Moody's Corporation · NYSE:MCO

Moody's — Q1 2018 Earnings Presentation

46 slides from Moody's's earnings presentation, Apr 27, 2018

1. Slide 1: First Quarter 2018 Earnings Call

   First Quarter 2018 Earnings Call April 27, 2018

2. Slide 2: Overview

   Overview Steve Maire Global Head of Investor Relations and Communications First Quarter 2018 Earnings Call, April 27, 2018 2

3. Slide 3: Disclaimer

   Disclaimer Certain statements contained in this release 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 release are made as of the dat

4. Slide 4: Agenda

   Agenda 1. First Quarter 2018 Results Ray McDaniel, President and Chief Executive Officer 2. Financial Highlights Steve Maire, Global Head of Investor Relations and Communications 3. Updated 2018 Outlook Ray McDaniel, President and Chief Executive Officer 4. Q&A Ray McDaniel, President and Chief Exec

5. Slide 5: First Quarter 2018 Results

   First Quarter 2018 1 Results Ray McDaniel President and Chief Executive Officer

6. Slide 6: First Quarter 2018 Results and Comparison to First Quarter 2017

   First Quarter 2018 Results and Comparison to First Quarter 2017 Moody’s Corporation » Revenue  16% to $1.1 billion » Operating Expenses  20% to $636 million – includes 12 percentage points attributable to Bureau van Dijk operating expenses, amortization of acquired intangible assets and non-recurr

7. Slide 7: First Quarter 2018 Results and Comparison (continued)

   First Quarter 2018 Results and Comparison to First Quarter 2017 (continued) Moody’s Corporation » Operating Margin  43.6% » Adjusted Operating Margin  48.0% » Diluted EPS  8% to $1.92 » Adjusted Diluted EPS1  35% to $2.02 1 First quarter 2018 adjusted diluted EPS excludes $0.10 per share related

8. Slide 8: Full Year 2018 Diluted EPS and Adjusted Diluted EPS Guidance

   Full Year 2018 Diluted EPS and Adjusted Diluted EPS Guidance1 Moody’s Corporation » Affirming FY 2018 diluted EPS guidance range of $7.20 to $7.40 » Affirming FY 2018 adjusted diluted EPS guidance range of $7.65 to $7.852 1 Moody’s outlook assumes foreign currency translation at end-of-quarter excha

9. Slide 9: Financial Highlights

   2 Financial Highlights Steve Maire Global Head of Investor Relations and Communications

10. Slide 10: Moody's Corporation Revenue

    First Quarter 2018 Results and Comparison to First Quarter 2017 Moody’s Corporation Revenue » Total Global 16% to $1.1 billion  » U.S.  3% to $598 million » Non-U.S.  33% to $529 million - 47% of total revenue » Recurring Revenue  26% to $603 million - 54% of total revenue » Total Global  Forei

11. Slide 11: MIS Revenue

    First Quarter 2018 Results and Comparison to First Quarter 2017 (continued) MIS Revenue » Total MIS  8% to $720 million » U.S.  3% to $433 million » Non-U.S.  17% to $287 million - 40% of total MIS revenue » Total MIS  Foreign currency translation favorably impacted MIS revenue by 3% First Quart

12. Slide 12: MIS Revenue by Line of Business

    First Quarter 2018 Results and Comparison to First Quarter 2017 (continued) MIS Revenue by Line of Business » Corporate Finance: $378 million - Global  7% - U.S.  1% - Non-U.S.  20% » Structured Finance: $130 million - Global  29% - U.S.  30% - Non-U.S.  28% First Quarter 2018 Earnings Call, A

13. Slide 13: MIS Revenue by Line of Business

    First Quarter 2018 Results and Comparison to First Quarter 2017 (continued) MIS Revenue by Line of Business » Financial Institutions: $114 million - Global  2% - U.S.  4% - Non-U.S.  7% » Public, Project & Infrastructure Finance: $93 million - Global  5% - U.S.  15% - Non-U.S.  13% First Quart

14. Slide 14: MA Revenue

    First Quarter 2018 Results and Comparison to First Quarter 2017 (continued) MA Revenue » Total MA  33% to $407 million » U.S.  6% to $164 million » Non-U.S.  60% to $243 million - 60% of total MA revenue » Total MA  Foreign currency translation favorably impacted MA revenue by 4% » Organic MA 

15. Slide 15: MA Revenue by Line of Business

    First Quarter 2018 Results and Comparison to First Quarter 2017 (continued) MA Revenue by Line of Business » Research, Data and Analytics: $269 million1 - Global  53% - U.S.  11% - Non-U.S.  More than doubled to $157 million - Organic  12% to $196 million 1 Bureau van Dijk’s revenue contribution

16. Slide 16: MA Revenue by Line of Business

    First Quarter 2018 Results and Comparison to First Quarter 2017 (continued) MA Revenue by Line of Business » Enterprise Risk Solutions: $100 million - Global  4% - U.S.  4% - Non-U.S.  11% First Quarter 2018 Earnings Call, April 27, 2018 16

17. Slide 17: MA Revenue by Line of Business

    First Quarter 2018 Results and Comparison to First Quarter 2017 (continued) MA Revenue by Line of Business » ERS TTM1 Revenue  6% » ERS TTM1 Sales  Approximately flat » ERS TTM1 Product Sales  5% » ERS TTM1 Services Sales  14% » Recurring revenue represented 81% of total ERS revenue, up from 76%

18. Slide 18: MA Revenue by Line of Business

    First Quarter 2018 Results and Comparison to First Quarter 2017 (continued) MA Revenue by Line of Business » Professional Services: $38 million - Global  5% - U.S.  4% - Non-U.S.  10% First Quarter 2018 Earnings Call, April 27, 2018 18

19. Slide 19: Operating Expenses, Margin and Tax Rate

    First Quarter 2018 Results and Comparison to First Quarter 2017 (continued) Moody’s Corporation » Operating Expenses  20% to $636 million - Foreign currency translation unfavorably impacted operating expenses by 3% - includes 12 percentage points attributable to Bureau van Dijk operating expenses,

20. Slide 20: Capital Allocation

    Capital Allocation First Quarter 2018 » Repurchased 0.3 million shares at a total cost of $43 million, or an average cost of $161.10 per share » Issued a net 1.2 million shares as part of employee stock-based compensation plans1 » Returned $84 million to shareholders via dividend payments Dividend A

21. Slide 21: Capital Allocation (continued)

    Capital Allocation (continued) First Quarter 2018 » Outstanding shares totaled 191.9 million - Approximately flat to March 31, 2017 » Approximately $500 million of share repurchase authority remaining 1 The net amount includes shares withheld for employee payroll taxes. First Quarter 2018 Earnings C

22. Slide 22: Balance Sheet and Free Cash Flow

    Balance Sheet and Free Cash Flow » As of March 31, 2018, Moody’s had: – $5.5 billion of outstanding debt – $910 million of additional borrowing capacity available under its revolving credit facility – Total cash, cash equivalents and short-term investments of $1.4 billion - 16% increase from Decembe

23. Slide 23: Updated 2018 Outlook

    3 Updated 2018 Outlook Ray McDaniel President and Chief Executive Officer

24. Slide 24: Updated 2018 Financial Outlook

    Updated 2018 Financial Outlook Moody’s outlook assumes foreign currency translation at end-of-quarter exchange rates. Specifically, our forecast reflects exchange rates for the British pound (£) of $1.40 to £1 and for the euro (€) of $1.23 to €1. Updated 2018 Financial Outlook MIS Guidance as of Apr

25. Slide 25: Q&A

    Q&A Ray McDaniel President and Chief Executive Officer 4 Steve Maire Global Head of Investor Relations and Communications Mark Almeida President, Moody’s Analytics Rob Fauber President, Moody’s Investors Service

26. Slide 26: 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 U.S. dollar issuance and may not align with Moody’s revenue categorizations. FY 2018E Investment Grade Bonds ~$1.20 trillion (down 5% to 10%)

27. Slide 27: 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 » Issuance has picked up from the beginning of the ye

28. Slide 28: Replay Details

    Replay Details » Available from 3:30pm (Eastern Time) April 27, 2018 until 3:30pm (Eastern Time) May 26, 2018 » Telephone Details: – US +1-888-203-1112 – Non-US +1-719-457-0820 – Passcode 3829550 » Webcast Details: – Go to ir.moodys.com – Click on “Events & Presentations” – Click on the link for “1Q

29. Slide 29: Appendix

    2 Oo c F or or <x

30. Slide 30: Consolidated Statements of Operations

    Consolidated Statements of Operations (Unaudited) First Quarter 2018 Earnings Call, April 27, 2018 30

31. Slide 31: Supplemental Revenue Information

    Supplemental Revenue Information (Unaudited) First Quarter 2018 Earnings Call, April 27, 2018 31

32. Slide 32: Selected Consolidated Balance Sheet Data

    Selected Consolidated Balance Sheet Data (Unaudited) First Quarter 2018 Earnings Call, April 27, 2018 32

33. Slide 33: Selected Consolidated Balance Sheet Data (continued)

    Selected Consolidated Balance Sheet Data (continued) (Unaudited) First Quarter 2018 Earnings Call, April 27, 2018 33

34. Slide 34: Non-Operating (Expense) Income, Net

    Non-Operating (Expense) Income, Net First Quarter 2018 Earnings Call, April 27, 2018 34

35. Slide 35: Financial Information by Segment

    Financial Information by Segment First Quarter 2018 Earnings Call, April 27, 2018 35

36. Slide 36: Transaction and Relationship Revenue

    Transaction and Relationship Revenue First Quarter 2018 Earnings Call, April 27, 2018 36

37. Slide 37: Adjusted Operating Income and Adjusted Operating Margin

    Adjusted Operating Income and Adjusted Operating Margin First Quarter 2018 Earnings Call, April 27, 2018 37

38. Slide 38: Free Cash Flow

    Free Cash Flow First Quarter 2018 Earnings Call, April 27, 2018 38

39. Slide 39: Organic Revenue and Growth Measures

    Organic Revenue and Growth Measures First Quarter 2018 Earnings Call, April 27, 2018 39

40. Slide 40: Adjusted Net Income and Adjusted Diluted EPS

    Adjusted Net Income and Adjusted Diluted Earnings per Share Attributable to Moody's Common Shareholders First Quarter 2018 Earnings Call, April 27, 2018 40

41. Slide 41: Adjusted Net Income and Adjusted Diluted EPS (continued)

    Adjusted Net Income and Adjusted Diluted Earnings per Share Attributable to Moody's Common Shareholders (continued) First Quarter 2018 Earnings Call, April 27, 2018 41

42. Slide 42: 2018 Outlook

    2018 Outlook First Quarter 2018 Earnings Call, April 27, 2018 42

43. Slide 43: 2018 Outlook (continued)

    2018 Outlook (continued) First Quarter 2018 Earnings Call, April 27, 2018 43

44. Slide 44: 2018 Outlook (continued)

    2018 Outlook (continued) First Quarter 2018 Earnings Call, April 27, 2018 44

45. Slide 45: Investor Relations

    Investor Relations http://ir.moodys.com ir@moodys.com moodys.com

46. Slide 46: First Quarter 2018 Earnings Call, April 27, 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

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