Moody's Corporation · NYSE:MCO
Moody's — Q2 2022 Earnings Presentation
45 slides from Moody's's earnings presentation, Jul 26, 2022
Slide 1: Second Quarter 2022 Summary
SECOND QUARTER 2022 SUMMARY Moody’s Corporation (MCO) Revenue Moody’s Investors Service (MIS) Revenue Moody’s Analytics (MA) Revenue MCO Diluted EPS MCO Adjusted Diluted EPS 1 MCO FY 2022 Projected 1 “In times of heightened uncertainty, our customers rely on Moody’s unparalleled global insights and
Slide 2: Revenue
REVENUE Moody’s Corporation (MCO)
Slide 3: Quarterly Revenue ($ millions)
Quarterly Revenue ($ millions) $1,553 2Q 2021 2Q 2022 Emus Mma
Slide 4: Second Quarter 2022 Year-to-Date 2022 Revenue Commentary
Second Quarter 2022 Year-to-Date 2022 • Revenue declined 11% and 13% on a reported and organic constant currency basis 1 , respectively, from the prior-year period. • Foreign currency translation unfavorably impacted Moody's revenue by 3%. • Revenue declined 8% and 11% on a reported and organic cons
Slide 5: Moody's Investors Service (MIS)
Moody’s Investors Service (MIS)
Slide 6: MIS Quarterly Revenue ($ millions)
Quarterly Revenue ($ millions) $980 2Q 2021 2Q 2022 I Corporate Finance I Structured Finance I Financial Institutions {) Public, Project and Infrastructure Finance BB Mis Other
Slide 7: MIS Year-to-Date Revenue ($ millions)
Year-to-Date Revenue ($ millions) $2,016 YTD 2021 YTD 2022 I Corporate Finance I Structured Finance I Financial Institutions {) Public, Project and Infrastructure Finance BB Mis Other
Slide 8: MIS Quarterly Recurring & Transaction Revenue
Quarterly Recurring & Transaction Revenue 42% 0% 2Q 2021 2Q 2022 Hi Recurring [ll Transaction
Slide 9: MIS Year-to-Date Recurring & Transaction Revenue
Year-to-Date Recurring & Transaction Revenue 29% Ooi YTD 2021 YTD 2022 HB Recurring Transaction
Slide 10: Moody's
Mooby’s
Slide 11: Quarterly Changes in Rated Issuance Volumes & Revenue
Quarterly Changes in Rated Issuance Volumes & Revenue (62) Total MIS (28)% | Co, Investment Grade G3 42) Leveraged Loans 64), High Yield Bond: ae neon 75) Ea | o> Structured Finance meres (12)% ‘nancial institut 9% Financial Institutions (15% Public, Project and (13)% || Infrastructure Finance oo» i
Slide 12: MIS Second Quarter and Year-to-Date 2022 Commentary
Second Quarter 2022 Year-to-Date 2022 • Revenue declined 28% against a record prior-year period. • Issuance, particularly for leveraged loans and high yield bonds, was dampened due to volatile market conditions. • Investment grade activity decreased due to lower opportunistic refinancing. • Foreign
Slide 13: Moody's Analytics (MA)
Moody’s Analytics (MA)
Slide 14: MA Quarterly Revenue ($ millions)
Quarterly Revenue ($ millions) $675 2Q 2021 2Q 2022 IB Decision Solutions __ [lJ Research & Insights I Data & Information
Slide 15: MA Year-to-Date Revenue ($ millions)
Year-to-Date Revenue ($ millions) $1,370 YTD 2021 YTD 2022 EB Decision Solutions __ [lJ Research & Insights I Data & Information
Slide 16: MA Quarterly Recurring & Transaction Revenue
Quarterly Recurring & Transaction Revenue 2Q 2021 2Q 2022 IB Recurring Transaction
Slide 17: MA Second Quarter and Year-to-Date 2022 Commentary
Second Quarter 2022 Year-to-Date 2022 • Revenue grew 18% from the prior-year period, driven by the RMS acquisition, as well as sustained demand for Know Your Customer solutions and credit research. • Organic constant currency revenue 1 growth was 8%. Foreign currency translation unfavorably impacted
Slide 18: Operating Expenses
OPERATING EXPENSES Operating Expenses
Slide 19: Quarterly Operating Expense Drivers ($ millions)
Quarterly Operating Expense Drivers ($ millions) 4% % fo 4% $873 12% | | | T T T T T 2Q 2021 Acquired Operating Growth, Restructuring FX 2Q 2022 Operating Companies Including Organic Charges Operating Expenses Investments and Expenses Efficiencies
Slide 20: Operating Expenses Second Quarter and Year-to-Date 2022
Second Quarter 2022 Year-to-Date 2022 • Operating expense growth of 16% from the prior-year period was primarily due to acquisitions completed in the prior twelve months. • 2022 - 2023 Geolocation Restructuring Program to accelerate ongoing cost efficiency initiatives, including the utilization of l
Slide 21: Operating Margin and Adjusted Operating Margin
Operating Margin and Adjusted Operating Margin 1
Slide 22: Quarterly MCO Operating Margin & Adjusted Operating Margin
Quarterly MCO Operating Margin & Adjusted Operating Margin Operating Margin Adjusted Operating Margin i 20 2021 2Q 2022
Slide 23: Year-to-Date MCO Operating Margin & Adjusted Operating Margin
Year-to-Date MCO Operating Margin & Adjusted Operating Margin Operating Margin Adjusted Operating Margin YTD 2021 {i YTD 2022
Slide 24: Quarterly MIS & MA Adjusted Operating Margin
Quarterly MIS & MA Adjusted Operating Margin MIS MA i 20 2021 2Q 2022
Slide 25: Operating Margin Second Quarter and Year-to-Date 2022
Second Quarter 2022 Year-to-Date 2022 • MCO’s adjusted operating margin 1 decreased from the prior-year period, primarily driven by lower MIS transaction revenue related to subdued market activity. Foreign currency translation unfavorably impacted adjusted operating income 1 by 2%. • Recent acquisit
Slide 26: Earnings Per Share
EARNINGS PER SHARE Diluted Earnings Per Share (EPS) and Adjusted Diluted EPS 1
Slide 27: Quarterly EPS
Quarterly EPS Diluted EPS Adjusted Diluted EPS i 20 2021 2Q 2022
Slide 28: EPS Second Quarter and Year-to-Date 2022
Second Quarter 2022 Year-to-Date 2022 • The decline in EPS from the prior-year period reflected the adverse impact of a cyclical disruption in the issuance markets, partially offset by robust demand for MA’s global integrated risk assessment offerings. • The effective tax rate was 26.2%, up from 23.
Slide 29: Capital Allocation and Liquidity
CAPITAL ALLOCATION AND LIQUIDITY Capital Returned to Shareholders & Free Cash Flow 1
Slide 30: Quarterly Capital Return
Quarterly Capital Return ($ millions) $487 2Q 2021 2Q 2022 I Share Repurchases I Dividends
Slide 31: Year-to-Date Capital Return
Year-to-Date Capital Return ($ millions) $1,130 YTD 2021 YTD 2022 I Share Repurchases I Dividends
Slide 32: Cash Flow, Dividend, Repurchases and Debt
• Cash flow from operations for the first half of 2022 was $761 million and free cash flow 1 was $628 million. • The decline in free cash flow was driven by lower net income, primarily attributable to significantly lower market issuance and increased investment in key organic growth initiatives. • O
Slide 33: Assumptions and Outlook
ASSUMPTIONS AND OUTLOOK Forecasted Item Current assumption Last publicly disclosed assumption TELECONFERENCE DETAILS ‘ ‘ ‘ ‘ Moody’s updated outlook for full year 2022, as of July 26, 2022, reflects assumptions about numerous factors that could affect its business and is based on currently available
Slide 34: About Moody's Corporation / Safe Harbor Statement
ABOUT MOODY’S CORPORATION “SAFE HARBOR” STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Moody’s (NYSE: MCO) is a global integrated risk assessment firm that empowers organizations to make better decisions. Its data, analytical solutions and insights help decision-makers identify
Slide 35: Table 1 - Consolidated Statements of Operations
Three Months Ended June 30, Six Months Ended June 30, Amounts in millions, except per share amounts 2022 2021 2022 2021 Table 1 - Consolidated Statements of Operations (Unaudited) Revenue $ 1,381 $ 1,553 $ 2,903 $ 3,153 Expenses: Operating 393 365 810 758 Selling, general and administrative 368 327
Slide 36: Condensed Consolidated Balance Sheet Data
Amounts in millions June 30, 2022 December 31, 2021 Table 2 - Condensed Consolidated Balance Sheet Data (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 1,617 $ 1,811 Short-term investments 86 91 Accounts receivable, net of allowance for credit losses of $46 in 2022 and $32 in 2021 1,6
Slide 37: Table 3 - Non-Operating (Expense) Income, Net
Three Months Ended June 30, Six Months Ended June 30, Amounts in millions 2022 2021 2022 2021 Table 3 - Non-Operating (Expense) Income, Net (Unaudited) Interest: Expense on borrowings $ (50) $ (41) $ (98) $ (82) UTPs and other tax related liabilities (1) (3) (5) (6) 30 Net periodic pension costs - i
Slide 38: Table 4 - Financial Information by Segment
Three Months Ended June 30, 2022 2021 Amounts in millions MIS MA Eliminations Consolidated MIS MA Eliminations Consolidated Six Months Ended June 30, 2022 2021 Amounts in millions MIS MA Eliminations Consolidated MIS MA Eliminations Consolidated Table 4 - Financial Information by Segment (Unaudited)
Slide 39: Table 5 - Adjusted Operating Income and Adjusted Operating Margin
Three Months Ended June 30, Six Months Ended June 30, Amounts in millions 2022 2021 2022 2021 Six Months Ended June 30, Amounts in millions 2022 2021 Table 5 - Adjusted Operating Income and Adjusted Operating Margin (Unaudited) The Company presents Adjusted Operating Income and Adjusted Operating Ma
Slide 40: Table 7 - Organic Constant Currency Revenue Growth
Three Months Ended June 30, Six Months Ended June 30, Amounts in millions 2022 2021 Change Growth 2022 2021 Change Growth Table 7 - Organic Constant Currency Revenue Growth (Decline)/ Constant Currency Revenue Growth (Decline) (Unaudited) Beginning in the second quarter of 2022, the Company began pr
Slide 41: Table 8 - Key Performance Metrics - Annualized Recurring Revenue
Amounts in millions June 30, 2022 June 30, 2021 Change Growth Table 8 - Key Performance Metrics - Annualized Recurring Revenue (Unaudited) The Company presents Annualized Recurring Revenue (“ARR”) and Organic ARR for its MA business as supplemental performance metrics to provide additional insight o
Slide 42: Table 9 - Adjusted Net Income and Adjusted Diluted EPS
Three Months Ended June 30, Six Months Ended June 30, Amounts in millions 2022 2021 2022 2021 Table 9 - Adjusted Net Income and Adjusted Diluted EPS Attributable to Moody's Common Shareholders (Unaudited) The Company presents Adjusted Net Income and Adjusted Diluted EPS because management deems thes
Slide 43: Table 9 - Adjusted Net Income and Adjusted Diluted EPS Continued
Three Months Ended June 30, Six Months Ended June 30, Amounts in millions 2022 2021 2022 2021 Table 9 - Adjusted Net Income and Adjusted Diluted EPS Attributable to Moody's Common Shareholders (Unaudited) Continued Diluted earnings per share attributable to Moody's common shareholders $ 1.77 $ 3.07
Slide 44: Table 10 - 2022 Outlook
Full Year 2022 Moody's Corporation Guidance as of July 26, 2022 MOODY'S CORPORATION Current guidance Last publicly disclosed guidance Moody's Investors Service (MIS) Current guidance Last publicly disclosed guidance Moody's Analytics (MA) Current guidance Last publicly disclosed guidance Table 10 -
Slide 45: Table 10 - 2022 Outlook Continued
Projected for the Year Ended December 31, 2022 Projected for the Year Ended December 31, 2022 Projected for the Year Ended December 31, 2022 Table 10 - 2022 Outlook Continued The following are reconciliations of the Company's adjusted forward looking measures to their comparable U.S. GAAP measure: O