Slide 1: First Quarter 2021 Earnings Call
First Quarter 2021 Earnings Call April 28, 2021
Slide 2: Introduction
Introduction Shivani Kak Head of Investor Relations Moody’s | Better decisions First Quarter 2021 - Earnings Call, April 2021 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 business and operations of Moody’s Corporation (the “Company”) that involve a number of risks and uncertainties. Such statements may include, among
Slide 4: Overview & 1Q 2021 Results
Overview & 1Q 2021 Results Rob Fauber President and Chief Executive Officer Moody’s | Better decisions First Quarter 2021 - Earnings Call, April 2021 4
Slide 5: Executive Summary
Executive Summary » Strong quarterly financial results: MCO revenue of $1.6 billion, up 24%; adjusted diluted EPS of $4.06, up 49%1 » MIS revenue growth accelerated by robust leveraged finance issuance, opportunistic refinancing and increased M&A activity » MA's focus on recurring revenue continues
Slide 6: 1Q 2021: Revenue Growth Drove Significant Margin and EPS Expansion
1Q 2021: Revenue Growth Drove Significant Margin and EPS Expansion » MCO revenue increased 24%, driven by 30% growth from MIS and 14% growth from MA » Adjusted operating income up 41%; adjusted operating margin of 57.1%, up 680 bps1 » Adjusted diluted EPS of $4.06, up 49%1 MCO Revenue MCO Adjusted O
Slide 7: Leveraged Loans and High Yield Bonds Led the Strongest First Quarter Issuance in a Decade
Leveraged Loans and High Yield Bonds Led the Strongest First Quarter Issuance in a Decade MIS Rated Issuance – Historical First Quarters 1Q 2021 Issuance Year-Over-Year Growth 2,000 Leveraged Loans 94% 1,500 $~1,300 High Yield Bonds 85% $ Billions 1,000 Structured Finance 67% 500 Financial Instituti
Slide 8: Improving Default Outlook and Tight Spreads Create Supportive Issuance Environment
Improving Default Outlook and Tight Spreads Create Supportive Issuance Environment High Yield Bond Spreads2 Default Rates for Speculative-Grade Corporate Rated Issuance1 U.S. 10 Year Treasury U.S. HY Yield (%) U.S. HY Spread (%) 12% Global U.S. Europe 10% 16% 8% 6% 14% 4% 4.8% U.S. HY Spread average
Slide 9: GDP Growth Supports Long-Term Issuance Expansion
GDP Growth Supports Long-Term Issuance Expansion U.S. Corporate Issuance1 and Nominal GDP2 2,000 25,000 20,000 1,500 15,000 $ Billions $ Billions 1,000 10,000 500 5,000 - - 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F Issuance (L) Nominal GDP (R) 1. MIS rated issuance, excludes sove
Slide 10: FY 2021 Issuance Outlook Above Historical Levels
FY 2021 Issuance Outlook Above Historical Levels Decline in the 6,000 low-single-digit % range 2021F issuance is expected $4,900 to be 10% - 13% above the 5,000 2016 - 2020 average $4,100 4,000 $ Billions 3,000 2,000 1,000 - 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F1 Total MIS Rated Is
Slide 11: Strong MA Organic Revenue Growth Across Multiple Products and Solutions
Strong MA Organic Revenue Growth Across Multiple Products and Solutions Credit Research and Data Feeds KYC and Compliance Insurance and Asset Management 12%1 24%2 18%1 $ Millions $ Millions 8%1 $ Millions 20%2 198 50 40 29%2 177 34 164 34 25 21 1Q19 1Q20 1Q21 1Q19 1Q20 1Q21 1Q19 1Q20 1Q21 Strong ret
Slide 12: Strategic Focus: Collaborate, Modernize and Innovate
Strategic Focus: Collaborate, Modernize and Innovate ESG & Climate Offerings Automated Financial Sentiment Analysis and Technology » Climate adjusted transition Spreading Scoring Capabilities Infrastructure and physical risk scores » QUIQspread: Next generation » AI enabled media monitoring » New pl
Slide 13: Invest with Intent: Successful Integration of Recent M&A
Invest with Intent: Successful Integration of Recent M&A RDC Acquire Media Catylist ZM Financial » High quality data » Enriched screening » Expansion of Catylist » Joining treasury, paired with automation and surveillance into new markets accounting and and machine learning solutions for KYC enhance
Slide 14: 1Q 2021 Analysis & FY 2021 Outlook
1Q 2021 Analysis & FY 2021 Outlook Mark Kaye Chief Financial Officer Moody’s | Better decisions First Quarter 2021 - Earnings Call, April 2021 14
Slide 15: MIS: Robust Issuance Drove Results
MIS: Robust Issuance Drove Results MIS Revenue Issuance1 $1,036 YoY Change $10 $ Billions $794 21% $116 $1,784 $1,451 $11 $143 31% $96 1Q20 1Q21 $162 30% $ Millions $109 $125 MIS Adjusted Operating Income and Margin 60.5% +720 bps 67.7% $605 34% $ Millions $453 $245 ($20) $728 $503 1Q20 1Q21 1Q20 MI
Slide 16: MA: Strong Revenue and Margin Growth
MA: Strong Revenue and Margin Growth MA Revenue MA Adjusted Operating Income and Margin YoY $564 Change +360 bps $496 32.9% $145 29.3% 5% $138 $68 $ Millions ($28) $ Millions $419 $186 $358 17% $146 1Q20 1Q21 1Q20 MA Adjusted MA Revenue MA Expense 1Q21 MA Adjusted Operating Income Increase 2 Increas
Slide 17: Adjusted Diluted EPS: Operating Leverage Drove 1Q Growth
Adjusted Diluted EPS1: Operating Leverage Drove 1Q Growth » MIS operating performance drove first quarter adjusted diluted EPS growth » Non-operating activities2 contributed ~10% to adjusted diluted EPS growth ~$0.02 ~$0.28 ~$0.09 ~$0.94 $4.06 $2.73 1Q20 Operating Growth Non-operating Activities2 FX
Slide 18: FY 2021 Corporate-Level Guidance
FY 2021 Corporate-Level Guidance1 Revenue Increase in the high-single-digit % Macro assumptions underpinning our guidance4 range Expenses Increase in the mid-single-digit % range 2021 GDP Benchmark interest rates remain low; U.S. high yield Adjusted Operating Margin2 Approximately 50% spreads below
Slide 19: Improvement in Issuance Outlook Driven by Leveraged Loans
Improvement in Issuance Outlook1,2 Driven by Leveraged Loans FY 2021 Issuance Guidance1,2 » Full year issuance expected to decline in the Decline in the Total Issuance3 low-single- low-single-digit percent range digit % range – Impact from potential U.S. infrastructure Investment legislation not ass
Slide 20: FY 2021 Segment-Level Guidance
FY 2021 Segment-Level Guidance1 MIS Revenue1 MIS Adjusted Operating Margin1 MA Revenue1 MA Adjusted Operating Margin1 Low-double- Mid-single-digit Approximately digit % increase Approximately % increase 59.7% 61% $2.1B $3.3B 29.4% 30% 2020 2021F 2020 2021F 2020 2021F 2020 2021F » Raised revenue guid
Slide 21: Disciplined Expense Management Enables Key Strategic Investments
Disciplined Expense Management Enables Key Strategic Investments 1Q21 vs. 1Q20 ~3.0% Flat ~7.0% ~5.0% ~1.0% ~1.5% (~3.5%) $ Millions $747 $698 1Q20 Incentive and Stock FX Strategic Investments Acquired & Divested Operating Growth Lower Bad Debt 1Q21 Operating Expenses Compensation Companies1 Operati
Slide 22: Key Takeaways
Key Takeaways » Solid execution coupled with robust issuance led to strong 1Q 2021 performance » Ongoing innovation furthers our integrated risk assessment strategy and enables our customers to make better decisions » Disciplined expense management while focusing on reinvestment into key strategic a
Slide 23: Questions and Answers
Questions and Answers Rob Fauber President and Chief Executive Officer Mark Kaye Chief Financial Officer
Slide 24: Moody's Attendance at Upcoming Conferences
Moody’s Attendance at Upcoming Conferences MAY Credit Suisse eXtreme Services Conference 7 » Mark Kaye, Chief Financial Officer MAY Morgan Stanley Business Services One-on-One Day 13 » David Platt, SVP and Chief Strategy Officer MAY Barclays Americas Select Conference 18 » Rob Fauber, President and
Slide 25: Replay Details
Replay Details Available from 3:30pm (Eastern Time) April 28, 2021 until 3:30pm (Eastern Time) May 27, 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 8834896 » Click on th
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 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 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: 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 the operating performance of Moody’s. Adjusted Operating Income exclu
Slide 30: 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 31: Organic Revenue and Growth Measures – MA, RD&A and ERS
Organic Revenue and Growth Measures – MA, RD&A and ERS The Company presents organic revenue and organic revenue Acquisition Acquisition Date Period excluded to determine organic revenue growth growth because management deems this metric to be a useful Regulatory DataCorp February 13, 2020 January 1,
Slide 32: Organic Revenue and Growth Measures – KYC and Compliance, and Insurance and Asset Management
Organic Revenue and Growth Measures – KYC and Compliance, and Insurance and Asset Management Three Months Ended March 31, Three Months Ended March 31, Amounts in millions 2021 2020 Change Growth 2020 2019 Change Growth KYC and Compliance Revenue $ 50 $ 34 $ 16 47% $ 34 $ 21 $ 13 62% Regulatory DataC
Slide 33: 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 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) Three Months Ended March 31, 2021 2020 Diluted earnings per share attributable to Moody's common shareholders $ 3.90 $ 2.57 Pre-tax Acquisition-Related Intangible Amortization Expenses
Slide 35: Moody's Legal Notices
© 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