Ewout Steenbergen
Executive Vice President, Chief Financial Officer at S&P Global
Thank you, Doug.
The adjusted financial metrics that we will be discussing today refer to non-GAAP adjusted metrics for the current period, and for our 2023 adjusted guidance 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 previously divested businesses in all periods.
Let me start with our fourth quarter financial results. Adjusted revenue decreased 6% to $2.9 billion, largely driven by a challenging issuance environment, and macroeconomic conditions. Excluding Ratings, fourth quarter revenue would have increased 4% year-over-year. Adjusted corporate and allocated expenses improved from a year ago, driven by a combination of synergies, and reduced incentive costs. Adjusted expenses were roughly flat for the full year, demonstrating strong expense discipline across the Company. For the fourth quarter, expenses decreased 4%, compared to prior year.
Adjusted operating profit margin contracted by 160 basis points to 41.2% primarily driven by revenue declines in Ratings. Excluding Ratings, adjusted margins would have improved more than 280 basis points year-over-year. Our adjusted net interest expense increased 9%, driven by higher total debt levels, partially offset by lower average cost of debt. Adjusted effective tax rate was up modestly, but right around the midpoint of the guidance range we provided for the full year. We exclude the impact of certain items from our adjusted diluted EPS number. Among those items in the fourth quarter were approximately $175 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 $1.4 billion in the fourth quarter. In 2022, we completed our $12 billion accelerated share repurchase program, with final share delivery executed earlier this week.
Turning to expenses. As I noted, we managed to keep adjusted expenses roughly flat for 2022, despite a high inflationary environment. I'm pleased to report we acted decisively, and delivered more than $400 million in expense reductions for the full year. Actions taken include pull forward in synergies, a reduction in incentive accruals, adjustments to the timing of certain investments, selective hiring, and limiting consulting spend in some areas.
Looking more closely at the largest contributor to those expense savings, I would like to provide an update on our synergy progress specifically. In 2022, we have achieved $276 million in cumulative cost synergies, and our annualized run rate exiting the fourth quarter was $422 million, representing 70% of target, after only 10 months.
We continue to make progress on our revenue synergies with $19 million in cumulative synergies achieved and an annualized run rate of $34 million. The cumulative integration and cost to achieve synergies through the end of the fourth quarter is $807 million. For 2023, we expect to achieve cost synergies and revenue synergies of approximately $510 million and $60 million, respectively. We originally targeted 80% of cost synergies in 2023. But with the outperformance in 2022, we're now targeting 85% of the $600 million target. We also originally expected 50% of our revenue synergies in 2024. But with the divestiture of Engineering Solutions, we now expect approximately 45%, though the full target of $350 million is unchanged.
Now let's turn to the division results. Market Intelligence revenue increased 3% with strong growth in Data & Advisory Solutions, offset by slower growth in Desktop and declines in Enterprise Solutions. Adjusted expenses decreased 2% this quarter, driven by continued realization of cost synergies, lower incentive compensation and real estate spend. Segment operating profit increased 16% and the segment operating profit margin increased 360 basis points to 31.4%. On a trailing 12-month basis, adjusted segment operating profit margin was 31.8%.
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 down 4%, and Credit & Risk Solutions revenue grew 4%. For Desktop, we continue to see strong demand for our subscription offerings like Capital IQ. Overall Desktop growth was below our expectations though due primarily to the impact of some one-time sales from products reported in our Desktop line. For Enterprise Solution, softness in our capital markets volume-based products continue to weigh in on the business line's performance as revenue decreased 4%. This was partially offset by strength in private market software solutions.
Now turning to Ratings. Ratings continued to face difficult market conditions this quarter as issuance volumes remained muted with revenue decreasing 29% year-over-year. Transaction revenue saw slight improvement sequentially, but decreased 51% compared to the prior year on continued softness in issuance. Non-transaction revenue decreased 6% on a reported basis and 3% on a constant-currency basis, primarily due to lower initial issuer credit ratings and Rating Evaluation Services, partially offset by increases in CRISIL. As a reminder, 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.
In the fourth quarter, surveillance and frequent issuer fees increased year-over-year on a constant-currency basis. Adjusted expenses decreased 13%, primarily driven by disciplined expense management and lower incentive expenses, partially offset by increased salary expense. This resulted in a 40% decrease in segment operating profit and a 910 basis point decrease in segment operating profit margin to 48%. On a trailing 12-month basis, adjusted segment operating profit margin was 55.9%. Now looking at Ratings revenue by its end markets, the largest contributor was the well-documented decline in issuance, partially offset by 6% growth in CRISIL and other revenue.
And now turning to Commodity Insights. Revenue increased 4%, driven by solid performance across all business lines. However, that growth was impacted by a $13 million headwind due to the Russia-Ukraine conflict and a $4 million commercial settlement in the fourth quarter of 2021. Excluding the impact of Russia-Ukraine and this commercial settlement, Commodity Insights would have grown approximately 8% year-over-year in the fourth quarter. It's important to note, we suspended commercial operations in Russia in March of 2022. Therefore, the first quarter of 2023 is the last remaining period that we'll see a material impact in the year-over-year growth rates.
Adjusted expenses were roughly flat for the quarter, primarily due to higher compensation, an increase in T&E expense and bad debt provision, partially offset by merger-related synergies, lower consulting spend and advertising and promotion costs. Segment operating profit increased 10% and the segment operating profit margin increased 230 basis points to 44.6%. The trailing 12-month adjusted segment operating profit margin was 44.3%.
Looking across the Commodity Insights business categories, Price Assessments grew 5% compared to prior year, driven by continued commercial momentum and strong subscription growth for market data offerings, particularly in Gas & Power, and liquefied natural gas. Energy & Resources Data & Insights grew 4% in the quarter, driven by continued strength in gas power and renewables. Advisory & Transactional Services increased 3% in the quarter as we saw high demand from Energy Transition advisory solutions, partially offset by revenues generated from a 2021 event that wasn't repeated in the fourth quarter of 2022.
Moving to Upstream. I'm pleased to report that business line grew 4% in the fourth quarter. While upstream ACV has had good momentum ex-Russia, the revenue growth this quarter was primarily driven by upfront revenue recognition of certain software products that are not recurring. We expect Upstream growth in the low single-digit range for 2023.
In our Mobility division, revenue increased 9% year-over-year, driven primarily by strong and broad-based performance across Dealer, Manufacturing and Financials. Adjusted expenses increased 15% in the fourth quarter, driven by increases in headcount versus the year-ago period, timing of advertising spend and cloud expenses. We expect expense growth to moderate in 2023. This resulted in a 2% decrease in adjusted operating profit and 380 basis points of margin compression year-over-year. On a trailing 12-month basis, the adjusted segment operating profit margin was 39%.
Dealer revenue increased 9% year-over-year, driven by strong demand for CARFAX subscription products. Manufacturing grew 8% year-over-year, driven by strength in Polk Automotive Solutions and the conclusion of several major recall deals. Financials and Other increased 10%, primarily driven by continued strength in our insurance underwriting volumes and new business.
Turning to S&P Dow Jones Indices. Revenue increased 4% year-over-year as growth in Exchange-Traded Derivatives offset declines in Asset-Linked Fees revenue. During the quarter, adjusted expenses increased 8% as there was an uptick in one-time outside service spend and continued strategic investments, partially offset by decreases in compensation and other discretionary areas. Segment operating profit increased 2% and the segment operating profit margin decreased 140 basis points to 62.2%.
On a trailing 12-month basis, the adjusted segment operating profit margin was 68.4%. Asset-Linked Fees were down 2%, primarily driven by lower AUM in ETFs. Exchange-Traded Derivatives revenue increased 34% on increased trading volumes across key contracts, including a more than 70% increase in S&P 500 index options volume. Data & Custom subscriptions increased 6%, driven by new business activities and price realization. Over the past year, market depreciation totaled $506 billion, ETF AUM net inflows were $157 billion, and this resulted in quarter-ending ETF AUM of $2.6 trillion, which is a 12% decrease compared to one year ago. Our average ETF AUM decreased 8% year-over-year.
Engineering Solutions revenue declined 4% 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. Adjusted expenses increased 5% due to planned investment spend, offset by favorable FX.
Before moving to guidance, I wanted to highlight some of the key drivers of our expected 2023 results and how these tie in with the core messages we delivered at our Investor Day. S&P Global is all about growth. 2023 will be a year of growth across the Company, driven by customer growth, product enhancements, revenue synergies and strategic initiatives. We'll continue to invest in our people, and you will see the annual reset of our incentive compensation targets.
We'll also continue to invest in technology as we drive innovation and position the Company for accelerating growth. In order to help investors see and assess the positive impact of these investments, we'll begin disclosing a few new metrics with our first quarter 2023 results, including our vitality revenue, which is the revenue generated by innovation, either new or enhanced products from across the organization. We'll also disclose the revenue generated from products in our two key strategic investment areas, private markets, as well as sustainability and energy transition.
In addition to these new disclosures, we'll begin a regular cadence of inter-quarter disclosures to help investors measure performance of market observable products. We'll begin disclosing ETD volumes and the year-over-year growth rate of billed issuance on a monthly basis in arrears starting later this month when we will disclose the January 2023 data. In addition to the monthly disclosures I just outlined, we'll also disclose billed issuance volumes on a quarterly basis broken out between investment grade and high yield. We know that in a volatile and potentially uncertain market, transparency and accountability are more important than ever, and S&P Global maintains its commitment to best-in-class disclosure and reporting for our shareholders.
Now moving to guidance. As noted in our press release, due to the pending divestiture of Engineering Solutions, we'll not be providing GAAP guidance at this time. And this slide depicts our initial 2023 adjusted guidance. For revenue, we expect 4% to 6% growth, reflecting our continued belief of a mild recession in the first half of 2023 and then some economic strengthening in the back half of the year. Excluding the impact of the divestiture of Engineering Solutions, we expect revenue growth to be between 6% to 8%. We expect corporate unallocated expense of $140 million to $150 million. The year-over-year growth is driven in part by a reset of incentive compensation and the expectation of approximately $10 million to $20 million in stranded costs from Engineering Solutions post divestiture.
We expect to expand operating margin to the range of 45.5% to 46.5%, diluted EPS, which excludes deal-related amortization, of $12.35 to $12.55, which is an 11% year-over-year increase from the midpoint. Adjusted free cash flow, excluding certain items, is expected to be approximately $4.3 billion to $4.4 billion. We continue to target a return of at least 85% of adjusted free cash flow to shareholders through dividends and buybacks. We also plan to utilize the net after-tax proceeds from the Engineering Solutions divestiture for share repurchases. As such, our Board has authorized a $3.3 billion share buyback for 2023, which we plan to begin with a $500 million ASR, which we expect to launch in the coming weeks. Lastly, we expect a quarterly dividend of $0.90 per share.
The following slide illustrates our guidance by division. Beginning with Market Intelligence, we expect growth in the 6.5% to 8.5% range and margins between 34% and 35%. As we mentioned at our Investor Day, this is a skilled business that's well positioned in growing markets such as private markets and supply chain, and we're confident in our ability to accelerate growth as we lap the 2022 headwinds from volume-driven businesses and FX.
In Ratings, we expect revenue to grow between 4% and 6% with growth to be driven by volume and price and continued growth in non-transaction revenue. Our assumption is for billed issuance to be up between 2% and 6% in 2023. Margins for Ratings are expected to be between 56% and 57%.
In Commodity Insights, we expect revenue growth in the 6.5% to 8.5% range and margins between 46% and 47%. We expect continued strength in commodity markets generally and look forward to lapping the Russia impact after the first quarter. Similar to our Market Intelligence division, we expect Commodity Insights to see expense benefit from further realization of synergies in 2023.
In Mobility, we expect revenue to grow between 6.5% and 8.5% and margins between 39% and 40% driven by some normalization of auto supply chain, price realization, new business and new product adoption. Importantly, we expect expense growth to moderate quickly and substantially from the outsized increase in the fourth quarter. We expect expense growth to be below revenue growth in 2023.
In Indices, we expect revenue to be flat to up 2% with margins of 66% to 67%. As we indicated at our Investor Day, revenue from Asset-Linked Fees lacks movements in underlying asset prices, so the 2022 decline in the S&P 500 will negatively impact this year's revenue. We'll also lap the very strong comps in Exchange-Traded Derivatives.
Before we turn it over for Q&A, I would like to take a moment to thank our people at S&P Global. The highlight of 2022 was the closing of our merger with IHS Markit. But what made it a highlight was the incredible dedication and execution demonstrated by our people. We saw strong decisive action in the speed of execution of our cost synergy plan. We delivered critical system integration along a very fast time line, rationalized our real estate footprint and at the same time, continued our strategic investments. 2022 truly was a year of transformation, but it was also a year of foundation. We intend to build on that foundation and drive strong growth in 2023 and for the years to come.
And with that, we'll have Adam and Martina join us and turn the call back over to Mark for your questions.
