Moody's Corporation · NYSE:MCO
Moody's — UBS Financial Services Virtual Conference 2020
30 slides from Moody's's conference presentation, Aug 12, 2020
Slide 1: UBS Financial Services Virtual Conference
UBS Financial Services Virtual Conference Michael West, President, Moody’s Investors Service August 12, 2020
Slide 2: Disclaimer
Disclaimer Certain statements contained in this release are forward-looking statements and are based on future expectations, plans and prospects for the business and operations of Moody’s Corporation (the “Company”) that involve a number of risks and uncertainties. Such statements may include, among
Slide 3: Company Overview
Company Overview Leading global provider of credit Independent provider of rating opinions, insight and tools Provides financial intelligence credit rating opinions and for financial risk measurement and analytical tools related information for over and management supporting our customers’ 100 years
Slide 4: Agency of Choice Strategy Makes us a Market Leader
Agency of Choice Strategy Makes us a Market Leader Rating Quality Research Award-winning Proven rating accuracy and and Insight Globally and locally acknowledged deeply experienced analysts Focus on research for award winning expertise in credit leadership ratings, research and risk analysis. #1 Glo
Slide 5: Managing Ratings in Turbulent Times
Managing Ratings in Turbulent Times Transparency and relevance of credit ratings through the cycle Order sectors by degree Order issuers by Reassess all Reassess ratings Monitor credit profiles Coordinate Take account of of exposure vulnerability ratings in the most of the most associated with all o
Slide 6: MIS: Robust IG Issuance Drove Results
MIS: Robust IG Issuance Drove Results Issuance1 MIS Revenue YoY Change $2,000.0 $938 $ Billions $1,500.0 $1,000 $10 $1,000.0 $900 23% 1,785 $739 $133 $500.0 1,168 $800 $700 $6 $142 14% $0.0 $108 2Q19 2Q20 $600 $81 (28%) $ Millions $125 MIS Adjusted Operating Income and Margin $500 $112 +390bps 64.0%
Slide 7: Record 2Q 2020 Issuance, Mix Shift
Record 2Q 2020 Issuance, Mix Shift Investment grade bond High yield bond Bank loan CFG transactional revenue growth Y/Y Issuance volume growth Y/Y $660 85% 65% 41% 37% 37% 36% 40% $358 25% -3% $278 $264 -7% $256 $210 -12% $186 $170 $171 -12% $138 $135 $135 $114 $113 $119 $101 $103 $103 1Q19 2Q19 3Q1
Slide 8: Moody's Investors Service Financial Profile
Moody’s Investors Service Financial Profile 2Q 2020 TTM Revenue: $3.2 billion » 25% recurring revenue Recurring U.S. » 32% recurring revenue Transaction Non-U.S. MIS Other 1% 38% Corporate Public, Project, Finance & Infrastructure 66% 56% Finance 15% Financial 62% Institutions 16% 34% Structured » 5
Slide 9: Liquidity and Refinancing Prominent Drivers of Issuance in 1H 2020
Liquidity and Refinancing Prominent Drivers of Issuance in 1H 2020, While M&A Declined Uses of Funds from USD High Yield Bonds and Bank Loans1 Debt Refinancing M&A Capital Spending Shareholder Payments Liquidity / Working Capital 100% 5% 9% 8% 8% 8% 15% 16% 17% 13% 15% 13% 5% 5% 5% 7% 80% 6% 7% 4% 3
Slide 10: Refunding Needs Support MIS Long-term Fundamentals
Refunding Needs1 Support MIS Long-term Fundamentals >$2.3 Trillion in Debt Maturities: North America Moody’s-Rated Corporate Bonds and Loans2 $677 $565 $490 $ Billions 342 $360 239 Speculative Grade Bank Loans $241 140 58 97 Speculative Grade Bonds 8 58 127 142 30 Investment Grade 203 245 253 199 19
Slide 11: Disintermediation of Credit is an Ongoing Trend in the Global Capital Markets
Disintermediation of Credit is an Ongoing Trend in the Global Capital Markets European Non-Financial Corporate Bonds vs. U.S. Non-Financial Corporate Bonds vs. Bank Loans Outstanding Bank Loans Outstanding Bonds Loans Bonds Loans €7,000 $9,000 €6,000 $7,500 50% €5,000 74% $6,000 4 4 $ Billions € Bil
Slide 12: Debt Leverage and Interest Coverage in North America and Europe
Debt Leverage and Interest Coverage in North America and Europe Credit Metrics: North American Speculative Grade Companies Debt / EBITDA EBITDA / Interest Expense 5.7x Interest Coverage 6.0x 5.1x 5.3x 5.4x 5.3x 5.4x 4.8x 4.8x 5.1x 5.0x 4.6x 4.6x 4.5x 4.4x 4.5x 4.6x 4.0x 3.0x 2.9x 2.9x 3.1x 3.0x 2.9x
Slide 13: MIS Guidance: Strong 1H 2020 Driving Improved Outlook
MIS Guidance: Strong 1H 2020 Driving Improved Outlook1 Revenue Adjusted Operating Margin1 FY 2020 Issuance Guidance1 Low-single-digit $3,000 % increase 58.0% Approximately 58% Investment Grade +50% $2.9B $2,800 High Yield Bonds +5% $2,600 Bank Loans -20% $2,400 $2,200 Structured -40% $2,000 $1,800 T
Slide 14: Harnessing Technologies to Drive Operating Efficiencies and Value
Harnessing Technologies to Drive Operating Efficiencies and Value Infusing technologies Innovation with purpose into our processes Delivering value to the market Insourcing and investing in tech and operations talent Production » Rating precision » Speed to market Surveillance Operational process Ne
Slide 15: Broad Coverage Serves Global Needs
Broad Coverage Serves Global Needs MIS 2Q 2020 Overview - August 12, 2020 15
Slide 16: Moody's in Greater China
Moody’s in Greater China 2nd Largest Onshore Bond Market at $15 Trillion 2019 Revenue and Attributable Income from China2 Total debt securities outstanding 2012–20191 MIS Cross Border Revenue Total MA Revenue Attributable Income from CCXI 2012 2019 200 $176 50 3% 40 150 $ Millions 30 100 20% -2% 20
Slide 17: Moody's ESG: Driving Standards Beyond Credit
Moody’s ESG: Driving Standards Beyond Credit Market Trends Key Stats2 OUTREACH » Moody’s forecasts global green, social » Over 500 media engagements and sustainability bond issuance to be 38,000+ 5,000+ in 1H 2020 driven by Moody’s Events and $275 to $325 billion in 20201 Credit ratings ESG assessme
Slide 18: Appendix
Appendix
Slide 19: Moody's Corporation Financial Profile
Moody’s Corporation Financial Profile 2Q 2020 TTM Revenue: $5.2 billion MIS Other 1% Recurring Transaction U.S. Non-U.S. PPIF 9% RD&A1 45% 45% FIG MIS 28% 10% MA SFG 7% ERS 55% 55% CFG 11% 34% Full Year 2020 Guidance as of July 30, 20202 Revenue » Increase in the low-single-digit % range Effective T
Slide 20: MA Guidance: Top-line Growth and Margin Improvement Remain on Track
MA Guidance1: Top-line Growth and Margin Improvement Remain on Track Revenue Adjusted Operating Margin1 Mid-single-digit Approximately 30% % increase $2.0B 27.8% 1 2019 2020F 2019 2020F 1 Key drivers of MA FY 2020 outlook1 » Strong recurring revenue mitigates COVID-19 impact » RD&A growth driven by
Slide 21: Financial Performance
Financial Performance1 Revenue1 Adjusted Diluted EPS3 $ Billions $ Per Share MIS Revenue MA Revenue $10.00 $8.80 - $9.20 $6.0 Low-single-digit % $9.00 $4.8 growth $8.00 $5.0 $4.2 $4.4 $3.5 $3.6 $7.00 $4.0 $2.0 $1.4 $1.7 $6.00 $3.0 $1.2 $1.2 $5.00 $8.29 $2.0 $7.39 $2.9 $4.00 $6.07 $2.3 $2.4 $2.8 $2.7
Slide 22: Capital Allocation Strategy
Capital Allocation Strategy Capital allocation levers Prudent approach in uncertain times INVESTING IN GROWTH OPPORTUNITIES Reinvestment Capital allocation goals Acquisitions RETURN OF CAPITAL Dividends Share repurchase Considerations around share repurchase program COVID-19 uncertainty Anchored aro
Slide 23: BvD + RDC Makes Us a Leading Global Player in KYC
BvD + RDC Makes Us a Leading Global Player in KYC Improved accuracy and streamlined decisions » Bureau van Dijk accelerating growth with Moody’s. BvD post acquisition BvD revenue growth1 of ~16% and adjustment operating margin2 of ~52% » BvD + RDC creates a leading provider of data for compliance-re
Slide 24: Strongly Positioned in Emerging Markets
Strongly Positioned in Emerging Markets Emerging Markets - Domestic TAM MIS Emerging Markets Revenue1 Others MIS Affiliate (majority) MIS Affiliate (minority) South Africa Moody’s Local $342M Argentina Brazil National Scale Ratings Other Emerging Markets Mexico Peru China Egypt Chile Israel $700 M S
Slide 25: Macro Assumptions Underpinning Our Outlook
Macro Assumptions Underpinning Our Outlook1 Base Case Developments since April 30th Expect continuing economic recovery in 2H 2020 ACCELERATE Continued global fiscal support and monetary stimulus actions 2020 GDP Benchmark interest rates remain low; high-yield Surge of investment grade capital -6% U
Slide 26: Historically, Moody's Revenue and Interest Rates Have Not Been Strongly Correlated
Historically, Moody’s Revenue and Interest Rates Have Not Been Strongly Correlated MCO Revenue and Interest Rates MIS Revenue (L) MIS Revenue Guidance MA Revenue (L) MA Revenue Guidance MCO Revenue (L) 10-yr U.S. Treasury Yield (R)1 $6,000 9% 7.8% +120bps 8% $5,000 7% 6.5% +100bps $ Millions $4,000
Slide 27: Default Rate Forecast Rises in Wake of Unprecedented Turmoil
Default Rate Forecast Rises in Wake of Unprecedented Turmoil Default Rates for Speculative-Grade Speculative-Grade Covenant Quality Indicators2 Corporate Rated Issuance1 Global U.S. Europe U.S. Loans U.S. Bonds European Bonds Weakening 16% 5.0 14% 4.54x 12% 4.5 12% 4.23x 10% 4.1% global 9% 4.0 3.91x
Slide 28: Moody's Priorities for Strategic Growth
Moody’s Priorities for Strategic Growth Enhance technology infrastructure to enable automation, innovation and efficiency Foster employee engagement and creative solutions through our diverse workforce and inclusive environment Global Integrated Risk Assessments Moody’s Core Strengths Expand into Ne
Slide 29: moodys.com
Investor Relations ir.moodys.com ir@moodys.com moodys.com
Slide 30: MIS 2Q 2020 Overview - August 12, 2020
© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liabilit
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