidance for the year. As Ewout will outline, our Ratings revenue guidance assumes a 30% to 45% decrease in billed issuance.
Looking beyond issuance, we see a number of secular trends that stand to benefit the company, both this year and beyond. Our experts in Commodity Insights expect oil prices and volatility to remain above historical norms for some time. This volatility often creates more demand among customers for price assessments and benchmarks as well as our data and insights. Our Mobility team also expects light vehicle sales to increase next year and beyond, returning to levels more in line with pre-pandemic production by 2025. As volumes continue to grow, we expect to see tailwinds in our Mobility segment across multiple product lines, including CARFAX and automotiveMastermind. As we evaluate the remainder of this year, however, we wanted to discuss some of the assumptions that underpin our outlook. As we noted in June when we suspended guidance, we have seen a deterioration in several economic indicators over the course of the second quarter. We expect slightly lower GDP growth, higher inflation and a lower debt issuance environment to impact not only our businesses, but our customers as well.
As Ewout will discuss in a moment, we're seeing inflationary pressure on our costs with approximately 70% of our expenses tied to headcount. That pressure is showing up most in our compensation and technology costs. As a reminder, this is not meant to be a comprehensive list of all metrics that inform our outlook, but we wanted to help investors understand the changes in some of the assumptions that we make about the global economy when formulating guidance. While we're not discussing 2023 or beyond on today's call, we're pleased to announce an Investor Day that we expect to hold on December one in New York City. We're looking forward to sharing with you some preliminary views on 2023 as well as a more holistic update on our strategy, positioning and medium-term financial targets at that time. Before handing it over to Ewout, I'd like to reiterate how pleased we are with the progress we're making on integration and the clear proof points we see reinforcing the industrial logic of the merger and the resilience of our businesses. We have a world-class team and appreciate the hard work and dedication of our people in every area across the firm. Our teams continue to execute incredibly well, evidenced by our early outperformance on synergies. And we believe we're positioning the company to accelerate growth, expand margins and deliver innovation in the years to come.
With that, I'll turn it over to Ewout to walk through the results and guidance. Ewout?