Earnings Call Transcript
S&P Global Inc. (SPGI)
Earnings Call Transcript - SPGI Q3 2022
Operator, Operator
Good morning, and thank you for joining today's S&P Global Third Quarter 2022 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. We issued a press release with our results earlier today. If you need a copy of the release and financial schedules, 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. A discussion of these risks and uncertainties can be found in our Forms 10-K, 10-Q and other periodic reports 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 exhibits that reconcile the difference between the non-GAAP measures and the comparable financial measures calculated in accordance with U.S. GAAP. I would also like to call your attention to a specific European regulation. 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 press release. At this time, I would like to turn the call over to Doug Peterson. Doug?
Douglas Peterson, CEO
Thank you, Mark. We're pleased to discuss our third quarter results and how we're growing, innovating and executing with discipline even in the face of a challenging macroeconomic backdrop. With each quarter that passes, we see further evidence of the strength of our combined company. While no one could have predicted what this year would have looked like, we have benefited from the diversification of our revenue and profit streams, and that ballast has provided great resilience as we continue to navigate choppy waters. It's been nearly two years since we announced the merger, and I'm proud of the progress we've made. We continue to put the customer at the core of everything we do and demonstrate a clear commitment to our people while maintaining a high standard of operational excellence. We have an incredibly bright future, and I'm excited to share more with you about our strategic vision at our Investor Day on December 1. As we look at our third quarter financial highlights, I want to remind you that 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 8% year-over-year or 6% ex-FX, with growth in four of our six divisions being offset by continued decreases in Ratings, as well as a year-over-year decline in Engineering Solutions this quarter due to the timing impact of a single product that Ewout will discuss later. Recurring revenue increased 2% year-over-year, representing 84% of revenue in the quarter. Adjusted expenses declined 5% year-over-year as cost synergies and disciplined expense management offset some of the inflationary impact we're seeing in labor and technology. Outside of the Ratings business, we saw an average of approximately 250 basis points of adjusted operating margin expansion year-over-year. We're updating our guidance ranges to reflect continued headwinds in Ratings as well as better-than-expected performance in Indices. Guidance ranges for our other four divisions are unchanged from last quarter. I'd also like to share a few other highlights from the third quarter. As I mentioned, we're coming up on two years since the merger was announced and nearly eight months since the close. Our post-merger integration efforts are proceeding on track, but very importantly, we're outperforming on both cost and revenue synergies. Our customer conversations remain encouraging despite the economic environment. We continue to see significant growth in multiple business lines due to secular trends that will likely benefit us for years to come, like energy transition as well as the near-term benefit we see from volatility and the need for insights and analytics in times of turbulence. We also remain committed to the capital allocation plan we laid out for you at the time the merger closed. We're on track to deploy the full $12 billion in funds for accelerated share repurchases by year-end. Turning to the commercial success we're seeing in the business. The merger continues to generate encouraging conversations with our customers about the increased value we offer as a combined company. In Market Intelligence, we developed a strong commercial pipeline in September, and we believe we will see a reacceleration of the Desktop business in the fourth quarter. Between Market Intelligence and Commodity Insights, we've generated well over 3,000 cross-sell referrals since the merger closed, and the conversion rates are strong. Despite the issuance environment, our Ratings teams remain highly engaged. We remain connected with investors and issuers to maintain relationships and ensure we have the appropriate understanding of their needs in advance of any recovery in the debt markets. Commodity Insights and Mobility are both seeing significantly improved retention rates relative to recent history as well as strong competitive wins and new customer growth. We saw a very important win in our Indices business this quarter as a large Japanese asset manager launched the first cross-asset ETF in Japan based on both iBoxx Fixed Income and S&P Dow Jones Equity Indices. While it's still early in our efforts in cross-asset indices, this launch is powerful proof of the demand for such products among global asset managers. Now to recap the financial results for the third quarter. Revenue decreased 8% to $2.86 billion or 6% constant currency. Our adjusted operating profit decreased 12% to $1.3 billion. Our adjusted pro forma operating profit margin decreased approximately 200 basis points to 46% as both profits and margin were negatively impacted by the decrease in Ratings transaction revenue, partially offset by cost synergies realized in the quarter. Our non-Ratings businesses in aggregate grew revenue 4% in the quarter compared to the prior year. As you know, we measure and track adjusted segment operating profit margin on a trailing 12-month basis, which was 45.5% as of the third quarter. Despite the impact of the issuance environment, we benefited from the resiliency of our businesses as well as disciplined cost management and cost synergies to significantly moderate the impact to our adjusted EPS, which declined only 4% year-over-year. Looking across the six divisions, I'm pleased to report positive growth across four of our divisions, with Ratings continuing to work through a difficult issuance cycle and Engineering Solutions entering an off-cycle quarter without the sale of a core product that is released once every two years. Throughout the year, we've seen outsized growth in certain products as customers depend on our data and information to make informed decisions during uncertain times. We saw double-digit revenue growth in multiple product lines as a result. Within our Indices business, revenue from exchange-traded derivatives outperformed our internal expectations, growing nearly 40% year-over-year. Our CDS Indices, which include the CDX and iTraxx index families, increased 66%. Markets continue to recognize our leadership in areas like climate and financial data, and we provide a consolidated platform on which to access information, whether it's tracking market movements, company performance or identifying physical risk from weather events, our customers continue to come to us for help navigating the uncertainty. This is evident in the growth we saw in key product offerings for Market Intelligence, including Trucost and Equities, Data and Analytics. I'm pleased to mark the first anniversary of the launch of Platts Dimensions Pro, a one-stop experience across Platts benchmark price assessments; news and analytics spanning 13 commodities, including energy transition. Over the last year, we've continuously increased functionality, introducing new features on a regular basis. This unified platform is gaining clear recognition with active user growth nearly doubling in just the last six months. Moreover, some of our newer benchmarks continue to expand their market presence, our low-sulfur marine fuel assessment is a great indicator of the trajectory of a successful new benchmark. Assessments like this often take multiple years to truly scale and become literal market benchmarks. In the third quarter, approximately 1.3 billion barrels of fuel were traded based on price assessment, representing a 15% increase compared to last year. Our iron ore assessment has been the primary physical market pricing reference for seaborne fine iron ore delivered to China for over 10 years, and it's still growing at an impressive rate. We understand the importance of reliable market benchmarks to the secular energy transition story, and we're positioning ourselves for long-term success. The chart on the right shows the cumulative number of new assessments we have launched in energy transition over the last two years. These include a new suite of Australian hydrogen prices covering one of the key producers of this future fuel as well as the Methane Performance Certificate that we believe will be an integral component of low-carbon crude trading. Now turning to issuance. During the third quarter, global-rated issuance decreased 40% year-over-year; in the U.S., rated issuance in aggregate decreased 47%; European-rated issuance decreased 19%; and in Asia, rated issuance declined 47%. High yield was down by 80% year-over-year in both the United States and Europe and was down nearly 100% in Asia. Structured finance in Europe was the only positive regional category in the quarter, increasing 7% year-over-year. We've included additional details on the subcomponents of issuance by region in the slide deck. We continue to make significant progress in our sustainability products. ESG revenue increased nearly 40% year-over-year to nearly $50 million in the quarter. We saw continued innovation in our ESG indices and the market recognition of our strength. We launched the S&P Net Zero 2050 Carbon Budget Indices, and we ended the quarter with ESG ETF AUM of $35 billion, an increase of 7% year-over-year in a down market. Within Market Intelligence, we launched enhanced Physical Risk Exposure Scores and Financial Impact data sets to support clients as they seek to understand and manage the physical and financial exposure to climate change. Our Ratings division continues to see success here as well, completing 13 ESG evaluations and 23 Sustainable Financing Opinions in the quarter. One of the most important competitive advantages in our ESG efforts is the Corporate Sustainability Assessment, which is an annual comprehensive assessment completed in partnership with participating companies. The S&P Global brand and everything it stands for continues to drive growth in the number of companies seeking to partner with us in this assessment process. Year-to-date, we've seen more than 2,300 companies opt-in, a more than 25% increase from the same time last year. Now turning to the outlook for the remainder of the year. Beginning with our issuance forecast. Our Ratings research team is expecting an approximately 19% decline in global market issuance, including both rated and unrated issuance for the full year. This compares to the previous forecast of down 16%. Importantly, our financial results and guidance are more closely tied to billed issuance, which can differ materially from market issuance as we described last quarter. Year-to-date, market issuances declined approximately 14%, while billed issuances declined approximately 42%. Based on the trends we saw in September and October, we now expect billed issuance to be down approximately 45% to 50% for the full year. When we look to the broader macroeconomic environment for the rest of 2022, we continue to see further deterioration from what we expected in August. In addition to the downward trend in issuance, our expectations for GDP growth, inflation and the commodities markets have all lowered. With only two months left in 2022, we wanted to provide what will likely be the final update on some of the macroeconomic indicators we're using to help inform our financial guidance for the year. We'll not be discussing our expectations for 2023 on this call, but we will be closely monitoring both the internal and external indicators of our business over the coming months. And we'll plan to provide our initial 2023 outlook at the customary time when we report our fourth quarter results early next year. Before I turn the call over to Ewout, I want to thank the incredible people we have at S&P Global. Our people have executed well in a challenging environment this year and have delivered great value for our customers and the organization while managing a complex integration. I'm confident that we're well-positioned to drive long-term growth and create long-term value for our shareholders. With that, I'll turn the call over to Ewout to walk through financials and guidance. Ewout?
Ewout Steenbergen, CFO
Thank you, Doug. Doug has already discussed the headline financial results, and I would like to cover a few other items. As Doug mentioned, the adjusted financial metrics we will be discussing today refer to non-GAAP adjusted metrics for the current period and non-GAAP pro forma adjusted metrics in the year ago period, unless explicitly called out as GAAP. Adjusted results also exclude the contribution from divested businesses in all periods. Adjusted corporate unallocated expenses improved from a year ago, driven by a combination of synergies and reduced incentive costs. Our net interest expense decreased 17% as we benefit from lower average rates due to refinancings following the merger. Adjusted effective tax rate was up modestly, but towards the low end of the guidance range we expect for the full year. As most are aware, we exclude the impact of certain items from our adjusted diluted EPS number. Among those items in the third quarter were approximately $108 million in merger-related expenses. The details of which can be found in the appendix. We generated adjusted free cash flow, excluding certain items, of $965 million. We remain committed to returning the majority of this cash flow to shareholders through dividends and share repurchases. Year-to-date, we have deployed $11 billion towards share repurchases, and we expect the final $1 billion of our previously announced ASR program to be completed by year-end. We note that the U.S. dollar remained strong against many foreign currencies, and we've seen a corresponding impact on both our revenue and expenses. As a reminder, approximately three-quarters of our international revenue is invoiced in U.S. dollars, which provides some protection to revenue against FX volatility. In addition to the natural hedges that exist due to the global footprint of our people, we have a hedging program in place that further mitigates the ultimate impact on our earnings. For the third quarter, we saw a $0.03 favorable impact to EPS from foreign exchange and hedging programs. Turning to expenses. We are committed to disciplined expense management in this current environment. And similar to last quarter, we highlight the levers we continue to pull to protect margins where we can while still preserving our investments to drive future growth. Actions taken include pull forward in synergies, a reduction in incentive accruals, adjustments to the timing of certain investments, and pausing select hiring and limiting consulting spend in some areas. Through cost synergies and other management actions we have taken so far this year, we expect to generate more than $400 million in expense savings for 2022. Now I would like to provide an update on our synergy progress. In the third quarter, we achieved $165 million in cumulative cost synergies and our current annualized run rate is $311 million. I'm pleased to report we continue to outperform our initial timeline on both revenue and cost synergies year-to-date. The cumulative integration and cost to achieve synergies through the end of the third quarter is $641 million. Given the outperformance on the timing of our synergies, we now expect to achieve slightly more than the 35% to 40% of total cost synergies in 2022 that we were targeting previously. Now let's turn to the division results and begin with Market Intelligence. Market Intelligence revenue increased 4% with strong growth in Data and Analytics, offset by slower growth in Desktop and flat growth in Enterprise Solutions. For this quarter, recurring revenue accounted for approximately 96% of Market Intelligence total revenue. Expenses were roughly flat this quarter with increases in compensation expense, cloud spend and outside services being offset by cost synergies and lower incentive compensation. Market Intelligence remains the biggest driver of cost synergies from the merger and the synergy outperformance we have seen year-to-date. Segment operating profit increased 13%, and the segment operating profit margin increased 260 basis points to 33.9%. On a trailing 12-month basis, adjusted segment operating profit margin was 30.9%. The OSTTRA joint venture that complements the operations of our Market Intelligence division contributed $19 million in adjusted operating profit to the company. As a reminder, because the JV is a 50% owned joint venture operating independently of the company, we recognize their results on an after-tax basis and do not include the financial results of OSTTRA in the Market Intelligence division. Looking across Market Intelligence, there was growth in most categories. And on a pro forma basis, Desktop revenue grew 3%, Data & Advisory Solutions revenue grew 7%, Enterprise Solutions revenue was flat and Credit & Risk Solutions revenue grew 7%. For Desktop, we saw slower growth this quarter, driven in part by the timing of certain revenue recognition items, and we expect desktop to reaccelerate in the fourth quarter. For Enterprise Solutions, the business line continues to see headwinds in several of our volume-driven products that rely on equity and debt capital markets activity under variable subscription terms. Excluding the impact of FX and these volume-driven products, growth across Market Intelligence would have been approximately 7% year-over-year. While we remain confident in the long-term growth of all these product lines, we expect deceleration in categories outside of Desktop to persist in the fourth quarter. Now turning to Ratings. Ratings continued to face difficult market conditions this quarter as issuance volumes remained muted with revenue decreasing 33% year-over-year. Transaction revenue decreased to 56% on the continued softness in issuance we highlighted earlier. Non-transaction revenue decreased 6% on a reported basis and 2% on a constant currency basis primarily due to lower Rating Evaluation Services and initial Issuer Credit Ratings, partially offset by increases in CRISIL, ICR and RES revenue are historically correlated with the relative strength of the issuance environment and M&A activity, respectively, and the declines we are seeing here are purely indicative of those market conditions. Expenses decreased 19%, primarily driven by disciplined expense management, including lower incentive expenses, partially offset by increased salary and fringe expenses. This resulted in a 41% decrease in segment operating profit and a 750 basis points decrease in segment operating profit margin to 55.9%. On a trailing 12-month basis, the adjusted segment operating profit margin was 57.9%. Now looking at Ratings revenue by its end markets. The largest contributors to the decrease in Ratings revenue were a 44% decrease in Corporates and a 31% decrease in Structured Finance, driven predominantly by structured credit. In addition, Financial Services decreased 20%, Governments decreased 33%, and the CRISIL and other categories increased 9%. And now turning to Commodity Insights, revenue increased 5%, driven by strong performance of subscription products, including those within Price Assessments and Energy & Resources, Data & Insights lines. However, that growth was impacted by the Russia-Ukraine conflict. As noted on the slide, revenue related to Russia contributed $12 million in the third quarter last year and made no contribution in the third quarter this year. Excluding this impact, Commodity Insights would have grown approximately 8% in the third quarter. There's no change to the expected impact from this conflict. But as a reminder, on an annualized run rate basis, we expect Commodity Insights revenue and operating income to be lower by approximately $52 million and $51 million, respectively. For this quarter, recurring revenue contributed 91% of Commodity Insights revenues. Expenses increased 1%, primarily due to salary and fringe and an increase in T&E expense partially offset by merger-related synergies, lower consulting spend and lower real estate costs. Segment operating profit increased 9%, and the segment operating profit margin increased 190 basis points to 45.8%. The trailing 12-month adjusted segment operating profit margin was 43.8%. Looking across the Commodity Insights business categories, price assessments grew 8% compared to the prior year, driven by continued commercial momentum and strong subscription growth for market data offerings. Energy & Resources, Data & Insights also grew 8% in the quarter, driven by strength in gas, power and renewables and in petrochemicals. Advisory and Transactional Services decreased 1% in the third quarter. The Upstream business was down 2% compared to the prior year, mainly driven by higher comps for Software and Analytics products offerings as well as the impact of Russia. Excluding that impact and the impact of FX, Upstream ACV growth would have been positive in the quarter. In our Mobility division, revenue increased 8% year-over-year, driven primarily by continued high retention rates and new business growth in CARFAX. For this quarter, recurring revenue contributed 78% of Mobility's total revenue. Expenses grew 5% year-over-year as we have yet to lap planned increases in headcounts, and we saw continued cloud expense growth, which were partially offset by lower data costs and favorable FX. This resulted in a 14% growth in adjusted operating profit and 200 basis points of margin expansion year-over-year. On a trailing 12-month basis, the adjusted segment operating profit margin was 40%. Dealer revenue increased 10% year-over-year, driven by strong demand for CARFAX as dealerships profitability remains at elevated levels. Manufacturing grew 4% year-over-year, driven by strength in subscriptions and an uptick in the Recall business. Inventory shortfalls continue to temper growth as OEMs spend on marketing initiatives powered by Mobility products remains muted. Financials and other increased 9%, primarily driven by continued strength in our insurance underwriting products and new business. S&P Dow Jones Indices revenue increased 3% year-over-year with strong margin expansion despite lower assets under management. For the third quarter, recurring revenue contributed 84% of the total for indices. During the quarter, expenses were roughly flat as strategic investments and higher information services costs were offset primarily by lower incentives and other expenses. Segment operating profit increased 5%, and the segment operating profit margin increased 100 basis points to 70.3%. On a trailing 12-month basis, the adjusted segment operating profit margin was 68.8%. Asset-linked fees were down 5%, primarily driven by lower AUM in ETFs. Exchange-rated derivative revenue increased 37% on increased trading volumes across key contracts, including a more than 60% increase in S&P 500 Index options volume. Data & Custom Subscriptions increased 10%, driven by new business activities. Over the past year, market depreciation totaled $472 billion. ETF AUM net inflows were $194 billion. This resulted in quarter-ending ETF AUM of $2.3 trillion, which is an 11% decrease compared to one year ago. Our ETF revenue is based on average AUM, which decreased 4% year-over-year. As a reminder, revenue tends to lag changes in asset prices. Given the declines across equity markets so far in the back half of this year, we continue to expect softness in asset-linked fees as we close out 2022. Engineering Solutions revenue declined 8% in the quarter, driven primarily by the negative impact of the timing of the Boiler Pressure Vessel Code, or BPVC, which was last released in August of 2021. The BPVC contributed approximately $1 million in revenue this quarter compared to approximately $8 million in the year-ago period. For this quarter, 94% of Engineering Solutions revenues were classified as recurring. Adjusted expenses decreased 7% due to favorable impact on BPVC royalties. On a trailing 12-month basis, the adjusted segment operating profit margin was 19.1%. Non-subscription revenue in Engineering Solutions decreased 63% year-over-year for the reasons I mentioned on the previous slide, while subscription revenue increased 3% over the same period. Now moving to our guidance. This slide depicts our new GAAP guidance. And this slide depicts our updated 2022 adjusted pro forma guidance due to the continued softening of the issuance environment, we now expect revenue to decrease mid-single digits compared to our prior guidance. Some of that impact is offset by the outperformance in indices. The net impact of our lower ratings revenue expectations, combined with the cost measures and capital allocation measures we have outlined today result in our slightly lower margin outlook and a new adjusted EPS range of $11 to $11.15. This margin outlook reflects our continued expectation for approximately 180 basis points of margin expansion outside of our Ratings business. Interest expense is expected in the range of $345 million to $355 million, slightly lower than our previous guidance due to higher interest on our cash deposits and positive impact from currency hedges. We're also reducing our outlook for capital expenditures to $115 million due to intentional delays in real estate investments. Adjusted free cash flow, excluding certain items, is now expected to be approximately $4 billion. The following slide illustrates our guidance by division. Based on this past quarter's performance, we're updating our expectations for adjusted revenue growth and adjusted operating profit margin for Ratings and Indices. The guidance ranges for our other divisions are unchanged. In closing, despite the geopolitical tensions and a challenging macroeconomic environment weighing on the markets, our portfolio of strong businesses continue to prove resilient. Furthermore, I'm pleased with the progress our teams have made since the closing of the merger earlier this year. We look forward to providing you with a deep dive into our businesses and the longer-term outlook of the company at our Investor Day on December 1. And with that, let me turn the call back over to Mark for your questions.
Operator, Operator
Thank you, Ewout. Operator, we will now take our first question.
Owen Lau, Analyst
For the MI Credit Risk Solutions and Data & Advisory Solutions, could you please unpack a little bit on the products and services driving that growth in the current backdrop? Are they new customers? Because based on my understanding, many of these products are subscription based. I just want to get a better sense of how you can further monetize it and drive that growth?
Douglas Peterson, CEO
Hi, Owen, this is Doug, and thanks for joining us today. Let me start, first of all, by mentioning that within Market Intelligence, Credit and Risk Solutions has always been a long-term outperformer. It's an area that we see very high demand from the markets for information about credit risk and other types of risk, especially in this market. As you know, the core products in this area are the basic products that are providing information from the Ratings business. So things like RatingsDirect, RatingsXpress. We also have a suite of products like Credit Analytics. And we do see a lot of growth now related to credit climate analytics. This is an area where we're seeing increased interest and demand, especially from financial institutions, especially large global banks. In addition, we're seeing some other growth from areas like traded market risks; some names of, I'll say, ex VA, CCR. We have a VAR product, et cetera. And then we have some additional buy-side risk opportunities for clients to look at for market risk and stress scenarios. So if you look at the entire suite of products, we're able to provide the market information at the time when they really want to understand risk.
Owen Lau, Analyst
Got it. That's very helpful. And then my follow-up is somehow related to the Ratings business. Could you please talk about your view on how the private credit market might have impacted S&P Global Rating business? And how S&P can provide services in this area.
Douglas Peterson, CEO
Yes. Thanks. On the private markets, as we saw earlier this year, there was a retreat of institutional investors and retail investors from credit funds. So there was really no liquidity at the beginning part of this year. It was a combination of people that were risk averse and also looking at the shift between fixed and floating. There were a lot of moves in interest rates. So we saw a retreat from the traditional loan funds and high-risk investors that left the markets. That left an opportunity for the private credit funds that had traditionally been focusing on mid-market credit. So SME credit was their expertise. Many of them also had started moving into the higher quality, higher levels of risk and large-cap companies. So they were there to fill the gap. The gap was filled by private credit at the beginning of the year. And we know that they've also been able to take on loans with a faster also with a higher risk level. And so we've seen that increase during the year. Now how do we think about that? First of all, we look at that as an opportunity for us going forward. We believe that the private credit funds will be looking over time to have some sort of risk transformation, whether it's related to fixed floating or it has to do with securitization or syndication. We think at that time, they're going to be wanting some Estimate services, potentially Rating services. In addition, we've identified private credit as one of our most important strategic growth drivers. We already have a base of private credit businesses that were part of IHS Markit. And related to that, we have a strong starting point with products like iLEVEL that provides information to portfolio managers. So we've identified private credit as a growth area for us for ratings as well as for Market Intelligence going forward. And we're watching the trend very carefully. We know at some point, investors will come back to the markets, and we'll see a broadening of the market again. But we've been watching this very closely and are actually interested in this as a growth area for us.
Ashish Sabadra, Analyst
I wanted to explore the Ratings and issuance guidance in more detail. Based on my calculations, it seems you're anticipating similar growth in transaction revenues for the fourth quarter as seen in the third quarter. I would appreciate any insights you could share regarding your expectations for issuance for the remainder of the year. Are you anticipating any rebound? Additionally, how are discussions with the issuers progressing?
Ewout Steenbergen, CFO
Ashish, if you look at the outlook, as you know, we are not really providing quarterly guidance. So we're not really speaking about the quarterly outlook for either our financial results or some of the input variables like issuance. But of course, if you look at the numbers that we put out today, then if you would do a backward calculation, you would assume that the most recent trends we are seeing in terms of issuance is what we expect to continue also in the fourth quarter. So, definitely, that’s the main reason why we took our guidance down. I would say that's the only reason, because overall the impact on our results from a top-line perspective is about $200 million reduction in revenue outlook for the Ratings business, so about $0.50 of EPS. And then there were a couple of smaller things. But net-net, I think that's the main driver of why the EPS outlook is down for the full year.
Ashish Sabadra, Analyst
That's very helpful color. And maybe just switching gears on Mobility, pretty strong momentum there despite what we are seeing in the auto lending space or in the auto space. And so I was just wondering, as we start to see the demand for auto slow down, how should we think about the growth in the business? Is there some counter-cyclicality as well here in the business?
Douglas Peterson, CEO
Yes, Ashish, thank you for your questions. When it comes to Mobility, we see that there's a very interesting shift going on over the last couple of years. As you know, when the market started slowing down from the pandemic and the supply chain interruptions, we saw the used auto market really start expanding, and we benefited from the CARFAX products and the CARFAX suite of products, especially at the dealer level. We know that there's some counter-cyclicality as you say, it as the market returns to new autos coming into the market and inventories rise that we will benefit from products and services to the OEMs and as well as the dealers are going to start having a different type of relationship again with the manufacturers and suppliers. So we're watching right now very closely three big trends in the automotive market: what's happening with the used car market where we have a strong position, what's happening with the OEMs and the supply chain for the new automobiles. They've been in historic lows over the last two years. So we expect that's going to start going up. And then there's also a transformation taking place in the industry as more and more vehicles start to become electric based with the drivetrain as opposed to internal combustion. So a lot of trends, which are all playing to our advantage because we have data analytics and research products that we can serve all of the users in these markets.
Alex Kramm, Analyst
I understand that you don't really want to comment much on 2023 quite yet, I guess, we'll wait until December. Just on the issuance side, however, your own research group yesterday put out not only the 2022 update but also the 2023 initial look, which I think calls, if I got this right, for 2% issuance growth and 10% growth, in particular, for the Corporate side, which I think is the most important for you. So since this is out there, I'm just wondering how we should be thinking about that forecast? And what's kind of items you would think about as you think about how that flows into billed issuance and revenues? I know it's early, but given that your own company has an issue outlook out there already, figured it's relevant.
Douglas Peterson, CEO
Thank you, Alex. We produce a report and are currently focused on identifying the main factors that will influence us as we approach the end of the year. In that report, we indicated that overall issuance is expected to decline by 19% for the year, which is down from the 16% forecast in our previous report. As usual, we will wait until February to provide guidance for 2023, along with our comprehensive issuance report. The information from our credit research team encompasses product insights but is not solely aligned with our billed issuance projections. As we mentioned last quarter, our billed issuance includes overall issuance expectations, adds leveraged loans, and removes certain debt sectors like unrated categories, most domestic debt from China, and international public finance. More importantly, to address your question, we are consistently monitoring the market. We reported over 3,000 interactions with market participants last quarter to better understand the factors influencing issuance. Our guidance is informed by numerous aspects, including issuance forecasts, GDP growth, macroeconomic influences like inflation and interest rates, spreads, which have remained quite elevated recently, as well as maturity schedules, which look promising for 2023 and beyond. M&A activities are also part of our considerations. When we finalize our guidance, we will have assessed all these variables. Most crucially, we are actively engaged in the market rather than waiting passively.
Toni Kaplan, Analyst
I wanted to ask about Ratings margins. They were down sequentially, but they were still really resilient just given the environment and especially relative to one of your big competitors. Just wanted to ask you if you could talk about some drivers that enabled you to flex cost outside of incentive comp?
Ewout Steenbergen, CFO
Toni, you're right. We are quite pleased with the overall expense discipline of the company in the third quarter. You've heard us announce last quarter that we're taking additional actions to deal with the macro environment and we're actually really pleased how that is playing out, and you may continue to see that kind of a result from us going forward across the company. And of course, we take the benefit also from the cost synergies that we can implement and accelerate during this period. So if you look specifically at the Ratings business, it is a mix. On the one hand, we continue to make sure that we invest in future growth, making sure that we stay competitive on a compensation perspective. We want to preserve the capacity we have on the analytical side. But on the other hand, there are also discretionary costs that we are bringing down. There are allocated costs that are benefiting from the synergies that we are realizing across the company, and then also incentive compensation is down year-over-year. So it's actually a balance of different elements that go into the mix. But definitely, as you have seen in the past, we're always focused on trying to preserve margins in our business businesses as much as possible, particularly in more challenging macro environments.
Douglas Peterson, CEO
Yes. Toni, thanks for that question. And as you know, the markets are going through a lot of uncertainty and turmoil. We've never lived through a period where you have an end of a pandemic, a war, inflation, interest rates going up, all sorts of different impacts. I mentioned earlier on the mobility discussion what kind of impact that's had on the markets overall. We've seen this interest in talking about risk. It's a topic which has increased dramatically. When we meet with customers, they want to talk about the external environment. They want the expertise of S&P Global that comes from our entire company to understand what's happening with risk, with markets, with credit as well as equities, commodities. So we start with very broad dialogues. And then we dig deeper into some specific topics. One that comes up in almost every single conversation we have is energy transition, climate and sustainability. That's a really common discussion. It's increasing in terms of how much time we spend on it. And another one is Data and Analytics. How are customers thinking about their own application of AI, Data and Analytics? They want to learn from us how we're managing S&P Global, but they also want to learn how they can be deploying new types of products and services using more AI. But overall, we have not seen any kind of initial pushback on slowing down a sales cycle. Clearly, there are some markets, as I mentioned, the ratings market, there's not a lot of issuance right now, but we've stayed engaged with the market. But maybe net-net, the big topics we spent a lot of time on are the macroeconomic environment, sustainability, as well as AI and data. Those are big conversations we have in almost every customer interaction.
Jeffrey Silber, Analyst
I wanted to start with a question about Ratings. I asked your large competitor the same question and I'm curious about your thoughts. What are you looking for in terms of signs of improvement in that market, early indicators, and what should we focus on?
Douglas Peterson, CEO
I'm focusing on several key areas, and while our Ratings team could provide additional insights, I can share a few notable factors. One significant aspect is M&A activity, which has been relatively weak lately. Typically, M&A involves various transactions, such as bridge loans transitioning into deal loans or rated loans. Another important area is IPOs, as these activities reflect market confidence and investment willingness. We have had conversations with around 3,000 issuers last quarter, and there is considerable interest in investing in new markets, innovation, and venture capital. We're monitoring when these potential investors will take action. The key takeaway is not if, but when this will happen. Many are prepared to move forward with great ideas, but it hinges on the return of favorable conditions like interest rates and market confidence. Additionally, we are keeping an eye on maturity schedules that will begin to play a role around the middle of next year, and we will be monitoring that closely as well. Well, that was the last question. So I'd like to make a quick closing comment. So first of all, thank you, everyone, for joining the call today for your questions and your support. But I'm really pleased with the progress we've made since closing the merger. It's only been eight months. And we've been able to unify our management team under a strong vision and set of purposes and values. We see strong commercial success. You heard about it on this call, our cross-sell and our product innovation, and we're ahead of schedule to achieve our cost synergies. And all of that in a challenging macroeconomic backdrop where we discuss some of those topics today. But we also have very important secular trends that are creating opportunities for S&P Global: the energy transition, the continued interest in climate and sustainability, the need for analytics and insights in very turbulent markets. So we're very pleased with our progress, and I'm excited that we'll be able to share more with you on our strategic vision and our multiyear targets at our Investor Day on December 1. But let me end by thanking again our people who are absolutely fantastic, they're world-class. And I want to thank all of you again for joining us on this call today. Thank you very much.
Operator, Operator
That concludes this morning's call. A PDF version of the presenter slides is available now for downloading from investor.spglobal.com. Replays of the entire call will be available in about two hours. The webcast with audio and slides will be maintained on S&P Global's website for one year. The audio-only telephone replay will be maintained for one month. On behalf of S&P Global, we thank you for participating and wish you a good day.