Slide 1: 2Q 2018 Investor Presentation
2Q 2018 Investor Presentation August 9, 2018
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 Company’s business and operations that involve a number of risks and uncertainties. The forward-looking statements and other information in this re
Slide 3: Table of Contents
Table of Contents 1. Financial Overview 2. Capital Markets Overview 3. Moody’s Investors Service (MIS) 4. Moody’s Analytics (MA) 5. Conclusion 6. Appendix August 9, 2018 3
Slide 4: Moody's Mission: To be the World's Most Respected Authority
Moody’s Mission: To be the World’s Most Respected Authority Serving Risk-Sensitive Financial Markets » Defend and enhance our core Risk ratings & research businesses Management Credit Risk – Ratings: predictive, predictable and Curated Data & Technology Advisory Services Measurement transparent Stre
Slide 5: Financial Overview
1 Financial Overview
Slide 6: Overview of Moody's Corporation
Overview of Moody’s Corporation Leading global provider of Independent provider of credit rating opinions, Provides financial credit rating opinions and insight and tools for intelligence and analytical related information for over financial risk tools supporting our clients’ 100 years growth, effic
Slide 7: Financial Performance
Financial Performance Revenue Adjusted Diluted EPS2 $7.65 to $7.853 High-single-digit $8.00 $5.0 % growth $7.00 $4.0 $6.00 $ Billions $3.0 $5.00 $2.0 $4.00 $6.07 $4.71 $4.94 $3.00 $4.31 $1.0 $3.74 $2.00 $0.0 1 2013 2014 2015 2016 2017 2018F 1 2013 2014 2015 2016 2017 2018F Operating Margin4 5-year A
Slide 8: Long-Term Growth Opportunities
Long-Term Growth Opportunities Three Levers to Achieve EPS Growth Note: Long-term growth opportunities presented on this slide are on average over time. 1. Assumes no material change in effective tax rate, foreign exchange rates, leverage profile and/or capital allocation policy. 2. Subject to marke
Slide 9: Disciplined Approach to Capital Allocation
Disciplined Approach to Capital Allocation Investing in Growth Opportunities Return of Capital Reinvestment Acquisitions Dividends Share Repurchase Invest in existing Evaluate carefully to Grow dividend in line Follow reinvestment, businesses to make sure aligned with earnings; target dividends and
Slide 10: De-leveraging in 2018 to Maintain Current BBB+ Credit Rating
De-leveraging in 2018 to Maintain Current BBB+ Credit Rating 1 Debt Outstanding (L) Gross Debt/Adj. Operating Income (R) $6,000 3.0x $5,000 2.5x $4,000 2.0x $ Millions $3,000 1.5x $2,000 1.0x $1,000 0.5x $0 0.0x 2010 2011 2012 2013 2014 2015 2016 2017 2018E » Current long-term credit ratings from S&
Slide 11: 2018 Outlook
2018 Outlook Guidance as of July 27, 20181 Revenue High-single-digit % growth Operating Expenses High-single-digit % growth Operating Margin ~44% 48% - 49% (Adjusted2) Effective Tax Rate 22% - 23% EPS $7.20 - $7.40 $7.65 - $7.85 (Adjusted2) Free Cash Flow2 ~$1.6 billion 1. See press release titled “
Slide 12: Capital Markets Overview
2 Capital Markets Overview
Slide 13: Historically, Rising Rates Have not had a Significant Impact on Moody's Revenue
Historically, Rising Rates Have not had a Significant Impact on Moody’s Revenue MCO Revenue and Interest Rates 1 MIS Revenue (L) MA Revenue (L) MCO Revenue (L) 10-yr U.S. Treasury Yield (R) $4,500 9% $4,000 7.8% 8% +120bps $3,500 7% 6.5% $ Millions +100bps $3,000 6% 5.8% $2,500 5% +200bps 4.7% $2,00
Slide 14: Interest Coverage Up and Debt Leverage Remains Steady in the U.S.
Interest Coverage Up and Debt Leverage Remains Steady in the U.S. Credit Metrics: U.S. Speculative Grade Public Companies 6.0x 5.2x 4.7x 4.7x 4.2x 4.3x 4.3x 4.2x 4.0x 4.1x 4.1x 3.9x 3.4x 3.2x 4.0x Interest Coverage 4.1x 4.4x 4.3x 2.0x 3.9x 3.8x 3.7x 3.7x 3.8x 3.8x 3.4x 3.5x 3.5x 3.4x 0.0x 1 2006 200
Slide 15: Global Default Rates Remain Under Historic Average
Global Default Rates Remain Under Historic Average Default Rates for Corporate Rated Issuance1 Global U.S. Europe 6.0% 5.0% 4.2% global historic average1 4.0% 3.0% 2.3% 2.0% 2.1% 2.0% 1.0% 0.0% 2012 2013 2014 2015 2016 2017 2018 2019F » Global speculative-grade default rate at 2.9% as of June 30, 20
Slide 16: North America and EMEA Non-Financial Corporates Have Significant Refunding Needs
North America and EMEA Non-Financial Corporates Have Significant Refunding Needs1 Debt Maturities: North America Moody’s-Rated Corporate Bonds and Loans $300 $226 $225 $239 $223 $250 $206 2019 – 2022 CAGR $181 $ Billions $200 $180 Investment Grade Bonds: 5% $150 $121 Speculative Grade Bonds: 44% $90
Slide 17: Debt Refinancing and M&A are Most Frequently Stated Uses of Proceeds
Debt Refinancing and M&A are Most Frequently Stated Uses of Proceeds Uses of Funds from USD High Yield Bonds and Bank Loans1 Debt Refinancing M&A Capital Spending Shareholder Payments 9% 4% 12% 13% 12% 18% 17% 18% 20% 16% 17% 11% 22% 17% 5% 6% 22% 5% 6% 7% 8% 8% 8% 7% 19% 25% 39% 43% 31% 30% 31% 41%
Slide 18: 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 U.S. Non-Financial Corporate Bonds vs. Bank Loans Outstanding Bonds vs. Bank Loans Outstanding Bonds Loans Bonds Loans €7,000 $9,000 €6,000 $7,500 €5,000 49% $6,000 $ Billions € Billions €4
Slide 19: Robust Growth of New Rating Mandates
Robust Growth of New Rating Mandates Global New Rating Mandates1 EMEA United States Rest of World 1,200 1,026 1,044 990 854 +19% # of New Mandates 800 771 738 616 518 400 0 2012 2013 2014 2015 2016 2017 1H 2017 1H 2018 » In 2Q 2018, Moody’s new rating mandates increased to 323, up 10% from 293 in 1Q
Slide 20: New Rating Mandates Provide Recurring Revenue Growth
New Rating Mandates Provide Recurring Revenue1 Growth MIS Recurring Revenue Corporate Finance Structured Finance Financial Institutions Public, Project, & Infrastructure Finance $1,200 MIS Other $1,000 $800 $ Millions $600 $400 $200 $0 2013 2014 2015 2016 2017 1H17 1H18 As a % of MIS 38% 39% 39% 39%
Slide 21: Moody's Investors Service
3 Moody’s Investors Service
Slide 22: Moody's Investors Service Financial Profile
Moody’s Investors Service Financial Profile TTM 2Q 2018 Revenue: $2.9 billion Recurring Transaction U.S. Non-U.S. » 28% recurring revenue MIS Other 1% Public, 39% Corporate Project, & Finance Infrastructure » 36% recurring revenue 65% 50% Finance 15% Financial 61% Institutions 35% 15% » 55% recurrin
Slide 23: Broad Coverage Serves Global Needs
Broad Coverage Serves Global Needs $72+ trillion of Total Rated Debt 4,700 Rated Non-Financial Corporates 4,100 Rated Financial Institutions 138 Rated Sovereigns 47 Rated Supranational Institutions Americas EMEA APAC 450 Rated Sub-Sovereigns » 32,500 rated » 4,600 rated » 2,000 rated 17,700 companie
Slide 24: Rating Performance Drives Investor Confidence
Rating Performance Drives Investor Confidence Three-Year Cumulative Default Rates of Fundamental Rated Universe1 60% ~15 Years Lead/Senior Analyst 50% tenure 40% 30% 20% #1 U.S. Credit Rating Agency 10% 2012-20182 0% » We remain focused on analytical expertise and the continuous refinement of our cr
Slide 25: Illustrative Value of a Moody's Rating
Illustrative Value of a Moody’s Rating Example: 10 year $500 million corporate bond Unrated Rated by Moody’s $500,000,000 Bond $500,000,000 x 4.3% Interest rate x 4.0% = $21,500,000 Annual interest payments = $20,000,000 x 10 years Tenor x 10 years = $215,000,000 Lifetime interest expense = $200,000
Slide 26: Continue to Invest in Key International Markets
Continue to Invest in Key International Markets Revenue in Emerging Markets China $313M » Successful joint venture with CCXI, leading domestic rating agency » CCXI provides >1,000 domestic Chinese ratings; 34% coverage in 20172 $81M » Cross border market rated via MIS Hong Kong office » In 2017, Chi
Slide 27: Moody's Investors Service ESG Initiative
Moody’s Investors Service ESG Initiative Three Primary Objectives 20 18 Number of GBAs Analysis 10 12 10 » Develop systematic and transparent incorporation of ESG issues into analytical process » Expand global Green Bond Assessment (GBA) 0 franchise 1 2016 2017 YTD 2018 Research » Expand MIS researc
Slide 28: Moody's Analytics
VAN Moody’s Analytics
Slide 29: Moody's Analytics Financial Profile
Moody’s Analytics Financial Profile TTM 2Q 2018 Revenue: $1.6 billion » 98% recurring revenue Recurring Transaction U.S. Non-U.S. » > 95% retention rate1 19% Research, Data and Analytics 63% 59% » 70% recurring revenue Enterprise Risk 81% Solutions 28% 41% Professional Services 9% » Combination of o
Slide 30: Moody's Analytics has Several Platforms for Growth
Moody’s Analytics has Several Platforms for Growth Revenue More Than Doubled Since Inception Moody’s Analytics 2017 Revenue: $1,430m $1,600 2008 – 2017 CAGR: +11% (~62% organic) $1,400 Professional Services 2017 Revenue: $149m $1,200 2008 – 2017 CAGR: +32% (~15% organic) $1,000 $ Millions Enterprise
Slide 31: Bureau van Dijk Acquisition
Bureau van Dijk Acquisition Bureau van Dijk aggregates, standardizes and distributes an extensive private company data set » €3 billion acquisition closed on August 10, 2017 Long History of Profitable Growth2 » Bureau van Dijk is a leading aggregator and distributor of private company business intel
Slide 32: Bureau van Dijk Collects and Enhances Information to Deliver a Market Leading Global Dataset
Bureau van Dijk Collects and Enhances Information to Deliver a Market Leading Global Dataset Diversified IP Network1 High Value Customer Solutions 280 Million Compliance and Financial Crime Private Companies Corporate Finance and M&A 67 Thousand Public Companies 170 Million Credit Risk Director Cont
Slide 33: RD&A: Subscription Growth Driven by Retention, Upgrades and Pricing & New Sales
RD&A: Subscription Growth Driven by Retention, Upgrades and Pricing & New Sales Subscription Sales Growth (constant currency) 6.5% Expansion of ratings coverage 110.1% 1H 2018 94.6% 9.0% Production of insightful credit Retained Base Upgrades and Price New Sales Business Base analysis New customers i
Slide 34: ERS Solutions Address Diverse Needs and Customers
ERS Solutions Address Diverse Needs and Customers Credit Risk & Actuarial Analytics Credit Assessment & Helps risk managers assess and manage current and future exposures Origination Automates financial spreading across all asset classes and credit scoring, decision making and monitoring Accounting
Slide 35: ERS Subscription Products Drive Growth
ERS Subscription Products Drive Growth TTM1 Revenue Prior: Growth from installed software » One-time projects – installed software & services Total Subscription 2 $500 » Bespoke projects accelerated development of IP » 61% of revenue from renewable products in 2015 $450 Now: SaaS & subscriptions dri
Slide 36: Conclusion
5 Conclusion
Slide 37: Why Invest in Moody's?
Why Invest in Moody’s? We strive to be the world’s most respected authority serving risk-sensitive financial markets We have had strong revenue and earnings growth, as well as cash flow conversion – 2013 – 2017 revenue CAGR of 9% – 2013 – 2017 adjusted diluted EPS1 CAGR of 15% – 2013 – 2017 free cas
Slide 38: Globally and locally acknowledged for award-winning tools to measure and manage risk
Globally and locally acknowledged for award-winning tools to measure and manage risk Moody's Investors Service Moody's Analytics Best Credit Rating Agency Mexico: 2018 “x moval 7arpue® Multi-award winner: 2016-2017 Green Rating Agency ofthe Year: 2017 e&rean ‘CLO Cer Bestrating agency Best CLO Ratin
Slide 39: Appendix
6 Appendix
Slide 40: Corporate Finance: Revenue and Issuance
Corporate Finance: Revenue and Issuance Revenue1: Mix by Quarter Issuance3: Mix by Quarter $400 $1,000 $350 $108 $118 $300 $104 $92 $85 $800 $84 $78 $ Millions $ Billions $69 $60 $71 $250 $73 $58 $39 $44 $72 $63 $63 $64 $59 $600 $25 $206 $65 $51 $64 $59 $200 $59 $48 $160 $210 $41 $99 $120 $138 $165
Slide 41: Corporate Finance: Revenue Diversification
Corporate Finance: Revenue Diversification Revenue1: Distribution by Geography Revenue1: Distribution by Recurring vs. Transaction 100% 100% 27% 30% 31% 32% 26% 26% 27% 30% 27% 27% 27% 80% 80% 62% 62% 68% 68% 62% 67% 63% 65% 65% 64% 69% 60% 60% 40% 40% 73% 74% 74% 73% 73% 73% 73% 70% 69% 68% 70% 20%
Slide 42: Structured Finance: Revenue and Issuance
Structured Finance: Revenue and Issuance Issuance2: Mix by Quarter Revenue1: Mix by Quarter $160 $1 $140 $1 $300 $1 $1 $1 $120 $1 $50 $1 $55 $250 $48 $42 $46 $43 $0 $64 $ Millions $100 $30 $0 $42 $ Billions $200 $32 $41 $36 $29 $27 $56 $80 $24 $26 $42 $26 $27 $46 $32 $12 $16 $14 $33 $40 $33 $150 $33
Slide 43: Structured Finance: Revenue Diversification
Structured Finance: Revenue Diversification Revenue1: Distribution by Geography Revenue1: Distribution by Recurring vs. Transaction 100% 100% 36% 34% 30% 35% 36% 33% 80% 80% 40% 38% 38% 43% 37% 64% 66% 69% 67% 65% 68% 70% 69% 65% 66% 71% 60% 60% 40% 40% 64% 66% 70% 65% 64% 67% 60% 62% 62% 57% 63% 20
Slide 44: Financial Institutions: Revenue and Issuance
Financial Institutions: Revenue and Issuance Revenue1: Mix by Quarter Issuance2: Mix by Quarter $140 $500 $3 $3 $120 $3 $3 $45 $3 $6 $7 $39 $5 $4 $6 $400 $3 $ Millions $100 $3 $ Billions $3 $6 $5 $30 $33 $32 $4 $25 $28 $29 $80 $4 $4 $23 $24 $300 $38 $47 $26 $39 $24 $23 $19 $49 $60 $200 $419 $411 $40
Slide 45: Financial Institutions: Revenue Diversification
Financial Institutions: Revenue Diversification Revenue1: Distribution by Geography Revenue1: Distribution by Recurring vs. Transaction 100% 100% 80% 42% 40% 43% 43% 45% 43% 40% 43% 43% 42% 45% 80% 52% 57% 52% 55% 56% 53% 65% 65% 63% 63% 60% 60% 60% 40% 40% 58% 60% 57% 57% 55% 57% 60% 57% 57% 58% 55
Slide 46: Public, Project and Infrastructure: Revenue and Issuance
Public, Project and Infrastructure: Revenue and Issuance Issuance2: Mix by Quarter Revenue1: Mix by Quarter $250 $140 $120 $0 $200 $0 $0 $0 $0 $0 $0 $ Millions $100 $66 $ Billions $0 $150 $72 $57 $0 $80 $57 $45 $60 $56 $50 $68 $49 $45 $51 $59 $75 $46 $57 $62 $60 $100 $55 $40 $114 $127 $50 $105 $95 $
Slide 47: Public, Project and Infrastructure: Revenue Diversification
Public, Project and Infrastructure: Revenue Diversification Revenue1: Distribution by Geography Revenue1: Distribution by Recurring vs. Transaction 100% 100% 37% 36% 35% 32% 35% 36% 80% 80% 40% 42% 40% 40% 42% 63% 63% 63% 58% 62% 62% 57% 57% 65% 67% 64% 60% 60% 40% 40% 63% 64% 65% 68% 65% 64% 60% 58
Slide 48: Moody's Analytics: Financial Overview
Moody’s Analytics: Financial Overview $500 Revenue1: Mix by Quarter $1,600 Revenue1: Mix by Year $450 $40 $1,400 $149 $400 $38 $37 $ Millions $1,200 $ Millions $350 $38 $147 $143 $106 $150 $449 $300 $37 $36 $100 Professional Services $1,000 $168 $38 $36 $36 $113 Enterprise Risk Solutions $119 $419 $
Slide 49: Revenue is Diversified by Business, Geography and Type
Revenue is Diversified by Business, Geography and Type TTM 2Q18 Revenue by Business TTM 2Q18 Revenue by Geography MIS MA U.S. Non-U.S. Public, Project & MIS Other Infrastructure 1% Asia-Pacific Americas 9% Research, 11% 6% Financial Data & Institutions Analytics 10% 23% Structured Enterprise Risk EM
Slide 50: Moody's Corporate Speculative Grade Credit Cycle
Moody’s Corporate Speculative Grade Credit Cycle Gauge North America Europe Latest 1-Year Long-Term Record Latest 1-Year Long-Term Record 1 2 Metric Ago Average Worst Metric Ago Average Worst Liquidity Stress Index 2.9% 3.5% 6.5% 20.8% 5.1% 8.8% 11.4% 18.5% B3-Neg / Lower 190 226 194 291 39 52 41 60
Slide 51: Moody's Global Presence
Moody’s Global Presence Americas Argentina Mexico Brazil Panama Canada Peru Costa Rica United States Europe, Middle East & Africa Austria Poland Belgium Portugal Cyprus Russia Czech Republic Saudi Arabia Denmark Slovakia France South Africa Germany Spain Ireland Sweden Israel Switzerland Italy UAE M
Slide 52: Corporate Social Responsibility: Opening the Door to a Better Future
Corporate Social Responsibility: Opening the Door to a Better Future Three Focus Areas, All Supported by Our Colleagues Empowering people with Activating an Environmentally Helping Young People Reach financial knowledge Sustainable Future Their Potential Changing the lives of people all over Develop
Slide 53: Reconciliation of Adjusted Financial Measures to GAAP
Reconciliation of Adjusted Financial Measures to GAAP Adjusted Operating Income and Adjusted Operating Margin Reconciliation1 (in $ millions) 2013 2014 2015 2016 2017 TTM2Q18 Operating Income $1,248.0 $1,449.8 $1,490.7 $650.9 $1,820.8 $1,933.0 Operating Margin 42.0% 43.5% 42.8% 18.1% 43.3% 42.7% Add
Slide 54: Reconciliation of Adjusted Financial Measures to GAAP (cont.)
Reconciliation of Adjusted Financial Measures to GAAP (cont.) Moody's Corporation Diluted EPS Reconciliation 2013 2014 2015 2016 2017 2018F1 Diluted EPS - GAAP $3.60 $4.61 $4.63 $1.36 $5.15 $7.20 - $7.40 Legacy Tax (0.09) (0.03) (0.03) - - - Impact of Litigation Settlement 0.14 - - $3.59 - - ICRA Ga
Slide 55: moodys.com
Investor Relations ir.moodys.com ir@moodys.com moodys.com
Slide 56: August 9, 2018
© 2018 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