Slide 1: First Quarter 2019 Earnings Call
First Quarter 2019 Earnings Call April 24, 2019
Slide 2: Overview
Overview Salli Schwartz Global Head of Investor Relations and Strategic Capital Management First Quarter 2019 Earnings Call, April 24, 2019 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 Company’s business and operations that involve a number of risks and uncertainties. The forward-looking statements and other information in this re
Slide 4: 1Q 2019 Results
1Q 2019 Results Ray McDaniel President and Chief Executive Officer First Quarter 2019 Earnings Call, April 24, 2019 4
Slide 5: Moody's Analytics' Mid-Teens Growth Offsets Issuance Headwinds
Moody’s Analytics’ Mid-Teens Growth Offsets Issuance Headwinds » 1Q19 MCO revenue increased 1%, including MA revenue up 16% and MIS revenue down 7% » Both GAAP diluted EPS and adjusted diluted EPS were up slightly, aided by a lower tax rate and reduced share count MCO Revenue MCO Adjusted Operating
Slide 6: Issuance Impacted by Uncertain Business Outlook
Issuance Impacted by Uncertain Business Outlook Global Growth Concerns Issuance Improves From Historic 4Q18 Disruption, Though Below » IMF: 2019 global GDP growth 1Q18 Levels forecast lowest since 2009 » Volatility abates in equity markets, » U.S. 3-month to 10-year treasury commodity prices rise sp
Slide 7: MIS Revenue Declined Less Than Issuance
MIS Revenue Declined Less Than Issuance Issuance1 MIS Revenue $2 $1.4 $1.2 $ Trillions $800 $720 YoY $1 $670 Change $700 $5 $1 $93 $6 $600 $93 (1%) $0 $114 1Q18 1Q19 $500 $116 +1% $ Millions $118 MIS Adjusted Operating Income and Margin3 $400 $101 58.6% -370bps 60.0% (15%) 54.9% $450 55.0% $ Million
Slide 8: CFG Issuance Spotlight: Market Preference Shifts Towards Fixed Rate Instruments
CFG Issuance Spotlight: Market Preference Shifts Towards Fixed Rate Instruments 1 2 Issuance ($ Billions) Yield % U.S. IG Bonds U.S. HY Bonds U.S. Bank Loans 00 Issuance 8.0% 200,000 200 8.0% 8.0% 19% Y/Y 00 180,000 $173 $173 $160 00 $154 7.0% 160,000 7.0% 7.0% $145 150 00 140,000 Issuance 00 $114 6
Slide 9: Double-Digit Revenue Growth Across All MA Businesses Drives 350 bps Margin Improvement
Double-Digit Revenue Growth Across All MA Businesses Drives 350 bps Margin Improvement MA Revenue YoY MA Adjusted Operating Income and Margin2 Change $300 $500 $472 28.1% $407 $42 13% +350bps $400 $37 $122 19% $200 24.6% $ Millions $102 $ Millions $300 ($31) $63 $200 $100 $308 15% $267 $133 $100 $10
Slide 10: ERS: Driving Growth via Recurring Revenue
ERS: Driving Growth via Recurring Revenue ERS Revenue1: Recurring vs. Non-recurring Recurring Revenue CAGR2 = 16% 100% $400 78% 80% % Recurring $300 61% $ Millions 60% $200 40% $100 20% $0 0% 2015 2016 2017 2018 TTM 1Q19 3 One-Time Recurring % Recurring » ERS recurring revenue has grown by over $100
Slide 11: Recent Acquisitions Contribute to Moody's Strategic Priorities
Recent Acquisitions Contribute to Moody’s Strategic Priorities First Quarter 2019 Earnings Call, April 24, 2019 11
Slide 12: Acquired a Majority Stake in Vigeo Eiris, a Global Leader in ESG Research
Acquired a Majority Stake in Vigeo Eiris, a Global Leader in ESG Research, Data and Assessments E S G D ATA & Collects ESG data and scores on RESEARCH over 4,500+ companies and provides 150+ Green Bond Assessments ESG INDICES Partners to provide ESG indices supporting index funds, ETFs and structure
Slide 13: Technology: Innovating with Purpose
Technology: Innovating with Purpose Next gen tech is a defining element of our culture, setting stage for growth » Incorporating alternative » NLP based early warning and data sources to augment monitoring tools for MIS SME credit scoring accuracy analysts and MA customers » QuantCube pilot program
Slide 14: FY 2019 Outlook
FY 2019 Outlook Mark Kaye Senior Vice President and Chief Financial Officer First Quarter 2019 Earnings Call, April 24, 2019 14
Slide 15: Affirming FY19 Guidance
Affirming FY19 Guidance1,2 Revenue Increase in mid-single-digit % range Total Expenses3 Increase in mid-single-digit % range Operating Margin Approximately 43% Adjusted Operating Margin Approximately 48% Interest Expense, Net $200 - $225 million Effective Tax Rate 21% - 22% Diluted EPS $7.30 - $7.55
Slide 16: MIS Guidance Unchanged; Revenue Growth Weighted Towards Second Half
MIS Guidance Unchanged; Revenue Growth Weighted Towards Second Half of the Year Revenue Adjusted Operating Margin1 Low-single digit Approximately 58% 58.4% $3,000 $2.7B % growth $2,800 $2,600 $2,400 Approximately $2,200 $2,000 Flat $1,800 $1,600 $1,400 $1,200 $1,000 Low-single $800 $600 digit % grow
Slide 17: MA Revenue Growth and Margin Expansion on Track
MA Revenue Growth and Margin Expansion on Track Revenue Adjusted Operating Margin1 32% Low-double-digit 31% 30% 29% - 30% 29% % growth 28% 27% 26.4% 26% 25% $1.7B 24% 23% 22% 21% High-single 20% 19% 18% digit % growth 17% 16% 15% 14% 13% 12% 11% 10% 9% 8% Mid-teens % 7% 6% 5% growth 4% 3% 2% 1% 0% 2
Slide 18: Capital Management
Capital Management ($ Billions) TTM 1Q192 $6.0 2.5x Adjusted Operating Income3 $2.1 Interest Expense $0.2 Capital Expenditures $0.1 $5.0 2.0x Free Cash Flow3 $1.3 2.0x Debt $5.5 Cash, Cash Equivalents & ST Investments $1.3 $4.0 Net Debt $4.2 1.5x $ Billions Net Debt/Adjusted Operating Income1 2.0x $
Slide 19: Key Takeaways
Key Takeaways » Moody’s will continue to deliver revenue growth and margin stability in 2019 ‒ Deepen Moody’s role in serving risk-sensitive markets by expanding down the credit pyramid ‒ Continue to pursue regional expansion ‒ Selectively expand in adjacent and / or emerging risk areas ‒ Grounded i
Slide 20: Q&A
Q&A Ray McDaniel President and Chief Executive Officer Mark Kaye Senior Vice President and Chief Financial Officer Mark Almeida President, Moody’s Analytics Rob Fauber President, Moody’s Investors Service First Quarter 2019 Earnings Call, April 24, 2019 20
Slide 21: Quiet Period Policy
Quiet Period Policy » Commences on the 16th of the last month of each calendar quarter and runs to after that quarter’s earnings call » Investor Relations contact details – http://ir.moodys.com – ir@moodys.com First Quarter 2019 Earnings Call, April 24, 2019 21
Slide 22: Expected Attendance at Upcoming Conferences
Expected Attendance at Upcoming Conferences » Morgan Stanley 1x1 Business Services Conference ‒ Thursday, May 9 ‒ NYC » Barclays Americas Select Franchise Conference – Tuesday, May 14 – London » William Blair Growth Stock Conference – Wednesday, June 5 – Chicago First Quarter 2019 Earnings Call, Apr
Slide 23: Replay Details
Replay Details » Available from 3:30pm (Eastern Time) April 24, 2019 until 3:30pm (Eastern Time) May 23, 2019 » Telephone Details: – U.S. +1-888-203-1112 – Non-U.S. +1-719-457-0820 – Passcode 1337587 » Webcast Details: – Go to ir.moodys.com – Click on “Events & Presentations” – Click on the link for
Slide 24: Appendix
Investor Relations http://ir.moodys.com Appendix ir@moodys.com moodys.com
Slide 25: 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 26: Adjusted Operating Income and Adjusted Operating Margin by Segment
Adjusted Operating Income and Adjusted Operating Margin by Segment First Quarter 2019 Earnings Call, April 24, 2019 26
Slide 27: Adjusted Operating Income and Adjusted Operating Margin
Adjusted Operating Income and Adjusted Operating Margin First Quarter 2019 Earnings Call, April 24, 2019 27
Slide 28: Free Cash Flow
Free Cash Flow First Quarter 2019 Earnings Call, April 24, 2019 28
Slide 29: Organic Revenue and Growth Measures – MA, RD&A and PS
Organic Revenue and Growth Measures – MA, RD&A and PS First Quarter 2019 Earnings Call, April 24, 2019 29
Slide 30: Adjusted Net Income and Adjusted Diluted Earnings per Share
Adjusted Net Income and Adjusted Diluted Earnings per Share Attributable to Moody's Common Shareholders First Quarter 2019 Earnings Call, April 24, 2019 30
Slide 31: 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) First Quarter 2019 Earnings Call, April 24, 2019 31
Slide 32: moodys.com
Investor Relations http://ir.moodys.com ir@moodys.com moodys.com
Slide 33: First Quarter 2019 Earnings Call, April 24, 2019
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, affiliates (collectively, “MOODY’S”). All rights reserved. licensors and suppliers