Moody's Corporation · NYSE:MCO
Moody's — Q2 2016 Earnings Presentation
55 slides from Moody's's earnings presentation, Aug 4, 2016
Slide 1: Investor Presentation 2Q 2016
Investor Presentation 2Q 2016 August 4, 2016
Slide 2: Disclaimer
Disclaimer Certain statements contained in this presentation 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. Moody’s outlook for 2016 and other forward-looking statements in
Slide 3: Table of Contents
Table of Contents 1. Financial Overview 2. Capital Markets Overview 3. Moody’s Investors Service (MIS) 4. Moody’s Analytics (MA) 5. Conclusion 6. Appendix August 4, 2016 3
Slide 4: Moody's Mission: To be the World's Most Respected Authority
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Mission: To be the World’s Most Respected Authority Serving Risk-Sensitive Financial Markets Risk Understanding Risk Understanding Risk Understanding Risk Risk
Slide 5: Financial Overview
1 Financial Overview August 4, 2016 5
Slide 6: Overview of Moody's Corporation
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Overview of Moody’s Corporation » Leading global provider of credit rating opinions, insight and tools for financial risk measurement and management » TTM 2Q16 revenue
Slide 7: Moody's Revenue is Diversified by Business, Geography and Type
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Revenue is Diversified by Business, Geography and Type TTM 2Q16 Revenue by Business TTM 2Q16 Revenue by Geography MIS MA US Non-US Public, Project & MIS Other
Slide 8: Long-term Growth Opportunities Intact Despite Near-term Macro Challenges
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Long-term Growth Opportunities Intact Despite Near- term Macro Challenges Debt market Disintermediation Growth in Moody’s MA and MIS pricing issuance driven of credit
Slide 9: Moody's has Consistently Delivered Strong Performance
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s has Consistently Delivered Strong Performance Revenue EPS* $4.55 Low-single- to digit $5.00 $4.65 $4.0 % growth $4.50 $3.0 $4.00 $ Billions $3.50 $2.0 $3.00 $4
Slide 10: Moody's has a Disciplined Approach to Capital Allocation
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s has a Disciplined Approach to Capital Allocation Investing in Growth Opportunities Return of Capital Reinvestment Acquisitions Dividends Share Repurchases » In
Slide 11: Variability of Moody's Ratings Revenue Growth
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Analytics Revenue Growth Moderates Variability of Moody’s Ratings Revenue Growth Year-over-Year % Change MIS MA MCO Fears Euro debt crisis may Oil prices crash
Slide 12: Revenue and Operating Income Follow a Saw Tooth Pattern
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Revenue and Operating Income have Historically Followed a “Saw Tooth” Pattern MCO Revenue MIS Revenue $1,000 $700 $929 $626 $900 $ Millions $816 $600 $ Millions $800 $
Slide 13: Full Year 2016 Guidance as of July 22, 2016
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Full Year 2016 Guidance as of July 22, 2016 » Revenue: Increase in the low-single-digit % range » Operating Expenses: Increase in the mid-single-digit % range » Operat
Slide 14: Capital Markets Overview
2 Capital Markets Overview August 4, 2016 14
Slide 15: Attractive Funding Costs in US and Europe as Rates and Spreads Decline
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Attractive Funding Costs in US and Europe as Benchmark Rates and Spreads Resume Decline Interest Rates High Yield 10 yr. US Treasury Yield % 900 10 yr. German Bund Yie
Slide 16: Debt Leverage Up in North America but Down in Europe
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Debt Leverage Up in North America but Down in Europe; Interest Coverage Remains Reasonable Credit Metrics: North American Speculative Grade Companies 6.0x 5.0x 5.0x 4.
Slide 17: Outside of Commodities, Default Rates are Contained
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Outside of Commodities, Default Rates are Contained Default Rates for Global Corporate Rated Issuance* US Speculative Grade Default Rates** 14.0% High Yield Historical
Slide 18: Disintermediation of Credit is an Ongoing Trend
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Disintermediation of Credit is an Ongoing Trend in the Global Capital Markets European Non-Financial Corporate US Non-Financial Corporate Bonds vs. Bank Loans Outstand
Slide 19: Disintermediation a Key Driver of Global New Rating Mandates
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Disintermediation a Key Driver of Moody’s Global New Rating Mandates Global New Rating Mandates* EMEA United States Rest of World 1,200 1,026 990 854 # of new mandates
Slide 20: Moody's Investors Service
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Slide 21: Moody's Investors Service: A Leading Provider of Credit Ratings
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Investors Service: A Leading Provider of Credit Ratings, Research, and Risk Analysis Dedicated, experienced A common language of analytical teams credit risk A
Slide 22: Moody's Investors Service Financial Profile
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Investors Service Financial Profile TTM 2Q 2016 Revenue: $2.2 billion* » 34% recurring revenue Recurring Transaction US Non-US MIS Other 1% Public, 36% Corpora
Slide 23: North America and EMEA Corporates have ~$3.1 Trillion of Refunding Needs
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix North America and EMEA Non-Financial Corporates have ~$3.1 Trillion of Refunding Needs* Debt Maturities: North America Moody’s-Rated Corporate Bonds and Loans $300 $26
Slide 24: Debt Refinancing and M&A are Most Frequent Uses of Proceeds
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Debt Refinancing and M&A are Most Frequently Stated Uses of Proceeds Uses of Funds from USD High Yield Bonds and Bank Loans* Debt Refinancing M&A Capital Spending Shar
Slide 25: MIS Recurring Revenue Provides Stability
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Investors Service’s Recurring Revenue* Provides Stability MIS Recurring Revenue Corporate Finance Structured Finance Financial Institutions Public, Project, &
Slide 26: Moody's Analytics
4 Moody’s Analytics August 4, 2016 26
Slide 27: Moody's Analytics Provides Essential Insight Serving Global Financial Markets
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Analytics Provides Essential Insight Serving Global Financial Markets Research Data & Analytics Enterprise Risk Solutions Professional Services » MIS research
Slide 28: Moody's Analytics Financial Profile
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Analytics Financial Profile TTM 2Q 2016 Revenue: $1.2 billion* Recurring Transaction US Non-US » > 95% recurring revenue » 96% retention rate 26% Research, 53%
Slide 29: Moody's Analytics Has Multiple Platforms for Growth
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Analytics Has Multiple Platforms for Growth 2015 Revenue and 2008 – 2015 CAGR ~65% organic $1,200 Professional Services $149.9m, 44% CAGR ~15% organic $1,000 E
Slide 30: RD&A Revenue has Grown Despite Flat Financial Services Employment
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix RD&A Revenue has Grown Despite Flat Financial Services Employment RD&A Revenue vs. Financial Services Employment US and UK Financial Services Employment* (L) TTM RD&A
Slide 31: ERS: Solid Track Record of Growth
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix ERS: Solid Track Record of Growth Overall CAGR Since 2011 of 15% » Growth drivers Recurring Revenue: Subscriptions & Maintenance – Regulation and accounting Non-Recurr
Slide 32: Professional Services Overview
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Professional Services Overview Knowledge process outsourcing » Leading provider of offshore research and analytic services » 2,500 employees; 6 delivery centers » 150+
Slide 33: Moody's Analytics: Well-Positioned to Drive Growth
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Analytics: Well-Positioned to Drive Growth » Strong operating track record – 34 consecutive quarters of year/year revenue growth – 2008 – 2015 revenue CAGR of
Slide 34: Conclusion
5 Conclusion August 4, 2016 34
Slide 35: Why Invest in Moody's?
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Why Invest in Moody’s? » We strive to be the world’s most respected authority serving risk-sensitive financial markets » We have had strong revenue and earnings growth
Slide 36: Moody's Awards
Moody's Awards Moody's is the proud recipient of over 20 awards from publications around the world. Spanning both Moody's Investors Service and Moody's Analytics, this recognition helps expand Moody's position as a leader in the global capital markets and reflects the hard work and contributions of
Slide 37: Appendix
Appendix Moopy’s August 4, 2016 37
Slide 38: Corporate Finance: Revenue and Issuance
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Corporate Finance: Revenue and Issuance Historical Revenue* Mix: By Quarter Global Rated Non-Financial Bonds and $350 US Speculative Grade Bank Loans (Quarterly)*** $6
Slide 39: Corporate Finance: Revenue Diversification
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Corporate Finance: Revenue Diversification Revenue* Distribution: Geography Revenue* Distribution: Recurring vs. Transaction 100% 100% 29% 26% 27% 30% 28% 27% 31% 29%
Slide 40: Structured Finance: Revenue and Issuance
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Structured Finance: Revenue and Issuance Historical Revenue* Mix: By Quarter Global Rated Structured Finance (Quarterly)** $120 $0 $1 $0 $0 $0 $1 $350 $100 $0 $0 $41 $
Slide 41: Structured Finance: Revenue Diversification
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Structured Finance: Revenue Diversification Revenue* Distribution: Geography Revenue* Distribution: Recurring vs. Transaction 100% 100% 38% 34% 38% 33% 36% 80% 80% 42%
Slide 42: Financial Institutions: Revenue and Issuance
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Financial Institutions: Revenue and Issuance Global Rated Financial Bonds Historical Revenue* Mix: By Quarter (Quarterly)** $100 $0 $0 $2 $2 $2 $2 $2 $3 $3 $500 Issuan
Slide 43: Financial Institutions: Revenue Diversification
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Financial Institutions: Revenue Diversification Revenue* Distribution: Geography Revenue* Distribution: Recurring vs. Transaction 100% 100% 80% 40% 41% 42% 40% 44% 42%
Slide 44: Public, Project and Infrastructure: Revenue and Issuance
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Public, Project and Infrastructure: Revenue and Issuance $120 Historical Revenue* Mix: By Quarter Long-Term Rated US Municipal Bond Issuance $0 $120 (Quarterly)** $100
Slide 45: Public, Project and Infrastructure: Revenue Diversification
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Public, Project and Infrastructure: Revenue Diversification Revenue* Distribution: Geography Revenue* Distribution: Recurring vs. Transaction 100% 100% 80% 80% 39% 40%
Slide 46: Moody's Analytics: Financial Overview
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Analytics: Financial Overview $350 Historical Revenue* Mix: By Quarter Historical Revenue* Mix: By Year $1,200 $300 $43 $38 $150 $37 $38 $1,000 $168 $37 Profes
Slide 47: Rising Rates Have Not Had a Significant Impact on Moody's Revenue
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Historically, Rising Rates have not had a Significant Impact on Moody’s Revenue MCO Revenue and Interest Rates MIS Revenue MA Revenue MCO Revenue 10-yr U.S. Treasury Y
Slide 48: Moody's Analytics Global Banking Regulatory Radar
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Analytics Global Banking Regulatory Radar EMEA Restrictions use Revised SA internal models for operational risk CR RWA Revised SA approach CR BoE/PRA ST CVA re
Slide 49: Moody's is a Seasoned Capital Markets Issuer
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s is a Seasoned Capital Markets Issuer Public Bond Offerings » 2010: $500m 10yr bond » 2012: $500m 10yr bond Private Placement » 2013: $500m 10yr bond » 2007: $3
Slide 50: Moody's Global Presence
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Global Presence 2016 3,442 7,372 10,814 US employees non-US employees total employees* 2015 3,257 6,906 10,163 US employees non-US employees total employees**
Slide 51: Reconciliation of Non-GAAP Financial Measures to GAAP
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Reconciliation of Non-GAAP Financial Measures to GAAP Adjusted Operating Income and Adjusted Operating Margin Reconciliation (in $ millions) 2011 2012 2013 2014 2015 A
Slide 52: Reconciliation of Non-GAAP Financial Measures to GAAP (cont.)
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Reconciliation of Non-GAAP Financial Measures to GAAP (cont.) Moody's Corporation EPS Reconciliation 2010 2011 2012 2013 2014 2015 2016F* Diluted EPS - GAAP $2.15 $2.4
Slide 53: Reconciliation of Non-GAAP Financial Measures to GAAP (cont.)
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Reconciliation of Non-GAAP Financial Measures to GAAP (cont.) Moody's Corporation EBITDA Reconciliation TTM ($ Millions) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2
Slide 54: Investor Relations Contact
Website: http://ir.moodys.com Email: ir@moodys.com August 4, 2016 54
Slide 55: Moody's Legal Notice
© 2016 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot licensors and affiliates (collectively, “MOODY’S”). All rights reserved. be excluded) on the part