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 nine months ended September 30, 2021. 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, 2020 (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 Nine Months Ended September 30, 2021 and 2020 • 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 leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. The capital markets include asset managers, investment banks, commercial banks, insurance companies, exchanges, trading firms and issuers; and the commodity markets include producers, traders and intermediaries within energy, petrochemicals, metals and agriculture. Our operations consist of four reportable segments: S&P Global Ratings ("Ratings"), S&P Global Market Intelligence ("Market Intelligence"), S&P Global Platts ("Platts") and S&P Dow Jones Indices ("Indices"). • Ratings is an independent provider of credit ratings, research, and analytics, offering investors and other market participants information, ratings and benchmarks. • Market Intelligence is a global provider of multi-asset-class data, research and analytical capabilities, which integrate cross-asset analytics and desktop services. • Platts is the leading independent provider of information and benchmark prices for the commodity and energy markets. • Indices is a global index provider maintaining a wide variety of valuation and index benchmarks for investment advisors, wealth managers and institutional investors. Key results for the periods ended September 30 are as follows: (in millions, except per share amounts) Three Months Nine Months 2021 2020 % Change 1 2021 2020 % Change 1 Revenue $ 2,087 $ 1,846 13% $ 6,209 $ 5,575 11% Operating profit 2 $ 1,083 $ 944 15% $ 3,317 $ 2,960 12% Operating margin % 52 % 51 % 53 % 53 % Diluted earnings per share from net income $ 3.30 $ 1.88 75% $ 9.72 $ 7.78 25% 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 September 30, 2021 includes IHS Markit merger costs of $54 million and a gain on disposition of $3 million. Operating profit for the nine months ended September 30, 2021 includes IHS Markit merger costs of $153 million, a gain on dispositions of $5 million, a lease impairment of $3 million and Kensho retention related expense of $2 million. Operating profit for the three months ended September 30, 2020 includes a gain on dispositions of $8 million, a technology-related impairment charge of $5 million and Kensho retention related expense of $2 million. Operating profit for the nine months ended September 30, 2020 includes a gain on dispositions of $16 million, employee severance charges of $12 million, a technology-related impairment charge of $5 million and Kensho retention related expense of $10 million. Operating profit also includes amortization of intangibles from acquisitions of $21 million and $32 million for the three months ended September 30, 2021 and 2020, respectively, and $74 million and $94 million for the nine months ended September 30, 2021 and 2020, respectively. 29 Three Months Revenue increased 13% driven by increases at all of our reportable segments. Revenue growth at Ratings was driven by an increase in transaction revenue and non-transaction revenue. Transaction revenue increased due to higher bank loan ratings revenue and an increase in structured finance revenue, partially offset by a decrease in corporate bond ratings revenue. Non-transaction revenue increased primarily due to an increase in surveillance, entity credit ratings, revenue at our CRISIL subsidiary and higher Ratings Evaluation Service ("RES") revenue. Revenue growth at Market Intelligence was driven by subscription revenue growth in Market Intelligence Desktop products, Credit Risk Solutions and Data Management Solutions. Revenue growth at Indices was due to higher average levels of assets under management for ETFs and mutual funds. The revenue increase at Platts was primarily due to continued demand for market data and market insights products. Foreign exchange rates had a favorable impact of less than 1 percentage point. Operating profit increased 15%, with a favorable impact from foreign exchange rates of 1 percentage point. Excluding the unfavorable impact of IHS Markit merger costs in 2021 of 5 percentage points, partially offset by higher amortization of intangibles from acquisitions in 2020 of 1 percentage point and a technology-related impairment charge in 2020 of 1 percentage point, operating profit increased 18%. The increase was primarily due to revenue growth at all of our reportable segments, partially offset by higher incentive costs and an increase in compensation costs driven by additional headcount and annual merit increases. Nine Months Revenue increased 11% driven by increases at all of our reportable segments. Revenue growth at Ratings was driven by an increase in transaction revenue and non-transaction revenue. Transaction revenue increased due to higher bank loan ratings revenue and an increase in structured finance revenue, partially offset by a decrease in corporate bond ratings revenue. Non-transaction revenue increased primarily due to an increase in entity credit ratings, surveillance, higher RES revenue and an increase in revenue at our CRISIL subsidiary. Revenue growth at Market Intelligence was driven by subscription revenue growth in Credit Risk Solutions, Market Intelligence Desktop products and Data Management Solutions. Revenue growth at Indices was due to higher average levels of assets under management for ETFs and mutual funds, partially offset by lower exchange-traded derivative revenue. The revenue increase at Platts was primarily due to continued demand for market data and market insights products. Foreign exchange rates had a favorable impact of 1 percentage point. Operating profit increased 12%, with a favorable impact from foreign exchange rates of 1 percentage point. Excluding the unfavorable impact of IHS Markit merger costs in 2021 of 5 percentage points, partially offset by higher amortization of intangibles from acquisitions in 2020 of 1 percentage point, operating profit increased 16%. The increase was primarily due to revenue growth at all of our reportable segments combined with a decrease in occupancy costs and travel and entertainment expenses from non-essential travel restrictions in response to the 2019 novel coronavirus ("COVID-19"), partially offset by higher incentive costs and an increase in compensation costs driven by additional headcount and annual merit increases. We are closely monitoring the impact of the outbreak of COVID-19 on all aspects of our business. While COVID-19 did not have a material adverse effect on our reported results for the three and nine months ended September 30, 2021 and 2020, we are unable to predict the ultimate impact that it may have on our business, future results of operations, financial position or cash flows. Our Strategy We are a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. Our purpose is to provide the intelligence that is essential for companies, governments and individuals to make decisions with conviction. We seek to deliver on this purpose in line with our core values of integrity, excellence and relevance. In 2018, we announced the launch of Powering the Markets of the Future to provide a framework for our forward-looking business strategy. Through this framework, we seek to deliver an exceptional, differentiated customer experience by enhancing our foundational capabilities, evolving and growing our core businesses, and pursuing growth via adjacencies. In 2021, we will strive to deliver on our strategic priorities in the following key areas: Finance • Meeting or exceeding revenue growth and EBITA margin targets with particular focus on accelerating growth in the greater Asia Pacific region; 30 • Funding organic opportunities and pursuing disciplined acquisitions, investments and partnerships to support our key growth areas; • Taking a lead role in the market regarding ESG disclosures and achieving our stated environmental sustainability targets; and • Executing against Integration Management Office ("IMO") and regulatory milestones; building trust and team cohesion with IHS Markit (NYSE:INFO) colleagues; laying groundwork to set the proforma organization up for successful realization of our synergy and strategic goals. Customer • Continuing to deliver our key initiatives to the market and building them through a customer-first lens; • Prioritizing customer preferences, while enhancing and adjusting the delivery of our products across multiple channels such as feeds and APIs; and delivering on S&P Global Platform initiatives; • Incorporating a customer perspective in all divisions and functions, including the reimagining of our customer's work environments and how best to serve them; pursuing partnerships to meet customers where they are; and • Nurturing and protecting the core franchise, while growing brand equity with the appropriate investments. Operations • Improving end-user productivity and experience by providing our employees with the tools and processes to better serve our customers; • Reimagining our work environment by continuing to standardize our technology and encouraging employee participation in the reshaping of where we work, how we work and how we serve; • Advancing our risk culture by maturing risk management & compliance processes and our cyber security posture; and • Utilizing our innovation teams and latest technology to maintain our commitment to advancing our shared data processes and technical capabilities. People • Continuing to foster a people first environment, while maintaining existing levels of engagement; • Encouraging career mobility through career coaching, while attracting and retaining the best people; and • Improving diverse representation through talent acquisition, advancement and retention, while continuing to raise awareness of racial education. 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. 31 RESULTS OF OPERATIONS — COMPARING THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020 Consolidated Review (in millions) Three Months Nine Months 2021 2020 % Change 2021 2020 % Change Revenue $ 2,087 $ 1,846 13% $ 6,209 $ 5,575 11% Total Expenses: Operating-related expenses 543 517 5% 1,603 1,528 5% Selling and general expenses 423 341 24% 1,157 949 22% Depreciation and amortization 41 52 (20)% 137 154 (11)% Total expenses 1,007 910 11% 2,897 2,631 10% Gain on dispositions (3) (8) (69)% (5) (16) (72)% Operating profit 1,083 944 15% 3,317 2,960 12% Other income, net (22) (6) NM (51) (16) N/M Interest expense, net 31 35 (13)% 94 109 (14)% Loss on extinguishment of debt — 279 N/M — 279 N/M Provision for taxes on income 213 138 54% 747 559 34% Net income 861 498 73% 2,527 2,029 25% Less: net income attributable to noncontrolling interests (64) (43) (45)% (178) (144) 23% Net income attributable to S&P Global Inc. $ 797 $ 455 75% $ 2,349 $ 1,885 25% N/M – Represents a change equal to or in excess of 100% or not meaningful Revenue The following table provides consolidated revenue information for the periods ended September 30: (in millions) Three Months Nine Months 2021 2020 % Change 2021 2020 % Change Revenue $ 2,087 $ 1,846 13% $ 6,209 $ 5,575 11% Subscription revenue $ 824 $ 765 7% $ 2,409 $ 2,260 7% Non-subscription / transaction revenue 566 503 13% 1,794 1,583 13% Non-transaction revenue 429 372 15% 1,251 1,083 15% Asset-linked fees 211 156 36% 589 469 26% Sales usage-based royalties 57 50 15% 166 180 (8)% % of total revenue: Subscription revenue 39 % 41 % 39 % 42 % Non-subscription / transaction revenue 27 % 27 % 29 % 28 % Non-transaction revenue 21 % 20 % 20 % 19 % Asset-linked fees 10 % 9 % 9 % 8 % Sales usage-based royalties 3 % 3 % 3 % 3 % U.S. revenue $ 1,260 $ 1,076 17% $ 3,761 $ 3,384 11% International revenue: European region 498 455 9% 1,497 1,310 14% Asia 227 214 7% 648 585 11% Rest of the world 102 101 1% 303 296 3% Total international revenue $ 827 $ 770 7% $ 2,448 $ 2,191 12% % of total revenue: U.S. revenue 60 % 58 % 61 % 61 % International revenue 40 % 42 % 39 % 39 % 32 Three Months Subscription revenue increased primarily from growth in Market Intelligence's Desktop products, Credit Risk Solutions and Data Management Solutions, and continued demand for Platts market data and market insights products. Non-subscription / transaction revenue increased due to an increase in bank loan ratings revenue and higher structured finance revenue, partially offset by a decrease in corporate bond ratings revenue at Ratings. Non-transaction revenue increased due to an increase in surveillance, entity credit ratings, revenue at our CRISIL subsidiary and higher RES revenue at Ratings. Asset linked fees increased reflecting higher average levels of assets under management for ETFs and mutual funds at Indices. The increase in sales-usage based royalties was primarily driven by higher exchange-traded derivative revenue at Indices. See “Segment Review” below for further information. The favorable impact of foreign exchange rates increased 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. Nine Months Subscription revenue increased primarily from growth in Market Intelligence's Credit Risk Solutions, Market Intelligence Desktop products and Data Management Solutions and continued demand for Platts market data and market insights products. Non-subscription / transaction revenue increased due to an increase in bank loan ratings revenue and higher structured finance revenue, partially offset by lower corporate bond ratings revenue at Ratings. Non-transaction revenue increased primarily due to an increase in entity credit ratings, surveillance, higher RES revenue and an increase in revenue at our CRISIL subsidiary at Ratings. Asset linked fees increased reflecting higher average levels of assets under management for ETFs and mutual funds at Indices. The decrease in sales-usage based royalties was primarily driven by lower exchange-traded derivative revenue at Indices. See “Segment Review” below for further information. The favorable impact of foreign exchange rates increased 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. 33 Total Expenses The following tables provide an analysis by segment of our operating-related expenses and selling and general expenses for the periods ended September 30: Three Months (in millions) 2021 2020 % Change Operating- related expenses Selling and general expenses Operating- related expenses Selling and general expenses Operating- related expenses Selling and general expenses Ratings 1 $ 245 $ 119 $ 240 $ 98 2% 20% Market Intelligence 229 131 222 123 3% 7% Platts 53 54 49 48 10% 14% Indices 44 40 33 48 33% (17)% Intersegment eliminations 2 (37) — (35) 1 (4)% N/M Total segments 534 344 509 318 5% 8% Corporate Unallocated expense 3 9 79 8 23 12% N/M Total $ 543 $ 423 $ 517 $ 341 5% 24% N/M – Represents a change equal to or in excess of 100% or not meaningful 1 In 2020 , selling and general expenses include a technology-related impairment charge of $5 million. 2 Intersegment eliminations primarily relate to a royalty charged to Market Intelligence for the rights to use and distribute content and data developed by Ratings. 3 In 2021, selling and general expenses include IHS Markit merger costs of $54 million. In 2020 , selling and general expenses include Kensho retention related expense of $2 million. Operating-Related Expenses Operating-related expenses increased 5% primarily driven by higher cost of sales at Indices, an increase in intersegment royalties tied to annualized contract value growth at Market Intelligence and higher compensation costs at Platts and Ratings. 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 24%. Excluding the unfavorable impact of IHS Markit merger costs in 2021 of 16 percentage points, partially offset by a technology-related impairment charge in 2020 of 2 percentage points and higher Kensho related retention expense in 2020 of 1 percentage point, selling and general expenses increased 11%. The increase was primarily driven by an increase at Ratings due to higher incentive costs and an increase in compensation costs, partially offset by a decrease in legal related costs at Indices. Depreciation and Amortization Depreciation and amortization decreased $11 million or 20% driven by a decrease in intangible asset amortization related to assets that became fully amortized. 34 Nine Months (in millions) 2021 2020 % Change Operating- related expenses Selling and general expenses Operating- related expenses Selling and general expenses Operating- related expenses Selling and general expenses Ratings 1 $ 715 $ 303 $ 681 $ 257 5% 18% Market Intelligence 2 687 377 670 361 2% 4% Platts 155 143 144 140 8% 2% Indices 127 113 108 115 17% (2)% Intersegment eliminations 3 (108) — (102) — (6)% N/M Total segments 1,576 936 1,501 873 5% 7% Corporate Unallocated expense 3 27 221 26 76 3% N/M Total $ 1,603 $ 1,157 $ 1,527 $ 949 5% 22% N/M – Represents a change equal to or in excess of 100% or not meaningful 1 In 2020 , selling and general expenses include a technology-related impairment charge of $5 million. 2 In 2020, selling and general expenses include employee severance charges of $2 million. 3 Intersegment eliminations primarily relate to a royalty charged to Market Intelligence for the rights to use and distribute content and data developed by Ratings. 4 In 2021, selling and general expenses include IHS Markit merger costs of $153 million and a lease impairment of $3 million. In 2020 , selling and general expenses include employee severance charges of $10 million. In 2021 and 2020, selling and general expenses include Kensho retention related expense of $2 million and $10 million, respectively. Operating-Related Expenses Operating-related expenses increased 5%. Increases at Ratings, Indices and Platts were primarily driven by higher incentive costs and an increase in compensation costs. The increase at Market Intelligence was primarily due to an increase in intersegment royalties tied to annualized contract value growth. 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 22%. Excluding the unfavorable impact of IHS Markit merger costs in 2021 of 16 percentage points, partially offset by higher employee severance charges in 2020 of 1 percentage points and higher Kensho retention related expense in 2020, selling and general expenses increased 8%. This increase was primarily driven by higher incentive costs and an increase in compensation costs due to additional headcount and annual merit increases, partially offset by lower occupancy costs, a decrease in travel and entertainment expenses from non-essential travel restrictions in response to COVID-19 and a decrease in legal related costs at Indices. Depreciation and Amortization Depreciation and amortization decreased $17 million or 11% driven by a decrease in intangible asset amortization related to assets that became fully amortized. Gain on Dispositions During the three and nine months ended September 30, 2021, we completed the following dispositions that resulted in a pre-tax gain of $3 million and $5 million, respectively, which was included in Gain on dispositions in the consolidated statements of income: • During the three and nine months ended September 30, 2021, we recorded a pre-tax gain of $3 million ($2 million after-tax) in Gain on dispositions in the consolidated statements of income related to the sale of an office facility in India in September of 2021. 35 • During the nine months ended September 30, 2021, we recorded a pre-tax gain of $2 million ($2 million after-tax) in Gain on dispositions in the consolidated statements of income related to the sale of Standard & Poor's Investment Advisory Services ("SPIAS") within our Market Intelligence segment that occurred in July of 2019. During the three and nine months ended September 30, 2020, we completed the following dispositions that resulted in a pre-tax gain of $8 million and $16 million, respectively, which was included in Gain on dispositions in the consolidated statements of income: • In January of 2020, Market Intelligence entered into a strategic alliance to transition S&P Global Market Intelligence's Investor Relations ("IR") webhosting business to Q4 Inc. ("Q4"). This alliance integrated Market Intelligence's proprietary data into Q4's portfolio of solutions, enabling further opportunities for commercial collaboration. In connection with transitioning its IR webhosting business to Q4, Market Intelligence received a minority investment in Q4. During the three and nine months ended September 30, 2020, we recorded a pre-tax gain of $3 million ($2 million after-tax) and $11 million ($10 million after-tax) in Gain on dispositions in the consolidated statements of income related to the sale of IR. • In September of 2020, we sold our facility at East Windsor, New Jersey. During the three and nine months ended September 30, 2020, we recorded a pre-tax gain of $4 million ($3 million after-tax) in Gain on dispositions in the consolidated statements of income related to the sale of East Windsor. • During the three and nine months ended September 30, 2020, we recorded a pre-tax gain of $1 million ($1 million after-tax) in Gain on dispositions in the consolidated statements of income related to the sale of SPIAS within our Market Intelligence segment that occurred in July of 2019. 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. 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. 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 September 30: Three Months (in millions) 2021 2020 % Change Ratings 1 $ 644 $ 544 18% Market Intelligence 2 187 164 14% Platts 3 128 121 6% Indices 4 213 151 41% Total segment operating profit 1,172 980 20% Corporate Unallocated expense 5 (89) (36) N/M Total operating profit $ 1,083 $ 944 15% N/M – Represents a change equal to or in excess of 100% or not meaningful 1 2020 includes a technology-related impairment charge of $5 million. 2021 and 2020 include amortization of intangibles from acquisitions of $2 million and $3 million, respectively. 2 2020 includes a gain on dispositions of $4 million. 2021 and 2020 includes amortization of intangibles from acquisitions of $16 million and $19 million, respectively. 3 2021 and 2020 include amortization of intangibles from acquisitions of $2 million. 4 2021 and 2020 include amortization of intangibles from acquisitions of $1 million. 5 2021 includes IHS Markit merger costs of $54 million and a gain on disposition of $3 million. 2020 includes a gain on disposition of $4 million, Kensho retention related expense of $2 million and amortization of intangibles from acquisitions of $7 million. 36 Segment Operating Profit — Increased 20% as compared to 2020. Excluding the impact of a technology-related impairment charge in 2020, operating profit increased 18%. The increase was primarily due to an increase in revenue at all of our reportable segments, partially offset by higher incentive costs and an increase in compensation costs driven by additional headcount and annual merit increases. 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 146% compared to 2020. Excluding the unfavorable impact of IHS Markit merger costs in 2021 of 147 percentage points and a higher gain on dispositions in 2020 of 5 percentage points, partially offset by higher amortization of intangibles in 2020 of 17 percentage points and higher Kensho retention related expense in 2020 of 7 percentage points, Corporate Unallocated expense increased 18% primarily due to proceeds from a Company-owned life insurance policy in 2020. 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 businesses functional currency. Nine Months (in millions) 2021 2020 % Change Ratings 1 $ 2,054 $ 1,758 17% Market Intelligence 2 533 469 14% Platts 3 392 357 10% Indices 4 600 504 19% Total segment operating profit 3,579 3,088 16% Corporate Unallocated expense 5 (262) (128) N/M Total operating profit $ 3,317 $ 2,960 12% N/M – Represents a change equal to or in excess of 100% or not meaningful 1 2020 includes a technology-related impairment charge of $5 million. 2021 and 2020 include amortization of intangibles from acquisitions of $8 million and $5 million, respectively. 2 2021 and 2020 include a gain on dispositions of $2 million and $12 million, respectively. 2021 and 2020 include amortization of intangibles from acquisitions of $49 million and $58 million, respectively. 3 2021 and 2020 include amortization of intangibles from acquisitions of $6 million and $7 million, respectively. 4 2021 and 2020 include amortization of intangibles from acquisitions of $4 million. 5 2021 includes IHS Markit merger costs of $153 million, a gain on disposition of $3 million and a lease impairment of $3 million. 2020 includes employee severance charges of $10 million and a gain on disposition of $4 million. 2021 and 2020 include Kensho retention related expense of $2 million and $10 million, respectively. 2021 and 2020 include amortization of intangibles from acquisitions of $7 million and $20 million, respectively. Segment Operating Profit — Increased 16% as compared to 2020. Excluding the impact of a higher gain on dispositions in 2020 of 1 percentage point, operating profit increased 15%. The increase was primarily due to an increase in revenue at all of our reportable segments combined with a decrease in occupancy costs and travel and entertainment expenses from non-essential travel restrictions in response to COVID-19, partially offset by higher incentive costs and an increase in compensation costs driven by additional headcount and annual merit increases. 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 106% compared to 2020. Excluding the unfavorable impact of IHS Markit merger costs in 2021 of 118 percentage points and a lease impairment in 2021 of 2 percentage points, partially offset by higher amortization of intangibles in 2020 of 9 percentage points, higher employee severance charges in 2020 of 8 percentage points, and higher Kensho retention related expense in 2020 of 5 percentage points, Corporate Unallocated expense increased 8% primarily due to higher incentive costs. 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- 37 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 businesses functional currency. Other Income, net Other income, includes the net periodic benefit cost for our retirement and post retirement plans and gains and losses on our mark-to-market investments. Other income, net was $22 million for the three months ended September 30, 2021 compared to $6 million for the three months ended September 30, 2020 and $51 million for the nine months ended September 30, 2021 compared to $16 million for the nine months ended September 30, 2020. Excluding a pension settlement charge of $3 million, other income, net was $19 million for the nine months ended September 30, 2020. The increase in other income, net for the three and nine months ended September 30, 2021 was primarily due to higher gains on our mark-to-market investments in 2021. Interest Expense, net Net interest expense decreased $4 million or 13% compared to the three months ended September 30, 2020 and $15 million or 14% compared to the nine months ended September 30, 2020, primarily due to lower interest expense resulting from the refinancing of a series of our senior notes in August of 2020. Loss on Extinguishment of Debt The three and nine months ended September 30, 2020 includes $279 million related to the redemption fee on the early retirement of our 4.4% senior notes due in 2026 and a portion of the 6.55% senior notes due in 2048 in the third quarter of 2020. Provision for Income Taxes The effective income tax rate was 19.9% and 22.8% for the three and nine months ended September 30, 2021, respectively, and 21.7% and 21.6% for the three and nine months ended September 30, 2020, respectively. The decrease in the three months ended September 30, 2021 was primarily due to a refinement in tax accruals on foreign operations related to both a prior and current period, partially offset by the deductible pre-tax loss on extinguishment of debt in the prior year. The increase in the nine months ended September 30, 2021 was primarily due to the decrease in the recognition of excess tax benefits associated with share-based payments in the statement of income, certain non-deductible IHS Markit merger costs and the deductible pre-tax loss on extinguishment of debt in the prior year. Segment Review Ratings Ratings is an independent provider of credit ratings, research, and analytics to investors, issuers and other market participants. 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 $34 million and $101 million for the three and nine months ended September 30, 2021 and $32 million and $95 million for the three and nine months ended September 30, 2020, respectively. 38 The following table provides revenue and segment operating profit information for the periods ended September 30: (in millions) Three Months Nine Months 2021 2020 % Change 2021 2020 % Change Revenue $ 1,017 $ 894 14% $ 3,107 $ 2,725 14% Transaction revenue $ 551 $ 488 13% $ 1,748 $ 1,540 14% Non-transaction revenue $ 466 $ 406 15% $ 1,359 $ 1,185 15% % of total revenue: Transaction revenue 1 54 % 55 % 56 % 57 % Non-transaction revenue 1 46 % 45 % 44 % 43 % U.S. revenue $ 592 $ 489 21% $ 1,828 $ 1,601 14% International revenue $ 425 $ 405 5% $ 1,279 $ 1,124 14% % of total revenue: U.S. revenue 58 % 55 % 59 % 59 % International revenue 42 % 45 % 41 % 41 % Operating profit 2 $ 644 $ 544 18% $ 2,054 $ 1,758 17% Operating margin % 63 % 61 % 66 % 65 % 1 In the first quarter of 2021, we reevaluated our transaction and non-transaction presentation which resulted in a reclassification from transaction revenue to non-transaction revenue of $2 million and $6 million for the three and nine months ended September 30, 2020, respectively. 2 Operating profit for the three and nine months ended September 30, 2020 include a technology-related impairment charge of $5 million. Operating profit includes amortization of intangibles from acquisitions of $2 million and $8 million for the three and nine months ended September 30, 2021, respectively, and $3 million and $5 million for the three and nine months ended September 30, 2020. Three Months Revenue increased 14%, with a favorable impact from foreign exchange rates of 1 percentage point. Transaction revenue increased due to higher bank loan ratings revenue driven by increased M&A activity and an increase in structured finance revenue primarily driven by increased issuance of U.S. collateralized loan obligations ("CLOs"), partially offset by a decrease in corporate bond ratings revenue driven by decreased investment-grade issuance volumes. U.S. and Europe investment-grade bond issuance volumes and U.S. high-yield corporate bond issuance volumes were particularly elevated in 2020 mainly resulting from historically low borrowing costs and central bank lending actions in response COVID-19. Non-transaction revenue increased primarily due to an increase in surveillance, entity credit ratings, revenue at our CRISIL subsidiary and higher Ratings Evaluation Service ("RES") revenue driven by increased M&A activity. Transaction and non-transaction revenue also benefited from improved contract terms across product categories. Operating profit increased 18%, with a favorable impact from foreign exchange rates of 1 percentage point. Excluding the impact of a technology-related impairment charge in 2020 of 1 percentage point, operating profit increased 17%. The impact of revenue growth and lower occupancy costs was partially offset by higher compensation costs due to annual merit increases and additional headcount and an increase in incentive costs. Nine Months Revenue increased 14%, with a favorable impact from foreign exchange rates of 2 percentage points. Transaction revenue increased due to higher bank loan ratings revenue driven by increased M&A activity and an increase in structured finance revenue primarily driven by increased issuance of U.S. CLOs, partially offset by a decrease in corporate bond ratings revenue driven by decreased investment-grade issuance volumes. Non-transaction revenue increased primarily due to an increase in entity credit ratings, surveillance, higher RES revenue driven by increased M&A activity and an increase in revenue at our CRISIL subsidiary. Transaction and non-transaction revenue also benefited from improved contract terms across product categories. 39 Operating profit increased 17%, with a favorable impact from foreign exchange rates of 2 percentage points. The impact of revenue growth and lower occupancy costs was partially offset by higher compensation costs due to annual merit increases and additional headcount and an increase in incentive costs. 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. Third 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 (16)% (4)% (9)% 17% 53% 28% Investment-grade issuance (12)% (7)% (6)% (31)% (6)% (8)% Total issuance (13)% (7)% (6)% (22)% 2% (4)% * Includes Industrials and Financial Services. • Corporate issuance was down in the U.S. and Europe for the quarter driven by weakness in high-yield and investment-grade issuance reflecting comparisons against a strong prior year period. Third 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”) 25% 50% 30% 38% 19% 40% Structured credit (primarily CLOs) 340% 197% 298% 250% 281% 257% Commercial mortgage-backed securities (“CMBS”) 106% 375% 121% 41% 208% 46% Residential mortgage-backed securities (“RMBS”) 113% (26)% 58% 95% 21% 59% Covered bonds * 68% 107% * —% (2)% Total issuance 105% 70% 91% 101% 45% 72% * Represents no activity in 2021 and 2020. • ABS issuance increased in the U.S. and Europe primarily driven by an increase in auto and credit card transactions, partially offset a decrease in student loans. • CLO issuance was up driving increases in the U.S. and European structured credit markets as demand for leveraged loans increased. • CMBS issuance was up in the U.S. reflecting increased market volume due to improved market conditions. CMBS issuance in Europe was also up, although from a low 2020 base. • RMBS issuance was up in the U.S. reflecting increased market volume due to improved market conditions. RMBS issuance decreased in Europe in the quarter reflecting a decrease in large jumbo deals. • Covered bond (debt securities backed by mortgages or other high-quality assets that remain on the issuer's balance sheet) issuance in Europe increased in the quarter driven by improved market conditions. 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. 40 Market Intelligence Market Intelligence's portfolio of capabilities are designed to help investment professionals, government agencies, corporations and universities track performance, generate alpha, identify investment ideas, understand competitive and industry dynamics, perform valuations and assess credit risk. During the nine months ended September 30, 2021 and during the three and nine months ended September 30, 2020, we recorded a pre-tax gain of $2 million ($2 million after-tax) and $1 million ($1 million after-tax), respectively, in Gain on dispositions in the consolidated statement of income related to the sale of SPIAS that occurred in July of 2019. In January of 2020, Market Intelligence entered into a strategic alliance to transition S&P Global Market Intelligence's IR webhosting business to Q4, a third party provider of investor relations related services. This alliance integrated Market Intelligence's proprietary data into Q4's portfolio of solutions, enabling further opportunities for commercial collaboration. In connection with transitioning its IR webhosting business to Q4, Market Intelligence received a minority investment in Q4. During the three and nine months ended September 30, 2020, we recorded a pre-tax gain of $3 million ($2 million after-tax) and $11 million ($10 million after-tax), respectively, in Gain on dispositions in the consolidated statement of income related to the sale of IR. Market Intelligence includes the following business lines: • Desktop — a product suite that provides data, analytics and third-party research for global finance professionals, which includes the Market Intelligence Desktop (which are inclusive of the S&P Capital IQ and SNL Desktop products); • Data Management Solutions — integrated bulk data feeds and application programming interfaces that can be customized, which includes Compustat, GICS, and Point In Time Financials; and • Credit Risk Solutions — commercial arm that sells Ratings' credit ratings and related data, analytics and research, which includes subscription-based offerings, RatingsDirect® and RatingsXpress®, and Credit Analytics. Subscription revenue at Market Intelligence is primarily derived from distribution of data, analytics, third party research, and credit ratings-related information primarily through web-based channels, including Market Intelligence Desktop, RatingsDirect®, RatingsXpress®, and Credit Analytics. Non-subscription revenue at Market Intelligence is primarily related to certain advisory, pricing and analytical services. The following table provides revenue and segment operating profit information for the periods ended September 30: (in millions) Three Months Nine Months 2021 2020 % Change 2021 2020 % Change Revenue $ 570 $ 530 7% $ 1,664 $ 1,565 6% Subscription revenue $ 557 $ 517 8% $ 1,624 $ 1,525 6% Non-subscription revenue $ 13 $ 13 3% $ 40 $ 39 1% Asset-linked fees $ — $ — N/M $ — $ 1 (83)% % of total revenue: Subscription revenue 98 % 98 % 98 % 97 % Non-subscription revenue 2 % 2 % 2 % 3 % Asset-linked fees — % — % — % — % U.S. revenue $ 359 $ 337 6% $ 1,056 $ 1,007 5% International revenue $ 211 $ 193 9% $ 608 $ 558 9% % of total revenue: U.S. revenue 63 % 64 % 63 % 64 % International revenue 37 % 36 % 37 % 36 % Operating profit 1 $ 187 $ 164 14% $ 533 $ 469 14% Operating margin % 33 % 31 % 32 % 30 % N/M – Represents a change equal to or in excess of 100% or not meaningful 1 Operating profit for the nine months ended September 30, 2021 includes a gain on disposition of $2 million. Operating profit for the three and nine months ended September 30, 2020 includes a gain on dispositions of $4 million and $12 million, respectively. Operating profit 41 for the nine months ended September 30, 2020 also includes employee severance charges of $2 million. Operating profit also includes amortization of intangibles from acquisitions of $16 million and $49 million for the three and nine months ended September 30, 2021, respectively, and $19 million and $58 million for the three and nine months ended September 30, 2020, respectively. Three Months Revenue increased 7% and was unfavorably impacted by 1 percentage point from the effect of a recent disposition. The increase was primarily driven by subscription revenue growth for certain Market Intelligence Desktop products, RatingsXpress®, RatingsDirect®, and certain data feed products within Data Management Solutions. Excluding the impact of a recent disposition favorably impacting Desktop revenue growth by less than 1 percentage point, revenue growth at Data Management Solutions, Credit Risk Solutions and Desktop was 12%, 7% and 6%, respectively. Both U.S. revenue and international revenue increased compared to the three months ended September 30, 2020. Foreign exchange rates had a favorable impact of less than 1 percentage point. Operating profit increased 14%, with an unfavorable impact from foreign exchange rates of 1 percentage point. Excluding the impact of a gain dispositions in 2020 of 13 percentage points, partially offset by higher amortization of intangibles in 2020 of 12 percentage points, operating profit increased 13% primarily due to revenue growth partially offset by an increase in intersegment royalties tied to annualized contract value growth and increased technology expenses. Nine Months Revenue increased 6% and was unfavorably impacted by 1 percentage point from the effect of recent dispositions. The increase was primarily driven by subscription revenue growth for RatingsXpress®, RatingsDirect®, certain Market Intelligence Desktop products, and certain data feed products within Data Management Solutions. Excluding the impact of recent dispositions favorably impacting Desktop revenue growth by 1 percentage point, revenue growth at Data Management Solutions, Credit Risk Solutions and Desktop was 10%, 8% and 5%, respectively. Both U.S. revenue and international revenue increased compared to the nine months ended September 30, 2020. Foreign exchange rates had a favorable impact of less than 1 percentage point. Operating profit increased 14%, with an unfavorable impact from foreign exchange rates of less than 1 percentage point. Excluding the impact from higher amortization of intangibles in 2020 of 14 percentage points and higher employee severance charges in 2020 of 2 percentage points, partially offset by the impact of a higher gain on the dispositions in 2020 of 14 percentage points, operating profit increased 12% primarily due to revenue growth partially offset by increased technology expenses and an increase in intersegment royalties tied to annualized contract value growth. 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. Platts Platts is the leading independent provider of information and benchmark prices for the commodity and energy markets. Platts provides essential price data, analytics, and industry insight enabling the commodity and energy markets to perform with greater transparency and efficiency. Platts' 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; • Sales usage-based royalties — primarily from licensing of our proprietary market price data and price assessments to commodity exchanges; and • Non-subscription revenue — conference sponsorship, consulting engagements, and events. 42 The following table provides revenue and segment operating profit information for the periods ended September 30: (in millions) Three Months Nine Months 2021 2020 % Change 2021 2020 % Change Revenue $ 239 $ 222 8% $ 700 $ 654 7% Subscription revenue $ 220 $ 205 7% $ 645 $ 603 7% Sales usage-based royalties $ 17 $ 15 14% $ 49 $ 47 4% Non-subscription revenue $ 2 $ 2 20% $ 6 $ 4 37% % of total revenue: Subscription revenue 92 % 92 % 92 % 92 % Sales usage-based royalties 7 % 7 % 7 % 7 % Non-subscription revenue 1 % 1 % 1 % 1 % U.S. revenue $ 79 $ 70 13% $ 226 $ 211 7% International revenue $ 160 $ 152 5% $ 474 $ 443 7% % of total revenue: U.S. revenue 33 % 32 % 32 % 32 % International revenue 67 % 68 % 68 % 68 % Operating profit 1 $ 128 $ 121 6% $ 392 $ 357 10% Operating margin % 54 % 55 % 56 % 55 % 1 Operating profit includes amortization of intangibles from acquisitions of $2 million for the three months ended September 30, 2021 and 2020, and $6 million and $7 million for the nine months ended September 30, 2021 and 2020, respectively. Three Months Revenue increased 8% 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. An increase in sales usage-based royalties from the licensing of our proprietary market price data and price assessments to commodity exchanges mainly due to increased trading volumes in LNG and Petroleum also contributed to revenue growth. Both U.S. revenue and international revenue grew compared to the three months ended September 30, 2020. Petroleum continues to be the most significant revenue driver, followed by natural gas, power & renewables, petrochemicals, shipping and metals & agriculture also contributing to revenue growth. Operating profit increased 6% with an unfavorable impact from foreign exchange rates of less than 1 percentage point. Excluding the impact of amortization of intangibles from acquisitions of 1 percentage point, operating profit increased 5%. The increase was primarily due to revenue growth partially offset by an increase in operating costs to support business initiatives at Platts, higher compensation costs and increased technology expenses. Nine Months Revenue increased 7% 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. An increase in sales usage-based royalties from the licensing of our proprietary market price data and price assessments to commodity exchanges mainly due to increased trading volumes in LNG and Petroleum also contributed to revenue growth. Both U.S. revenue and international revenue grew compared to the nine months ended September 30, 2020. Petroleum continues to be the most significant revenue driver, followed by natural gas, power & renewables, petrochemicals, metals & agriculture, and shipping also contributing to revenue growth. Operating profit increased 10% with an unfavorable impact from foreign exchange rates of less than 1 percentage point. Excluding the impact of amortization of intangibles from acquisitions of 1 percentage point, operating profit increased 9%. The increase was primarily due to revenue growth partially offset by an increase in operating costs to support business initiatives at Platts, increased technology expenses, higher compensation costs and increased incentive costs. 43 For a further discussion of competitive and other risks inherent in our Platts 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. Indices Indices is a global index provider maintaining a wide variety of indices to meet an array of investor needs. 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. 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, and to a lesser extent 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. The following table provides revenue and segment operating profit information for the periods ended September 30: (in millions) Three Months Nine Months 2021 2020 % Change 2021 2020 % Change Revenue $ 298 $ 234 28% $ 846 $ 733 16% Asset-linked fees $ 211 $ 156 36% $ 589 $ 468 26% Subscription revenue $ 47 $ 43 8% $ 140 $ 132 7% Sales usage-based royalties $ 40 $ 35 15% $ 117 $ 133 (12)% % of total revenue: Asset-linked fees 71 % 67 % 70 % 64 % Subscription revenue 16 % 18 % 16 % 18 % Sales usage-based royalties 13 % 15 % 14 % 18 % U.S. revenue $ 249 $ 197 26% $ 707 $ 619 14% International revenue $ 49 $ 37 35% $ 139 $ 114 22% % of total revenue: U.S. revenue 84 % 84 % 84 % 84 % International revenue 16 % 16 % 16 % 16 % Operating profit 1 $ 213 $ 151 41% $ 600 $ 504 19% Less: net operating profit attributable to noncontrolling interests 58 41 161 136 Net operating profit $ 155 $ 110 41% $ 439 $ 368 19% Operating margin % 71 % 65 % 71 % 69 % Net operating margin % 52 % 47 % 52 % 50 % 1 Operating profit includes amortization of intangibles from acquisitions of $1 million for the three months ended September 30, 2021 and 2020 and $4 million for the nine months ended September 30, 2021 and 2020. 44 Three Months Revenue at Indices increased 28% primarily due to higher average levels of assets under management ("AUM") for ETFs and mutual funds. Average levels of AUM for ETFs increased 48% to $2.528 trillion and ending AUM for ETFs increased 43% to $2.474 trillion compared to the three months ended September 30, 2020. ETF revenue was impacted by a $5 million breakup fee associated with the termination of several ETF funds. Foreign exchange rates had a favorable impact of 1 percentage point. Operating profit increased 41%. Excluding the impact of amortization of intangibles from acquisitions of 1 percentage point, operating profit increased 40%. The impact of revenue growth and lower legal related costs was partially offset by higher cost of sales, an increase in compensation costs driven by additional headcount and annual merit increases and higher incentive costs. Foreign exchange rates had an unfavorable impact of less than 1 percentage point. Nine Months Revenue at Indices increased 16% primarily due to higher average levels of AUM for ETFs and mutual funds, partially offset by lower exchange-traded derivative revenue. Average levels of AUM for ETFs increased 44% to $2.334 trillion and ending AUM for ETFs increased 43% to $2.474 trillion compared to the nine months ended September 30, 2020 while exchange-traded derivative activity was impacted by both lower average daily trading volume from reduced volatility and lower rates per trade from a shift in product mix in the first half of 2021. Foreign exchange rates had a favorable impact of 1 percentage point. Operating profit increased 19%. The impact of revenue growth and lower legal related costs was partially offset by higher cost of sales, an increase in compensation costs driven by additional headcount and annual merit increases and higher incentive costs. Foreign exchange rates had an unfavorable 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. 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. Cash Flow Overview Cash, cash equivalents, and restricted cash were $5,907 million as of September 30, 2021, an increase of $1,785 million from December 31, 2020. The following table provides cash flow information for the nine months ended September 30: (in millions) 2021 2020 % Change Net cash provided by (used for): Operating activities $ 2,658 $ 2,426 10% Investing activities $ (42) $ (204) (79)% Financing activities $ (772) $ (1,950) (60)% In the first nine months of 2021, free cash flow increased $214 million to $2,454 million compared to $2,240 million in the first nine months of 2020. 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 and free cash flow excluding certain items. 45 Operating activities Cash provided by operating activities increased $232 million to $2,658 million for the first nine months of 2021. The increase is mainly due to higher operating results in 2021. Investing activities Our cash outflows from investing activities are primarily for acquisitions and capital expenditures, while cash inflows are primarily proceeds from dispositions. Cash used for investing activities decreased to $42 million for the first nine months of 2021 compared to $204 million in the first nine months of 2020, primarily due to cash used for the acquisitions of the ESG Ratings Business from RobecoSAM and Greenwich Associates LLC in 2020. 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 $1,178 million to $772 million for the first nine months of 2021. The decrease is primarily attributable to a decrease in cash used for share repurchases in 2021. During the nine months ended September 30, 2021, we did not use cash to repurchase shares. During the nine months ended September 30, 2020, we purchased a total of 4.0 million shares for $1,161 million of cash. During the fourth quarter of 2019, we repurchased shares for $3 million, which settled in the first quarter of 2020, resulting in $1,164 million of cash used to repurchase shares. See Note 8 — Equity to the consolidated financial statements of this Form 10-Q for further discussion. Additional Financing On April 26, 2021, we entered into a revolving $1.5 billion five-year credit agreement (our "credit facility") that will terminate on April 26, 2026. This credit facility replaced our revolving $1.2 billion five-year credit facility (our "previous credit facility") that was scheduled to terminate on June 30, 2022. The previous credit facility was canceled immediately after the new credit facility became effective. There were no outstanding borrowings under the previous credit facility when it was replaced. We have the ability to borrow a total of $1.5 billion through our commercial paper program, which is supported by our credit facility that we entered into on April 26, 2021. As of September 30, 2021 and December 31, 2020, there was no commercial paper issued or outstanding, and we similarly did not draw or have any borrowings outstanding from the credit facility or previous credit facility during the three and nine months ended September 30, 2021 and 2020. 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 9 basis points. The credit facility also includes an accordion feature which allows the Company to increase the total commitments thereunder by up to an additional $500 million, subject to certain customary terms and conditions. The credit facility contains customary affirmative and negative covenants and customary events of default. The occurrence of an event of default could result in an acceleration of the obligations under the credit facility. The 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 27, 2021, the Board of Directors approved an increase in the quarterly common stock dividend from $0.67 per share to $0.77 per share. 46 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. All senior notes 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. 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 September 30, 2021 are as follows: (in millions) Three Months Nine Months Revenue $ 856 $ 2,597 Operating Profit 499 1,658 Net Income 194 571 Net income attributable to S&P Global Inc. 194 571 Summarized balance sheet information as of September 30, 2021 and December 31, 2020 is as follows: (in millions) September 30, December 31, 2021 2020 Current assets (excluding intercompany from Non-Obligor Group) $ 5,091 $ 3,093 Non-current assets 1,042 1,055 Current liabilities (excluding intercompany to Non-Obligor Group) 1,291 1,179 Non-current liabilities 5,217 4,936 Intercompany payables to Non-Obligor Group 4,823 3,893 47 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, net. 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. 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 nine months ended September 30: (in millions) 2021 2020 % Change Cash provided by operating activities $ 2,658 $ 2,426 10 % Capital expenditures (33) (43) Distributions to noncontrolling interest holders, net (171) (143) Free cash flow $ 2,454 $ 2,240 10 % (in millions) 2021 2020 % Change Cash used for investing activities (42) (204) (79) % Cash used for financing activities (772) (1,950) (60) % 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, 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 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. 48 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 COVID-19 and the 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, and factors that contribute to uncertainty and volatility, natural and man-made disasters, civil unrest, pandemics (e.g., COVID-19), geopolitical uncertainty, and conditions that may result from legislative, regulatory, trade and policy changes; • the satisfaction of the conditions precedent to consummation of the Merger, including the ability to secure regulatory approvals and consummate related dispositions on the terms expected at all or in a timely manner; • the occurrence of events that may give rise to a right of one or both of the parties to terminate the merger agreement; • uncertainty relating to the impact of the Merger, divestitures and liability management transactions on the businesses of the Company and IHS Markit, including potential adverse reactions or changes to the market price of the Company’s common stock and IHS Markit shares resulting from the announcement or completion of the Merger and changes to existing business relationships during the pendency of the acquisition that could affect the Company’s and/or IHS Markit’s financial performance; • risks relating to the value of the Company’s stock to be issued in the Merger, significant transaction costs and/or unknown liabilities; • the ability of the Company to successfully integrate IHS Markit’s operations and retain and hire key personnel of both companies; • the ability of the Company to retain customers and to implement its plans, forecasts and other expectations with respect to IHS Markit’s business after the consummation of the Merger and realize expected synergies; • business disruption following the Merger; • the possibility that the Merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; • the Company’s and IHS Markit’s ability to meet expectations regarding the accounting and tax treatments of the Merger; • the Company’s ability to successfully recover should it experience a disaster or other business continuity problem from a hurricane, flood, earthquake, terrorist attack, pandemic, security breach, cyber attack, data breach, power loss, telecommunications failure or other natural or man-made event, including the ability to function remotely during long-term disruptions such as the ongoing COVID-19 pandemic; • 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; • the health of debt and equity 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; • concerns in the marketplace affecting the Company’s credibility or otherwise affecting market perceptions of the integrity or utility of independent credit ratings, benchmarks and indices; 49 • the effect of competitive products and pricing, including the level of success of new product developments and global expansion; • 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 domestic and international 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 S&P Global Ratings, S&P Global Platts, S&P Dow Jones Indices, S&P Global Market Intelligence and the products those business divisions offer including our ESG products, and the Company’s compliance therewith; • the Company’s ability to make acquisitions and dispositions and successfully integrate the businesses we acquire; • consolidation in the Company’s end-customer markets; • the introduction of competing products or technologies by other companies; • the impact of customer cost-cutting pressures, including in the financial services industry and the commodities markets; • a decline in the demand for credit risk management tools by financial institutions; • the level of merger and acquisition activity in the United States and abroad; • the volatility and health of the energy and commodities markets; • our ability to attract, incentivize and retain key employees, especially in today’s competitive business environment; • 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; • the Company's ability to adjust to changes in European and United Kingdom markets as the United Kingdom leaves the European Union, and the impact of the United Kingdom’s departure on our credit rating activities and other offerings in the European Union and United Kingdom; and • the impact of changes in applicable tax or accounting requirements on the Company. 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 our most recently filed Annual Report on Form 10-K. 50