Moody's Corporation · NYSE:MCO
Moody's — Q3 2015 Earnings Presentation
52 slides from Moody's's earnings presentation, Jan 6, 2016
Slide 1: Investor Presentation 3Q 2015
Investor Presentation 3Q 2015 JANUARY 6, 2016
Slide 2: 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. Moody’s outlook for 2015 and other forward- looking statements in thi
Slide 3: Table of Contents
Table of Contents 1. Financial Overview 2. Moody’s Investors Service (MIS) 3. Moody’s Analytics (MA) 4. Conclusion 5. Appendix January 6, 2016 3
Slide 4: Overview of Moody's Corporation
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Overview of Moody’s Corporation » Leading global provider of credit rating opinions, insight and tools for financial risk measurement and management » Revenue of $3.5 billion; operating income o
Slide 5: Financial Overview
1 Financial Overview January 6, 2016 5
Slide 6: Secular Trends Continue to Provide Long-term Growth Opportunities
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Secular Trends Continue to Provide Long-term Growth Opportunities Debt market Disintermediation Growth in Moody’s MA and MIS pricing issuance driven of credit markets in both Analytics driven by
Slide 7: Moody's has Consistently Delivered Strong Performance
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s has Consistently Delivered Strong Performance Revenue EPS* Mid-single- digit $5.00 $4.0 % growth $4.50 $4.55 $3.0 $4.00 $4.21 to $ Billions $3.50 $4.65 $3.65 $2.0 $3.00 $2.99 $2.50 $1.0
Slide 8: Moody's has a Disciplined Approach to Capital Allocation
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s has a Disciplined Approach to Capital Allocation Investing in Growth Opportunities Return of Capital Reinvestment Acquisitions Dividends Share Repurchases » Invest in existing » Aligned
Slide 9: Moody's Continues to Return Capital to Shareholders
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Continues to Return Capital to Shareholders Share Repurchases and Dividends Paid Annualized Dividend Per Share (Last 5 Years) Share Repurchases (L) Dividends Paid (L) Share Count (R) $1.
Slide 10: Moody's Recurring Revenue also Provides Stability
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Recurring Revenue also Provides Stability Recurring Revenue* Corporate Finance Structured Finance Financial Institutions Public, Project, & Infrastructure Finance MIS Other Moody's Analy
Slide 11: Moody's Investors Service
2 Moody’s Investors Service January 6, 2016 11
Slide 12: Moody's Investors Service Financial Profile
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Investors Service Financial Profile TTM 3Q15 Revenue: $2.4 billion Recurring Transaction US Non-US » 31% recurring revenue MIS Other 1% Public, 37% Corporate Project, & Finance Infrastru
Slide 13: Favorable Context for Global Issuance Remains in Place in the Near-term
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Favorable Context for Global Issuance Remains in Place in the Near-term Global Long-Term Interest Rates Annual Default Rates for Global Corporate Rated Issuance* 10 yr. US Treasury Yield % 10 yr
Slide 14: Non-Financial Corporates have Refunding Needs of Approximately $3 Trillion
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Non-Financial Corporates have Refunding Needs of Approximately $3 Trillion* Debt Maturities: US Moody’s-Rated Corporate Bonds and Loans** $250 $210 $200 $172 $164 $151 $151 $146 $139 $ Billions
Slide 15: M&A Activity has Increased as a Stated Use of Proceeds
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Recently, M&A Activity has Increased as a Stated Use of Proceeds, While Refinancing has Fallen Uses of Proceeds for Uses of Proceeds for US Investment Grade Debt US Speculative Grade Debt* 3% 2%
Slide 16: Reverse Yankee Issuance has also Increased
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Reverse Yankee Issuance has also Increased Reverse Yankee Issuance* $75 $60 $ Billions $45 $30 $15 $0 2010 2011 2012 2013 2014 YTD 3Q15 Source: Moody’s Capital Markets Research Group; excludes f
Slide 17: Disintermediation of Capital Markets: Europe and US
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Disintermediation of Capital Markets: Europe and US European Non-Financial Corporate US Non-Financial Corporate Bonds vs. Bank Loans Outstanding Bonds vs. Bank Loans Outstanding Loans Bonds Loan
Slide 18: Moody's New Rating Mandates
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s New Rating Mandates Global New Rating Mandates* 1,200 EMEA United States Rest of World » In the US, there has been less leveraged loan activity in 2015 1,026 990 than in 2014, which prev
Slide 19: Bank Loan Issuance has Decelerated
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Bank Loan Issuance has Decelerated US Non-Financial Corporate Speculative-Grade Bank Loans Rated* Unrated** » Unfavorable market conditions $800 combined with adherence to the US Shared National
Slide 20: Issuance is not the Only Factor Driving MIS Revenue
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Issuance is not the Only Factor Driving MIS Revenue MIS Revenue vs. Rated Issuance* Year-over-Year 2010 - 2014 2010 2011 2012 2013 2014 YTD 3Q15 Percent Change CAGR Issuance -16% 2% 11% 1% 5% 5%
Slide 21: Historically, Rising Rates have not had a Significant Impact on Revenue
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Historically, Rising Rates have not had a Significant Impact on Moody’s Revenue MCO Revenue and Interest Rates MIS Revenue MA Revenue MCO Revenue 10-yr U.S. Treasury Yield (R)* $4,000 9% +120bps
Slide 22: Moody's Analytics
3 Moody’s Analytics January 6, 2016 22
Slide 23: Moody's Analytics Financial Profile
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Analytics Financial Profile TTM 3Q15 Revenue: $1.1 billion Recurring Transaction US Non-US » ~95% recurring revenue » 96% retention rate 26% Research, 54% Data and Analytics Enterprise 5
Slide 24: ERS' Renewable Book Growing, but Revenue Remains Dependent on Project Timing
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix ERS’ Renewable Book Growing, but Revenue Remains Dependent on Project Timing ERS: Year-over-Year Revenue Growth by ERS TTM Revenue by Type Quarter License and Services Subscriptions Maintenance
Slide 25: ERS has an Attractive Market Opportunity
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix ERS has an Attractive Market Opportunity $2.6bn >$8bn $2.1bn annual spend $3.5bn ERS share 2015: 10% Core Markets Extensions Adjacent Markets Total » ~2,100 customers and » Take expertise to new
Slide 26: Professional Services Overview
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Professional Services Overview Knowledge process outsourcing » Leading provider of offshore research and analytic services » 2,400 employees; 9 delivery centers » 200+ institutional clients in g
Slide 27: Conclusion
4 Conclusion January 6, 2016 27
Slide 28: Why Invest in Moody's?
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix 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 strong cash fl
Slide 29: Appendix
Appendix Moopy’s January 6,2016 29
Slide 30: Full-Year 2015 Guidance as of November 3, 2015
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Full-Year 2015 Guidance as of November 3, 2015 » Revenue: Mid-single-digit % growth range » Operating Expenses: Mid-single-digit % growth range » Operating Margin: Approximately 43% » Adjusted O
Slide 31: Corporate Finance: Revenue and Issuance
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Corporate Finance: Revenue and Issuance Historical Revenue* Mix: By Quarter Global Rated Non-Financial Bonds and $350 US Speculative Grade Bank Loans (Quarterly)*** $600 Issuance $ Billions $300
Slide 32: Corporate Finance: Revenue Diversification
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Corporate Finance: Revenue Diversification Revenue* Distribution: Geography Revenue* Distribution: Recurring vs. Transaction 100% 100% 29% 26% 27% 29% 26% 31% 30% 28% 27% 33% 35% 80% 80% 62% 57%
Slide 33: Structured Finance: Revenue and Issuance
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Structured Finance: Revenue and Issuance Historical Revenue* Mix: By Quarter Global Rated Structured Finance (Quarterly)** $120 $300 $100 Issuance $ Billions Revenue $ Millions $250 $80 $200 $60
Slide 34: Structured Finance: Revenue Diversification
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Structured Finance: Revenue Diversification Revenue* Distribution: Geography Revenue* Distribution: Recurring vs. Transaction 100% 100% 80% 37% 34% 38% 39% 34% 38% 80% 47% 48% 42% 40% 42% 41% 54
Slide 35: Financial Institutions: Revenue and Issuance
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Financial Institutions: Revenue and Issuance Global Rated Financial Bonds Historical Revenue* Mix: By Quarter (Quarterly)** $100 $500 Issuance $ Billions $80 $400 Revenue $ Millions $60 $300 $40
Slide 36: Financial Institutions: Revenue Diversification
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Financial Institutions: Revenue Diversification Revenue* Distribution: Geography Revenue* Distribution: Recurring vs. Transaction 100% 100% 80% 40% 41% 42% 41% 38% 41% 40% 40% 44% 42% 45% 80% 66
Slide 37: Public, Project and Infrastructure: Revenue and Issuance
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Public, Project and Infrastructure: Revenue and Issuance $120 Historical Revenue* Mix: By Quarter Long-Term Rated US Municipal Bond Issuance $120 (Quarterly)** $100 $100 Issuance $ Billions Reve
Slide 38: Public, Project and Infrastructure: Revenue Diversification
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Public, Project and Infrastructure: Revenue Diversification Revenue* Distribution: Geography Revenue* Distribution: Recurring vs. Transaction 100% 100% 80% 80% 42% 39% 40% 37% 42% 41% 42% 36% 38
Slide 39: Moody's Analytics: Financial Overview
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Analytics: Financial Overview $350 Historical Revenue* Mix: By Quarter Historical Revenue* Mix: By Year $1,200 $300 $1,000 Professional Services Revenue $ Millions $250 Revenue $ Million
Slide 40: We Continue to Invest for the Future in High Growth Markets
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix We Continue to Invest for the Future in High Growth Markets China India Latin America MIS Shanghai office, Majority control of Acquisition of 100% of Recent Investments Greater China team ICRA E
Slide 41: Oil & Gas Bond Issuance and Debt Maturities
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Oil & Gas Bond Issuance and Debt Maturities Global Oil and Gas Bond Issuance* $100 $103 $120 $97 $80 $100 $73 $80 $ Billions $60 $58 $49 $46 $60 $40 $40 $20 $20 $0 $0 2Q14 3Q14 4Q14 1Q15 2Q15 3Q
Slide 42: Moody's Analytics Global Banking Regulatory Radar
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Analytics Global Banking Regulatory Radar EMEA TLAC2 IRRBB review Concentration & BoE/PRA ST Large Exposures BoE/PRA ST CVA review Revised SA FRTB New securitization approach CR NSFR fra
Slide 43: Moody's is a Seasoned Capital Markets Issuer
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s is a Seasoned Capital Markets Issuer Public Bond Offerings Eurobond Offering » 2010: $500m 10yr bond » 2015: €500m 12yr bond Private Placements » 2012: $500m 10yr bond » 2005: $300m 10yr
Slide 44: Incentive Compensation – Funding Metrics
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Incentive Compensation – Funding Metrics » Funding metrics differ based on level and individual areas of responsibility » Payout to individual employees based on achievement of individual object
Slide 45: Moody's Global Presence
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Global Presence 2015 3,302 6,946 10,248 US employees non-US employees total employees* 2014 3,033 6,704 9,737 US employees non-US employees total employees** *As of September 30, 2015. *
Slide 46: Recurring Revenue Detail
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Recurring Revenue Detail Recurring Revenue 2010 – TTM TTM 3Q15 (in $ millions) 2010 2011 2012 2013 2014 3Q15 CAGR Corporate Finance $ 155 $ 190 $ 226 $ 273 $ 327 $ 346 18% Structured Finance $ 1
Slide 47: Reconciliation of Non-GAAP Financial Measures to GAAP
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Reconciliation of Non-GAAP Financial Measures to GAAP Adjusted Operating Income and Adjusted Operating Margin Reconciliation (in $ millions) 2010 2011 2012 2013 2014 As Reported Operating Income
Slide 48: Reconciliation of Non-GAAP Financial Measures to GAAP (cont.)
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Reconciliation of Non-GAAP Financial Measures to GAAP (cont.) Moody's Corporation Free Cash Flow Reconciliation (in $ millions) 2010 2011 2012 2013 2014 2015F* Cash Flow from Operations $ 653.3
Slide 49: Reconciliation of Non-GAAP Financial Measures to GAAP (cont.)
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Reconciliation of Non-GAAP Financial Measures to GAAP (cont.) Moody's Corporation EPS Reconciliation 1Q 2Q 3Q 2010 2011 2012 2013 1Q14 2Q14 3Q14 4Q14 2014 2015F* 2015 2015 2015 Diluted EPS - GAA
Slide 50: Reconciliation of Non-GAAP Financial Measures to GAAP (cont.)
Introduction | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Reconciliation of Non-GAAP Financial Measures to GAAP (cont.) Moody's Corporation EBITDA Reconciliation TTM ($ Millions) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 3Q15 Net Income attribu
Slide 51: Website and Email
Website: http://ir.moodys.com Email: ir@moodys.com January 6, 2016 51
Slide 52: Moody's legal disclaimer
© 2015 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or licensors and affiliates (collectively, “MOODY’S”). All rights reserved. damages caused to any person