Moody's Corporation · NYSE:MCO

Moody's — Q2 2018 Earnings Presentation

55 slides from Moody's's earnings presentation, Jul 27, 2018

1. Slide 1: Second Quarter 2018 Earnings Call

   Second Quarter 2018 Earnings Call July 27, 2018

2. Slide 2: Overview

   Overview Steve Maire Global Head of Investor Relations and Communications Second Quarter 2018 Earnings Call, July 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 the Company’s business and operations that involve a number of risks and uncertainties. The forward-looking statements and other information in this re

4. Slide 4: Agenda

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

5. Slide 5: Second Quarter and First Half 2018 Results

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

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

   Second Quarter 2018 Results and Comparison to Second Quarter 2017 Moody’s Corporation » Revenue  17% to $1.2 billion » Operating Expenses  19% to $641 million – includes 11 percentage points attributable to Bureau van Dijk operating expenses, amortization of acquired intangible assets and non-recu

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

   Second Quarter 2018 Results and Comparison to Second Quarter 2017 (continued) Moody’s Corporation » Operating Margin  45.4% » Adjusted Operating Margin1  49.7% » Diluted EPS2  20% to $1.94 » Adjusted Diluted EPS2,3  32% to $2.04 1 Refer to Table 8 – “Adjusted Operating Income and Adjusted Operat

8. Slide 8: First Half 2018 Performance and Comparison to First Half 2017

   First Half 2018 Performance and Comparison to First Half 2017 Moody’s Corporation Revenue » Total Global  17% to $2.3 billion – includes 8 percentage points of growth attributable to Bureau van Dijk » U.S.  7% to $1.2 billion » Non-U.S.  30% to $1.1 billion Foreign currency translation » Total Gl

9. Slide 9: First Half 2018: MIS Revenue

   First Half 2018 Performance and Comparison to First Half 2017 (continued) MIS Revenue » Total MIS  9% to $1.5 billion » U.S.  6% to $885 million » Non-U.S.  13% to $588 million » Total MIS  Foreign currency translation favorably impacted MIS revenue by 2% Second Quarter 2018 Earnings Call, July

10. Slide 10: First Half 2018: MA Revenue

    First Half 2018 Performance and Comparison to First Half 2017 (continued) MA Revenue » Total MA  34% to $830 million » U.S.  9% to $339 million » Non-U.S.  58% to $491 million » Total MA  Foreign currency translation favorably impacted MA revenue by 3% » Organic MA1  9% to $676 million 1 Refer

11. Slide 11: First Half 2018 Performance (continued)

    First Half 2018 Performance and Comparison to First Half 2017 (continued) Moody’s Corporation » Operating Expenses  19% to $1.3 billion ─ Foreign currency translation unfavorably impacted expenses by 2% – includes 12 percentage points attributable to Bureau van Dijk operating expenses, amortization

12. Slide 12: First Half 2018 Performance (continued)

    First Half 2018 Performance and Comparison to First Half 2017 (continued) Moody’s Corporation » Operating Margin  44.5% » Adjusted Operating Margin1  48.9% » Effective Tax Rate  19.4% 1 Refer to Table 8 – “Adjusted Operating Income and Adjusted Operating Margin” in the press release for a reconci

13. 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 » Reaffirming FY 2018 diluted EPS guidance range of $7.20 to $7.40 » Reaffirming FY 2018 adjusted diluted EPS guidance range of $7.65 to $7.852 1 Moody’s outlook assumes foreign currency at end-of-quarter exchange rate

14. Slide 14: Financial Highlights

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

15. Slide 15: Second Quarter 2018 Moody's Corporation Revenue

    Second Quarter 2018 Results and Comparison to Second Quarter 2017 Moody’s Corporation Revenue » Total Global  17% to $1.2 billion – includes 8 percentage points of growth attributable to Bureau van Dijk » U.S.  10% to $625 million » Non-U.S.  27% to $550 million - 47% of total revenue » Recurring

16. Slide 16: Second Quarter 2018: MIS Revenue

    Second Quarter 2018 Results and Comparison to Second Quarter 2017 (continued) MIS Revenue » Total MIS  10% to $752 million » U.S.  9% to $451 million » Non-U.S.  10% to $301 million - 40% of total MIS revenue » Total MIS  Foreign currency translation favorably impacted MIS revenue by 1% Second Q

17. Slide 17: MIS Revenue by Line of Business

    Second Quarter 2018 Results and Comparison to Second Quarter 2017 (continued) MIS Revenue by Line of Business » Corporate Finance: $378 million - Global  6% - U.S.  10% - Non-U.S.  Approximately flat » Structured Finance: $142 million - Global  19% - U.S.  14% - Non-U.S.  28% Second Quarter 20

18. Slide 18: MIS Revenue by Line of Business

    Second Quarter 2018 Results and Comparison to Second Quarter 2017 (continued) MIS Revenue by Line of Business » Financial Institutions: $121 million - Global  18% - U.S.  24% - Non-U.S.  13% » Public, Project & Infrastructure Finance: $108 million - Global  3% - U.S.  7% - Non-U.S.  21% Second

19. Slide 19: MA Revenue by Geography

    Second Quarter 2018 Results and Comparison to Second Quarter 2017 (continued) MA Revenue by Geography » Total MA  35% to $423 million » U.S.  12% to $174 million » Non-U.S.  57% to $249 million - 59% of total MA revenue » Total MA  Foreign currency translation favorably impacted MA revenue by 2%

20. Slide 20: MA Revenue by Line of Business: Research, Data and Analytics

    Second Quarter 2018 Results and Comparison to Second Quarter 2017 (continued) MA Revenue by Line of Business » Research, Data and Analytics: $280 million1 - Global  55% - U.S.  16% - Non-U.S.  More than doubled to $162 million - Organic2  11% to $200 million 1 Bureau van Dijk’s revenue contribut

21. Slide 21: MA Revenue by Line of Business: Enterprise Risk Solutions

    Second Quarter 2018 Results and Comparison to Second Quarter 2017 (continued) MA Revenue by Line of Business » Enterprise Risk Solutions: $106 million - Global  8% - U.S.  5% - Non-U.S.  11% » ERS TTM1 Revenue  8% » ERS TTM1 Sales  Approximately flat 1 Trailing twelve months ended June 30, 2018

22. Slide 22: MA Revenue by Line of Business: ERS Sales and Revenue

    Second Quarter 2018 Results and Comparison to Second Quarter 2017 (continued) MA Revenue by Line of Business » ERS TTM1 Subscription Sales  11% » ERS TTM1 One-time Sales2  25% » ERS TTM1 Subscription Revenue  12% » ERS TTM1 One-time Revenue  1% 1 Trailing twelve months ended June 30, 2018. 2 One

23. Slide 23: MA Revenue by Line of Business: Professional Services

    Second Quarter 2018 Results and Comparison to Second Quarter 2017 (continued) MA Revenue by Line of Business » Professional Services: $37 million - Global  5% - U.S.  1% - Non-U.S.  8% Second Quarter 2018 Earnings Call, July 27, 2018 23

24. Slide 24: Second Quarter 2018 Expenses, Margins and Tax Rate

    Second Quarter 2018 Results and Comparison to Second Quarter 2017 (continued) Moody’s Corporation » Operating Expenses  19% to $641 million – Foreign currency translation unfavorably impacted expense by 1% – includes 11 percentage points attributable to Bureau van Dijk operating expenses, amortizat

25. Slide 25: Capital Allocation

    Capital Allocation Second Quarter 2018 » Repurchased 0.2 million shares at a total cost of $38 million, or an average cost of $167.05 per share » Issued approximately 0.2 million shares as part of employee stock- based compensation plans » Returned $85 million to shareholders via dividend payments D

26. Slide 26: Capital Allocation (continued)

    Capital Allocation (continued) First Half 2018 » Repurchased 0.5 million shares at a total cost of $81 million, or an average cost of $163.80 per share » Issued a net 1.4 million shares as part of employee stock-based compensation plans1 » Returned $169 million to shareholders via dividend payments

27. Slide 27: Capital Allocation (continued)

    Capital Allocation (continued) First Half 2018 » Outstanding shares totaled 191.9 million – approximately flat to June 30, 2017 » Approximately $450 million of share repurchase authority remaining » In June 2018, Moody’s issued $300 million of 3.250% senior unsecured notes due 2021, the proceeds of

28. Slide 28: Balance Sheet and Free Cash Flow

    Balance Sheet and Free Cash Flow » As of June 30, 2018, Moody’s had: – $5.3 billion of outstanding debt – $910 million of additional debt capacity available under revolving credit facility – Total cash, cash equivalents and short-term investments were $1.4 billion - approximately 76% held outside th

29. Slide 29: 2018 Outlook

    3 2018 Outlook Ray McDaniel President and Chief Executive Officer

30. Slide 30: 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 $1.32 to £1 and for the euro (€) of $1.17 to €1. Certain Components of 2018 Full-Year Financial Outlook1 MCO Guidance as

31. Slide 31: Moody's Corporate Social Responsibility Report

    Moody’s Corporate Social Responsibility Report » For more information, please see the CSR press release issued on July 24th, 2018 at ir.moodys.com » To view the full CSR report, please visit moodys.com/csr Second Quarter 2018 Earnings Call, July 27, 2018 31

32. Slide 32: Moody's Recognition

    Moody’s Recognition » Moody’s Investors Service – #1 Credit Rating Agency in Institutional Investor’s 2018 All-American Fixed Income Research poll for a 7th year in a row – Best Credit Agency Mexico 2018 by Capital Financial International » Moody’s Analytics – Chartis “FinTech Quandrant” and “RiskTe

33. Slide 33: 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

34. Slide 34: 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%)

35. Slide 35: 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 down double digits YTD and pipeline relati

36. Slide 36: Replay Details

    Replay Details » Available from 3:30pm (Eastern Time) July 27, 2018 until 3:30pm (Eastern Time) August 25, 2018 » Telephone Details: – U.S. +1-888-203-1112 – Non-U.S. +1-719-457-0820 – Passcode 7935614 » Webcast Details: – Go to ir.moodys.com – Click on “Events & Presentations” – Click on the link f

37. Slide 37: Appendix

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38. Slide 38: Consolidated Statements of Operations

    Consolidated Statements of Operations (Unaudited) Second Quarter 2018 Earnings Call, July 27, 2018 38

39. Slide 39: Supplemental Revenue Information

    Supplemental Revenue Information (Unaudited) Second Quarter 2018 Earnings Call, July 27, 2018 39

40. Slide 40: Selected Consolidated Balance Sheet Data

    Selected Consolidated Balance Sheet Data (Unaudited) Second Quarter 2018 Earnings Call, July 27, 2018 40

41. Slide 41: Selected Consolidated Balance Sheet Data (continued)

    Selected Consolidated Balance Sheet Data (continued) (Unaudited) Second Quarter 2018 Earnings Call, July 27, 2018 41

42. Slide 42: Non-operating (expense) Income, Net

    Non-operating (expense) Income, Net Second Quarter 2018 Earnings Call, July 27, 2018 42

43. Slide 43: Financial Information by Segment

    Financial Information by Segment Second Quarter 2018 Earnings Call, July 27, 2018 43

44. Slide 44: Transaction and Relationship Revenue

    Transaction and Relationship Revenue Second Quarter 2018 Earnings Call, July 27, 2018 44

45. Slide 45: Transaction and Relationship Revenue (continued)

    Transaction and Relationship Revenue (continued) Second Quarter 2018 Earnings Call, July 27, 2018 45

46. Slide 46: Adjusted Operating Income and Adjusted Operating Margin

    Adjusted Operating Income and Adjusted Operating Margin Second Quarter 2018 Earnings Call, July 27, 2018 46

47. Slide 47: Free Cash Flow

    Free Cash Flow Second Quarter 2018 Earnings Call, July 27, 2018 47

48. Slide 48: Organic Revenue and Growth Measures

    Organic Revenue and Growth Measures Second Quarter 2018 Earnings Call, July 27, 2018 48

49. Slide 49: Adjusted Net Income and Diluted Earnings per Share

    Adjusted Net Income and Diluted Earnings per Share Attributable to Moody's Common Shareholders Second Quarter 2018 Earnings Call, July 27, 2018 49

50. Slide 50: 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 2018 Earnings Call, July 27, 2018 50

51. Slide 51: 2018 Outlook

    2018 Outlook Second Quarter 2018 Earnings Call, July 27, 2018 51

52. Slide 52: 2018 Outlook (continued)

    2018 Outlook (continued) Second Quarter 2018 Earnings Call, July 27, 2018 52

53. Slide 53: 2018 Outlook (continued)

    2018 Outlook (continued) Second Quarter 2018 Earnings Call, July 27, 2018 53

54. Slide 54: moodys.com

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

55. Slide 55: Second Quarter 2018 Earnings Call, July 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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