Moody's Corporation · NYSE:MCO
Moody's — Q4 2021 Earnings Presentation
40 slides from Moody's's earnings presentation, Feb 10, 2022
Slide 1: Fourth Quarter and Full Year 2021 Earnings Call
Fourth Quarter and Full Year 2021 Earnings Call February 10, 2022
Slide 2: Introduction
Introduction Shivani Kak Head of Investor Relations Moody’s | Better decisions Fourth Quarter and Full Year 2021 - Earnings Call 2
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
Slide 4: 4Q and Full Year 2021 Recap and Strategy Update
4Q and Full Year 2021 Recap and Strategy Update Rob Fauber President and Chief Executive Officer Moody’s | Better decisions Fourth Quarter and Full Year 2021 - Earnings Call 4
Slide 5: Executive Summary
Executive Summary » Strong FY 2021 financial results: MCO revenue of $6.2 billion up 16% (MIS $3.8 billion and MA $2.4 billion); adjusted diluted EPS of $12.29 up 21% 1 » Balancing investments in high-growth markets with return of stockholder capital; projecting ~$2.0 billion of share repurchases an
Slide 6: 2021 Year in Review
2021 Year in Review Strong financial performance » MIS rated over $6 trillion in issuance1 » MA delivered over 55 consecutive quarters of revenue growth » Two consecutive years of 20%+ adjusted diluted EPS2 growth MCO Revenue MCO Adjusted Operating Income and MCO Adjusted Diluted EPS2 Margin2 49.9%
Slide 7: 2021 Year in Review
2021 Year in Review Executed on our global integrated risk assessment vision Investing Purposeful Commitment to for Growth Innovation Stakeholders Investments and Acquisitions 15+ Product Launches Culture of Inclusion » ~$150M deployed organically » Enhanced value proposition through » DE&I1 goals o
Slide 8: MIS: 2021 Issuance Recap
MIS: 2021 Issuance Recap Historical MIS Rated Issuance1 FY 2021 Year-Over-Year Issuance1 Growth 9% 6.0 Total MIS Rated Issuance 9% $4.9 Structured Finance 123% $ Trillions 4.0 Leveraged Loans 104% Financial Institutions 13% 2.0 High Yield Bonds 12% 0.0 Public, Project and Infrastructure Finance (20%
Slide 9: MIS: 2022 Issuance Factors
MIS: 2022 Issuance Factors GROWTH & INVESTMENT POLITICS & POLICY » Global GDP growth and post- » Trade, climate, tax and regulatory pandemic recovery policies » Ample dry powder at private equity » Government investment (e.g., U.S. firms supports M&A activity Infrastructure Bill and Next Generation
Slide 10: MA: 2021 Performance Recap
MA: 2021 Performance Recap MA Recurring and Transaction Revenue Key Drivers of FY 2021 MA Revenue Growth Recurring Revenue CAGR = 9% ~15% Organic Revenue1 Growth 93% 95% 91% Retention Rate2 85% 84% 2,000+ Customer Accounts Added in 2021 Strategic Investments FY 2018 FY 2019 FY 2020 FY 2021 and Acqui
Slide 11: MA: Investments Continue to Fuel Recurring Growth
MA: Investments Continue to Fuel Recurring Growth Key Focus Areas Acquired PassFort’s workflow capabilities and accelerated product KYC roadmap to help digitize our clients’ customer and supplier onboarding 24% Sales1 Growth Launched new solution for CRE lenders in 3Q 2021 and expecting to roll- in
Slide 12: MA: Accelerating Revenue Growth
MA: Accelerating Revenue Growth Recurring Revenue Growth Rate1 Organic Growth Acquired Growth Low- ~17% twenties % Low-to-mid-teens % ~13% Total Revenue CAGR Low-double- ~4% ~7% digit % Within 5 years 2 Low-double- Low-double- 2 2 ~9% ~10% digit %1 digit %1 2020 2021 2022 Strong Cross-selling, Conti
Slide 13: Current Addressable Market Expansion
Current Addressable Market Expansion Selection of Use Cases Addressable by Moody’s Solutions MA Organic Recurring Revenue1 in High-Growth Markets Weather and natural disaster analysis 35% Supply chain Transfer management and 30% FY 2021 Recuring Revenue Growth pricing trade credit KYC and Compliance
Slide 14: RMS Update
RMS Update Up to $150M in Transition Cross-sell New and incremental RMS- customers existing integrated related revenue to SaaS offerings solutions by 20251 Cross-sell & Product Development Integration Collaboration Exploration » Cross-trained sales forces to offer » Deepening relationships with P&C
Slide 15: Case Study: Compelling Customer Value for Leading P&C Insurer
Case Study: Compelling Customer Value for Leading P&C Insurer Customer Needs MA Solutions Integrate ESG criteria with their foundation of RMS risk models and solutions into: Enhanced underwriting risk selection Optimal portfolio construction Financial impact of natural Underwriting Investment Regula
Slide 16: 4Q 2021 Analysis & Outlooks
4Q 2021 Analysis & Outlooks Mark Kaye Chief Financial Officer Moody’s | Better decisions Fourth Quarter and Full Year 2021 - Earnings Call 16
Slide 17: 4Q21 MIS: Highest Fourth Quarter Revenue on Record
4Q21 MIS: Highest Fourth Quarter Revenue on Record MIS Revenue Issuance2,3 $1,500.0 $ Billions YoY Change $1,300.0 $871 $1,100.0 $735 $900.0 $1,211 $161 66% $983 $700.0 $97 $500.0 $ Millions $118 (2%) $121 4Q20 4Q21 $137 6% $129 MIS Adjusted Operating Margin4 $444 20% 7.3% $371 (2.0%) 4Q20 4Q21 48.3
Slide 18: 4Q21 MA: 20% Revenue Growth
4Q21 MA: 20% Revenue Growth MA Revenue MA Adjusted Operating Margin $668 YoY Change $555 (2.6%) $214 42% (3.5%) $151 $ Millions 28.4% 25.8% (7.4%) 14.9% $404 $454 12% 4Q20 MA Higher Operating Impact of 4Q21 MA Adjusted Incentive Performance, Recent Adjusted Operating Compensation Including Acquisiti
Slide 19: Acquisition Activity Drives Growth; Balancing Organic Investment and Cost Efficiencies
Acquisition Activity Drives Growth; Balancing Organic Investment and Cost Efficiencies in 2022 FY 2020 vs. FY 2021 4% 2% 1% 13% 5% 7% (4%) (2%) $3.4B $3.0B FY2020 Acquired Organic Strategic Operating Incentive Efficiency Restructuring and FX FY2021 Operating Expenses Companies Investments Growth Com
Slide 20: Multi-Year Investment Approach
Multi-Year Investment Approach Market Penetration and KYC, CRE, Banking and Technology and Customer Access ESG & Climate Product Development Incremental sales staff, Continuation of strategic New capabilities, including customer-oriented travel, investment roadmaps across continued development of Be
Slide 21: FY 2022 Corporate-Level Guidance
FY 2022 Corporate-Level Guidance1 Revenue Increase in the high-single-digit Macro assumptions underpinning our guidance4 percent range Increase in the low-double-digit 2022 GDP Global benchmark rates to Expenses percent range increase from historic lows; Adjusted Operating Margin2 U.S. high yield in
Slide 22: FY 2022 Issuance by Asset Class Guidance
FY 2022 Issuance by Asset Class Guidance FY 2022 3 Decrease in the Issuance Total Issuance low-single-digit % range Guidance1,2 » Challenging 2021 total issuance comparative Investment Grade ~15% » Investment grade issuance to rebound after sharp contraction High Yield Bonds (~15%) » Funding conditi
Slide 23: FY 2022 Segment-Level Guidance
FY 2022 Segment-Level Guidance1 MIS Revenue MIS Adjusted Operating Margin MA Revenue MA Adjusted Operating Margin Low-single-digit % 62.2% Approximately 62% High-teens % $3.8B $2.4B increase Approximately 29% increase 26.0% 2021 2022F 2021 2022F 2021 2022F 2021 2022F » Low-single-digit revenue growt
Slide 24: Medium-Term Growth Targets
Medium-Term Growth Targets M E D I U M - T E R M 1,2,3 MCO Revenue At least 10% growth MA Revenue Low-to-mid-teens % growth MIS Revenue Low-to-mid-single-digit % growth MCO Adjusted Operating Margin Low-50s % range MA Adjusted Operating Margin Mid-30s % range MIS Adjusted Operating Margin Low-60s %
Slide 25: Key Takeaways
Key Takeaways » In 2021, Moody’s delivered over $6 billion in revenue and adjusted diluted EPS1 growth above 20%, reflecting the value we provide to our customers » Overall issuance expected to remain robust in 2022 » Continued recurring revenue growth and strong retention rates underpin MA’s result
Slide 26: Questions and Answers
Questions and Answers Rob Fauber President and Chief Executive Officer Mark Kaye Chief Financial Officer
Slide 27: Investor Day
Investor Day Moody’s Corporation will hold its next Investor Day on March 10, 2022 Thursday, March 10, 2022, Save the Date and will showcase important aspects of the Company’s business. Additional details to follow. Moody’s | Better decisions Fourth Quarter and Full Year 2021 - Earnings Call 27
Slide 28: Replay Details
Replay Details Available from 3:30pm (Eastern Time) February 10, 2022 until 3:30pm (Eastern Time) March 11, 2022 Telephone Details Webcast Details » U.S. & Canada +1-888-203-1112 » Go to ir.moodys.com » Non-U.S. & Canada +1-719-457-0820 » Click on “Events & Presentations” » Passcode 3147599 » Click
Slide 29: Investor Relations
Investor Relations ir.moodys.com ir@moodys.com
Slide 30: Glossary of Terms and Abbreviations
Glossary of Terms and Abbreviations TERM DEFINITION CFG Corporate finance group; an LOB of MIS CRE Commercial Real Estate ERS The Enterprise Risk Solutions LOB within MA, which offers risk management software solutions, as well as related risk management advisory engagements services ESG Environment
Slide 31: Key Assumptions Underlying our Medium-Term Targets
Key Assumptions Underlying our Medium-Term Targets Moody’s medium-term guidance refers to a time period within 5 years and reflects assumptions about numerous factors that could affect its business, and is based on currently available information reviewed by management through and as of today’s date
Slide 32: Financial Information by Segment
Financial Information by Segment The table below presents revenue and adjusted operating income by reportable segment. The Company defines adjusted operating income as operating income excluding: i) depreciation and amortization; and ii) restructuring. Moody’s | Better decisions Fourth Quarter and F
Slide 33: Financial Information by Segment (Continued)
Financial Information by Segment (Continued) The table below presents revenue and adjusted operating income by reportable segment. The Company defines adjusted operating income as operating income excluding: i) depreciation and amortization; ii) restructuring; and iii) a loss pursuant to the divesti
Slide 34: 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 Moody’s operating performance. Adjusted Operating Income excludes the
Slide 35: 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 36: Organic Revenue and Growth Measures – MA, RD&A and ERS
Organic Revenue and Growth Measures – MA, RD&A and ERS The Company presents the organic revenue and organic revenue growth (including Below is a reconciliation of MA's reported revenue and growth rates to its organic revenue and organic recurring revenue and organic transaction revenue, as well as o
Slide 37: 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 Moody’s operating performance. A
Slide 38: Adjusted Net Income and Adjusted Diluted EPS (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 39: Organic Constant Currency Recurring Revenue Growth – MA
Organic Constant Currency Recurring Revenue Growth – MA The Company presents organic constant currency recurring 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 fr
Slide 40: Moody's | Better decisions
© 2022 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