Moody's Corporation · NYSE:MCO

Moody's — Q1 2015 Earnings Presentation

41 slides from Moody's's earnings presentation, May 1, 2015

1. Slide 1: First-Quarter 2015 Earnings Call

   First-Quarter 2015 Earnings Call May 1, 2015

2. Slide 2: Overview

   Overview SALLI SCHWARTZ GLOBAL HEAD OF INVESTOR RELATIONS First-Quarter 2015 Earnings Call, May 1, 2015 2

3. Slide 3: Agenda

   Agenda 1. First-Quarter 2015 Results Ray McDaniel, President and Chief Executive Officer 2. Financial and Operating Highlights Linda Huber, Executive Vice President and Chief Financial Officer 3. 2015 Outlook Ray McDaniel, President and Chief Executive Officer 4. Q&A Ray McDaniel, President and Chie

4. Slide 4: 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. Moody’s outlook for 2015 and other forward-looking statements in this

5. Slide 5: 1. First-Quarter 2015 Results

   1. First-Quarter 2015 Results RAY MCDANIEL PRESIDENT AND CHIEF EXECUTIVE OFFICER First-Quarter 2015 Earnings Call, May 1, 2015 5

6. Slide 6: First-Quarter 2015 Results and Comparison to First-Quarter 2014 Moody's Corporation

   First-Quarter 2015 Results and Comparison to First-Quarter 2014 Moody’s Corporation » Revenue  13% to $866 million • 18% on a constant currency basis • 16% excluding acquisitions and the impact of FX » Expense  14% to $494 million » Operating Income  12% to $371 million » Adjusted Operating Incom

7. Slide 7: 2. Financial and Operating Highlights

   2. Financial and Operating Highlights LINDA HUBER EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER First-Quarter 2015 Earnings Call, May 1, 2015 7

8. Slide 8: Moody's Corporation Revenue

   First-Quarter 2015 Results and Comparison to First-Quarter 2014 Moody’s Corporation Revenue » Total Global  13% at $866 million • Foreign currency translation unfavorably impacted revenue by 5% » U.S.  17% to $500 million » Non-U.S.  7% to $366 million • 42% of Total Global » Recurring Revenue •

9. Slide 9: MIS Revenue by Geography

   First-Quarter 2015 Results and Comparison to First-Quarter 2014 (continued) MIS Revenue by Geography » Total MIS  14% to $602 million • 12% excluding 2014 ICRA consolidation • Foreign currency translation unfavorably impacted revenue by 5% » U.S.  18% to $372 million » Non-U.S.  8% to $231 millio

10. Slide 10: MIS Revenue by Line of Business

    First-Quarter 2015 Results and Comparison to First-Quarter 2014 (continued) MIS Revenue by Line of Business » Corporate Finance: $299 million – Global  13% – U.S.  13% – Non-U.S.  14% » Structured Finance: $101 million – Global  6% – U.S.  13% – Non-U.S.  6% First-Quarter 2015 Earnings Call, M

11. Slide 11: MIS Revenue by Line of Business (continued)

    First-Quarter 2015 Results and Comparison to First-Quarter 2014 (continued) MIS Revenue by Line of Business » Financial Institutions: $94 million – Global  10% – U.S.  19% – Non-U.S.  4% » Public, Project & Infrastructure Finance: $101 million – Global  25% – U.S.  37% – Non-U.S.  7% » MIS Oth

12. Slide 12: MA Revenue by Geography

    First-Quarter 2015 Results and Comparison to First-Quarter 2014 (continued) MA Revenue by Geography » Total MA  11% to $263 million • 7% excluding 2014 acquisitions • Foreign currency translation unfavorably impacted revenue by 5% » U.S.  17% to $128 million » Non-U.S.  5% to $135 million • 51% o

13. Slide 13: MA Revenue by Line of Business

    First-Quarter 2015 Results and Comparison to First-Quarter 2014 (continued) MA Revenue by Line of Business » RD&A: $150 million – Global  9% • 96% customer retention rate – U.S.  13% – Non-U.S.  3% First-Quarter 2015 Earnings Call, May 1, 2015 13

14. Slide 14: MA Revenue by Line of Business (continued)

    First-Quarter 2015 Results and Comparison to First-Quarter 2014 (continued) MA Revenue by Line of Business » ERS: $77 million – Global  29% – U.S.  41% – Non-U.S.  22% – TTM* Revenue  28% – TTM* Sales  24% » Professional Services: $37 million – Global  10% – U.S.  4% – Non-U.S.  13% *Trailin

15. Slide 15: Moody's Corporation Expense and Margin

    First-Quarter 2015 Results and Comparison to First-Quarter 2014 (continued) Moody’s Corporation » Total Expense  14% to $494 million • 9% excluding 2014 ICRA consolidation and 2014 acquisitions • Foreign currency translation favorably impacted expense by 4% » Operating Margin • 42.9% » Adjusted Ope

16. Slide 16: Capital Allocation

    Capital Allocation » During 1Q15 repurchased 3.8 million shares at a total cost of $366 million and issued approximately 2.3 million shares under annual employee stock-based compensation plans » As of March 31, 2015 shares outstanding totaled 202.2 million – 5% decline from March 31, 2014 » As of Ma

17. Slide 17: Balance Sheet and Free Cash Flow

    Balance Sheet and Free Cash Flow » On March 9, 2015, issued €500 million of 12-year senior unsecured notes at 1.75% » As of March 31, 2015, Moody’s had: – $3.1 billion of outstanding debt – $1.0 billion of additional debt capacity under revolving credit facility – Cash, cash equivalents and short-te

18. Slide 18: 3. 2015 Outlook

    3. 2015 Outlook RAY MCDANIEL PRESIDENT AND CHIEF EXECUTIVE OFFICER First-Quarter 2015 Earnings Call, May 1, 2015 18

19. Slide 19: 2015 Outlook

    2015 Outlook » Guidance assumes foreign currency translation at end-of-quarter exchange rates – $1.48 to £1 and $1.07 to €1 » Still expect full-year 2015 revenue to grow in the mid-single-digit percent range » On a constant dollar basis, Moody’s full-year 2015 revenue and operating expense growth ra

20. Slide 20: Changes to MIS 2015 Full-Year Financial Outlook

    Changes to MIS 2015 Full-Year Financial Outlook* » U.S.  high-single-digit % range » Non-U.S.  low-single-digit % range » Structured Finance  low-single-digit % range » Financial Institutions  low-single-digit % range *Refer to “Moody’s Corporation Reports Results for First-Quarter 2015” press r

21. Slide 21: Changes to MA 2015 Full-Year Financial Outlook

    Changes to MA 2015 Full-Year Financial Outlook* » U.S.  low-double-digit % range » Non-U.S.  low-single-digit % range » Professional Services  low-single-digit % range *Refer to “Moody’s Corporation Reports Results for First-Quarter 2015” press release for a full review of guidance First-Quarter

22. Slide 22: 4. Q&A Session

    4. Q&A Session » Ray McDaniel President and Chief Executive Officer, Moody’s Corporation » Linda Huber Executive Vice President and Chief Financial Officer, Moody’s Corporation » Michel Madelain President and Chief Operating Officer, Moody’s Investors Service » Mark Almeida President, Moody’s Analyt

23. Slide 23: Investor Day 2015

    Investor Day 2015 First-Quarter 2015 Earnings Call, May 1, 2015 23

24. Slide 24: Replay Details

    Replay Details » Available from 3:30pm (Eastern Time) May 1, 2015 until 3:30pm (Eastern Time) May 30, 2015 » Telephone Details: – U.S. and Canada +1-888-203-1112 – Other +1-719-457-0820 – Passcode 6383368 » Webcast Details: – Go to http://ir.moodys.com – Click on “Events & Presentations” featured on

25. Slide 25: Appendix

    Appendix First-Quarter 2015 Earnings Call, May 1, 2015 25

26. Slide 26: Consolidated Statements of Operations (Unaudited)

    Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, 2015 2014 Amounts in millions, except per share amounts Revenue $ 865.6 $ 767.2 Expenses: Operating 244.4 216.0 Selling, general and administrative 221.3 195.1 Depreciation and amortization 28.6 23.1 Total expenses 494.3

27. Slide 27: Supplemental Revenue Information (Unaudited)

    Supplemental Revenue Information (Unaudited) Three Months Ended March 31, Amounts in millions 2015 2014 Moody's Investors Service Corporate Finance $ 298.7 $ 264.4 Structured Finance 101.3 95.3 Financial Institutions 93.8 85.4 Public, Project and Infrastructure Finance 100.7 80.7 MIS Other* 7.8 3.3

28. Slide 28: Supplemental Revenue Reclassification (Unaudited)

    Supplemental Revenue Reclassification (Unaudited) Three Months Ended March 31,2014 As Amounts in millions As Reported Reclassification Reclassified Moody's Investors Service Corporate Finance $ 264.4 $ - $ 264.4 Structured Finance 95.3 - 95.3 Financial Institutions 85.4 - 85.4 Public, Project and In

29. Slide 29: Non-Operating (Expense) Income, Net

    Non-Operating (Expense) Income, Net Three Months Ended March 31, 2015 2014 Amounts in millions Interest expense, net: Expense on borrowings $ (28.3) $ (26.1) Income 1.9 1.6 UTPs and other tax related liabilities (3.2) 0.6 Interest Capitalized 0.3 0.1 Total interest expense, net $ (29.3) $ (23.8) Oth

30. Slide 30: Selected Consolidated Balance Sheet Data (Unaudited)

    Selected Consolidated Balance Sheet Data (Unaudited) March 31, December 31, 2015 2014 Amounts in millions Cash and cash equivalents $ 1,509.9 $ 1,219.5 Short-term investments 485.5 458.1 Total current assets 3,039.3 2,686.4 Non-current assets 1,936.7 1,982.6 Total assets 4,976.0 4,669.0 Total curren

31. Slide 31: Financial Information by Segment

    Financial Information by Segment The table below presents revenue, adjusted operating income and operating income by reportable segment. The Company defines adjusted operating income as operating income excluding depreciation and amortization. Three Months Ended March 31, 2015 2014 MIS MA Eliminatio

32. Slide 32: Transaction and Relationship Revenue

    Transaction and Relationship Revenue The tables below summarize the split between transaction and relationship revenue. In the MIS segment, excluding MIS Other, transaction revenue represents the initial rating of a new debt issuance as well as other one-time fees while relationship revenue represen

33. Slide 33: Non-GAAP Financial Measures

    Non-GAAP Financial Measures The tables below reflect certain adjusted results that the SEC defines as "non-GAAP financial measures" as well as a reconciliation of each non-GAAP measure to its most directly comparable GAAP measure. Management believes that such non-GAAP financial measures, when read

34. Slide 34: Adjusted Operating Income and Adjusted Operating Margin

    Adjusted Operating Income and Adjusted Operating Margin The table below reflects a reconciliation of the Company’s operating income and operating margin to adjusted operating income and adjusted operating margin. The Company defines adjusted operating income as operating income excluding depreciatio

35. Slide 35: 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 believes that free cash flow is a use

36. Slide 36: Revenue and Operating Income Growth Excluding Foreign Exchange Impact

    Revenue and Operating Income Growth Excluding Foreign Exchange Impact The table below reflects reconciliations of the Company's reported revenue and operating income growth rates to their growth rates assuming 2015 results were translated using the same foreign currency rate as used in 2014. The Com

37. Slide 37: Revenue Growth Excluding 2014 Acquisitions

    Revenue Growth Excluding 2014 Acquisitions The table below reflects a reconciliation of the reported revenue growth rate to the growth rate excluding the impact of revenue from acquisitions which were completed in 2014. The Company presents the revenue growth rate excluding acquisitions because mana

38. Slide 38: Expense Growth Excluding 2014 Acquisitions

    Expense Growth Excluding 2014 Acquisitions The table below reflects a reconciliation of the Company's reported expense growth rate to the growth rate excluding the impact of the 2014 acquisitions. The Company presents the expense growth rate using this approach because management deems this metric t

39. Slide 39: Revenue Growth Excluding Foreign Exchange and 2014 Acquisitions

    Revenue Growth Excluding Foreign Exchange and 2014 Acquisitions The table below reflects a reconciliation of the Company's reported revenue growth rate to the growth rate assuming 2015 results were translated using the same foreign currency rate as used in 2014 as well as excluding the impact of the

40. Slide 40: moodys.com

    40 moodys.com Website: http://ir.moodys.com Email: ir@moodys.com First-Quarter 2015 Earnings Call, May 1, 2015 40

41. Slide 41: First-Quarter 2015 Earnings Call, May 1, 2015

    © 2015 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, and affiliates (collectively, “MOODY’S”). All rights reserved. licensors and suppliers

Moody's — Q1 2015 Earnings Presentation on 6ix