Moody's Corporation · NYSE:MCO

Moody's — Q3 2017 Earnings Presentation

56 slides from Moody's's earnings presentation, Nov 3, 2017

1. Slide 1: Third Quarter 2017 Earnings Call

   Third Quarter 2017 Earnings Call November 3, 2017

2. Slide 2: Overview

   Overview Stephen Maire Global Head of Investor Relations and Communications Third Quarter 2017 Earnings Call, November 3, 2017 2

3. Slide 3: Disclaimer

   Disclaimer Certain statements contained in this document are forward-looking statements and are based on future expectations, plans and prospects for Moody’s business and operations that involve a number of risks and uncertainties. The forward-looking statements in this document are made as of the d

4. Slide 4: Agenda

   Agenda 1. Third Quarter and Year-to-Date 2017 Results Ray McDaniel, President and Chief Executive Officer 2. Third Quarter Financial Highlights Linda Huber, Executive Vice President and Chief Financial Officer 3. Current 2017 Outlook Ray McDaniel, President and Chief Executive Officer 4. Q&A Ray McD

5. Slide 5: Third Quarter and Year-to-Date 2017 Results

   Third Quarter and 1 Year-to-Date 2017 Results Ray McDaniel President and Chief Executive Officer

6. Slide 6: Third Quarter 2017 Results and Comparison to Third Quarter 2016

   Third Quarter 2017 Results and Comparison to Third Quarter 2016 Moody’s Corporation » Revenue  16% to $1.1 billion » Operating Expenses  19% to $618 million ─ Of which Bureau van Dijk operating expenses and Acquisition-Related Expenses constituted eight percentage points » Operating Income  12% t

7. Slide 7: Third Quarter 2017 Results and Comparison (continued)

   Third Quarter 2017 Results and Comparison to Third Quarter 2016 (continued) Moody’s Corporation » Operating Margin  41.9% » Adjusted Operating Margin  46.9% » Diluted EPS1  24% to $1.63 » Adjusted Diluted EPS1,2,3  10% to $1.52 1 Third quarter 2017 diluted EPS and adjusted diluted EPS include a

8. Slide 8: Year-to-Date 2017 Results and Comparison to Year-to-Date 2016

   Year-to-Date 2017 Results and Comparison to Year-to-Date 2016 Moody’s Corporation Revenue » Total Global  14% to $3.0 billion » U.S.  10% to $1.7 billion » Non-U.S.  20% to $1.3 billion » Total Global  Impact of foreign currency translation was negligible Third Quarter 2017 Earnings Call, Novemb

9. Slide 9: Year-to-Date 2017 Results: MIS Revenue

   Year-to-Date 2017 Results and Comparison to Year-to-Date 2016 (continued) MIS Revenue » Total MIS  16% to almost $2.1 billion » U.S.  12% to $1.3 billion » Non-U.S.  24% to $787 million Third Quarter 2017 Earnings Call, November 3, 2017 9

10. Slide 10: Year-to-Date 2017 Results: MA Revenue

    Year-to-Date 2017 Results and Comparison to Year-to-Date 2016 (continued) MA Revenue » Total MA  10% to $990 million » U.S.  6% to $471 million » Non-U.S.  14% to $518 million » Excluding Bureau van Dijk, organic MA revenue was $959 million, up 7% Third Quarter 2017 Earnings Call, November 3, 201

11. Slide 11: Year-to-Date 2017 Results: Expenses and Operating Income

    Year-to-Date 2017 Results and Comparison to Year-to-Date 2016 (continued) Moody’s Corporation » Operating Expenses  9% to approximately $1.7 billion ─ Of which Bureau van Dijk operating expenses and Acquisition-Related Expenses constituted three percentage points ─ Foreign currency translation favo

12. Slide 12: Year-to-Date 2017 Results: Margins and Guidance

    Year-to-Date 2017 Results and Comparison to Year-to-Date 2016 (continued) Moody’s Corporation » Operating Margin  44.3% » Adjusted Operating Margin  48.4% » Effective Tax Rate  29.0% » Raising FY 2017 diluted EPS guidance to a range of $6.18 to $6.33 » Anticipate FY 2017 adjusted diluted EPS now

13. Slide 13: Third Quarter 2017 Financial Highlights

    Third Quarter 2017 2 Financial Highlights Linda Huber Executive Vice President and Chief Financial Officer

14. Slide 14: Third Quarter 2017 Moody's Corporation Revenue

    Third Quarter 2017 Results and Comparison to Third Quarter 2016 Moody’s Corporation Revenue » Total Global  16% to $1.1 billion » U.S.  8% to $588 million » Non-U.S.  28% to $475 million - 45% of total revenue » Total Global  Foreign currency translation favorably impacted Moody’s revenue by 1%

15. Slide 15: Third Quarter 2017 MIS Revenue

    Third Quarter 2017 Results and Comparison to Third Quarter 2016 (continued) MIS Revenue » Total MIS  13% to $694 million » U.S.  9% to $428 million » Non-U.S.  21% to $267 million - 38% of total MIS revenue » Total MIS  Foreign currency translation favorably impacted MIS revenue by 1% Third Quar

16. Slide 16: MIS Revenue by Line of Business

    Third Quarter 2017 Results and Comparison to Third Quarter 2016 (continued) MIS Revenue by Line of Business » Corporate Finance: $350 million - Global  17% - U.S.  17% - Non-U.S.  17% » Structured Finance: $128 million - Global  23% - U.S.  25% - Non-U.S.  19% Third Quarter 2017 Earnings Call,

17. Slide 17: MIS Revenue by Line of Business (continued)

    Third Quarter 2017 Results and Comparison to Third Quarter 2016 (continued) MIS Revenue by Line of Business » Financial Institutions: $102 million - Global  7% - U.S.  2% - Non-U.S.  13% » Public, Project & Infrastructure Finance: $109 million - Global  4% - U.S.  16% - Non-U.S.  53% » MIS Oth

18. Slide 18: MA Revenue by Geography

    Third Quarter 2017 Results and Comparison to Third Quarter 2016 (continued) MA Revenue by Geography » Total MA  21% to $369 million » U.S.  4% to $161 million » Non-U.S.  38% to $208 million - 56% of total MA revenue » Total MA  Foreign currency translation favorably impacted MA revenue by 1% »

19. Slide 19: MA Revenue by Line of Business: Research, Data and Analytics

    Third Quarter 2017 Results and Comparison to Third Quarter 2016 (continued) MA Revenue by Line of Business » Research, Data and Analytics: $218 million1 - Global  30% - 59% of total MA revenue - U.S.  7% - Non-U.S.  65% » Excluding Bureau van Dijk, global organic RD&A revenue was $188 million, up

20. Slide 20: MA Revenue by Line of Business: Enterprise Risk Solutions

    Third Quarter 2017 Results and Comparison to Third Quarter 2016 (continued) MA Revenue by Line of Business » Enterprise Risk Solutions: $113 million - Global  11% - U.S.  4% - Non-U.S.  21% » ERS TTM1 Revenue  6% » ERS TTM1 Sales  7% » ERS TTM1 Product Sales  17% » ERS TTM1 Services Sales  18

21. Slide 21: MA Revenue by Line of Business: Professional Services

    Third Quarter 2017 Results and Comparison to Third Quarter 2016 (continued) MA Revenue by Line of Business » Professional Services: $38 million - Global  6% - U.S.  5% - Non-U.S.  6% Third Quarter 2017 Earnings Call, November 3, 2017 21

22. Slide 22: Third Quarter 2017 Expenses, Margins and Tax Rate

    Third Quarter 2017 Results and Comparison to Third Quarter 2016 (continued) Moody’s Corporation » Operating Expenses  19% to $618 million – Of which Bureau van Dijk operating expenses and Acquisition-Related Expenses constituted eight percentage points – Impact of foreign currency translation was n

23. Slide 23: Capital Allocation

    Capital Allocation Third Quarter 2017 » Repurchased 0.2 million shares at a total cost of $29 million, or an average cost of $130.75 per share » Issued 0.3 million shares as part of its employee stock-based compensation plans » Returned $73 million to its shareholders via dividend payments Dividend

24. Slide 24: Capital Allocation (continued)

    Capital Allocation (continued) Year-to-Date 2017 » Repurchased 1.4 million shares at a total cost of $164 million, or an average cost of $116.70 per share » Issued approximately 2.2 million shares as part of its employee stock-based compensation plans » Returned $218 million to its shareholders via

25. Slide 25: Bureau van Dijk Acquisition Financing

    Bureau van Dijk Acquisition Financing » Acquisition closed on August 10, 2017 – Approximately €3 billion, or $3.5 billion » Moody’s issued approximately $1.8 billion of debt: – $1.0 billion of notes – $500 million term loan – $300 million of commercial paper – Combined interest rate of approximately

26. Slide 26: Balance Sheet and Free Cash Flow

    Balance Sheet and Free Cash Flow » As of September 30, 2017, Moody’s had: – $5.7 billion of outstanding debt – Approximately $700 million of additional borrowing capacity available under its revolving credit facility – Total cash, cash equivalents and short-term investments of $1.1 billion - Approxi

27. Slide 27: Current 2017 Outlook

    3 Current 2017 Outlook Ray McDaniel President and Chief Executive Officer

28. Slide 28: Current 2017 Outlook

    Current 2017 Outlook Moody’s outlook assumes foreign currency translation at end-of-quarter exchange rates. Specifically, our forecast reflects exchange rates for the British pound (£) of $1.34 to £1 and for the euro (€) of $1.18 to €1. Changes to 2017 Full-Year Financial Outlook1 MCO Current Guidan

29. Slide 29: Current 2017 Outlook (continued)

    Current 2017 Outlook (continued) Changes to 2017 Full-Year Financial Outlook1 MIS Current Guidance as of November 3, 2017 Revenue increase in the low-teens percent range U.S. increase in the low-double-digit percent range Non-U.S. increase in high-teens percent range Corporate Finance increase in th

30. Slide 30: Current 2017 Outlook (continued)

    Current 2017 Outlook (continued) Changes to 2017 Full-Year Financial Outlook1 MA Current Guidance as of November 3, 2017 Revenue2,3 increase in the low-teens percent range Non-U.S. increase in the low-twenties percent range Research, Data & Analytics2,3 increase in the low-twenties percent range 1 R

31. Slide 31: Q&A

    Q&A Ray McDaniel President and Chief Executive Officer 4 Linda Huber Executive Vice President and Chief Financial Officer Mark Almeida President, Moody’s Analytics Rob Fauber President, Moody’s Investors Service

32. Slide 32: USD Market: Issuance Views From Investment Banks

    USD Market: Issuance Views From Investment Banks Views on this page are from various investment banks. Issuance views are for both financial and non-financial U.S. dollar issuance and may not align with Moody’s revenue categorizations. YTD 2017 FY 2017E Investment Grade Bonds ~$1.1 trillion Flat to

33. Slide 33: Euro Market: Issuance Views From Investment Banks

    Euro Market: Issuance Views From Investment Banks Views on this page are from various investment banks. Issuance views are for both financial and non-financial euro issuance and may not align with Moody’s revenue categorizations. Investment Grade » Busy period of investment grade bond issuance expec

34. Slide 34: Drivers of FY 2017 Adjusted Diluted EPS Guidance Increase

    Drivers of FY 2017 Adjusted Diluted EPS Guidance Increase Third Quarter 2017 Earnings Call, November 3, 2017 34

35. Slide 35: Next Investor Day

    Next Investor Day Moody’s Corporation will hold its next Investor Day on February 28, 2018 in New York City. The event, which will be webcast live, will feature presentations from management and showcase important aspects of the Company’s business. Third Quarter 2017 Earnings Call, November 3, 2017

36. Slide 36: Replay Details

    Replay Details » Available from 3:30pm (Eastern Time) November 3, 2017 until 3:30pm (Eastern Time) December 2, 2017 » Telephone Details: – US +1-888-203-1112 – Non-US +1-719-457-0820 – Passcode 5032731 » Webcast Details: – Go to ir.moodys.com – Click on “Events & Presentations” – Click on the link f

37. Slide 37: Appendix

    2 Oo c F or or <x

38. Slide 38: Consolidated Statements of Operations

    Consolidated Statements of Operations (Unaudited) Third Quarter 2017 Earnings Call, November 3, 2017 38

39. Slide 39: Supplemental Revenue Information

    Supplemental Revenue Information (Unaudited) Third Quarter 2017 Earnings Call, November 3, 2017 39

40. Slide 40: Selected Consolidated Balance Sheet Data

    Selected Consolidated Balance Sheet Data (Unaudited) Third Quarter 2017 Earnings Call, November 3, 2017 40

41. Slide 41: Selected Consolidated Balance Sheet Data (continued)

    Selected Consolidated Balance Sheet Data (continued) (Unaudited) Third Quarter 2017 Earnings Call, November 3, 2017 41

42. Slide 42: Non-Operating (Expense) Income, Net

    Non-Operating (Expense) Income, Net Third Quarter 2017 Earnings Call, November 3, 2017 42

43. Slide 43: Financial Information by Segment

    Financial Information by Segment Third Quarter 2017 Earnings Call, November 3, 2017 43

44. Slide 44: Transaction and Relationship Revenue

    Transaction and Relationship Revenue Third Quarter 2017 Earnings Call, November 3, 2017 44

45. Slide 45: Transaction and Relationship Revenue (continued)

    Transaction and Relationship Revenue (continued) Third Quarter 2017 Earnings Call, November 3, 2017 45

46. Slide 46: Adjusted Operating Income and Adjusted Operating Margin

    Adjusted Operating Income and Adjusted Operating Margin Third Quarter 2017 Earnings Call, November 3, 2017 46

47. Slide 47: Free Cash Flow

    Free Cash Flow Third Quarter 2017 Earnings Call, November 3, 2017 47

48. Slide 48: Organic Revenue and Growth Measures

    Organic Revenue and Growth Measures Third Quarter 2017 Earnings Call, November 3, 2017 48

49. Slide 49: Adjusted Net Income and Adjusted Diluted EPS

    Adjusted Net Income and Adjusted Diluted Earnings per Share Attributable to Moody's Common Shareholders Third Quarter 2017 Earnings Call, November 3, 2017 49

50. Slide 50: Adjusted Net Income and Adjusted Diluted EPS (continued)

    Adjusted Net Income and Adjusted Diluted Earnings per Share Attributable to Moody's Common Shareholders (continued) Third Quarter 2017 Earnings Call, November 3, 2017 50

51. Slide 51: 2017 Outlook

    2017 Outlook Third Quarter 2017 Earnings Call, November 3, 2017 51

52. Slide 52: 2017 Outlook (continued)

    2017 Outlook (continued) Third Quarter 2017 Earnings Call, November 3, 2017 52

53. Slide 53: 2017 Outlook (continued)

    2017 Outlook (continued) Third Quarter 2017 Earnings Call, November 3, 2017 53

54. Slide 54: 2017 Outlook (continued)

    2017 Outlook (continued) Third Quarter 2017 Earnings Call, November 3, 2017 54

55. Slide 55: moodys.com

    Investor Relations http://ir.moodys.com ir@moodys.com moodys.com

56. Slide 56: Third Quarter 2017 Earnings Call, November 3, 2017

    © 2016 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any and affiliates (collectively, “MOODY’S”). All rights reserved. contingency within or

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