Moody's Corporation · NYSE:MCO
Moody's — Investor Presentation (March 2020)
33 slides from Moody's's investor presentation, Mar 11, 2020
Slide 1: Investor Update
Investor Update March 11, 2020
Slide 2: Disclaimer
Disclaimer Moody’s outlook for 2020 and other 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. Such statements may include, among o
Slide 3: Fireside Chat Participants
Fireside Chat Participants Ray McDaniel Rob Fauber Mark Kaye Shivani Kak President and CEO Chief Operating Officer Chief Financial Officer Head of Investor Relations Stephen Tulenko Michael West Anne Van Praagh President President MD - Global Credit Strategy & Research Moody’s Analytics Moody’s Inve
Slide 4: What is the impact of coronavirus on Moody's business?
QUESTION 1 Ray and Rob What is the impact of coronavirus on Moody’s business?
Slide 5: Coronavirus preparedness and impact
Coronavirus preparedness and impact » Primary focus: health and safety » Reaffirming FY 20201 guidance, of our employees, investors, customers including adjusted diluted EPS2, and the overall community with the exception of MIS revenue » Economic impacts from coronavirus - Year-over-year adjusted di
Slide 6: Moody's provides valuable market insights in uncertain times
Moody’s provides valuable market insights in uncertain times View at moodys.com /coronavirus Investor Update, March 11, 2020 6
Slide 7: Can you provide more detail on Moody's expectations for the impact of coronavirus?
QUESTION 2 Anne, Mike and Steve Can you provide more detail on Moody’s expectations for the impact of coronavirus?
Slide 8: Coronavirus adversely impacts economic growth
Coronavirus adversely impacts economic growth Real GDP growth forecast (%) for G-20 Economies (2020-21) Euro Area ’20 0.7% ’21 1.5% UK RUSSIA CANADA ’20 0.9% ’20 1.3% ’20 1.4% ’21 1.0% ’21 1.8% ’21 1.6% GERMANY USA ’20 0.3% ’20 1.5% ’21 1.5% FRANCE CHINA JAPAN ’21 1.9% ’19 1.1% ’20 4.8% ’20 0.0% ’20
Slide 9: Channels of coronavirus economic impact
Channels of coronavirus economic impact Impact on global economy from the coronavirus Economic effects DEMAND SHOCK SUPPLY SHOCK FINANCIAL MARKET SHOCK Falling consumer demand Production disruption from restricted Volatility from spread of the coronavirus movement in financial markets Channel of imp
Slide 10: Global speculative-grade default rate expected to rise
Global speculative-grade default rate expected to rise Region: Global 18% Sector: Corporate 15% Historical 12% data Default Rate 9.7% Baseline 9% Forecast 6% Pessimistic Historical average Forecast 4.1% 3.7% 3% Historical Average 3.1% from 1983-2019 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 20
Slide 11: Global debt issuance tends to rebound after a shock
Global debt issuance tends to rebound after a shock Moody’s total rated debt QE taper Oil price China Stock market 1,600 Sovereign crisis announcement shock Slowdown fears slide 1,400 1,200 1,000 $ Billions 800 600 400 200 - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Slide 12: Revised Moody's Investors Service 2020 outlook
Revised Moody’s Investors Service 2020 outlook1 2020 revenue expectation revised down to low-single-digits Key drivers include GDP Issuance Commodity Benchmark rates M&A activity Spreads volumes and mix prices stabilize remain low 1. 2020 MIS guidance as of March 11, 2020. Investor Update, March 11,
Slide 13: Moody's Analytics has a resilient recurring revenue base
Moody’s Analytics has a resilient recurring revenue base Coronavirus concerns could affect business development in the short-term For 2020, we expect2: Revenue from sales ~50% closed prior to 1/1/2020 High retention rates 1 Risk and uncertainty in the market 89% ~40% Revenue from scheduled reinforce
Slide 14: Looking beyond current events, what are the underlying drivers of MIS and MA?
QUESTION 3 Mike and Steve Looking beyond current events, what are the underlying drivers of MIS and MA?
Slide 15: Moody's Investors Service: Agency of choice
Moody’s Investors Service: Agency of choice Rating Quality Research Award-winning Proven rating accuracy and and Insight Globally and locally acknowledged deeply experienced analysts Focus on research for award winning expertise in credit leadership ratings, research and risk analysis. #1 Global Cre
Slide 16: Moody's Investors Service: New ratings mandates and refunding support revenue growth
Moody’s Investors Service: New ratings mandates and refunding support revenue growth 4k+ new rating mandates over the last 5 years $3T+ of corporate refunding needs over the next 4 years First time mandates North America / EMEA refunding needs, 2020-20232 1,200 1,044 1,046 864 800 - 850 800 771 738
Slide 17: Moody's Analytics: Diverse customer base provides a stable foundation for growth
Moody’s Analytics: Diverse customer base provides a stable foundation for growth Revenue more than tripled since inception 1300+ 2800+ $2,500 Asset Managers Commercial Banks CAGR Guidance1 $2,000 44 ~12% 3000+ 280+ $ Millions quarters since inception of $1,500 of growth Moody’s Analytics Corporation
Slide 18: What are the puts and takes in re-affirming full year adjusted diluted EPS guidance?
QUESTION 4 Mark What are the puts and takes in re-affirming Moody’s full year adjusted diluted EPS guidance?
Slide 19: Updated FY 2020 Guidance
Updated FY 2020 Guidance1,2 Revenue Increase in the mid-single-digit % range MIS Revenue Increase in the low-single-digit % range MA Revenue Increase in the high-single-digit % range Total Expenses3 Increase in the low-single-digit % range Operating Margin Approximately 44% Adjusted Operating Margin
Slide 20: Moody's 2020 margin drivers
Moody’s 2020 margin drivers Disciplined expense management drives both margin expansion and opportunity for investment 48%-49% +60 bps to +160 bps 75-175 bps 100-110 bps Organic Acquisitions Business 47.4% Investments and Divestitures Mix Impact 2020 Adjusted 2019 Operating Efficiencies Operating Ad
Slide 21: Can you tell us about the growth opportunities Moody's is pursuing?
QUESTION 5 Rob and Ray Can you tell us about the growth opportunities Moody’s is pursuing?
Slide 22: Bureau van Dijk: accelerating growth with Moody's
Bureau van Dijk: accelerating growth with Moody’s Pre-Acquisition Post-Acquisition Exceeding Investment Criteria Financial IRR at / above Moody’s cost of capital Revenue CAGR1 Revenue growth3 ~9% ~16% >10% annual cash Adjusted Operating Margin2 Adjusted Operating Margin4 return yield within 3-5
Slide 23: Compliance leading the way
Compliance leading the way 45% 40% Compliance YoY Growth (2019 vs. 2018) 35% 30% 25% 38% Research Growth of Compliance Use Case 20% (Economic/Library) Trade Credit 15% Data management 10% Sales and marketing 12% 5% Tax/Transfer pricing Avg Growth of Other Use Cases Bank credit risk Corporate finance
Slide 24: BvD + RDC makes Moody's Analytics a leading global player in KYC
BvD + RDC makes Moody’s Analytics a leading global player in KYC1 Improved accuracy and streamlined decisions » BvD + RDC creates a leading provider of data BvD for compliance-related use cases » Complementary assets: 365M 184M 176M PUBLIC & PRIVATE ACTIVE OWNERSHIP SHAREHOLDERS ENTITIES LINKS – RDC
Slide 25: U.S. - China trade deal implications
U.S. - China trade deal implications » U.S. – China Phase 1 trade deal signed January 15, 2020 » Specific reference to international credit rating agencies » Enhances Moody’s optionality in China Investor Update, March 11, 2020 25
Slide 26: What are the key takeaways for investors?
QUESTION 6 Rob What are the key takeaways for investors?
Slide 27: Core strengths underpin our business amidst near term volatility and medium term uncertainty
Core strengths underpin our business amidst near term volatility and medium term uncertainty Volatility / uncertainty drivers Moody’s Core Strengths Depth & length of Trusted brand Proprietary data and coronavirus issue integrated analytics Globally recognized and respected with over a century of ex
Slide 28: Questions and Answers
Questions and Answers
Slide 29: Replay details
Replay details Available from 3:30pm (Eastern Time) March 11, 2020 until 3:30pm (Eastern Time) April 9, 2020 TELEPHONE DETAILS U.S. +1-888-203-1112 Non-U.S. +1-719-457-0820 Passcode 7889155 WEBCAST DETAILS Go to ir.moodys.com Click on “Events & Presentations” Click on the link for “Moody’s Investor
Slide 30: Appendix
Appendix
Slide 31: Reconciliation of adjusted financial measures to GAAP
Reconciliation of adjusted financial measures to GAAP Moody's Corporation Operating Margin Guidance Reconciliation Moody's Corporation Diluted EPS Reconciliation 2020F1 2020F1 Projected Operating Margin - GAAP Approximately 44% Diluted EPS - GAAP $8.60 - $8.80 Depreciation & Amortization Approximate
Slide 32: moodys.com
Investor Relations http://ir.moodys.com ir@moodys.com moodys.com
Slide 33: Investor Update, March 11, 2020
© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liabilit