Slide 1: Fourth Quarter and Full Year 2017 Earnings Call
Fourth Quarter and Full Year 2017 Earnings Call February 9, 2018
Slide 2: Overview
Overview Stephen Maire Global Head of Investor Relations and Communications Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 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: Agenda
Agenda 1. Fourth Quarter and Full Year 2017 Results Ray McDaniel, President and Chief Executive Officer 2. Financial Highlights Linda Huber, Executive Vice President and Chief Financial Officer 3. 2018 Outlook Ray McDaniel, President and Chief Executive Officer 4. Q&A Ray McDaniel, President and Chi
Slide 5: Investor Day, February 28, 2018, New York City
Wednesday, February 28, 2018 New York City Investor Relations ir@moodys.com +1 (212) 553-4857 Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 5
Slide 6: Fourth Quarter and Full Year 2017 Results
Fourth Quarter and 1 Full Year 2017 Results Ray McDaniel President and Chief Executive Officer
Slide 7: Fourth Quarter 2017 Results and Comparison to Fourth Quarter 2016
Fourth Quarter 2017 Results and Comparison to Fourth Quarter 2016 Moody’s Corporation » Revenue 24% to $1.2 billion » Operating Expenses1 To $703 million » Excluding the Settlement Charge, operating expenses were up 27% – includes 12 percentage points attributable to Bureau van Dijk operating ex
Slide 8: Fourth Quarter 2017 Results and Comparison (continued)
Fourth Quarter 2017 Results and Comparison to Fourth Quarter 2016 (continued) Moody’s Corporation » Operating Margin 39.7% » Adjusted Operating Margin 44.5% » Diluted EPS To $0.13 from a loss per share of $2.25 » Adjusted Diluted EPS1 20% to $1.51 1 Fourth quarter 2017 adjusted diluted EPS e
Slide 9: Full Year 2017 Results: Moody's Corporation Revenue
Full Year 2017 Results and Comparison to Full Year 2016 Moody’s Corporation Revenue » Total Global 17% to $4.2 billion » U.S. 12% to $2.3 billion » Non-U.S. 24% to $1.9 billion » Total Global Foreign currency translation favorably impacted revenue by 1% Fourth Quarter and Full Year 2017 Earn
Slide 10: Full Year 2017 Results: MIS Revenue
Full Year 2017 Results and Comparison to Full Year 2016 (continued) MIS Revenue » Total MIS 17% to $2.8 billion » U.S. 13% to $1.7 billion » Non-U.S. 23% to $1.1 billion Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 10
Slide 11: Full Year 2017 Results: MA Revenue
Full Year 2017 Results and Comparison to Full Year 2016 (continued) MA Revenue » Total MA 16% to $1.4 billion » U.S. 7% to $646 million » Non-U.S. 25% to $785 million » Organic MA 8% to $1.3 billion Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 11
Slide 12: Full Year 2017 Results: Operating Expenses and Income
Full Year 2017 Results and Comparison to Full Year 2016 (continued) Moody’s Corporation » Operating Expenses1 19% to $2.4 billion ─ There was no material impact from foreign currency translation » Excluding the Settlement Charge and restructuring charge in 2016, operating expenses were up 15% – in
Slide 13: Full Year 2017 Results: Margins and Tax Rate
Full Year 2017 Results and Comparison to Full Year 2016 (continued) Moody’s Corporation » Operating Margin 43.0% » Adjusted Operating Margin 47.3% » Effective Tax Rate1 43.6% 1 The effective tax rate for full year 2017 included a net charge in the fourth quarter related to the impacts of tax r
Slide 14: Full Year 2018 Diluted EPS and Adjusted Diluted EPS Guidance
Full Year 2018 Diluted EPS and Adjusted Diluted EPS Guidance1 Moody’s Corporation » Expect FY 2018 diluted EPS to be $7.20 to $7.40 » Expect FY 2018 adjusted diluted EPS to be $7.65 to $7.852 » Both ranges include an approximate $0.65 benefit from U.S. tax reform 1 Moody’s outlook assumes foreign cu
Slide 15: Financial Highlights
2 Financial Highlights Linda Huber Executive Vice President and Chief Financial Officer
Slide 16: Fourth Quarter 2017 Moody's Corporation Revenue
Fourth Quarter 2017 Results and Comparison to Fourth Quarter 2016 Moody’s Corporation Revenue » Total Global 24% to $1.2 billion » U.S. 15% to $614 million » Non-U.S. 35% to 551 million - 47% of total revenue » Recurring Revenue 23% to $581 million - 50% of total revenue » Total Global For
Slide 17: Fourth Quarter 2017 MIS Revenue
Fourth Quarter 2017 Results and Comparison to Fourth Quarter 2016 (continued) MIS Revenue » Total MIS 19% to $725 million » U.S. 17% to $440 million » Non-U.S. 23% to $285 million - 39% of total MIS revenue » Total MIS Foreign currency translation favorably impacted MIS revenue by 3% Fourth
Slide 18: MIS Revenue by Line of Business: Corporate and Structured Finance
Fourth Quarter 2017 Results and Comparison to Fourth Quarter 2016 (continued) MIS Revenue by Line of Business » Corporate Finance: $334 million - Global 20% - U.S. 16% - Non-U.S. 28% » Structured Finance: $148 million - Global 13% - U.S. 17% - Non-U.S. 5% Fourth Quarter and Full Year 201
Slide 19: MIS Revenue by Line of Business: Financial Institutions and Public Finance
Fourth Quarter 2017 Results and Comparison to Fourth Quarter 2016 (continued) MIS Revenue by Line of Business » Financial Institutions: $119 million - Global 34% - U.S. 36% - Non-U.S. 33% » Public, Project & Infrastructure Finance: $119 million - Global 16% - U.S. 14% - Non-U.S. 18% Four
Slide 20: Fourth Quarter 2017 MA Revenue
Fourth Quarter 2017 Results and Comparison to Fourth Quarter 2016 (continued) MA Revenue » Total MA 32% to $441 million » U.S. 10% to $174 million » Non-U.S. 51% to $267 million - 60% of total MA revenue » Organic MA 13% to $379 million » Total MA Foreign currency translation favorably imp
Slide 21: MA Revenue: Research, Data and Analytics
Fourth Quarter 2017 Results and Comparison to Fourth Quarter 2016 (continued) MA Revenue by Line of Business » Research, Data and Analytics: $258 million1 - Global 55% - U.S. 18% - Non-U.S. More than doubled to $144 million - Organic 17% 1 Bureau van Dijk’s revenue contribution of $62 millio
Slide 22: MA Revenue: Enterprise Risk Solutions
Fourth Quarter 2017 Results and Comparison to Fourth Quarter 2016 (continued) MA Revenue by Line of Business » Enterprise Risk Solutions: $143 million - Global 10% - U.S. 5% - Non-U.S. 18% Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 22
Slide 23: MA Revenue: ERS Trailing Twelve Month Sales
Fourth Quarter 2017 Results and Comparison to Fourth Quarter 2016 (continued) MA Revenue by Line of Business » ERS TTM1 Sales 7% » ERS TTM1 Product Sales 14% » ERS TTM1 Services Sales 13% » Recurring revenue represented 69% of total ERS revenue in 2017, up from 66% in the prior year 1 Trailing
Slide 24: MA Revenue: Professional Services
Fourth Quarter 2017 Results and Comparison to Fourth Quarter 2016 (continued) MA Revenue by Line of Business » Professional Services: $40 million - Global 7% - U.S. 6% - Non-U.S. 8% Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 24
Slide 25: Fourth Quarter 2017 Operating Expenses and Margins
Fourth Quarter 2017 Results and Comparison to Fourth Quarter 2016 (continued) Moody’s Corporation » Operating Expenses1 To $703 million – Foreign currency translation unfavorably impacted expenses by 1% » Excluding the Settlement Charge, operating expenses were up 27% – includes 12 percentage poin
Slide 26: Capital Allocation
Capital Allocation Fourth Quarter 2017 » Repurchased 0.2 million shares at a total cost of $36 million, or an average cost of $146.85 per share » Issued 0.1 million shares as part of employee stock-based compensation plans » Returned $73 million to shareholders via dividend payments Dividend Announc
Slide 27: Capital Allocation (continued)
Capital Allocation (continued) Full Year 2017 » Repurchased 1.6 million shares at a total cost of $200 million, or an average cost of $121.21 per share » Issued a net 1.9 million shares as part of employee stock-based compensation plans1 » Returned $290 million to shareholders via dividend payments
Slide 28: Balance Sheet and Free Cash Flow
Balance Sheet and Free Cash Flow » As of December 31, 2017, Moody’s had: – $5.5 billion of outstanding debt – Approximately $870 million of additional borrowing capacity available under its revolving credit facility – Total cash, cash equivalents and short-term investments of $1.2 billion - Down $1.
Slide 29: 2018 Outlook
3 2018 Outlook Ray McDaniel President and Chief Executive Officer
Slide 30: Full Year 2018 Financial Outlook
Full Year 2018 Financial Outlook Moody’s outlook assumes foreign currency translation at exchange rates as of January 31, 2018. Specifically, our forecast reflects exchange rates for the British pound (£) of $1.42 to £1 and for the euro (€) of $1.25 to €1. Full-Year 2018 Financial Outlook MCO Guidan
Slide 31: Full Year 2018 Financial Outlook (continued)
Full Year 2018 Financial Outlook (continued) Full-Year 2018 Financial Outlook MCO Guidance as of February 9, 2018 Free cash flow approximately $1.6 billion Share repurchase approximately $200 million (subject to available cash, conditions and other ongoing capital allocation decisions) Capital expen
Slide 32: Full Year 2018 Financial Outlook: MIS Guidance
Full Year 2018 Financial Outlook (continued) Full-Year 2018 Financial Outlook MIS Guidance as of February 9, 2018 Revenue increase mid-single-digit percent range U.S. increase in the low-single-digit percent range Non-U.S. increase in high-single-digit percent range Corporate Finance increase in the
Slide 33: Full Year 2018 Financial Outlook: MA Guidance
Full Year 2018 Financial Outlook (continued) Full-Year 2018 Financial Outlook MA Guidance as of February 9, 2018 Revenue1,2 increase in the mid-twenties percent range U.S. increase in the low-double-digit percent range Non-U.S. increase in the mid-thirties percent range Research, Data & Analytics1,2
Slide 34: Q&A
Q&A Ray McDaniel President and Chief Executive Officer 4 Linda Huber Executive Vice President and Chief Financial Officer Mark Almeida President, Moody’s Analytics Rob Fauber President, Moody’s Investors Service
Slide 35: USD Market: Issuance Views From Investment Banks
USD Market: Issuance Views From Investment Banks Views on this page are from various investment banks. Issuance views are for both financial and non-financial U.S. dollar issuance and may not align with Moody’s revenue categorizations. FY 2018E Investment Grade Bonds ~$1.25 trillion (flat to down 10
Slide 36: Euro Market: Issuance Views From Investment Banks
Euro Market: Issuance Views From Investment Banks Views on this page are from various investment banks. Issuance views are for both financial and non-financial euro issuance and may not align with Moody’s revenue categorizations. Investment Grade » Slow start to issuance for the year, but expected t
Slide 37: Replay Details
Replay Details » Available from 3:30pm (Eastern Time) February 9, 2018 until 3:30pm (Eastern Time) March 10, 2018 » Telephone Details: – US +1-888-203-1112 – Non-US +1-719-457-0820 – Passcode 8257606 » Webcast Details: – Go to ir.moodys.com – Click on “Events & Presentations” – Click on the link for
Slide 38: Appendix
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Slide 39: Consolidated Statements of Operations
Consolidated Statements of Operations (Unaudited) Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 39
Slide 40: Supplemental Revenue Information
Supplemental Revenue Information (Unaudited) Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 40
Slide 41: Selected Consolidated Balance Sheet Data
Selected Consolidated Balance Sheet Data (Unaudited) Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 41
Slide 42: Selected Consolidated Balance Sheet Data (continued)
Selected Consolidated Balance Sheet Data (continued) (Unaudited) Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 42
Slide 43: Non-Operating (Expense) Income, Net
Non-Operating (Expense) Income, Net Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 43
Slide 44: Financial Information by Segment
Financial Information by Segment Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 44
Slide 45: Transaction and Relationship Revenue
Transaction and Relationship Revenue Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 45
Slide 46: Transaction and Relationship Revenue (continued)
Transaction and Relationship Revenue (continued) Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 46
Slide 47: Adjusted Operating Income and Adjusted Operating Margin
Adjusted Operating Income and Adjusted Operating Margin Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 47
Slide 48: Adjusted Operating Expenses
Adjusted Operating Expenses Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 48
Slide 49: Free Cash Flow
Free Cash Flow Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 49
Slide 50: Organic Revenue and Growth Measures
Organic Revenue and Growth Measures Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 50
Slide 51: Adjusted Provision for Income Taxes and Effective Tax Rate Measures
Adjusted Provision for Income Taxes and Effective Tax Rate Measures Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 51
Slide 52: Adjusted Net Income and Adjusted Diluted EPS
Adjusted Net Income and Adjusted Diluted Earnings per Share Attributable to Moody's Common Shareholders Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 52
Slide 53: Adjusted Net Income and Adjusted Diluted EPS (continued)
Adjusted Net Income and Adjusted Diluted Earnings per Share Attributable to Moody's Common Shareholders (continued) Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 53
Slide 54: 2018 Outlook
2018 Outlook Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 54
Slide 55: 2018 Outlook (continued)
2018 Outlook (continued) Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 55
Slide 56: 2018 Outlook (continued)
2018 Outlook (continued) Fourth Quarter and Full Year 2017 Earnings Call, February 9, 2018 56
Slide 57: Investor Relations
Investor Relations http://ir.moodys.com ir@moodys.com moodys.com
Slide 58: Moody's legal disclaimer
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, affiliates (collectively, “MOODY’S”). All rights reserved. licensors and suppliers