Slide 1: Second Quarter 2024 Earnings Call
MOODY’S Second Quarter 2024 Earnings Call July 23, 2024
Slide 2: Shivani Kak, Head of Investor Relations
Shivani Kak HEAD OF INVESTOR RELATIONS
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. Such statements involve estimates, projections, goals, forecasts, as
Slide 4: Rob Fauber, President and Chief Executive Officer
Rob Fauber PRESIDENT AND CHIEF EXECUTIVE OFFICER
Slide 5: Moody's achieved outstanding results
MOODY’S all adjuster Moody’s achieved outstanding results 2Q revenue grew 22%; Adjusted Operating Margin' up 590 bps to 49.6%; Adjusted Diluted EPS' increased 43% to $3.28 MIS generated significant operating leverage 2Q revenue grew 36%; Adjusted Operating Margin up 730bps to 63.2%; raising full yea
Slide 6: MIS Revenue and Rated Issuance
REVENUE ISSUANCE2 Total MIS Rated Issuance Leveraged Loans High Yield Bonds Investment Grade Structured Finance Financial Institutions Public, Project and Infrastructure Finance
Slide 7: Moody's Analytics Strong First Half Performance
Moody's Analytics Strong First Half Performance 8% 95% 94% 29.1% REVENUE GROWTH! RECURRING REVENUE RETENTION RATE ADJUSTED OPERATING MARGIN 18% 14% 9% 10% 6% KYC INSURANCE BANKING II | | | Decision Data & Research Solutions Information & Insights juarter 2024 - Earnings Call 7
Slide 8: Banking KYC
Banking KYC Lending Portfolio Monitoring Asset Managers Banks Automated Credit CRE Early Sanctioned European Union: Memo Warning Securities Screening Regulatory Reporting Second Party Opinion ORGANIZATIONS OPINIONS Second Quarter 2024 - Earnings Call 8
Slide 9: Noémie Heuland, Chief Financial Officer
Noémie Heuland CHIEF FINANCIAL OFFICER
Slide 10: MCO, MA and MIS Key Metrics
MCO Revenue MCO Revenue MCO Adjusted MCO Adjusted MCO Free Cash Flow Growth1 Operating Margin2 Diluted EPS2 Growth2,3 MA Revenue MA ARR MA Adjusted MIS Revenue Rated Issuance MIS Adjusted Growth1 Growth1,4 Operating Margin Growth1 Growth1,5 Operating Margin
Slide 11: FY 2024 MIS Rated Issuance Guidance
FY 2024 MIS RATED ISSUANCE GUIDANCE1,2 CONSIDERATIONS As of May 2, 2024 As of July 23, 2024 INFORMING OUR VIEW Total MIS Rated Issuance 20% to 25% growth Positive market conditions; strong investor demand; and tight credit spreads driving opportunistic issuance activity ahead of potential volatility
Slide 12: FY 2024 Segment Guidance
AS OF MAY 2, 2024 AS OF JULY 23, 2024 MOODY’S INVESTORS SERVICE Revenue Growth HSD to LDD % range Adjusted Operating Margin 56% - 58% MOODY’S ANALYTICS Revenue Growth HSD % range ARR Growth2 LDD % range Adjusted Operating Margin 30% - 31%
Slide 13: FY 2024 Moody's Corporation Guidance
AS OF MAY 2, 2024 AS OF JULY 23, 2024 MOODY’S CORPORATION Revenue Growth HSD to LDD % range Operating Expense MSD to HSD % range Adjusted Operating Margin2 44% to 46% Diluted EPS $9.55 - $10.15 Adjusted Diluted EPS2 $10.40 - $11.00 Share Repurchases3 Approximately $1B Free Cash Flow2 $1.9B - $2.1B
Slide 14: President and CEO; Chief Financial Officer
PRESIDENT AND CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
Slide 15: Appendix
Second Quarter 2024 - Earnings Cal
Slide 16: Revenue and Adjusted Operating Margin
REVENUE ADJUSTED OPERATING MARGIN
Slide 17: MA: ARR Growth Sustained at 10%
MA: ARR! Growth Sustained at 10% $802M $3.1B REVENUE? 7% ° . Banking 10% DECISION SOLUTIONS 13% 11% ° 5 Insurance 4% RESEARCH & INSIGHTS 6% 13% 7% DATA & INFORMATION 10% KYC 7% TOTAL MA 10% RR growth as of June 30, 2024. Refer to the Appendix for the definition of and further information on ARR. ARR
Slide 18: MA ARR Growth Attribution and Growth by Quarter
MA ARR1 GROWTH ATTRIBUTION 7% 9% 110% 94% As of June 30, 2024 Retained Base Upgrades and Price New Sales Business Base 7% 9% 110% Year-end 94% 2023 Retained Base Upgrades and Price New Sales Business Base 94% 7% 9% 110% Year-end 2022 Retained Base Upgrades and Price New Sales Business Base MA ARR1 G
Slide 19: MA Revenue Mix and Distribution
Decision Solutions Research & Insights Data & Information Revenue: Mix by Quarter Revenue: Distribution by Line of Business Revenue: Mix by Year $900 $3,200 26% 26% 25% 26% 26% 26% 26% 27% 26% $789 $200 $205 $212 $210 $2,400 $712 $600 $180 $188 $196 $178 $176 $698 $ Millions $ Millions 30% 29% 29% 2
Slide 20: MIS Revenue and Adjusted Operating Margin
REVENUE ISSUANCE2 47% ADJUSTED OPERATING MARGIN 730bps
Slide 21: Macroeconomic Assumptions, Tailwinds and Headwinds
MACROECONOMIC ASSUMPTIONS1 TAILWINDS Real GDP2: U.S.: 1.5% - 2.5%; Euro area: 0.5% - 1.5%; Global: 2.0% - 3.0% Central banks to cut rates as inflation eases in the latter half of the year Global policy rates to remain elevated, with gradual rate reductions ~$4.4T of refinancing needs between 2024 an
Slide 22: Global Issuance and MIS Revenue Mix
4 Global Issuance2: Mix by Quarter MIS Revenue3: Mix by Year Other Investment Grade Speculative Grade Bank Loans $2,500 Global Non-Financial Speculative-Grade Bonds Global Non-Financial Investment-Grade Bonds $2,000 $500 $287 $606 $ Millions $1,500 $313 $352 $411 $292 $379 $275 $400 $1,000 $258 $150
Slide 23: MIS Revenue Distribution by Geography and Product
MIS Revenue1: Distribution by Geography Non-U.S. U.S. MIS Revenue1: Distribution by Recurring vs. Transaction Transaction Recurring 25% 26% 38% 39% 35% 35% 38% 39% 37% 45% 50% 65% 68% 63% 66% 69% 65% 67% 68% 65% 70% 70% 75% 74% 62% 61% 65% 65% 62% 61% 63% 55% 50% 35% 32% 37% 34% 31% 35% 33% 32% 35%
Slide 24: Financial Institutions Issuance and Revenue
Global Issuance2: Mix by Quarter MIS Revenue3: Mix by Year Banking Insurance Managed Investments Other 4 Global Speculative Grade Financial Corporate Bonds $750 Global Investment Grade Financial Corporate Bonds $700 $10 $10 $36 $12 $500 $12 $28 $13 $32 $13 $145 $28 $52 $25 $123 $ Millions $600 $25 $
Slide 25: MIS Revenue Distribution: Financial Institutions
MIS Revenue1,2: Distribution by Geography Non-U.S. U.S. MIS Revenue1: Distribution by Recurring vs. Transaction Transaction Recurring 41% 41% 37% 41% 50% 43% 47% 45% 44% 49% 46% 50% 51% 50% 50% 53% 55% 58% 57% 55% 53% 62% 59% 59% 59% 63% 59% 50% 57% 53% 55% 56% 51% 54% 50% 50% 47% 45% 42% 43% 49% 50
Slide 26: Public, Project and Infrastructure Finance Issuance and Revenue
Global Issuance2: Mix by Quarter MIS Revenue3: Mix by Year Public Finance and Sovereign Project & Infrastructure Finance Global Non-Financial Speculative-Grade Bonds $600 Global Non-Financial Investment-Grade Bonds $100 $3 $400 $ Millions $2 $246 $277 $9 $224 $271 $234 $206 $80 $200 $3 $222 $250 $24
Slide 27: MIS Revenue Distribution: Public and Project Finance
MIS Revenue1: Distribution by Geography Non-U.S. U.S. MIS Revenue1,2: Distribution by Recurring vs. Transaction Transaction Recurring 33% 33% 34% 32% 29% 39% 39% 42% 37% 46% 45% 64% 62% 60% 62% 59% 65% 60% 61% 61% 61% 64% 67% 67% 66% 68% 71% 61% 61% 58% 63% 54% 55% 36% 38% 40% 38% 41% 35% 40% 39% 39
Slide 28: Structured Finance Revenue Mix
MIS Revenue1: Mix by Year ABS RMBS CMBS Structured Credit Other MIS Revenue1: Mix by Quarter ABS RMBS CMBS Structured Credit Other $600 $200 $2 $2 $2 $450 $4 $215 $150 $3 $196 $140 $1 $2 $1 $ Millions $ Millions $148 $129 $1 $1 $50 $105 $100 $36 $1 $300 $1 $102 $39 $98 $34 $31 $32 $34 $78 $60 $32 $8
Slide 29: MIS Revenue Distribution: Structured Finance
MIS Revenue1: Distribution by Geography Non-U.S. U.S. MIS Revenue1,2: Distribution by Recurring vs. Transaction Transaction Recurring 41% 43% 48% 42% 50% 52% 55% 53% 52% 53% 53% 63% 62% 59% 64% 65% 62% 67% 68% 67% 67% 70% 59% 57% 52% 58% 50% 48% 45% 47% 48% 47% 47% 37% 38% 41% 36% 35% 38% 33% 32% 33
Slide 30: MCO: Balancing Strategic Investments and Expense Management
MCO: Balancing Strategic Investments and Expense Management FY 2023 vs. FY 2024F' Increase in the high-single- 5.0-5.5% 1.5-2.0% 1.0 - 1.5% percent range ~2.59 —— 2.0- 2.5% — 2%) $3.8B FY 2023 Incentive & Operating Growth, Depreciation and Restructuring Charges related to FY 2024F Operating Expenses
Slide 31: Dial In Replay
DIAL IN REPLAY AVAILABLE FROM July 23, 2024, through August 22, 2024. → → → → → → → → → 31
Slide 32: Upcoming Investor Conferences
Oppenheimer Technology, Internet & Communications Conference Goldman Sachs Communacopia + Technology Conference Barclays Global Financial Services Conference UBS Fintech One-on-one Conference
Slide 33: Second Quarter 2024 Earnings Call
Second Quarter 2024 - Earnings Call
Slide 34: Glossary of Terms and Abbreviations
Glossary of Terms and Abbreviations Term Definition CFG Corporate finance group; an LOB within MIS D&l The Data & Information LOB within MA, which provides vast data sets on companies and securities via data feeds and data applications products The Decision Solutions LOB within MA that provides SaaS
Slide 35: Annualized Recurring Revenue (ARR) Definition
The Company presents Annualized Recurring Revenue (“ARR”) on a constant currency organic basis for its MA business as a supplemental performance metric to provide additional insight on the estimated value of MA's recurring revenue contracts at a given point in time. The Company uses ARR to manage an
Slide 36: Revenue and Adjusted Operating Income by Segment
The table below shows revenue and Adjusted Operating Income by reportable segment. Adjusted Operating Income is a financial metric utilized by the Company’s chief operating decision maker to assess the profitability of each reportable segment.
Slide 37: Adjusted Operating Income and Margin Reconciliation
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 impact of: i) depreciation and amortization; ii) restru
Slide 38: Free Cash Flow Reconciliation
The Company defines Free Cash Flow as net cash provided by operating activities minus cash paid for capital additions. Management believes that Free Cash Flow is a useful metric in assessing the Company’s cash flows to service debt, pay dividends and to fund acquisitions and share repurchases. Manag
Slide 39: Adjusted Net Income and Adjusted Diluted EPS
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. Adjusted Net Income and Adjusted Diluted EPS exclude the impact of: i) amortization of acquired intangibl
Slide 40: Constant Currency Revenue Growth
The Company presents constant currency revenue growth (decline) as its non-GAAP measure of revenue growth (decline). Management deems this measure to be useful in providing additional perspective in assessing the Company's revenue growth (decline) excluding the impacts of changes in foreign exchange
Slide 41: Moody's Copyright and Credit Ratings Notice
© 2024 Moody's Corporation, Moody's Investors Service, nc., Moody's Analytics, Ine. and/or their licensors and affiliates (collectively, “MOODY'S”. All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIE