S&P Global Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) The following Management's Discussion and Analysis (“MD&A”) provides a narrative of the results of operations and financial condition of S&P Global Inc. (together with its consolidated subsidiaries, (“S&P Global,” the “Company,” “we,” “us” or “our”) for the three and six months ended June 30, 2023. The MD&A should be read in conjunction with the consolidated financial statements, accompanying notes and MD&A included in our Form 10-K for the year ended December 31, 2022 (our “Form 10-K”), which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The MD&A includes the following sections: • Overview • Results of Operations — Comparing the Three and Six Months Ended June 30, 2023 and 2022 • Liquidity and Capital Resources • Reconciliation of Non-GAAP Financial Information • Critical Accounting Estimates • Recently Issued or Adopted Accounting Standards • Forward-Looking Statements OVERVIEW We are a provider of credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity, automotive and engineering markets. The capital markets include asset managers, investment banks, commercial banks, insurance companies, exchanges, trading firms and issuers; the commodity markets include producers, traders and intermediaries within energy, petrochemicals, metals & steel and agriculture; the automotive markets include manufacturers, suppliers, dealerships and service shops; and the engineering markets include engineers, builders, and architects. Our operations consist of six reportable segments: S&P Global Market Intelligence (“Market Intelligence”), S&P Global Ratings (“Ratings”), S&P Global Commodity Insights (“Commodity Insights”), S&P Global Mobility (“Mobility”), S&P Dow Jones Indices (“Indices”) and S&P Global Engineering Solutions (“Engineering Solutions”). • Market Intelligence is a global provider of multi-asset-class data and analytics integrated with purpose-built workflow solutions. • Ratings is an independent provider of credit ratings, research, and analytics, offering investors and other market participants information, ratings and benchmarks. • Commodity Insights is a leading independent provider of information and benchmark prices for the commodity and energy markets. • Mobility is a leading provider of solutions serving the full automotive value chain including vehicle manufacturers (OEMs), automotive suppliers, mobility service providers, retailers, consumers, and finance and insurance companies. • Indices is a global index provider maintaining a wide variety of valuation and index benchmarks for investment advisors, wealth managers and institutional investors. • Engineering Solutions is a leading provider of engineering standards and related technical knowledge. As of May 2, 2023, we completed the sale of Engineering Solutions and the results are included through that date. On May 2, 2023, we completed the sale of Engineering Solutions to Allium Buyer LLC, a Delaware limited liability company controlled by funds affiliated with Kohlberg Kravis Roberts & Co. L.P. (“KKR”) . We received the full proceeds from the sale of $975 million in cash, subject to purchase price adjustments, which we expect to result in approximately $750 million in after-tax proceeds. The assets and liabilities of Engineering Solutions were classified as held for sale in our consolidated balance sheet as of December 31, 2022. During the three months ended June 30, 2023, we recorded a pre-tax loss of $120 million in Loss (gain) on dispositions and disposition-related costs of $3 million in selling and general expenses in the consolidated statement of income ($189 million after-tax, net of a release of a deferred tax liability of $101 million) related to the sale of Engineering Solutions. During the six months ended June 30, 2023, we recorded a pre-tax loss of $120 million in Loss (gain) on dispositions and disposition-related costs of $16 million in selling and general expenses in the consolidated statement of income ($182 million after-tax, net of a release of a deferred tax liability of $157 million) related to the sale of Engineering Solutions. The transaction follows our announced intent in November of 2022 to divest the business. Engineering Solutions became part of the Company following our merger with IH S Markit. See Note 2 - Acquisitions and Divestitures for additional information. 32 On February 28, 2022, we completed the merger with IHS Markit Ltd (“IHS Markit”), and as a result, IHS Markit and its subsidiaries became wholly owned consolidated subsidiaries of S&P Global, and the financial results include IHS Markit from the date of acquisition. See Note 2 - Acquisitions and Divestitures for additional information. Key results for the periods ended June 30 are as follows: (in millions) Three Months Six Months 2023 2022 % Change 1 2023 2022 % Change 1 Revenue $ 3,101 $ 2,993 4% $ 6,261 $ 5,383 16% Operating profit 2 $ 911 $ 1,482 (39)% $ 2,056 $ 3,374 (39)% Operating margin % 29 % 50 % 33 % 63 % Diluted earnings per share from net income $ 1.60 $ 2.86 (44)% $ 4.07 $ 7.17 (43)% 1 % changes in the tables throughout the MD&A are calculated off of the actual number, not the rounded number presented. 2 Operating profit for the three months ended June 30, 2023 includes a loss on disposition of $120 million, IHS Markit merger costs of $51 million, employee severance charges of $51 million, disposition-related costs of $3 million, and acquisition-related costs of $2 million. Operating profit for the six months ended June 30, 2023 includes IHS Markit merger costs of $115 million, a loss on disposition of $69 million, employee severance charges of $62 million, disposition-related costs of $16 million, and acquisition-related costs of $3 million. Operating profit for the three and six months ended June 30, 2023 includes lease impairments of $15 million and asset impairment of $5 million. Operating profit for the three months ended June 30, 2022 includes a gain on dispositions of $556 million, IHS Markit merger costs of $135 million, employee severance charges of $61 million, acquisition-related costs of $7 million and an asset impairment of $3 million. Operating profit for the six months ended June 30, 2022 includes a gain on dispositions of $1.9 billion, IHS Markit merger costs of $379 million, a S&P Foundation grant of $200 million, employee severance charges of $139 million, acquisition-related costs of $8 million, lease impairments of $5 million and an asset write-off of $3 million. Operating profit also includes amortization of intangibles from acquisitions of $275 million and $282 million for the three months ended June 30, 2023 and 2022, respectively, and $550 million and $407 million for the six months ended June 30, 2023 and 2022, respectively. Three Months Revenue increased 4% driven by increases at Ratings, Market Intelligence, Mobility, Commodity Insights and Indices, partially offset by a decrease at Engineering Solutions which was unfavorably impacted by its sale on May 2, 2023. The increase at Ratings was primarily due to growth in corporate bond ratings transaction revenue driven by increased investment-grade and high-yield issuance volumes due to an increase in refinancing activity. The increase at Market Intelligence was primarily due to subscription revenue growth for data feed products within Data and Advisory Solutions, work flow solutions at Enterprise Solutions, Desktop products, and RatingsXpress®, RatingsDirect® and Credit Analytics within Credit & Risk Solutions. The increase at Mobility was primarily due to price increases and new business growth within the Dealer business as well as the favorable impact of the acquisition of Market Scan in February of 2023. Revenue growth at Commodity Insights was primarily due to continued demand for market data and market insights products. The increase at Indices was primarily due to higher exchange-traded derivative revenue and higher data subscription revenue. Foreign exchange rates had an unfavorable impact of less than 1 percentage point. Operating profit decreased 39%. Excluding the unfavorable impact of a higher gain on dispositions in 2022 of 45 percentage points and higher lease impairments in 2023 of 1 percentage point, partially offset by higher IHS Markit merger costs in 2022 of 6 percentage points, operating profit increased 1%. The increase was primarily due to revenue growth, partially offset by increased incentives and higher compensation costs. Foreign exchange rates had a favorable impact of 1 percentage point. Six Months Revenue increased 16% primarily due to the impact of the merger with IHS Markit; subscription revenue growth for Desktop products, RatingsXpress®, RatingsDirect®, and data feed products within Data & Advisory Solutions at Market Intelligence; continued demand for market data and market insights products and higher conference revenue at Commodity Insights; higher exchange-traded derivative revenue and higher data subscription revenue at Indices; and growth in corporate bond ratings transaction revenue driven by increased investment-grade and high-yield issuance volumes due to an increase in refinancing activity at Ratings. These increases were partially offset by a decrease at Engineering Solutions which was unfavorably impacted by the sale on May 2, 2023 and lower bank loan ratings revenue at Ratings. Foreign exchange rates had an unfavorable impact of 1 percentage point. 33 Operating profit decreased 39%. Excluding the unfavorable impact of a higher gain on dispositions in 2022 of 61 percentage points and higher amortization of intangibles in 2023 of 4 percentage points, partially offset by the impact of higher IHS Markit merger costs in 2022 of 8 percentage points, the impact of a S&P Foundation grant in 2022 of 6 percentage points and higher employee severance charges in 2022 of 2 percentage points, operating profit increased 10%. The increase was primarily due to revenue growth, partially offset by expenses associated with the merger with IHS Markit, increased incentives, higher compensation costs and an increase in technology costs. Foreign exchange rates had a favorable impact of 1 percentage point. Our Strategy We are a provider of credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity, automotive and engineering markets. Our purpose is to accelerate progress. We seek to deliver on this purpose in line with our core values of discovery, partnership and integrity. In 2022, we announced the launch of Powering Global Markets to provide a framework for our forward-looking business strategy. Through this framework, we focus on our customer’s ever-changing needs, growing our core businesses, innovating in new markets and leveraging the power of our data and technology. In 2023, we are striving to deliver on our strategic priorities in the following key areas: Finance • Meeting or exceeding our organic revenue growth and EBITA margin targets; • Realizing our merger/integration commitments - cost and revenue synergy targets; and • Driving growth and superior shareholder returns through effective execution, active portfolio management and prudent capital allocation. Customer at the Core • Enhancing customer support and seamless user experience with a focus on ease of discoverability, distribution, and delivery of our products and services and integrated capabilities; and • Continuing to invest in customer facing solutions and processes. Grow and Innovate • Continuing to fund and accelerate key growth areas and transformational adjacencies; • Exercising disciplined organic capital allocation, inorganic and partnership strategies; and • Growing the value of S&P Global’s brand through an integrated marketing and communication strategy; driving awareness and consideration across the product offering. Data and Technology • Efficient integration, accessibility and governance of enterprise data assets, with initial focus on sustainability data, data science and enterprise-wide data management through the formation of a data council to drive enterprise value creation; • Advancing transition to optimize tech spend practice i.e., shifting the balance towards funding higher growth innovation, establishing key spend benchmarks and 3-year transition plan; and • Continuing momentum in transitioning all products and services to a cloud-based ecosystem while implementing technologies that align to our customer needs and unlock new opportunities. • Lead and Inspire • Continuing to improve diverse representation through hiring, advancement and retention, while continuing to raise awareness through Diversity, Equity, and Inclusion education; and 34 • Ensuring our people are engaged with a particular focus on learning, development and career opportunities, and continue to embed our purpose and values throughout the Company. Execute and Deliver • Driving continuous commitment to risk management, compliance, and control across S&P Global; and • Creating a more sustainable impact. There can be no assurance that we will achieve success in implementing any one or more of these strategies as a variety of factors could unfavorably impact operating results, including prolonged difficulties in the global credit markets and a change in the regulatory environment affecting our businesses. See Item 1A, Risk Factors in this Form 10-Q and our most recently filed Annual Report on Form 10-K. 35 RESULTS OF OPERATIONS — COMPARING THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022 Consolidated Review (in millions) Three Months Six Months 2023 2022 % Change 2023 2022 % Change Revenue $ 3,101 $ 2,993 4% $ 6,261 $ 5,383 16% Total Expenses: Operating-related expenses 1,026 1,007 2% 2,114 1,756 20% Selling and general expenses 771 768 —% 1,476 1,726 (14)% Depreciation and amortization 285 303 (6)% 571 441 30% Total expenses 2,082 2,078 —% 4,161 3,923 6% Loss (gain) on dispositions 119 (556) N/M 69 (1,899) N/M Equity in Income on Unconsolidated Subsidiaries (11) (11) —% (25) (15) 74% Operating profit 911 1,482 (39)% 2,056 3,374 (39)% Other income, net (11) (1) N/M — (50) N/M Interest expense, net 88 90 (1)% 174 147 19% Loss on extinguishment of debt, net — 2 N/M — 19 N/M Provision for taxes on income 259 340 (24)% 447 908 (51)% Net income 575 1,051 (45)% 1,435 2,350 (39)% Less: net income attributable to noncontrolling interests (64) (79) 19% (130) (143) 10% Net income attributable to S&P Global Inc. $ 511 $ 972 (47)% $ 1,305 $ 2,207 (41)% N/M – Represents a change equal to or in excess of 100% or not meaningful 36 Revenue The following table provides consolidated revenue information for the periods ended June 30: (in millions) Three Months Six Months 2023 2022 % Change 2023 2022 % Change Revenue $ 3,101 $ 2,993 4% $ 6,261 $ 5,383 16% Subscription revenue 1,723 1,685 2% 3,463 2,810 23% Non-subscription / transaction revenue 525 492 7% 1,122 1,004 12% Non-transaction revenue 427 409 4% 831 835 —% Asset-linked fees 211 214 (2)% 420 433 (3)% Sales usage-based royalties 85 72 19% 170 140 20% Recurring variable 130 121 8% 255 161 58% % of total revenue: Subscription revenue 56 % 56 % 55 % 52 % Non-subscription / transaction revenue 17 % 17 % 19 % 19 % Non-transaction revenue 14 % 14 % 13 % 15 % Asset-linked fees 7 % 7 % 7 % 8 % Sales usage-based royalties 2 % 2 % 4 % 3 % Recurring variable 4 % 4 % 2 % 3 % U.S. revenue $ 1,865 $ 1,782 5% $ 3,791 $ 3,208 18% International revenue: European region 703 699 1% 1,414 1,266 12% Asia 342 326 5% 679 590 15% Rest of the world 191 186 2% 377 319 18% Total international revenue $ 1,236 $ 1,211 2% $ 2,470 $ 2,175 14% % of total revenue: U.S. revenue 60 % 60 % 61 % 60 % International revenue 40 % 40 % 39 % 40 % 37 Three Months Revenue increased 4% as compared to the three months ended June 30, 2022. Subscription revenue increased due growth in data feed products within Data and Advisory Solutions, work flow solutions at Enterprise Solutions, Desktop products, and RatingsXpress®, RatingsDirect® and Credit Analytics within Credit & Risk Solutions at Market Intelligence, price increases and new business growth within the Dealer business as well as the favorable impact of the acquisition of Market Scan in February of 2023 at Mobility, continued demand for Commodity Insights market data and market insights products and higher data subscription revenue at Indices, partially offset by a decrease at Engineering Solutions which was unfavorably impacted by its sale on May 2, 2023. Non-subscription / transaction revenue increased primarily due to growth in corporate bond ratings revenue driven by increased investment-grade and high-yield issuance volumes due to an increase in refinancing activity at Ratings. Non-transaction revenue increased due to an increase in surveillance revenue, higher Ratings Evaluation Service (“RES”) revenue and an increase in revenue at our CRISIL subsidiary, partially offset by a decrease in new entity credit ratings revenue. Asset linked fees decreased at Indices driven by product mix. The increase in sales-usage based royalties was primarily driven by higher exchange-traded derivative revenue at Indices. Recurring variable revenue at Market Intelligence increased due to fixed income new issuance volumes. See “Segment Review” below for further information. The unfavorable impact of foreign exchange rates reduced revenue by less than 1 percentage point. This impact refers to constant currency comparisons estimated by recalculating current year results of foreign operations using the average exchange rate from the prior year. Six Months Revenue increased 16% as compared to the six months ended June 30, 2022. Subscription revenue increased primarily due to the impact of the merger with IHS Markit. Subscription revenue growth in Desktop products, Credit & Risk Solutions and Data & Advisory Solutions at Market Intelligence, continued demand for Commodity Insights market data and market insights products and higher data subscription revenue at Indices, partially offset by a decrease at Engineering Solutions which was unfavorably impacted by its sale on May 2, 2023. Non-subscription / transaction revenue increased due to the impact of the merger with IHS Markit, growth in corporate bond ratings revenue driven by increased investment-grade and high-yield issuance volumes due to an increase in refinancing activity at Ratings and an increase in conference revenue at Commodity Insights, partially offset by a decrease in bank loan ratings revenue at Ratings. Non-transaction revenue decreased due to a decrease in new entity credit ratings revenue, partially offset by an increase in surveillance revenue and an increase in revenue at our CRISIL subsidiary. Asset linked fees decreased at Indices driven by product mix. The increase in sales-usage based royalties was primarily driven by higher exchange-traded derivative revenue at Indices. Recurring variable revenue at Market Intelligence increased due to the impact of the merger with IHS Markit and represents revenue from contracts for services that specify a fee based on, among other factors, the number of trades processed, assets under management, or the number of positions valued. See “Segment Review” below for further information. The unfavorable impact of foreign exchange rates reduced revenue by 1 percentage point. This impact refers to constant currency comparisons estimated by recalculating current year results of foreign operations using the average exchange rate from the prior year. Total Expenses The following tables provide an analysis by segment of our operating-related expenses and selling and general expenses for the periods ended June 30: 38 Three Months (in millions) 2023 2022 % Change Operating- related expenses Selling and general expenses Operating- related expenses Selling and general expenses Operating- related expenses Selling and general expenses Market Intelligence 1 $ 486 $ 269 $ 458 $ 241 6% 12% Ratings 2 236 120 225 90 5% 34% Commodity Insights 3 154 117 139 124 11% (5)% Mobility 4 100 122 86 114 16% 7% Indices 5 58 54 52 43 12% 24% Engineering Solutions 6 22 6 59 22 (62)% (71)% Intersegment eliminations 7 (41) — (43) — 4% N/M Total segments 1,015 688 976 634 4% 9% Corporate Unallocated expense 8 11 83 31 134 (65)% (38)% Total $ 1,026 $ 771 $ 1,007 $ 768 2% —% N/M – Represents a change equal to or in excess of 100% or not meaningful 1 In 2023 selling and general expenses include employee severance charges of $16 million, IHS Markit merger costs of $12 million, and an asset impairment of $5 million. In 2022, selling and general expenses include include employee severance charges of $13 million, IHS Markit merger costs of $12 million, and acquisition-related costs of $1 million. 2 In 2023 and 2022, selling and general expenses include employee severance charges of $4 million and $7 million, respectively. 3 In 2023, selling and general expenses include employee severance charges of $14 million and IHS Markit merger costs of $8 million. In 2022, selling and general expenses include employee severance costs of $17 million and acquisition-related costs of $4 million. 4 In 2023, selling and general expenses include employee severance charges of $3 million and acquisition-related costs of $1 million. In 2022, selling and general expenses include acquisition-related costs of $3 million, employee severance charges of $2 million, and IHS Markit merger costs of $1 million. 5 In 2023, selling and general expenses include employee severance charges of $2 million and IHS Markit merger costs of $1 million. In 2022, selling and general expenses include employee severance charges of $2 million and acquisition-related costs of $1 million. 6 In 2022, selling and general expenses include employee severance charges of $1 million. 7 Intersegment eliminations primarily relate to a royalty charged to Market Intelligence for the rights to use and distribute content and data developed by Ratings. 8 In 2023, selling and general expenses include IHS Markit merger costs of $30 million, lease impairments of $15 million, employee severance charges of $12 million, disposition-related costs of $3 million, and acquisition-related costs of $1 million. In 2022, selling and general expenses include IHS Markit merger costs of $117 million, employee severance charges of $18 million, acquisition-related costs of $4 million, and an asset write-off of $3 million. Operating-Related Expenses Operating-related expenses increased 2% primarily driven by increased incentives and higher compensation costs. Intersegment eliminations primarily relate to a royalty charged to Market Intelligence for the rights to use and distribute content and data developed by Ratings. Selling and General Expenses Selling and general expenses increased less than 1%. Excluding the favorable impact of higher IHS Markit merger costs in 2022 of 15 percentage points, higher employee severance charges in 2022 of 2 percentage points, higher acquisition-related costs in 2022 of 1 percentage point, partially offset by higher lease impairments in 2023 of 3 percentage points, selling and general expenses increased 15%. The increase was primarily driven by increased incentives and higher compensation costs. 39 Depreciation and Amortization Depreciation and amortization decreased to $285 million in 2023 compared to $303 million in 2022, primarily due to lower depreciation driven by asset disposals and lower intangible asset amortization driven by the impact of the sale of Engineering Solutions on May 2, 2023. Six Months (in millions) 2023 2022 % Change Operating- related expenses Selling and general expenses Operating- related expenses Selling and general expenses Operating- related expenses Selling and general expenses Market Intelligence 1 $ 974 $ 519 $ 779 $ 431 25% 20% Ratings 2 468 226 463 200 1% 13% Commodity Insights 3 337 221 253 202 33% 10% Mobility 4 200 239 117 155 71% 54% Indices 5 111 98 99 88 11% 11% Engineering Solutions 6 85 27 79 29 8% (7)% Intersegment eliminations 7 (83) — (81) — (2)% N/M Total segments 2,092 1,330 1,709 1,105 22% 20% Corporate Unallocated expense 8 22 146 47 621 (54)% (76)% Total $ 2,114 $ 1,476 $ 1,756 $ 1,726 20% (14)% N/M – Represents a change equal to or in excess of 100% or not meaningful 1 In 2023 selling and general expenses include IHS Markit merger costs of $25 million, employee severance charges of $22 million, and an asset impairment of $5 million. In 2022, selling and general expenses include employee severance charges of $31 million, IHS Markit merger costs of $15 million and acquisition-related costs of $1 million. 2 In 2023 and 2022, selling and general expenses include employee severance charges of $5 million and $12 million, respectively. 3 In 2023, selling and general expenses include IHS Markit merger costs of $20 million and employee severance charges of $15 million. In 2022, selling and general expenses include employee severance costs of $24 million and IHS Markit merger costs of $6 million. 4 In 2023, selling and general expenses include employee severance charges of $4 million, acquisition-related costs of $1 million, and IHS Markit merger costs of $1 million. In 2022, selling and general expenses include acquisition-related costs of $4 million, employee severance charges of $2 million, and IHS Markit merger costs of $1 million. 5 In 2023, selling and general expenses include employee severance charges of $3 million and IHS Markit merger costs of $2 million. In 2022, selling and general expenses include employee severance charges of $4 million and IHS Markit merger costs of $1 million. 6 In 2022, selling and general expenses include employee severance charges of $2 million. 7 Intersegment eliminations primarily relate to a royalty charged to Market Intelligence for the rights to use and distribute content and data developed by Ratings. 8 In 2023, selling and general expenses include IHS Markit merger costs of $66 million, lease impairments of $15 million, disposition-related costs of $16 million, employee severance charges of $14 million, and acquisition-related costs of $2 million. In 2022, selling and general expenses include IHS Markit merger costs of $357 million, a S&P Foundation grant of $200 million, employee severance charges of $64 million, acquisition-related costs of $5 million, lease impairments of $5 million, and an asset write-off of $3 million. Operating-Related Expenses Operating-related expenses increased 20% primarily driven by the impact of the merger with IHS Markit, increased incentives and higher compensation costs. Intersegment eliminations primarily relate to a royalty charged to Market Intelligence for the rights to use and distribute content and data developed by Ratings. Selling and General Expenses Selling and general expenses decreased 14%. Excluding the favorable impact of higher IHS Markit merger costs in 2022 of 21 40 percentage points, a S&P Foundation grant in 2022 of 16 percentage points and higher employee severance charges in 2022 of 6 percentage points, partially offset by disposition-related costs in 2023 of 1 percentage points and higher lease impairments in 2023 of 1 percentage point, selling and general expenses increased 27%. The increase was primarily driven by the impact of the merger with IHS Markit, increased incentives and higher compensation costs. Depreciation and Amortization Depreciation and amortization increased to $571 million in 2023 compared to $441 million in 2022, primarily due to higher intangible asset amortization driven by the impact of the merger with IHS Markit, partially offset by lower intangible asset amortization driven by the impact of the sale of Engineering Solutions on May 2, 2023. Loss (Gain) on Dispositions During the three and six months ended June 30, 2023, we completed the following disposition and received a contingent payment that were included in Loss (gain) on dispositions in the consolidated statements of income: • During the three months ended June 30, 2023, we recorded a pre-tax loss of $120 million in Loss (gain) on dispositions and disposition-related costs of $3 million in selling and general expenses in the consolidated statement of income ($189 million after-tax, net of a release of a deferred tax liability of $101 million) related to the sale of Engineering Solutions. During the six months ended June 30, 2023, we recorded a pre-tax loss of $120 million in Loss (gain) on dispositions and disposition-related costs of $16 million in selling and general expenses in the consolidated statement of income ($182 million after-tax, net of a release of a deferred tax liability of $157 million) related to the sale of Engineering Solutions. • In the first quarter of 2023, we received a contingent payment following the sale of Leveraged Commentary and Data (“LCD”) along with a related family of leveraged loan indices in June of 2022. The contingent payment was payable six months following the closing upon the achievement of certain conditions related to the transition of LCD customer relationships. During the six months ended June 30, 2023, the contingent payment resulted in a pre-tax gain of $46 million ($34 million after-tax) related to the sale of LCD in our Market Intelligence segment and $4 million ($3 million after-tax) related to the sale of a family of leveraged loan indices in our Indices segment. During the six months ended June 30, 2022, we completed the following dispositions that were included in Loss (gain) on dispositions in the consolidated statement of income: • In June of 2022, we completed the previously announced sale of LCD along with a related family of leveraged loan indices, within our Market Intelligence and Indices segments, respectively, to Morningstar for a purchase price of $600 million in cash, subject to customary adjustments, and a contingent payment of up to $50 million which was payable six months following the closing upon the achievement of certain conditions related to the transition of LCD customer relationships. During the three and six months ended June 30, 2022, we recorded a pre-tax gain of $518 million ($396 million after tax) for the sale of LCD and $38 million ($31 million after tax) for the sale of a family of leveraged loan indices in Loss (gain) on dispositions in the consolidated statements of income. • In June of 2022, we completed the previously announced sale of the Base Chemicals business to News Corp for $295 million in cash. We did not recognize a gain on the sale of the Base Chemicals business. • In March of 2022, we completed the previously announced sale of CUSIP Global Services (“CGS”), a business within our Market Intelligence segment, to FactSet Research Systems Inc. for a purchase price of $1.925 billion in cash, subject to customary adjustments. During the six months ended June 30, 2022, we recorded a pre-tax gain of $1.344 billion ($1.006 billion after tax) in Loss (gain) on dispositions in the consolidated statements of income related to the sale of CGS. • In February of 2022, we completed the previously announced sale of Oil Price Information Services (“OPIS”) to News Corp for $1.150 billion in cash. We did not recognize a gain on the sale of OPIS. Operating Profit We consider operating profit to be an important measure for evaluating our operating performance and we evaluate operating profit for each of the reportable business segments in which we operate. 41 We internally manage our operations by reference to operating profit with economic resources allocated primarily based on each segment's contribution to operating profit. Segment operating profit is defined as operating profit before Corporate Unallocated expense and Equity in Income on Unconsolidated Subsidiaries. Segment operating profit is not, however, a measure of financial performance under U.S. GAAP, and may not be defined and calculated by other companies in the same manner. The tables below reconcile segment operating profit to total operating profit for the periods ended June 30: Three Months (in millions) 2023 2022 % Change Market Intelligence 1 $ 176 $ 702 (75)% Ratings 2 486 464 5% Commodity Insights 3 156 141 10% Mobility 4 68 58 18% Indices 5 226 270 (16)% Engineering Solutions 6 4 1 N/M Total segment operating profit 1,116 1,636 (32)% Corporate Unallocated expense 7 (216) (165) (31)% Equity in Income on Unconsolidated Subsidiaries 8 11 11 —% Total operating profit $ 911 $ 1,482 (39)% N/M – Represents a change equal to or in excess of 100% or not meaningful 1 2023 includes employee severance charges of $16 million, IHS Markit merger costs of $12 million, and an asset impairment of $5 million. 2022 includes a gain on disposition of $518 million, employee severance charges of $13 million, IHS Markit merger costs of $12 million, and acquisition-related costs of $1 million. 2023 and 2022 include amortization of intangibles from acquisitions of $140 million and $133 million, respectively. 2 2023 and 2022 include employee severance charges of $4 million and $7 million, respectively. 2023 and 2022 both include amortization of intangibles from acquisitions of $2 million. 3 2023 includes employee severance charges of $14 million and IHS Markit merger costs of $8 million. 2022 includes employee severance charges of $17 million and IHS Markit merger costs of $4 million. 2023 and 2022 include amortization of intangibles from acquisitions of $33 million and $32 million, respectively. 4 2023 includes employee severance charges of $3 million and acquisition-related costs of $1 million. 2022 includes acquisition-related costs of $3 million, employee severance charges of $2 million, and IHS Markit merger costs of $1 million. 2023 and 2022 include amortization of intangibles from acquisitions of $76 million a nd $77 million , respectively. 5 2023 includes employee severance charges of $2 million and IHS Markit merger costs of $1 million. 2022 includes a gain on disposition of $38 million, employee severance charges of $2 million, and IHS Markit merger costs of $1 million. 2023 and 2022 include amortization of intangibles from acquisitions of $9 million. 6 2022 includes employee severance charges of $1 million. 2022 includes amortization of intangibles from acquisitions of $15 million. 7 2023 includes a loss on disposition of $120 million, IHS Markit merger costs of $30 million, lease impairments of $15 million, employee severance charges of $12 million, disposition-related costs of $3 million, and acquisition-related costs of $1 million. 2022 includes IHS Markit merger costs of $117 million, employee severance charges of $18 million, acquisition-related costs of $4 million, and an asset write-off of $3 million. 2023 includes amortization of intangibles from acquisitions of $1 million. 8 2023 and 2022 include amortization of intangibles from acquisitions of $14 million. Segment Operating Profit — Segment operating profit decreased 32% as compared to 2022. Excluding the unfavorable impact of a higher gain on dispositions in 2022 of 34 percentage points, segment operating profit increased 2%. The increase was primarily due to revenue growth, partially offset by increased incentives and higher compensation costs. See “Segment Review” below for further information. Corporate Unallocated Expense — Corporate Unallocated expense includes costs for corporate functions, select initiatives, unoccupied office space and Kensho, included in selling and general expenses. Corporate Unallocated expense increased 31% compared to 2022. Excluding the impact of a loss on disposition in 2023 of 103 percentage points and lease impairments in 2023 of 13 percentage points, partially offset by higher IHS Markit merger costs in 2022 of 76 percentage points, higher employee severance charges in 2022 of 5 percentage points and an asset write-off in 2022 of 3 percentage points, Corporate Unallocated expense increased 63% primarily due to increased incentives. 42 Equity in Income on Unconsolidated Subsidiaries — The Company holds an investment in a 50/50 joint venture arrangement with shared control with CME Group that combined each company’s post-trade services into a joint venture, OSTTRA. The joint venture provides trade processing and risk mitigation operations and incorporates CME’s optimization businesses (Traiana, TriOptima, and Reset) and the Company’s MarkitSERV business. The combination is intended to increase operating efficiencies of both businesses to more effectively service clients with enhanced platforms and services for OTC markets across interest rate, FX, equity, and credit asset classes. Equity in Income on Unconsolidated Subsidiaries includes the OSTTRA joint venture acquired in connection with the merger with IHS Markit. Equity in Income on Unconsolidated Subsidiaries was $11 million for the three months ended June 30, 2023 and June 30, 2022. Foreign exchange rates had a favorable impact on operating profit of 1 percentage point. This impact refers to constant currency comparisons and the remeasurement of monetary assets and liabilities. Constant currency impacts are estimated by re-calculating current year results of foreign operations using the average exchange rate from the prior year. Remeasurement impacts are based on the variance between current-year and prior-year foreign exchange rate fluctuations on assets and liabilities denominated in currencies other than the individual business’s functional currency. Six Months (in millions) 2023 2022 % Change Market Intelligence 1 $ 404 $ 2,191 (82)% Ratings 2 962 976 (1)% Commodity Insights 3 343 299 15% Mobility 4 133 76 74% Indices 5 464 493 (6)% Engineering Solutions 6 19 2 N/M Total segment operating profit 2,325 4,037 (42)% Corporate Unallocated expense 7 (294) (678) 57% Equity in Income on Unconsolidated Subsidiaries 8 25 15 74% Total operating profit $ 2,056 $ 3,374 (39)% N/M – Represents a change equal to or in excess of 100% or not meaningful 1 2023 includes a gain on disposition of $46 million, IHS Markit merger costs of $25 million, employee severance charges of $22 million, and an asset impairment of $5 million. 2022 includes a gain on disposition of $1.9 billion, employee severance charges of $31 million, IHS Markit merger costs of $15 million, and acquisition-related costs of $1 million. 2023 and 2022 include amortization of intangibles from acquisitions of $281 million and $197 million, respectively. 2 2023 and 2022 include employee severance charges of $5 million and $12 million, respectively. 2023 and 2022 include amortization of intangibles from acquisitions of $4 million and $3 million, respectively. 3 2023 includes IHS Markit merger costs of $20 million and employee severance charges of $15 million. 2022 includes employee severance charges of $24 million and IHS Markit merger costs of $6 million. 2023 and 2022 include amortization of intangibles from acquisitions of $66 million and $45 million, respectively. 4 2023 includes employee severance charges of $4 million, acquisition-related costs of $1 million, and IHS Markit merger costs of $1 million. 2022 includes acquisition-related costs of $4 million, employee severance charges of $2 million, and IHS Markit merger costs of $1 million. 2023 and 2022 include amortization of intangibles from acquisitions of $150 million a nd $101 million , respectively. 5 2023 includes a gain on disposition of $4 million, employee severance charges of $3 million, and IHS Markit merger costs of $2 million. 2022 includes a gain on disposition of $38 million, employee severance charges of $4 million, and IHS Markit merger costs of $1 million. 2023 and 2022 include amortization of intangibles from acquisitions of $18 million and $13 million, respectively. 6 2022 includes employee severance charges of $2 million. 2023 and 2022 include amortization of intangibles from acquisitions of $1 million and $19 million, respectively. 7 2023 includes a loss on disposition of $120 million, IHS Markit merger costs of $66 million, lease impairments of $15 million, employee severance charges of $14 million, disposition-related costs of $16 million, and acquisition-related costs of $2 million. 2022 includes IHS Markit merger costs of $357 million, S&P Foundation grant of $200 million, employee severance charges of $64 million, acquisition-related costs of $5 million, lease impairments of $5 million, and an asset write-off of $3 million. 2023 and 2022 include amortization of intangibles from acquisitions of $2 million and $1 million, respectively. 8 2023 and 2022 include amortization of intangibles from acquisitions of $28 million. 43 Segment Operating Profit — Segment operating profit decreased 42% as compared to 2022. Excluding the unfavorable impact of a higher gain on dispositions in 2022 of 49 percentage points, higher amortization of intangibles from acquisitions in 2023 of 4 percentage points and higher IHS Markit merger costs in 2023 of 1 percentage point, partially offset by higher employee severance charges in 2022 of 1 percentage point, segment operating profit increased 11%. The increase was primarily due to revenue growth, partially offset by increased incentives, higher compensation costs and an increase in technology costs. See “Segment Review” below for further information. Corporate Unallocated Expense — Corporate Unallocated expense includes costs for corporate functions, select initiatives, unoccupied office space and Kensho, included in selling and general expenses. Corporate Unallocated expense decreased 57% compared to 2022. Excluding the impact of higher IHS Markit merger costs in 2022 of 70 percentage points, a S&P Foundation grant in 2022 of 48 percentage points, higher employee severance charges in 2022 of 12 percentage points and higher acquisition-related costs in 2022 of 1 percentage point, partially offset by a loss on disposition in 2023 of 28 percentage points, disposition-related costs in 2023 of 4 percentage points and lease impairments of 2 percentage points, Corporate Unallocated expense increased 40% primarily due to increased incentives. Equity in Income on Unconsolidated Subsidiaries — The Company holds an investment in a 50/50 joint venture arrangement with shared control with CME Group that combined each company’s post-trade services into a joint venture, OSTTRA. The joint venture provides trade processing and risk mitigation operations and incorporates CME’s optimization businesses (Traiana, TriOptima, and Reset) and the Company’s MarkitSERV business. The combination is intended to increase operating efficiencies of both businesses to more effectively service clients with enhanced platforms and services for OTC markets across interest rate, FX, equity, and credit asset classes. Equity in Income on Unconsolidated Subsidiaries includes the OSTTRA joint venture acquired in connection with the merger with IHS Markit. Equity in Income on Unconsolidated Subsidiaries was $25 million and $15 million for the six months ended June 30, 2023 and June 30, 2022, respectively. Foreign exchange rates had a favorable impact on operating profit of 1 percentage point. This impact refers to constant currency comparisons and the remeasurement of monetary assets and liabilities. Constant currency impacts are estimated by re-calculating current year results of foreign operations using the average exchange rate from the prior year. Remeasurement impacts are based on the variance between current-year and prior-year foreign exchange rate fluctuations on assets and liabilities denominated in currencies other than the individual business’s functional currency. Other Income, net Other income, net includes gains and losses on our mark-to-market investments and the net periodic benefit cost for our retirement and post retirement plans. Other income, net increased compared to the three months ended June 30, 2022 primarily due to gains on our mark-to-market investments in 2023 compared to losses in 2022 and decreased compared to the six months ended June 30, 2022 primarily due to losses on our mark-to-market investments in 2023 compared to gains in 2022. Interest Expense, net Interest expense, net decreased $2 million compared to the three months ended June 30, 2022. Interest expense, net increased $27 million compared to the six months ended June 30, 2022, primarily due to higher debt balances in 2023 resulting from the Exchange Offer that took place in March of 2022 in connection with the merger of IHS Markit. Loss on Extinguishment of Debt, net During the six months ended June 30, 2022, we recognized a $19 million loss on extinguishment of debt which includes a $118 million tender premium paid to tendering note holders in accordance with the terms of the tender offer, offset by a $99 million non-cash write-off related to the fair market value step up premium on extinguished debt. Provision for Income Taxes The effective income tax rate was 31.1% and 23.8% for the three and six months ended June 30, 2023, respectively, and 24.5% and 27.9% for the three and six months ended June 30, 2022, respectively. The higher rate for the three months ended June 30, 2023 was primarily due to the tax charge on divestitures. The higher rate for the six months ended June 30, 2022 was primarily due to the tax charge on merger related divestitures and deal related non-deductible costs. 44 Segment Review Market Intelligence Market Intelligence is a global provider of multi-asset-class data and analytics integrated with purpose-built workflow solutions. Market Intelligence's portfolio of capabilities are designed to help trading and investment professionals, government agencies, corporations and universities track performance, generate alpha, identify investment ideas, understand competitive and industry dynamics, perform valuations and manage credit risk. In January of 2023, we completed the acquisition of ChartIQ, a premier charting provider for the financial services industry. ChartIQ is a professional grade charting solution that allows users to visualize data with a fully interactive web-based library that works seamlessly across web, mobile and desktop. It provides advanced capabilities including trade visualization, options analytics, technical analysis and more. Additionally, ChartIQ allows clients to visualize vendor-supplied data combined with their own proprietary content, alternative datasets or analytics. The acquisition further enhances our S&P Capital IQ Pro platform, our digital investment solutions provider Markit Digital and other workflow solutions to provide the industry with leading visualization capabilities. The acquisition of ChartIQ is not material to our consolidated financial statements. In January of 2023, we completed the acquisition of TruSight Solutions LLC (“TruSight”) a provider of third-party vendor risk assessments. The acquisition further expands the breadth and depth of S&P Global’s third party vendor risk management solutions by offering high-quality validated assessment data to clients designed to reduce further the vendor due diligence burden on service providers to the financial services industry. The acquisition of TruSight is not material to our consolidated financial statements. In the first quarter of 2023, we received a contingent payment following the sale of Leveraged Commentary and Data (“LCD”) that resulted in a pre-tax gain of $46 million ($34 million after-tax) which was included in Loss (gain) on dispositions in the consolidated statements of income. In June of 2022, we completed the previously announced sale of Leveraged Commentary and Data (“LCD”), a business within our Market Intelligence segment, to Morningstar. During the three and six months ended June 30, 2022, we recorded a pre-tax gain of $518 million ($396 million after-tax) for the sale of LCD in Loss (gain) on dispositions in the consolidated statements of income. In March of 2022, we completed the previously announced sale of CUSIP Global Services (“CGS”), a business within our Market Intelligence segment, to FactSet Research Systems Inc. for a purchase price of $1.925 billion in cash, subject to customary adjustments. During the six months ended June 30 2022, we recorded a pre-tax gain of $1.344 billion ($1.006 billion after tax) in Loss (gain) on dispositions in the consolidated statements of income related to the sale of CGS. See Note 2 - Acquisitions and Divestitures to the consolidated financial statements of this Form 10-Q for information on the merger with IHS Markit. Market Intelligence includes the following business lines: • Desktop — a product suite that provides data, analytics and third-party research for global finance and corporate professionals, which includes the Capital IQ platforms (which are inclusive of S&P Capital IQ Pro, Capital IQ, Office and Mobile products); • Data & Advisory Solutions — a broad range of research, reference data, market data, derived analytics and valuation services covering both the public and private capital markets, delivered through flexible feed-based or API delivery mechanisms. This also includes issuer solutions for public companies, a range of products for the maritime & trade market, data and insight into Financial Institutions, the telecoms, technology and media space as well as ESG and supply chain data analytics; • Enterprise Solutions — software and workflow solutions that help our customers manage and analyze data; identify risk; reduce costs; and meet global regulatory requirements. The portfolio includes industry leading financial technology solutions like Wall Street Office, Enterprise Data Manager, Information Mosaic, and iLevel. Our Global Markets Group offering delivers bookbuilding platforms across multiple assets including municipal bonds, equities and fixed income; and • Credit & Risk Solutions — commercial arm that sells Ratings' credit ratings and related data and research, advanced analytics, and financial risk solutions which includes subscription-based offerings, RatingsXpress®, RatingsDirect® and Credit Analytics. 45 Subscription revenue at Market Intelligence is primarily derived from distribution of data, valuation services, analytics, third party research, and credit ratings-related information through both feed and web-based channels. Subscription revenue also includes software and hosted product offerings which provide maintenance and continuous access to our platforms over the contract term. Recurring variable revenue at Market Intelligence represents revenue from contracts for services that specify a fee based on, among other factors, the number of trades processed, assets under management, or the number of positions valued. Non-subscription revenue at Market Intelligence is primarily related to certain advisory, pricing conferences and events, and analytical services. The following table provides revenue and segment operating profit information for the periods ended June 30: (in millions) Three Months Six Months 2023 2022 % Change 2023 2022 % Change Revenue $ 1,079 $ 1,030 5% $ 2,150 $ 1,758 22% Subscription revenue $ 910 $ 867 5% $ 1,800 $ 1,526 18% Recurring variable revenue $ 130 $ 121 8% $ 255 $ 161 58% Non-subscription revenue $ 39 $ 42 (8)% $ 95 $ 71 33% % of total revenue: Subscription revenue 84 % 84 % 84 % 87 % Recurring variable revenue 12 % 12 % 12 % 9 % Non-subscription revenue 4 % 4 % 4 % 4 % U.S. revenue $ 646 $ 602 7% $ 1,274 $ 1,036 23% International revenue $ 433 $ 428 1% $ 876 $ 722 21% % of total revenue: U.S. revenue 60 % 58 % 59 % 59 % International revenue 40 % 42 % 41 % 41 % Operating profit 1 $ 176 $ 702 (75)% $ 404 $ 2,191 (82)% Operating margin % 16 % 68 % 19 % 125 % 1 Operating profit for the three and six months ended June 30, 2023 includes employee severance charges of $16 million and $22 million, respectively, IHS Markit merger costs of $12 million and $25 million, respectively, and an asset impairment of $5 million. Operating profit for the six months ended June 30, 2023 includes a gain on dispositions of $46 million. Operating profit for the three and six months ended June 30, 2022 includes a gain on dispositions of $518 million and $1.9 billion, respectively, employee severance charges of $13 million and $31 million, respectively, IHS Markit merger costs of $12 million and $15 million, respectively, and acquisition-related costs of $1 million. Additionally, operating profit includes amortization of intangibles from acquisitions of $140 million and $133 million for the three months ended June 30, 2023 and 2022, respectively, and $281 million and $197 million for the six months ended June 30, 2023 and 2022, respectively. Three Months Revenue increased 5% primarily due to subscription revenue growth for data feed products within Data and Advisory Solutions, work flow solutions at Enterprise Solutions, Market Intelligence Desktop products, and RatingsXpress®, RatingsDirect® and Credit Analytics within Credit & Risk Solutions. An increase in recurring variable revenue due to fixed income new issuance volumes also contributed to revenue growth. Foreign exchange rates had an unfavorable impact of less than 1 percentage point. Operating profit decreas ed 75%. Excludi ng the impact of a gain on dispositions in 2022 of 75 percentage points and higher amortization of intangibles in 2023 of 1 percentage point, operating profit increased 1% primarily due to revenue growth, partially offset by higher compensation costs and increased incentives. Foreign exchange rates had a favorable impact of 2 percentage points. Six Months Revenue increased 22% primarily due to the impact of the merger with IHS Markit. Subscription revenue growth for Market Intelligence Desktop products, RatingsXpress®, RatingsDirect®, and data feed products within Data and Advisory Solutions also contributed to revenue growth. Foreign exchange rates had an unfavorable impact of 1 percentage point. Operating profit decreased 82%. Ex cludi ng the impact of a higher gain on dispositions in 2022 of 97 percentage points, higher 46 amortization of intangibles in 2023 of 5 percentage points and higher IHS Markit merger costs in 2023 of 1 percentage point, operating profit increased 21% primarily due to revenue growth, partially offset by expenses associated with the merger with IHS Markit, higher compensation costs and increased incentives. Foreign exchange rates had an unfavorable impact of 1 percentage point. For a further discussion of competitive and other risks inherent in our Market Intelligence business, see Item 1A, Risk Factors in this Form 10-Q and our most recently filed Annual Report on Form 10-K. For a further discussion of the legal and regulatory matters see Note 12 – Commitments and Contingencies to the consolidated financial statements of this Form 10-Q. Ratings Ratings is an independent provider of credit ratings, research, and analytics, offering investors and other market participants information, ratings and benchmarks. Credit ratings are one of several tools investors can use when making decisions about purchasing bonds and other fixed income investments. They are opinions about credit risk and our ratings express our opinion about the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time. Our credit ratings can also relate to the credit quality of an individual debt issue, such as a corporate or municipal bond, and the relative likelihood that the issue may default. Ratings disaggregates its revenue between transaction and non-transaction. Transaction revenue primarily includes fees associated with: • ratings related to new issuance of corporate and government debt instruments, as well as structured finance debt instruments; and • bank loan ratings. Non-transaction revenue primarily includes fees for surveillance of a credit rating, annual fees for customer relationship-based pricing programs, fees for entity credit ratings and global research and analytics at CRISIL. Non-transaction revenue also includes an intersegment royalty charged to Market Intelligence for the rights to use and distribute content and data developed by Ratings. Royalty revenue was $38 million and $74 million three and six months ended June 30, 2023 and 2022, respectively, and $36 million and $70 million for the three and six months ended June 30, 2022, respectively. The following table provides revenue and segment operating profit information for the periods ended June 30: (in millions) Three Months Six Months 2023 2022 % Change 2023 2022 % Change Revenue $ 851 $ 796 7% $ 1,675 $ 1,663 1% Transaction revenue $ 383 $ 344 11% $ 761 $ 747 2% Non-transaction revenue $ 468 $ 452 4% $ 914 $ 916 —% % of total revenue: Transaction revenue 45 % 43 % 45 % 45 % Non-transaction revenue 55 % 57 % 55 % 55 % U.S. revenue $ 466 $ 438 6% $ 926 $ 912 2% International revenue $ 385 $ 358 8% $ 749 $ 751 —% % of total revenue: U.S. revenue 55 % 55 % 55 % 55 % International revenue 45 % 45 % 45 % 45 % Operating profit 1 $ 486 $ 464 5% $ 962 $ 976 (1)% Operating margin % 57 % 58 % 57 % 59 % 1 Operating profit for the three and six months ended June 30, 2023 includes employee severance charges of $4 million and $5 million, respectively. Operating profit for the three and six months ended June 30, 2022 includes employee severance charges of $7 million and $12 million, respectively. Additionally, operating profit includes amortization of intangibles from acquisitions of $2 million for the three months ended June 30, 2023 and 2022, and $4 million and $3 million for the six months ended June 30, 2023 and 2022, respectively. 47 Three Months Revenue increased 7%, with an unfavorable impact from foreign exchange rates of less than 1 percentage point. Transaction revenue increased due to growth in corporate bond ratings revenue driven by increased investment-grade and high-yield issuance volumes primarily due to higher refinancing activity, partially offset by a decrease in structured finance revenues and lower bank loan ratings revenue driven by decreased issuance volumes. Non-transaction revenue increased due to an increase in surveillance revenue, higher Ratings Evaluation Service (“RES”) revenue and an increase in revenue at our CRISIL subsidiary, partially offset by a decrease in new entity credit ratings revenue. Transaction and non-transaction revenue also benefited from improved contract terms across product categories. Operating profit increased 5%, with a favorable impact from foreign exchange rates of less than 1 percentage point. Excluding the impact of higher employee severance charges in 2022 of 1 percentage point, operating profit increased 4% due to revenue growth, partially offset by prior-year write-downs in incentive compensation as result of financial performance and higher current-year compensation costs. Six Months Revenue increased 1%, with an unfavorable impact from foreign exchange rates of 1 percentage point. Transaction revenue increased due to growth in corporate bond ratings revenue driven by increased investment-grade and high-yield issuance volumes primarily due to higher refinancing activity, partially offset by lower bank loan ratings revenue driven by decreased issuance volumes. Non-transaction revenue decreased due to a decrease in new entity credit ratings revenue, partially offset by an increase in surveillance revenue and an increase in revenue at our CRISIL subsidiary. Transaction and non-transaction revenue also benefited from improved contract terms across product categories. Operating profit decreased 1%, with a favorable impact from foreign exchange rates of less than 1 percentage point. Excluding the impact of higher employee severance charges in 2022 of 1 percentage point, operating profit decreased 2% primarily due to prior-year write-downs in incentive compensation as result of financial performance and higher current-year compensation costs, partially offset by revenue growth. Market Issuance Volumes We monitor market issuance volumes regularly within Ratings. Market issuance volumes noted within the discussion that follows are based on where an issuer is located or where the assets associated with an issue are located. Structured Finance issuance includes amounts when a transaction closes, not when initially priced, and excludes domestically rated Chinese issuance. The following tables depict changes in issuance levels as compared to the prior year based on data from SDC Platinum for Corporate bond issuance and based on a composite of external data feeds and Ratings' internal estimates for Structured Finance issuance. Second Quarter Compared to Prior Year Year-to-Date Compared to Prior Year Corporate Bond Issuance * U.S. Europe Global U.S. Europe Global High-yield issuance 106% 117% 91% 53% 30% 29% Investment-grade issuance 20% 52% 21% —% 22% 4% Total issuance ** 31% 39% 14% 6% 15% 1% Note – Global issuance includes U.S., Europe, Asia and the rest of the world. * Includes Industrials and Financial Services. ** Includes rated and non-rated issuance. • Corporate issuance was up in the second quarter and first half of 2023 in the U.S. and Europe driven by strong increases in high-yield issuance and investment-grade issuance in the quarter due to an increase in refinancing activity ahead of the U.S. debt ceiling expiration date and anticipated interest rate increases. 48 Second Quarter Compared to Prior Year Year-to-Date Compared to Prior Year Structured Finance Issuance U.S. Europe Global U.S. Europe Global Asset-backed securities (“ABS”) (6)% 49% 11% (9)% 69% 3% Structured credit (primarily CLOs) (46)% (8)% (42)% (41)% (30)% (40)% Commercial mortgage-backed securities (“CMBS”) (73)% (100)% (74)% (82)% (60)% (81)% Residential mortgage-backed securities (“RMBS”) (60)% 32% (38)% (61)% (32)% (47)% Covered bonds * 16% 22% * 20% 11% Total issuance (37)% 19% (11)% (41)% 10% (20)% Note – Global issuance includes U.S., Europe, Asia and the rest of the world. * Represents no activity in 2023 or 2022. • ABS issuance decreased in the U.S. driven by a decline in Credit Cards and Non-Traditional / Esoterics and was up in Europe although from a low 2022 base. • CLO issuance was down in the U.S. structured credit markets due to a decline in new and refinancing issuance and down in Europe due to a decline in refinancing issuance. • CMBS issuance was down in the U.S. and Europe reflecting unfavorable market conditions. • RMBS issuance was down in the U.S. reflecting unfavorable market conditions. • Covered bond (debt securities backed by mortgages or other high-quality assets that remain on the issuer's balance sheet) issuance in Europe increased with the elimination of cheaper government funding programs. For a further discussion of competitive and other risks inherent in our Ratings business, see Item 1A, Risk Factors in this Form 10-Q and our most recently filed Annual Report on Form 10-K. For a further discussion of the legal and regulatory matters see Note 12 – Commitments and Contingencies to the consolidated financial statements of this Form 10-Q. Commodity Insights Commodity Insights is a leading independent provider of information and benchmark prices for the commodity and energy markets. Commodity Insights provides essential price data, analytics, industry insights and software & services, enabling the commodity and energy markets to perform with greater transparency and efficiency. Commodity Insights includes the following business lines: • Energy & Resources Data & Insights — includes data, news, insights, and analytics for petroleum, gas, power & renewables, petrochemicals, metals & steel, agriculture, and other commodities; • Price Assessments — includes price assessments and benchmarks, and forward curves; • Upstream Data & Insights — includes exploration & production data and insights, software and analytics; and • Advisory & Transactional Services — includes consulting services, conferences, events and global trading services. Commodity Insights' revenue is generated primarily through the following sources: • Subscription revenue — primarily from subscriptions to our market data and market insights (price assessments, market reports and commentary and analytics) along with other information products and software term licenses; • Sales usage-based royalties — primarily from licensing our proprietary market price data and price assessments to commodity exchanges; and • Non-subscription revenue — conference sponsorship, consulting engagements, events, and perpetual software licenses. See Note 2 - Acquisitions and Divestitures to the consolidated financial statements of this Form 10-Q for information on the merger with IHS Markit. 49 The following table provides revenue and segment operating profit information for the periods ended June 30: (in millions) Three Months Six Months 2023 2022 % Change 2023 2022 % Change Revenue $ 462 $ 438 5% $ 970 $ 801 21% Subscription revenue $ 420 $ 397 6% $ 829 $ 694 20% Sales usage-based royalties $ 18 $ 15 24% $ 37 $ 33 10% Non-subscription revenue $ 24 $ 26 (9)% $ 104 $ 74 40% % of total revenue: Subscription revenue 91 % 91 % 85 % 87 % Sales usage-based royalties 4 % 3 % 4 % 4 % Non-subscription revenue 5 % 6 % 11 % 9 % U.S. revenue $ 174 $ 171 2% $ 406 $ 328 24% International revenue $ 288 $ 267 8% $ 564 $ 473 19% % of total revenue: U.S. revenue 38 % 39 % 42 % 41 % International revenue 62 % 61 % 58 % 59 % Operating profit 1 $ 156 $ 141 10% $ 343 $ 299 15% Operating margin % 34 % 32 % 35 % 37 % 1 Operating profit for the three and six months ended June 30, 2023 includes employee severance charges of $14 million and $15 million, respectively, and IHS Markit merger costs of $8 million and $20 million, respectively. Operating profit for the three and six months ended June 30, 2022 includes employee severance costs of $17 million and $24 million, respectively, and IHS Markit merger costs of $4 million and $6 million, respectively. Additionally, operating profit includes amortization of intangibles from acquisitions of $33 million and $32 million for the three months ended June 30, 2023 and 2022, respectively, and $66 million and $45 million for the six months ended June 30, 2023 and 2022, respectively. Three Months Revenue increased 5% primarily due to continued demand for market data and market insights products driven by expanded product offerings to our existing customers under enterprise use contracts and higher conference revenue. An increase in sales usage-based royalties from the licensing of our proprietary market data and price assessments to commodity exchanges mainly due to increased trading volumes across all commodity sectors also contributed to revenue growth. Revenue growth was partially offset by the unfavorable impact of divestitures in 2022. The Energy & Resources Data & Insights, Price Assessments and Upstream Data & Insights businesses continue to be the most significant revenue streams, followed by the Advisory & Transactional Services business. Foreign exchange rates had an unfavorable impact of less than 1 percentage point. Operating profit increased 10%. Excluding the impact of higher IHS Markit merger costs in 2023 of 9 percentage points, higher amortization of intangibles from acquisitions in 2023 of 1 percentage point, partially offset by higher employee severance charges in 2022 of 7 percentage points and acquisition-related costs in 2022 of 1 percentage point, operating profit increased 8%. The increase was primarily due to revenue growth partially offset by higher compensation costs, increased incentives and an increase in strategic investments. Foreign exchange rates had a favorable impact of 3 percentage points. Six Months Revenue increased 21% primarily due to the impact of the merger with IHS Markit, continued demand for market data and market insights products driven by expanded product offerings to our existing customers under enterprise use contracts and higher conference revenue. An increase in sales usage-based royalties from the licensing of our proprietary market data and price assessments to commodity exchanges mainly due to increased trading volumes also contributed to revenue growth. The Energy & Resources Data & Insights, Price Assessments and Upstream Data & Insights businesses continue to be the most significant revenue streams, followed by the Advisory & Transactional Services business. Foreign exchange rates had an unfavorable impact of less than 1 percentage point. Operating profit increased 15%. Excluding the impact of higher amortization of intangibles from acquisitions in 2023 of 3 50 percentage points and higher IHS Markit merger costs in 2023 of 2 percentage points, partially offset by higher employee severance charges in 2022 of 1 percentage point and acquisition-related costs in 2022 of 1 percentage point, operating profit increased 19%. The increase was primarily due to revenue growth partially offset by expenses associated with the merger with IHS Markit, higher compensation costs, increased incentives, an increase in costs related to the Commodity Insights conferences in 2023 and an increase in strategic investments. Foreign exchange rates had a favorable impact of 4 percentage points. For a further discussion of competitive and other risks inherent in our Commodity Insights business, see Item 1A, Risk Factors in this Form 10-Q and our most recently filed Annual Report on Form 10-K. For a further discussion of the legal and regulatory matters see Note 12 – Commitments and Contingencies to the consolidated financial statements of this Form 10-Q. Mobility Mobility is a leading provider of solutions serving the full automotive value chain including vehicle manufacturers (OEMs), automotive suppliers, mobility service providers, retailers, consumers, and finance and insurance companies. In February of 2023, we completed the acquisition of Market Scan Information Systems Inc. (“Market Scan”), a leading provider of automotive pricing and incentive intelligence, including Automotive Payments as a Service TM and its powerful payment calculation engine. The addition of Market Scan to Mobility will enable the integration of detailed transaction intelligence in areas that are complementary to existing services for dealers, OEMs, lenders, and other market participants. The acquisition of Market Scan is not material to our consolidated financial statements. Mobility includes the following business lines: • Dealer — includes analytics to predict future buyers, targeted marketing, and vehicle history data to allow people to shop, buy, service and sell used cars; • Manufacturing — includes insights, forecasts and advisory services spanning the entire automotive value chain, from product planning to marketing, sales and the aftermarket; and • Financial — includes reports and data feeds to support lenders and insurance companies . Mobility's revenue is generated primarily through the following sources: • Subscription revenue — Mobility's core information products provide critical information and insights to all global OEMs, most of the world’s leading suppliers, and the majority of North American dealerships. Mobility operates across both the new and used car markets. Mobility provides data and insight on future vehicles sales and production, including detailed forecasts on technology and vehicle components; supplies car makers and dealers with market reporting products, predictive analytics and marketing automation software; and supports dealers with vehicle history reports, used car listings and service retention services. Mobility also sells a range of services to financial institutions, to support their marketing, insurance underwriting and claims management activities; and • Non-subscription revenue — One-time transactional sales of data that are non-cyclical in nature – and that are usually tied to underlying business metrics such as OEM marketing spend or safety recall activity – as well as consulting and advisory services. See Note 2 - Acquisitions and Divestitures to the consolidated financial statements of this Form 10-Q for information on the merger with IHS Markit. 51 The following table provides revenue and segment operating profit information for the periods ended June 30: (in millions) Three Months Six Months 2023 2022 % Change 2023 2022 % Change Revenue $ 369 $ 337 10% $ 727 $ 452 61% Subscription revenue $ 292 $ 264 11% $ 573 $ 350 64% Non-subscription revenue $ 77 $ 73 6% $ 154 $ 102 51% % of total revenue: Subscription revenue 79 % 78 % 79 % 77 % Non-subscription revenue 21 % 22 % 21 % 23 % U.S. revenue $ 303 $ 273 11% $ 597 $ 365 64% International revenue $ 66 $ 64 3% $ 130 $ 87 50% % of total revenue: U.S. revenue 82 % 81 % 82 % 81 % International revenue 18 % 19 % 18 % 19 % Operating profit 1 $ 68 $ 58 18% $ 133 $ 76 74% Operating margin % 19 % 17 % 18 % 17 % 1 Operating profit for the three and six months ended June 30, 2023 includes employee severance charges of $3 million and $4 million, respectively, and acquisition-related costs of $1 million. Operating profit for the six months ended June 30, 2023 includes IHS Markit merger costs of $1 million. Operating profit for the three and six months ended June 30, 2022 includes acquisition-related costs of $3 million and $4 million, respectively, employee severance charges of $2 million and IHS Markit merger costs of $1 million. Additionally, operating profit includes amortization of intangibles from acquisitions of $76 million and $77 million for the three months ended June 30, 2023 and 2022, respectively, and $150 million and $101 million for the six months ended June 30, 2023 and 2022, respectively. Three Months Revenue increased 10% primarily due to price increases and new business growth within the Dealer business as well as the favorable impact of the acquisition of Market Scan in February of 2023. Increases within the Financial business due to strong underwriting volumes and the Manufacturing business due to strong recall activity also contributed to revenue growth. Operating profit increased 18%. Excluding the impact of higher acquisition-related costs in 2022 of 13 percentage points, higher amortization of intangibles in 2022 of 4 percentage points and higher IHS Markit merger costs in 2022 of 1 percentage points, partially offset by higher employee severance charges in 2023 of 5 percentage points, operating profit increased 5% driven by revenue growth, partially offset by increased incentives, higher compensation costs and expenses associated with the acquisition of Market Scan. Six Months Revenue and operating profit increased primarily due to the impact of the merger with IHS Markit. The Mobility business was acquired in connection with the merger with IHS Markit on February 28, 2022 and financial results are included since the date of acquisition. For a further discussion of competitive and other risks inherent in our Mobility business, see Item 1A, Risk Factors in this Form 10-Q and our most recently filed Annual Report on Form 10-K. For a further discussion of the legal and regulatory matters see Note 12 – Commitments and Contingencies to the consolidated financial statements of this Form 10-Q. 52 Indices Indices is a global index provider maintaining a wide variety of valuation and index benchmarks for investment advisors, wealth managers and institutional investors. Indices’ mission is to provide transparent benchmarks to help with decision making, collaborate with the financial community to create innovative products, and provide investors with tools to monitor world markets. During the three and six months ended June 30, 2022, we recorded a pre-tax gain of $38 million ($31 million after-tax) in Loss (gain) on dispositions in the consolidated statements of income for the sale of a family of leveraged loan indices, within our Indices segment, to Morningstar. Indices derives revenue from asset-linked fees when investors direct funds into its proprietary designed or owned indexes, sales usage-based royalties of its indices, as well as data subscription arrangements. Specifically, Indices generates revenue from the following sources: • Investment vehicles — asset-linked fees such as ETFs and mutual funds, that are based on the S&P Dow Jones Indices' benchmarks that generate revenue through fees based on assets and underlying funds; • Exchange traded derivatives — generate sales usage-based royalties based on trading volumes of derivatives contracts listed on various exchanges; • Index-related licensing fees — fixed or variable annual and per-issue asset-linked fees for over-the-counter derivatives and retail-structured products; and • Data and customized index subscription fees — fees from supporting index fund management, portfolio analytics and research. See Note 2 - Acquisitions and Divestitures to the consolidated financial statements of this Form 10-Q for information on the merger with IHS Markit. The following table provides revenue and segment operating profit information for the periods June 30: (in millions) Three Months Six Months 2023 2022 % Change 2023 2022 % Change Revenue $ 348 $ 339 2% $ 689 $ 661 4% Asset-linked fees $ 211 $ 214 (2)% $ 420 $ 433 (3)% Subscription revenue $ 70 $ 68 3% $ 136 $ 121 12% Sales usage-based royalties $ 67 $ 57 17% $ 133 $ 107 23% % of total revenue: Asset-linked fees 61 % 63 % 61 % 66 % Subscription revenue 20 % 20 % 20 % 18 % Sales usage-based royalties 19 % 17 % 19 % 16 % U.S. revenue $ 279 $ 275 1% $ 560 $ 546 2% International revenue $ 69 $ 64 8% $ 129 $ 115 12% % of total revenue: U.S. revenue 80 % 81 % 81 % 83 % International revenue 20 % 19 % 19 % 17 % Operating profit 1 $ 226 $ 270 (16)% $ 464 $ 493 (6)% Less: net operating profit attributable to noncontrolling interests 58 72 119 131 Net operating profit $ 168 $ 198 (15)% $ 345 $ 362 (5)% Operating margin % 65 % 79 % 67 % 75 % Net operating margin % 48 % 58 % 50 % 55 % 53 1 Operating profit for the three and six months ended June 30, 2023 includes employee severance charges of $2 million and $3 million, respectively, and IHS Markit merger costs of $1 million and $2 million, respectively. Operating profit for the six months ended June 30, 2023 includes a gain on disposition of $4 million. Operating profit for the three and six months ended June 30, 2022 includes a gain on disposition of $38 million, employee severance charges of $2 million and $4 million, respectively, and IHS Markit merger costs of $1 million. Additionally, operating profit includes amortization of intangibles from acquisitions of $9 million for the three months ended June 30, 2023 and 2022 and $18 million and $13 million for the six months ended June 30, 2023 and 2022, respectively. Three Months Revenue at Indices increased 2% primarily due to higher exchange-traded derivative revenue driven by continued strength in average trading volume and higher data subscription revenue, partially offset by lower asset-linked fees revenue driven by product mix. Ending average levels of assets under management (“AUM”) for ETFs increased 19% to $2.929 trillion compared to June 30, 2022 and average levels of AUM for ETFs increased 5% to $2.771 trillion compared to the three months ended June 30, 2022. Foreign exchange rates had an unfavorable impact of less than 1 percentage point. Operating profit decreased 16%. Excluding the impact of a gain on dispositions in 2022 of 14 percentage points, operating profit decreased 2% driven by an increase in strategic investments, higher compensation costs and increased incentives, partially offset by revenue growth. Foreign exchange rates had a favorable impact of less than 1 percentage point. Six Months Revenue at Indices increased 4% primarily due to higher exchange-traded derivative revenue driven by continued strength in average trading volume, higher data subscription revenue and the impact of the merger with IHS Markit, partially offset by lower asset-linked fees revenue driven by product mix. Foreign exchange rates had an unfavorable impact of less than 1 percentage point. Operating profit decreased 6%. Excluding the impact of a higher gain on dispositions in 2022 of 7 percentage points and higher amortization of intangibles from acquisitions in 2023 of 1 percentage point, operating profit increased 2%. The impact of revenue growth was partially offset by an increase in strategic investments, higher compensation costs, increased incentives and the impact of the merger with IHS Markit. Foreign exchange rates had a favorable impact of less than 1 percentage point. For a further discussion of competitive and other risks inherent in our Indices business, see Item 1A, Risk Factors in this Form 10-Q and our most recently filed Annual Report on Form 10-K. For a further discussion of the legal and regulatory matters see Note 12 – Commitments and Contingencies to the consolidated financial statements of this Form 10-Q. Engineering Solutions Engineering Solutions is a leading provider of engineering standards and related technical knowledge. Engineering Solutions includes our Product Design offerings that provide technical professionals with the information and insight required to more effectively design products, optimize engineering projects and outcomes, solve technical problems and address complex supply chain issues. Our offerings utilize advanced knowledge discovery technologies, research tools, and software-based engineering decision engines to advance innovation, maximize productivity, improve quality and reduce risk. Engineering Solutions' revenue is generated primarily through the following sources: • Subscription revenue — primarily from subscriptions to our Product Design offerings providing standards, codes and specifications; applied technical reference; engineering journals, reports, best practices, and other vetted technical reference; and patents and patent applications, which includes Engineering Workbench; Goldfire's cognitive search and other advanced knowledge discovery capabilities that help pinpoint answers buried in enterprise systems and unstructured data enabling engineers and technical professionals to accelerate problem solving; and • Non-subscription revenue — primarily from retail transaction and consulting services. As of May 2, 2023, we completed the sale of Engineering Solutions and the results are included through that date. See Note 2 - Acquisitions and Divestitures to the consolidated financial statements of this Form 10-Q for information on the sale of Engineering Solutions and the merger with IHS Markit. 54 The following table provides revenue and segment operating profit information for the periods ended June 30: (in millions) Three Months Six Months 2023 2022 % Change 2023 2022 % Change Revenue $ 33 $ 96 (65)% $ 133 $ 129 3% Subscription revenue $ 31 $ 89 (65)% $ 125 $ 119 5% Non-subscription revenue $ 2 $ 7 (77)% $ 8 $ 10 (21)% % of total revenue: Subscription revenue 95 % 93 % 94 % 92 % Non-subscription revenue 5 % 7 % 6 % 8 % U.S. revenue $ 18 $ 53 (66)% $ 72 $ 71 1% International revenue $ 15 $ 43 (65)% $ 61 $ 58 6% % of total revenue: U.S. revenue 55 % 55 % 54 % 55 % International revenue 45 % 45 % 46 % 45 % Operating profit 1 $ 4 $ 1 N/M $ 19 $ 2 N/M Operating margin % 13 % 1 % 14 % 1 % N/M - Represents a change equal to or in excess of 100% or not meaningful 1 Operating profit for the three and six months ended June 30, 2022 includes employee severance charges of $1 million and $2 million, respectively. Additionally, operating profit includes amortization of intangibles from acquisitions of $15 million for the three months ended June 30, 2022 and $1 million and $19 million for the six months ended June 30, 2023 and 2022, respectively. Three Months Revenue and operating profit decreased as a result of the sale of Engineering Solutions. As of May 2, 2023, we completed the sale of Engineering Solutions and the results are included through that date. Six Months Revenue and operating profit increased primarily due to the impact of the merger with IHS Markit. The Engineering Solutions business was acquired in connection with the merger with IHS Markit on February 28, 2022 and the financial results are included since the date of acquisition through May 2, 2023. For a further discussion of competitive and other risks inherent in our Engineering Solutions business, see Item 1A, Risk Factors in this Form 10-Q and our most recently filed Annual Report on Form 10-K. For a further discussion of the legal and regulatory matters see Note 12 – Commitments and Contingencies to the consolidated financial statements of this Form 10-Q. LIQUIDITY AND CAPITAL RESOURCES We continue to maintain a strong financial position. Our primary source of funds for operations is cash from our businesses. Cash on hand, cash flows from operations and availability under our existing credit facility are expected to be sufficient to meet any additional operating and recurring cash needs into the foreseeable future. We use our cash for a variety of needs, including but not limited to: ongoing investments in our businesses, strategic acquisitions, share repurchases, dividends, repayment of debt, capital expenditures and investment in our infrastructure. 55 Cash Flow Overview Cash, cash equivalents, and restricted cash were $1,562 million as of June 30, 2023, an increase of $275 million from December 31, 2022. The following table provides cash flow information for the six months ended June 30: (in millions) 2023 2022 % Change Net cash provided by (used for): Operating activities $ 1,363 $ 676 N/M Investing activities $ 656 $ 3,745 (82)% Financing activities $ (1,747) $ (7,268) (76)% In the first six months of 2023, free cash flow increased $654 million to $1,164 million compared to $510 million in the first six months of 2022. The increase is primarily due to an increase in cash provided by operating activities as discussed below. Free cash flow is a non-GAAP financial measure and reflects our cash flow provided by operating activities less capital expenditures and distributions to noncontrolling interest holders. Capital expenditures include purchases of property and equipment and additions to technology projects. See “Reconciliation of Non-GAAP Financial Information” below for a reconciliation of cash flow provided by operating activities, the most directly comparable U.S. GAAP financial measure, to free cash flow. Operating activities Cash provided by operating activities increased $687 million to $1,363 million for the first six months of 2023. The increase is mainly due to higher operating results in 2023, higher IHS Markit merger costs in 2022 and a grant payment to the S&P Global Foundation in 2022. For the first six months of 2023, our cash taxes were adversely impacted by the requirement to capitalize and amortize research and development expenses under Internal Revenue Code Section 174. If legislation is not passed to defer, repeal, or otherwise modify the capitalization and amortization requirement we expect our cash taxes to be greater than in the prior year. See Note 3 – Income Taxes to the consolidated financial statements of this Form 10-Q for further information. Investing activities Our cash outflows from investing activities are primarily for acquisitions and capital expenditures, while cash inflows are primarily proceeds from dispositions. Cash provided by investing activities decreased to $656 million for the first six months of 2023 compared to $3,745 million in the first six months of 2022, primarily due to higher cash proceeds received from dispositions in 2022 related to the dispositions of CUSIP Global Services, Oil Price Information Services, the Leveraged Commentary and Data business and a related family of leveraged loan indices, and the Base Chemicals business. See Note 2 — Acquisitions and Divestitures to the consolidated financial statements of this Form 10-Q for further discussion. Financing activities Our cash outflows from financing activities consist primarily of share repurchases, dividends to shareholders and repayments of short-term and long-term debt, while cash inflows are primarily attributable to the borrowing of short-term and long-term debt and proceeds from the exercise of stock options. Cash used for financing activities decreased $5,521 million to $1,747 million for the first six months of 2023. The decrease is primarily attributable to a decrease in cash used for share repurchases in 2023. During the six months ended June 30, 2023, we purchased a total of 3.9 million shares for $1.5 billion of cash. During the six months ended June 30, 2022, we purchased a total of 19.0 million shares for $8.5 billion of cash. See Note 8 — Equity to the consolidated financial statements of this Form 10-Q for further discussion. 56 Contractual Obligations We typically have various contractual obligations, which are recorded as liabilities in our consolidated balance sheets, while other items, such as certain purchase commitments and other executory contracts, are not recognized. For example, we are contractually committed to contracts for information-technology outsourcing, certain enterprise-wide information-technology software licensing and maintenance. In the first quarter of 2023, S&P Global and Amazon Web Services (“AWS”) entered into a multi-year strategic collaboration agreement with a purchase obligation of $1.0 billion, before incremental credits, over a five-year period. With AWS as its preferred cloud provider, S&P Global will enhance its cloud infrastructure, accelerate business growth, engineer new innovations for key industry segments, and help their customers navigate rapidly changing market conditions . Additional Financing We have the ability to borrow a total of $2.0 billion through our commercial paper program, which is supported by our $2.0 billion five-year credit agreement (our “credit facility”) that will terminate on April 26, 2026. As of June 30, 2023 and December 31, 2022, respectively, there was $740 million and $188 million of commercial paper outstanding. Commitment fees for the unutilized commitments under the credit facility and applicable margins for borrowings thereunder are linked to the Company achieving three environmental sustainability performance indicators related to emissions, tested annually. We currently pay a commitment fee of 8 basis points. The credit facility contains customary affirmative and negative covenants and customary events of default. The occurr ence of an event of default could result in an acceleration of the obligations under the credit facility. T he only financial covenant required is that our indebtedness to cash flow ratio, as defined in our credit facility, was not greater than 4 to 1, and this covenant level has never been exceeded. Dividends On January 25, 2023, the Board of Directors approved a quarterly common stock dividend of $0.90 per share. Supplemental Guarantor Financial Information The senior notes described below were issued by S&P Global Inc. and are fully and unconditionally guaranteed by Standard & Poor's Financial Services LLC, a 100% owned subsidiary of the Company. Issuance of all senior notes described below have been registered with the SEC. • On August 13, 2020, we issued $600 million of 1.25% senior notes due in 2030 and $700 million of 2.3% senior notes due in 2060. • On November 26, 2019, we issued $500 million of 2.5% senior notes due in 2029 and $600 million of 3.25% senior notes due in 2049. • On May 17, 2018, we issued $500 million of 4.5% senior notes due in 2048. • On September 22, 2016, we issued $500 million of 2.95% senior notes due in 2027. • On May 26, 2015, we issued $700 million of 4.0% senior notes due in 2025. • On November 2, 2007 we issued $400 million of 6.55% Senior Notes due 2037. • On March 1, 2023, S&P Global Inc. issued new senior notes that have been registered with the SEC and guaranteed by Standard & Poor's Financial Services LLC in exchange for the following series of unregistered senior notes of like principal amount and terms: • $700 million of 4.75% Senior Notes due 2028 that were originally issued on March 2, 2022; • $921 million of 4.25% Senior Notes due 2029 that were originally issued on March 2, 2022; • $1,237 million of 2.45% Senior Notes due 2027 that were originally issued on March 18, 2022; • $1,227 million of 2.70% Sustainability-Linked Senior Notes due 2029 that were originally issued on March 18, 2022; • $1,492 million of 2.90% Senior Notes due 2032 that were originally issued on March 18, 2022; • $974 million of 3.70% Senior Notes due 2052 that were originally issued on March 18, 2022; and • $500 million of 3.90% Senior Notes due 2062 that were originally issued on March 18, 2022. 57 The notes above are unsecured and unsubordinated and rank equally and ratably with all of our existing and future unsecured and unsubordinated debt. The guarantees are the subsidiary guarantor’s unsecured and unsubordinated debt and rank equally and ratably with all of the subsidiary guarantor’s existing and future unsecured and unsubordinated debt. The guarantees of the subsidiary guarantor may be released and discharged upon (i) a sale or other disposition (including by way of consolidation or merger) of the subsidiary guarantor or the sale or disposition of all or substantially all the assets of the subsidiary guarantor (in each case other than to the Company or a person who, prior to such sale or other disposition, is an affiliate of the Company); (ii) upon defeasance or discharge of any applicable series of the notes, as described above; or (iii) at such time as the subsidiary guarantor ceases to guarantee indebtedness for borrowed money, other than a discharge through payment thereon, under any Credit Facility of the Company, other than any such Credit Facility of the Company the guarantee of which by the subsidiary guarantor will be released concurrently with the release of the subsidiary guarantor’s guarantees of the notes. Other subsidiaries of the Company do not guarantee the registered debt securities of either S&P Global Inc. or Standard & Poor's Financial Services LLC (the “Obligor Group”) which are referred to as the “Non-Obligor Group”. The following tables set forth the summarized financial information of the Obligor Group on a combined basis. This summarized financial information excludes the Non-Obligor Group. Intercompany balances and transactions between members of the Obligor Group have been eliminated. This information is not intended to present the financial position or results of operations of the Obligor Group in accordance with U.S. GAAP. Summarized results of operations for the periods ended June 30, 2023 are as follows: (in millions) Three Months Six Months Revenue $ 775 $ 1,530 Operating Profit 451 979 Net Income 104 589 Net income attributable to S&P Global Inc. 104 589 Summarized balance sheet information as of June 30, 2023 and December 31, 2022 is as follows: (in millions) June 30, December 31, 2023 2022 Current assets (excluding intercompany from Non-Obligor Group) $ 921 $ 699 Non-current assets 1,337 1,410 Current liabilities (excluding intercompany to Non-Obligor Group) 1,354 1,046 Non-current liabilities 11,065 11,172 Intercompany payables to Non-Obligor Group 13,530 11,926 RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION Free cash flow is a non-GAAP financial measure and reflects our cash flow provided by operating activities less capital expenditures and distributions to noncontrolling interest holders. Capital expenditures include purchases of property and equipment and additions to technology projects. Our cash flow provided by operating activities is the most directly comparable U.S. GAAP financial measure to free cash flow. We believe the presentation of free cash flow allows our investors to evaluate the cash generated from our underlying operations in a manner similar to the method used by management. We use free cash flow to conduct and evaluate our business because we believe it typically presents a more conservative measure of cash flows since capital expenditures and distributions to noncontrolling interest holders are considered a necessary component of ongoing operations. Free cash flow is useful for management and investors because it allows management and investors to evaluate the cash available to us to prepay debt, make strategic acquisitions and investments and repurchase stock. 58 The presentation of free cash flow is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. Free cash flow, as we calculate it, may not be comparable to similarly titled measures employed by other companies. The following table presents a reconciliation of our cash flow provided by operating activities to free cash flow for the six months ended June 30: (in millions) 2023 2022 % Change Cash provided by operating activities $ 1,363 $ 676 N/M Capital expenditures (59) (40) Distributions to noncontrolling interest holders (140) (126) Free cash flow $ 1,164 $ 510 N/M (in millions) 2023 2022 % Change Cash provided by investing activities 656 3,745 (82)% Cash used for financing activities (1,747) (7,268) (76)% CRITICAL ACCOUNTING ESTIMATES Our accounting policies are described in Note 1 — Accounting Policies to the consolidated financial statements in our most recent Form 10-K. As discussed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , in our most recent Form 10-K, we consider an accounting estimate to be critical if it required assumptions to be made that were uncertain at the time the estimate was made and changes in the estimate or different estimates could have a material effect on our results of operations. These critical estimates include those related to revenue recognition, business combinations, allowance for doubtful accounts, valuation of long-lived assets, goodwill and other intangible assets, pension plans, incentive compensation and stock-based compensation, income taxes, contingencies and redeemable non-controlling interests. We base our estimates on historical experience, current developments and on various other assumptions that we believe to be reasonable under these circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that cannot readily be determined from other sources. There can be no assurance that actual results will not differ from those estimates. Since the date of our most recent Form 10-K, there have been no material changes to our critical accounting estimates. RECENTLY ISSUED OR ADOPTED ACCOUNTING STANDARDS See Note 13 – Recently Issued or Adopted Accounting Standards to the consolidated financial statements of this Form 10-Q for further information. 59 FORWARD-LOOKING STATEMENTS This report contains “forward-looking statements,” as defined in the Private Securities Litigation Reform Act of 1995. These statements, including statements about the completed merger (the “Merger”) between a subsidiary of the Company and IHS Markit Ltd. (“IHS Markit”), which express management’s current views concerning future events, trends, contingencies or results, appear at various places in this report and use words like “anticipate,” “assume,” “believe,” “continue,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “potential,” “predict,” “project,” “strategy,” “target” and similar terms, and future or conditional tense verbs like “could,” “may,” “might,” “should,” “will” and “would.” For example, management may use forward-looking statements when addressing topics such as: the outcome of contingencies; future actions by regulators; changes in the Company’s business strategies and methods of generating revenue; the development and performance of the Company’s services and products; the expected impact of acquisitions and dispositions; the Company’s effective tax rates; and the Company’s cost structure, dividend policy, cash flows or liquidity. Forward-looking statements are subject to inherent risks and uncertainties. Factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements include, among other things: • worldwide economic, financial, political, and regulatory conditions (including slower GDP growth or recession, instability in the banking sector and inflation), and factors that contribute to uncertainty and volatility, natural and man-made disasters, civil unrest, pandemics (e.g., COVID-19), geopolitical uncertainty (including military conflict), and conditions that may result from legislative, regulatory, trade and policy changes; • the volatility and health of debt, equity, commodities and energy markets, including credit quality and spreads, the level of liquidity and future debt issuances, demand for investment products that track indices and assessments and trading volumes of certain exchange traded derivatives; • the demand and market for credit ratings in and across the sectors and geographies where the Company operates; • the Company’s ability to maintain adequate physical, technical and administrative safeguards to protect the security of confidential information and data, and the potential for a system or network disruption that results in regulatory penalties and remedial costs or improper disclosure of confidential information or data; • the outcome of litigation, government and regulatory proceedings, investigations and inquiries; • concerns in the marketplace affecting the Company’s credibility or otherwise affecting market perceptions of the integrity or utility of independent credit ratings, benchmarks, indices and other services; • our ability to attract, incentivize and retain key employees, especially in a competitive business environment; • the Company’s exposure to potential criminal sanctions or civil penalties for noncompliance with foreign and U.S. laws and regulations that are applicable in the jurisdictions in which it operates, including sanctions laws relating to countries such as Iran, Russia, Sudan, Syria and Venezuela, anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act of 2010, and local laws prohibiting corrupt payments to government officials, as well as import and export restrictions; • the continuously evolving regulatory environment in Europe, the United States and elsewhere around the globe affecting each of our business divisions and the products our business divisions offer, and our compliance therewith; • the ability of the Company to implement its plans, forecasts and other expectations with respect to IHS Markit’s business and realize expected synergies; • the Company’s ability to meet expectations regarding the accounting and tax treatments of the Merger; • the Company’s ability to make acquisitions and dispositions and successfully integrate the businesses we acquire; • consolidation of the Company’s customers, suppliers or competitors; • the introduction of competing products or technologies by other companies; • our ability to develop new products or technologies, to integrate our products with new technologies (e.g., artificial intelligence), or to compete with new products or technologies offered by new or existing competitors; • the effect of competitive products and pricing, including the level of success of new product developments and global expansion; • the impact of customer cost-cutting pressures; • a decline in the demand for our products and services by our customers and other market participants; • the ability of the Company, and its third-party service providers, to maintain adequate physical and technological infrastructure; • the Company’s ability to successfully recover from a disaster or other business continuity problem, such as an earthquake, hurricane, flood, civil unrest, protests, military conflict, terrorist attack, outbreak of pandemic or contagious diseases, security breach, cyber attack, data breach, power loss, telecommunications failure or other natural or man-made event; • the level of merger and acquisition activity in the United States and abroad; • the level of the Company’s future cash flows and capital investments; • the impact on the Company’s revenue and net income caused by fluctuations in foreign currency exchange rates; and • the impact of changes in applicable tax or accounting requirements on the Company. 60 The factors noted above are not exhaustive. The Company and its subsidiaries operate in a dynamic business environment in which new risks emerge frequently. Accordingly, the Company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the dates on which they are made. The Company undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date on which it is made, except as required by applicable law. Further information about the Company’s businesses, including information about factors that could materially affect its results of operations and financial condition, is contained in the Company’s filings with the SEC, including Item 1A, Risk Factors in this Form 10-Q and Item 1A, Risk Factors in our most recently filed Annual Report on Form 10-K. 61