Executive Summary

Adjusted results were strong despite legal charges: revenue +7% YoY to $1.29B, adjusted operating margin +570 bps YoY to 34.5%, and adjusted diluted EPS +23% YoY to $0.95 .
Company recorded $1.552B in Q4 charges to resolve DOJ/States/CalPERS and other matters; GAAP results showed a material loss, but underlying businesses grew across all units .
2015 guidance introduced: mid-single-digit revenue growth, >125 bps adjusted margin expansion, adjusted EPS $4.35–$4.45, FCF >$1.1B (ex-settlement payments), capex ~$100M; dividend raised 10% to $1.32 and management plans to resume buybacks with potential leverage up to 2.5–3.0x EBITDA .
Catalysts: legal overhang substantially resolved, visible margin-expansion program ($140M cost actions identified), dividend growth and potential buyback resumption; FX is a modest revenue headwind (~1–1.5 pts) and Indices faces a known license drag near term .

What Went Well and What Went Wrong

What Went Well

Broad-based operating momentum: “Every business unit delivered top line growth and margin improvement”; Q4 adjusted EPS +23% and international growth outpaced domestic .
Ratings momentum and margin: Q4 Ratings revenue +8% YoY to $618M; adjusted margin +380 bps YoY to 42.2% on expense discipline despite elevated legal costs .
Capital return and guidance durability: 2015 outlook targets >125 bps adjusted margin expansion and >$1.1B FCF; dividend +10% and intent to resume buybacks supported by stronger balance sheet flexibility .

What Went Wrong

Legal/regulatory charges overshadow GAAP: $1.552B Q4 charge tied to DOJ/States/CalPERS and other matters led to a meaningful loss of net income for the quarter .
Indices sequential softness: Q4 Indices revenue was up YoY, but management noted sequential pressure tied to a lost license; drag likely into early 2015 .
Commodities & Commercial margin dip: Q4 adjusted margin down 120 bps YoY to 32.3% due to timing of J.D. Power investments and Eclipse acquisition mix; oil volatility remains a watch item even as subscription retention stays high .

Financial Results

Consolidated performance vs prior periods

Metric	Q4 2013	Q3 2014	Q4 2014
Revenue ($MM)	$1,206	$1,263	$1,290
Adjusted Operating Profit ($MM)	$347	$475	$444
Adjusted Operating Margin (%)	28.8%	37.6%	34.5%
Adjusted Diluted EPS ($)	$0.78	$1.02	$0.95

Notes: GAAP results were materially impacted by Q4 legal/regulatory charges; adjusted metrics reflect continuing operations as presented in management’s materials .

Segment breakdown (Q4 YoY)

Segment	Revenue Q4 2013 ($MM)	Revenue Q4 2014 ($MM)	Adj Op Profit Q4 2013 ($MM)	Adj Op Profit Q4 2014 ($MM)	Adj Op Margin Q4 2013 (%)	Adj Op Margin Q4 2014 (%)
S&P Ratings	$574	$618	$220	$261	38.4%	42.2%
S&P Capital IQ	$301	$318	$47	$62	15.7%	19.4%
S&P Dow Jones Indices	$130	$140	$48	$87	36.6%	61.7%
Commodities & Commercial	$220	$236	$73	$76	33.5%	32.3%

Context: Indices’ YoY margin expansion reflects a $26M non-cash impairment in Q4’13; Commodities’ Q4 margin compressed due to timing of JDP investments and portfolio mix .

Key KPIs and balance sheet (FY context)

KPI	2013	2014
Free Cash Flow ($MM)	$590	$1,033
Cash & Equivalents at 4Q ($MM)	—	$2,497
Total Debt at 4Q ($MM)	—	$799

Supplemental business drivers: U.S. Q4 issuance strong across IG (+22%), HY (+17%), Public Finance (+23%), and Structured Finance (+14%); Europe saw IG (-17%), HY (-63%), with Structured Finance +49% (RMBS-led) . ETF AUM linked to SPDJI indices +25% YoY to $832B; MF AUM >$1T; Q4 derivatives volumes +20% as volatility returned .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue Growth	FY 2015	—	Mid single-digit	New
Adjusted Op Margin Expansion	FY 2015	—	>125 bps	New
Adjusted Diluted EPS	FY 2015	—	$4.35–$4.45	New
Adjusted Tax Rate	FY 2015	—	~33%	New
Capital Expenditures	FY 2015	—	~$100M	New
Free Cash Flow (ex-settlements)	FY 2015	—	>$1.1B	New
Annual Dividend/Share	2015	$1.20	$1.32	Raised 10%

Additional capital allocation commentary: plan to resume buybacks (45.6M shares remain authorized) and consider adding leverage while remaining investment grade .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 & Q3 2014)	Current Period (Q4 2014)	Trend
Legal/regulatory	Q2: Wells notice/ongoing matters; Q3: $60M accrual; 2 dozen non-govt cases outstanding	Settlements reached (DOJ/19 States/DC, CalPERS); $1.552B Q4 charges; most payments by Q1’15	Overhang resolved; expense to decline from Q2’15
Cost reduction program	$100M target by 2016; procurement/real estate/tech/workflow	$140M identified; ~75% realized by end 2015; supports margin expansion	Upsized; accelerating
Capital allocation/leverage	Maintain flexibility amid legal matters; selective M&A; paused buybacks in Q3	Resume buybacks; leverage headroom 2.5–3.0x EBITDA; dividend +10%	More shareholder-friendly
FX/macro	Intl growth > domestic; low vol weighed on trading/derivatives	FX a ~1–1.5 pt revenue headwind; 80% billing in USD; rupee cost exposure noted	Modest headwind
Issuance backdrop	Q2/Q3 solid; mix shift to financials and structured finance; CLO strength	U.S. IG/HY/PF/Structured all up double digits; Europe HY weak, RMBS strong	Constructive mix
Indices dynamics	UBS commodities contract expired; SPX/E-mini vols low in Q2	YoY growth robust; sequential drag from lost license; AUM/derivatives improving	Net positive but near-term drag
Platts & oil	Trading revs pressured by low vol; subscription growth intact	Retention strong; watch oil value chain; Petroleum high single-digit growth; margins impacted by timing	Operationally resilient

Management Commentary

“While these settlements resulted in a meaningful loss of net income for the quarter, our businesses are performing very well. Our adjusted results... show just how well these businesses are doing.”
“Revenue grew 7%... Meaningful adjusted margin expansion continued... fourth quarter diluted adjusted EPS increased 23%.”
“As a result of these settlements, we recorded a fourth quarter charge of $1.552 billion.”
“Guidance is as follows: Mid-single-digit revenue growth... >125 bps of adjusted profit margin improvement... adjusted diluted EPS of $4.35 to $4.45... capex ~$100M... FCF >$1.1B (ex-settlement payments).”
“We announced... a 10% increase in the dividend to an annual payout of $1.32 per share... We currently expect to resume share repurchases... and contemplate selectively adding leverage... remaining investment grade.”

Q&A Highlights

Leverage and buybacks: Management sees capacity to 2.5–3.0x EBITDA while staying investment grade; plans to resume repurchases, potentially accelerate with added leverage .
Legal costs and margins: Legal spend expected to decline beginning in Q2’15, contributing to Ratings’ margin expansion; some offset from increased compliance .
FX impact: Guidance incorporates ~1–1.5 pts revenue drag from FX; 80% of revenue billed in USD; rupee a meaningful cost driver .
Indices sequential dynamics: Q4 slowdown vs Q3 tied to a lost license; expected to be a modest drag into early 2015 despite solid underlying performance .
Platts and oil: High retention and demand for pricing/information; limited exposure to wildcatters (~3% of business); building workforce flexibility to manage any volume impacts .

Estimates Context

S&P Global (Capital IQ) consensus for Q4 2014 EPS and revenue could not be retrieved at this time due to access limits; as a result, we have not included “vs. estimates” columns in the tables above. If helpful, we can update this recap with consensus and compute beats/misses once data access is restored.
Management’s adjusted EPS was $0.95 and revenue $1.29B for Q4’14; the company does not provide quarterly guidance, but 2015 full-year guidance implies continued adjusted margin expansion and EPS growth trajectory .

Key Takeaways for Investors

Core franchises executed: Ratings, Capital IQ, and Indices each delivered revenue growth and significant margin gains; underlying demand (issuance, data, AUM/derivatives) remained healthy .
Legal overhang removed: Comprehensive settlements booked, with most cash outflows by Q1’15; legal expenses poised to trend lower from Q2’15, supporting margin expansion .
Visible margin levers: ~$140M cost program identified with ~75% realized by end-2015; 2015 guide targets >125 bps adjusted margin improvement .
Capital returns accelerating: Dividend +10%; buybacks to resume with balance sheet flexibility to leverage to 2.5–3.0x as appropriate; 45.6M shares remain authorized .
Macro/FX manageable: FX a modest revenue headwind; mix shift in issuance constructive; oil volatility primarily a trading headwind but subscription businesses resilient .
Near-term watch items: Indices’ lost license remains a small drag into early 2015; monitor oil-driven activity at Platts and the pace of legal expense normalization .
Setup: With legal risk de-risked, sustained cost actions, and capital deployment, the narrative skews positive for multiple expansion and EPS compounding if issuance and passive flows remain supportive .

Sources

Q4 2014 earnings call transcript, February 12, 2015
Q4 2014 earnings slides
Q3 2014 earnings slides and call, October 29, 2014
Q2 2014 earnings call, July 29, 2014
DOJ/States/CalPERS settlement press release (Ex.99.1) and 8-K, February 3, 2015

S&P Global Inc. (SPGI)·Q4 2014 Earnings Summary