Slide 1: Third Quarter 2022 Earnings Call
Third Quarter 2022 Earnings Call October 25, 2022
Slide 2: Introduction
Introduction Shivani Kak Head of Investor Relations Third Quarter 2022 - Earnings Call 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 Moody’s business and operations that involve a number of risks and uncertainties. Such statements involve estimates, projections, goals, forecasts, ass
Slide 4: 3Q 2022 Highlights
3Q 2022 Highlights Rob Fauber President and Chief Executive Officer Third Quarter 2022 - Earnings Call 4
Slide 5: Key Takeaways
Key Takeaways 1 MA revenue grew 14% on delivery of mission-critical insights for our customers, while MIS revenue declined 36% on significant credit market uncertainty and ongoing volatility 2 Issuance contraction reflects cyclical market disruption amid challenging macroeconomic and geopolitical co
Slide 6: MA Delivers Strong Results; MIS Revenue Impacted by Market Uncertainty
MA Delivers Strong Results; MIS Revenue Impacted by Market Uncertainty (16%) MIS revenue declined MA revenue grew MCO revenue 14% (36%) 39% contraction from 3Q21 MA ARR1 increased Rated issuance down MCO Adjusted Operating Margin2 9% (41%) $1.3B $497M $1.85 MCO Adjusted MCO Adjusted MCO Revenue Oper
Slide 7: MIS: Revised Outlook Reflects Adverse Macroeconomic Conditions
MIS: Revised Outlook Reflects Adverse Macroeconomic Conditions Revenue1 Adjusted Operating Margin1 FY 2022 Issuance Guidance1,2 $3.8B As of October 25, 2022 As of July 26, 2022 62.2% Total Issuance (Mid-30s%) Decline of approximately Approximately 30% 51% Investment Grade (~35%) High Yield Bonds (~7
Slide 8: MA: Accelerating Growth and Expanding Margins
MA: Accelerating Growth and Expanding Margins ARR1,2 Revenue1 Adjusted Operating Margin1 Increase in the Increase in the low-double-digit Approximately mid-teens percent range 30% percent range $2.5B 26.0% $2.4B 4Q21 4Q22F 2021 2022F 2021 2022F » ARR acceleration supported by new product pipeline an
Slide 9: MA: Industry-Leading KYC & Compliance Solutions
MA: Industry-Leading KYC & Compliance Solutions Deliver Mid-20s% Revenue Growth Integrated Risk Assessment Capabilities Recognition for MA’s Best-in-Class Solutions Identification & Verification DATA 2 Beneficial Ownership Sanction, Financial Crime, Adverse Media Best Category of breed leaders BEST
Slide 10: MCO: Taking Decisive Actions to Reduce Cost Base by at Least $200M
MCO: Taking Decisive Actions to Reduce Cost Base by at Least $200M Aggregate Non- Swift management action in response Established Expanded Restructuring restructuring By year- to evolving operating conditions Restructuring Restructuring Plan Related Plan1 2Q 2022 Plan 3Q 2022 2022 - 2023 Expense Act
Slide 11: Questions and Answers
Questions and Answers Rob Fauber President and Chief Executive Officer Mark Kaye Chief Financial Officer
Slide 12: Supplemental Information
Supplemental Information
Slide 13: MIS: Muted Issuance Across All Sectors Adversely Impacted 3Q 2022 Revenue
Performance MIS: Muted Issuance Across All Sectors Adversely Outlook Investment Thesis Impacted 3Q 2022 Transaction Revenue MIS Revenue Issuance2 $925 $ Billions (41%) $130 (36%) $1,436 YoY $851 $153 $590 Change $ Millions $143 $92 (29%) 3Q21 3Q22 $109 (29%) $101 MIS Adjusted Operating Margin3 (29%)
Slide 14: MA: Delivering Robust Growth Through Mission-Critical Products
Performance MA: Delivering Robust Growth Through Mission-Critical Products Outlook Investment Thesis MA Revenue MA Adjusted Operating Margin1 Organic C$1 2.3% YoY YoY $685 3.8% 14% Change Change $601 (1.8%) $176 1% 12% $174 $ Millions $184 4% 10% $177 30.3% 26.0% $325 30% 7% $250 3Q21 3Q22 3Q21 MA U
Slide 15: MCO: Updated Full Year Guidance
Performance MCO: Updated Full Year Guidance Investment Thesis Outlook Full Year 2022 Revenue Decline in the low-double-digit percent range Financial Outlook as Expenses Increase in the mid-single-digit percent range of October 25, 20221 Adjusted Operating Margin2 Approximately 42% Interest Expense,
Slide 16: MIS: Adverse Macroeconomic Conditions Factored into Updated 2022 Outlook
Performance MIS: Adverse Macroeconomic Conditions Outlook Investment Thesis Factored into Updated 2022 Outlook Macroeconomic Assumptions1 GDP Growth2 Credit Spreads Inflation & Unemployment Default Rates FX Rates 1.0% - 2.0% United States Benchmark rates to rise; U.S. Global inflation levels to rema
Slide 17: MIS: Non-financial Corporates Have Significant Refunding Needs
Performance MIS: Non-financial Corporates Have Significant Refunding Needs Outlook Investment Thesis Four-year Refinancing Walls1,2,3 for U.S. and EMEA issuers 2023 – 2026 Refunding Needs1,2,3 U.S. EMEA Withdrawn Russian Debt 3 $1.3 $1.2 CAGR = ~7% $4.0 <$0.2 $0.9 $0.6 $ trillions $0.5 $0.7 $3.1 $0.
Slide 18: MIS: Rates Below Historical Average, Spread Volatility Has Hindered Debt Issuance
Performance MIS: While Rates Remain Below Historical Average, Outlook Investment Thesis Spread Volatility Has Hindered Debt Issuance U.S. 10-year Treasury Yields (%) 6 U.S. 10Y Treasury Average 10 4 8 (%) (%) 6 2 4 2 0 1 - Jan-22 Apr-22 Jul-22 Oct-22 Sep-90 Sep-94 Sep-98 Sep-02 Sep-06 Sep-10 Sep-14
Slide 19: MIS: Favorable 2020/2021 Conditions Led to Outsized Opportunistic Issuance
Performance MIS: Favorable Market Conditions in 2020/2021 Led to Outsized Outlook Investment Thesis Opportunistic Issuance MIS-Rated Investment Grade (IG) Bond Issuance MIS-Rated High Yield (HY) Bond Issuance IG Bonds IG Bond Avg U.S. 10YR Treasury Avg U.S. CPI Avg HY Bonds HY Bond Average U.S. HY S
Slide 20: MA: Resilient Business Produces Consistent Revenue Growth Through Cycles
Performance MA: Resilient Business Produces Consistent Revenue Growth Investment Thesis Outlook Through Macroeconomic Cycles MA Revenue Russia Invades Ukraine $3.0 59 $2.5 Pandemic quarters of consecutive revenue growth $2.0 $ billions $1.5 Taper Tantrum 94% European recurring revenue2 Global Financ
Slide 21: MA: $2.7 Billion ARR Demonstrates Customer Value Proposition
Performance MA: $2.7 Billion ARR Demonstrates Customer Value Proposition Outlook Investment Thesis TTM Recurring and Transaction Revenue1 ARR Growth2 by Line of Business Recurring Revenue CAGR = ~17% 9% Total MA 94% 93% 10% Decision Solutions 89% 84% 8% Research & Insights 3Q19 3Q20 3Q21 3Q22 9% Dat
Slide 22: Teleconference Details
Teleconference Details WEBCAST DIAL IN D I A L I N R E P L AY » Go to ir.moodys.com » U.S. & Canada: +1-888-330-2508 » U.S. & Canada: +1-800-770-2030 » Click on “Events & Presentations” » Non-U.S. & Canada: +1-240-789-2735 » Non-U.S. & Canada: +1-647-362-9199 » Click on the link for » Passcode: 9302
Slide 23: Moody's Attendance at Upcoming Conferences
Moody’s Attendance at Upcoming Conferences NOV RBC Global Technology, Internet, Media & Telecommunications Conference 16 » Tameka Alsop, Chief Administrative Officer NOV J.P. Morgan Ultimate Services Investor Conference 17 » Rob Fauber, Chief Executive Officer NOV Redburn CEO Conference 30 » Mark Ka
Slide 24: Investor Relations
Investor Relations ir.moodys.com ir@moodys.com
Slide 25: Appendix
Appendix
Slide 26: Glossary of Terms and Abbreviations
Glossary of Terms and Abbreviations TERM DEFINITION CFG Corporate finance group; an LOB within MIS CRE Commercial Real Estate D&I 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 w
Slide 27: Glossary of Terms and Abbreviations (contd.)
Glossary of Terms and Abbreviations (contd.) TERM DEFINITION The RiskTech Quadrant® is a trademark of Infopro Digital Services Limited (‘Infopro Digital’) and is used herein with permission. All rights reserved. This graphic was published by Infopro Digital as part of a larger research document (KYC
Slide 28: Annualized Recurring Revenue (ARR)
Annualized Recurring Revenue (ARR) 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
Slide 29: Financial Information by Segment
Financial Information by Segment The table below presents revenue and Adjusted Operating Income by reportable segment. The Company defines Adjusted Operating Income as operating income excluding: i) depreciation and amortization; and ii) restructuring. Third Quarter 2022 - Earnings Call 29
Slide 30: Financial Information by Segment (Continued)
Financial Information by Segment (Continued) The table below presents revenue and Adjusted Operating Income by reportable segment. The Company defines Adjusted Operating Income as operating income excluding: i) depreciation and amortization; and ii) restructuring. Third Quarter 2022 - Earnings Call
Slide 31: Organic Constant Currency Revenue Growth (Decline)
Organic Constant Currency Revenue Growth (Decline) / Constant Currency Revenue Growth (Decline) Beginning in the second quarter of 2022, the Company began presenting organic constant currency revenue growth (decline) and constant currency revenue growth (decline) as its non- GAAP measure of revenue
Slide 32: 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 Moody’s operating performance. Adjusted Operating Income excludes the
Slide 33: Free Cash Flow
Free Cash Flow The table below reflects a reconciliation of the Company's net cash flow 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 t
Slide 34: Adjusted Net Income and Adjusted Diluted EPS
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 Moody’s operating performance. A
Slide 35: Adjusted Net Income and Adjusted Diluted EPS (Continued)
Adjusted Net Income and Adjusted Diluted Earnings per Share Attributable to Moody's Common Shareholders (Continued) 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 pe
Slide 36: Third Quarter 2022 - Earnings Call
© 2022 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