Slide 1: Third Quarter 2015 Earnings Call
Third Quarter 2015 Earnings Call October 30, 2015
Slide 2: Overview
Overview SALLI SCHWARTZ GLOBAL HEAD OF INVESTOR RELATIONS Third Quarter 2015 Earnings Call, October 30, 2015 2
Slide 3: Disclaimer
Disclaimer Certain statements contained in this presentation 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
Slide 4: Agenda
Agenda 1. Third Quarter 2015 Results Ray McDaniel, President and Chief Executive Officer 2. Financial and Operating Highlights Linda Huber, Executive Vice President and Chief Financial Officer 3. 2015 Outlook Ray McDaniel, President and Chief Executive Officer 4. Q&A Ray McDaniel, President and Chie
Slide 5: 1. Third Quarter 2015 Results
1. Third Quarter 2015 Results RAY MCDANIEL PRESIDENT AND CHIEF EXECUTIVE OFFICER Third Quarter 2015 Earnings Call, October 30, 2015 5
Slide 6: Third Quarter 2015 Results and Comparison to Third Quarter 2014
Third Quarter 2015 Results and Comparison to Third Quarter 2014 Moody’s Corporation » Revenue 2% to $835 million 7% on a constant currency basis » Expense 4% to $485 million • Foreign currency translation favorably impacted expense by 4% » Operating Income flat at $350 million 5% on a consta
Slide 7: Third Quarter 2015 Results and Comparison to Third Quarter 2014 (continued)
Third Quarter 2015 Results and Comparison to Third Quarter 2014 (continued) Moody’s Corporation » Operating Margin • 41.9% » Adjusted Operating Margin • 45.3% » GAAP EPS 14% to $1.14 » Non-GAAP EPS* 14% to $1.11 *Non-GAAP EPS excludes a $0.03 benefit from a legacy tax matter in the third quarter
Slide 8: Year-to-Date 2015 Performance and Comparison to Year-to-Date 2014
Year-to-Date 2015 Performance and Comparison to Year- to-Date 2014 Moody’s Corporation » Revenue 7% to $2.6 billion 11% on a constant currency basis – MIS 5% to $1.8 billion 10% on a constant currency basis – MA 10% to $829 million 15% on a constant currency basis » Expense 9% to $1.5
Slide 9: Year-to-Date 2015 Performance and Comparison to Year-to-Date 2014 (continued)
Year-to-Date 2015 Performance and Comparison to Year- to-Date 2014 (continued) Moody’s Corporation » Operating Margin • 43.5% » Adjusted Operating Margin • 46.8 % » On a constant currency basis and excluding our 2014 and 2015 acquisitions, operating margin and adjusted operating margin would have in
Slide 10: 2. Financial and Operating Highlights
2. Financial and Operating Highlights LINDA HUBER EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER Third Quarter 2015 Earnings Call, October 30, 2015 10
Slide 11: Moody's Corporation Revenue
Third Quarter 2015 Results and Comparison to Third Quarter 2014 Moody’s Corporation Revenue » Total Global 2% to $835 million 7% on a constant currency basis » US 7% to $482 million » Non-US 4% to $353 million • 42% of total global » Recurring Revenue • $447 million • 54% of total revenue Th
Slide 12: MIS Revenue by Geography
Third Quarter 2015 Results and Comparison to Third Quarter 2014 (continued) MIS Revenue by Geography » Total MIS flat at $548 million 5% on a constant currency basis » US 7% to $353 million » Non-US 10% to $196 million • 36% of total MIS Third Quarter 2015 Earnings Call, October 30, 2015 12
Slide 13: MIS Revenue by Line of Business
Third Quarter 2015 Results and Comparison to Third Quarter 2014 (continued) MIS Revenue by Line of Business » Corporate Finance: $248 million – Global 5% – Constant currency basis 1% – US 5% – Non-US 22% » Structured Finance: $113 million – Global 10% – Constant currency basis 15% – US
Slide 14: MIS Revenue by Line of Business
Third Quarter 2015 Results and Comparison to Third Quarter 2014 (continued) MIS Revenue by Line of Business » Financial Institutions: $90 million – Global 3% – Constant currency basis 4% – US 8% – Non-US 10% » Public, Project & Infrastructure Finance: $91 million – Global 2% – Constant cur
Slide 15: MA Revenue by Geography
Third Quarter 2015 Results and Comparison to Third Quarter 2014 (continued) MA Revenue by Geography » Total MA 6% to $287 million 11% on a constant currency basis » US 8% to $130 million » Non-US 5% to $157 million • 55% of Total MA Third Quarter 2015 Earnings Call, October 30, 2015 15
Slide 16: MA Revenue by Line of Business
Third Quarter 2015 Results and Comparison to Third Quarter 2014 (continued) MA Revenue by Line of Business » RD&A: $158 million – Global 10% – Constant currency basis 15% – US 16% – Non-US 3% – The October 2014 acquisition of Lewtan Technologies contributed approximately 3 percentage points
Slide 17: MA Revenue by Line of Business
Third Quarter 2015 Results and Comparison to Third Quarter 2014 (continued) MA Revenue by Line of Business » ERS: $92 million – Global 14% – Constant currency basis 18% – US 7% – Non-US 17% – TTM* Revenue 27% – TTM* Sales 12% *Trailing twelve months Third Quarter 2015 Earnings Call, Octo
Slide 18: MA Revenue by Line of Business
Third Quarter 2015 Results and Comparison to Third Quarter 2014 (continued) MA Revenue by Line of Business » Professional Services: $37 million – Global 19% – Constant currency basis 14% – US 28% – Non-US 13% Third Quarter 2015 Earnings Call, October 30, 2015 18
Slide 19: Expense, Operating Margin and Tax Rate
Third Quarter 2015 Results and Comparison to Third Quarter 2014 (continued) Moody’s Corporation » Total Expense 4% to $485 million • Foreign currency translation favorably impacted expense by 4% » Operating Margin • 41.9% » Adjusted Operating Margin • 45.3% » On a constant currency basis and exclu
Slide 20: Capital Allocation
Capital Allocation » During 3Q15, Moody’s repurchased 2.9 million shares at a total cost of $304.9 million, or an average cost of $105.03 per share, and issued approximately 300,000 shares under annual employee stock-based compensation plans » In the first nine months of 2015, Moody’s repurchased 8.
Slide 21: Balance Sheet and Free Cash Flow
Balance Sheet and Free Cash Flow » As of September 30, 2015, Moody’s had: – $3.1 billion of outstanding debt – $1 billion of additional debt capacity under revolving credit facility – Cash, cash equivalents and short-term investments of $1.9 billion » Free cash flow of $827.6 million in first nine m
Slide 22: 3. 2015 Outlook
3. 2015 Outlook RAY MCDANIEL PRESIDENT AND CHIEF EXECUTIVE OFFICER Third Quarter 2015 Earnings Call, October 30, 2015 22
Slide 23: 2015 Outlook
2015 Outlook » Our guidance assumes foreign currency translation at end-of-quarter exchange rates » Specifically, our forecast reflects exchange rates for the British pound and the euro of $1.52 to £1 and $1.12 to €1, respectively » Reaffirming our 2015 EPS guidance of $4.55 to $4.65, which now incl
Slide 24: 4. Q&A Session
4. Q&A Session » Ray McDaniel President and Chief Executive Officer, Moody’s Corporation » Linda Huber Executive Vice President and Chief Financial Officer, Moody’s Corporation » Michel Madelain President and Chief Operating Officer, Moody’s Investors Service » Mark Almeida President, Moody’s Analyt
Slide 25: Replay Details
Replay Details » Available from 3:30pm (Eastern Time) October 30, 2015 until 3:30pm (Eastern Time) November 21, 2015 » Telephone Details: – US +888-203-1112 – Non-US +1-719-457-0820 – Passcode 5837983 » Webcast Details: – Go to http://ir.moodys.com – Click on “Events & Presentations” featured on the
Slide 26: Appendix
Appendix Third Quarter 2015 Earnings Call, October 30, 2015 26
Slide 27: Consolidated Statements of Operations (Unaudited)
Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months End September 30, September 30, 2015 2014 2015 2014 Amounts in millions, except per share amounts Revenue $ 834.9 $ 816.1 $ 2,618.6 $ 2,456.8 Expenses: Operating 236.1 236.7 724.4 674.8 Selling, general and administrati
Slide 28: Supplemental Revenue Information (Unaudited)
Supplemental Revenue Information (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, Amounts in millions 2015 2014 2015 2014 Moody's Investors Service Corporate Finance $ 248.3 $ 260.7 $ 866.6 $ 846.0 Structured Finance 112.5 102.1 335.0 308.0 Financial Institutions 89.5 91.
Slide 29: Supplemental Revenue Reclassification (Unaudited)
Supplemental Revenue Reclassification (Unaudited) The following table summarizes the 2014 impact of the reclassification of non-ratings revenue associated with Moody's majority ownership of KIS, which was formerly reported in MA's RD&A LOB, to the MIS Other LOB. Three Months Ended Nine Months Ended
Slide 30: Selected Consolidated Balance Sheet Data (Unaudited)
Selected Consolidated Balance Sheet Data (Unaudited) September 30, December 31, 2015 2014 Amounts in millions Cash and cash equivalents $ 1,471.1 $ 1,219.5 Short-term investments 470.2 458.1 Total current assets 2,862.1 2,686.4 Non-current assets 1,910.8 1,982.6 Total assets 4,772.9 4,669.0 Total cu
Slide 31: Non-operating (expense) income, net
Non-operating (expense) income, net Three Months Ended Nine Months Ended September 30, September 30, 2015 2014 2015 2014 Amounts in millions Interest expense, net: Expense on borrowings (a) $ (29.8) $ (38.8) $ (88.8) $ (90.5) Income 2.8 1.8 7.0 5.1 Legacy Tax benefit (b) 0.7 0.7 0.7 0.7 UTPs and oth
Slide 32: Financial Information by Segment
Financial Information by Segment The table below presents revenue, adjusted operating income and operating income by reportable segment. The Company defines adjusted operating income as operating income excluding depreciation and amortization. Three Months Ended September 30, 2015 2014 MIS MA Elimin
Slide 33: Transaction and Relationship Revenue
Transaction and Relationship Revenue The tables below summarize the split between transaction and relationship revenue. In the MIS segment, excluding MIS Other, transaction revenue represents the initial rating of a new debt issuance as well as other one-time fees while relationship revenue represen
Slide 34: Transaction and Relationship Revenue (continued)
Transaction and Relationship Revenue (continued) Nine Months Ended September 30, 2015 2014 Transaction Relationship Total Transaction Relationship Total Corporate Finance $608.0 $258.6 $866.6 $605.8 $240.2 $846.0 70% 30% 100% 72% 28% 100% Structured Finance $211.9 $123.1 $335.0 186.3 121.7 $308.0 63
Slide 35: Adjusted Operating Income and Adjusted Operating Margin
Adjusted Operating Income and Adjusted Operating Margin The tables below reflect certain adjusted results that the SEC defines as "non-GAAP financial measures" as well as a reconciliation of each non-GAAP measure to its most directly comparable GAAP measure. Management believes that such non-GAAP fi
Slide 36: Free Cash Flow
Free Cash Flow The table below reflects a reconciliation of the Company’s net cash flows from operating activities to free cash flow. The Company defines free cash flow as net cash provided by operating activities minus payments for capital additions. Management believes that free cash flow is a use
Slide 37: Non-GAAP Diluted EPS Attributable to Moody's Common Shareholders
Non-GAAP Diluted EPS Attributable to Moody's Common Shareholders The Company presents this non-GAAP measure to exclude the impact of the ICRA Gain as well as benefits from the resolution of Legacy Tax Matters to allow for a more meaningful comparison of Moody’s diluted earnings per share from period
Slide 38: Constant Currency Measures
Constant Currency Measures The Company presents revenue and operating income growth on a constant currency basis because management deems this metric to be a useful measure of assessing the operations of the Company in times of foreign exchange rate volatility. Constant currency measures exclude the
Slide 39: 2015 Outlook
2015 Outlook Moody’s outlook for 2015 is based on assumptions about many macroeconomic and capital market factors, including interest rates, foreign currency exchange rates, corporate profitability and business investment spending, merger and acquisition activity, consumer borrowing and securitizati
Slide 40: moodys.com
40 moodys.com Website: http://ir.moodys.com Email: ir@moodys.com Third Quarter 2015 Earnings Call, October 30, 2015 40
Slide 41: Third Quarter 2015 Earnings Call, October 30, 2015
© 2015 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, licensors and affiliates (collectively, “MOODY’S”). All rights reserved. representatives, licensors and suppliers