Ewout Steenbergen
Executive Vice President and Chief Financial Officer at S&P Global
Thank you, Doug. Doug has already discussed the headline financial results, and I would like to cover a few other items. As Doug mentioned, the adjusted financial metrics we will be discussing today refer to non-GAAP adjusted metrics for the current period and non-GAAP pro forma adjusted metrics in the year ago period, unless explicitly called out as GAAP. Adjusted results also exclude the contribution from divested businesses in all periods. Adjusted corporate unallocated expenses improved from a year ago, driven by a combination of synergies and reduced incentive cost. Our net interest expense decreased 17% as we benefit from lower average rates due to refinancings following the merger. Adjusted effective tax rate was up modestly, but towards the low end of the guidance range we expect for the full year.
As most are aware, we exclude the impact of certain items from our adjusted diluted EPS number. Among those items in the third quarter were approximately $108 million in merger-related expenses. The details of which can be found in the appendix. We generated adjusted free cash flow, excluding certain items, of $965 million. We remain committed to returning the majority of this cash flow to shareholders through dividends and share repurchases. Year-to-date, we have deployed $11 billion towards share repurchases, and we expect the final $1 billion of our previously announced ASR program to be completed by year-end. We note that the U.S. dollar remained strong against many foreign currencies, and we've seen a corresponding impact on both our revenue and expenses. As a reminder, approximately 3/4 of our international revenue is invoiced in U.S. dollars, which provides some protection to revenue against FX volatility.
In addition to the natural hedges that exist due to the global footprint of our people, we have a hedging program in place that further mitigates the ultimate impact on our earnings. For the third quarter, we saw a $0.03 favorable impact to EPS from foreign exchange and hedging programs. Turning to expenses. We are committed to disciplined expense management in this current environment. And similar to last quarter, we highlight the levers we continue to pull to protect margins where we can while still preserving our investments to drive future growth. Actions taken include pull forward in synergies, a reduction in incentive accruals, adjustments to the timing of certain investments and pausing select hiring and limiting consulting spend in some areas. Through cost synergies and other management actions we have taken so far this year, we expect to generate more than $400 million in expense savings for 2022.
Now I would like to provide an update on our synergy progress. In the third quarter, we achieved $165 million in cumulative cost synergies and our current annualized run rate is $311 million. I'm pleased to report we continue to outperform our initial time line on both revenue and cost synergies year-to-date. The cumulative integration and cost to achieve synergies through the end of the third quarter is $641 million. Given the outperformance on the timing of our synergies, we now expect to achieve slightly more than the 35% to 40% of total cost synergies in 2022 that we were targeting previously. Now let's turn to the division results and begin with Market Intelligence.
Market Intelligence revenue increased 4% with strong growth in Data & Analytics, offset by slower growth in Desktop and flat growth in Enterprise Solutions. For this quarter, recurring revenue accounted for approximately 96% of Market Intelligence total revenue. Expenses were roughly flat this quarter with increases in compensation expense, cloud spend and outside services being offset by cost synergies and lower incentive compensation. Market Intelligence remains the biggest driver of cost synergies from the merger and the synergy outperformance we have seen year-to-date. Segment operating profit increased 13%, and the segment operating profit margin increased 260 basis points to 33.9%. On a trailing 12-month basis, adjusted segment operating profit margin was 30.9%. The OSTTRA joint venture that complements the operations of our Market Intelligence division contributed $19 million in adjusted operating profit to the company.
As a reminder, because the JV is a 50% owned joint venture operating independent of the company, we recognized their results on an after-tax basis and do not include the financial results of OSTTRA in the Market Intelligence division. Looking across Market Intelligence, there was growth in most categories. And on a pro forma basis, Desktop revenue grew 3%, Data & Advisory Solutions revenue grew 7%, Enterprise Solutions revenue was flat and Credit & Risk Solutions revenue grew 7%. For Desktop, we saw slower growth this quarter, driven in part by the timing of certain revenue recognition items, and we expect desktop to reaccelerate in the fourth quarter. For Enterprise Solutions, the business line continues to see headwinds in several of our volume-driven products that rely on equity and debt capital markets activity under variable subscription terms. Excluding the impact of FX and these volume-driven products, growth across Market Intelligence would have been approximately 7% year-over-year.
While we remain confident in the long-term growth of all these product lines, we expect deceleration in categories outside of desktop to persist in the fourth quarter. Now turning to Ratings. Ratings continued to face difficult market conditions this quarter as issuance volumes remained muted with revenue decreasing 33% year-over-year. Transaction revenue decreased to 56% on the continued softness in issuance we highlighted earlier. Non-transaction revenue decreased 6% on a reported basis and 2% on a constant currency basis, primarily due to lower rating evaluation services and initial issuer credit ratings, partially offset by increases in CRISIL. ICR and RES revenue are historically correlated with the relative strength of the issuance environment and M&A activity, respectively, and the declines we are seeing here are purely indicative of those market conditions.
Expenses decreased 19%, primarily driven by disciplined expense management, including lower incentive expenses, partially offset by increased salary and fringe expenses. This resulted in a 41% decrease in segment operating profit and a 750 basis point decrease in segment operating profit margin to 55.9%. On a trailing 12-month basis, adjusted segment operating profit margin was 57.9%. Now looking at Ratings revenue by its end markets. The largest contributors to the decrease in Ratings revenue were a 44% decrease in Corporates and a 31% decrease in Structured Finance, driven predominantly by structured credit. In addition, Financial Services decreased 20%, Governments decreased 33%, and the CRISIL and other category increased 9%. And now turning to Commodity Insights. Revenue increased 5%, driven by strong performance of subscription products, including those within Price Assessments and Energy & Resources Data & Insights lines.
However, that growth was impacted by the Russia-Ukraine conflict. As noted on the slide, revenue related to Russia contributed $12 million in the third quarter last year and made no contribution in the third quarter this year. Excluding this impact, Commodity Insights would have grown approximately 8% in the third quarter. There's no change to the expected impact from this conflict. But as a reminder, on an annualized run rate basis, we expect Commodity Insights revenue and operating income to be lower by approximately $52 million and $51 million, respectively. For this quarter, recurring revenue contributed 91% of Commodity Insights revenues. Expenses increased 1%, primarily due to salary and fringe and an increase in T&E expense, partially offset by merger-related synergies, lower consulting spend and lower real estate costs. Segment operating profit increased 9%, and the segment operating profit margin increased 190 basis points to 45.8%.
The trailing 12-month adjusted segment operating profit margin was 43.8%. Looking across the Commodity Insights business categories. Price Assessments grew 8% compared to the prior year, driven by continued commercial momentum and strong subscription growth for market data offerings. Energy & Resources Data & Insights also grew 8% in the quarter, driven by strength in Gas, Power & Renewables and in Petrochemicals. Advisory and Transactional Services decreased 1% in the third quarter. The Upstream business was down 2% compared to prior year, mainly driven by higher comps for Software and Analytics products offerings as well as the impact of Russia. Excluding that impact and the impact of FX, Upstream ACV growth would have been positive in the quarter. In our Mobility division, revenue increased 8% year-over-year, driven primarily by continued high retention rates and new business growth in CARFAX. For this quarter, recurring revenue contributed 78% of Mobility's total revenue.
Expenses grew 5% year-over-year as we have yet to lap planned increases in headcounts, and we saw continued cloud expense growth, which were partially offset by lower data cost and favorable FX. This resulted in a 14% growth in adjusted operating profit and 200 basis points of margin expansion year-over-year. On a trailing 12-month basis, the adjusted segment operating profit margin was 40%. Dealer revenue increased 10% year-over-year, driven by strong demand for CARFAX as dealerships' profitability remain at elevated levels. Manufacturing grew 4% year-over-year, driven by strength in subscriptions and an uptick in the Recall business. Inventory shortfalls continue to temper growth as OEMs spend on marketing initiatives powered by Mobility products remains muted. Financials and Other increased 9%, primarily driven by continued strength in our insurance underwriting products and new business. S&P Dow Jones Indices revenue increased 3% year-over-year with strong margin expansion despite lower assets under management.
For the third quarter, recurring revenue contributed 84% of the total for indices. During the quarter, expenses were roughly flat as strategic investments and higher information services costs were offset primarily by lower incentives and other expenses. Segment operating profit increased 5%, and the segment operating profit margin increased 100 basis points to 70.3%. On a trailing 12-month basis, the adjusted segment operating profit margin was 68.8%. Asset-linked fees were down 5%, primarily driven by lower AUM in ETFs. Exchange-rated derivative revenue increased 37% on increased trading volumes across key contracts, including a more than 60% increase in S&P 500 Index Options volume. Data & Custom Subscriptions increased 10%, driven by new business activities. Over the past year, market depreciation totaled $472 billion. ETF AUM net inflows were $194 billion. This resulted in quarter-ending ETF AUM of $2.3 trillion, which is an 11% decrease compared to one year ago.
Our ETF revenue is based on average AUM, which decreased 4% year-over-year. As a reminder, revenue tends to lag changes in asset prices. Given the declines across equity markets so far in the back half of this year, we continue to expect softness in asset-linked fees as we close out 2022. Engineering Solutions revenue declined 8% in the quarter, driven primarily by the negative impact of the timing of the Boiler Pressure Vessel Code, or BPVC, which was last released in August of 2021. The BPVC contributed approximately $1 million in revenue this quarter compared to approximately $8 million in the year ago period. For this quarter, 94% of Engineering Solutions revenues were classified as recurring. Adjusted expenses decreased 7% due to favorable impact on BPVC royalties. On a trailing 12-month basis, the adjusted segment operating profit margin was 19.1%.
Non-subscription revenue in Engineering Solutions decreased 63% year-over-year for the reasons I mentioned on the previous slide, while subscription revenue increased 3% over the same period. Now moving to our guidance. This slide depicts our new GAAP guidance. And this slide depicts our updated 2022 adjusted pro forma guidance. Due to the continued softening of the issuance environment, we now expect revenue to decrease mid-single digits compared to our prior guidance. Some of that impact is offset by the outperformance in indices. The net impact of our lower ratings revenue expectations, combined with the cost measures and capital allocation measures we have outlined today result in our slightly lower margin outlook and a new adjusted EPS range of $11 to $11.15. This margin outlook reflects our continued expectation for approximately 180 basis points of margin expansion outside of our Ratings business. Interest expense is expected in the range of $345 million to $355 million, slightly lower than our previous guidance due to higher interest on our cash deposits and positive impact from currency hedges.
We're also reducing our outlook for capital expenditures to $115 million due to intentional delays in real estate investments. Adjusted free cash flow, excluding certain items, is now expected to be approximately $4 billion. The following slide illustrates our guidance by division. Based on this past quarter's performance, we're updating our expectations for adjusted revenue growth and adjusted operating profit margin for Ratings and Indices. The guidance ranges for our other divisions are unchanged. In closing, despite the geopolitical tensions and a challenging macroeconomic environment weighing on the market, our portfolio of strong businesses continue to prove resilient. Furthermore, I'm pleased with the progress our teams have made since the closing of the merger earlier this year. We look forward to providing you with a deep dive into our businesses and the longer-term outlook of the company at our Investor Day on December 1.
And with that, let me turn the call back over to Mark for your questions.
