Slide 1: Third Quarter 2020 Earnings Call
Third Quarter 2020 Earnings Call October 29, 2020
Slide 2: Introduction
Introduction Shivani Kak Head of Investor Relations Third Quarter 2020 - Earnings Call, October 2020 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: Chief Executive Officer Transition
Chief Executive Officer Transition » Rob Fauber named Chief Executive Officer, effective January 1, 2021 – Has joined the company’s Board of Directors, effective immediately » Ray McDaniel to become non-executive Chairman of the Board, effective January 1, 2021 – Hank McKinnell, Moody’s current Chai
Slide 5: Overview and 3Q 2020 Results
Overview and 3Q 2020 Results Ray McDaniel President and Chief Executive Officer Third Quarter 2020 - Earnings Call, October 2020 5
Slide 6: Executive Summary
Executive Summary » Strong 3Q 2020 results: MCO revenue growth of 9%; adjusted diluted EPS of $2.69, up 25%1 » Credit markets buoyed by proactive monetary stimulus and anticipated future fiscal expenditure » Issuance driven by continued opportunistic refinancing and balance sheet fortification » Inc
Slide 7: 3Q 2020: Strong Margin Expansion Driving EPS Growth
3Q 2020: Strong Margin Expansion Driving EPS Growth » MCO revenue increased 9%, driven by 11% growth from MIS and 7% growth from MA – MA organic constant currency growth of 8%1 » Adjusted operating income up 17%; adjusted operating margin of 53.2% up 370 bps2 » Adjusted diluted EPS of $2.69, up 25%2
Slide 8: 3Q 2020 Credit Market Update
3Q 2020 Credit Market Update Buoyant credit markets despite ongoing real economy disruption from COVID-19 Real Economy Credit Markets COVID-19 Pandemic Investment Grade Bonds » New cases of COVID-19 increased in the U.S. and Europe » Record issuance volumes1 » Policy responses: some U.S. states and
Slide 9: CFG Spotlight: Issuance-driven Revenue Growth
CFG Spotlight: Issuance-driven Revenue Growth Issuance by Line of Business CFG Issuance Volume and Transaction Revenue ($ Billions) $1,000 100% 100% 85% 7% 4% 7% 10% 12% 10% 14% $900 90% $103 80% 16% 20% 14% 14% 15% 20% $800 80% 65% 18% 37% $171 60% 70% $700 40% 41% 37% 31% 24% 36% 40% 60% 34% 29% 2
Slide 10: Use of Proceeds: Refinancing and Balance Sheet Fortification
Use of Proceeds: Refinancing and Balance Sheet Fortification Uses of Funds from USD Bonds1 YTD 20202 Issuance Drivers: Debt Refinancing M&A Capital Spending Shareholder Payments Working Capital / Liquidity 100% Opportunistic refinancing driven 9% 14% 6% 25% 4% 17% by lower effective yields 10% 5% 80
Slide 11: Refunding Needs Continue to Build
Refunding Needs Continue to Build Next Four Years North America and EMEA Total Refunding Needs1 as of: $4,000 $3,806 10% $3,466 $3,500 $3,000 $ Billions $2,500 $1,972 $2,000 $1,500 $1,000 Jan '12 Jan '13 Jan '14 Jan '15 Jan '16 Jan '17 Jan '18 Jan '19 Jan '20 Sep '20 1. Amount reflects total maturit
Slide 12: Increased Issuance Volume Offsets Impact of Longer Average Maturities
Increased Issuance Volume Offsets Impact of Longer Average Maturities U.S. Investment Grade Bond Issuance by Maturity Length U.S. High Yield Bond Issuance by Maturity Length 1-2 years ($ Billions) ($ Billions) $341 3-5 years 6-10 years 11-30 years $264 Long term $230 $167 $165 $176 $184 $166 $130 $9
Slide 13: Subscription Sales Resilient Through COVID-19 Disruption
Subscription Sales 2020 OUTLOOK 2021 OUTLOOK Resilient Through Retention COVID-19 Disruption Positive Retention holding at ~94% despite Positive Retention expected to remain stable Continued demand for insights and initial concerns analytics Subscription Sales Growth YTD 2020 RETENTION ~96% Research
Slide 14: Newly Integrated Capabilities Help Customers Make Better Decisions
Newly Integrated Capabilities Help Customers Make Better Decisions Leveraging interoperability to create new solutions CUSTOMER NEEDS CAPABILITIES & DATA NEW INTEGRATED SOLUTIONS Credit Sentiment Score Credit Sentiment Score and AI powered news Early warning tools to identify CreditEdge feed added t
Slide 15: Investing with Intent
Investing with Intent Recent investments accelerate strategic growth priorities BUSINESS ADJACENCIES REGIONAL EXPANSION Acquire Media » MARC: Minority investment in a Malaysian domestic rating agency » Enhances KYC business Know Your Customer » Curated news and workflow solutions Asia Pacific enable
Slide 16: 3Q 2020 Results and FY 2020 Outlook
3Q 2020 Results and FY 2020 Outlook Mark Kaye Chief Financial Officer Third Quarter 2020 - Earnings Call, October 2020 16
Slide 17: MIS: Favorable Revenue Mix
MIS: Favorable Revenue Mix Issuance1 $1,250.0 $ Billions MIS Revenue $1,200.0 1,242 $950 $825 YoY Change 1,189 $850 $746 $9 $1,150.0 $750 $9 $133 11% 3Q19 3Q20 $650 $120 $134 12% MIS Adjusted Operating Income and Margin $550 $120 +410bps 64.2% $ Millions $88 (16%) $700 65.1% 65.0% 64.9% 64.8% 64.7%
Slide 18: MA: Organic Constant Currency Revenue Growth of 8%
MA: Organic Constant Currency Revenue Growth of 8%1 MA Revenue2 YoY MA Adjusted Operating Income and Margin $531 Change $200 +220bps 31.4% $494 $500 29.2% ($14) $43 $145 8% $36 $400 $134 $ Millions $ Millions $300 $100 $167 $200 $386 $145 $317 22% $100 $0 $0 15.0% 3Q19 3Q20 3Q19 MA MA Revenue MA Exp
Slide 19: FY 2020 Corporate-Level Guidance
FY 2020 Corporate-Level Guidance1 Revenue Increase in the high-single-digit Macro assumptions underpinning our guidance3 % range Expenses Increase in the low-single-digit 2020 GDP Benchmark interest rates % range remain low; U.S. high-yield Adjusted Operating Margin2 Approximately 50% -6% United Sta
Slide 20: MIS Guidance: Robust YTD Driving Improved Outlook
MIS Guidance: Robust YTD Driving Improved Outlook1 Revenue Adjusted Operating Margin1 FY 2020 Issuance Guidance1,2 Low-double-digit 78% Approximately 60% 60% % increase 58% $3,200 58.0% $3,000 $2.9B 38% 25% High-teens $2,800 % range 18% $2,600 $2,400 -2% $2,200 -22% -10% $2,000 $1,800 -42% -35% $1,6
Slide 21: MA Guidance: Recurring Revenue Creates Stability
MA Guidance: Recurring Revenue Creates Stability1 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 strong demand for K
Slide 22: Key Takeaways
Key Takeaways » Strong 3Q 2020 performance and improved full year 2020 outlook » High demand for Moody's products and services in times of uncertainty » Continued innovation and reinvestment into the business » Disciplined expense management and planning for the Workplace of the Future » Prudent cap
Slide 23: Questions and Answers
Questions and Answers Ray McDaniel President and Chief Executive Officer Rob Fauber Chief Operating Officer Mark Kaye Chief Financial Officer
Slide 24: Replay Details
Replay Details Available from 3:30pm (Eastern Time) October 29, 2020 until 3:30pm (Eastern Time) November 27, 2020 Telephone Details Webcast Details » U.S. +1 888-203-1112 » Go to ir.moodys.com » Non-U.S. +1 719-457-0820 » Click on “Events & Presentations” » Passcode 9286036 » Click on the link for
Slide 25: Investor Relations
Investor Relations ir.moodys.com ir@moodys.com
Slide 26: 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 27: 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) restructuring; ii) depreciation and amortization;
Slide 28: 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) restructuring; ii) depreciation and a
Slide 29: 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 30: 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 31: 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 32: 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 33: Adjusted Net Income and Adjusted Diluted EPS
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 34: 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. Third Quarter 2020 - Earnings Call, October 2020 34
Slide 35: Moody's legal notices
© 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