Moody's Corporation · NYSE:MCO
Moody's — Q1 2020 Earnings Presentation
34 slides from Moody's's earnings presentation, Apr 30, 2020
Slide 1: First Quarter 2020 Earnings Call
First Quarter 2020 Earnings Call April 30, 2020
Slide 2: Introduction
Introduction Shivani Kak Head of Investor Relations First Quarter 2020 Earnings Call, April 30, 2020 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 the business and operations of Moody’s Corporation (the “Company”) that involve a number of risks and uncertainties. Such statements may include, among
Slide 4: Overview & 1Q 2020 Results
Overview & 1Q 2020 Results Ray McDaniel President and Chief Executive Officer First Quarter 2020 Earnings Call, April 30, 2020 4
Slide 5: Executive Summary
Executive Summary » Active stakeholder engagement and operational resilience » Long-term business fundamentals intact, bolstered by increased relevance in times of stress » Strong liquidity with $2.2 billion in cash and short-term investments, and an undrawn $1.0 billion revolving credit facility1 »
Slide 6: Moody's Stakeholder Engagement
Moody’s Stakeholder Engagement Supporting our stakeholders during COVID-19 crisis Employees Customers Communities Policymakers » Employee safety and » Dedicated » Focusing on areas » Increased dialogue with wellbeing remains our priority microsite showing research where we can leverage government of
Slide 7: Increased Relevance in Times of Stress
Increased Relevance in Times of Stress Monitoring the effects of Coronavirus View at moodys.com/coronavirus 120% YTD increase in usage -- moodys.com and credit scoring tools 120,000+ total visits to COVID-19 website Economic data downloads 35,000+ +10x YoY 2.4 million people participated in Moody’s
Slide 8: Stepping Up During This Crisis
Stepping Up During This Crisis Agile innovation and access to our unique datasets and insights Product enhancements New Products For our customers For the community ECONOMIC SCENARIOS moodys.com/coronavirus Incorporating pandemic considerations into All COVID-related content collected, curated our p
Slide 9: Key Business Development and Growth Initiatives
Key Business Development and Growth Initiatives Better decisions through unique and powerful customer solutions Know-Your-Customer Environment, Social Commercial Real Estate (KYC) and Governance (ESG) (CRE) WORLD CLASS KYC SOLUTIONS EXTENSIVE ESG CAPABILITIES NEW CRE PLATFORMS BvD and RDC recognized
Slide 10: Credit Market Update
Credit Market Update Coronavirus disrupts real economy, impact to credit market may be delayed COVID-19 PANDEMIC GEOPOLITICAL IMPACT MACROECONOMIC RESPONSE » Abrupt shock » Global fiscal easing » Aggressive worldwide central bank rate cuts » Heroic health community response – Trillions more in loan
Slide 11: U.S. Investment Grade Drives Issuance in 1Q20
U.S. Investment Grade Drives Issuance in 1Q20 Investment grade issuance surged in March, while leveraged finance stalled Investment grade bond Bank loan High-yield bond Investment grade bond spread High-yield bond spread 1Q 2019 1Q 2020 $160 790 460 410 400 390 360 260 150 130 130 100 110 $87 $65 $6
Slide 12: 1Q 2020: Strong Revenue Growth and Margin Enhancement
1Q 2020: Strong Revenue Growth and Margin Enhancement » 1Q20 MCO revenue increased 13%, driven by 19% growth in MIS and 5% growth in MA – MA organic growth of 9%1 » Adjusted operating income up 25%; adjusted operating margin up 490 bps2 » Adjusted diluted EPS of $2.73, up 32%2 MCO Revenue MCO Adjust
Slide 13: FY 2020 Outlook
FY 2020 Outlook Mark Kaye Chief Financial Officer First Quarter 2020 Earnings Call, April 30, 2020 13
Slide 14: Macro Environment Informing Our Outlook
Macro Environment Informing Our Outlook BASE CASE ASSUMPTIONS Expect economic 2020 GDP Benchmark interest Full year average High yield default rates remain low; 2020 U.S. rate of 11%-16%2 recovery late 3Q/4Q 2020 U.S. -5.7% high yield spreads unemployment rate of Europe -6.5% remain >700 bps ~10%1 C
Slide 15: FY 2020 Corporate-Level Guidance
FY 2020 Corporate-Level Guidance1 Revenue Decline in the mid-single-digit % range Expenses Decline in the mid-single-digit % range Adjusted Operating Margin2 46% - 48% Interest Expense, Net $180 - $200 million Effective Tax Rate 19.5% - 21.5% Diluted EPS $7.25 - $7.85 Adjusted Diluted EPS2 $7.80 - $
Slide 16: MIS Guidance: COVID-19 Lowers Outlook
MIS Guidance: COVID-19 Lowers Outlook1 Revenue Adjusted Operating Margin1 $2.9B 58.0% $2,900 High-single-digit 55% - 57% % decline $2,700 $2,500 $2,300 $2,100 $1,900 $1,700 1 1 2019 2020F 2019 2020F Key drivers of MIS FY 2020 outlook » Issuance2 expected to decline in the low-double-digit percent ra
Slide 17: Refunding Needs Support MIS Long-term Fundamentals
Refunding Needs1 Support MIS Long-term Fundamentals >$2.3 Trillion in Debt Maturities: North America Moody’s-Rated Corporate Bonds and Loans1 $677 $565 $490 $ Billions 342 $360 140 239 Speculative Grade Bank Loans $241 58 58 97 Speculative Grade Bonds 8 127 142 30 Investment Grade 203 245 253 199 19
Slide 18: MA Guidance: Continue to Expect Revenue Growth and Margin Expansion
MA Guidance: Continue to Expect Revenue Growth and Margin Expansion1 Revenue Adjusted Operating Margin1 Mid-single-digit Approximately 30% % growth $2.0B 27.8% 1 2019 2020F 2019 2020F1 Key drivers of MA FY 2020 outlook » Strong recurring revenue moderates COVID-19 impact » MAKS divestiture weighs on
Slide 19: MA's Strong Retention Rates Mitigate COVID-19 Impact
MA’s Strong Retention Rates Mitigate COVID-19 Impact Revenue components 2020 Current Outlook Revenue from sales Existing contractual obligations 1 ~50% 89% closed prior to 1/1/2020 being met by MA and Customers Recurring Revenue from Revenue ~40% scheduled renewals Renewal yield might be affected Re
Slide 20: Sales Strategies Adapting to COVID-19
Sales Strategies Adapting to COVID-19 Observing some impact Sales Activities on new business pipeline Shifting » Expect sales cycles to take Converting selling longer than 9-12 month activities from historical average Up +400% face-to-Face to Number of » Business development virtual Virtual Meetings
Slide 21: Prudently Reducing Expenses
Prudently Reducing Expenses FY20F vs. FY19A 3,100 +~0.5% 3,050 3,000 +2.0% - 2.5% 2,950 $2,831 Mid-single-digit 2,900 2,850 % decline 2,800 2,750 ~(5.0% - 6.0%) 2,700 2,650 ~(2.5%) $ Millions 2,600 2,550 ~(1.0%) 2,500 2,450 2,400 2,350 2,300 2,250 2,200 2,150 2,100 2,050 2,000 FY 2019 Total Operatin
Slide 22: Proactive Capital and Liquidity Management
Proactive Capital and Liquidity Management Bond portfolio WAC1 Balanced maturity schedule5 900 $ in millions 5.0% 4.7% 800 4.3% 4.3% 700 4.5% 3.9% 600 4.0% 3.5% 3.3% 500 3.5% 4.2% 3.9% 4.0% 3.4% 500 400 823 3.0% 3.4% 3.4% 250 700 330 300 549 500 600 2.5% 2.1% 487 500 200 400 400 2.0% 2.2% 300 100 25
Slide 23: Key Takeaways
Key Takeaways » Operational resilience to COVID-19 impact » Engaged with key stakeholders; more relevant in times of stress » Effectively adapting to current environment » Strong balance sheet and liquidity » Disciplined expense management
Slide 24: Questions and Answers
Questions and Answers Ray McDaniel Stephen Tulenko President and President, Chief Executive Officer Moody’s Analytics Rob Fauber Michael West Chief Operating Officer President, Moody’s Investors Service Mark Kaye Chief Financial Officer
Slide 25: Replay Details
Replay Details Available from 3:30pm (Eastern Time) April 30, 2020 until 3:30pm (Eastern Time) May 29, 2020 Telephone Details » U.S. +1-888-203-1112 » Non-U.S. +1-719-457-0820 » Passcode 7297711 Webcast Details » Go to ir.moodys.com » Click on “Events & Presentations” » Click on the link for “1Q 202
Slide 26: moodys.com
Investor Relations ir.moodys.com ir@moodys.com moodys.com
Slide 27: Glossary of Terms and Abbreviations
Glossary of Terms and Abbreviations TERM DEFINITION CFG Corporate finance group; an LOB of MIS ERS The Enterprise Risk Solutions LOB within MA, which offers risk management software solutions as well as related risk management advisory engagements services FIG Financial institutions group; an LOB of
Slide 28: Adjusted Operating Income and Adjusted Operating Margin by Segment
Adjusted Operating Income and Adjusted Operating Margin by Segment The table below presents revenue, operating income and adjusted operating income by reportable segment. The Company defines adjusted operating income as operating income excluding: i) depreciation and amortization; ii) restructuring;
Slide 29: 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 the operating performance of Moody’s. Adjusted Operating Income exclu
Slide 30: 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 deems capital expenditures essential
Slide 31: Organic Revenue and Growth Measures – MA, RD&A and ERS
Organic Revenue and Growth Measures – MA, RD&A and ERS The Company presents organic revenue and organic revenue growth because management deems this metric to be a useful measure which provides additional perspective in assessing the revenue growth excluding the inorganic revenue impacts from certai
Slide 32: 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 the operating performance of Moo
Slide 33: Adjusted Net Income and Adjusted Diluted EPS (continued)
Adjusted Net Income and Adjusted Diluted Earnings per Share Attributable to Moody's Common Shareholders (continued) Note: The tax impacts in the table above were calculated using tax rates in effect in the jurisdiction for which the item relates. First Quarter 2020 Earnings Call, April 30, 2020 33
Slide 34: First Quarter 2020 Earnings Call, April 30, 2020
© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, affiliates (collectively, “MOODY’S”). All rights reserved. agents, repres