Slide 1: Third Quarter 2014 Earnings Call
Third Quarter 2014 Earnings Call October 24, 2014
Slide 2: Overview
Overview SALLI SCHWARTZ GLOBAL HEAD OF INVESTOR RELATIONS Third Quarter 2014 Earnings Call, October 24, 2014 2
Slide 3: Agenda
Agenda 1. Third Quarter 2014 Results Ray McDaniel, President and Chief Executive Officer 2. Financial and Operating Highlights Linda Huber, Executive Vice President and Chief Financial Officer 3. 2014 Outlook Ray McDaniel, President and Chief Executive Officer 4. Q&A Ray McDaniel, President and Chie
Slide 4: Disclaimer
Disclaimer Certain statements contained in this presentation 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. Moody’s outlook for 2014 and other forward-looking statements in
Slide 5: 1. Third Quarter 2014 Results
1. Third Quarter 2014 Results RAY MCDANIEL PRESIDENT AND CHIEF EXECUTIVE OFFICER Third Quarter 2014 Earnings Call, October 24, 2014 5
Slide 6: Third Quarter 2014 Results and Comparison to Third Quarter 2013
Third Quarter 2014 Results and Comparison to Third Quarter 2013 Moody’s Corporation » Revenue 16% to $816 million » Expenses 13% to $466 million » Operating Income 20% to $350 million » Adjusted Operating Income 18% to $373 million » Operating Margin • 42.9% » Adjusted Operating Margin • 45.
Slide 7: Year-to-Date 2014 Performance and Comparison to Year-to-Date 2013
Year-to-Date 2014 Performance and Comparison to Year- to-Date 2013 Moody’s Corporation » Revenue 12% to $2.5 billion – MIS 10% to $1.7 billion – MA 17% to $766 million » Operating Expenses* 7% to $1.4 billion » Operating Income* 19% to $1.1 billion » Adjusted Operated Income* 17% to $1.2
Slide 8: Year-to-Date 2014 Performance and Comparison to Year-to-Date 2013
Year-to-Date 2014 Performance and Comparison to Year- to-Date 2013 Moody’s Corporation » GAAP EPS 31% to $3.48 » Non-GAAP EPS* 10% to $3.09 * Year-to-date 2014 non-GAAP EPS excludes a $0.36 gain resulting from Moody’s acquisition of a controlling interest in ICRA Ltd. in the second quarter and t
Slide 9: 2. Financial and Operating Highlights
2. Financial and Operating Highlights LINDA HUBER EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER Third Quarter 2014 Earnings Call, October 24, 2014 9
Slide 10: Moody's Corporation Revenue
Third Quarter 2014 Results and Comparison to Third Quarter 2013 Moody’s Corporation Revenue » Total Global 16% at $816 million » U.S. 15% to $449 million » Non-U.S. 17% to $367 million • 45% of Total Global » Recurring Revenue 10% to $415 million • 51% of Total Global Third Quarter 2014 Earn
Slide 11: MIS Revenue by Geography
Third Quarter 2014 Results and Comparison to Third Quarter 2013 MIS Revenue by Geography » Total MIS 14% to $543 million » U.S. 13% to $329 million » Non-U.S. 14% to $214 million • 39% of Total MIS Third Quarter 2014 Earnings Call, October 24, 2014 11
Slide 12: MIS Revenue by Line of Business
Third Quarter 2014 Results and Comparison to Third Quarter 2013 MIS Revenue by Line of Business » Corporate Finance: $261 million – Global 12% – U.S. 8% – Non-U.S. 19% » Structured Finance: $102 million – Global 22% – U.S. 31% – Non-U.S. 7% Third Quarter 2014 Earnings Call, October 24, 2
Slide 13: MIS Revenue by Line of Business
Third Quarter 2014 Results and Comparison to Third Quarter 2013 MIS Revenue by Line of Business » Financial Institutions: $92 million – Global 16% – U.S. 9% – Non-U.S. 22% » Public, Project & Infrastructure Finance: $89 million – Global 7% – U.S. 15% – Non-U.S. 5% Third Quarter 2014 Earn
Slide 14: MA Revenue by Geography
Third Quarter 2014 Results and Comparison to Third Quarter 2013 MA Revenue by Geography » Total MA 20% to $273 million » U.S. 19% to $120 million » Non-U.S. 21% to $153 million • 56% of Total MA » More than two-thirds of MA’s growth in the quarter was organic, with the remainder coming from ac
Slide 15: MA Revenue by Line of Business
Third Quarter 2014 Results and Comparison to Third Quarter 2013 MA Revenue by Line of Business » RD&A: $147 million – Global 10% • 54% of total MA revenue • mid-90’s customer retention rate – U.S. 6% – Non-U.S. 14% » ERS: $81 million – Global 26% – U.S. 23% – Non-U.S. 27% – TTM* Revenue
Slide 16: MA Revenue by Line of Business
Third Quarter 2014 Results and Comparison to Third Quarter 2013 MA Revenue by Line of Business » Professional Services: $45 million – Global 54% – U.S. 130% – Non-U.S. 28% Third Quarter 2014 Earnings Call, October 24, 2014 16
Slide 17: Moody's Corporation Expenses, Margins and Tax Rate
Third Quarter 2014 Results and Comparison to Third Quarter 2013 Moody’s Corporation » Total Expenses 13% to $466 million » Operating Margin • 42.9% ̶ up 160 basis points from 41.3% in 3Q13 » Adjusted Operating Margin • 45.7% ̶ up 110 basis points from 44.6% in 3Q13 » Effective Tax Rate • 33.5% ̶ u
Slide 18: Capital Allocation
Capital Allocation » During 3Q14, repurchased 3.5 million shares at a total cost of $320.5 million, or an average of $91.89, and issued 900 thousand shares under our employee stock-based compensation plans » Shares outstanding totaled 208.6 million as of September 30, 2014 – 3% decline from Septembe
Slide 19: Balance Sheet and Free Cash Flow
Balance Sheet and Free Cash Flow » As of September 30, 2014, Moody’s had: – $2.5 billion of outstanding debt – $1 billion of additional debt capacity under its revolving credit facility – Total cash, cash equivalents and short-term investments of $2.1 billion 66% of total cash holdings were mainta
Slide 20: 3. 2014 Outlook
3. 2014 Outlook RAY MCDANIEL PRESIDENT AND CHIEF EXECUTIVE OFFICER Third Quarter 2014 Earnings Call, October 24, 2014 20
Slide 21: Regulatory Recap
Regulatory Recap United States: – In August, the SEC voted to adopt its final rules for NRSROs as required by the Financial Reform Act. The final rules closely track the proposed rules which had been published in 2011. – In anticipation of the final rules, Moody’s has made substantial technology and
Slide 22: Recent Market Recognition
Recent Market Recognition » Moody’s Investors Service (MIS) and Moody’s Analytics (MA) both recognized as market leaders: – MIS: » Institutional Investor #1 U.S. Credit Rating Agency 2012-2014, » FinanceAsia Fixed Income Research Poll Most Influential Credit Rating Agency in Asia 2013- 2014 – MA: »
Slide 23: 2014 Full-Year Financial Outlook Highlights
2014 Full-Year Financial Outlook Highlights* » Non-GAAP EPS • In the range of $3.95 to $4.05 – Excludes the $0.36 ICRA gain resulting from Moody’s acquisition of a controlling interest in ICRA Ltd. in the second quarter and the $0.03 legacy tax benefit in the third quarter. » MIS Revenue high-sing
Slide 24: 4. Q&A Session
4. Q&A Session » Ray McDaniel President and Chief Executive Officer, Moody’s Corporation » Linda Huber Executive Vice President and Chief Financial Officer, Moody’s Corporation » Michel Madelain President and Chief Operating Officer, Moody’s Investors Service » Mark Almeida President, Moody’s Analyt
Slide 25: Replay Details
Replay Details » Available from 3:30pm (Eastern Time) October 24, 2014 until 3:30pm (Eastern Time) November 22, 2014 » Telephone Details: – U.S. +1-888-203-1112 – Non-U.S. +1-719-457-0820 – Passcode 9971396 » Webcast Details: – Go to http://ir.moodys.com – Click on “Events & Presentations” featured
Slide 26: Appendix
Appendix Third Quarter 2014 Earnings Call, October 24, 2014 26
Slide 27: Consolidated Statements of Operations (Unaudited)
Consolidated Statements of Operations (Unaudited) Third Quarter 2014 Earnings Call, October 24, 2014 27
Slide 28: Supplemental Revenue Information (Unaudited)
Supplemental Revenue Information (Unaudited) Third Quarter 2014 Earnings Call, October 24, 2014 28
Slide 29: Non-Operating (Expense) Income, Net
Non-Operating (Expense) Income, Net Third Quarter 2014 Earnings Call, October 24, 2014 29
Slide 30: Selected Consolidated Balance Sheet Data (Unaudited)
Selected Consolidated Balance Sheet Data (Unaudited) Third Quarter 2014 Earnings Call, October 24, 2014 30
Slide 31: Financial Information by Segment
Financial Information by Segment Third Quarter 2014 Earnings Call, October 24, 2014 31
Slide 32: Transaction and Relationship Revenue
Transaction and Relationship Revenue Refer to “Moody’s Corporation Reports Results for Third Quarter 2014” press release for table details Third Quarter 2014 Earnings Call, October 24, 2014 32
Slide 33: Transaction and Relationship Revenue (continued)
Transaction and Relationship Revenue (continued) Refer to “Moody’s Corporation Reports Results for Third Quarter 2014” press release for table details Third Quarter 2014 Earnings Call, October 24, 2014 33
Slide 34: Non-GAAP Financial Measures
Non-GAAP Financial Measures Refer to “Moody’s Corporation Reports Results for Third Quarter 2014” press release for table details Third Quarter 2014 Earnings Call, October 24, 2014 34
Slide 35: Adjusted Operating Income and Adjusted Operating Margin
Adjusted Operating Income and Adjusted Operating Margin Refer to “Moody’s Corporation Reports Results for Third Quarter 2014” press release for table details Third Quarter 2014 Earnings Call, October 24, 2014 35
Slide 36: Free Cash Flow
Free Cash Flow Refer to “Moody’s Corporation Reports Results for Third Quarter 2014” press release for table details Third Quarter 2014 Earnings Call, October 24, 2014 36
Slide 37: 2014 Outlook
2014 Outlook Full-year 2014 Moody’s Corporation guidance Last publicly disclosed guidance as of Current guidance as of October 24, 2014 MOODY'S CORPORATION September 30, 2014 Revenue growth in the low-double-digit percent range NC Operating expenses growth in the high-single-digit percent range NC G
Slide 38: moodys.com
38 moodys.com Website: http://ir.moodys.com Email: ir@moodys.com Third Quarter 2014 Earnings Call, October 24, 2014 38
Slide 39: © 2014 Moody's Corporation
© 2014 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, licensors and affiliates (collectively, “MOODY’S”). All rights reserved. representatives, licensors and suppliers