Slide 1: Second Quarter 2019 Earnings Call
Second Quarter 2019 Earnings Call July 31, 2019
Slide 2: Overview
Overview Salli Schwartz Global Head of Investor Relations and Strategic Capital Management Second Quarter 2019 Earnings Call, July 31, 2019 2
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. Such statements may include, among other words, “believe”, “exp
Slide 4: 2Q 2019 Overview and Strategy Discussion
2Q 2019 Overview and Strategy Discussion Ray McDaniel President and Chief Executive Officer Second Quarter 2019 Earnings Call, July 31, 2019 4
Slide 5: Highlights
Highlights » Continued double-digit growth in MA revenue, with strong contributions from all lines of business ‒ Trailing twelve month recurring revenue 84% of total MA revenue » MIS 2Q19 constant currency revenue1 in line with record prior year quarter ‒ Constructive issuance environment going into
Slide 6: Results Bolstered by Double-Digit MA Revenue Growth and MIS's Resilience
Results Bolstered by Double-Digit MA Revenue Growth and MIS’s Resilience Despite Subdued Issuance » 2Q19 MCO revenue increased 3%, including MA revenue up 12% and MIS revenue down 2% » Adjusted diluted EPS up slightly, aided by reduced diluted share count MCO Revenue MCO Adjusted Operating Income MC
Slide 7: Q2 Issuance Activity: Receptive Market Conditions Tempered by Cautious Sentiment
Q2 Issuance Activity: Receptive Market Conditions Tempered by Cautious Sentiment Strong Issuance Conditions » Falling 10Y benchmark rates: U.S. to multiyear lows, Mixed Issuance Activity Germany reverts back to Issuance1 declines for sub-zero » Ongoing Macro and fourth consecutive quarter: » Fed and
Slide 8: Moody's Strategic Core
Moody’s Strategic Core Mission Vision Purpose Trusted insights and Informed decisions that Clarity, knowledge standards promote progress and fairness Second Quarter 2019 Earnings Call, July 31, 2019 8
Slide 9: Transactions Provide Enhancements to Analytical and Risk Measurement Capabilities
Transactions Provide Enhancements to Analytical and Risk Measurement Capabilities Risk » Provider of data and analytics related to physical climate risks Assessments Four Twenty Seven Analytical » Fintech company providing risk analytics solutions for asset Solutions owners, pension consultants, ass
Slide 10: 2Q 2019 Results and FY 2019 Outlook
2Q 2019 Results and FY 2019 Outlook Mark Kaye Chief Financial Officer Second Quarter 2019 Earnings Call, July 31, 2019 10
Slide 11: MIS 2Q Revenue and Margin Demonstrate Resilience Amid Subdued Issuance Activity
MIS 2Q Revenue and Margin Demonstrate Resilience Amid Subdued Issuance Activity MIS Revenue YoY Issuance1 Change $1.5 $ Trillions $1.3 $800 $752 $738 $1.1 $4 $1.0 $5 $700 $108 0% $109 $0.5 $600 $121 $125 4% $500 $0.0 $ Millions $128 $112 (13%) 2Q18 2Q19 $400 MIS Adjusted Operating Income and Margin3
Slide 12: Revenue Growth Across All MA Businesses Drives Margin Improvement
Revenue Growth Across All MA Businesses Drives 350 bps Margin Improvement MA Revenue YoY MA Adjusted Operating Income and Margin2 Change $300 $500 $475 28.2% $423 $42 13% +350bps $400 $37 $118 7% $200 24.7% $110 $ Millions $ Millions $300 $52 $200 $100 $(22) $315 14% $276 $135 $100 $105 $0 $0 18.0%
Slide 13: Updated FY19 Guidance
Updated FY19 Guidance1,2 Revenue Increase in mid-single-digit % range Total Expenses3 Increase in high-single-digit % range Operating Margin Approximately 42% Adjusted Operating Margin Approximately 48% Interest Expense, Net Approximately $195 million Effective Tax Rate 21% - 22% Diluted EPS $7.15 -
Slide 14: Total MIS Revenue Guidance Unchanged; Support Solid 2H19
Total MIS Revenue Guidance Unchanged; Market Conditions and Easier Comps Support Solid 2H19 Revenue Adjusted Operating Margin1 Low-single digit Approximately 58% % growth 58.4% $3,000 $2.7B $2,800 $2,600 $2,400 Approximately $2,200 $2,000 Flat $1,800 $1,600 $1,400 $1,200 $1,000 Mid-single-digit $800
Slide 15: MA Revenue Growth on Track; Margin Guidance Updated
MA Revenue Growth on Track; Margin Guidance Updated for Impact from Transactions Revenue Adjusted Operating Margin1 31% 28% - 29% Low-double-digit 30% 29% 28% 26.4% % growth 27% 26% 25% $1.7B 24% 23% 22% 21% 20% High-single 19% 18% 17% digit % growth 16% 15% 14% 13% 12% 11% 10% 9% 8% Mid-teens % 7%
Slide 16: Restructuring Program Essentially Complete; Run-Rate Savings of ~$60 Million
Restructuring Program Essentially Complete; Expected Annual Run-Rate Savings of ~$60 Million » Combined restructuring charges from 2018 and 2019 total $108 million, exceeding previously announced range of $70 to $80 million – Acceleration of staffing optimization and acquisition integration – Real e
Slide 17: Key Takeaways
Key Takeaways » Delivering revenue growth and margin stability » Executing on strategic vision to apply trusted insights and standards while delivering transparency to adjacent markets and emerging risk areas » Disciplined approach to capital management; increasing prior $1 billion share buyback gui
Slide 18: Expanding CSR / ESG Engagement
Expanding CSR / ESG Engagement Demonstrating our Commitment to a Sustainable Future » Joined the United Nations Global Compact (UNGC) initiative » UNGC is the world's largest corporate sustainability initiative » Joined the PRI as a Service Provider and a call to companies to align signatory strateg
Slide 19: Q&A
Q&A Ray McDaniel President and Chief Executive Officer Mark Kaye Senior Vice President and Chief Financial Officer Mark Almeida President, Moody’s Analytics Rob Fauber President, Moody’s Investors Service Second Quarter 2019 Earnings Call, July 31, 2019 19
Slide 20: Replay Details
Replay Details » Available from 3:30pm (Eastern Time) July 31, 2019 until 3:30pm (Eastern Time) August 29, 2019 » Telephone Details: – U.S. +1-888-203-1112 – Non-U.S. +1-719-457-0820 – Passcode 5201705 » Webcast Details: – Go to ir.moodys.com – Click on “Events & Presentations” – Click on the link f
Slide 21: Appendix
Investor Relations http://ir.moodys.com Appendix ir@moodys.com moodys.com
Slide 22: Glossary of Terms and Abbreviations
Glossary of Terms and Abbreviations TERM DEFINITION CFG Corporate finance group; an LOB of MIS ERS The Enterprise Risk Solutions LOB within MA, which offers risk management software solutions as well as related risk management advisory engagements services FIG Financial institutions group; an LOB of
Slide 23: Adjusted Operating Income and Adjusted Operating Margin by Segment
Adjusted Operating Income and Adjusted Operating Margin 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, restructuring, Acquisi
Slide 24: Adjusted Operating Income and Adjusted Operating Margin
Adjusted Operating Income and Adjusted Operating Margin The Company presents Adjusted Operating Income because management deems this metric to be a useful measure of assessing the operating performance of Moody’s. Adjusted Operating Income excludes depreciation and amortization, restructuring, Acqui
Slide 25: 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 deems capital expenditures essential
Slide 26: Impact of Foreign Currency Translation on MIS Revenue
Impact of Foreign Currency Translation on MIS Revenue The Company presents revenue for MIS on a constant currency basis because management deems this metric to be a useful measure of assessing revenue performance in times of foreign exchange rate volatility. Constant currency measures exclude the im
Slide 27: Organic Revenue and Growth Measures – MA, RD&A and PS
Organic Revenue and Growth Measures – MA, RD&A and PS The Company presents the organic revenue and growth for the MA segment, the RD&A LOB and the PS LOB because management deems this metric to be a useful measure which provides additional perspective in assessing the revenue growth excluding the in
Slide 28: Adjusted Net Income and Adjusted Diluted EPS Attributable to Moody's Common Shareholders
Adjusted Net Income and Adjusted Diluted Earnings per Share Attributable to Moody's Common Shareholders The Company presents Adjusted Net Income and Adjusted Diluted EPS because management deems these metrics to be useful measures to provide additional perspective on the operating performance of Moo
Slide 29: Adjusted Net Income and Adjusted Diluted EPS (continued)
Adjusted Net Income and Adjusted Diluted Earnings per Share Attributable to Moody's Common Shareholders (continued) Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Earnings per share attributable to Moody's $ 1.62 $ 1.94 $ 3.56 $ 3.85 common shareholders Pre-Tax Acquisition
Slide 30: moodys.com
Investor Relations http://ir.moodys.com ir@moodys.com moodys.com
Slide 31: Second Quarter 2019 Earnings Call, July 31, 2019
© 2019 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