Moody's Corporation · NYSE:MCO
Moody's — Q4 2020 Earnings Presentation
38 slides from Moody's's earnings presentation, Feb 12, 2021
Slide 1: Fourth Quarter and Full Year 2020 Earnings Call
Fourth Quarter and Full Year 2020 Earnings Call February 12, 2021
Slide 2: Introduction
Introduction Shivani Kak Head of Investor Relations Moody’s | Better decisions Fourth Quarter and Full Year 2020 - Earnings Call, February 2021 2
Slide 3: 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 4: 4Q and Full Year 2020 Overview and Strategy Discussion
4Q and Full Year 2020 Overview and Strategy Discussion Rob Fauber President and Chief Executive Officer Moody’s | Better decisions Fourth Quarter and Full Year 2020 - Earnings Call, February 2021 4
Slide 5: Executive Summary
Executive Summary » Record FY 2020 financial results: MCO revenue of $5.4 billion up 11%; adjusted diluted EPS of $10.15 up 22%1 » Introducing FY 2021 guidance2: MCO revenue up mid-single-digits; adjusted diluted EPS range of $10.30 – $10.701 » Integration of data and capabilities to address custome
Slide 6: Full Year 2020: MIS Drove Record Results
Full Year 2020: MIS Drove Record Results » MCO revenue increased 11%, driven by 15% growth from MIS and 6% growth from MA – MA organic constant currency growth of 8%1 » Adjusted operating income up 16%; adjusted operating margin of 49.7% up 230 bps2 » Adjusted diluted EPS of $10.15, up 22%2 MCO Reve
Slide 7: 2020: A Year of Progress
2020: A Year of Progress Demonstrated resilience and relevance of our products, insights and solutions, despite uncertain environment Strong Financial Commitment to Increasing Investing Performance Stakeholders2 Capabilities for Growth >$2 Billion Support for Our Compliance 7 Investments and Moody’s
Slide 8: MIS Issuance Spotlight
MIS Issuance Spotlight 2020 CFG Issuance 34% Above Prior 5 Year Average ($ Billions)1 Investment Grade Speculative Grade Bank Loans 2015-2019 Average 2,900 » Balance sheet fortification and increasingly $2,637 favorable conditions led many corporates $1,973 2015-2019 Avg. $1,955 $2,264 $562 2,400 $1
Slide 9: Healthy Growth in MA's Recurring Revenue Supports Long-term Margin Expansion
Healthy Growth in MA’s Recurring Revenue Supports Long-term Margin Expansion Amidst Investment MA RECURRING AND TRANSACTION REVENUE MA ADJUSTED OPERATING MARGIN 2 EXPANSION % Transaction % Recurring Recurring Revenue 29.4% ~$1.9B 27.8% 84% 26.4% 78% 85% 91% ~$1.1B 24.6% 22% 16% 15% 9% 2017 2018 2019
Slide 10: Moody's Has Evolved Over the Last 15 Years
2006 – 2016 Expanded beyond rating agency Moody’s Has » Established Moody’s Analytics Evolved Over » Built the ERS business (e.g., Fermat, B&H) » Expanded ratings to China (i.e., CCXI) the Last 2017 – 2020 Built-out substantial data and analytics capabilities 15 Years » » Complemented ERS business w
Slide 11: Customers Are Searching for Solutions to Manage New Risks
Customers Are Digitization & Cloud Digitization of manual processes Big Data Proliferation of data analysis in Searching for Solutions and move to Cloud lowers costs and increases agility core risk processes to provide early warning signals in real-time to Manage New Risks Interconnected Risks Resil
Slide 12: Our Priorities Looking Forward
Our Priorities Looking Forward Realizing the full potential of our global integrated risk assessment opportunity Sharpen focus on understanding Invest with intent to grow Collaborate, modernize and and delivering for our customers and scale innovate World-class customer experience Deepen and extend
Slide 13: Moody's as an Integrated Risk Assessment Business $35B+
Moody’s as an Integrated Risk Assessment Business $35B+ Supply chain management Helping customers make Transfer pricing & trade credit Total Addressable Market BETTER DECISIONS Fixed income CURATED DATA investing Commercial lending Entities Securities ~400 million $79+ trillion public & private enti
Slide 14: Integrated Risk Assessment in Action: Cortera Data Utilized Across Several Markets
Integrated Risk Assessment in Action: Cortera Data Utilized Across Several Markets Supply chain management Transfer pricing & trade credit CORTERA » Private company and trade Fixed income investing Commercial lending credit data » 36M+ North American business profiles CURATED DATA » Integration into
Slide 15: Bringing it All Together
Bringing it All Together Comprehensive suite of data assets to serve a range of use cases, including KYC, compliance and anti-financial crime » Private company data » Private company and trade credit data ~$525M » Scalable compliance ANNUAL SALES1 solutions High-teens growth % ANNUAL GROWTH RATE2 KY
Slide 16: 4Q 2020 Results and FY 2021 Outlook
4Q 2020 Results and FY 2021 Outlook Mark Kaye Chief Financial Officer Moody’s | Better decisions Fourth Quarter and Full Year 2020 - Earnings Call, February 2021 16
Slide 17: 4Q 2020: MIS Resiliency and MA Growth
4Q 2020: MIS Resiliency and MA Growth » MCO revenue increased 5%, driven by 8% growth from MA and 2% growth from MIS » Adjusted operating income down 5%; adjusted operating margin of 41.2% down ~400 bps1 » Adjusted diluted EPS of $1.91, down 5%1 MCO Revenue MCO Adjusted Operating MCO Adjusted Dilute
Slide 18: 4Q 2020 MIS: Bolstered by Favorable Revenue Mix
4Q 2020 MIS: Bolstered by Favorable Revenue Mix Issuance1 MIS Revenue $1,050.0 YoY Change $ Billions $950 $950.0 $735 $720 $850.0 $850 $1,013 $983 $750 $9 $17 $750.0 $650 (3%) $650.0 $125 $121 4Q19 4Q20 $550 12% $ Millions $115 $129 $450 (11%) MIS Adjusted Operating Income and Margin $109 $97 $350 5
Slide 19: 4Q 2020 MA: RD&A Drove Growth; >90% Recurring Revenue
4Q 2020 MA: RD&A Drove Growth; >90% Recurring Revenue MA Revenue1 YoY MA Adjusted Operating Income and Margin $555 Change $513 +280 bps $200 28.4% 30% $500 $31 $151 1% 25.6% 25% $400 $149 $42 $ Millions ($16) 20% $ Millions $300 $100 15% $200 $404 $158 $333 21% $132 10% $100 5% $0 $0 0% 4Q19 4Q20 4Q
Slide 20: FY 2021 Corporate-Level Guidance
FY 2021 Corporate-Level Guidance1 Revenue Increase in the mid-single-digit Macro assumptions underpinning our guidance4 % range Expenses Increase in the mid-single-digit 2021 GDP Benchmark interest rates % range remain low; U.S. high yield Adjusted Operating Margin2 49% - 50% 4.0% - 5.0% United Stat
Slide 21: MIS Guidance: Transactional Orientation Benefits Revenue
MIS Guidance: Transactional Orientation Benefits Revenue Adjusted Operating Margin1 FY 2021 Issuance Guidance1,2 Revenue $3.3B Approximately flat 59.7% Approximately 60% 15%-20% $3,400 $3,200 ~10% $3,000 $2,800 $2,600 ~(5%) $2,400 Decline in the $2,200 high-single- $2,000 digit % range ~(30%) $1,800
Slide 22: MA Guidance: Revenue Growth and Reinvestment to Drive Future Expansion
MA Guidance: Revenue Growth and Reinvestment to Drive Future Expansion Revenue Adjusted Operating Margin1 Low-double-digit % increase 29.4% Approximately 30% $2.1B 1 2020 2021F 2020 2021F 1 Key drivers of MA FY 2021 outlook1 » ~93% recurring revenue » ERS: Strong growth in recurring revenue, partial
Slide 23: Investing for the Future: Strategic Investments
Investing for the Future: Strategic Investments $80-$100 million of cost savings reinvested in 2021 into key strategic areas to drive future growth COMMERCIAL REAL ESTATE KYC AND COMPLIANCE CHINA AND LATIN AMERICA Develop new analytic tools to serve Deepen curated data sets, nurture Build out local
Slide 24: Key Takeaways
Key Takeaways » Strong execution in 2020 and a solid 2021 outlook » Reaffirmed strategic priorities » High customer demand for Moody’s data, analytics and insight » Strategic investment coupled with balanced capital return » Broad stakeholder commitment through sustainable stewardship and community
Slide 25: Questions and Answers
Questions and Answers Rob Fauber President and Chief Executive Officer Mark Kaye Chief Financial Officer
Slide 26: Moody's Attendance at Upcoming Conferences
Moody’s Attendance at Upcoming Conferences MAR Deutsche Bank ESG Conference 01 » Andrea Blackman, Global Head of Moody’s ESG Solutions MAR Raymond James Institutional Investor Conference 03 » Rob Fauber, President and Chief Executive Officer Moody’s | Better decisions Fourth Quarter and Full Year 20
Slide 27: Replay Details
Replay Details Available from 3:30pm (Eastern Time) February 12, 2021 until 3:30pm (Eastern Time) March 13, 2021 Telephone Details Webcast Details » U.S. +1-877-400-0505 » Go to ir.moodys.com » Non-U.S. +1-720-452-9084 » Click on “Events & Presentations” » Passcode 5584368 » Click on the link for “4
Slide 28: Investor Relations
Investor Relations ir.moodys.com ir@moodys.com
Slide 29: Glossary of Terms and Abbreviations
Glossary of Terms and Abbreviations TERM DEFINITION CFG Corporate finance group; an LOB of MIS ERS The Enterprise Risk Solutions LOB within MA, which offers risk management software solutions as well as related risk management advisory engagements services FIG Financial institutions group; an LOB of
Slide 30: Adjusted Operating Income and Adjusted Operating Margin by Segment
Adjusted Operating Income and Adjusted Operating Margin by Segment The table below presents revenue, operating income and adjusted operating income by reportable segment. The Company defines adjusted operating income as operating income excluding: i) depreciation and amortization; ii) restructuring;
Slide 31: Adjusted Operating Income and Adjusted Operating Margin by Segment (continued)
Adjusted Operating Income and Adjusted Operating Margin by Segment (continued) The table below presents revenue, operating income and adjusted operating income by reportable segment. The Company defines adjusted operating income as operating income excluding: i) depreciation and amortization; ii) re
Slide 32: Adjusted Operating Income and Adjusted Operating Margin
Adjusted Operating Income and Adjusted Operating Margin The Company presents Adjusted Operating Income and Adjusted Operating Margin because management deems these metrics to be useful measures to provide additional perspective on the operating performance of Moody’s. Adjusted Operating Income exclu
Slide 33: Free Cash Flow
Free Cash Flow The table below reflects a reconciliation of the Company's net cash flows from operating activities to free cash flow. The Company defines free cash flow as net cash provided by operating activities minus payments for capital additions. Management deems capital expenditures essential
Slide 34: Organic Revenue and Growth Measures – MA, RD&A and ERS
Organic Revenue and Growth Measures – MA, RD&A and ERS The Company presents organic revenue and organic revenue growth because management deems this metric to be a useful measure which provides additional perspective in assessing the revenue growth excluding the inorganic revenue impacts from certai
Slide 35: Organic Constant Currency Revenue and Growth Measures – MA
Organic Constant Currency Revenue and Growth Measures – MA The Company presents organic constant currency revenue and organic constant currency revenue growth because management deems this metric to be a useful measure which provides additional perspective in assessing the revenue growth excluding t
Slide 36: Adjusted Net Income and Adjusted Diluted Earnings per Share
Adjusted Net Income and Adjusted Diluted Earnings per Share Attributable to Moody's Common Shareholders The Company presents Adjusted Net Income and Adjusted Diluted EPS because management deems these metrics to be useful measures to provide additional perspective on the operating performance of Moo
Slide 37: Adjusted Net Income and Adjusted Diluted Earnings per Share (continued)
Adjusted Net Income and Adjusted Diluted Earnings per Share Attributable to Moody's Common Shareholders (continued) Note: The tax impacts in the table above were calculated using tax rates in effect in the jurisdiction for which the item relates. Moody’s | Better decisions Fourth Quarter and Full Ye
Slide 38: Moody's legal disclaimer and credit ratings notice
© 2021 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