Moody's Corporation · NYSE:MCO

Moody's — Q2 2017 Earnings Presentation

52 slides from Moody's's earnings presentation, Jul 21, 2017

1. Slide 1: Second Quarter 2017 Call

   Second Quarter 2017 Call July 21, 2017

2. Slide 2: Overview

   Overview Salli Schwartz Global Head of Investor Relations and Communications Second Quarter 2017 Earnings Call, July 21, 2017 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. Second Quarter Highlights and First Half 2017 Results Ray McDaniel, President and Chief Executive Officer 2. Second Quarter Financial and Operating Highlights Linda Huber, Executive Vice President and Chief Financial Officer 3. Current 2017 Outlook Ray McDaniel, President and Chief Executi

5. Slide 5: Second Quarter Highlights and First Half 2017 Results

   Second Quarter 1 Highlights and First Half 2017 Results Ray McDaniel President and Chief Executive Officer

6. Slide 6: Second Quarter 2017 Results and Comparison to Second Quarter 2016

   Second Quarter 2017 Results and Comparison to Second Quarter 2016 Moody’s Corporation » Revenue  8% to $1 billion » Operating Expense  5% to $543 million » Operating Income  12% to $458 million 13% to $497 million » Adjusted Operating Income1  1 Adjusted operating income is defined as operating

7. Slide 7: Second Quarter 2017 Results and Comparison (continued)

   Second Quarter 2017 Results and Comparison to Second Quarter 2016 (continued) Moody’s Corporation » Operating Margin  45.7% » Adjusted Operating Margin  49.7% » Diluted EPS  24% to $1.61 » Adjusted Diluted EPS1  16% to $1.51 1 Adjusted diluted EPS excludes a $0.13 unrealized gain on a foreign cu

8. Slide 8: First Half 2017 Performance: Revenue

   First Half 2017 Performance and Comparison to First Half 2016 Moody’s Corporation Revenue » Total Global  13% to almost $2 billion » U.S.  12% to $1.1 billion » Non-U.S.  15% to $830 million Impact of foreign currency » Total Global  translation was negligible Second Quarter 2017 Earnings Call,

9. Slide 9: First Half 2017 Performance: MIS Revenue

   First Half 2017 Performance and Comparison to First Half 2016 (continued) MIS Revenue » Total MIS  18% to almost $1.4 billion » U.S.  14% to $835 million » Non-U.S.  25% to $520 million Second Quarter 2017 Earnings Call, July 21, 2017 9

10. Slide 10: First Half 2017 Performance: MA Revenue

    First Half 2017 Performance and Comparison to First Half 2016 (continued) MA Revenue » Total MA  4% to $621 million » U.S.  7% to $311 million » Non-U.S.  2% to $310 million Second Quarter 2017 Earnings Call, July 21, 2017 10

11. Slide 11: First Half 2017 Performance (continued)

    First Half 2017 Performance and Comparison to First Half 2016 (continued) Moody’s Corporation 4% to almost $1.1 billion » Operating Expense  ─ Foreign currency translation favorably impacted expense by 2% 26% to $901 million » Operating Income  ─ Foreign currency translation favorably impacted ope

12. Slide 12: First Half 2017 Performance (continued)

    First Half 2017 Performance and Comparison to First Half 2016 (continued) Moody’s Corporation » Operating Margin  45.6% » Adjusted Operating Margin  49.2% » Effective Tax Rate  27.8% » Raising FY 2017 diluted EPS guidance to a range of $5.69 to $5.84 » Anticipate FY 2017 adjusted diluted EPS1 now

13. Slide 13: Second Quarter Financial and Operating Highlights

    Second Quarter 2 Financial and Operating Highlights Linda Huber Executive Vice President and Chief Financial Officer

14. Slide 14: Second Quarter 2017 Results: Revenue

    Second Quarter 2017 Results and Comparison to Second Quarter 2016 Moody’s Corporation Revenue » Total Global  8% to $1 billion » U.S.  4% to $568 million » Non-U.S.  13% to $433 million - 43% of total revenue Impact of foreign currency » Total Global  translation was negligible » Recurring Reven

15. Slide 15: Second Quarter 2017: MIS Revenue

    Second Quarter 2017 Results and Comparison to Second Quarter 2016 (continued) MIS Revenue  » Total MIS 10% to $687 million  » U.S. 3% to $412 million  21% to $274 million » Non-U.S. - 40% of total MIS revenue Impact of foreign currency translation » Total MIS  on MIS revenue was negligible Secon

16. Slide 16: MIS Revenue by Line of Business

    Second Quarter 2017 Results and Comparison to Second Quarter 2016 (continued) MIS Revenue by Line of Business » Corporate Finance: $356 million - Global  17% - U.S.  6% - Non-U.S.  40% » Structured Finance: $119 million - Global  7% - U.S.  12% - Non-U.S.  3% Second Quarter 2017 Earnings Call,

17. Slide 17: MIS Revenue by Line of Business (continued)

    Second Quarter 2017 Results and Comparison to Second Quarter 2016 (continued) MIS Revenue by Line of Business » Financial Institutions: $102 million - Global  14% - U.S.  8% - Non-U.S.  20% » Public, Project & Infrastructure Finance: $105 million - Global  7% - U.S.  12% - Non-U.S.  4% » MIS O

18. Slide 18: MA Revenue by Geography

    Second Quarter 2017 Results and Comparison to Second Quarter 2016 (continued) MA Revenue by Geography » Total MA  3.5% to $314 million » U.S.  6% to $155 million 1% to $158 million » Non-U.S.  - 50% of total MA revenue Impact of foreign currency » Total MA  translation on MA revenue was negligib

19. Slide 19: MA Revenue by Line of Business: Research, Data and Analytics

    Second Quarter 2017 Results and Comparison to Second Quarter 2016 (continued) MA Revenue by Line of Business » Research, Data and Analytics: $181 million - Global  7% - 58% of total MA revenue - U.S.  6% - Non-U.S.  10% Second Quarter 2017 Earnings Call, July 21, 2017 19

20. Slide 20: MA Revenue by Line of Business: Enterprise Risk Solutions

    Second Quarter 2017 Results and Comparison to Second Quarter 2016 (continued) MA Revenue by Line of Business » Enterprise Risk Solutions: $97 million - Global flat - U.S.  7% - Non-U.S.  5% » ERS TTM1 Revenue  6% » ERS TTM1 Sales  14% » ERS TTM1 Product Sales  21% » ERS TTM1 Services Sales  4%

21. Slide 21: MA Revenue by Line of Business: Professional Services

    Second Quarter 2017 Results and Comparison to Second Quarter 2016 (continued) MA Revenue by Line of Business » Professional Services: $36 million - Global  5% - U.S.  6% - Non-U.S.  10% Second Quarter 2017 Earnings Call, July 21, 2017 21

22. Slide 22: Second Quarter 2017 Results and Comparison (continued)

    Second Quarter 2017 Results and Comparison to Second Quarter 2016 (continued) Moody’s Corporation  5% to $543 million » Operating Expense – Foreign currency translation favorably impacted expense by 2% – Includes $51.1 million of incentive compensation » Operating Margin  45.7% » Adjusted Operatin

23. Slide 23: Second Quarter 2017 Capital Allocation

    Second Quarter 2017 Capital Allocation » During 2Q 2017, Moody’s repurchased approximately 0.7 million shares at a total cost of $79.5 million, or an average cost of $115.35 per share » During 2Q 2017, Moody’s issued approximately 0.4 million shares as part of its employee stock-based compensation p

24. Slide 24: First Half 2017 Capital Allocation

    First Half 2017 Capital Allocation » During 1H 2017, Moody’s repurchased 1.2 million shares at a total cost of $134.5 million, or an average cost of $114.06 per share » During 1H 2017, Moody’s issued approximately 1.9 million shares as part of its employee stock-based compensation plans » During 1H

25. Slide 25: Bureau van Dijk Acquisition Financing

    Bureau van Dijk Acquisition Financing » On June 12, 2017, Moody’s issued $1 billion of notes: – $500 million of 2.625% senior unsecured notes due 2023 – $500 million of 3.25% senior unsecured notes due 2028 » Prior to bond issuance, Moody’s had an undrawn bridge loan facility » In 2Q 2017, increment

26. Slide 26: Balance Sheet and Free Cash Flow

    Balance Sheet and Free Cash Flow » As of June 30, 2017, Moody’s had: – $4.9 billion of outstanding debt – $1.5 billion of additional debt capacity available under its revolving credit facility and undrawn term loan – Total cash, cash equivalents and short-term investments of almost $3.4 billion - Ap

27. Slide 27: Current 2017 Outlook

    3 Current 2017 Outlook Ray McDaniel President and Chief Executive Officer

28. Slide 28: Current 2017 Outlook

    Current 2017 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 $1.14 to €1. Changes to 2017 Full-Year Financial Outlook1 MCO Current Guidan

29. Slide 29: Current 2017 Outlook (continued)

    Current 2017 Outlook (continued) Changes to 2017 Full-Year Financial Outlook1 MIS Current Guidance as of July 21, 2017 Revenue increase in the high-single-digit percent range Non-U.S. increase in the low-teens percent range Corporate Finance increase in the low-teens percent range Financial Institut

30. Slide 30: Q&A

    Q&A Ray McDaniel President and Chief Executive Officer 4 Linda Huber Executive Vice President and Chief Financial Officer Mark Almeida President, Moody’s Analytics Rob Fauber President, Moody’s Investors Service

31. Slide 31: 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. YTD 2017 FY 2017E Investment Grade Bonds ~$720 billion Down 5% t

32. Slide 32: 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 » Expect 2H 2017 volumes to be in-line with 1H activi

33. Slide 33: Next Investor Day

    Next Investor Day Moody’s Corporation will hold its next Investor Day in late February 2018 in New York City. The event, which will be webcast live, will feature presentations form management and showcase important aspects of the Company’s business. Additional details to follow. Second Quarter 2017

34. Slide 34: Replay Details

    Replay Details » Available from 3:30pm (Eastern Time) July 21, 2017 until 3:30pm (Eastern Time) August 19, 2017 » Telephone Details: – US +1-888-203-1112 – Non-US +1-719-457-0820 – Passcode 6159765 » Webcast Details: – Go to ir.moodys.com – Click on “Events & Presentations” – Click on the link for “

35. Slide 35: Appendix

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36. Slide 36: Consolidated Statements of Operations

    Consolidated Statements of Operations (Unaudited) Second Quarter 2017 Earnings Call, July 21, 2017 36

37. Slide 37: Supplemental Revenue Information

    Supplemental Revenue Information (Unaudited) Second Quarter 2017 Earnings Call, July 21, 2017 37

38. Slide 38: Selected Consolidated Balance Sheet Data

    Selected Consolidated Balance Sheet Data (Unaudited) Second Quarter 2017 Earnings Call, July 21, 2017 38

39. Slide 39: Selected Consolidated Balance Sheet Data (continued)

    Selected Consolidated Balance Sheet Data (continued) (Unaudited) Second Quarter 2017 Earnings Call, July 21, 2017 39

40. Slide 40: Non-operating (expense) Income, Net

    Non-operating (expense) Income, Net Second Quarter 2017 Earnings Call, July 21, 2017 40

41. Slide 41: Financial Information by Segment

    Financial Information by Segment Second Quarter 2017 Earnings Call, July 21, 2017 41

42. Slide 42: Transaction and Relationship Revenue

    Transaction and Relationship Revenue Second Quarter 2017 Earnings Call, July 21, 2017 42

43. Slide 43: Transaction and Relationship Revenue (continued)

    Transaction and Relationship Revenue (continued) Second Quarter 2017 Earnings Call, July 21, 2017 43

44. Slide 44: Adjusted Operating Income and Adjusted Operating Margin

    Adjusted Operating Income and Adjusted Operating Margin Second Quarter 2017 Earnings Call, July 21, 2017 44

45. Slide 45: Free Cash Flow

    Free Cash Flow Second Quarter 2017 Earnings Call, July 21, 2017 45

46. Slide 46: Adjusted Net Income and Diluted Earnings per Share

    Adjusted Net Income and Diluted Earnings per Share Attributable to Moody's Common Shareholders Second Quarter 2017 Earnings Call, July 21, 2017 46

47. Slide 47: Adjusted Net Income and Diluted Earnings per Share (continued)

    Adjusted Net Income and Diluted Earnings per Share Attributable to Moody's Common Shareholders (continued) Second Quarter 2017 Earnings Call, July 21, 2017 47

48. Slide 48: 2017 Outlook

    2017 Outlook Second Quarter 2017 Earnings Call, July 21, 2017 48

49. Slide 49: 2017 Outlook (continued)

    2017 Outlook (continued) Second Quarter 2017 Earnings Call, July 21, 2017 49

50. Slide 50: 2017 Outlook (continued)

    2017 Outlook (continued) Second Quarter 2017 Earnings Call, July 21, 2017 50

51. Slide 51: moodys.com

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

52. Slide 52: Second Quarter 2017 Earnings Call, July 21, 2017

    © 2016 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any and affiliates (collectively, “MOODY’S”). All rights reserved. contingency within or

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