S&P Global Inc. (SPGI) Q2 2020 Earnings Call Transcript

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S&P Global Inc. (SPGI -0.29%)
Q2 2020 Earnings Call
Jul 28, 2020, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning and welcome to S&P Global's Second Quarter 2020 Earnings Conference Call. I'd like to inform you that this call is being recorded for broadcast. All participants are in a listen-only mode. We will open the conference to questions and answers after the presentation and instructions will follow at that time. To access the webcast and slides, go to investor.spglobal.com.

[Operator Instructions]

I would now like to introduce, Mr. Chip Merritt, Senior Vice President of Investor Relations for S&P Global. Sir, you may begin.

Robert S. Merritt -- Senior Vice President, Investor Relations

Thank you for joining us today for S&P Global's second quarter earnings call. Presenting on today's call are Doug Peterson, President and CEO, and Ewout Steenbergen, Executive Vice President and Chief Financial Officer.

As COVID-19 remains a concern, we are all calling in remotely instead of hosting this call together from our headquarters. If you notice any delays, we thank you for your understanding.

We issued a news release with our second quarter 2020 results earlier today. If you need a copy of the release and financial schedules, they can be downloaded at investor.spglobal.com.

In today's earnings release and during the conference call, we're providing adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the corporation's operating performance between periods and to view the corporation's business from the same perspective as management's. The earnings release contains exhibits that reconcile the difference between the non-GAAP measures and the comparable financial measures calculated in accordance with US GAAP.

This call, especially the discussion of our outlook and associated scenarios, contains statements about expected future events that are forward-looking and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from expectations can be found in our filings with the SEC and on our website.

Before we begin, I need to provide certain cautionary remarks about forward-looking statements. Except for historical information, the matters discussed in the teleconference may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections, estimates and descriptions of future events. Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. In this regard, we direct listeners to the cautionary statements contained in our Form 10-Ks, 10-Qs and other periodic reports filed with the US Securities and Exchange Commission.

I would also like to call your attention to a European regulation. Any investor who has or expects to obtain ownership of 5% or more of S&P Global should give me a call to better understand the impact of this legislation on investor and potentially the company.

We are aware that we do have some media representatives with us on the call. However, this call is intended for investors and we would ask that questions from the media be directed to Dave Guarino at 212-438-1471.

At this time, I would like to turn the call over to Doug Peterson. Doug?

Douglas L. Peterson -- President and Chief Executive Officer

Thank you, Chip. Good morning and welcome to today's earnings call. I'm going to begin by talking about our second quarter financial highlights, but I want to take a moment to express my gratitude for people at S&P Global for their dedication and commitment in these extremely challenging times. I'm very proud of our teams and their resilience.

As we enter the second half of the year that none of us could have predicted, S&P Global and our people remain focused on supporting each other, our customers and our communities through this ongoing pandemic.

We're still largely all working from home. We have developed plans to return to the office in a way that best suits our business and our employees when conditions permit. Because we're fortunate enough to be able to work remotely and continue to deliver the highest value to our customers, we will only move forward with these plans when we're comfortable and confident in our ability to support all of our employees and clients with a safe environment. More to come on how we're doing this.

Now, let me begin with our second quarter financial highlights. A surge in liquidity-driven bond issuance resulted in an exceptional second quarter results. Not only was the performance of the Ratings business strong, all four divisions delivered revenue and adjusted operating profit growth.

During our first quarter earnings call, we explained the expense controls we were putting in place to prudently manage through the pandemic. These efforts resulted in a 3% decline in total adjusted expenses during the second quarter and demonstrate the company's ability to reduce costs in a difficult environment. The combination of revenue growth, cost reductions and the reduction of shares outstanding resulted in adjusted diluted EPS growth of 40%.

I'd also like to share some additional highlights from the second quarter. Most importantly, the company continued to successfully operate despite the COVID-19 pandemic. We completed the $100 million productivity program that we initiated at Investor Day in May of 2018 and achieved a run rate of $120 million in savings. Ewout will provide more details on that during his remarks as well as review our increased 2020 guidance.

We also continued our investment growth initiatives and launched several new products. I'll share information on these in a moment. And we introduced a new internal initiative [Technical Issues]. Over the next few months, we will reimagine and design the future of our workplace, focusing on technology to transform how we serve our customers, where we work and how we work.

During these unprecedented times, our goal first and foremost was to support our people [Technical Issues] and our communities. To help our employees, we've increased benefits and introduced flexible work schedules to help them juggle hectic home lives and work.

We've also introduced programs to elevate employees' understanding of racial injustice. Our efforts for [Technical Issues] extend to our supply chain and business partners where we strive to partner with minority, women, veteran and LGBTQ-owned businesses.

We do not tolerate any discrimination at S&P Global and we're taking the time to listen and learn from each other and ensure that we are part of the solution and are advocates of change.

In April, we added a question to our NPS survey asking our customers how we were supporting them during the COVID-19 crisis. Our customers have expressed overwhelmingly positive feedback, acknowledging the increased frequency and availability of our research and insights related to COVID-19 via weekly calls, webinars and robust online content.

Similarly, visitors across all our public websites have expressed a strong appetite for insights and research during the first half of the year. We've reached record levels of website visitors, time spent on our site and content consumed in our thought leadership pieces, webinars and virtual events.

In line with our commitment to give back and support our communities, the company was also able to make an additional $6 million contribution to the S&P Global Foundation in Q2. In 2020, the foundation is scheduled to make at least $11 million in contributions to support organizations in line with COVID-19 relief, racial equity and social justice, economic inclusion, environmental sustainability, gender equality and other organizations supporting our communities.

Our foundation grants during the COVID-19 pandemic have been used to help organizations connect 0.5 million people to local nutritious food distribution in the United States, distribute PPE kits to vulnerable families in many locations in Brazil and to feed 1 million people hot meals across parts of India.

To recap the financial results for the second quarter, revenue increased 14% to $1.9 billion. Our adjusted operating profit increased 31% and our adjusted operating profit margin increased 740 basis points to 58.7%. As you know, we measure and track adjusted operating profit margin on a trailing four-quarter basis, which increased 410 basis points to 53.6%. In addition, shares outstanding declined 2% over the past year, contributing to the 40% increase in adjusted diluted EPS.

One of the strengths of S&P Global is the resilience of our business model. In 2019, over 70% of our revenue came from either subscriptions from the non-transaction portion of our Ratings business or from asset-linked fees, primarily in Indices. In addition, much of the transaction-based revenue in Ratings is driven by the refinancing of debt as it reaches maturity on a known and predictable schedule.

Another strength of our company is the wide range of sectors that we serve. In addition to financial institutions, we serve numerous industries including utilities, technology, integrated oil and gas as well as governments. And because of this diversity of revenue, no one industry and certainly no one customer represents the majority of our business. In fact, non-financial corporates and industrial categories represent almost 60% of our revenue.

Each quarter, we highlight a few key drivers to our business and important projects under way. This quarter, let's start with the ratings issuance trends. During the second quarter, global bond issuance increased 36%. If we also include bank loan ratings volume, total global issuance increased 31%. US led the way with quarterly records for both investment grade and high yield issuance. Companies poured into the market to enhance our cash positions.

While it's not unusual for large banks to tap the bond markets several times during the quarter, it's unusual for corporates to do so. However, between the third week of March and the end of June, there are over 50 corporations that came to the market with multiple bond offerings.

What is also interesting was the way that companies approached issuance. Some came straight to the market. Some tapped their revolvers and then several weeks later termed out their debt with new issuance and repaid their revolvers as you see on the next slide. And finally, some companies that were frequent issuers of commercial paper turned to the bond market with new debt as the commercial paper market experienced a period of great volatility.

Turning to the data. in the US, bond issuance in aggregate increased 57% as investment grade increased 135%, high-yield increased 115%, public finance increased 9% and structured finance decreased 56%, with large declines in every asset class.

European bond issuance increased 36% as investment grade increased 63%, high-yield decreased 28% and structured finance decreased 21% due to declines across every asset class except ABS.

In Asia, bond issuance increased 16% overall and Ratings issued three new domestic ratings in China as China recovers from the pandemic, lockdowns are ending and we have reopened our Chinese offices. While the pipeline prospects continues to grow, meeting clients in person should help to advance the business.

As mentioned, here you can see how corporations drew down these revolvers in March and April. And on the right hand side of this slide, you see the dramatic increase in issuers during the quarter with over 500 compared to 300 last year.

One of the first questions investors ask whenever there is a strong quarter of issuance is, how much of this was pull-forward? Because of the unprecedented level of issuance, we felt we've tried to address this with some data.

On this slide, we analyze upcoming maturity data from different points in time. As you can see, the upcoming maturities in the second half of this year and the next few years have not changed much in the past six months. So, despite the flurry of issuance in the last few months, there doesn't appear to have been much pull-forward activity.

Next, we look at the total amount of global debt outstanding. As you can see, it's been growing every year by an average of $884 billion or approximately 5%. In the first six months of this year, the amount of global debt outstanding increased by $781 billion, clearly a significant increase.

So, we conclude that the level of pull-forward activity is not unusual. Instead, we have a surge in new issuance that has created an uptick in the growth of total global corporate debt.

Bank loan rating activity is not captured in issuance data. However, since it's an important element of ratings revenue, we like to disclose bank loan rating revenue each quarter. In the second quarter, it decreased 47% from the prior period to $45 million. High-yield bonds were clearly the preferred option for issuers this quarter.

ESG is a major emphasis across the company and we continued to strengthen our footprint. In Ratings, 15 ESG evaluations were completed or in progress during the quarter and 80 year-to-date. We also completed three green evaluations during the quarter, with 79 to date.

In addition, we launched the S&P Global ESG Scores based on the SAM data that we acquired earlier this year. Trucost climate data has been integrated into portfolio analytics, enabling investment professionals to analyze ESG factors for enhanced portfolio view.

The Trucost Metals and Mining Climate Competitiveness dataset was launched on our Data Marketplace. The dataset covers 1,400 money assets owned by more than 500 public and private companies located in 78 countries.

In Indices, ESG ETF AUM continues to climb, reaching $6.6 billion at the end of June, and Platts launched three new daily spot price assessments for the US, post-consumer PET bottle builds, adding transparency to the trade of recycled material.

In addition, Platts Analytics Scenario Planning Service, SPS, and World Energy Demand have been gaining traction with annual contract value growth of over 70% at the end of the second quarter compared to a year ago.

SPS, underpinned by the market-leading World Energy Demand, offers clients a view of the medium and long-term trajectory of energy and commodity markets as well as insights into the interconnected nature of market fundamentals, technology, policy and consumer preferences. This comprehensive service gives access to data and tools needed to respond to the risks and opportunities presented in the energy transition.

Platts has been operating in the energy transition space for over 15 years with valuable analytics in the form of price assessments, news and analytical services across a variety of environmental markets and related commodities.

We think that the launch of S&P Global ESG Scores is a significant milestone for the company. These scores are based on 20 years of SAM data. This dataset we provide includes sustainability scores that have an impact on the company's business value drivers, including growth, profitability, capital efficiency and risk exposure for more than 7,000 companies; a qualitative screening to evaluate the company's response to critical sustainability issues that may arise during the year; and full data history dating back to 2013.

The scores are available as data feeds and can be found on the Data Marketplace that we described to you last quarter. In fact, these scores have quickly become the most sought-after dataset of our Data Marketplace. A sample of the data for an industrial company is depicted on the right side of this slide, with the total ESG score in the top row and the scoring components underneath.

I'm particularly pleased that, with all of the distractions that employees faced during this pandemic, they continue to innovate and launch new products. Let me highlight just a few of these.

Machine-readable filings by market intelligence is a new data offering that applies cleansing and parsing techniques to generate machine-readable text extracted from SEC regulatory filings. This might be of interest to many of you.

Our Indices business has partnered with IHS Markit to create multi-asset class indices. We'll use the S&P 500 in IHS Markit's iBoxx bond indices and CDX and iTraxx credit indices to construct new multi-asset benchmarks. In the first phase of the collaboration, the companies are working to design a liquid multi-asset allocation strategy.

As we continue to ramp up our Chinese operations, we launched the first Mandarin language release of Ratings360. As part of the broader efforts of contributing to the digitalization of commodity markets, Platts has introduced APIs for two important datasets, the world refinery database and Platts oil inventory.

Platts worked with selected clients in the development phase of these APIs. These new APIs are the beginning of a multi-year effort to provide fundamental commodity insights and data from our highly valued analytical services to direct machine consumption in customer back-end systems and quantitative model.

Lastly, I want to share that Kensho is now making its entity-linking capability available to our customers. It's called Kensho Link and it's a machine learning model which minimizes the time it takes to onboard new datasets and organize entity data. We've even seen clients use Kensho Link to manage data in their CRM system.

There is just one more new product launch I want to feature. It's called RiskGauge. Small and medium-sized enterprises account for approximately 90% of global businesses. Financials for many of these companies, however, are difficult to find. RiskGauge offers credit information on more than 50 million global companies. With its significant SME coverage, RiskGauge reports allow the streamlining of counterparty credit risk assessment by helping them cover risks and deteriorations in payment behavior. Clients can now access a detailed company credit risk profile that contains relative performance benchmarks and insightful commentary.

In addition to company profiles, a RiskGauge score and probability of default commentary, we offer PaySense which allows identification of an entity's trade payment behavior and potential liquidity risk based on our statistical model, and MaxLimit, a framework the recommends maximum exposure limits by incorporating multiple risk dimensions, user risk appetite and macroeconomic elements.

Each year, S&P Dow Jones Indices releases the annual survey of assets. This chart depicts the highlights of that survey for 2018. Asset levels in actively managed funds that benchmark against our indices increased 21% to $9.3 trillion. Assets in passive funds invested in products indexed to our indices increased 33% to $6.4 trillion.

Numerous indices underlie the $6.4 trillion, including the S&P 500, the largest with $4.6 trillion in assets. Other categories include smart beta and fixed income, which both increased, and ESG, which increased 37% to $11 billion in 2019. We anticipate the new ESG products launched by UBS, DWS, State Street and BlackRock will create further growth in this category.

Next, I would like to provide additional information around our outlook for 2020. Let me start with our issuance outlook. The correlation between GDP and issuance has been upended by the surge in liquidity-driven issuance after central banks initiated bond purchase programs to support market liquidity. This windfall in issuance has resulted in our expectation for a 5% increase in global issuance excluding international public finance versus a decline of 10% in our previous forecast. The fastest growing area is non-financial corporates, which we expect increased 20%. The weakest area is structured finance which we expect to contract 30%.

Earlier this month, our economists updated their global GDP forecast due to a deeper downturn than initially anticipated in emerging markets, notably in India. The forecast now calls for a 3.8% contraction to global GDP in 2020.

The effects of extended lockdowns, unemployment and consumer confidence also means the recovery will take longer than previously expected into 2021 to 2023, with a permanent loss in output. We continue to maintain a close watch on the macroeconomic and other factors that impact our business.

We're in unprecedented times and there is a great deal of uncertainty in our ability to predict how geopolitical and macroeconomic forces might react and behave in times of very little historic precedent. We continue to monitor the developments in global political and economic scenarios and hope to gain better visibility and clarity into their impact on the global business climate and our company as we get further into the year.

I will now turn the call over to Ewout Steenbergen, who is going to provide additional insights into our financial performance and outlook. Ewout?

Ewout Steenbergen -- Executive Vice President and Chief Financial Officer

Thank you, Doug. And good morning to all of you on the call. Let me start with our second quarter financial results. Doug offered the highlights of strong revenue and adjusted earnings-per-share growth. I will take a moment to cover a few other items. While some of the segments have a difference between reported and organic revenue growth, in aggregate, they are the same at 14%.

Adjusted total expenses declined 3%. This is the result of our productivity programs, but also due to the management actions we have taken in response to COVID-19. This included a hiring freeze, reductions in T&E, lower advertising and promotions and reduced use of outside professional services. However, the increase in spending in growth initiatives continued.

Adjusted operating profit margin improved 740 basis points based on revenue growth and lower expenses. The adjusted effective tax rate improved to 21.7% due primarily to the successful resolution of tax examinations in various jurisdictions.

During the quarter, changes in foreign exchange rates had a positive impact on adjusted EPS of $0.02. The only meaningful impact was in Ratings where revenue was negatively impacted by $7 million.

The non-GAAP adjustments this quarter collectively generated a pre-tax loss of $39 million. They included $6 million in restructuring charges in corporate and a UK pension adjustment, $1 million in gains from the disposition of an IR web hosting business in Market Intelligence, $2 million for Kensho retention-related expenses, and $32 million in deal-related amortization.

This quarter, all four divisions delivered increased revenue and adjusted operating profit, with the Ratings delivering tremendous gains. On a trailing four-quarter basis, adjusted operating profit margin increased for all divisions except Market Intelligence where a large portion of our investment spending is taking place. I'll provide color on the individual business results in a moment.

Now turning to the balance sheet. Our balance sheet has low leverage and ample liquidity. We have cash and cash equivalents of $2.7 billion, debt of $4 billion and undrawn revolver capacity of $1.2 billion and no commercial paper outstanding. Our debt ratios declined slightly versus the end of last year.

In light of the attractive new issue rates, we may undertake an opportunistic refinancing of a portion of our bond debt during the third quarter subject to market conditions and board approval.

Free cash flow excluding certain items reached $1.5 billion in the first half of this year, an increase of $551 million over the prior-year period. No new share repurchases were made in the second quarter while our existing ASR program was in place.

On July 27, this ASR program was completed. The average price of shares purchased under this program was approximately $292 per share. While we're not pursuing share repurchases at this time, our Board of Directors may consider a potential resumption of our share repurchase program later in the year.

Including the ASR that was just completed, share repurchases totaled $1.15 billion in the first half of 2020. In addition, $323 million of dividends have been paid so far this year. This activity, along with anticipated dividends in the second half of the year, amount to approximately 66% of our anticipated free cash flow for the year.

Now, let's turn to the division results. Ratings revenue increased 26%. And excluding the acquisition of the ESG ratings business from RobecoSAM and CRISIL's acquisition of Greenwich Associates, organic revenue increased 25%. This revenue growth was driven by the increase in issuance Doug already discussed.

Adjusted expenses declined 5%. Excluding changes in foreign exchange rates, expenses declined 2% due primarily to management actions and the in-sourcing of IT resources that we discussed on our fourth quarter earnings call. This resulted in a 47% increase in adjusted segment operating profit and a 1,020 basis point increase in adjusted segment operating profit margin. On a trailing four-quarter basis, adjusted segment operating profit margin increased 660 basis points to 63.1%.

Non-transaction revenue increased 1%. Transaction revenue increased 48% due to very strong bond investment grade issuance globally and high yield issuance in the US, partially offset by weakness in structured finance and decreased bank loan rating activity.

This slide depicts Ratings revenue by its end markets. The largest contributor to the increase in Ratings revenue was the 38% increase in corporates. In addition, financial services revenue increased 24%, structured finance decreased 21%, governments increased 24% and CRISIL and other category increased 8%. On the right side of the slide, you can see the changes in revenue within structured products. The largest decreases were in ABS and CMBS.

Turning to S&P Dow Jones Indices. The segment delivered 2% revenue growth due primarily to gains in exchange traded derivatives. Excluding a non-recurring benefit of approximately $11 million in the second quarter of 2019, primarily from contract renegotiations, revenue would have increased 7%.

In the second quarter, we reported a 5% improvement in adjusted expenses due primarily to management actions, 5% adjusted segment operating profit growth and an adjusted segment operating profit margin of 71.9%, an increase of 210 basis points. On a trailing four-quarter basis, the adjusted segment operating profit margin increased 150 basis points to 70.2%.

Revenue growth was led by exchange traded derivatives during the quarter. Asset-linked fees decreased 4% due primarily to a non-recurring benefit of approximately $11 million in the second quarter of 2019. Exchange traded derivative revenue increased 20% on growth in trading volumes. Data and custom subscriptions increased 6% due to an increase in end-of-day and real-time ACC.

For our Indices division, over the past year, ETF net inflows were $102 billion and market declines were $7 billion. This resulted in quarter-ending ETF AUM of $1.6 trillion, which is 6% higher compared to one year ago.

I want to make a clear distinction between average AUM and quarter-ending AUM. Our revenue is based on average AUM which increased 2% year-over-year. We disclose quarter-ending figures because flows and market gains and losses are best depicted using quarter-end figures as shown in the waterfall chart on the right.

Sequentially, versus the first quarter of 2020, ETF net inflows associated with our indices totaled $17 billion, while market appreciation totaled $254 billion. Industry inflows into exchange-traded funds were $195 billion in the second quarter. The category with the largest gains was fixed income. Flows into US equity funds were $59 billion.

I also want to point out that AUM in funds tracking our flagship S&P Kensho New Economies Composite Index have passed $1 billion, increasing nine-fold year-to-date.

Activity at the CBOE declined in the second quarter, with S&P 500 Index options activity declining 9% and fixed futures and options activity declining 35%. This was in contrast to increased activity at the CME where the equity complex volume increased 60%. The majority of the gain at the CME was due to the successful launch of the Micro E-mini S&P 500 futures. Excluding this product, the volumes at the CME equity complex increased 16%.

Market Intelligence delivered reported revenue growth of 6% and organic growth of 5%. The COVID-19 pandemic has lengthened sales cycles while driving record usage, particularly in the Market Intelligence desktop, Panjiva, 451 Research and LCD.

Adjusted expenses increased 3% due primarily to acquisitions, increased headcount in the second half of 2019 and investment spending, partially offset by management actions. Much of the investment spending is on projects that are becoming more visible to you, including the launch of Data Marketplace last quarter and RiskGauge for the SME space this quarter.

Adjusted segment operating profit increased 13% and the adjusted segment operating profit margin increased 220 basis points to 34.4%. On a trailing four-quarter basis, adjusted segment operating profit margin declined 100 basis points to 32.4%.

Looking across the Market Intelligence components, desktop revenue grew 4% excluding acquisitions and divestments, while active desktop users grew 7%. Data management solutions revenue grew 5% and credit risk solutions revenue grew 8%. We continue to expect revenue from both of these categories to grow high single-digit this year.

And now turning to Platts. Reported revenue increased 2%. And on an organic basis, adjusting for the sale of RigData, revenue increased 3%, with core subscriptions and global trading services both growing 4%.

The impact from the COVID-19 pandemic resulted in a $3 million decline to almost zero in conference revenue this quarter. You have probably never heard us discuss the conference business because it has annual revenue of only about $10 million. However, because of COVID-19, the business largely evaporated during the quarter. Steps are being taken to shift some of the business to virtual conferences.

The recession has also reduced oil prices, putting enormous cost pressure on many of our customers. This has resulted in bankruptcy filings by 45 US exploration and production and oil service firms year-to-date. Many of them are our customers, but small part of our revenue. This will impact us in the future.

Adjusted expenses decreased 7% due to the divestiture of RigData and management actions. Adjusted segment operating profit margin increased 400 basis points to 58.3%. The trailing four-quarter adjusted segment operating profit margin increased 240 basis points to 54.2%.

Last quarter, Doug shared with you some initial success we had with Kensho and our Market-on-Close process. Kensho has enabled Platts to accelerate the assessment process and improve efficiencies for Platts pricing reporters, while adding significant time savings and analytical value for our customers.

Ten markets with a total of 35 assessments are now Kensho powered. This has reduced the time between the market close and publishing by an average of 70%, which has already produced internal productivity gains for our editorial team. Our efforts to discover the commercial value of faster assessments and developed analytics offering in collaboration with our customers are ongoing. Growth in each of the categories was 3% to 4% during the quarter.

And now I'm pleased to share that the $100 million productivity program that we announced at our Investor Day in May of 2018 has been achieved. In fact, we exceeded the original target and delivered $120 million in productivity savings.

Some of the key areas of improvement were in standardizing and centralizing processes, utilizing RPA to automate routine activities, reducing our real estate footprint and consolidating data centers.

That being said, given what we have experienced through the COVID-19 period with virtual work and digital acceleration, we know there will be a change to how and where we work. In our prior guidance, we had assumed that 15% of our discretionary savings from the impact of COVID-19 would be permanent in nature. As we more holistically analyze all the potential opportunities that have been eliminated over the past several months, we're framing a new productivity program of at least $100 million that we'll introduce later this year.

COVID-19 had a meaningful impact on our business. On this slide, we attempt to disclose the impact on revenue and expenses in each segments compared to our first quarter baseline scenario guidance. As we have mentioned earlier in the call, there was a surge of liquidity-driven issuance that increased Ratings revenue during the second quarter by $170 million to $190 million.

There was a modest improvement in our Indices business as ETF AUM levels improved quicker than anticipated. The impact on revenue in our other businesses was in line with previous guidance. However, I want to remind you that in our subscription businesses, any customer bankruptcies or cancellations that occur this year generally will not have a full impact on our revenue until 2021. From an expense impact, the management actions taken reduced expenses by an additional $10 million in the second quarter above our previous guidance.

Collectively, there was about $0.60 EPS benefit from these items in the second quarter. If you then combine this with an improved outlook for the second half of this year of about $0.20, we're increasing our 2020 adjusted diluted EPS guidance by $0.80 per share.

Last quarter, we introduced three scenarios with different timeframes for when the economy will begin to recover. The baseline scenario was based on a late third quarter recovery. This scenario remains our baseline and has been updated with our latest forecast. In addition, we have updated the late fourth quarter recovery scenario.

We feel these as the key metrics which will impact revenue in various parts of our company and are derived from various forecasts from our economic, credit, oil and other market specialists across S&P Global. Many of the inputs for these scenarios can be found on our divisional research and analytical platforms and are sourced accordingly.

In addition, there are two items that we are providing at this time to give additional color for the scenarios. The first is global issuance growth. In the baseline, the 5% increase in global issuance relates to market issuance excluding international public finance. Under this scenario, billed investment grade issuance growth is forecast to increase double digits, while high yield is expected to be up in the high single-digit range.

The second is exchange traded derivative volume growth. The baseline of approximately 20% assumes elevated levels in the first half of this year, followed by low single-digit increases in the second half. While we are not predicting when the pandemic will end, we're using the late third quarter recovery scenario as our baseline and the basis for our new guidance. We think that it is important for our investors that we make a good-faith attempt to provide appropriately framed forward-looking information.

Despite our resilience and financial strength, we're not immune to structural risks arising from COVID-19. These include risks to the macroeconomic environment, to bonds and credit markets, to equity markets and to oil markets. We could see a drop in bond issuance, weakness in new sales or subscription renewals, or further drops in AUM, among the many risks that could arise. We're staying close to the trends. The longer the pandemic continues, the greater the risks.

This slide depicts the scenarios with the typical guidance line items we normally disclose. The baseline column is our new 2020 GAAP guidance. And this slide depicts our adjusted figures. The third column is our new 2020 adjusted guidance based on the revised late third quarter recovery scenario.

Now, let me review our new adjusted guidance. We increased our revenue guidance to a mid to high single-digit increase. Corporate unallocated expense has been increased by $20 million to a range of $135 million to $145 million due to increased incentive compensation accruals and the contribution to the S&P Global Foundation.

Operating profit margin is increased to a range of 51.5% to 52.5%. Interest expense net includes both interest income and interest expense. It has been reduced by $5 million due to our cross-currency swap derivatives, partially offset by lower interest income received on our cash balances. The tax rate has been reduced due to the impact from equity compensation.

These items result in a new adjusted diluted EPS guidance range of $10.75 to $10.95. Our expectations for free cash flow are a range of $2.7 to $2.8 billion.

In conclusion, I'm very proud of the outstanding performance and execution that our team has delivered during this exceptional quarter. The financial results that we have delivered year-to-date demonstrate the resiliency of our businesses and the commitment of our leadership to control expenses and to apply the highest professional standards in managing the company through this period.

While we continue to navigate through uncertainty, we remain committed to provide transparency for our investors to deliver essential intelligence for our customers and to support sustainable development in our communities.

And with that, let me turn the call back over to Chip for your questions.

Questions and Answers:

Robert S. Merritt -- Senior Vice President, Investor Relations

Thank you. [Operator Instructions].

Operator

Thank you. The first question comes from Toni Kaplan with Morgan Stanley. You may now ask your question.

Toni Kaplan -- Morgan Stanley -- Analyst

Thank you. Congratulations on the quarter. I wanted to ask about the Ratings margins. They are incredibly strong in the quarter. Does this make you rethink the high 50s over the medium term that you've mentioned previously, just given the operating leverage that seems to exist in the business? And just if you could give us some color on the sustainability of the margins going forward. Thanks.

Ewout Steenbergen -- Executive Vice President and Chief Financial Officer

Good morning, Toni. And thank you for your recognition of our results. Indeed, we are of course pleased to see the margins for Ratings going up so much. And now, on a trailing four-quarter basis at 63% level. We have decided not at this moment to make any changes with respect to our aspirational margin targets because we think this is not the right time to do that given the external environment. And by the way, that's applicable for all of our divisions.

And what you should expect for Ratings is that margins should be somewhere around that 60% level for the full year. That's the best expectation. What we will do is we're going to work on this new productivity program where we will provide you more details later this year and, most likely, we could attach new aspirational margin targets to that same moment and introduce that to you and the other analysts and investors.

So, not at this moment. But around that 60% level is the best expectation for Ratings margins for this year.

Toni Kaplan -- Morgan Stanley -- Analyst

That's great. And the Reimagine workplace program that you mentioned in the early comments, is that program expected to result in cost savings? Is it related to that productivity program or is it different? And maybe it's just a reallocation of expenses. So, just wanted to get a little bit more color on what that means and if it's part of that program as well. Thanks. Yes, yes, absolutely. And let me first explain a bit more what is Reimagine because that is an aspirational program to define the future of our operating model. So, the way how we are going to work, how we're going to interact, make decisions, how we are going to accelerate our digital transformation, where we can find talent around the globe and, of course, that will also lead to a reduction in physical footprint. That will lead, as a consequence, to some expense savings is the expectation and we are going to roll that up in our new productivity program. So, if you think about our new productivity program, the key elements of that will be a reduction in real estate, given that, most likely, we will be more in the mix of virtual work and working at the office; a reduction in travel, there will be probably a more permanent element to our travel reduction -- reduction in travel expenses; some further cleanup of some older technology infrastructure; and also, we will go after some of our procurement spend in the company. So, those are the key elements. So, you're right that some of the outcomes from project Reimagine will be an input for the new productivity program. That's great. Thanks a lot. Congratulations again.

Ewout Steenbergen -- Executive Vice President and Chief Financial Officer

Thanks, Toni.

Operator

Our next question comes from Manav Patnaik with Barclays. Your line is now open.

Manav Patnaik -- Barclays Capital -- Analyst

Thank you. Good morning, gentlemen. My first question was just around Platts. In your assumptions, you have $10 to $40 oil price range. And just in that context, I was just wondering if you know what the current environment looked like and just some more color on whether you think this could be a little bit worse than what we saw in 2015, 2016 because that's a big range. Just curious on how we should think about the impact there.

Douglas L. Peterson -- President and Chief Executive Officer

Hi, Manav. This is Doug. I'm actually pleased that you asked the question because we're looking right now at a price of oil in the range of $35 to $40. It might be a little bit above that. Right now, you've seen in the last few days that oil is in the $40 range. Clearly, there have been a lot of impacts in the industry overall from the dip, the major dip that it took earlier this year. There have been bankruptcy filings by 45 US E&P companies to date, so far this year. We see also, on the other hand, there are some people that are starting to enter the market to pick up that capacity. So, we're seeing more M&A and distressed activity taking place in the business.

What we have seen, as we mentioned last quarter, is that the sales cycle has lengthened. We -- at the very beginning, we obviously had a hard time being able to reach our customers and everybody is working at home, both from our side and the customer side, but there has -- in the meantime, though, we've seen incredible engagement across all of our businesses in the specialty Platts. We were able to put all of our regular seminars, the different organizations that we meet with, we will put all of this online. The amount of people and the number of engagements we're having has increased dramatically. In some cases, up over 200%, 300% of people attending our webinars and going to our website traffic.

So, we see a lot of engagement with the customers, but we do expect -- it's a very difficult and volatile environment even though we do feel that the price of oil settling in the $40 range is going to be beneficial.

Manav Patnaik -- Barclays Capital -- Analyst

Got it. And you guys identified a lot of great new innovation. Maybe just to pick on one, the RiskGauge product, the whole SME space, private company space, it sounds like it's something that every company out there talks about and wants to get in. And I was hoping you could just help filter out maybe a little bit what target market are you going after. Like, what does that landscape or competitive set look like because it feels like everyone has some solution like this coming up?

Douglas L. Peterson -- President and Chief Executive Officer

Yeah. So, RiskGauge is something that we had identified a couple of years ago meeting with our customers. We heard this need for better, faster, independent information about suppliers, about the supply chain. It's also credit. It's limits, it's credit, et cetera, the things that we've talked about with RiskGauge. And so, we've designed RiskGauge, so that's it's a consistent approach with a consistent model that's used globally. As you saw now, it's over 50 million companies, with data that comes from multiple sources around the globe. But then it's applied in a way that's consistent and we're able to deliver this now with these 50 million companies into a company's workflow, whether it's a bank or it's large global buyer of different parts and services, et cetera.

So, we see this as an area where companies need more faster, consistent data, so that they can make decisions about their supply chain, and it's a space that we were very pleased that we could get into quickly. We've got multiple sources of data. We have great partners that we've been building this with. And then, we can build it off of the back of our technology for our delivery as well as credit models that are time tested. So, we're very pleased that we're getting into this space, and you should see more to come.

Manav Patnaik -- Barclays Capital -- Analyst

Got it. Thank you.

Douglas L. Peterson -- President and Chief Executive Officer

Thanks, Manav.

Operator

Our next question comes from Alex Kramm with UBS. Your line is now open.

Alex Kramm -- UBS -- Analyst

Yeah, hey. Hello, everyone. Going to the Ratings business, of course, here you did a good job addressing the pull forward question that people always ask, some of the data on the maturities still going up, debt outstanding going up. Obviously, all suggest that the algorithm of growth of issuance is alive, but at the same time, I think you also said a lot of the debt raised here was for liquidity reasons. So, I think companies are generally flush with cash. So, is there anything that you can point to that gives us a better confidence level that algorithm is alive and there is not going to be maybe a lower level of issuance in the next couple of years just because companies are so flush and they don't really need to refi some of the maturities that are coming up? Thanks.

Douglas L. Peterson -- President and Chief Executive Officer

Alex, this is Doug. Let me take that one. So, first of all, when we look at the issuance, as you can see, we put a lot of analytics in this time. And clearly, there was a rush to the market for liquidity. There was no company that wasn't looking out to have a strong liquidity position as we entered what people were fearing was going to be a major recession. And so, we saw that rush to get cash. And some companies, obviously, are spending that cash. They're going to continue to need to fill their coffers with new cash because they're spending it. There is also many who are out in the markets right now, they're looking at what they're going to do with the cash later on as the pandemic starts to resolve itself. We'll see if companies are going to use that additional cash to either do M&A deals, if they're going to use it to invest in their operations, are they going to use it to repay debt. We don't quite know yet exactly where that's going to -- where companies come out of this because there is going to be some excess liquidity.

You saw in the charts that we provided today that there were 300 -- typically about 300 issuers in a quarter. And this quarter, there were 500 issuers that went to the market, showing that companies were going to the market to raise liquidity.

Now, clearly, because this is our core business, we're watching this very carefully. We're staying in touch with issuers, with investors, with investment banks to see what kind of a pipeline, we think, is going to be coming forward. But even so, given that we are in a very unusual environment with very low interest rates, with a potential recession that could go on longer than originally expected, we think that it's hard to actually predict what the behavior is going to be of companies.

And we do see, though, still over the next couple of years -- one of the other slides we showed you, a very potential healthy pipeline of issuance which will be based on maturities of debt schedule that are coming up and all the new debt that was just recently issued is going to go into that maturity schedule as well.

So, if you look at this quarter by quarter, we expect there is always going to be volatility. If you look at it over the long run, we see a healthy potential pipeline of all the maturities coming forward.

Alex Kramm -- UBS -- Analyst

Okay, helpful. Thank you. And then, just shifting gears quickly, you mentioned a couple of times now that in some of the other businesses, Market Intelligence and Platts, sales cycles are getting delayed, just bankruptcies and that we should be careful as we think about our model as this may have delayed reaction in terms of the numbers coming through. So, any early looks maybe as you think about the base in 2021 as what that impact or negative impact may be as it stands today because of some of those sales cycles and bankruptcies?

Ewout Steenbergen -- Executive Vice President and Chief Financial Officer

Alex, this is Ewout. Let me take that question. It's very hard to give you a precise indication of this. Where we are in our subscription businesses, Platts and Market Intelligence, is what we are seeing from a sales and impact on the book of business actually slightly better than the guidance we provided to you a quarter ago. So, that's encouraging to see that the impact is less fiery than we expected, although still worse than what we thought at the beginning of the year.

What is happening in the subscription business is that the full effect you see the following year because then you see 12 months of impact on your subscription revenue in the following year. So, it will have some muted effect. But overall, slightly better than what we thought one quarter ago.

Alex Kramm -- UBS -- Analyst

Okay, thank you.

Operator

Our next question comes from Craig Huber with Huber Research Partners. Your line is now open.

Craig Huber -- Huber Research Partners -- Analyst

Yes, good morning. My first question, Doug, maybe if you could just talk on the second half of the year, what your thoughts are on the high yield issuance versus bank loans, what's your sort of outlook there, to maybe just take the US. I'll start there please.

Douglas L. Peterson -- President and Chief Executive Officer

Yeah. The outlook for the rest of the year for high-yield issuance, I think of it in two different segments. One segment is the recently downgraded companies that have been BBB and are now BB companies, and we see a lot of potential robust issuance there. The Fed is continuing to support that area. We have to see if those companies still need the cash, if they're going to the market. That was an area that, as you know, in the second quarter was a quite robust part of the issuance.

There is another part of high yield which would be the deeper risk credits, which are those that are in the deeper level, the Bs, the CCC companies. We expect that there is going to be a decline in the second half of those areas and bank loan ratings have also -- we're expecting that there is going to be a decline in the second half of the year as well.

The pipeline is not that strong even though interest rates are low. Spreads continue to be high. Recently, the spreads for the B were over 700 basis points, CCC were over 1,000 basis points. Typically, the recent -- recently, rates have been more in the 400 level instead of 700 and 800 versus 1,000. So, rates are still -- spreads are still high. So, we're expecting a decrease in issuance overall, with the one question mark being about the BB sector itself that has seen a lot of robust issuance recently.

Craig Huber -- Huber Research Partners -- Analyst

And my second question, Doug, maybe this investment grade outlook for the second half of the year after the robust second quarter please, are you expecting a material dip at any juncture like the third quarter, for example?

Douglas L. Peterson -- President and Chief Executive Officer

Not necessarily the third quarter itself, but we are expecting that the issuance of investment grade will not be as robust as it was during the first half of the year.

Craig Huber -- Huber Research Partners -- Analyst

But still up for the second half, if you don't mind me asking? What is your preliminary thought on that?

Douglas L. Peterson -- President and Chief Executive Officer

Yeah. Well, the total amount in our forecast is up about 5% for the year. And when we look at the total investment grade for the entire year, if you look at the entire year, we are up -- it's going to be up about 20%. But when you parse that out to look at what was in the first half versus second half, that ends up being up a few percent, maybe 5% in the second half of the year, but it's flat to up 5% is what the expectations are.

Craig Huber -- Huber Research Partners -- Analyst

Right. Thank you.

Operator

Next question is from Jeff Silber with BMO Capital Markets. Your line is now open.

Jeff Silber -- BMO Capital Markets -- Analyst

Thanks so much. I wanted to shift gears a bit. We've got a fairly big election coming up in about three months or so. It looks more and more likely that we might have a regime change down in Washington, not only in the White House, but potentially in Congress as well. Are you hearing anything that could impact your business? And I'm specifically focused on potential movement against issuer pay on the rating side. Thanks.

Douglas L. Peterson -- President and Chief Executive Officer

Sorry, I was just speaking with my mute. So, first of all, we are watching obviously election very closely to see what we could -- what could change in Washington and we stay very close to what are some of the topics which are discussed in the policy areas. We don't expect that there is going to be a robust discussion about issuer pay model or about the Ratings business. There has already been a lot of work that's been happening around that the last few years. And so, if it is, we expect that it would be something that would take a while. It would have to go through the SEC. It would have to go through Congress. We are members or we are active in our relationship with regulators, with policymakers, with others and we would expect that we could be part of that dialog.

Finally, what I'd say is that if you look at the performance of our Ratings business -- and I don't mean from the point of view of financial performance, I mean Ratings performance themselves, the way Ratings have performed -- we have made a fantastic amount of investment over the last 10 years in the ratings methodology, how we see this playing out and we're seeing very high quality performance right now. And we're hoping that the markets also recognize the quality of our ratings performance during this period and that doesn't end up leading to a lot of noise.

Anyway, we watch very carefully what could happen in Washington. But so far, nothing that we are very concerned about or doing a lot of specific work on.

Jeff Silber -- BMO Capital Markets -- Analyst

Okay, great. That's good to hear. My follow-up question is regarding capital allocation, specifically on share repurchase. I think you said that the Board could consider resuming share repurchase later this year. I'm not going to ask you to speak for the Board, but what do you think they might be looking for to determine that decision?

Ewout Steenbergen -- Executive Vice President and Chief Financial Officer

Yeah, this is Ewout. Let me take that. Let me take that question. Of course, we cannot anticipate such a decision at this point in time. And as you said, we cannot really pre-empt the Board. Clearly, the decision last quarter not to enter into a new buyback program was purely driven by the external environment because if you look at our balance sheet, the quality of our assets, our liquidity position, the performance of the company, all of that, of course, points to a very strong situation. So, none of that is, of course, an argument in such a decision. It's really driven by the external environment, what we are seeing in the world around us. But I would like to reemphasize that there is no change with respect to our long-term capital philosophy and target. So, the 75% return target remains in place. So, this is really more a short-term consideration for management and the Board.

Jeff Silber -- BMO Capital Markets -- Analyst

Okay. Appreciate the color. Thanks so much.

Ewout Steenbergen -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Our next question comes from Hamzah Mazari with Jefferies. Your line is now open.

Hamzah Mazari -- Jefferies -- Analyst

Hey, good morning. Thank you. You touched a lot on ESG across your various segments. Could you maybe frame for us just how big ESG revenue is today? I think you did it on the Analyst Day a while back. Just curious how big that is, what the growth rate there is, how do you just think about that getting critical mass over time? Good morning, Hamzah. In the second quarter, approximately $15 million of revenue for ESG across the whole company. That corresponds with about 25% growth year-over-year. We're still committed to a 40% CAGR in the mid and longer term. The reason why we are not there yet is that we are introducing several new ESG products as we also mentioned during the prepared remarks. Think about the new ESG data and scores product for Market Intelligence, think about the collaboration we have with several managers like State Street, BlackRock, UBS, DWS with respect to ESG ETFs. So, all of that is under development and therefore expect that the growth will go up in the future, but $15 million revenue for ESG was booked in the second quarter. Got it. Thank you. My follow-up question is around the US tax reform going away potentially. Could you maybe talk about implications of that? Clearly, there's a direct implication with tax rate, but historically, with US tax reform, it had been a headwind for you and you had specific slides on that previously. And so, more interested in what you think the indirect impact could be on bond issuance and any thoughts there. Thank you.

Ewout Steenbergen -- Executive Vice President and Chief Financial Officer

Yeah. And I appreciate that you are asking this question from a holistic perspective because indeed the impact for the company is more than the direct tax rates. The impact on the overall economy and what that will do for the company is as important. So, we are of course monitoring very closely what is happening in this respect, but it is premature to speculate what will be the outcome. But what I can say is ultimately tax rates should become attractive from a geopolitical competitive perspective for any country because it should stimulate business activities, create an attractive investment climate, create jobs and ultimately ensure a strong economy. And when we have a strong economy, that is ultimately good for our company. So, that is obviously the most important with any tax code and any changes to a tax code in the future.

Hamzah Mazari -- Jefferies -- Analyst

Great. Thank you.

Operator

Next question comes from George Tong with Goldman Sachs. Your line is now open.

George Tong -- Goldman Sachs -- Analyst

Hi, thanks. Good morning. You mentioned that investment grade issuance in the second half of the year won't be as robust as the first half. I think you mentioned up flat 5%. Can you talk about whether that reflects diminishing marginal benefits from the Fed credit facilities that are supporting elevated investment grade issuance or are you simply seeing reduced demand for liquidity pre-funding by corporates?

Douglas L. Peterson -- President and Chief Executive Officer

Yeah. It's interesting you ask about the Fed liquidity program because when you look at the Fed liquidity program, this was a fantastic way that the Fed was -- and the government is able to show their support for the economy at a time when there was so much uncertainty. And in the corporate bond primary markets and secondary markets facilities, it's $750 billion of potential authorities they have. They've only actually used $12 billion of that authority as of last week. I'm not sure if they've done anymore this week. And so, it's interesting the way that that provided so much backstop and support for the economy. Just having the number out there, knowing that the Fed could use this.

What's been much more important for the Fed has been there, the Paycheck Protection Program that's used, that's been the lending facilities that are out there that can be forgiven. So, the actual bond market itself has been supported by the promise of the Fed, but the Fed has not been that active in direct bond purchases. We do think that having that firepower of up to $750 billion is very valuable for the market. The Fed has used it to purchase a little bit of ABS, a little bit of money markets and a little bit of funding markets and they've been involved with other global central banks to support the dollar with swap facilities and things like that.

Anyway, to your question then, we think that the investment grade issuance is going to be driven more so by the needs of companies than what's going to happen in the market. And one of the things what's going to happen with the Fed, what I think will be interesting to see, though, is the evolution of rates if they stay as low as they are and the spreads stays as low as they are, that will be one of the other factors that might induce some companies to go back to the market to raise more debt.

George Tong -- Goldman Sachs -- Analyst

Got it. That's very helpful. And then, as a follow-up, can you provide details on what segment revenue growth expectations are embedded in your updated full-year 2020 guidance?

Ewout Steenbergen -- Executive Vice President and Chief Financial Officer

Yes, of course. If you look at the guidance we provided and you compare it with the guidance from one quarter ago, we are seeing improvements in the revenue outlook in all of our four divisions. We have indicated on the one page in our slide deck, page 43, that for the second quarter, there was an improvement for Ratings in quite a meaningful way, but also in the index business based on the higher assets under management levels, but no impact for Market Intelligence and Platts. And that's more a bit due to the late effect that you see impacts in those subscription businesses, but we expect for the next two quarters, also compared to our last guidance also for Market Intelligence and Platts. So, an improvement in revenue outlook for all four divisions. There is of course an offset because a part of the expense saves are related to performance correlation. So, think about incentive compensation, variable compensation, commissions. So, if revenue is higher, sales are higher, then of course the expense saves on that element are going to be lower, but that's for a good reason.

The discretionary expense savings based on management's specific decisions and actions, we actually expect to outperform the guidance we provided to you last quarter.

George Tong -- Goldman Sachs -- Analyst

Got it. Thank you.

Operator

Next question comes from Andrew Nicholas with William Blair. Your line is now open.

Trevor Romeo -- William Blair -- Analyst

Good morning. This is actually Trevor Romeo on for Andrew. Thank you for taking the questions. First one, just on Market Intelligence, now we have a full quarter of the COVID impact behind us, just wondering if you could update us on the competitive environment there. Have you seen any evidence of customers consolidating vendors or switching from more expensive data providers since the beginning of the pandemic or any other competitive changes that you've mentioned?

Douglas L. Peterson -- President and Chief Executive Officer

We haven't seen anything. By the way, welcome, Trevor. We haven't seen any major trends of customer consolidation or any kind of a move across to -- to move to new customers. Clearly -- I mean, to move to new service providers. Clearly, it's a very competitive market. But the COVID impact hasn't really had any impact on that.

What we have seen, though, is that, in our own case, we're seeing a very high level of engagement with our customers. We were able to move quickly, almost immediately, to our own ability to work from home. And then, the way we work with our desktop as well as the ability to push out enhancements, new products, new services, things like you've heard us talk about marketplace, all of these have allowed us to continue to engage with our customers at a higher level than in the past.

So, competitive wise, we think that we are being-we're very competitive that we were able to get into our customers to allow them to work from home very quickly. But when it comes to competitive factors, clearly, there is people out looking, but we haven't seen any major sort of consolidation. We do see a tough competitive environment. We also see customers that themselves have some suffering and struggling with their own businesses and potentially asking for changes to their contracts or the sales cycle has slowed down. So, some of those impacts we've talked about in the past, we continue to see. But we haven't heard this theme about customers consolidating.

Trevor Romeo -- William Blair -- Analyst

Okay, great. Thank you. That's helpful. And then, one quick one on margins maybe. I think you've talked in the past about gradually kind of shifting employees to lower-cost regions over time as a driver of margin improvement. I'm just wondering if you think the pandemic and this exclusively virtual working environment we have gives you the confidence or the ability to accelerate that trend going forward. I don't think I heard that mentioned as part of what could go into the new productivity programs. So, I was just curious, do you think if you saw room to continue that effort. Thank you.

Ewout Steenbergen -- Executive Vice President and Chief Financial Officer

Yeah, that's a great point. Although I would like to say that our talent strategy is first and foremost based on trying to find the best staff, the best colleagues in different locations around the world. That is the main purpose. And of course, in a more virtual environment, that is opening up the room of possibilities because of the less needs to be physically together at least all the time going forward. So, could that mean to finding more colleagues in the future at lower cost locations? Yes, possibly, that might be the case. And having less job in higher cost locations? Yes, that could definitely be possible. But, again, I think we start not with our talent strategy from a cost perspective. We start with what are the skills and capabilities and background that we need to build this company out in the future and to be as successful as possible.

Trevor Romeo -- William Blair -- Analyst

Okay, thank you very much.

Operator

Next question comes from Owen Lau with Oppenheimer. Your line is now open.

Owen Lau -- Oppenheimer & Co. Inc. -- Analyst

Thank you. Good morning. And congrats on a strong quarter. Can you please provide a bit more color and the assumption on the $0.20 improved second half outlook on slide 43? Is it mainly driven by better issuance outlook or is there any other expense assumption do you want to call out? Thank you.

Ewout Steenbergen -- Executive Vice President and Chief Financial Officer

Yeah, it's a combination of all of that. And let me try to explain this in the following way. First -- because we need to be very clear about what is the reference. The reference is the guidance that we provided last quarter. If we take that into account, so the late third quarter recovery baseline scenario that we provided to you last quarter, then we are looking at revenues that come in at a higher level than we expected at that time. Again, Ratings for obvious reasons, Market Intelligence and Platts as I explained because of the lower impact on the book of business than we anticipated before and also the Index business looks a bit better.

Then if you look on the expenses and we provided to you $180 million of expense savings last time. In fact, there's two underlying components. We have the performance-related expenses. So, those are the ones that are correlated with sales and revenues. Think about the incentive compensation, commissions, sales-based royalties. Obviously, the savings there are lower because we have higher revenues. But then, we have a second part of the expense saves. These are the discretionary expense saves with respect to hiring, travel, consultants and so on. And there, we expect to outperform.

So, if you put that altogether, net-net, we expect to be better by $0.20 in terms of outlook for the second half of the year, but we are overcoming in that $0.20, in fact, lower expense savings on those performance-related elements like variable compensation and commission. So, in fact, it's a net number. The growth number in terms of outperformance is a bit higher.

Owen Lau -- Oppenheimer & Co. Inc. -- Analyst

Yeah, I think that's very helpful. And then, could you please give us an update on China? There are still lots of geopolitical tensions as you mentioned. But during the quarter, I think one of your competitors and at least two other financial institutions have got the approval to operate a fully owned business in China. It will be great if you can provide your updated view on that. Thank you.

Douglas L. Peterson -- President and Chief Executive Officer

Hi, Owen. This is Doug. Yeah. First of all, as you've heard from us all along, we are very pleased with our progress in China. And despite COVID and having to have our people work from home, we continue to engage very well with the market. As you know, we've reported three more ratings that we published since the last time we reported. We have a great team on the ground. We've been building a market share of voice of market. We had a lot of people that are attending our webinars, et cetera.

But what's really important is that the overall market continues to develop. We remain engaged with the regulators, with issuers, with investors. Having one of our other competitors in the market we think is going to help develop the market for the type of research and analysis that foreign rating agencies in China on the ground are going to be doing. The rating agency, which also received a license, it's a more limited license than ours, but we welcome having another rating agency that's going to be using global oriented criteria to the market.

And so, we continue to be committed to China. We think in the long run, it is a very large bond market. We're also pleased and encouraged by the discussion that we continue to have with the Chinese regulators about reform of the financial markets overall.

So, China is still there. It's really important for us. We're pleased that we are there and we're the first one on the ground. And we're also pleased that the competition is starting to open up.

Owen Lau -- Oppenheimer & Co. Inc. -- Analyst

That's it for me. Thank you.

Douglas L. Peterson -- President and Chief Executive Officer

Thank you.

Operator

Next question comes from Judah Sokel with J.P. Morgan. Your line is now open. Hi, good morning. Thank you. I wanted to ask a question about Market Intelligence. You guys mentioned that the COVID-19 pandemic lengthened the sales cycle, but also drove record usage. And so, we talked about the sales cycle earlier in the Q&A. But in terms of that record usage, I was wondering if you could elaborate a little bit on to what do you owe that record usage and perhaps whether it can and how long that might last and perhaps round out the color with just how your contracts are structured in Market Intelligence, so that you can best monetize if we are looking at maybe more of a secular greater usage of those platforms.

Ewout Steenbergen -- Executive Vice President and Chief Financial Officer

Yes. Of course, Judah. And welcome to the call. And if you look at usage, let me give you an example, the data feeds business. So, the client's interest in the data feeds business is at an all-time high and we measure that, for example, with respect to downloads of data feeds at this moment. So, that is a great example of where we see usage being very high. We measure usage on our desktop products and we see that the usage numbers being also at a very high level. So, clearly, at this time, we see usage across the board in Market Intelligence being very high. That is not immediately translating in commercial benefit because the sales process has been lengthened as those discussions take a longer period of time for obvious reasons. But the way how we look at it is, this is very positive because if we can contribute and help our customers in this period of time and we can improve even more the benefits of our products, ultimately, there are only going to be good things that come out of that. So, overall, we are very pleased what we see from an overall interaction with our customers and usage perspective in Market Intelligence.

Judah Sokel -- J.P. Morgan -- Analyst

Understood. Just one other question. When it comes to Ratings, obviously, we're all hoping that we don't see a major second wave and this is not an elongated recession. But if we did go into a longer period of economic challenge and we saw more defaults and bankruptcies, what would -- can you review with us what would happen to your revenue base? I'm thinking in terms of restructuring, perhaps new ratings when companies emerge from bankruptcy? And obviously, there's liquidation scenarios to think through as well. Thank you.

Douglas L. Peterson -- President and Chief Executive Officer

Yeah. It's an interesting question because whenever there is a downturn -- we always have said that one of the most important drivers of our business is GDP growth. And clearly, the last four months have been completely different. It's not your typical cycle where we've seen GDP slowed down and we saw this huge increase in issuance. But at the same time, when you do see a down cycle, you see that sometimes companies going to bankruptcy, sometimes there is restructuring, but once bond is a bond, it doesn't go away unless it's a true liquidation and the bond, it disappears.

When you see companies that get taken over -- right now, we're expecting that there is -- we're seeing a pipeline of M&A activity in healthcare and in oil and gas, in particular. Some of the oil and gas, M&A activity is actually distressed M&A activity. And because of that, we expect that once somebody draws down their revolver or has a bank loan to complete the deal that they're going to go back to the markets or they're going to actually restructure the debt directly.

So, we see that once debt is debt, it continues to stay debt even if it's shrunk through a restructuring. And so, what we really look at is the number of issuers, the number of issuance, what the banks are seeing in their pipelines, GDP growth, industry growth, et cetera. And even in a downturn, there is -- many times, there's a lot of different types of debt instruments.

The final thing I'd say related to structured finance. Structured finance, although you've seen it very, very low in the last four months, the structured finance activity has been down overall 42% globally in the last quarter and in the US was down 56%. In fact, there were some asset class in Europe, there was not even one issuance of a CMBS transaction. So, that's where we've seen the activity of a very weak structured finance cycle.

But we think after a while, financial institutions, corporations, et cetera, are going to start wanting to manage their balance sheets and we believe that there will be a recovery at some point again of structured finance as well. It's a really critical corporate finance, asset management, asset liability management tool. So, again, even though it's been incredibly weak recently, we do think eventually structured finance also starts recovering again.

Judah Sokel -- J.P. Morgan -- Analyst

Thanks. Thank you for that warm welcome to the call as well.

Douglas L. Peterson -- President and Chief Executive Officer

Thanks, Judah.

Operator

We will now take our final question from Kevin McVeigh with Credit Suisse. Your line is now open.

Kevin McVeigh -- Credit Suisse -- Analyst

Great. Thank you so much. Hey, I wonder if you could give us a sense of where we are in the Kensho evolution across the enterprise. I guess I know there's going to be outsized impact on both the revenue and expense side, but is there a way to think about where it is in the integration across S&P?

Ewout Steenbergen -- Executive Vice President and Chief Financial Officer

Yeah, it's a great question, Kevin. And I always want to speak about Kensho with a lot of enthusiasm because, overall, it has been an acquisition for the company that is working out in a very positive way. It's really helping as a catalyst for innovation and change within the company. And what you are hearing every call is that we are giving you a couple of examples where Kensho is helping, if it is in the Data Marketplace, if it is with the entity linking, if it is in the Market-on-Close with Platts, omnisearch. We have several initiatives going on in the Ratings business. And there are many, many examples where Kensho is helping the company.

What we have also keeping track off is the overall benefit and contribution of those initiatives. And what we said at year-end, and we have recently refreshed that again, is that the overall net present value of all those initiatives that are in flight, the net present value of that really justify the overall acquisition price we paid for Kensho a bit over two years ago. So, very positive development. And I'll give you another example at the end, the Kensho index, the new economy index, what we mentioned, that exceeded assets by over $1 billion right now.

So, many initiatives. And what we really like is all divisions take advantage of having this capability within the company.

Kevin McVeigh -- Credit Suisse -- Analyst

It's helpful. And then, just one quick follow-up. On the corporate side, is there any way that you folks track anything around allocation toward M&A or buyback just as a proxy for the outlook for IG and maybe some of the other parts of the debt stack as we think about the back half of this year?

Douglas L. Peterson -- President and Chief Executive Officer

Well, those are clearly some of the factors that we look at for understanding what the pipeline is. It's the ability of our teams to understand what are the needs of different companies in terms of their own capital allocation models, their M&A models, as well as very important for us to stay close to what the financial institutions, the debt capital markets desks on banks are seeing and how they believe the evolution is going to be of debt. And so, these are many of the different tools we use to try to forecast what issuance is going to be.

We also look very closely at interest rates and -- interest rates and spreads. It's not just -- both of them. And as we've recently seen, some investment grade companies issuing debt as low as 1.5% for 7 to 10-year debt and we haven't seen debt that low for a long time.

Just one other interest rate story. Recently, as you know, mortgage bonds were -- mortgages were down to the lowest rate they've ever been, well below 3%. Some mortgages even below 2%. And so, interest rates, what corporations are doing with their cash, what financial institutions are doing to manage their balance sheets, what governments and municipalities are doing, how people are looking at their balance sheets when it comes to understanding the way they might use structured products, et cetera, those are all the different factors we look at to come up with our forecast and to also allocate resources across the Ratings team.

So, with that, I want to thank everyone for joining the call today. And first of all, it's been great to see that the company performed so well this quarter. And I want to thank all of you on the call for supporting the company, the analysts who were on the call today for publishing your research and your opinions and for the excellent questions today.

But since our last call, COVID-19 and the risks that it poses to our health and our economies, it still is dominating the airwaves in corporate and government planning discussions. And there is frontline healthcare workers out there that are battling the coronavirus every day. And I've been watching and listening with great hope to the epidemiologists, the pharmaceutical companies, public health officials and watching how they develop vaccines and treatments that we know will eventually allow our communities to return to social contact and their office work and travel.

But I want to final -- I want to end the call by thanking again the employees of S&P Global. You've been dedicated, you've been committed, and you've been persevering during the pandemic, and you've continued to support each other and the markets. And despite the volatility, the uncertainty and the risk, you're all doing a fantastic job and I want to thank you.

And thank you again, everyone, for joining the call today.

Operator

[Operator Closing Remarks]

Duration: 88 minutes

Call participants:

Robert S. Merritt -- Senior Vice President, Investor Relations

Douglas L. Peterson -- President and Chief Executive Officer

Ewout Steenbergen -- Executive Vice President and Chief Financial Officer

Toni Kaplan -- Morgan Stanley -- Analyst

Manav Patnaik -- Barclays Capital -- Analyst

Alex Kramm -- UBS -- Analyst

Craig Huber -- Huber Research Partners -- Analyst

Jeff Silber -- BMO Capital Markets -- Analyst

Hamzah Mazari -- Jefferies -- Analyst

George Tong -- Goldman Sachs -- Analyst

Trevor Romeo -- William Blair -- Analyst

Owen Lau -- Oppenheimer & Co. Inc. -- Analyst

Judah Sokel -- J.P. Morgan -- Analyst

Kevin McVeigh -- Credit Suisse -- Analyst

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