Slide 1: Fourth Quarter and Full Year 2016 Earnings Call
Fourth Quarter and Full Year 2016 Earnings Call February 17, 2017
Slide 2: Overview
Overview SALLI SCHWARTZ GLOBAL HEAD OF INVESTOR RELATIONS AND COMMUNICATIONS Fourth Quarter and Full Year 2016 Earnings Call, February 17, 2017 2
Slide 3: 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. The forward-looking statements in this presentation are made as
Slide 4: Agenda
Agenda 1. Fourth Quarter and Full Year 2016 Results Ray McDaniel, President and Chief Executive Officer 2. Financial and Operating Highlights Linda Huber, Executive Vice President and Chief Financial Officer 3. 2017 Outlook Ray McDaniel, President and Chief Executive Officer 4. Q&A Ray McDaniel, Pre
Slide 5: 1. Fourth Quarter and Full Year 2016 Results
1. Fourth Quarter and Full Year 2016 Results RAY MCDANIEL PRESIDENT AND CHIEF EXECUTIVE OFFICER Fourth Quarter and Full Year 2016 Earnings Call, February 17, 2017 5
Slide 6: Fourth Quarter 2016 Results and Comparison to Fourth Quarter 2015
Fourth Quarter 2016 Results and Comparison to Fourth Quarter 2015 Moody’s Corporation » Revenue 9% to $942 million » Adjusted Operating Expense1 3% to $551 million » Adjusted Operating Income2 17% to $424 million » Adjusted Operating Margin 320 bps to 45% » Adjusted EPS3 13% to $1.23 1 Adj
Slide 7: Full Year 2016 Performance and Comparison to Full Year 2015
Full Year 2016 Performance and Comparison to Full Year 2015 Moody’s Corporation » Revenue 3% to $3.6 billion • Foreign currency translation unfavorably impacted Moody’s revenue by 1% – MIS 2% to $2.4 billion • The impact of foreign currency on MIS revenue was negligible – MA 7% to $1.2 billion
Slide 8: Full Year 2016 Performance and Comparison to Full Year 2015 (continued)
Full Year 2016 Performance and Comparison to Full Year 2015 (continued) Moody’s Corporation » Adjusted Operated Income1 3% to $1.6 billion » Adjusted Operating Margin • 45.5% 1 Adjusted operating income is defined as operating income less the settlement and restructuring charges, as well as deprec
Slide 9: MCO Full Year 2017 Financial Outlook
MCO Full Year 2017 Financial Outlook » Revenue mid-single-digit % range » EPS • $5.15 - $5.30 • Includes an estimated $0.15 benefit from an accounting change related to equity compensation Fourth Quarter and Full Year 2016 Earnings Call, February 17, 2017 9
Slide 10: 2. Financial and Operating Highlights
2. Financial and Operating Highlights LINDA HUBER EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER Fourth Quarter and Full Year 2016 Earnings Call, February 17, 2017 10
Slide 11: Fourth Quarter 2016 Moody's Corporation Revenue
Fourth Quarter 2016 Results and Comparison to Fourth Quarter 2015 Moody’s Corporation Revenue » Total Global 9% to $942 million » U.S. 11% to $534 million » Non-U.S. 6% to $408 million • 43% of total revenue » Total Global • Foreign currency translation unfavorably impacted Moody’s revenue by
Slide 12: Fourth Quarter 2016 MIS Revenue
Fourth Quarter 2016 Results and Comparison to Fourth Quarter 2015 (continued) MIS Revenue » Total MIS 12% to $608 million » U.S. 11% to $376 million » Non-U.S. 13% to $232 million • 38% of total MIS revenue » Total MIS • The impact of foreign currency translation on MIS revenue was negligible
Slide 13: MIS Revenue by Line of Business
Fourth Quarter 2016 Results and Comparison to Fourth Quarter 2015 (continued) MIS Revenue by Line of Business » Corporate Finance: $278 million – Global 13% – U.S. 6% – Non-U.S. 28% » Structured Finance: $131 million – Global 14% – U.S. 18% – Non-U.S. 7% Fourth Quarter and Full Year 2016
Slide 14: MIS Revenue by Line of Business (continued)
Fourth Quarter 2016 Results and Comparison to Fourth Quarter 2015 (continued) MIS Revenue by Line of Business » Financial Institutions: $89 million – Global 4% – U.S. 4% – Non-U.S. 8% » Public, Project & Infrastructure Finance: $103 million – Global 21% – U.S. 21% – Non-U.S. 21% » MIS Ot
Slide 15: MA Revenue by Geography
Fourth Quarter 2016 Results and Comparison to Fourth Quarter 2015 (continued) MA Revenue by Geography » Total MA 4% to $334 million » U.S. 11% to $158 million » Non-U.S. 1% to $176 million • 53% of total MA revenue » Total MA • Foreign currency translation unfavorably impacted MA revenue by 4%
Slide 16: MA Revenue by Line of Business: Research, Data and Analytics
Fourth Quarter 2016 Results and Comparison to Fourth Quarter 2015 (continued) MA Revenue by Line of Business » Research, Data and Analytics: $167 million – Global 3% • 50% of total MA revenue – U.S. 7% – Non-U.S. 1% – Global • Foreign currency translation unfavorably impacted RD&A revenue by 4
Slide 17: MA Revenue by Line of Business: Enterprise Risk Solutions
Fourth Quarter 2016 Results and Comparison to Fourth Quarter 2015 (continued) MA Revenue by Line of Business » Enterprise Risk Solutions: $130 million – Global 7% – U.S. 24% – Non-U.S. 1% – Global • Foreign currency translation unfavorably impacted ERS revenue by 3% » ERS TTM1 Revenue 12% »
Slide 18: MA Revenue by Line of Business: Professional Services
Fourth Quarter 2016 Results and Comparison to Fourth Quarter 2015 (continued) MA Revenue by Line of Business » Professional Services: $37 million – Global 3% – U.S. flat – Non-U.S. 4% – Global • Foreign currency translation unfavorably impacted Professional Services revenue by 3% Fourth Quarter
Slide 19: Fourth Quarter 2016 Operating Expense and Margin
Fourth Quarter 2016 Results and Comparison to Fourth Quarter 2015 (continued) Moody’s Corporation » Adjusted Operating Expense1 3% to $551 million • Foreign currency translation favorably impacted adjusted operating expense by 3% » Adjusted Operating Margin 320 bps to 45% 1 Adjusted operating ex
Slide 20: Fourth Quarter 2016 Capital Allocation
Fourth Quarter 2016 Capital Allocation » During 4Q 2016, Moody’s repurchased 558 thousand shares at a total cost of $59.9 million, or an average cost of $107.48 per share, and issued 86 thousand shares as part of its employee stock-based compensation plans » During 4Q 2016, Moody’s returned $71 mill
Slide 21: Full Year 2016 Capital Allocation
Full Year 2016 Capital Allocation » For full year 2016, Moody’s repurchased 7.7 million shares at a total cost of $739 million, or an average cost of $96.38 per share, and issued 2.8 million shares as part of its employee stock-based compensation plans » For full year 2016, Moody’s returned $285 mil
Slide 22: Balance Sheet and Free Cash Flow
Balance Sheet and Free Cash Flow » As of December 31, 2016, Moody’s had: – $3.4 billion of outstanding debt – $1 billion of additional borrowing capacity under its commercial paper program which is backstopped by an undrawn $1 billion dollar revolving credit facility – Total cash, cash equivalents a
Slide 23: 3. 2017 Outlook
3. 2017 Outlook RAY MCDANIEL PRESIDENT AND CHIEF EXECUTIVE OFFICER Fourth Quarter and Full Year 2016 Earnings Call, February 17, 2017 23
Slide 24: MCO Full Year 2017 Financial Outlook
MCO Full Year 2017 Financial Outlook Our outlook does not include any estimated impact for potential changes in US tax laws or other possible policy or regulatory changes. Moody’s guidance assumes foreign currency translation at end-of-year exchange rates. Specifically, our forecast reflects exchang
Slide 25: MCO Full Year 2017 Financial Outlook
MCO Full Year 2017 Financial Outlook » Operating Margin • Approximately 43% » Adjusted Operating Margin1 • Approximately 46% » Effective Tax Rate2 • 31% to 32% » EPS3 • $5.15 - $5.30 1 This metric is a non-GAAP measure. See Appendix for a reconciliation of this measure to its comparable GAAP measure
Slide 26: MCO Full Year 2017 Financial Outlook (continued)
MCO Full Year 2017 Financial Outlook (continued) » Free Cash Flow1,2 • Approximately $500 million » Share Repurchase • Approximately $500 million (subject to available cash, market conditions and other ongoing capital allocation decisions) » Capital Expenditures • Approximately $100 million » Deprec
Slide 27: MIS Full Year 2017 Financial Outlook
MIS Full Year 2017 Financial Outlook » Global mid-single-digit % range » U.S. mid-single-digit % range » Non-U.S. mid-single-digit % range » On a constant dollar basis, MIS revenue growth rate would be approximately 100 basis points higher » Corporate Finance mid-single-digit % range » Struc
Slide 28: MA Full Year 2017 Financial Outlook
MA Full Year 2017 Financial Outlook » Global mid-single-digit % range » U.S. low-single-digit % range » Non-U.S. high-single-digit % range » On a constant dollar basis, MA revenue growth would be approximately 180 basis points higher » Research, Data & Analytics high-single-digit % range » E
Slide 29: 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 » Mark Almeida President, Moody’s Analytics » Rob Fauber President, Moody’s Investors Service Fourth Quarter and Full Year
Slide 30: USD Market: Issuance Views From Investment Banks
USD Market: Issuance Views From Investment Banks Views on this page are from various investment banks. Issuance views are for both financial and non-financial US dollar issuance and may not align with Moody’s revenue categorizations. YTD 2017 FY 2017E Investment Grade ~$200 billion ~$1.2 trillion (a
Slide 31: Euro Market: Issuance Views From Investment Banks
Euro Market: Issuance Views From Investment Banks Views on this page are from various investment banks. Issuance views are for both financial and non-financial euro issuance and may not align with Moody’s revenue categorizations. Investment Grade » Volumes higher than usual in January as many issuer
Slide 32: Replay Details
Replay Details » Available from 3:30pm (Eastern Time) February 17, 2017 until 3:30pm (Eastern Time) March 18, 2017 » Telephone Details: – US +1-888-203-1112 – Non-US +1-719-457-0820 – Passcode 4534443 » Webcast Details: – Go to http://ir.moodys.com – Click on “Events & Presentations” – Click on the
Slide 33: Appendix
Appendix Fourth Quarter and Full Year 2016 Earnings Call, February 17, 2017 33
Slide 34: Consolidated Statements of Operations (Unaudited)
Consolidated Statements of Operations (Unaudited) Fourth Quarter and Full Year 2016 Earnings Call, February 17, 2017 34
Slide 35: Supplemental Revenue Information (Unaudited)
Supplemental Revenue Information (Unaudited) Three Months Ended Year Ended December 31, December 31, Amounts in millions 2016 2015 2016 2015 Moody's Investors Service Corporate Finance $ 277.6 $ 246.1 $ 1,122.3 $ 1,112.7 Structured Finance 130.5 114.1 436.8 449.1 Financial Institutions 88.5 91.9 368
Slide 36: Selected Consolidated Balance Sheet Data (Unaudited)
Selected Consolidated Balance Sheet Data (Unaudited) Table 3 - Selected Consolidated Balance Sheet Data (Unaudited) December 31, December 31, 2016 2015(1) Amounts in millions Cash and cash equivalents $ 2,051.5 $ 1,757.4 Short-term investments 173.4 474.8 Total current assets 3,253.1 3,243.1 Non-cur
Slide 37: Selected Consolidated Balance Sheet Data (continued)
Selected Consolidated Balance Sheet Data (continued) (Unaudited) Table 4 - Selected Consolidated Balance Sheet Data (Unaudited) Continued Total debt consists of the following: December 31, 2016 Fair Value of Unamortized Unamortized Principal Interest Rate (Discount) Debt Issuance Carrying Amounts in
Slide 38: Non-operating (Expense) Income, Net
Non-operating (Expense) Income, Net Three Months Ended Year Ended December 31, December 31, 2016 2015 2016 2015 Amounts in millions Interest (expense) / income, net: Expense on borrowings $ (36.3) $ (31.8) $ (141.9) $ (120.6) Income 2.7 2.7 10.9 9.7 Legacy Tax (a) - - 0.2 0.7 UTPs and other tax rela
Slide 39: Financial Information by Segment
Financial Information by Segment The table below presents revenue, adjusted operating income and operating income by reportable segment. The Company defines adjusted operating income as operating income excluding depreciation and amortization, restructuring and settlement charges. Table 6 - Financia
Slide 40: Transaction and Relationship Revenue
Transaction and Relationship Revenue The tables below summarize the split between transaction and relationship revenue. In the MIS segment, excluding MIS Other, transaction revenue represents the initial rating of a new debt issuance as well as other one-time fees while relationship revenue represen
Slide 41: Transaction and Relationship Revenue (continued)
Transaction and Relationship Revenue (continued) The tables below summarize the split between transaction and relationship revenue. In the MIS segment, excluding MIS Other, transaction revenue represents the initial rating of a new debt issuance as well as other one-time fees while relationship reve
Slide 42: Adjusted Financial Measures
Adjusted Financial Measures The tables below reflect certain adjusted results that the SEC defines as "non-GAAP financial measures" as well as a reconciliation of each non- GAAP measure to its most directly comparable GAAP measure. Management believes that such adjusted financial measures, when read
Slide 43: Adjusted Financial Measures (continued)
Adjusted Financial Measures (continued) The Company presents adjusted operating expense because management deems this metric to be a useful additional measure of assessing period- to-period comparisons of the Company's operating expenses. Adjusted operating expense excludes a settlement and restruct
Slide 44: 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 believes that free cash flow is a use
Slide 45: Adjusted Net Income and Earnings Per Share
Adjusted Net Income and Earnings Per Share Attributable to Moody's Common Shareholders The Company presents these adjusted measure to exclude restructuring and settlement charge, a foreign exchange gain related to a subsidiary liquidation and a Legacy Tax benefit as well as the income tax effects of
Slide 46: 2017 Outlook
2017 Outlook Moody’s outlook for 2017 is based on assumptions about many macroeconomic and capital market factors, including interest rates, foreign currency exchange rates, corporate profitability and business investment spending, merger and acquisition activity, consumer borrowing and securitizati
Slide 47: 2017 Outlook (continued)
2017 Outlook (continued) Moody’s outlook for 2017 is based on assumptions about many macroeconomic and capital market factors, including interest rates, foreign currency exchange rates, corporate profitability and business investment spending, merger and acquisition activity, consumer borrowing and
Slide 48: 2017 Outlook (continued)
2017 Outlook (continued) The following are reconciliations of the Company's adjusted forward looking measures to their comparable GAAP measure: Year Ended December 31, 2017 Operating margin guidance Approximately 43% Depreciation and amortization Approximately 3% Adjusted operating margin guidance A
Slide 49: moodys.com
49 moodys.com Website: http://ir.moodys.com Email: ir@moodys.com
Slide 50: Fourth Quarter and Full Year 2016 Earnings Call, February 17, 2017
© 2017 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, and affiliates (collectively, “MOODY’S”). All rights reserved. licensors and suppliers