Slide 1: Third Quarter 2018 Earnings Call
Third Quarter 2018 Earnings Call October 26, 2018
Slide 2: Overview
Overview Steve Maire Global Head of Investor Relations and Communications Third Quarter 2018 Earnings Call, October 26, 2018 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 Company’s business and operations that involve a number of risks and uncertainties. The forward-looking statements and other information in this re
Slide 4: Agenda
Agenda 1. Third Quarter and Year-to-Date 2018 Results Ray McDaniel, President and Chief Executive Officer 2. Financial and Operating Highlights Mark Kaye, Senior Vice President and Chief Financial Officer 3. 2018 Outlook Ray McDaniel, President and Chief Executive Officer 4. Q&A Ray McDaniel, Presid
Slide 5: Third Quarter and Year-to-Date 2018 Results
Third Quarter and 1 Year-to-Date 2018 Results Ray McDaniel President and Chief Executive Officer
Slide 6: Third Quarter 2018 Results and Comparison to Third Quarter 2017
Third Quarter 2018 Results and Comparison to Third Quarter 2017 Moody’s Corporation » Revenue 2% to $1.1 billion » Operating Expenses approximately flat at $614 million » Operating Income 4% to $467 million ─ Impact of foreign currency translation was negligible » Adjusted Operating Income1 3%
Slide 7: Third Quarter 2018 Results and Comparison (continued)
Third Quarter 2018 Results and Comparison to Third Quarter 2017 (continued) Moody’s Corporation » Operating Margin 43.2% » Adjusted Operating Margin1 47.6% » Diluted EPS2 2% to $1.59 » Adjusted Diluted EPS1,2,3 11% to $1.69 1 Refer to Table 9 – “Adjusted Operating Income and Adjusted Operati
Slide 8: Year-to-Date 2018 Performance: Moody's Corporation Revenue
Year-to-Date 2018 Performance and Comparison to Year-to-Date 2017 Moody’s Corporation Revenue » Total Global 11% to $3.4 billion » U.S. 3% to $1.8 billion » Non-U.S. 23% to $1.6 billion Foreign currency translation » Total Global favorably impacted Moody’s revenue by 1% Third Quarter 2018 Ea
Slide 9: Year-to-Date 2018 Performance: MIS Revenue
Year-to-Date 2018 Performance and Comparison to Year-to-Date 2017 (continued) MIS Revenue » Total MIS 3% to $2.1 billion » U.S. 1% to $1.3 billion » Non-U.S. 8% to $848 million » Total MIS Foreign currency translation favorably impacted MIS revenue by 1% Third Quarter 2018 Earnings Call, Oct
Slide 10: Year-to-Date 2018 Performance: MA Revenue
Year-to-Date 2018 Performance and Comparison to Year-to-Date 2017 (continued) MA Revenue » Total MA 28% to $1.3 billion » U.S. 9% to $513 million » Non-U.S. 45% to $752 million » Total MA Foreign currency translation favorably impacted MA revenue by 2% » Organic MA1,2 9% to $1.1 billion 1
Slide 11: Year-to-Date 2018 Performance: Operating Expenses and Income
Year-to-Date 2018 Performance and Comparison to Year-to-Date 2017 (continued) Moody’s Corporation » Operating Expenses 12% to $1.9 billion ─ Foreign currency translation unfavorably impacted expenses by 1% » Operating Income 10% to $1.5 billion ─ Foreign currency translation favorably impacted o
Slide 12: Year-to-Date 2018 Performance: Margins and Tax Rate
Year-to-Date 2018 Performance and Comparison to Year-to-Date 2017 (continued) Moody’s Corporation » Operating Margin 44.1% » Adjusted Operating Margin1 48.5% » Effective Tax Rate 21.0% 1 Refer to Table 9 – “Adjusted Operating Income and Adjusted Operating Margin” in the press release for a rec
Slide 13: Full Year 2018 Diluted EPS and Adjusted Diluted EPS Guidance
Full Year 2018 Diluted EPS and Adjusted Diluted EPS Guidance1 Moody’s Corporation » FY 2018 diluted EPS guidance range now $6.95 to $7.10 » FY 2018 adjusted diluted EPS range now $7.50 to $7.652 1 Moody’s outlook assumes foreign currency at end-of-quarter exchange rates. Specifically, our forecast r
Slide 14: Financial and Operating Highlights
Financial and 2 Operating Highlights Mark Kaye Senior Vice President and Chief Financial Officer
Slide 15: Third Quarter 2018: Moody's Corporation Revenue
Third Quarter 2018 Results and Comparison to Third Quarter 2017 Moody’s Corporation Revenue » Total Global 2% to $1.1 billion » U.S. 5% to $560 million » Non-U.S. 10% to $521 million - 48% of total revenue » Recurring Revenue 16% to $619 million - 57% of total revenue » Total Global Impact
Slide 16: Third Quarter 2018: MIS Revenue
Third Quarter 2018 Results and Comparison to Third Quarter 2017 (continued) MIS Revenue » Total MIS 7% to $645 million » U.S. 10% to $385 million » Non-U.S. 2% to $260 million - 40% of total MIS revenue » Total MIS Impact of foreign currency translation was negligible Third Quarter 2018 Earn
Slide 17: MIS Revenue by Line of Business
Third Quarter 2018 Results and Comparison to Third Quarter 2017 (continued) MIS Revenue by Line of Business » Corporate Finance: $296 million - Global 15% - U.S. 21% - Non-U.S. 4% » Structured Finance: $125 million - Global 2% - U.S. 9% - Non-U.S. 13% Third Quarter 2018 Earnings Call, Oc
Slide 18: MIS Revenue by Line of Business (continued)
Third Quarter 2018 Results and Comparison to Third Quarter 2017 (continued) MIS Revenue by Line of Business » Financial Institutions: $120 million - Global 17% - U.S. 48% - Non-U.S. 3% » Public, Project & Infrastructure Finance: $99 million - Global 9% - U.S. 7% - Non-U.S. 13% Third Quar
Slide 19: MA Revenue by Geography
Third Quarter 2018 Results and Comparison to Third Quarter 2017 (continued) MA Revenue by Geography » Total MA 18% to $436 million » U.S. 9% to $175 million » Non-U.S. 26% to $261 million - 60% of total MA revenue » Total MA Foreign currency translation unfavorably impacted MA revenue by 1%
Slide 20: MA Revenue by Line of Business: Research, Data and Analytics
Third Quarter 2018 Results and Comparison to Third Quarter 2017 (continued) MA Revenue by Line of Business » Research, Data and Analytics: $283 million - Global 29% - U.S. 9% - Non-U.S. 50% - Organic1,2 13% to $246 million 1 Organic RD&A revenue included Bureau van Dijk revenue as of August
Slide 21: MA Revenue by Line of Business: Enterprise Risk Solutions
Third Quarter 2018 Results and Comparison to Third Quarter 2017 (continued) MA Revenue by Line of Business » Enterprise Risk Solutions: $113 million - Global approximately flat - U.S. 9% - Non-U.S. 4% » ERS TTM1 Revenue 6% » ERS TTM1 Sales 4% 1 Trailing twelve months ended September 30, 2018
Slide 22: MA Revenue by Line of Business: ERS Sales and Revenue
Third Quarter 2018 Results and Comparison to Third Quarter 2017 (continued) MA Revenue by Line of Business » ERS TTM1 Subscription Sales 9% » ERS TTM1 One-time Sales2 11% » ERS TTM1 Subscription Revenue 11% » ERS TTM1 One-time Revenue2 6% 1 Trailing twelve months ended September 30, 2018. 2
Slide 23: MA Revenue by Line of Business: Professional Services
Third Quarter 2018 Results and Comparison to Third Quarter 2017 (continued) MA Revenue by Line of Business » Professional Services: $40 million - Global 7% - U.S. 11% - Non-U.S. 5% Third Quarter 2018 Earnings Call, October 26, 2018 23
Slide 24: Third Quarter 2018: Expenses, Margins and Tax Rate
Third Quarter 2018 Results and Comparison to Third Quarter 2017 (continued) Moody’s Corporation » Operating Expenses approximately flat at $614 million – Foreign currency translation favorably impacted expense by 1% » Operating Margin 43.2% » Adjusted Operating Margin1 47.6% » Effective Tax Rate
Slide 25: Capital Allocation
Capital Allocation Third Quarter 2018 » Repurchased 0.4 million shares at a total cost of $66 million, or an average cost of $174.33 per share » Issued approximately 0.1 million shares as part of employee stock- based compensation plans » Returned $84 million to shareholders via dividend payments Di
Slide 26: Capital Allocation (continued)
Capital Allocation (continued) Through September 30, 2018 » Repurchased 0.9 million shares at a total cost of $147 million, or an average cost of $168.37 per share » Issued a net 1.5 million shares as part of employee stock-based compensation plans1 » Returned $253 million to shareholders via divide
Slide 27: Capital Allocation (continued)
Capital Allocation (continued) As of September 30, 2018 » Outstanding shares totaled 191.6 million – approximately flat to September 30, 2017 » Approximately $380 million of share repurchase authority remaining Third Quarter 2018 Earnings Call, October 26, 2018 27
Slide 28: Balance Sheet
Balance Sheet As of September 30, 2018 » Approximately $5 billion of outstanding debt » Approximately $975 million of additional debt capacity available under its revolving credit facility » Total cash, cash equivalents and short-term investments were $1.1 billion – approximately 87% held outside th
Slide 29: Free Cash Flow
Free Cash Flow » Cash flow from operations in the first nine months of 2018 was $1.1 billion, up from $350 million in the first nine months of 20171 » Free cash flow in the first nine months of 2018 was $1.0 billion, up from $280 million in the first nine months of 20171 1 Increases in cash flow fro
Slide 30: Bureau van Dijk Stand-alone Performance
Bureau van Dijk Stand-alone Performance Q3 20181 YTD 20181 » Revenue $84 million $237 million » Direct Expenses2 $61 million $188 million » Operating Income $23 million $49 million » Depreciation and Amortization $18 million $56 million » Adjusted Operating Income2,3 $41 million $105 million » Opera
Slide 31: 2018 Outlook
3 2018 Outlook Ray McDaniel President and Chief Executive Officer
Slide 32: 2018 Outlook
2018 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 $1.30 to £1 and for the euro (€) of $1.16 to €1. Changes to 2018 Full-Year Financial Outlook1 MCO Guidance as of October
Slide 33: 2018 Outlook (continued)
2018 Outlook (continued) Certain Components of 2018 Full-Year Financial Outlook1 MIS Guidance as of October 26, 2018 Global Revenue increase in the low-single-digit percent range U.S. Revenue approximately flat Corporate Finance approximately flat Structured Finance increase in the high-single-digit
Slide 34: Recent Acquisitions, Investments and Initiatives
Recent Acquisitions, Investments and Initiatives » Omega Performance acquisition closed on August 20, 2018 » Reis cash tender offer and acquisition closed on October 15, 2018 » Mona Breed joined Moody’s as Chief Information Officer » Derek Vadala named Global Head of Cyber Risk Analytics Group for M
Slide 35: Q&A
Q&A Ray McDaniel President and Chief Executive Officer 4 Mark Kaye Senior Vice President and Chief Financial Officer Mark Almeida President, Moody’s Analytics Rob Fauber President, Moody’s Investors Service
Slide 36: 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 ~$1.15 trillion (down 10% to 15%
Slide 37: 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 was strong in 3Q, though still down high s
Slide 38: Replay Details
Replay Details » Available from 3:30pm (Eastern Time) October 26, 2018 until 3:30pm (Eastern Time) November 24, 2018 » Telephone Details: – U.S. +1-888-203-1112 – Non-U.S. +1-719-457-0820 – Passcode 3746341 » Webcast Details: – Go to ir.moodys.com – Click on “Events & Presentations” – Click on the l
Slide 39: Appendix
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Slide 40: Consolidated Statements of Operations
Consolidated Statements of Operations (Unaudited) Third Quarter 2018 Earnings Call, October 26, 2018 40
Slide 41: Supplemental Revenue Information
Supplemental Revenue Information (Unaudited) Third Quarter 2018 Earnings Call, October 26, 2018 41
Slide 42: Selected Consolidated Balance Sheet Data
Selected Consolidated Balance Sheet Data (Unaudited) Third Quarter 2018 Earnings Call, October 26, 2018 42
Slide 43: Selected Consolidated Balance Sheet Data (continued)
Selected Consolidated Balance Sheet Data (continued) (Unaudited) Third Quarter 2018 Earnings Call, October 26, 2018 43
Slide 44: Non-operating (expense) Income, Net
Non-operating (expense) Income, Net Third Quarter 2018 Earnings Call, October 26, 2018 44
Slide 45: Financial Information by Segment
Financial Information by Segment Third Quarter 2018 Earnings Call, October 26, 2018 45
Slide 46: Transaction and Relationship Revenue
Transaction and Relationship Revenue Third Quarter 2018 Earnings Call, October 26, 2018 46
Slide 47: Transaction and Relationship Revenue (continued)
Transaction and Relationship Revenue (continued) Third Quarter 2018 Earnings Call, October 26, 2018 47
Slide 48: Bureau van Dijk Stand-alone Performance
Bureau van Dijk Stand-alone Performance Third Quarter 2018 Earnings Call, October 26, 2018 48
Slide 49: Adjusted Operating Income and Adjusted Operating Margin
Adjusted Operating Income and Adjusted Operating Margin Third Quarter 2018 Earnings Call, October 26, 2018 49
Slide 50: Free Cash Flow
Free Cash Flow Third Quarter 2018 Earnings Call, October 26, 2018 50
Slide 51: Organic Revenue and Growth Measures
Organic Revenue and Growth Measures Third Quarter 2018 Earnings Call, October 26, 2018 51
Slide 52: Adjusted Net Income and Diluted Earnings per Share Attributable to Moody's Common Shareholders
Adjusted Net Income and Diluted Earnings per Share Attributable to Moody's Common Shareholders Third Quarter 2018 Earnings Call, October 26, 2018 52
Slide 53: Adjusted Net Income and Diluted Earnings per Share (continued)
Adjusted Net Income and Diluted Earnings per Share Attributable to Moody's Common Shareholders (continued) Third Quarter 2018 Earnings Call, October 26, 2018 53
Slide 54: 2018 Outlook
2018 Outlook Third Quarter 2018 Earnings Call, October 26, 2018 54
Slide 55: 2018 Outlook (continued)
2018 Outlook (continued) Third Quarter 2018 Earnings Call, October 26, 2018 55
Slide 56: 2018 Outlook (continued)
2018 Outlook (continued) Third Quarter 2018 Earnings Call, October 26, 2018 56
Slide 57: moodys.com
Investor Relations http://ir.moodys.com ir@moodys.com moodys.com
Slide 58: Third Quarter 2018 Earnings Call, October 26, 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