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3Q 2020 Investor Presentation
November 11, 2020
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3Q 2020 Investor Presentation - November 11, 2020 2
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 other words, “believe”, “expect”, “anticipate”, “intend”, “plan”, “will”, “predict”, “potential”, “continue”, “strategy”, “aspire”, “target”, “forecast”, “project”, “estimate”, “should”, “could”, “may” and similar expressions or words and variations thereof that convey the prospective nature of events or outcomes generally indicative of forward-looking statements. The forward-looking statements and other information in this release are made as of the date hereof and the Company undertakes no obligation (nor does it intend) to publicly supplement, update or revise such statements on a going-forward basis, whether as a result of subsequent developments, changed expectations or otherwise, except as required by applicable law or regulation. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company is identifying examples of factors, risks and uncertainties that could cause actual results to differ, perhaps materially, from those indicated by these forward-looking statements. Those factors, risks and uncertainties include, but are not limited to, the impact of COVID-19 on volatility in the U.S. and world financial markets, on general economic conditions and GDP growth in the U.S. and worldwide, and on the Company’s own operations and personnel. Many other factors could cause actual results to differ from Moody’s outlook, including credit market disruptions or economic slowdowns, which could affect the volume of debt and other securities issued in domestic and/or global capital markets; other matters that could affect the volume of debt and other securities issued in domestic and/or global capital markets, including regulation, credit quality concerns, changes in interest rates and other volatility in the financial markets such as that due to Brexit and uncertainty as companies transition away from LIBOR; the level of merger and acquisition activity in the U.S. and abroad; the uncertain effectiveness and possible collateral consequences of U.S. and foreign government actions affecting credit markets, international trade and economic policy, including those related to tariffs and trade barriers; concerns in the marketplace affecting our credibility or otherwise affecting market perceptions of the integrity or utility of independent credit agency ratings; the introduction of competing products or technologies by other companies; pricing pressure from competitors and/or customers; the level of success of new product development and global expansion; the impact of regulation as an NRSRO, the potential for new U.S., state and local legislation and regulations, including provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) and regulations resulting from Dodd-Frank; the potential for increased competition and regulation in the EU and other foreign jurisdictions; exposure to litigation related to Moody’s Investors Service’s rating opinions, as well as any other litigation, government and regulatory proceedings, investigations and inquiries to which the Company may be subject from time to time; provisions in the Dodd-Frank legislation modifying the pleading standards, and EU regulations modifying the liability standards, applicable to credit rating agencies in a manner adverse to credit rating agencies; provisions of EU regulations imposing additional procedural and substantive requirements on the pricing of services and the expansion of supervisory remit to include non-EU ratings used for regulatory purposes; the possible loss of key employees; failures or malfunctions of our operations and infrastructure; any vulnerabilities to cyber threats or other cybersecurity concerns; the outcome of any review by controlling tax authorities of the Company’s global tax planning initiatives; exposure to potential criminal sanctions or civil remedies if the Company fails to comply with foreign and U.S. laws and regulations that are applicable in the jurisdictions in which the Company operates, including data protection and privacy laws, sanctions laws, anti-corruption laws, and local laws prohibiting corrupt payments to government officials; the impact of mergers, acquisitions or other business combinations and the ability of the Company to successfully integrate such acquired businesses; currency and foreign exchange volatility; the level of future cash flows; the levels of capital investments; and a decline in the demand for credit risk management tools by financial institutions. These factors, risks and uncertainties as well as other risks and uncertainties that could cause Moody’s actual results to differ materially from those contemplated, expressed, projected, anticipated or implied in the forward-looking statements are currently, or in the future could be, amplified by the COVID-19 outbreak and are described in greater detail under “Risk Factors” in Part I, Item 1A of the Company’s annual report on Form 10-K for the year ended December 31, 2019, its quarterly report on Form 10-Q for the quarter ended March 31, 2020, and in other filings made by the Company from time to time with the SEC or in materials incorporated herein or therein. Stockholders and investors are cautioned that the occurrence of any of these factors, risks and uncertainties may cause the Company’s actual results to differ materially from those contemplated, expressed, projected, anticipated or implied in the forward-looking statements, which could have a material and adverse effect on the Company’s business, results of operations and financial condition. New factors may emerge from time to time, and it is not possible for the Company to predict new factors, nor can the Company assess the potential effect of any new factors on it.
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3Q 2020 Investor Presentation - November 11, 2020 3
1. Moody’s Overview2. Financial Overview3. Capital Markets Overview4. Moody’s Investors Service (MIS)5. Moody’s Analytics (MA)6. Appendix
Table of Contents
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Moody’s Overview
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3Q 2020 Investor Presentation - November 11, 2020 5
Independent provider of credit rating opinions and related information for over 100 years
Proven ratings accuracy and deeply experienced analysts
Expanded sales and marketing activities in Commercial group
Provides financial intelligence and analytical tools supporting our customers’ growth, efficiency and risk management objectives
Solutions address diverse needs and customers
Extending brand into new markets and deepening customer relationship
Note: Financial data for the trailing twelve months ended September 30, 2020.
Company Overview
Leading global provider of credit rating opinions, insight and tools for financial risk measurement and management
Revenue of $5.3 billion
Adjusted Operating Income of $2.7 billion
MIS 78%
MA 22%
MIS 62%
MA 38%
Adjusted Operating Margin
MIS 61.6%
MA 28.8%
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3Q 2020 Investor Presentation - November 11, 2020 6
Moody’s Priorities for Strategic Growth
Global Integrated Risk Assessments Moody’s Core Strengths Expand into New Geographies and Strategic Adjacencies
» »STANDARDS, SOLUTIONS & INSIGHTS
Credit
Data Analytics
Trusted brand Proprietary data andintegrated analytics
Business-credit products
Extended global customer base
REGIONAL EXPANSION
EMEA Asia Pacific Latin America
BUSINESS ADJACENCIES
Commercial Real Estate
Know Your Customer
ESG
Enhance technology infrastructure to enable automation, innovation and efficiency
Foster employee engagement and creative solutions through our diverse workforce and inclusive environment
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3Q 2020 Investor Presentation - November 11, 2020 7
Recent investments accelerate strategic growth prioritiesPriorities for Strategic Growth: Investing with Intent
BUSINESS ADJACENCIES
Acquire Media
» Enhances KYC business» Curated news and workflow solutions
enable the creation of early warning and real-time insights
ESG Solutions Group
» Brings together Moody’s portfolio of premier ESG assets
» Creates unified solutions and accelerates innovation to drive new products and research
REGIONAL EXPANSION
Know Your Customer
ESG
Latin America
Asia Pacific
» MARC: Minority investment in a Malaysian domestic rating agency
» Created the Commercial Strategies Group in China to focus on growth opportunities for MA
– Facilitates development of new products and insights
– Better align with market opportunities, as well as local regulatory requirements
» MioTech: Minority investment in China based ESG and KYC data provider
» Expansion of Moody’s Local in Uruguay and Argentina
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3Q 2020 Investor Presentation - November 11, 2020 8
Real Estate Solutions Moodys.com
Lending Solutions and Tools
APIs, Data Feeds and Other
Subscriptions
Priorities for Strategic Growth: ESG Integrated Across All Platforms, Driving Growth and Enhanced Relevance
MIS Integration MA Integration Stand-alone ESG & Climate Solutions
+ +
Carbon Transition Assessment
ESG & Climate Risk Impact on Credit
Corporate Governance Assessment
Thematic Reports
Climate Risk Solutions
Sustainability Ratings
ESG Assessments
ESG Data (Indices)
Second Party Opinions (Green Bonds)
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Financial Overview
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3Q 2020 Investor Presentation - November 11, 2020 10
CFG35%
SFG7%
FIG10%
PPIF9%
MIS Other1%
RD&A128%
ERS10%
MA
MIS
55%
45%
Recurring Transaction
3Q 2020 TTM Revenue: $5.3 billion
55%
45%
U.S. Non-U.S.
Full Year 2020 Guidance as of October 29, 20202
Revenue » Increase in the high-single-digit % range Effective Tax Rate » 19.5% - 21.5%
Operating Expenses » Increase in the low-single-digit % range Diluted EPS » $9.30 - $9.50
Operating Margin » Approximately 45% Adjusted Diluted EPS3 » $9.95 - $10.15
Adjusted Operating Margin3 » Approximately 50% Share Repurchases » Approximately $500 million
1. Includes trailing twelve months of professional services revenue. Excludes MAKS. Subsequent to the divestiture of MAKS in 2019, revenue from the Moody's Analytics Learning Solutions ("MALS") unit, which previous to 2020 was reported in the Professional Services line of business ("LOB"), will now be reported as part of the RD&A LOB.
2. See press release titled “Moody's Corporation Reports Results for Third Quarter 2020” from October 29, 2020 for Moody’s complete full year 2020 guidance. 3. These metrics are adjusted measures. See Appendix for reconciliations from adjusted financial measures to U.S. GAAP.Note: The revenue reclassifications of REITs to Corporate Finance from Structured Finance and the FACT product from RD&A to ERS are reflected in the full year (FY) calculations.
Moody’s Corporation Financial Profile
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3Q 2020 Investor Presentation - November 11, 2020 11
Macro assumptions underpinning our guidance1
2020 GDP
-6% United States-9% Euro area-5% Global
Benchmark interest rates remain low; U.S. high-yield spreads of ~500 bps
U.S. unemployment rate of ~8% by year-end
High yield default rate rising to ~8%2
Macro Assumptions Underpinning Our Outlook
1. Sources: “September 2020 Default Report” and “Global Macro Outlook 2020-2021 (August 2020 Update)” from Moody’s Investors Service. Assumptions underpinning guidance that was issued on October 29, 2020.2. Global high yield default rate by the end of 2020.
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3Q 2020 Investor Presentation - November 11, 2020 12
Financial Performance1
$2.3 $2.4 $2.8 $2.7 $2.9
$1.2 $1.2$1.4 $1.7 $2.0
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
2015 2016 2017 2018 2019 2020F
MIS Revenue MA Revenue
$4.8
2
$3.5 $3.6$4.2 $4.4
$1,109 $1,144$664
$1,370$1,606
Approximately $1,800
$500$700$900
$1,100$1,300$1,500$1,700$1,900$2,100
2015 2016 2017 2018 2019 2020F2
Adjusted Diluted EPS3Revenue1High-single-digit
% growth
$4.71 $4.94$6.07
$7.39 $8.29
$2.00$3.00$4.00$5.00$6.00$7.00$8.00$9.00
$10.00
2015 2016 2017 2018 2019 2020F
Free Cash Flow3
2
1. Totals may not sum due to rounding.2. Guidance as of October 29, 2020.3. These figures are adjusted measures. See appendix for reconciliations from adjusted financial measures to U.S. GAAP.4. 2015 – 2017 operating and adjusted operating margins have been restated to conform to the new presentation for pension expenses.5. Includes approximately $700 million in net payments pursuant to a settlement charge.
$ Millions
$9.95 - $10.15
Operating Margin4
42.8
%
18.1
%
43.3
%
42.0
%
41.4
%
46.0
%
45.9
%
47.6
%
47.6
%
47.4
%
0%10%20%30%40%50%60%
2015 2016 2017 2018 2019 2020F
Operating Margin Adj. Operating Margin
App
rox.
50%
App
rox.
45%
2
3
$ Billions $ Per Share
5
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3Q 2020 Investor Presentation - November 11, 2020 13
Long-Term Growth OpportunitiesThree Levers to Achieve EPS Growth
1. Assumes no material change in effective tax rate, foreign exchange rates, leverage profile and/or capital allocation policy.2. Subject to market conditions and other ongoing capital allocation decisions.Note: Long-term growth opportunities presented on this slide are on average over time.
EPS Low Teens % Growth Range 1,2
REVENUE High Single Digit % Growth Range1
Issuance Volume & Mix Coverage Moody’s Analytics Pricing Initiatives
ADJ. OPERATING MARGIN High-40s % Range1
Cost Discipline Process Re-Engineering Technology Enablement
CAPITAL ALLOCATION Dividend Growth & Share Count Reduction2
Reinvestment Acquisitions Dividends Share Repurchases
Investing for future growth
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3Q 2020 Investor Presentation - November 11, 2020 14
Capital Allocation StrategyPrudent approach in uncertain times
Anchored around a BBB+ rating
Ensure adequate financial flexibility
Provide necessary capital to pursue growth opportunities
Meet return thresholds and create long-term value for shareholders
Manage risk
Capital allocation goals Capital allocation levers
INVESTING IN GROWTH OPPORTUNITIES
Reinvestment
Acquisitions
RETURN OF CAPITAL
Dividends
Share repurchase
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3Q 2020 Investor Presentation - November 11, 2020 15
Investment Criteria and Post Acquisition Review
Clear Industrial LogicStrategic fit is the most important factor and the first screen
Disciplined Financial TargetsLong held, clear financial framework for external (and internal) investments
Post-Acquisition ReviewDisciplined and rigorous monitoring post close
» Complementary ratings, content, data, analytics, risk management, etc., in existing and / or high growth markets
» Financial services and adjacent client base that can leverage Moody’s brand, distribution,core credit expertise andanalytic capabilities
» Preference for recurring or “repeat” revenue and lowcapital intensity
» IRR at / above Moody’s cost of capital
» >10% annual cash return yield within 3-5 years
» Cash payback within7-9 years
» GAAP EPS accretive by year 3 (where applicable)
» Transactions evaluated on an unlevered basis
» Clear accountability with regular reporting to senior management and board
» Integrate within acquiring business unit while maintaining unique and / or entrepreneurial characteristics
» Acquisition tracking for minimum of 3 years after close for transactions>$10 million
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3Q 2020 Investor Presentation - November 11, 2020 16
Operational Excellence
Key Takeaways
Disciplined Capital Allocation
Growth Company
» Long-term financial expectations remain positive
» Balanced revenue model maximizes growth potential while ensuring resilience
» Strong free cash flow generation
» Strategic initiatives generate cost efficiencies, enabling reinvestment and margin improvement
» Continued MA margin expansion
» Investment in innovation creates sustainable value
» Emphasis on returning excess capital to stockholders through dividends and share repurchases
» Strong track record of investment success exemplified by Bureau van Dijk
» Efficient balance sheet management
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Capital Markets Overview
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3Q 2020 Investor Presentation - November 11, 2020 18
3Q 2020 Credit Market UpdateBuoyant credit markets despite ongoing real economy disruption from COVID-19
Real EconomyCOVID-19 Pandemic» New cases of COVID-19 increased in the U.S. and Europe» Policy responses: some U.S. states and European
countries rolled back re-opening measures» Vaccine / treatment timing unclear; optimism for 1H 2021
Geopolitical Impact» U.S. – China frictions remained elevated» U.S. election season in heightened focus» Continued international travel restrictions» Oil prices recovered from lows but subdued
Macroeconomic Response» U.S. Fed and other central bank actions are accommodative» Fiscal stimulus measures in the E.U.» Additional fiscal stimulus in the U.S. delayed» Many businesses have fully utilized PPP funding» Some industries resuming furloughs (travel, entertainment, etc.)
Credit MarketsInvestment Grade Bonds» Record issuance volumes1» Liquidity-driven capital raising» Opportunistic refinancing driven by effective yields
lower than pre-pandemic for many issuers » M&A pipeline limited, though indications of
improvement
High Yield Bonds» Continued strength» Significant spread tightening from March, with
spreads now approximately in line with historical averages (U.S. HY ~500 bps)
» Appetite for risk assets evidenced by continued equity market strength
Leveraged Loans» Improving, but relatively weak» Demand for floating rate debt limited» Modest M&A pipeline
1. MIS rated issuance.
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3Q 2020 Investor Presentation - November 11, 2020 19Note: MIS rated issuance.
CFG Spotlight: Issuance-driven Revenue Growth
42% 43% 46% 43% 47%51% 49%
34% 30% 29% 25%31% 24% 24%
14% 14% 15%18%
16% 20% 20%
10% 12% 10% 14%7% 4% 7%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
Corporate Finance Financial Institutions
Public, Proj. & Infra. Fin. Structured Finance
Issuance by Line of Business
$264 $256 $278 $186
$358
$660
$322
$101 $114 $103
$113
$119
$171
$151
$138 $135 $170
$135
$210
$103
$133
-12%
-3%
41% 37%36%
65%
23%
-7%-12%
40%
25%
37%
85%
10%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
Bank Loans High Yield BondsInvestment Grade Bonds CFG Transaction Revenue Y/Y Growth %CFG Y/Y Issuance Growth
CFG Issuance Volume and Transaction Revenue($ Billions)
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3Q 2020 Investor Presentation - November 11, 2020 20
$1,972
$3,466
$3,806
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
Jan '12 Jan '13 Jan '14 Jan '15 Jan '16 Jan '17 Jan '18 Jan '19 Jan '20 Sep '20
$ Bi
llions
Refunding Needs Continue to BuildNext Four Years North America and EMEA Total Refunding Needs1 as of:
1. Amount reflects total maturities as defined in Moody’s Investors Service’s U.S., Canada and EMEA refunding needs reports January 2012 – October 2020. Note: Data represents U.S., Canadian and European MIS rated non-financial corporate bonds & loans. Canadian data not available before 2015.
10%
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3Q 2020 Investor Presentation - November 11, 2020 21
1. Non-financial corporates.2. Source: Moody’s Investors Service, October 2020. Data represents U.S. & Canadian MIS rated corporate bonds & loans.3. Source: Moody’s Investors Service, October 2020. Data represents EMEA Investment-Grade & EMEA Speculative-Grade.4. Comparison to previously provided refinancing needs data for the upcoming four years from 1Q 2020 Investor Presentation.
Prior data: Moody’s Investors Service. U.S. & Canadian MIS rated corporate bonds & loans for North America as of January 2020 & EMEA as of July 2019.
191 230 222 186
3871 105 1272386
205 311
$252$387
$532$624
2021 2022 2023 2024
$ Bi
llions Speculative Grade Bank Loans
Speculative Grade BondsInvestment Grade
Refunding Needs1 Support MIS Long-term Fundamentals
346 363 363 358
34 5374 7762
79 84119$442
$495 $521$554
2021 2022 2023 2024
$ Bi
llions Speculative Grade Bank Loans
Speculative Grade Bonds
Investment Grade
Debt Maturities: North America Moody’s-Rated Corporate Bonds and Loans2
Debt Maturities: EMEA Moody’s-Rated Corporate Bonds and Loans3
» Approximately $1.8 trillion of non-financial corporate debt maturing in North America through 2024, up ~8%4
» North America speculative grade bank loans refinancing needs up ~$180 billion, or ~40%4
» Four-year debt maturities for EMEA non-financial corporates exceed $2 trillion, up ~$200 billion, or 11%4
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3Q 2020 Investor Presentation - November 11, 2020 22
- - -$19
$27
$98
$167 $165
$10 $15 $19$1 $3 $2
FY 2018 FY 2019 YTD 2020
$36 $28 $16
$130$119
$176
$230
$341
$108
$166
$264
$12 $16
$74
FY 2018 FY 2019 YTD 2020
1-2 years3-5 years6-10 years11-30 yearsLong term
1. YTD through September 30, 2020. | 2. Proxy calculation uses weighted average years of tenor. | Source: Moody’s Investors Service. | Note: Data represents tenors on Moody’s rated debt in U.S.
Increased Issuance Volume Offsets Impact of Longer Average Maturities
TOTAL ISSUANCE ($B) $462 $561 $880 $128 $212 $287
AVG. MATURITY2 12.0 12.4 14.5 8.6 8.4 7.5
$184
$101
U.S. Investment Grade Bond Issuance by Maturity Length ($ Billions)
U.S. High Yield Bond Issuance by Maturity Length($ Billions)
1 1
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3Q 2020 Investor Presentation - November 11, 2020 23
Debt Leverage and Interest Coverage inNorth America and EuropeCredit Metrics: North American Speculative Grade Companies
1. Trailing twelve months ended September 30, 2020.Source: Moody’s Investors Service.Note: Historical figures may change due to timing differences in issuer reporting deadlines.
4.6x 4.6x 4.7x 4.5x 4.3x 4.4x 4.6x 4.9x5.1x 5.2x 5.3x 5.5x 5.4x 5.5x
6.2x
2.9x 2.6x 2.4x 2.7x 2.9x3.0x 3.0x 3.0x 3.0x 2.9x 2.9x 2.9x 2.7x 2.6x 2.5x
0.0x
2.0x
4.0x
6.0x
8.0x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Inte
rest
Cov
erag
e
Debt / EBITDA EBITDA / Interest Expense
Credit Metrics: European Speculative Grade Companies
5.0x4.1x 4.6x
4.8x4.2x 4.3x 4.5x 4.6x
4.8x 4.6x 4.6x 4.6x5.3x 5.3x 5.5x
2.9x 2.9x 2.6x 2.8x3.3x 3.1x 3.0x 3.0x 3.0x 3.1x 3.5x
3.7x 3.4x 3.5x 3.5x
0.0x1.0x2.0x3.0x4.0x5.0x6.0x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Inte
rest
Cov
erag
e
Debt / EBITDA EBITDA / Interest Expense
1
1
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3Q 2020 Investor Presentation - November 11, 2020 24
Default Rate Forecast Reflects COVID-19 Impacts; Expected to Peak in 1Q 2021Default Rates for Speculative-GradeCorporate Rated Issuance1
1. Moody’s rated corporate global speculative grade default historical average of 4.1% from 1983 through September 30,2020. 2020 forecast for TTM ended December 31, 2020 and March 31, 2021 from Moody’s Investor Service “October 2020 Default Report”, published November 10, 2020.
2. Covenant data for European bonds represent a three quarter rolling average, North American loans and bonds represent a two quarter rolling and a three month rolling average, respectively.Source: Moody’s Investors Service.
4.22x
4.51x
3.91x
2.0
2.5
3.0
3.5
4.0
4.5
5.0U.S. Loans U.S. Bonds European Bonds Weakening
Improving
Speculative-Grade Covenant Quality Indicators2
7%10%
5%
0%2%4%6%8%
10%12%14%16%
Global U.S. Europe
4.1% global historic average1
» Global trailing twelve month speculative-grade default rate at 6.4% as of September 30, 2020; expected to increase to 7.2% by December 2020 and peak at 8.1% by March 2021, before declining to 6.3% by September 2021
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3Q 2020 Investor Presentation - November 11, 2020 25
64% 71% 62% 68%72%
41%39% 49% 35% 25%
6% 5% 5% 7% 4%17% 13% 15% 13% 9%
9% 8% 8% 8% 17%
0%
20%
40%
60%
80%
100%
2016 2017 2018 2019 YTD 3Q20
% o
f Men
tions
Debt Refinancing M&A Capital Spending Shareholder Payments Liquidity / Working Capital
1. Percent of mentions for each respective period in bond issue or bank loan program tranche documents. Excludes issues of less than $25 million and general corporate purposes. An issue can have multiple purposes and, as a result, percentages do not sum to 100%.
2. YTD through September 30, 2020.Source: Moody’s Analytics.
Liquidity and Refinancing Prominent Drivers of Issuance YTD 2020, While M&A DeclinedUses of Funds from USD High Yield Bonds and Bank Loans1
Opportunistic refinancing driven by lower effective yields
Liquidity and working capital
Lower M&A related issuance
YTD 20202 Issuance Drivers:
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3Q 2020 Investor Presentation - November 11, 2020 26
European Non-Financial Corporate Bonds vs. Bank Loans Outstanding
48%
€0
€1,000
€2,000
€3,000
€4,000
€5,000
€6,000
€7,000
€ B
illio
ns
Bonds Loans
U.S. Non-Financial Corporate Bonds vs. Bank Loans Outstanding
48%
$0
$1,500
$3,000
$4,500
$6,000
$7,500
$9,000
$ B
illio
ns
Bonds Loans
73%
27%
50%
50%
Sources: ECB, Federal Reserve, BarCap Indices. Europe bank loan data includes Eurozone and UK bank loans. Europe bond data includes euro and sterling denominated bonds. European data is through August 2020 and U.S. data is through September 2020.
Disintermediation of Credit is an Ongoing Trendin the Global Capital Markets
-
Moody’s Investors Service
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3Q 2020 Investor Presentation - November 11, 2020 28
34%
66%
RecurringTransaction
3Q 2020 TTM Revenue: $3.3 billion
Public, Project, & Infrastructure
Finance15%
Financial Institutions
16%
CorporateFinance
56%
StructuredFinance
12%
MIS Other 1%
62%
38%
U.S.Non-U.S.
» 32% recurring revenue
» 50% recurring revenue
» 25% recurring revenue
Note: The revenue reclassification of REITs to Corporate Finance from Structured Finance is reflected in 2019’s calculations. Percentages have been rounded and may not total to 100%.
» 51% recurring revenue
Moody’s Investors Service Financial Profile
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3Q 2020 Investor Presentation - November 11, 2020 29
MIS Guidance: Robust YTD Driving Improved Outlook1
» Strong YTD results driving increased full-year outlook» Issuance2 expected to grow in the high-teens percent range
from $4.6T in 2019
- Pace of issuance likely to moderate in 4Q 2020» Favorable issuance mix
1. Guidance as of October 29, 2020. Refer to Table 12 – “2020 Outlook” in the press release for a complete list of guidance and a reconciliation between adjusted measures to GAAP as well as assumptions used by the Company with respect to its guidance.2. MIS rated issuance. 3. Total issuance includes CFG, SFG, FIG and PPIF. Excludes sovereign debt.
Key drivers of MIS FY 2020 outlook1
$1,600$1,800$2,000$2,200$2,400$2,600$2,800$3,000$3,200
2019 2020F
Low-double-digit % increase
$2.9B
Revenue
1
Adjusted Operating Margin1
58.0%Approximately 60%
2019 2020F1
» Approximately 600-700 first time mandates
» Refinancing and liquidity driven issuance, limited M&A activity
» Higher expectation for incentive compensation, though in-line with full year 2019
FY 2020 Issuance Guidance1,260%
25%
-10%
-35%
High-teens % range
-42%
-22%
-2%
18%
38%
58%
78%
InvestmentGrade
High YieldBonds
BankLoans
StructuredFinance
TotalIssuance3
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3Q 2020 Investor Presentation - November 11, 2020 30
The Benefits of a Moody’s Rating
Investors seek our opinions and particularly value the knowledge of our analysts and the depth of our research.
Wider access to capital
Tangible financing benefits
Planningand budgeting
Transparency,credit comparison
and market stability
Responsive toinvestor demand
Moody’s opinions on credit are broadly used by institutional investors
throughout the world, making an issuer’s debt more attractive to a wider range of potential buyers
The credibility of Moody’s ratings may allow rated issuers to
enter the capital marketsmore economically
through a lower cost of capital
Helps issuers formulate internal capital plans
and funding strategies
Signals a willingness by issuers to be transparent
and provides issuers with an independent assessment
against which to compare their own creditworthiness
Moody’s ratings are the most used by investors, (when multiple agencies are
used), who have acknowledged our track record of accuracy
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3Q 2020 Investor Presentation - November 11, 2020 31
Managing Ratings in Turbulent TimesTransparency and relevance of credit ratings through the cycle
1. Includes all publicly-rated nonfinancial corporate entities; excludes subsidiaries and project finance-related corporations.2. Trailing twelve months.Source: Moody’s Investors Service.
Order sectors by degreeof exposure
Order issuers by vulnerability
within each sector
Reassess all ratings in the most vulnerable sectors
Reassess ratings of the most
vulnerable issuers in the moderately vulnerable sectors
Monitor credit profiles associated with all other
ratings and reassess those with special situations
that merit prompt reconsideration
Coordinate analytical views and sequencing of rating actions
Take account of government policy
measures designed to soften the effects
of coronavirus
Global corporate default rates ended September 20202March 1 – September 30, 2020
11.9%
3.5%
0.4%
0.1%
0.0%
0.0%
0.0%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%
Caa_C
B
Ba
Baa
A
Aa
Aaa
Top 10 sectors most affected by COVID-191
-
3Q 2020 Investor Presentation - November 11, 2020 32
Illustrative Value of a Moody’s Rating
Example: 10 year $500 million corporate bond
$15 million in total interest expensevs.
lifetime cost of a rating
$500,000,000x 4.3%
= $21,500,000x 10 years
= $215,000,000
Unrated Rated by Moody’s$500,000,000
x 4.0%= $20,000,000
x 10 years= $200,000,000
BondInterest rate
Annual interest paymentsTenor
Lifetime interest expense
Note: Illustrative spread differential based on feedback from syndicate desks and FBR & Co. research on Moody’s Corporation (January 2014) which stated that obtaining a Moody’s rating typically saves approximately 30 basis points per year for investment grade issuers. Many factors go into the pricing of a bond.
-
3Q 2020 Investor Presentation - November 11, 2020 33
Broad Coverage Serves Global Needs
~15 Years Lead/Senior
Analyst tenure
33Offices*
1,000+Analysts
~11,400+MCO employees***
***As at 30 September 2020.
-
3Q 2020 Investor Presentation - November 11, 2020 34
Strongly Positioned in Emerging Markets
Note: Size of pie represents the estimated total CRA revenue from domestic markets ($700 million) as of June 30, 2020.
2009 2019
Emerging Asia Latin America Middle East CEE/CIS Africa
$94M
$342M
1. Includes revenue from cross border issuance.
MIS Affiliate (majority)
National Scale RatingsOther Emerging Markets
Moody’s Local MIS Affiliate (minority)
MIS Emerging Markets Revenue1Emerging Markets - Domestic TAM
China
India
South Korea
IsraelEgypt
PeruArgentina
Mexico
Brazil
South Africa
OthersChile Malaysia
$700M
Size of domestic CRA markets
-
3Q 2020 Investor Presentation - November 11, 2020 35
Moody’s in Greater China
Estimated China Ratings Market Size: Domestic and Cross Border3
58%42%
Rest of Market CCXI's Share
57%43%
Rest of Market Moody's Share
Domestic Market ~$310M
Cross Border Market~$270M3
Revenue and Attributable Income from China2
1. Percentage growth numbers are rounded compound annual growth calculations. Source: Bank for International Settlements’ latest data available as of 1Q 2020.2. Greater China: Mainland, Hong Kong and Macau. Revenue and attributable income data for full year 2019.3. Revenue as of 3Q 2020; USD 1 = RMB 6.79 RMB exchange rate as of September 30, 2020 is used for conversion for domestic CRAs’ estimated revenue. Note: These are high level estimates based on MIS & CCXI 3Q 2020 revenue/market
coverage in domestic market; in cross border, market share is coverage/sum of coverage for three major CRAs.
$176
$17 -
50
100
150
200
MIS Cross Border and Total MA Attributable Income from CCXI
$ M
illion
s
MIS Cross Border Revenue Total MA Revenue Attributable Income from CCXI
» Moody’s participates directly in the cross border China issuance market through MIS and in the domestic market through a 30% interest in CCXI
» Long-term growth prospects enabled by participation in the ongoing development of China’s domestic credit markets
» Continuing to foster constructive relationships and partnerships with issuers, regulators and other market participants
01020304050
US China Japan UK France
Total debt securities outstanding 2012–20201
2012 2020
2nd Largest Onshore Bond Market at $15 Trillion
0%0%21% -2%
4%
-
3Q 2020 Investor Presentation - November 11, 2020 36
Key Stats2
30+Years of ESG experienceOur affiliate VE hasbeen a pioneer in ESG analysis since the 1990s
5,000+ESG assessmentsCovering 273 unique ESG data points
100%Systematic integration of ESG considerations into credit ratingsA detailed discussion is now required in all rating committees
6,000+Climate risk scoresSpanning countries, counties, cities, companies and real estate assets globally
260+ Global sustainable bonds and loansGreen, social, sustainability bonds and sustainability-linked loans and bonds
51% Green Bonds
19% Sustainability Bonds
13% CBI Verified
11% Social Bonds
6% Sustainability LinkedLoans and Bonds
Market Trends
» Moody’s forecasts global green, social and sustainability bond issuance to be $325 to $375 billion in 20201
» Coronavirus crisis expected to accelerate credit-relevant ESG trends with increased impact to credit2
Moody’s ESG Solutions
Outreach
» Over 700 media engagements from January to September 2020 driven by Moody’s events and research
» Strategic relationships with industry organizations and influencers across sustainable finance
» Moody’s ESG & Climate Risk hub: A one stop-shop for everything ESG at Moody’s (moodys.com/esg)
1. Moody’s Investors Service “Sector in-depth: Sustainable Finance – Global – Record sustainable bond issuance in second quarter as social bonds surge”, August 17, 2020.2. As of September 30, 2020; combined for all Moody’s entities including affiliates.3. Includes 3% for sustainability/green bonds and Climate Bond Initiative verification.
Moody’s ESG: Driving Standards Beyond Credit
ESG & Climate Measures
Sustainable Finance
Solutions
ESG & Credit
Risk Management
Solutions
3SPOsProduct Type
-
3Q 2020 Investor Presentation - November 11, 2020 37
Enhanced ESG Solutions
Index Partnerships
» Partnered with Euronext on a new ESG index powered by VE data: the Euronext ESG80
» Agreements to provide ESG data in support of the creation of new ESG products and indices with The Stock Exchange of Thailand and Solactive
Second Party Opinions(SPOs)
Note: For more information please refer to https://esg.moodys.io/solutions.
Integration of Analytics, Risk Measurement and CRE tools
» VE and 427 content integrating into multiple platforms within MA, including moodys.com and the REIS commercial real estate portal
» Working with asset managers, banks, regulators to develop climate-based stress testing solutions
Second Party Opinions (SPOs)
» VE launched an enhanced SPO service for sustainable bonds featuring an updated impact assessment and a more intuitive, impactful format
» Includes Green Bonds, Social Bonds, Sustainability linked bonds and loan assessments
» VE’s SPO offering provides an independent assessment of green, social and sustainability bond frameworks
Second Party Opinions(SPOs)
Sustainability Ratings
Climate Risk Solutions
ESG Assessments
ESG Integration into Credit Ratings & Research
ESG Integration into Analytics, Risk Measurement and CRE tools
Index Partnerships
-
Moody’s Analytics
-
3Q 2020 Investor Presentation - November 11, 2020 39
Research, Data and Analytics1
72%
Enterprise Risk Solutions
28%
Moody’s Analytics Financial Profile
89%
11%
Recurring Transaction
43%
57%
U.S. Non-U.S.
» 96% recurring revenue2» 94% retention rate3
» 77% recurring revenue» 93% retention rate
3Q 2020 TTM Revenue: $2.0 billion
1. Includes trailing twelve months of professional services revenue, excluding MAKS.2. Recurring revenue for RD&A as reported, including MALS for YTD 2020. It does not include MALS or other professional services revenue prior to 2020.3. 3Q 2020 TTM. Includes Bureau van Dijk.Note: The revenue reclassification of the FACT product from RD&A to ERS, MALS to RD&A and the MAKS sale is reflected in the trailing twelve month calculations.
-
3Q 2020 Investor Presentation - November 11, 2020 401. Guidance as of October 29, 2020. Refer to Table 12 – “2020 Outlook” in the press release for a complete list of guidance and a reconciliation between adjusted measures to GAAP as well as assumptions used by the Company with respect to its guidance.
» Strong recurring revenue mitigates COVID-19 impact
» MAKS divestiture weighs on revenue growth, partially offset by RDC, RiskFirst, ABS Suite and Acquire Media acquisitions
– FY revenue guidance includes an approximately 2% unfavorable impact from inorganic activity and FX
2019 2020F
$2.0B
Revenue
Mid-single-digit % increase
1
27.8%
2019 2020F
Approximately 30%
Adjusted Operating Margin1
1
Key drivers of MA FY 2020 outlook1
» RD&A growth driven by strong demand for KYC and compliance solutions, followed by research and data feeds
» ERS: Strength in lending software and analytics sales supports steady growth; modest impact from delays of IFRS 17 and CECL implementations
» Margin improvement primarily driven by operating leverage and cost management initiatives
MA Guidance: Recurring Revenue Creates Stability1
-
3Q 2020 Investor Presentation - November 11, 2020 41
Subscription Sales Resilient Through COVID-19 Disruption
» Strong retention» Softer demand for lower margin, one-time sales» Robust subscriptions sales growth expected to continue
1. Reflects RD&A excluding BvD. | 2. Incorporates retention and pricing components of recurring business growth.
YTD 2020 RETENTION
~94%Total MA
~96% Research1
~92% ERS
~90% BvD
PositiveRetention holding at ~94% despite initial concerns
PositiveRetention expected to remain stable
PositiveRenewal yield2outlook better than prior expectations
PositiveRenewal yields2expected to remain at existing levels
StableSocial distancing challenged sales efforts, but strong pipeline execution
COVID-19 Related ImpactHealthy new renewable sales pipeline
Softness in one-time project sales pipeline
2020 OUTLOOK 2021 OUTLOOK
Retention
Subscription Sales Growth
Pipeline
Continued demand for insights and analytics
-
3Q 2020 Investor Presentation - November 11, 2020 42
Moody’s Analytics Has Several Platforms for Growth
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
$ M
illion
s
Moody’s Analytics
2019 Revenue: $1,954m
2008 – 2019 CAGR: +12%(~60% organic)
Enterprise Risk Solutions
2019 Revenue: $522M
2008 – 2019 CAGR: +14% (~68% organic)
Research, Data & Analytics1
2019 Revenue2: $1,432M
2008 – 2019 CAGR3: +11%(~62% organic)
Revenue Has More Than Tripled Since Inception
1. Includes Professional Services line of business ("LOB"). Subsequent to the divestiture of MAKS in 2019, revenue from the Moody's Analytics Learning Solutions ("MALS") unit, which previous to 2020 was reported in the Professional Services LOB, will now be reported as part of the RD&A LOB.
2. RD&A reported revenue in 2019, excluding Professional Services, was $1,273M.3. RD&A CAGR calculation excludes professional services.Note: Individual line of business revenues may not add up to total Moody’s Analytics revenue due to rounding.
-
3Q 2020 Investor Presentation - November 11, 2020 43
Integrated Experience:Ease of Use
Enhanced Content & Coverage:More Value
Diverse Product Solutions
Onboard customersConfirm KYC, AML, Ownership tree
Analyze credit and transactionRun credit scores and consider portfolio
Consider risks holisticallyClimate change, cyber, macro-economic
Gather financialsCreate credit statistics
Spreading toolsPrepopulate and digitize financials
World class credit analytics Early warning and credit scoring
Understand ESG impactof customer’s business
Compliance modules Leverage BvD, RDC data
1,400+ Asset Managers
2,900+Commercial Banks
2,300+Corporations
240+Securities Dealers and Investment Banks
780+Insurance Companies
3,370+Governments & Other Entities
Web
Continuous improvement of content and user experience provides tools for customer to make better decisions, faster
Multichannel Delivery:Mobile
Excel add-in
Third party platforms 300+Real Estate Entities
Note: Data as of September 30, 2020.
-
3Q 2020 Investor Presentation - November 11, 2020 44
Newly Integrated Capabilities Help Customers Make Better DecisionsLeveraging interoperability to create new solutions
» »
CUSTOMER NEEDS CAPABILITIES & DATA NEW INTEGRATED SOLUTIONS
Early warning tools to identify credit deterioration
Incorporating ESG and climate information to enhance understanding of credit
Credit Sentiment Score
CreditEdge
RiskCalc
moodys.com
VE
Four Twenty Seven
Credit Sentiment Score and AI powered news feed added to CreditEdge and RiskCalc solutions
CreditView users can access ESG and climate resources from affiliates VE and Four Twenty Seven
-
3Q 2020 Investor Presentation - November 11, 2020 45
Expansion of ratings coverage
Production of insightful credit analysis
New customers in geographies with developing debt capital markets
Expansion of data sets anddelivery options
Strong customer retention
Full
Year
20
18 95.8% 109.7%9.1% 4.8%
Retained Base Upgrades and Price New Sales Business Base
Subscription Sales Growth(constant currency)
Full
Year
2017 95.5% 109.4%8.2% 5.7%
Retained Base Upgrades and Price New Sales Business BaseNote: The sales growth attributions presented on this slide are related to RD&A subscription sales on a constant currency basis includes Reis and excludes Bureau van Dijk and ABS Suite. Upgrades reflect amendments to existing customer contracts. New Sales reflect new contracts with new and existing customers.
Full
Year
20
19 96.2% 110.6%9.0%5.4%
Retained Base Upgrades and Price New Sales Business Base
RD&A: Subscription Growth Driven by Retention, Upgrades and Pricing & New Sales
Firs
t Hal
f20
20 95.6%108.5%8.2% 4.7%
Retained Base Upgrades and Price New Sales Business Base
RD&A
-
3Q 2020 Investor Presentation - November 11, 2020 46
Bureau van Dijk Collects and Enhances Information to Deliver High Value Solutions
KYC, compliance and financial crimeConduct on-boarding and anti-money laundering research with extensive corporate structure and beneficial ownership data combined with information on politically exposed persons (PEPs), sanctions and adverse news.
Transfer pricingFind comparable companies and conduct peer analysis for tax compliance.
Credit and financial riskAssess customers, partners or suppliers using globally comparable financial strength metrics and standardized financial statements.
Corporate finance and M&AFind targets/sellers, perform M&A/deal analysis and conduct due diligence using detailed deal and company data in a standardized format.
Business developmentImprove efficiency of sales and marketing efforts by using Orbis data to enrich and refresh CRM systems, research new markets and improve customer targeting.
Data managementCombine multiple data sources into single entity views using unique identifiers and matching, de-duplication and data enhancement services.
Supplier risk and procurementIncreased demand to lower risk within the supply chain and for companies to have a better understanding of who they are doing business with. Moody’s recently launched a Beta of the Know Your Supplier tool helping healthcare providers research PPE suppliers for criminal histories and negative media mentions.
High Value Customer Solutions
RD&A
-
3Q 2020 Investor Presentation - November 11, 2020 47
Today1,2TTM 2020 Q3
Approx. $400m~33% growth in Rev
Strong tailwinds in Compliance, RDC acquisition
Sales playbook – segment expertise and team selling
Significant investment in coverage and product enhancement
Investment in revenue producing FTE’s
Leveraging Moody’s financial stability and scale BvD Acquisition – Growth Synergies Are Coming Through
Pre-Moody’s12017 Revenue Approx. $300m
Operational efficiencies and modernization
1. Excludes FACT.2. Excludes RDC.
RD&A
-
3Q 2020 Investor Presentation - November 11, 2020 48
Bank credit risk
Compliance
Corporate finance and M&A
Trade Credit
Data management
Research (Economic/Library)
Business development
Tax/Transfer pricing
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0% 5% 10% 15% 20% 25% 30% 35%
12%Avg Growth of Other
Use Cases
38%Growth of Compliance
Use Case
BvD: Diverse Client Base and Broad Range of Use Cases
Percent of Total Sales1
YoY
Gro
wth
(201
9 vs
. 201
8)
Use Case Growth RatesBvD Customer Mix by industry1
Government and
Education, 22%
Professional Services, 20%
Corporates, 29%
Financial Institutions,
29%
1. For full year 2019.Source: Moody’s Analytics.
RD&A
-
3Q 2020 Investor Presentation - November 11, 2020 49
» Bureau van Dijk accelerating growth with Moody’s: BvD post acquisition revenue growth1 of ~16% and adjusted operating margin2 of ~52%
» BvD + RDC creates a leading provider of data for compliance-related use cases
» The KYC space is a $900M market with ~18% 5-yr CAGR3
» 2019 pro forma combined compliance product sales of ~$150M4
– Expect combined sales to more than double by 20235
» Complementary assets:
– RDC’s Global Risk Information Database (GRID): over 12.7+ million profiles of risk-related organizations and individuals
– Worldwide entity and ultimate ownership data from BvD’s Orbis database and Compliance Catalyst tool
Improved accuracy and streamlined decisions
381M+PUBLIC & PRIVATEENTITIES
198M+ACTIVE OWNERSHIP LINKS6
155MBENEFICIAL OWNERSHIP7
BvD + RDC Makes Us a Leading Global Player in KYC
BvD
RDC12.7M+RISK PROFILES
1,100MONITORED LISTS
1.8MPOLITICALLY EXPOSED PEOPLE
+
1. 2019 revenue growth. 2018 revenue includes the impact of $17M of revenue reductions relating to previous adjustments to deferred revenue recorded as part of acquisition accounting.
2. Direct adjusted operating margin for Bureau van Dijk for full year 2019. Excludes the allocation of corporate overhead expenses.
3. Source: Burton-Taylor, “AML/KYC Data & Services Global Sizing 2019”, November 2019; Moody’s Analytics estimates.
4. Pro forma estimate assuming RDC owned for full year 2019.5. Guidance as of February 12, 2020.6. As of October 15, 2020. 7. Beneficial owner is any individual or individuals who ultimately own or control an entity. Beneficial ownership
calculated based on ownership links: 5% threshold at all levels. As of September 30, 2020.
RD&A
-
3Q 2020 Investor Presentation - November 11, 2020 50
Technology with a purpose – Enabling better, faster decisionsERS Empowers Customers’ Success With Analytics
Our business solutions Our customers
Customers
Insurers
CorporatesBanks
AssetManagers
PensionFunds
Accounting
Impairments,IFRS-17
Balance sheet management
Portfolio, valuation and ALM1
Credit decisioning & lending
Credit modeling,scoringand spreading
RegTech
Regulatoryreporting
1. Asset and liability management.
ERS
-
3Q 2020 Investor Presentation - November 11, 2020 51
61%
77%
0%
20%
40%
60%
80%
100%
$0
$100
$200
$300
$400
$500
2015 2016 2017 2018 2019 TTM 3Q20
% R
ecur
ring
$ M
illio
ns
ERS Revenue: Recurring1 vs. Non-recurringRecurring Revenue CAGR2 = 16%
One-Time (L) Recurring (L) % Recurring (R)
3
1
ERS: Recurring ~80% of Revenue with Mid-teens CAGR» ERS recurring revenue has grown by
approximately $200 million since 2015
» Emphasis on subscription products supports scalability, drives operating leverage and margin
» Ease of use and lower cost of ownership shifting customer demand to SaaS
» Next gen products enhance customer experience, improve adoption rates and shorten sales cycles
» TTM3 revenue as of 3Q 2020:
– Subscriptions (recurring)4 +12%
– One-time (non-recurring) +19%
1. Recurring revenue includes maintenance and subscription.2. Compound Annual Growth Rate, 2015-2019.3. Trailing twelve months ended September 30, 2020.4. Subscriptions / recurring revenue include maintenance. Excluding maintenance, TTM subscription / recurring revenue would be +16%.
ERS
-
3Q 2020 Investor Presentation - November 11, 2020 52
EMEA
20192020202120222023 and beyond 2020 2021 2022 2023 and beyond
FRTB
BoE/ PRA ST
TLAC
CVA review
Revised IRB approach CR
FBO ST
CCAR /DFAST
EU-wide ST
SEC Liquidity rules (ETF, mutual funds)
NCUA RBC rule for large credit unions
CECL*
Vickers reform
Revised SA operational risk
Updated Leverage Ratio
CCAR / DFAST
CCAR /DFAST
Revised minimum capital requirements for MR
Output floor
Supervisory rating system for LFIs
Revised G-SIB assessment
SCCL for large banks
NSFR
NSFR
Minimum Leverage Ratio
BoE/ PRA BES(Climate-related element)
CCAR / DFAST
EU Sustainability taxonomy
Interest Rate Benchmark Reform
EBA Guidelines on Outsourcing Agreements
SFTR regulatory technical standards
EU “Banking Package” CRR2, CRD5, BRRD2 and SRMR2
Incorporate ESG risks into supervisory process
EU Investment Firms Directive and Regulation
EU MLD5
TLAC
IRRBB review
TLAC
New securitization framework
New securitization framework
Interest Rate Benchmark Reform
Interest Rate Benchmark Reform
HLA requirement
Revised G-SIB assessment
Revised G-SIB assessment
Output floorOutput floor
CVA review
CVA review
Revised minimum capital requirements for MR
Revised minimum capital requirements for MR
Revised SA operational risk
Revised SA operational risk
Revised SA market risk
Updated Leverage Ratio
Updated Leverage Ratio
Revised IRB approach CR
Revised IRB approach CR
Revised standardized approach CR
Revised standardized approach CR
Revised standardized approach CR
FRTB
FRTB
HLA requirement
HLA requirement
Climate ChangeST
CCAR /DFAST
BoE/ PRA ST
BoE/ PRAST
DNB Climate ST
Credit Risk Management
Revised SA market risk
Revised SA market risk
* Regulation has been delayed/ cancelled to allow banks to focus their resources on navigating the coronavirus pandemic (the FED has implemented a transition rule that provides a two-years delay period to eligible institutions, followed by a three-year transition period (the pre-existing 2020 CECL transition period))Pandemic related delays noted in last quarters report; OSFI NSFR; FED SCCL; EBA CRD 5, CRR 2 and BRRD 2Source: Moody’s Analytics market research as of October 2020.
Global Regulatory and Accounting Drivers for the ERS Business
ERS
-
Appendix
-
3Q 2020 Investor Presentation - November 11, 2020 54
Corporate Finance: Revenue and Issuance1
$135 $145 $128 $140 $140 $139 $145 $139 $146
$55 $57 $97 $96 $106 $80$144
$291$141$39 $19
$57 $69 $56 $75$75
$99
$101$78 $70
$73 $83 $90 $68
$89
$43
$73
$0
$100
$200
$300
$400
$500
$600
3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
$ M
illion
s
Revenue2: Mix by Quarter
Other Investment Grade Speculative Grade Bank Loans
$275 $312 $363 $420 $421 $425$488 $554 $547
$137 $197$193
$230 $305 $262$301 $271
$379
$120$194 $229
$219 $183 $181$254 $175
$258
$120
$155$212
$242 $204 $254
$349 $379$313
$0$200$400$600$800
$1,000$1,200$1,400$1,600
2011 2012 2013 2014 2015 2016 2017 2018 2019
$ M
illion
s
Revenue2: Mix by YearOther Investment Grade Speculative Grade Bank Loans
$236 $221 $329 $314$370 $406 $433
$732
$378$64 $33
$105 $120 $105$162 $134
$164
$161$123 $103
$100 $105 $111$108 $119
$44
$88$39$28
$26 $25$43
$50 $55
$18
$28
$0
$200
$400
$600
$800
$1,000
$1,200
3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
$ Bi
llions
Issuance4: Mix by QuarterGlobal Non-Financial Investment-Grade Bonds Global Non-Financial Speculative-Grade BondsU.S. Speculative-Grade Bank Loans Non-U.S. Speculative-Grade Bank Loans
$641 $750$1,125 $1,073 $1,043 $1,120 $1,192 $1,271 $1,074
$1,419$293 $250$329 $411 $405 $329 $311
$426$304
$492
$273 $330
$353 $504 $425 $354 $414$638
$601
$425$120 $247
$204
$144
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
$ Bi
llions
Issuance4: Mix by YearNon-U.S. Speculative-Grade Bank Loans U.S. Speculative-Grade Bank LoansGlobal Non-Financial Speculative-Grade Bonds Global Non-Financial Investment-Grade Bonds
2
2
1. Total estimated market issuance unless otherwise noted.2. Historical data has been adjusted to conform with current information and excludes intercompany revenue. The revenue reclassification of REITs to Corporate Finance from Structured Finance is reflected starting from 1Q 2018.3. Other includes: monitoring, commercial paper, medium term notes, and ICRA.4. Sources: Moody’s Analytics, Dealogic. U.S. and Non-U.S. Speculative-Grade Bank Loans represent only Moody’s rated speculative-grade bank loans. Non-U.S. Speculative-Grade Bank Loan Origination data available starting 2016. Note:
Debt issuance categories do not directly correspond to Moody’s revenue categorization.
-
3Q 2020 Investor Presentation - November 11, 2020 55
44% 50% 40% 36% 36% 36% 38% 37% 32% 24% 32%
18%19%
20% 27% 25% 27% 22% 25% 32% 51% 31%
13% 7% 13%16% 18% 15% 21% 17% 17%
17%22%
26% 24% 28% 20% 22% 23% 19% 21% 20%8% 16%
0%
20%
40%
60%
80%
100%
3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 3Q20
Other Investment Grade Speculative Grade Bank Loans
65% 62% 69% 70% 71% 72% 69% 71%75% 80% 75%
35% 38% 31% 30% 29% 28% 31% 29%25% 20% 25%
0%
20%
40%
60%
80%
100%
3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 3Q20
Revenue1: Distribution by Recurring vs. TransactionTransaction Recurring
Corporate Finance: Revenue Diversification
37% 36% 35% 32% 37% 34% 38% 35% 31% 28% 33%
63% 64% 65% 68% 63% 66% 62% 65% 69% 72% 67%
0%
20%
40%
60%
80%
100%
3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 3Q20
Revenue1: Distribution by GeographyNon - U.S. U.S.
Revenue1: Distribution by Product2
1. Historical data has been adjusted to conform with current information and excludes intercompany revenue. The revenue reclassification of REITs from Corporate Finance to Structured Finance is reflected starting from 1Q 2018.2. Other includes: monitoring, commercial paper, medium term notes, and ICRA. Note: Percentages have been rounded and may not total to 100%.
-
3Q 2020 Investor Presentation - November 11, 2020 56
Structured Finance: Revenue and Issuance1
$25 $26 $23 $26 $25 $25 $22 $23 $25
$24 $24 $24 $24 $21 $26 $27 $23 $24$15 $24 $18 $20 $18
$25 $17 $13 $15
$51$47
$35$41 $40
$32$29
$21 $24
$1 $0
$1$1 $1 $1
$1$1 $0
$0$20$40$60$80
$100$120$140$160
3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
$ M
illion
s
Revenue2: Mix by QuarterABS RMBS CMBS Structured Credit Other
$110 $98 $92 $91 $94 $97 $107 $99
$85 $73 $76 $81 $85 $90 $98 $95
$95 $116 $122 $140 $133 $143 $78 $81
$91 $96 $137$135 $122
$165 $196$148
$0 $0$0 $2 $2
$2 $2$4
$0
$200
$400
$600
2012 2013 2014 2015 2016 2017 2018 2019
$ M
illion
s
Revenue2: Mix by YearABS RMBS CMBS Structured Credit Other
$319 $335 $317 $319 $292 $298 $337 $384 $348
$371 $231 $189 $238 $200 $204 $254$270 $283
$36 $73 $120 $114 $117 $94$120 $115 $145
$39 $65$94
$159 $132 $116$136
$200 $153
$0$200$400$600$800
$1,000$1,200$1,400
2011 2012 2013 2014 2015 2016 2017 2018 2019
$ Bi
llions
Issuance3: Mix by YearABS RMBS CMBS Structured Credit
$79$115
$65 $90 $91$103
$66 $74 $89
$64$70
$48
$87 $63$85
$65 $40$66
$26
$36
$16
$38$34
$57
$31$13
$22$51
$49
$21
$49$39
$44
$25 $22
$31
$0
$50
$100
$150
$200
$250
$300
$350
3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
$ Bi
llions
Issuance3: Mix by Quarter ABS RMBS CMBS Structured Credit
1. Total estimated market issuance unless otherwise noted.2. Historical data has been adjusted to conform with current information and excludes intercompany revenue. The revenue reclassification of REITs to Corporate Finance from Structured Finance is reflected starting from 1Q 2018.3. Sources: AB Alert, CM Alert, Moody’s Corporation. Debt issuance categories do not directly correspond to Moody’s revenue categorization.Notes: ABS (Asset Backed Securitization) includes asset-backed commercial paper and long-term asset-backed securities. RMBS (Residential Mortgage Backed Securitization) includes covered bonds. CMBS includes commercial mortgage-backed securities and commercial real estate CDOs. Structured Credit includes CLOs and CDOs.
-
3Q 2020 Investor Presentation - November 11, 2020 57
Structured Finance: Revenue Diversification
Revenue1: Distribution by Product
1. Historical data has been adjusted to conform with current information and excludes intercompany revenue. The revenue reclassification of REITs to Corporate Finance from Structured Finance is reflected starting from 1Q 2018.Notes: ABS (Asset Backed Securitization) includes asset-backed commercial paper and long-term asset-backed securities. RMBS (Residential Mortgage Backed Securitization) includes covered bonds. CMBS includes commercial mortgage-backed securities and commercial real estate CDOs. Structured Credit includes CLOs and CDOs.Percentages have been rounded and may not total to 100%.
64% 63% 64% 56% 61% 55% 57% 58% 52% 43% 47%
36% 37% 36% 44% 39% 45% 43% 42% 48% 57% 53%
0%
20%
40%
60%
80%
100%
3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q10 FY19 1Q20 2Q20 3Q20
Revenue1: Distribution by Recurring vs. TransactionTransaction Recurring
38% 37% 37% 39% 36% 36% 38% 37% 36% 44% 39%
62% 63% 63% 61% 64% 64% 62% 63% 64% 56% 61%
0%
20%
40%
60%
80%
100%
3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 3Q20
Revenue1: Distribution by GeographyNon - U.S. U.S.
22% 21% 22% 23% 23% 24% 23% 23% 23% 28% 28%
21% 19% 20% 23% 21% 21% 24% 22%28%
28% 27%13% 20% 16%
18% 18% 17%23% 19%
18% 16% 17%
44% 39% 41% 35% 37% 38%29% 35% 30% 26% 27%
0% 0% 0% 1% 1% 1% 1% 1% 1% 1% 0%
ABS RMBS CMBS Structured Credit Other
-
3Q 2020 Investor Presentation - November 11, 2020 58
$327
$170
$396$315 $279 $309
$396$333
$235
$20
$4
$29
$18
$27$34
$36
$18
$29
$0
$100
$200
$300
$400
$500
3Q18 4Q18 1Q19 2Q19 3Q 19 4Q19 1Q20 2Q20 3Q20
$ Bi
llions
Issuance3: Mix by QuarterGlobal Speculative Grade Financial Corporate BondsGlobal Investment Grade Financial Corporate Bonds
Financial Institutions: Revenue and Issuance1
$73 $63$80 $84 $80 $76 $86 $88
$95
$38
$15
$29 $28 $31 $31$30
$44 $31$6
$6
$4 $10 $6 $5$6
$8 $6$3
$3
$3$3 $3 $3
$3$2 $2
$0$20$40$60$80
$100$120$140$160
3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
$ M
illion
s
Revenue2: Mix by QuarterBanking Insurance Managed Investments Other
$205 $228 $234 $242 $244 $240$300 $290 $320
$73$79 $89 $92
$96 $102
$102 $114$119
$17$19 $16
$19 $16 $17
$22 $25$25
$0$0 $0
$2 $9 $10
$13 $13$12
$0
$100
$200
$300
$400
$500
2011 2012 2013 2014 2015 2016 2017 2018 2019
$ M
illion
s
Revenue2: Mix by YearBanking Insurance Managed Investments Other
$1,266 $1,312$1,072 $1,247 $1,194 $1,187 $1,232 $1,248
$1,298
$79 $137$161
$197 $136 $112 $183$74 $108
$0
$400
$800
$1,200
$1,600
$2,000
2011 2012 2013 2014 2015 2016 2017 2018 2019$
Billio
ns
Issuance3: Mix by YearGlobal Speculative Grade Financial Corporate BondsGlobal Investment Grade Financial Corporate Bonds
1. Total estimated market issuance unless otherwise noted.2. Historical data has been adjusted to conform with current information and excludes intercompany revenue. 3. Sources: Moody’s Analytics, Dealogic. Note: Debt issuance categories do not directly correspond to Moody’s revenue categorization.
-
3Q 2020 Investor Presentation - November 11, 2020 59
Financial Institutions: Revenue Diversification
Revenue1: Distribution by Product
1. Historical data has been adjusted to conform with current information and excludes intercompany revenue.Note: Percentages have been rounded and may not total to 100%.
50%63% 56% 60% 58% 55% 58% 58% 52% 51% 56%
50%37% 44% 40% 42% 45% 42% 42% 48% 49% 44%
0%
20%
40%
60%
80%
100%
3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 3Q20
Revenue1: Distribution by Geography
Non - U.S. U.S.
47%28%
42% 41% 49% 46% 42% 45% 48%54% 50%
53%72%
58% 59% 51% 54% 58% 55% 52%46% 50%
0%
20%
40%
60%
80%
100%
3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 3Q20
Revenue1: Distribution by Recurring vs. Transaction
Transaction Recurring
66% 69% 68% 67% 66% 67% 69% 62% 71%
26% 25% 22% 26% 27% 25% 24% 31%23%
5% 3% 8% 5% 4% 5% 5% 6% 4%3% 3% 2% 3% 3% 3% 2% 1% 1%
0%
20%
40%
60%
80%
100%
FY18 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 3Q20
Banking Insurance Managed Investments Other
-
3Q 2020 Investor Presentation - November 11, 2020 60
$156 $181 $174 $177$202 $225 $218 $185 $222
$121$142 $167 $181
$174$188 $213
$206$224
$0
$100
$200
$300
$400
$500
2011 2012 2013 2014 2015 2016 2017 2018 2019
$ M
illion
s
Revenue2: Mix by YearPublic Finance and Sovereign Project and Infrastructure Finance Other
$248 $313 $302 $307 $364 $408 $384
$292 $374
$207 $266
$220
$243
$0
$100
$200
$300
$400
$500
$600
$700
2011 2012 2013 2014 2015 2016 2017 2018 2019
$ Bi
llions
Issuance3: Mix by YearLong-Term Rated U.S. Muni Bonds Rated Global Project and Infrastructure Finance Bonds
$78 $74 $71 $79 $95$129
$76 $95$132
$57 $39 $51 $64
$75 $52
$64
$114 $84
$0
$50
$100
$150
$200
$250
3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
$ Bi
llions
Issuance3: Mix by QuarterLong-Term Rated U.S. Muni Bonds Rated Global Project and Infrastructure Finance Bonds
$45 $42 $46 $53 $58$65 $57 $64 $71
$54 $49 $47$55 $62
$60$52
$69 $62
$0
$50
$100
$150
3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
$ M
illion
s
Revenue2: Mix by Quarter Public Finance and Sovereign Project and Infrastructure Finance Other
1. Total estimated market issuance unless otherwise noted.2. Historical data has been adjusted to conform with current information and excludes intercompany revenue. 3. Global Rated Project & Infrastructure Finance available starting in 2016 and represents Moody’s rated issuance. Sources: Thomson SDC, Moody’s Corporation. Note: Debt issuance categories do not directly correspond to Moody’s revenue categorization.
Public, Project and Infrastructure: Revenue and Issuance1
-
3Q 2020 Investor Presentation - November 11, 2020 61
61% 58% 61% 59% 66%69% 67% 65% 63% 72% 69%
39% 42% 39% 41% 34%31% 33% 35% 37% 28% 31%
0%
20%
40%
60%
80%
100%
3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 3Q20
Revenue1: Distribution by Recurring vs. TransactionTransaction Recurring
40% 40% 41% 35% 36% 39% 36% 37% 38% 35% 38%
60% 60% 59% 65% 64% 61% 64% 63% 62% 65% 62%
0%
20%
40%
60%
80%
100%
3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 3Q20
Revenue1: Distribution by GeographyNon - U.S. U.S.
46% 45% 47% 49% 49% 48% 52% 50% 52% 48% 53%
54% 55% 53% 51% 51% 52% 48% 50% 48% 52% 47%
0%
20%
40%
60%
80%
100%
3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 3Q20
Public Finance and Sovereign Project and Infrastructure Finance Other
Revenue1: Distribution by Product
1. Historical data has been adjusted to conform with current information and excludes intercompany revenue.Note: Percentages have been rounded and may not total to 100%.
Public, Project and Infrastructure: Revenue Diversification
-
3Q 2020 Investor Presentation - November 11, 2020 62
16% 17% 16% 15% 15% 16% 14% 15% 10% 8% 10%
84% 83% 84% 85% 85% 84% 86% 85% 90% 92% 90%
0%
20%
40%
60%
80%
100%
3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 3Q20
Transaction Recurring
Moody’s Analytics: Financial Overview
$280 $297 $308 $315 $317 $333$358 $366 $386
$115 $124$122 $117 $134
$149 $138 $131$145
$40 $44$42 $43 $43
$31
$0
$100
$200
$300
$400
$500
$600
3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
$ M
illion
s
Revenue1: Mix by Quarter
Professional Services
Revenue1: Distribution by Line of Business
Revenue1: Distribution by Recurring vs. Transaction
1. Historical data has been adjusted to conform with current information and excludes intercompany revenue. Research, Data and Analytics includes Bureau van Dijk revenue beginning from the acquisition close date, August 10, 2017. The revenue reclassification of the FACT product from RD&A to ERS is reflected starting from 1Q 2018. Subsequent to the divestiture of MAKS in 2019, revenue from the Moody's Analytics Learning Solutions ("MALS") unit, which previous to 2020 was reported in the Professional Services line of business ("LOB"), will now be reported as part of the RD&A LOB.
Note: Percentages have been rounded and may not total to 100%.
64% 64% 65% 65% 66% 64% 65% 65% 72% 74% 73%
26% 27% 26% 26% 25% 27% 29% 27%28% 26% 27%
9% 9% 9% 9% 9% 9% 6% 8%
0%
20%
40%
60%
80%
100%
3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 3Q20
60% 58% 59% 57% 58% 58% 58% 58% 57% 56% 58%
40% 42% 41% 43% 42% 42% 42% 42% 43% 44% 42%
0%
20%
40%
60%
80%
100%
3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 3Q20
Revenue1: Distribution by GeographyNon-U.S. U.S.
Enterprise Risk Solutions Research, Data and Analytics
$445 $483 $520 $572$626 $668
$833$1,121
$1,273$196 $243$263 $329
$374 $419$449
$451$522
$62 $108 $119$168 $150
$147$149
$159$159
$0
$400
$800
$1,200
$1,600
$2,000
$2,400
2011 2012 2013 2014 2015 2016 2017 2018 2019
$ M
illion
s
Revenue1: Mix by Year
-
3Q 2020 Investor Presentation - November 11, 2020 63
Historically, Moody’s Revenue and InterestRates Have Not Been Strongly Correlated
Note: Gray bars reflect periods of significant increases in the 10-year Treasury Yield.1. 10-yr U.S. Treasury Yields are represented by the rate at the end-of-period.2. Guidance as of October 29, 2020. Source: www.treasury.gov.
+200bps
+120bps
+100bps
+180bps
MCO Revenue and Interest Rates
5.8%
7.8%
4.7%
6.5%
2.3%
3.3%
1.8%
3.0%
1.9%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
F
$ M
illion
s
MIS Revenue (L) MIS Revenue Guidance MA Revenue (L) MA Revenue Guidance MCO Revenue (L) 10-yr U.S. Treasury Yield (R)1
2
-
3Q 2020 Investor Presentation - November 11, 2020 64
» Strong liquidity with $2.6B in cash and short-term investments, and a $1.0B revolving credit facility2
» 0.9x net debt to adjusted operating income3
» Leverage well below maximum 4.5x net debt/EBITDA covenant4
Proactive Capital and Liquidity Management
1. WAC = Weighted Average Coupon. 2014-2019 data as of year-end. 2020 data as of September 30, 2020.2. As of September 30, 2020.3. Trailing twelve months adjusted operating income. Amounts are adjusted measures, see Appendix for reconciliations from adjusted financial measures to U.S. GAAP and gross debt to net debt.4. Total Debt (gross debt less $100M of cash and equivalents) to EBITDA ratio threshold is normally 4.0x, but elevated to 4.5x for three quarters after an acquisition >$500 million.5. Certain USD denominated debt has been synthetically converted to EUR via cross-currency swaps. EUR converted to USD as of September 30, 2020.
400 400600
400500
300
170 250
500 586
879
300
330 250
500
0100200300400500600700800900
1000
2022 2023 2024 2025 2026 2027 2028 2029 2030 2044 2048 2050 2060
USD Fixed USD Floating EUR Fixed EUR Floating
4.2% 3.9% 4.0%3.4% 3.4%
2.1% 2.4%
4.7%4.3% 4.3%
3.5%3.9%
3.3% 3.3%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
2014 2015 2016 2017 2018 2019 2020
WAC With Hedges WAC Excluding Hedges
Bond portfolio WAC1 Balanced maturity schedule5
$ in millions
Annualized Dividend Per Share
$1.36 $1.48$1.52
$1.76$2.00
$2.24
2015 2016 2017 2018 2019 2020F 2
-
3Q 2020 Investor Presentation - November 11, 2020 65
1,189 1,242
$1,150.0
$1,200.0
$1,250.0
3Q19 3Q20
$ B
illio
ns
Issuance1
$469 $82
$3 $554
60.1%64.2%
46.0%46.0%46.1%46.1%46.2%46.2%46.2%46.3%46.3%46.3%46.4%46.4%46.5%46.5%46.5%46.6%46.6%46.6%46.7%46.7%46.8%46.8%46.8%46.9%46.9%47.0%47.0%47.0%47.1%47.1%47.1%47.2%47.2%47.3%47.3%47.3%47.4%47.4%47.5%47.5%47.5%47.6%47.6%47.6%47.7%47.7%47.8%47.8%47.8%47.9%47.9%47.9%48.0%48.0%48.1%48.1%48.1%48.2%48.2%48.3%48.3%48.3%48.4%48.4%48.4%48.5%48.5%48.6%48.6%48.6%48.7%48.7%48.8%48.8%48.8%48.9%48.9%48.9%49.0%49.0%49.1%49.1%49.1%49.2%49.2%49.2%49.3%49.3%49.4%49.4%49.4%49.5%49.5%49.6%49.6%49.6%49.7%49.7%49.7%49.8%49.8%49.9%49.9%49.9%50.0%50.0%50.1%50.1%50.1%50.2%50.2%50.2%50.3%50.3%50.4%50.4%50.4%50.5%50.5%50.5%50.6%50.6%50.7%50.7%50.7%50.8%50.8%50.9%50.9%50.9%51.0%51.0%51.0%51.1%51.1%51.2%51.2%51.2%51.3%51.3%51.3%51.4%51.4%51.5%51.5%51.5%51.6%51.6%51.7%51.7%51.7%51.8%51.8%51.8%51.9%51.9%52.0%52.0%52.0%52.1%52.1%52.2%52.2%52.2%52.3%52.3%52.3%52.4%52.4%52.5%52.5%52.5%52.6%52.6%52.6%52.7%52.7%52.8%52.8%52.8%52.9%52.9%53.0%53.0%53.0%53.1%53.1%53.1%53.2%53.2%53.3%53.3%53.3%53.4%53.4%53.5%53.5%53.5%53.6%53.6%53.6%53.7%53.7%53.8%53.8%53.8%53.9%53.9%53.9%54.0%54.0%54.1%54.1%54.1%54.2%54.2%54.3%54.3%54.3%54.4%54.4%54.4%54.5%54.5%54.6%54.6%54.6%54.7%54.7%54.7%54.8%54.8%54.9%54.9%54.9%55.0%55.0%55.1%55.1%55.1%55.2%55.2%55.2%55.3%55.3%55.4%55.4%55.4%55.5%55.5%55.6%55.6%55.6%55.7%55.7%55.7%55.8%55.8%55.9%55.9%55.9%56.0%56.0%56.0%56.1%56.1%56.2%56.2%56.2%56.3%56.3%56.4%56.4%56.4%56.5%56.5%56.5%56.6%56.6%56.7%56.7%56.7%56.8%56.8%56.9%56.9%56.9%57.0%57.0%57.0%57.1%57.1%57.2%57.2%57.2%57.3%57.3%57.3%57.4%57.4%57.5%57.5%57.5%57.6%57.6%57.7%57.7%57.7%57.8%57.8%57.8%57.9%57.9%58.0%58.0%58.0%58.1%58.1%58.2%58.2%58.2%58.3%58.3%58.3%58.4%58.4%58.5%58.5%58.5%58.6%58.6%58.6%58.7%58.7%58.8%58.8%58.8%58.9%58.9%59.0%59.0%59.0%59.1%59.1%59.1%59.2%59.2%59.3%59.3%59.3%59.4%59.4%59.4%59.5%59.5%59.6%59.6%59.6%59.7%59.7%59.8%59.8%59.8%59.9%59.9%59.9%60.0%60.0%60.1%60.1%60.1%60.2%60.2%60.3%60.3%60.3%60.4%60.4%60.4%60.5%60.5%60.6%60.6%60.6%60.7%60.7%60.7%60.8%60.8%60.9%60.9%60.9%61.0%61.0%61.1%61.1%61.1%61.2%61.2%61.2%61.3%61.3%61.4%61.4%61.4%61.5%61.5%61.6%61.6%61.6%61.7%61.7%61.7%61.8%61.8%61.9%61.9%61.9%62.0%62.0%62.0%62.1%62.1%62.2%62.2%62.2%62.3%62.3%62.4%62.4%62.4%62.5%62.5%62.5%62.6%62.6%62.7%62.7%62.7%62.8%62.8%62.9%62.9%62.9%63.0%63.0%63.0%63.1%63.1%63.2%63.2%63.2%63.3%63.3%63.3%63.4%63.4%63.5%63.5%63.5%63.6%63.6%63.7%63.7%63.7%63.8%63.8%63.8%63.9%63.9%64.0%64.0%64.0%64.1%64.1%64.1%64.2%64.2%64.3%64.3%64.3%64.4%64.4%64.5%64.5%64.5%64.6%64.6%64.6%64.7%64.7%64.8%64.8%64.8%64.9%64.9%65.0%65.0%65.0%65.1%65.1%
$0$50$100$150$200$250$300$350$400$450$500$550$600$650$700
3Q19 MIS AdjustedOperating Income
MIS RevenueIncrease
MIS ExpenseDecrease
3Q20 MIS AdjustedOperating Income
$ M
illio
ns
MIS Adjusted Operating Income and Margin+410bps
2 2
1. MIS rated issuance, excludes sovereign debt issuance.2. Includes intercompany revenue and expenses. Changes in expenses include the impact of adjusting items.
$392 $461
$105$88
$120$134
$120$133$9$9
-$50$50
$150$250$350$450$550$650$750$850$950
3Q19 3Q20
$ M
illio
ns
MIS Revenue
CFG SFG FIG PPIF MIS Other
$746$825
18%
(16%)12%
11%
YoY Change
MIS 3Q 2020: Favorable Revenue Mix
» CFG: Opportunistic refinancing, liquidity driven issuance and speculative grade strength contributed to favorable mix
» FIG: Revenue growth on active participation from infrequent issuers
» SFG: Slightly improved, but remains weak overall due to preference for fixed rate instruments
» Stronger than expected first time mandates YTD: ~540» Revenue growth and accompanying expense discipline
drove 410 bps increase in adjusted operating margin
-
3Q 2020 Investor Presentation - November 11, 2020 66
$167$145
$36 ($14)29.2%
31.4%
15.0%$0
$100
$200
3Q19 MAAdjustedOperating
Income
MA RevenueIncrease
MA ExpenseIncrease
3Q20 MAAdjustedOperating
Income
$ M
illio
ns
MA Adjusted Operating Income and Margin
+220bps
3 3
$317$386
$134$145$43
$0
$100
$200
$300
$400
$500
3Q19 3Q20
$ M
illio
ns
MA Revenue2
RD&A ERS PS
22%
8%$494
$531YoY
Change
1. MA organic constant currency growth as defined in the reconciliation tables in the Appendix.2. Subsequent to the divestiture of MAKS in 2019, revenue from the Moody's Analytics Learning Solutions ("MALS") unit that was reported in the Professional Services line of business ("LOB") is now being reported as part of the
RD&A LOB. Prior periods have not been reclassified as the amounts were not material.3. Includes intercompany revenue and expenses. Changes in expenses include the impact of adjusting items.
MA 3Q 2020: 8%1 Organic Constant Currency Revenue Growth
» MA revenue grew 8%, excluding the impact of divestiture, acquisitions and FX1
– RD&A: Driven by KYC and compliance solutions, research and data feeds
– ERS: Growth from credit assessment and origination solutions, as well as insurance products
» Year-over-year margin expansion enabled by:– Scalable top-line growth generating operating leverage– Continued savings from reduced marketing, travel and
entertainment expenses
-
3Q 2020 Investor Presentation - November 11, 2020 67
Drivers of Sustainable Corporate ValueIntroduced Sustainability Disclosures in our Public Filings
1. The Science Based Targets initiative is a collaboration between CDP, UNGC, World Resources Institute (WRI), and the World Wide Fund for Nature (WWF), that is seeking to reduce corporate GHG emissions. 2. To be completed by 2040 through the purchase of verified carbon offsets.3. Carbon Disclosure Project.4. While the Company reports its financial results in accordance with GAAP, financial performance targets and results under the Company’s incentive plans are based on adjusted financial measures. These metrics and the related performance targets are
relevant only to Moody’s executive compensation program and should not be used or applied in other contexts.5. This measure is a qualitative assessment of strategic and operational metrics tied to key non-financial business objectives certified by the Compensation & Human Resources Committee at the beginning of the performance period. The Committee
assessed the achievement of the metric by evaluating performance against the following objectives: (i) business focus and innovation and growth; (ii) people and culture; (iii) operating effectiveness and efficiency; and (iv) quality and risk management.
Executive compensation metrics include4:» Moody’s Corporation EPS and operating income» MIS operating income and ratings performance
» MA operating income and sales» Strategic & operational5
ENVIRONMENTAL» Focused on reducing greenhouse gas emissions with
science-based targets1 on our path to net-zero» Committed to remaining carbon neutral on an annual
basis and retroactively since September 20002
» Expansion of ESG products and services» CDP3 participation» Procuring 100% renewable electricity
SOCIAL» Support a diverse and inclusive workplace» Active global community and
philanthropic involvement» Robust data security and privacy practices» Fair compensation practices and benefits
packages» Recognized by Working Mother’s list of 100
Best Companies
GOVERNANCE» Professional integrity» Systematic risk management» Diverse Board membership
and skill sets» Separate CEO and Chairman positions» Active stockholder engagement
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» ML and deep learning tools to automate financial data spreading at both MA and MIS
» AI and NLP used to generate credit reports on 6,000 municipal issuers
» RPA of manual, repeatable tasks within MIS
» Incorporating alternative data sources to augment SME credit scoring accuracy
» QuantCube pilot program to synthesize unstructured data to enhance financial analysis
» CompStak’s use of crowd-sourced data on CRE leases and sales
» NLP based early warning and monitoring tools for MIS analysts and MA customers
» AI tailored credit training for MA customers – Credit Coach
» Faster loan approvals with AI powered lending decisions – CreditLens
» SaaS accelerating product development and improving customer experience
» Leveraging PaaS to experiment with application of tools and techniques -- blockchain and big data
» Moody’s IT moving to IaaS to expand capabilities and lower costs
EnhanceData & Analytics
Deliver Efficiencies
Improve Decisions
IncreaseAdaptability
Note: AI: Artificial Intelligence; ML: Machine learning; NLP: Natural language processing; RPA: Robotic process automation; IaaS: Infrastructure-as-a-service;SaaS: Software-as-a-service; PaaS: Platform-as-a-service.
Technology: Innovating with PurposeNext Gen Tech is a Defining Element of our Culture, Setting Stage for Growth
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Moody’s Global Presence
U.S. employees non-U.S. employees total employees14,087 7,310 11,397
2020 3,875
U.S. employees non-U.S. employees total employees29,850 13,725
2019
1. As of September 30, 2020. Reflects acquisition of RDC, VE, Four Twenty Seven, Risk First, ABS Suite and divestiture of MAKS.2. As of September 30, 2019.
AmericasArgentina MexicoBrazil PanamaCanada PeruChile United StatesCosta RicaEurope, Middle East & AfricaAustria PolandBelgium PortugalCyprus RussiaCzech Republic Saudi ArabiaDenmark Slovak RepublicFrance South AfricaGermany SpainIsrael SwedenItaly SwitzerlandLithuania United Arab EmiratesMorocco United KingdomNetherlandsAsia-PacificAustralia NepalChina SingaporeHong Kong South KoreaIndia ThailandJapan Sri Lanka
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3Q 2020 Investor Presentation - November 11, 2020 70
Reconciliation of Adjusted Financial Measures to GAAPAdjusted Operating Income and Adjusted Operating Margin Reconciliation1
(in $ millions) 2015 2016 2017 2018 2019 TTM 3Q 2020
Operating Income $1,491 $651 $1,821 $1,868 $1,998 $2,448Operating Margin 42.8% 18.1% 43.3% 42.0% 41.4% 46.1%
Add Adjustment:Depreciation & Amortization 114 127 158 192 200 213Acquisition-RelatedExpenses - - 23 8 3 0
Restructuring - 12 - 49 60 22Captive insurance company settlement - - - - 16 0
Settlement Charge - 864
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