Slide 1: Investor Presentation 4Q and Full Year 2016
Investor Presentation 4Q and Full Year 2016 February 23, 2017
Slide 2: Disclaimer
Disclaimer Certain statements contained in this presentation 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 presentation are made as
Slide 3: Table of Contents
Table of Contents 1. Financial Overview 2. Capital Markets Overview 3. Moody’s Investors Service (MIS) 4. Moody’s Analytics (MA) 5. Conclusion 6. Appendix February 23, 2017 3
Slide 4: Moody's Mission: To be the World's Most Respected Authority
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Mission: To be the World’s Most Respected Authority Serving Risk-Sensitive Financial Markets Risk Understanding Risk Understanding Risk Understanding Risk Risk
Slide 5: Financial Overview
1 Financial Overview February 23, 2017 5
Slide 6: Overview of Moody's Corporation
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Overview of Moody’s Corporation » Leading global provider of credit rating opinions, insight and tools for financial risk measurement and management » Revenue of $3.6
Slide 7: Revenue is Diversified by Business, Geography and Type
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Revenue is Diversified by Business, Geography and Type Revenue by Business Revenue by Geography MIS MA U.S. Non-U.S. Public, Project & MIS Other 1% Asia-Pacific Infras
Slide 8: Financial Performance
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Financial Performance Revenue EPS1 $5.15 to Mid-single- $5.50 $5.30 $5.0 digit $5.00 % growth $4.0 $4.50 $ Billions $3.0 $4.00 $3.50 $4.81 $2.0 $4.60 $3.00 $4.21 $3.65
Slide 9: Long-Term Growth Opportunities
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Long-Term Growth Opportunities Three Levers to Achieve EPS Growth Note: Revenue and EPS long-term growth opportunities are on average over time. 1 Assumes no material
Slide 10: Global Trends Present Opportunities and Risks
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Global Trends Present Opportunities and Risks Unusual Monetary Conditions » Gradual U.S. rate normalization » QE / NIRP in other advanced economies » Potential U.S. po
Slide 11: All Areas of the Company Undertaking Actions to Actively Manage Expense Growth
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix All Areas of the Company Undertaking Actions to Actively Manage Expense Growth Moody’s Investors Service Moody’s Analytics Moody’s Shared Services » Revised organizati
Slide 12: Moody's has a Disciplined Approach to Capital Allocation
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s has a Disciplined Approach to Capital Allocation Investing in Growth Opportunities Return of Capital Reinvestment Acquisitions Dividends Share Repurchases » In
Slide 13: Full Year 2017 Guidance as of February 17, 2017
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Full Year 2017 Guidance as of February 17, 2017 » Revenue: Increase in the mid-single-digit % range » Operating Expense: Decrease in the 25% - 30% range » Adjusted Ope
Slide 14: Capital Markets Overview
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Slide 15: Historically, Rising Rates Have not had a Significant Impact on Moody's Revenue
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Historically, Rising Rates Have not had a Significant Impact on Moody’s Revenue MCO Revenue and Interest Rates 1 MIS Revenue MA Revenue MCO Revenue 10-yr U.S. Treasury
Slide 16: Although U.S. Interest Rates Have Risen, Spreads Have Tightened
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Although U.S. Interest Rates Have Risen, Spreads Have Tightened 10 Year U.S. Treasury Yield 4% 3% +1.1% 2.5% 2% 1% 0% Bond Spreads Bond Yields U.S. Investment Grade U.
Slide 17: Outside of Commodities, Default Rates are Contained
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Outside of Commodities, Default Rates are Contained U.S. Speculative Grade Default Rates1 Default Rates for Global Corporate Rated Issuance2 2015 2016 5.0% High Yield
Slide 18: North America and EMEA Non-Financial Corporates Have Over $3.3 Trillion of Refunding Needs
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix North America and EMEA Non-Financial Corporates Have Over $3.3 Trillion of Refunding Needs1 Debt Maturities: North America Moody’s-Rated Corporate Bonds and Loans $300
Slide 19: Debt Refinancing and M&A are Most Frequently Stated Uses of Proceeds
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Debt Refinancing and M&A are Most Frequently Stated Uses of Proceeds Uses of Funds from USD High Yield Bonds and Bank Loans1 Debt Refinancing M&A Capital Spending Shar
Slide 20: Disintermediation of Credit is an Ongoing Trend in the Global Capital Markets
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Disintermediation of Credit is an Ongoing Trend in the Global Capital Markets European Non-Financial Corporate U.S. Non-Financial Corporate Bonds vs. Bank Loans Outsta
Slide 21: Rated Bank Loan Issuance Continues to Grow
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Rated Bank Loan Issuance Continues to Grow U.S. Corporate Speculative-Grade Bank Loans1 Rated (L) Unrated (L) $800 74% 75% 80% 70% 59% 59% 57% $600 52% 54% 60% $ Billi
Slide 22: Disintermediation is a Key Driver of Moody's Global New Rating Mandates
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Disintermediation is a Key Driver of Moody’s Global New Rating Mandates Global New Rating Mandates1 EMEA United States Rest of World 1,200 1,026 990 854 # of New Manda
Slide 23: Moody's Investors Service
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Slide 24: Moody's Investors Service: A Leading Provider of Credit Ratings, Research and Risk Analysis
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Investors Service: A Leading Provider of Credit Ratings, Research and Risk Analysis Proven rating accuracy Focus on research and deeply experienced leadership
Slide 25: Illustrative Value of a Moody's Rating
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Illustrative Value of a Moody’s Rating Example: 10 year $500 million corporate bond Unrated Rated by Moody’s $500,000,000 Bond $500,000,000 x 4.3% Interest rate x 4.0%
Slide 26: Moody's Continues to Invest in Key International Markets
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Continues to Invest in Key International Markets Americas Emerging Markets Rated Corporate Bond Issuance1 » 2015: Acquired 100% of $350 Equilibrium EMEA $300 »
Slide 27: Moody's Investors Service Financial Profile
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Investors Service Financial Profile FY 2016 Revenue: $2.4 billion » 32% recurring revenue Recurring Transaction U.S. Non-U.S. MIS Other 1% Public, 37% Corporat
Slide 28: Moody's Analytics
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Slide 29: Moody's Analytics Provides Essential Insight Serving Global Financial Markets
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Analytics Provides Essential Insight Serving Global Financial Markets Research Data & Analytics Enterprise Risk Solutions Professional Services » MIS research
Slide 30: Moody's Analytics Financial Profile
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Analytics Financial Profile FY 2016 Revenue: $1.2 billion Recurring Transaction U.S. Non-U.S. » > 95% recurring revenue » 95% retention rate 25% Research, 51%
Slide 31: Moody's Analytics has Multiple Platforms for Growth
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Analytics has Multiple Platforms for Growth Added ~$700 Million in Revenue in 9 Years $1,400 2016 Revenue and 2008 – 2016 CAGR ~65% organic $1,200 Professional
Slide 32: RD&A: Subscription Growth Driven by Retention, Upgrades and Pricing & New Sales
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix RD&A: Subscription Growth Driven by Retention, Upgrades and Pricing & New Sales Subscription Sales Growth Reported Total (constant currency) Revenue Growth Full Year 2
Slide 33: ERS' Renewable Book Growing, but Revenue Remains Dependent on Project Timing
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix ERS’ Renewable Book Growing, but Revenue Remains Dependent on Project Timing ERS: Quarterly Revenue ERS: TTM Revenue by Type Subscriptions and Maintenance License and
Slide 34: Professional Services: Extending the Brand Into New Markets
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Professional Services: Extending the Brand Into New Markets and Deepening Relationships With Customers Financial services training » Provider of global learning capabi
Slide 35: Conclusion
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Slide 36: Why Invest in Moody's?
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Why Invest in Moody’s? » We strive to be the world’s most respected authority serving risk-sensitive financial markets » We have had strong revenue and earnings growth
Slide 37: Moody's Awards
Moody's Awards Moody's is the proud recipient of over 20 awards from publications around the world. Spanning both Moody's Investors Service and Moody's Analytics, this recognition helps expand Moody's position as a leader in the global capital markets and reflects the hard work and contributions of
Slide 38: Appendix
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Slide 39: Corporate Finance: Revenue and Issuance
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Corporate Finance: Revenue and Issuance Historical Revenue1 Mix: By Quarter Global Rated Non-Financial Bonds and $350 Speculative Grade Bank Loans (Quarterly)3 $600 $2
Slide 40: Corporate Finance: Revenue Diversification
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Corporate Finance: Revenue Diversification Revenue1 Distribution: Geography Revenue1 Distribution: Recurring vs. Transaction 100% 100% 26% 27% 30% 31% 32% 80% 80% 66%
Slide 41: Structured Finance: Revenue and Issuance
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Structured Finance: Revenue and Issuance Historical Revenue1 Mix: By Quarter Global Rated Structured Finance $140 (Quarterly)2 $1 $120 $0 $1 $250 $0 $0 $1 $42 Revenue
Slide 42: Structured Finance: Revenue Diversification
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Structured Finance: Revenue Diversification Revenue1 Distribution: Geography Revenue1 Distribution: Recurring vs. Transaction 100% 100% 80% 80% 42% 40% 38% 36% 38% 54%
Slide 43: Financial Institutions: Revenue and Issuance
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Financial Institutions: Revenue and Issuance Global Rated Financial Bonds Historical Revenue1 Mix: By Quarter (Quarterly)2 $120 $500 Issuance $ Billions $100 $0 $2 $2
Slide 44: Financial Institutions: Revenue Diversification
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Financial Institutions: Revenue Diversification Revenue1 Distribution: Geography Revenue1 Distribution: Recurring vs. Transaction 100% 100% 80% 41% 42% 40% 43% 43% 80%
Slide 45: Public, Project and Infrastructure: Revenue and Issuance
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Public, Project and Infrastructure: Revenue and Issuance Long-Term Rated U.S. Municipal Bond and Global Rated $120 Historical Revenue1 Mix: By Quarter $200 Project & I
Slide 46: Public, Project and Infrastructure: Revenue Diversification
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Public, Project and Infrastructure: Revenue Diversification Revenue1 Distribution: Geography Revenue1 Distribution: Recurring vs. Transaction 100% 100% 80% 80% 39% 40%
Slide 47: Moody's Analytics: Financial Overview
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Analytics: Financial Overview $400 Historical Revenue1 Mix: By Quarter Historical Revenue1 Mix: By Year $1,400 $350 $1,200 $37 $147 Revenue $ Millions $300 $43
Slide 48: Revenue Growth by Quarter: MCO, MIS and MA
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Revenue Growth by Quarter: MCO, MIS and MA Year-over-Year % Change MIS MA MCO Fears Euro debt crisis may 50% Oil prices crash Euro / Greece standoff Global macro conce
Slide 49: Moody's Investors Service's Recurring Revenue Provides Stability
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Investors Service’s Recurring Revenue1 Provides Stability MIS Recurring Revenue Corporate Finance Structured Finance Financial Institutions Public, Project, &
Slide 50: MIS Revenue vs. Rated Issuance
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix MIS Revenue vs. Rated Issuance1 Year-over-Year 2012-2016 2012 2013 2014 2015 2016 Percent Change CAGR Issuance 16% 0% 6% -6% 2% 3% Revenue 20% 9% 9% 3% 2% 6% Global No
Slide 51: Moody's is a Seasoned Capital Markets Issuer
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s is a Seasoned Capital Markets Issuer Public Bond Offerings » 2010: $500m 10yr bond » 2012: $500m 10yr bond Private Placement » 2013: $500m 10yr bond » 2007: $3
Slide 52: Moody's Global Presence
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Moody’s Global Presence 2016 3,387 7,230 10,617 U.S. employees non-U.S. employees total employees1 2015 3,364 7,006 10,370 U.S. employees non-U.S. employees total empl
Slide 53: Reconciliation of Adjusted Financial Measures to GAAP
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Reconciliation of Adjusted Financial Measures to GAAP Adjusted Operating Income and Adjusted Operating Margin Reconciliation (in $ millions) 2012 2013 2014 2015 2016 A
Slide 54: Reconciliation of Adjusted Financial Measures to GAAP (cont.)
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Reconciliation of Adjusted Financial Measures to GAAP (cont.) Moody's Corporation Adjusted Operating Expense Reconciliation 2017F1 Operating Expense Guidance Decreased
Slide 55: Reconciliation of Adjusted Financial Measures to GAAP (cont.)
Introduction | Financial Overview | Capital Markets Overview | Moody’s Investors Service | Moody’s Analytics | Conclusion | Appendix Reconciliation of Adjusted Financial Measures to GAAP (cont.) Moody's Corporation EBITDA Reconciliation ($ Millions) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Slide 56: Investor Relations Contact
Website: http://ir.moodys.com Email: ir@moodys.com February 23, 2017 56
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