Moody's Corporation · NYSE:MCO
Moody's — Q3 2012 Earnings Presentation
55 slides from Moody's's earnings presentation, Nov 6, 2012
Slide 1: Investor Presentation 3Q 2012
Investor Presentation 3Q 2012 NOVEMBER 6, 2012
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. Moody’s outlook for 2012 and other forward-looking statements in
Slide 3: Table of Contents
Table of Contents 1. Corporate Overview 2. Financial Overview and Outlook 3. Macro Summary 4. Moody’s Investors Service (MIS) 5. Moody’s Analytics (MA) 6. Appendix NOVEMBER 6, 2012 3
Slide 4: Corporate Overview
1 Corporate Overview NOVEMBER 6, 2012 4
Slide 5: Overview of Moody's Corporation
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix 5 Overview of Moody’s Corporation Leading global provider of credit rating opinions, insight and tools for financial risk measurement and management Independent provider of
Slide 6: Moody's Helps Institutions Manage Financial Risk
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Moody’s Helps Institutions Manage Financial Risk Recognized Leader by Customers and Third Parties » MIS voted “Best Rating Agency” in the 2012 Institutional Investor Measure
Slide 7: Moody's has Ongoing Robust Opportunities for Growth
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Moody’s has Ongoing Robust Opportunities for Growth Debt market Disintermediation Growth in MA Pricing initiatives issuance driven by of credit markets driven by further ali
Slide 8: Breadth of Moody's Businesses and Global Footprint Provide Diversification
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Breadth of Moody’s Businesses and Global Footprint Provide Diversification 3Q 2012 REVENUE BY BUSINESS 3Q 2012 REVENUE BY GEOGRAPHY Public, Project Other & Infrastructure In
Slide 9: Steady MA Revenue Growth Complements Variability of MIS Revenue
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Steady MA Revenue Growth Complements Variability of MIS Revenue » MA revenue growth steadily up between 2% and 20%, while MIS revenue growth ranges from down 37% to up 35% R
Slide 10: Financial Overview and Outlook
2 Financial Overview and Outlook NOVEMBER 6, 2012 10
Slide 11: Double-Digit Revenue Growth in All Lines of Business at MIS
Corporate Overview | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Macro Summary and Outlook | Appendix Double-Digit Revenue Growth in All Lines of Business at MIS and Continued Strong Growth in All Areas of MA in 3Q12 3Q 2012 YoY Revenue Performance ($ millions) $221 Corporat
Slide 12: MCO Resumed Double-Digit Revenue Growth Rate
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix MCO Resumed Double-Digit Revenue Growth Rate 2012 Guidance Range* Revenue: mid-teens % 2,800 2,600 2,400 2,200 2,000 Revenue $ Millions 1,800 1,600 1,400 1,200 1,000 800 6
Slide 13: Margin Performance
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Margin Performance 4,000 50% 46.8% Revenue $ Millions 3,000 43.0% 45% 42.8% 42.4% 41.3% 42.6% 2,000 40% 40.0% 39.0% 38.3% 38.0% 1,000 35% 0 30% 2008 2009 2010 2011 2012F Rev
Slide 14: Solid Operating Metrics and Cash Flow Generation
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Solid Operating Metrics and Cash Flow Generation » MCO’s 3-Year Free Cash Flow CAGR of 17% compares with a mean of 10% and median of 4% for the S&P 500* 1,000 900 800 700 $
Slide 15: Recent Tax Planning Strategies have also Contributed to Available Capital
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Recent Tax Planning Strategies have also Contributed to Available Capital 150 41% 40% 40% 45% 135 37% 37% 37% 120 31% 32% 105 28% $ Millions 30% 90 75 $89 $87 $79 60 45 15%
Slide 16: Twin Commitments to Supporting Growth and Returning Cash to Shareholders
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Twin Commitments to Supporting Growth and Returning Cash to Shareholders » Invest organically in » Invest organically in ratings quality and sales staff and Return product e
Slide 17: Balanced Approach to Return of Capital through Share Repurchases and Dividends
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Balanced Approach to Return of Capital through Share Repurchases and Dividends Share Repurchases Dividends $600 $0.70 $500 $0.60 $ Millions $400 $0.50 $0.64 $0.54 $300 $593
Slide 18: Balance Sheet Highlights
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Balance Sheet Highlights » Strong balance sheet facilitates investment and return of capital » $500 million 10-year bond at 4.5% fixed annual interest executed in August 201
Slide 19: Full-Year 2012 Guidance as of October 26, 2012
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix 19 Full-Year 2012 Guidance as of October 26, 2012 » Revenue: mid-teens % range » Operating Expenses: mid-teens % range » Operating Margin: Approximately 40% » Adjusted O
Slide 20: Macro Summary
3 Macro Summary NOVEMBER 6, 2012 20
Slide 21: Issuance Overview
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Issuance Overview* 600 12.5 11.5 500 10.5 9.5 400 In Percent $ Billions 8.5 300 7.5 6.5 200 5.5 4.5 100 3.5 0 2.5 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2011 2011 2011 2011 2012 2012 2012 USD
Slide 22: European Capital Markets Have Room For Growth
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix European Capital Markets Have Room For Growth European Non-Financial European and U.S. Non-Financial Corporate Bank Loans vs. Bonds Corporate Bank Loans and Bonds 3,000 6,00
Slide 23: European Corporates Issuing in the USD Market
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix European Corporates Issuing in the USD Market European USD Issuance* 350 300 250 $ Billions 200 150 100 50 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Slide 24: Newly Rated Corporate Issuers Across Global Markets
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Newly Rated Corporate Issuers* Across Global Markets Investment Grade High Yield 700 700 600 600 500 500 400 400 300 300 200 200 100 100 0 0 United States Europe Emerging Ma
Slide 25: Significant Refunding Needs Remain
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Significant Refunding Needs Remain Debt Maturities: U.S. Moody’s-Rated Debt Maturities: EMEA Moody’s-Rated Corporate Bonds and Loans Corporate Bonds and Loans 250 250 200 20
Slide 26: Financing for M&A, Equity Buybacks and Capital Expenditures Contributes to Issuance
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Financing for M&A, Equity Buybacks and Capital Expenditures Contributes to Issuance U.S. M&A Volume and Bond Issuance U.S. Stock Buybacks and Bond Issuance U.S. M&A Volume,
Slide 27: Small, But Growing Emerging Market Bond Issuance
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Small, But Growing Emerging Market Bond Issuance Emerging Markets Corporate Bond Issuance* 250 200 150 $ Billions 100 50 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Slide 28: Moody's Investors Service
4 Moody’s Investors Service NOVEMBER 6, 2012 28
Slide 29: Moody's Investors Service Financial Profile
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Moody’s Investors Service Financial Profile 3Q12 Revenue: $473.5 million(1) 25% recurring revenue Recurring Transaction U.S. Non-U.S. Public, Project, & Infrastructure Cor
Slide 30: Strength Across MIS Drove 3Q 2012 Revenue Growth
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Strength Across MIS Drove 3Q 2012 Revenue Growth Revenue Mix: Moody’s Investors Service* 500 400 Revenue $ Millions 300 200 100 0 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q1
Slide 31: Regulatory Developments
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Regulatory Developments United States: (the following developments are related to the Dodd-Frank Act) » SEC’s rule-making pursuant to Dodd-Frank is pending » Timing is uncer
Slide 32: Moody's Analytics
5 Moody’s Analytics NOVEMBER 6, 2012 32
Slide 33: Moody's Analytics Financial Profile
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Moody’s Analytics Financial Profile 3Q12 Revenue: $215.0 million(1) ~100% recurring revenue Recurring Transaction U.S. Non-U.S. 90%+ renewal rates Research, Highly pro
Slide 34: Relevant to Financial Markets at All Stages of Development
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Relevant to Financial Markets at All Stages of Development » Moody’s Analytics enables us to increase our presence in emerging markets, selling products and services before
Slide 35: Product Offering Relevant Across Financial Institutions
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Product Offering Relevant Across Financial Institutions Loan markets Securities Markets Other Comm’l Consumer Investment Investment Sales & Lending Lending Management Bankin
Slide 36: Moody's Analytics Competes for Market Opportunities Estimated at Nearly $12 billion
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Moody’s Analytics Competes for Market Opportunities Estimated at Nearly $12 billion Market Expected Competitive MA’s Size Growth Landscape Position Enterprise Risk Solutions
Slide 37: Focusing Product Suite on Need-to-have Products
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Focusing Product Suite on Need-to-have Products » Customer demand is most robust when driven by external forces – Regulation: banks and insurers required to undertake common
Slide 38: Appendix
6 Appendix NOVEMBER 6, 2012 38
Slide 39: Moody's International Growth
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Moody’s International Growth 2000-2011 INTERNATIONAL REVENUE CAGR = 18% 49% 1,200 48% 48% 50% 46% International Revenue % of Total International Revenue, $ Millions 40% 1,00
Slide 40: Issuance and Yields: By Quarter
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Issuance* and Yields: By Quarter Global Investment Grade and High Yield Bonds and U.S. Bank Loans 600 15 Global Financial Institutions 800 8 Issuance $ Billions 500 Issuance
Slide 41: Issuance: By Year
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Issuance*: By Year Global Financial Institutions Global Investment Grade and High Yield Bonds and 2,500 U.S. Bank Loans 1,600 2,000 Issuance $ Billions 1,400 Issuance $ Bill
Slide 42: Revenue Distribution: By Geography
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Revenue Distribution: By Geography Corporate Finance Structured Finance 100% 100% 80% 80% 46% 47% 49% 46% 46% 50% 46% 47% 50% 53% 56% 60% 62% 66% 66% 62% 65% 67% 65% 65% 62%
Slide 43: Revenue Distribution: Recurring vs. Transaction
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Revenue Distribution: Recurring vs. Transaction Corporate Finance Structured Finance 100% 100% 27% 24% 24% 27% 30% 25% 80% 46% 36% 38% 35% 29% 80% 50% 59% 57% 46% 49% 51% 46
Slide 44: Revenue Distribution: By MIS Line of Business and MA Segment
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Revenue Distribution: By MIS Line of Business and MA Segment Moody’s Investors Service Moody’s Analytics 100% 100% 4% 4% 4% 9% 10% 9% 14% 11% 14% 13% 13% 25% 20% 34% 37% 25%
Slide 45: Revenue Distribution: By MIS Product / Asset Class
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Revenue Distribution: By MIS Product / Asset Class Corporate Finance Revenue by Product Structured Finance Revenue by Asset Class 100% 7% 100% 12% 17% 16% 15% 18% 17% 16% 19
Slide 46: Historical Revenue Mix
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Historical Revenue Mix* Corporate Finance Structured Finance 700 1000 600 800 Revenue $ Millions 500 Revenue $ Millions 400 600 300 400 200 100 200 0 2005 2006 2007 2008 200
Slide 47: Enterprise Risk Solutions Metrics
Corporate Overview | Financial Overview | Moody’s Investors Service | Moody’s Analytics | Macro Summary and Outlook | Appendix Enterprise Risk Solutions Metrics 90 80 ERS Sales by Type 70 ERS Revenue by Type 70 60 $ Millions 60 50 $ Millions 50 40 40 30 30 20 20 10 10 0 0 Maintenance Subscriptions L
Slide 48: Regulatory Uncertainty Continues to Weigh on New Securitization Conditions
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Regulatory Uncertainty Continues to Weigh on New Securitization Conditions FAS 166/167 Requirement to consolidate ABCP on sponsor bank’s balance sheet may lead to lower outs
Slide 49: Moody's Global Presence
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Moody’s Global Presence Moody’s Global Staffing » More than 1,400 analysts U.S. Non-U.S. Total » Approximately 6,700 employees 9/30/2012 2,592 4,079 6,671 » Presence in 28 c
Slide 50: 2008 Revenue MIS Business Line Reclassification
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix 2008 Revenue MIS Business Line Reclassification in $millions Reporting as per 2008 filings 1Q 2Q 3Q 4Q FY08** Structured Finance $ 107.2 $ 120.1 $ 97.7 $ 92.2 $ 417.2 Corpor
Slide 51: 2009 Moody's Analytics Revenue Reclassification
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix 2009 Moody’s Analytics Revenue Reclassification in $millions Reporting as per filings in year 2008 2009 Subscriptions $ 475.9 n/a Software 49.2 n/a Professional Services 25.
Slide 52: Reconciliation of Non-GAAP Financial Measures to GAAP
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Reconciliation of Non-GAAP Financial Measures to GAAP Moody's Corporation Free Cash Flow Reconciliation (in millions) 2008 2009 2010 2011 Cash Flow from Operations 539.7 643
Slide 53: Reconciliation of Non-GAAP Financial Measures to GAAP (cont.)
Corporate Overview | Financial Overview and Outlook | Macro Summary | Moody’s Investors Service | Moody’s Analytics | Appendix Reconciliation of Non-GAAP Financial Measures to GAAP (cont.) Moody's Corporation Adjusted Operating Income Reconciliation (in millions, except %) 2008 2009 2010 2011 As Rep
Slide 54: moodys.com
54 moodys.com Website: http://ir.moodys.com Email: ir@moodys.com 54
Slide 55: NOVEMBER 6, 2012
© 2012 Moody’s Corporation and/or its licensors and affiliates (collectively, “MOODY’S”). All rights reserved. CREDIT RATINGS ARE MOODY'S INVESTORS SERVICE, INC.'S (“MIS”) CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MIS DEFINE