Moody's Corporation · NYSE:MCO
Moody's — Q3 2021 Earnings Presentation
36 slides from Moody's's earnings presentation, Oct 28, 2021
Slide 1: Third Quarter 2021 Earnings Call
Third Quarter 2021 Earnings Call October 28, 2021
Slide 2: Introduction
Introduction Shivani Kak Head of Investor Relations Moody’s | Better decisions Third Quarter 2021 - Earnings Call 2
Slide 3: Disclaimer
Disclaimer Certain statements contained in this document 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 document are made as of the d
Slide 4: Overview & 3Q 2021 Results
Overview & 3Q 2021 Results Rob Fauber President and Chief Executive Officer Moody’s | Better decisions Third Quarter 2021 - Earnings Call 4
Slide 5: Executive Summary
Executive Summary » Strong third quarter financial results: MCO revenue of $1.5 billion, up 13%; adjusted diluted EPS1 of $2.69 » Double-digit revenue growth in both MIS and MA: – MIS: Attractive market conditions facilitate opportunistic refinancing and M&A activity, specifically for leveraged loan
Slide 6: 3Q 2021: Results Bolstered by Double-Digit Revenue Growth
3Q 2021: Results Bolstered by Double-Digit Revenue Growth » MCO revenue increased 13%, including 13% growth from MA and 12% growth from MIS – MA organic1 revenue growth of 8% » Adjusted operating income2 up 2% and adjusted diluted EPS2 of $2.69 MCO Adjusted Operating MCO Revenue Income and Margin2 M
Slide 7: Heightened Issuance Activity Continued in 3Q 2021
Heightened Issuance Activity Continued in 3Q 2021 Historical MIS Rated Issuance1 – Third Quarters 3Q 2021 Year-Over-Year Issuance1 Growth 1,500 Total MIS Rated Issuance 11% ~$1,050 Structured Finance 104% 1,000 Leveraged Loans 96% $ Billions Financial Institutions 25% 500 Public, Project and -17% In
Slide 8: Tight Spreads and Lower Defaults Supported Opportunistic Refinancing and M&A Activity
Tight Spreads and Lower Defaults Supported Opportunistic Refinancing and M&A Activity U.S. HY Bond Spreads1,2 and U.S. Spec Grade Default Rate1,3 Uses of Funds from USD High Yield Bonds and Bank Loans1,4 6% 3% 2% 7% 6% 1,000 10% 14% 14% 900 9% 19% 800 8% 28% 29% 700 7% Basis points (bps) 600 6% 500
Slide 9: Refunding Walls Continue to Build
Refunding Walls Continue to Build Next Four Years U.S. and EMEA Total Refunding Needs1 as of: U.S. Non-financial Corporate Bond and Loan Maturities ($B)2 $4,500 719 Investment Grade $4,062 High Yield Bonds $4,000 Leveraged Loans $3,729 308 524 $3,500 387 266 $3,000 151 $ Billions 129 249 25 57 62 $2
Slide 10: MA Recurring Revenue Above 90%
MA Recurring Revenue Above 90% TTM MA Recurring and Transaction Revenue1 Key Contributors to TTM MA Organic Recurring Revenue1 35% TTM Recuring Revenue YoY Growth 30% KYC and Compliance 93% 25% Insurance and Asset 89% Credit Research and 20% Management 2 84% Data Feeds 82% 15% Banking 10% 5% 0% 3Q18
Slide 11: KYC Tools Integral to an Increasing Number of Customer Use Cases
KYC Tools Integral to an Increasing Number of Customer Use Cases Continued strategic investment driving >25% growth1 Banking Leasing Transportation » Enhanced bank’s ability to » Automated leasing company’s » Augmented supplier risk prevent money laundering onboarding and monitoring of assessment pr
Slide 12: RMS: Mission Critical Role in Global Insurance Markets
RMS: Mission Critical Role in Global Insurance Markets Climate capabilities further accelerate our integrated risk assessment strategy Areas of Focus for Integration Path to Achieving Targets Financial Targets Life and P&C Cross-selling Combined revenues from Insurance Opportunities RMS and Insuranc
Slide 13: Innovation and Thought Leadership Accelerate Our Integrated Risk Assessment Strategy
Innovation and Thought Leadership Accelerate Our Integrated Risk Assessment Strategy ESG & Climate SaaS Solutions Cyber » Launched climate-conditioned default » Introduced Data Alliance dashboards for CECL » Significant investment in BitSight to probabilities on 40K+ public entities customers, provi
Slide 14: Moody's on Climate
Moody’s on Climate COP26 Stakeholder Engagement Leading Climate Solutions and Insights » Accelerated corporate net-zero commitment to 2040 Physical Risk Data » Recognized as a UN Global Compact LEAD company Credit Ratings Transition Risk Data1 » Founding member of the Net Zero Financial Services Pro
Slide 15: 3Q 2021 Analysis & FY 2021 Outlook
3Q 2021 Analysis & FY 2021 Outlook Mark Kaye Chief Financial Officer Moody’s | Better decisions Third Quarter 2021 - Earnings Call 15
Slide 16: MIS: Significant Leveraged Loan and CLO Activity
MIS: Significant Leveraged Loan and CLO Activity MIS Revenue Issuance2,3 $1,500.0 $925 YoY Change $ Billions $1,300.0 $825 $1,100.0 $143 63% $88 $900.0 $1,270 $1,410 $130 (2%) $700.0 $133 $ Millions $153 14% $500.0 $134 3Q20 3Q21 6% MIS Adjusted Operating Margin4 $461 $488 ~1.9% 3Q20 3Q21 (~3.0%) CF
Slide 17: MA: Strong Renewal and Customer Retention Rates
MA: Strong Renewal and Customer Retention Rates MA Revenue MA Adjusted Operating Margin2 $601 YoY Change ~2.1% $531 $156 8% (~7.5%) $145 $ Millions 31.4% $445 15% 26.0% $386 3Q20 MA Adjusted Underlying Impact of Recent 3Q21 MA Adjusted 3Q20 3Q21 Operating Margin Expansion Acquisitions and Operating
Slide 18: FY 2021 Corporate-Level Guidance
FY 2021 Corporate-Level Guidance1 Revenue Increase in the low-teens percent range Macro assumptions underpinning our guidance4 Expenses Increase of approximately 10% 2021 GDP Benchmark rates to increase Adjusted Operating Margin2 Approximately 51% gradually from historic lows; U.S. high yield spread
Slide 19: FY 2021 Segment-Level Guidance
FY 2021 Segment-Level Guidance1 MIS Revenue1 MIS Adjusted Operating Margin1 MA Revenue1 MA Adjusted Operating Margin1 Low-teens Approximately 62% 59.7% Mid-teens % increase % increase 29.4% Approximately 29% $3.3B $2.1B 2020 2021F 2020 2021F 2020 2021F 2020 2021F » Total Issuance2: Increase in the h
Slide 20: Maintaining Expense Guidance; Acquisition Activity Drives Growth
Maintaining Expense Guidance; Acquisition Activity Drives Growth as Cost Efficiencies Enable Strategic Investment 3Q 2021 vs. 3Q 2020 Approximately 16% Approximately 3% ~4.0% ~1.0% ~2.5% 19.0% ~5.0% ~2.0% ~8.5% (~4.0%) $850M $714M FY 2021F vs. FY 2020 ~3.5% ~1.5% Approximately 10% ~6.5% ~3.5% (~1.5%
Slide 21: Key Takeaways
Key Takeaways » Robust 3Q 2021 performance and improved full year 2021 revenue and adjusted EPS outlook1 » Economic recovery and constructive market conditions drive issuance levels and refunding activity » Strong MA recurring revenue base and retention rates support long-term growth » Key organic i
Slide 22: Questions and Answers
Questions and Answers Rob Fauber President and Chief Executive Officer Mark Kaye Chief Financial Officer
Slide 23: Investor Day
Investor Day Moody’s Corporation will hold its next Investor Day on Thursday, March 10, 2022 March 10, 2022. The event will Save the Date showcase important aspects of the Company’s business. Additional details to follow. Moody’s | Better decisions Third Quarter 2021 - Earnings Call 23
Slide 24: Moody's Attendance at Upcoming Conferences
Moody’s Attendance at Upcoming Conferences NOV Autonomous Operational Decisions Conference 04 » Mark Kaye, Chief Financial Officer NOV RBC Global Technology, Internet, Media & Telecommunications Conference 17 » Mona Breed, Chief Information Officer NOV J.P. Morgan Ultimate Services Investor Conferen
Slide 25: Replay Details
Replay Details Available from 4:00pm (Eastern Time) October 28, 2021 until 4:00pm (Eastern Time) November 26, 2021 Telephone Details Webcast Details » U.S. & Canada +1-888-203-1112 » Go to ir.moodys.com » Non-U.S. & Canada +1-719-457-0820 » Click on “Events & Presentations” » Passcode 4335083 » Clic
Slide 26: Investor Relations
Investor Relations ir.moodys.com ir@moodys.com
Slide 27: Glossary of Terms and Abbreviations
Glossary of Terms and Abbreviations TERM DEFINITION CFG Corporate finance group; an LOB of MIS CRE Commercial Real Estate ERS The Enterprise Risk Solutions LOB within MA, which offers risk management software solutions, as well as related risk management advisory engagements services ESG Environment
Slide 28: Financial Information by Segment
Financial Information by Segment The table below presents revenue, operating income and adjusted operating income by reportable segment. The Company defines adjusted operating income as operating income excluding: i) depreciation and amortization; ii) restructuring; and iii) a loss pursuant to the d
Slide 29: Financial Information by Segment (Continued)
Financial Information by Segment (Continued) The table below presents revenue, operating income and adjusted operating income by reportable segment. The Company defines adjusted operating income as operating income excluding: i) depreciation and amortization; ii) restructuring; and iii) a loss pursu
Slide 30: Adjusted Operating Income and Adjusted Operating Margin
Adjusted Operating Income and Adjusted Operating Margin The Company presents Adjusted Operating Income and Adjusted Operating Margin because management deems these metrics to be useful measures to provide additional perspective on Moody’s operating performance. Adjusted Operating Income excludes the
Slide 31: 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 32: Organic Revenue and Growth Measures – MA, RD&A and ERS
Organic Revenue and Growth Measures – MA, RD&A and ERS The Company presents the organic revenue and organic revenue growth (including Below is a reconciliation of MA's reported revenue and growth rates to its organic revenue and organic recurring revenue and organic recurring revenue growth for the
Slide 33: Adjusted Net Income and Adjusted Diluted Earnings per Share
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 Moody’s operating performance. A
Slide 34: Adjusted Net Income and Adjusted Diluted EPS (Continued)
Adjusted Net Income and Adjusted Diluted Earnings per Share Attributable to Moody's Common Shareholders (Continued) Note: The tax impacts in the table above were calculated using tax rates in effect in the jurisdiction for which the item relates. Moody’s | Better decisions Third Quarter 2021 - Earni
Slide 35: Projected Organic MA Revenue Growth and Adjusted Operating Margin Expansion
Projected Organic MA Revenue Growth and Adjusted Operating Margin Expansion Moody’s | Better decisions Third Quarter 2021 - Earnings Call 35
Slide 36: Moody's | Better decisions Third Quarter 2021 - Earnings Call
© 2021 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