3q 2018 investor presentation - s21.q4cdn.com€¦ · november 6, 2018 9 $893 $1,221 $1,098 $739...
TRANSCRIPT
3Q 2018 Investor Presentation
November 6, 2018
November 6, 2018 2
Disclaimer
Certain statements contained in this release are forward-looking statements and are based on future expectations, plans and prospects for the Company’s business and operations
that involve a number of risks and uncertainties. The forward-looking statements and other information in this release are made as of the date hereof (except where noted otherwise),
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. 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, 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 the U.K.’s referendum vote whereby the U.K. citizens voted to withdraw from
the EU; 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; 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 our rating opinions, as well as any other litigation, government and regulatory proceedings,
investigations and inquires 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
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 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, 2017, 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.
November 6, 2018 3
Table of Contents
1. Financial Overview
2. Capital Markets Overview
3. Moody’s Investors Service (MIS)
4. Moody’s Analytics (MA)
5. Conclusion
6. Appendix
November 6, 2018 4
» Ratings
» Estimated Default Frequency
Analytics (EDFs)
» Market-Implied
Ratings (MIRs)
Ratings
EDFs
MIRs
Credit Risk
Measurement
Specialized Use Cases,
e.g., ESG, KYC / AML,
Transfer Pricing, etc.
Other Financial
Risk
Assessments
Information
Aggregation &
Harmonization
Gather and Curate
Widest Range of
Financial and Credit
Risk Data
Methodologies
Company Data
Research
Training & Certification
Analyst Outreach
Risk
Understanding
Curated Data & Technology
Advisory Services
Stress Testing
Software
Risk
Management
» Defend and enhance our core
ratings & research businesses
– Ratings: predictive, predictable and
transparent
– Research: timely and insightful
» Pursue strategic growth
opportunities
– Leverage the brand to extend our reach
in financial markets
– More broadly occupy credit / financial risk
management and information vertical
– Extend both thought leadership footprint
and presence as a recognized standard
– Move upstream in emerging financial
markets
Moody’s Mission: To be the World’s Most Respected
Authority Serving Risk-Sensitive Financial Markets
1 Financial Overview
November 6, 2018 6
Provides financial
intelligence and analytical
tools supporting our clients’
growth, efficiency and risk
management objectives
Solutions address diverse
needs and customers
Extending brand into new
markets and deepening
customer relationship
Leading global provider of
credit rating opinions,
insight and tools for
financial risk
measurement and
management
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
Revenue of
$4.5 billion
Operating Income
of $2.0 billion
MIS
84%
MA
16%
MIS
62%
MA
38%
Note: Financial data for the trailing twelve months ended September 30, 2018.
Overview of Moody’s Corporation
November 6, 2018 7
Operating Margin4
Adjusted Diluted EPS2Revenue
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
2013 2014 2015 2016 2017 2018F
$ B
illio
ns
High-single-digit
% growth
$1 of
Revenue
$3.74$4.31 $4.71 $4.94
$6.07
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
2013 2014 2015 2016 2017 2018F
42
.0%
43
.5%
42
.8%
18
.1%
43
.3%
45
.1%
46
.3%
46
.0%
45
.9%
47
.6%
0%
10%
20%
30%
40%
50%
60%
2013 2014 2015 2016 2017 2018F
Operating Margin Adj. Operating Margin
~ 4
8%
~ 4
3%
$0.13
$0.21
$0.27
S&P 500
Select Peers
Moody's
5-year Average Free Cash Flow Conversion6
$7.50
to
$7.653
11
1
5
7
Financial Performance
1. Guidance as of October 26, 2018.
2. Adjusted diluted EPS is an adjusted measure. See appendix for reconciliations from adjusted financial measures to U.S. GAAP.
3. Includes an approximate $0.60 benefit resulting from the lower U.S. statutory tax rate.
4. 2013 – 2017 operating and adjusted operating margins have been restated to conform to the new presentation for pension expenses.
5. Adjusted Operating Margin is an adjusted measure. See appendix for reconciliation from adjusted financial measures to U.S. GAAP.
6. As of October 2018, over the last five available fiscal years ended 2017. Free Cash Flow is an adjusted financial measure. See appendix for reconciliation from adjusted financial
measures to U.S. GAAP. Source: FactSet.
7. Includes: CLGX, DNB, EXPN, FDS, INFO, MORN, MSCI, SPGI, TRI and VRSK.
November 6, 2018 8
Long-Term Growth Opportunities
Three Levers to Achieve EPS Growth
Note: Long-term growth opportunities presented on this slide are on average over time.
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.
November 6, 2018 9
$893
$1,221$1,098
$739
$200 $147
$197
$236$272
$285
$290$253
$0
$400
$800
$1,200
$1,600
150
170
190
210
230
2013 2014 2015 2016 2017 YTD 3Q2018
$ M
illions
Mill
ion
s o
f S
ha
res
Share Repurchases (R) Dividends Paid (R)
Shares Outstanding (L)
$1,090
$1,457$1,370
Disciplined Approach to Capital Allocation
Share Repurchases and Dividends Paid Annualized Dividend Per Share
$1,024
Investing in Growth Opportunities Return of Capital
Reinvestment
Invest in existing
businesses to
support organic
growth
Acquisitions
Evaluate carefully to
make sure aligned
with strategy and
market evolution
Dividends
Grow dividend in line
with earnings; target
25% - 30% payout1
Share Repurchase
Follow reinvestment,
dividends and
acquisitions in capital
allocation prioritization
$0.90
$1.12
$1.36$1.48 $1.52
$1.76
2013 2014 2015 2016 2017 20182
$490$400
1. Dividend payout ratio is defined as dividends per share paid/adjusted net income.
2. Annualized dividend total, based on first, second, third and fourth quarter dividend of $0.44 declared on January 24, April 24, July 10 and October 22, 2018, respectively.
November 6, 2018 10
Large
Entities
Emerging
Markets
Smaller Public
Companies w/o
Public Bonds
Larger Private
Companies, SMEs
and Tier 2 & 3 Banks
Smaller SMEs
Pursuing Organic and Inorganic Investments to
Execute on Moody’s Mission
Private
Co. Data /
SME
China
Domestic
Ratings
Expansion
Cyber
RiskCREESG
Risk
Analytics
Economics,
Structured Data &
Analytics
AI / Big Data
Technology
Enablement
Deepen Moody’s Role in Credit:
Expand Down the Credit Pyramid
Strategic Focus Areas to Increase
Breadth and Depth
November 6, 2018 11
» Current long-term credit ratings from S&P and Fitch are each BBB+ (stable)
» Solid investment-grade rating provides reliable, cost-effective access to capital in a
variety of market environments
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
2010 2011 2012 2013 2014 2015 2016 2017 3Q 2018
$ M
illio
ns
Gross Debt Outstanding (L) Net Debt/TTM Adj. Operating Income (R)
De-leveraging in 2018 to Maintain Current BBB+
Credit Rating
1
1. 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.
2. Negative net debt / TTM adjusted operating income calculation shown as 0.0x.
2
November 6, 2018 12
Guidance as of October 26, 20181
Revenue High-single-digit % growth
Operating Expenses High-single-digit % growth
Operating Margin ~43%
~48% (Adjusted2)
Effective Tax Rate 22% - 23%
EPS $6.95 - $7.10
$7.50 - $7.65 (Adjusted2)
Free Cash Flow2 ~$1.5 billion
2018 Outlook
1. See press release titled “Moody's Corporation Reports Results for Third Quarter 2018” from October 26, 2018 for Moody’s full 2018 guidance.
2. These metrics are adjusted measures. See Appendix for reconciliations from adjusted financial measures to U.S. GAAP.
2 Capital Markets Overview
November 6, 2018 14
Historically, Rising Rates Have not had a Significant
Impact on Moody’s Revenue
+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%2.4%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
$ M
illio
ns
MIS Revenue (L) MA Revenue (L) MCO Revenue (L) 10-yr U.S. Treasury Yield (R)1
1. 10-yr U.S. Treasury Yields are represented by the rate at the end-of-period.
Source: www.treasury.gov.
November 6, 2018 15
Debt Leverage and Interest Coverage Remain Stable
in North America and Europe
Credit Metrics: North American Speculative Grade Companies
1. Trailing twelve months as of September 10, 2018.
Source: Moody’s Investors Service.
4.6x 4.6x 4.7x 4.5x 4.3x 4.4x 4.6x 4.8x 5.0x 5.1x 5.2x 5.3x 5.3x
2.9x 2.6x 2.4x 2.7x 3.0x 3.1x 3.0x 3.0x 3.0x 2.9x 3.0x 3.0x 3.1x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Inte
rest
Covera
ge
Debt / EBITDA EBITDA / Interest Expense
Credit Metrics: European Speculative Grade Companies
4.8x4.1x 4.1x
4.5x4.0x 4.0x 4.2x 4.4x 4.6x 4.5x 4.5x 4.5x 4.6x
3.0x 3.0x 2.9x 3.1x 3.4x 3.4x 3.2x 3.1x 3.2x 3.3x 3.6x 3.9x 3.9x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Inte
rest
Covera
ge
Debt / EBITDA EBITDA / Interest Expense
1
1
November 6, 2018 16
1.8%
2.0%
2.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2012 2013 2014 2015 2016 2017 2018 2019F
Global U.S. Europe
Global Default Rates Remain Under Historic Average
Default Rates for Corporate Rated Issuance1
4.2% global historic average1
» Global speculative-grade default rate at 2.6% as of September 30, 2018; expected to
decline to 1.8% by September 2019
1. Moody’s rated corporate global speculative grade default historical average of 4.2% since 1983. 2019 forecast for trailing twelve months ended September 30, 2019.
Source: Moody’s Investors Service.
November 6, 2018 17
North America and EMEA Non-Financial Corporates
Have Significant Refunding Needs1
Debt Maturities: North America Moody’s-Rated Corporate Bonds and Loans
$206$226 $225 $239
$60$90
$121
$180
$49
$101
$181$223
$0
$50
$100
$150
$200
$250
$300
2019 2020 2021 2022
$ B
illio
ns
Source: MIS, February 2018.
Note: Data represents U.S. & Canadian MIS rated corporate bonds & loans.
Debt Maturities: EMEA Moody’s-Rated Corporate Bonds and Loans
$247 $248 $246$263
$33 $37 $52$88
$40 $50 $59 $75
$0
$50
$100
$150
$200
$250
$300
2019 2020 2021 2022
$ B
illio
ns
Source: MIS, July 2018.
2019 – 2022 CAGR
Investment Grade Bonds: 5%
Speculative Grade Bonds: 44%
Speculative Grade Bank Loans: 66%
Investment Grade Bonds Speculative Grade Bonds Speculative Grade Bank Loans
2019 – 2022 CAGR
Investment Grade Bonds: 2%
Speculative Grade Bonds: 39%
Speculative Grade Bank Loans: 23%
1. Amount reflects total maturities identified in the above sources.
November 6, 2018 18
Debt Refinancing and M&A are Most Frequently
Stated Uses of Proceeds
Uses of Funds from USD High Yield Bonds and Bank Loans1
62% 52%
83%
71% 74% 78%71%
65%54%
64%71%
63%
63% 53%
19%
31% 30% 25%31%
41% 54%41%
39%
52%
22% 17%11%
7% 8% 8%7% 8%
5% 6%5% 4%
12% 9% 4%
18% 17% 18% 22% 20% 16% 17% 13% 17%
1999 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD 3Q2018
% o
f M
entions
Debt Refinancing M&A Capital Spending Shareholder Payments
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%.
Source: Moody’s Analytics.
November 6, 2018 19
Disintermediation of Credit is an Ongoing Trend in the Global Capital Markets
European Non-Financial Corporate
Bonds vs. Bank Loans Outstanding
4
8
%
€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
4
8
%
$0
$1,500
$3,000
$4,500
$6,000
$7,500
$9,000
$ B
illio
ns
Bonds Loans
76%
24%
49%
51%
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 2018 and U.S. data is through September 2018.
November 6, 2018 20
+6%
Robust Growth of New Rating Mandates
0
400
800
1,200
2012 2013 2014 2015 2016 2017 YTD 3Q2017
YTD 3Q2018
# o
f N
ew
Mandate
s
EMEA United States Rest of World
1,044
Global New Rating Mandates1
» Expect ~1,000 new mandates in 20182
854
1,026990
771 738 783832
1. Rated by Moody’s Investors Service.
2. New mandates estimate as of October 26, 2018.
November 6, 2018 21
$0
$200
$400
$600
$800
$1,000
$1,200
2013 2014 2015 2016 2017 YTD 3Q 2017 YTD 3Q 2018
$ M
illio
ns
Corporate Finance Structured FinanceFinancial Institutions Public, Project, & Infrastructure FinanceMIS Other
» MIS recurring revenue growth primarily driven by increased monitoring fees from recent new mandates
» Recurring revenue ~35% of total MIS revenue
MIS Recurring Revenue
As a % of MIS
revenue38% 39% 39% 39% 36%
New Rating Mandates Provide Recurring Revenue1
Growth
35% 35%
1. MIS recurring revenue is typically billed annually and recognized ratably over 12 months. Recurring revenue can also be billed upfront and recognized over the life of the security.
3 Moody’s Investors Service
November 6, 2018 23
36%
64%
Recurring Transaction
TTM 3Q 2018 Revenue: $2.8 billion
Moody’s Investors Service Financial Profile
Public,
Project, &
Infrastructure
Finance
15%
Financial
Institutions
16%
Corporate
Finance
49%
Structured
Finance
19%
MIS Other
1%
60%
40%
U.S. Non-U.S.
» 37% recurring revenue
» 54% recurring revenue
» 33% recurring revenue
2018 Revenue Guidance as of October 26, 2018
Global low-single-digit % range
U.S. approximately flat
Non-U.S. mid-single-digit % range
Corporate Finance approximately flat
Structured Finance high-single-digit % range
Financial Institutions mid-single-digit % range
Public, Project & Infrastructure Finance mid-single-digit % range
» 30% recurring revenue
November 6, 2018 24
Americas APACEMEA
» 32,500 rated
companies and
structured deals
» $34+ trillion total
debt rated
» 19,500 research
publications
» Offices in 5
countries
» 4,600 rated
companies and
structured deals
» $21+ trillion total
debt rated
» 6,300 research
publications
» Offices in 12
countries
» 2,000 rated
companies and
structured deals
» $15+ trillion total
debt rated
» 3,500 research
publications
» Offices in 7
countries
$72+ trillionof Total Rated Debt
4,700Rated Non-Financial
Corporates
4,100Rated Financial Institutions
138Rated Sovereigns
47Rated Supranational
Institutions
450Rated Sub-Sovereigns
17,700Rated Public
Finance Issuers
1,000Rated Infrastructure &
Project Finance Issuers
11,000Rated Structured
Deals
213Rating
Methodologies
Broad Coverage Serves Global Needs
Note: Data as of December 31, 2017.
Numbers of rated entities (other than sovereigns and supranational institutions) and structured deals, research publications and event participants/activities rounded to nearest hundred.
November 6, 2018 25
» We remain focused on analytical expertise and the continuous refinement of our
credit methodologies to provide predictive, predictable and transparent ratings
» Reinforces investor “demand pull”
Three-Year Cumulative Default Rates of Fundamental Rated Universe1
0%
10%
20%
30%
40%
50%
60%~15 Years
Lead/Senior Analyst
tenure
Rating Performance Drives Investor Confidence
#1 U.S. Credit
Rating Agency
2012-20182
1. The data in the chart above shows the three-year cumulative default rates by rating from January 1998, through December 2017 of fundamental Moody’s rated universe globally.
Rating category is based on senior unsecured rating (or equivalent) of the issuer. Source: Moody’s Investors Service.
2. Institutional Investor Survey.
November 6, 2018 26
Illustrative Value of a Moody’s Rating
Example: 10 year $500 million corporate bond
$15 million in total interest expense
vs.
lifetime cost of a rating
$500,000,000
x 4.3%
= $21,500,000
x 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
Bond
Interest rate
Annual interest payments
Tenor
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.
November 6, 2018 27
60 8496
128156
187213
253286
0
50
100
150
200
250
300
350
Num
ber
of
Issuers
Continue to Invest in Key International Markets
Moody’s-Rated Chinese Issuers1
China» Successful joint venture with CCXI,
leading domestic rating agency
» CCXI provides >1,000 domestic
Chinese ratings; 34% coverage in
20172
» Cross border market rated via MIS
Hong Kong office
» In 2017, China announced it will allow
foreign firms to provide credit rating
services in part of the domestic market
Latin America
» Deepens Moody’s presence in a
dynamic and expanding market
Rest of World
» Acquired full ownership of KIS, a
leading provider of domestic credit
ratings
» Increased majority stake in ICRA to
serve growing domestic bond market
2007 2017
Emerging Asia Latin AmericaMiddle East CEE/CISAfrica
Revenue in Emerging Markets
» Opened Saudi Arabia office
$81M
$313M
1. Includes rated issuers where major operations or headquarters are in Mainland China. Hong Kong, Macau and Taiwan are not included.
2. Based on full year 2017 rated bond issuance (deal count) in China’s Interbank Market. Source: CCXI.
Sources: Dealogic, Moody’s Analytics, Moody’s Investors Service.
November 6, 2018 28
Analysis
» Develop systematic and transparent incorporation
of ESG issues into analytical process
» Expand global Green Bond Assessment (GBA)
franchise
Outreach
» Elevate Moody’s voice in ESG sphere as a
thought leader
» Collaborate with key organizations and
influencers in the market
Research
» Expand MIS research focused on ESG risks and
opportunities to meet growing market demand
Moody’s Investors Service ESG InitiativeThree Primary Objectives
10
18 17
0
10
20
2016 2017 YTD 2018
Num
ber
of
GB
As
1
1. As of September 30, 2018.
4 Moody’s Analytics
November 6, 2018 30
Research, Data and Analytics
64%
Enterprise Risk Solutions
27%
Professional Services
9%
Moody’s Analytics Financial Profile
82%
18%
Recurring Transaction
40%
60%
U.S. Non-U.S.
» 98% recurring revenue
» > 95% retention rate1
» 72% recurring revenue
» Combination of one-off contracts and
semi-recurring revenue
2018 Revenue Guidance as of October 26, 2018
Global2 low-twenties % range
U.S. approximately 10%
Non-U.S. low-thirties % range
Research, Data & Analytics2 high-thirties % range
Enterprise Risk Solutions low-single-digit % range
Professional Services high-single-digit % range
TTM 3Q 2018 Revenue: $1.7 billion
1. Excludes Bureau van Dijk.
2. Organic MA global revenue is expected to increase in the high-single-digit percent range and organic RD&A revenue is expected to increase in the low-teens percent range.
November 6, 2018 31
Moody’s Analytics has Several Platforms for Growth
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
$ M
illio
ns
Moody’s Analytics
2017 Revenue: $1,430m
2008 – 2017 CAGR: +11%
(~62% organic)
Professional Services
2017 Revenue: $149m
2008 – 2017 CAGR: +32%
(~15% organic)
Enterprise Risk Solutions
2017 Revenue: $449m
2008 – 2017 CAGR: +16%
(~67% organic)
Research, Data & Analytics
2017 Revenue: $833m
2008 – 2017 CAGR: +8%
(~74% organic)
Revenue More Than Doubled Since Inception
Note: Individual line of business revenues may not foot due to rounding.
November 6, 2018 32
Expansion of ratings coverage
Production of insightful credit
analysis
New customers in
geographies with developing
debt capital markets
Expansion of data sets and
delivery options
Strong customer retention
RD&A: Subscription Growth Driven by Retention, Upgrades and Pricing & New Sales
1H
201
8F
ull
Ye
ar
201
6
95.4% 110.2%8.0%6.8%
Retained Base Upgrades and Price New Sales Business Base
94.6% 110.1%9.0%6.5%
Retained Base Upgrades and Price New Sales Business Base
Subscription Sales Growth(constant currency)
Full
Ye
ar
2017
95.5% 109.4%8.2%5.7%
Retained Base Upgrades and Price New Sales Business Base
Note: The sales growth attributions presented on this slide are related to RD&A subscription sales on a constant currency basis and excludes Bureau van Dijk. Upgrades reflect
amendments to existing customer contracts. New Sales reflect new contracts with new and existing customers.
November 6, 2018 33
Diversified IP Network1 High Value Customer Solutions
Data from 160+
Information Providers
Publicly Available Data
Other Data Sourced
By Bureau van Dijk
280 Million Private Companies
67 Thousand Public Companies
170 Million Director Contacts
Bureau van Dijk Collects and Enhances Information
to Deliver a Market Leading Global Dataset
Compliance and Financial Crime
Corporate Finance and M&A
Credit Risk
Transfer Pricing
Business Development
Data Management
1. Data as of December 31, 2017.
November 6, 2018 34
ERS Solutions Address Diverse Needs and
Customers
Credit Risk & Actuarial
AnalyticsHelps risk managers assess and
manage current and future exposures
across all asset classes
Accounting Calculation &
ReportingProduces key calculations and reports
required by many of the world’s accounting
standards
Regulatory Calculation &
ReportingGenerates key calculations and reports
required by many of the world’s financial
regulations
Credit Assessment &
Origination Automates financial spreading
and credit scoring, decision
making and monitoring
Portfolio & Capital StrategyHelps firms to improve portfolio
performance and meet regulatory and
economic capital requirements
Asset & Liability ManagementIntegrates ALM, liquidity risk management,
funds transfer pricing and regulatory reporting
capabilities into a seamless enterprise platform
November 6, 2018 35
ERS Subscription Products Drive Growth
Prior: Growth from installed software
» One-time projects – installed software & services
» Bespoke projects accelerated development of IP
» 61% of revenue from renewable products in 2015
Now: SaaS & subscriptions driving growth
» Expanding SaaS and subscription product array
» Subscriptions generate lower Annual Contract Value in
short run, but better Lifetime Customer Value
» ~70% of revenue from subscription products over TTM1
Key Growth Drivers
» New accounting standards require Moody’s expertise at
banks and Insurance companies
– CECL, IFRS17
» Moody’s software and analytics enable customers’ to
realize digitization and automation initiativesTTM1 as of 3Q18:
» Subscriptions:
– Sales +9%; Revenues +11%
» Non-recurring (one-time):
– Sales -11%; Revenues -6%
$200
$250
$300
$350
$400
$450
$500
$ M
illio
ns
Total Subscription
TTM1 Revenue2
1. Trailing twelve months (TTM) as of September 30, 2018.
2. Subscription revenue includes subscriptions and maintenance.
5 Conclusion
November 6, 2018 37
Why Invest in Moody’s?
We strive to be the world’s most respected authority serving risk-sensitive financial
markets
We have had strong revenue and earnings growth, as well as cash flow conversion
– 2013 – 2017 revenue CAGR of 9%
– 2013 – 2017 adjusted diluted EPS1 CAGR of 15%
– 2013 – 2017 free cash flow1 conversion rate of ~28%
We are committed to returning capital to our shareholders
– 2013 – 2017 returned $5.4 billion, or 114% of free cash flow, to shareholders via share
repurchases and dividends
We will selectively invest in strategic growth opportunities
– Leverage brand to extend our relevance in financial markets
– Expand our product offerings and geographic influence
1. Adjusted diluted EPS is an adjusted measure. See appendix for reconciliations from adjusted financial measures to U.S. GAAP.
6 Appendix
November 6, 2018 40
Corporate Finance: Revenue and Issuance
$109 $108 $113 $116 $124 $126 $131 $134 $131
$61 $56 $72 $85 $79 $66 $81 $67 $51
$59$41
$64$63 $63 $64
$58 $59$38
$71$73
$104 $92 $85 $78$108 $118
$76
$0
$50
$100
$150
$200
$250
$300
$350
$400
3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
$ M
illio
ns
Revenue1: Mix by Quarter
Other Investment Grade Speculative Grade Bank Loans
$178 $216 $275 $312 $363 $420 $421 $425 $478$119 $109$137
$197$193
$230 $305 $262$301
$84$143
$120
$194$229
$219$183 $181
$254
$28$96
$120
$155
$212$242 $204 $254
$359
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2009 2010 2011 2012 2013 2014 2015 2016 2017
$ M
illio
ns
Revenue1: Mix by Year
Other Investment Grade Speculative Grade Bank Loans
$320$215
$348 $332 $322 $269 $312 $310$240
$91
$65
$123 $104 $99$100
$98 $94
$64
$120
$124
$206$160 $138
$134$165 $210
$123
$39
$48
$84
$60$44
$59
$65$72
$39
$0
$200
$400
$600
$800
3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
$ B
illi
on
s
Issuance3: Mix by Quarter
Non-U.S. Speculative-Grade Bank Loans
U.S. Speculative-Grade Bank Loans
Global Non-Financial Speculative-Grade Bonds
Global Non-Financial Investment-Grade Bonds
$1,129
$641 $750$1,125 $1,073 $1,043 $1,120 $1,192 $1,270
$221
$293 $250
$329 $411 $405 $329 $311$422$79
$273$330
$353$504 $425 $354 $414
$638$120
$ 247
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2009 2010 2011 2012 2013 2014 2015 2016 2017
$ B
illi
on
s
Issuance3: Mix by Year
Non-U.S. Speculative-Grade Bank LoansU.S. Speculative-Grade Bank LoansGlobal Non-Financial Speculative-Grade BondsGlobal Non-Financial Investment-Grade Bonds
2
2
1. Historical data has been adjusted to conform with current information and excludes intercompany revenue.
2. Other includes: monitoring, commercial paper, medium term notes, and ICRA.
3. 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.
November 6, 2018 41
36% 38% 39% 38% 32% 32% 35% 38% 34% 35% 35%44%
19% 21%27% 23%
20% 24% 22% 20% 22% 21% 18%
17%
23% 20%16%
16%
18%18% 18% 19% 18% 15% 16%
13%
21% 22% 18% 23%29% 26% 24% 23% 26% 29% 31% 26%
0%
20%
40%
60%
80%
100%
FY13 FY14 FY15 FY16 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18
Other Investment Grade Speculative Grade Bank Loans
73% 70% 69% 68% 74% 74% 73% 70% 73% 73% 73%65%
27% 30% 31% 32% 26% 26% 27% 30% 27% 27% 27%35%
0%
20%
40%
60%
80%
100%
FY13 FY14 FY15 FY16 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18
Revenue1: Distribution by Recurring vs. Transaction
Transaction Recurring
Corporate Finance: Revenue Diversification
38% 38% 32% 32% 31%38% 33% 37% 35% 35% 36% 38%
62% 62% 68% 68% 69%62% 67% 63% 65% 65% 64% 62%
0%
20%
40%
60%
80%
100%
FY13 FY14 FY15 FY16 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18
Revenue1: Distribution by Geography
Non - U.S. U.S.
Revenue1: Distribution by Product
2
1. Historical data has been adjusted to conform with current information and excludes intercompany revenue.
2. Other includes: monitoring, commercial paper, medium term notes, and ICRA.
Percentages have been rounded and may not total to 100%.
November 6, 2018 42
Structured Finance: Revenue and Issuance
$23 $24 $23 $24 $23 $27 $28 $28 $25
$19 $25 $20 $22 $22$25 $24 $27
$24
$33$40
$29$30 $38
$46$33 $32
$26
$29
$42
$27$42
$46
$50
$43$55
$51$0
$1
$0
$1$1
$1
$1$1
$1
$0
$20
$40
$60
$80
$100
$120
$140
$160
3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
$ M
illio
ns
Revenue1: Mix by Quarter
ABS RMBS CREF Structured Credit Other
$101 $91 $107 $110 $98 $92 $91 $94 $97
$59 $65$90 $85
$73 $76 $81 $85 $90$46 $53
$70 $95 $116 $122 $140 $133 $143$99 $82
$78$91 $96
$137$135 $122
$165
$0 $0
$0$0 $0
$0$2 $2
$2
$0
$200
$400
$600
2009 2010 2011 2012 2013 2014 2015 2016 2017
$ M
illio
ns
Revenue1: Mix by Year
ABS RMBS CREF Structured Credit Other
$296 $220$319 $335 $317 $319 $292 $298 $337
$355$396
$371$231 $189 $238
$200 $204$254
$30 $24$36
$73
$120$114
$117 $94$120
$93
$59 $39 $65
$94$159
$132 $116
$136
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
2009 2010 2011 2012 2013 2014 2015 2016 2017
$ B
illi
on
s
Issuance2: Mix by Year
ABS RMBS CREF Structured Credit
$68 $80 $74 $88$67
$107 $102 $89 $79
$36$48 $47
$75
$59
$73$62 $74
$64$25
$33$18
$26
$34
$41$26 $27
$26$25
$56$14
$32$42
$48
$36$64
$51
$0
$50
$100
$150
$200
$250
$300
3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
$ B
illi
on
s
Issuance2: Mix by Quarter
ABS RMBS CREF Structured Credit
1. Historical data has been adjusted to conform with current information and excludes intercompany revenue.
2. 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. CREF (Commercial Real Estate Finance) includes commercial mortgage-backed securities, real estate finance, commercial real estate CDOs, and real estate
investment trusts (REITs). Structured Credit includes CLOs and CDOs.
November 6, 2018 43
Structured Finance: Revenue Diversification
60% 62% 64% 62% 57% 63% 66% 70% 65% 64% 67% 65%
40% 38% 36% 38% 43% 37% 34% 30% 35% 36% 33% 35%
0%
20%
40%
60%
80%
100%
FY13 FY14 FY15 FY16 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18
Revenue1: Distribution by Recurring vs. Transaction
Transaction Recurring
36% 34% 31% 33% 35% 32% 30% 29% 31% 35% 34% 35%
64% 66% 69% 67% 65% 68% 70% 71% 69% 65% 66% 65%
0%
20%
40%
60%
80%
100%
FY13 FY14 FY15 FY16 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18
Revenue1: Distribution by Geography
Non - U.S. U.S.
26% 22% 20% 22% 23% 20% 18% 18% 19% 22% 20% 20%
19%18% 18% 19% 20%
19%17% 17% 18% 19% 19% 19%
30%28% 31% 31% 29%
25% 29% 31% 29% 26%22% 21%
25%32% 31% 28% 27%
35% 36% 33% 33% 33% 38% 40%
0% 0% 0% 1% 0% 1% 0% 0% 0% 0% 1% 0%
0%
20%
40%
60%
80%
100%
FY13 FY14 FY15 FY16 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18
ABS RMBS CREF Structured Credit Other
Revenue1: Distribution by Product
1. Historical data has been adjusted to conform with current information and excludes intercompany revenue.
Percentages have been rounded and may not total to 100%.
Notes: ABS (Asset Backed Securitization) includes asset-backed commercial paper and long-term asset-backed securities. RMBS (Residential Mortgage Backed Securitization)
includes covered bonds. CREF (Commercial Real Estate Finance) includes commercial mortgage-backed securities, real estate finance, commercial real estate CDOs, and real estate
investment trusts (REITs). Structured Credit includes CLOs and CDOs.
November 6, 2018 44
Financial Institutions: Revenue and Issuance
$63 $59$79 $70 $70
$80 $77 $77 $73
$26$23
$25$23 $24
$30 $28 $33 $38$4$4
$5$6 $5
$6 $6$7 $6
$3$3
$3$3 $4
$3 $3$3 $3
$0
$20
$40
$60
$80
$100
$120
$140
3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
$ M
illio
ns
Revenue1: Mix by Quarter
Banking Insurance Managed Investments Other
$176 $192 $205 $228 $234 $242 $244 $240$300
$66$69 $73
$79 $89 $92 $96 $102
$102
$16$18
$17$19 $16 $19 $16 $17
$22
$0$0
$0$0 $0 $2 $9 $10
$13
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
2009 2010 2011 2012 2013 2014 2015 2016 2017
$ M
illio
ns
Revenue1: Mix by Year
Banking Insurance Managed Investments Other
$1,764
$1,340 $1,266 $1,312$1,072
$1,247 $1,194 $1,187 $1,230
$80
$87 $79$137
$161
$197$136 $112
$180
$0
$400
$800
$1,200
$1,600
$2,000
2009 2010 2011 2012 2013 2014 2015 2016 2017
$ B
illi
on
s
Issuance2: Mix by Year
Global Speculative Grade Financial Corporate Bonds
Global Investment Grade Financial Corporate Bonds
$284$216
$419
$294 $278$241
$411$339 $327
$38
$19
$45
$49$39
$49
$39
$24 $20
$0
$100
$200
$300
$400
$500
3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
$ B
illi
on
s
Issuance2: Mix by Quarter
Global Speculative Grade Financial Corporate Bonds
Global Investment Grade Financial Corporate Bonds
1. Historical data has been adjusted to conform with current information and excludes intercompany revenue.
2. Sources: Moody’s Analytics, Dealogic. Note: Debt issuance categories do not directly correspond to Moody’s revenue categorization.
November 6, 2018 45
Financial Institutions: Revenue Diversification
35% 35% 37% 37%48% 43% 40%
48% 45% 44% 47% 47%
65% 65% 63% 63%52% 57% 60%
52% 55% 56% 53% 53%
0%
20%
40%
60%
80%
100%
FY13 FY14 FY15 FY16 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18
Revenue1: Distribution by Recurring vs. Transaction
Transaction Recurring
58% 60% 57% 57% 55% 57% 60% 57% 57% 58% 55% 50%
42% 40% 43% 43% 45% 43% 40% 43% 43% 42% 45% 50%
0%
20%
40%
60%
80%
100%
FY13 FY14 FY15 FY16 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18
Revenue1: Distribution by Geography
Non - U.S. U.S.
69% 68% 67% 65%70% 69% 69% 67% 69% 67% 64% 61%
26% 26% 26% 28%22% 23% 23% 25% 23% 25% 27% 32%
5% 5% 4% 5% 5% 6% 5% 5% 5% 5% 6% 5%
0% 1% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3%
0%
20%
40%
60%
80%
100%
FY13 FY14 FY15 FY16 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18
Banking Insurance Managed Investments Other
Revenue1: Distribution by Product
1. Historical data has been adjusted to conform with current information and excludes intercompany revenue.
Percentages have been rounded and may not total to 100%.
November 6, 2018 46
$142 $159 $156 $181 $174 $177 $202 $225 $218
$104$113 $121
$142 $167 $181$174
$188 $213
$0$0 $0
$0$0
$0$0
$0$0
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
2009 2010 2011 2012 2013 2014 2015 2016 2017
$ M
illi
on
s
Revenue1: Mix by Year
Public Finance and SovereignProject & Infrastructure FinanceOther
$355 $374 $248
$313 $302 $307 $364 $408 $375
$207 $266
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
2009 2010 2011 2012 2013 2014 2015 2016 2017
$ B
illi
on
s
Issuance2: Mix by Year
Rated Global Project & Infrastructure Finance Bonds
Long-Term Rated U.S. Muni Bonds
Public, Project and Infrastructure: Revenue and Issuance
$105 $95 $82 $95 $80
$127
$59$82 $78
$50 $59 $57
$68 $75
$66
$57
$66 $57
$0
$50
$100
$150
$200
$250
3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
$ B
illi
on
s
Issuance2: Mix by Quarter
Rated Global Project & Infrastructure Finance Bonds
Long-Term Rated U.S. Muni Bonds
$60 $54 $53 $53 $49$62
$47 $52 $45
$45 $49 $45 $51 $60
$57
$46$56
$54
$0 $0$0
$0$0
$0
$0
$0
$0
$20
$40
$60
$80
$100
$120
$140
3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
$ M
illio
ns
Revenue1: Mix by Quarter
Public Finance and SovereignProject & Infrastructure FinanceOther
1. Historical data has been adjusted to conform with current information and excludes intercompany revenue.
2. 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.
November 6, 2018 47
60% 58% 60% 63% 60% 64% 65% 68% 65%58% 64% 61%
40% 42% 40% 37% 40% 36% 35% 32% 35%42% 36% 39%
0%
20%
40%
60%
80%
100%
FY13 FY14 FY15 FY16 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18
Revenue1: Distribution by Recurring vs. Transaction
Transaction Recurring
37% 37% 35% 33% 36% 37% 42% 38% 38% 43% 43% 40%
63% 63% 65% 67% 64% 63% 58% 62% 62% 57% 57% 60%
0%
20%
40%
60%
80%
100%
FY13 FY14 FY15 FY16 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18
Revenue1: Distribution by Geography
Non - U.S. U.S.
51% 49% 54% 54% 54% 51% 45%52% 51% 50% 48% 46%
49% 51% 46% 46% 46% 49% 55%48% 49% 50% 52% 54%
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
0%
20%
40%
60%
80%
100%
FY13 FY14 FY15 FY16 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18
Public Finance and Sovereign Project & Infrastructure Finance Other
Revenue1: Distribution by Product
Public, Project and Infrastructure: Revenue Diversification
1. Historical data has been adjusted to conform with current information and excludes intercompany revenue.
Percentages have been rounded and may not total to 100%.
November 6, 2018 48
Moody’s Analytics: Financial Overview
$168 $167 $175 $181$218
$258 $269 $280 $283
$102 $130 $96 $97
$113
$143 $100 $106 $113
$36$37
$36 $36
$38
$40$38 $37 $40
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
$ M
illio
ns
Revenue1: Mix by Quarter
$411 $419 $445 $483 $520 $572 $626 $668$833
$151 $181 $196$243 $263
$329$374
$419
$449
$11 $19 $62 $108$119
$168$150
$147
$149
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2009 2010 2011 2012 2013 2014 2015 2016 2017
$ M
illio
ns
Revenue1: Mix by Year
Professional Services
Enterprise Risk Solutions
Research, Data and
Analytics
23% 27% 26% 25% 21% 20% 21% 24% 22% 15% 16% 16%
77% 73% 74% 75% 79% 80% 79% 76% 78% 85% 84% 84%
0%
20%
40%
60%
80%
100%
FY13 FY14 FY15 FY16 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18
Transaction Recurring
55% 56% 54% 51% 49% 50% 56% 56% 55% 60% 59% 60%
45% 44% 46% 49% 51% 50% 44% 44% 45% 40% 41% 40%
0%
20%
40%
60%
80%
100%
FY13 FY14 FY15 FY16 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18
Revenue1: Distribution by Geography
Non-U.S. U.S.
58% 54% 54% 54% 57% 58% 59% 59% 58%66% 66% 65%
29% 31% 33% 34% 31% 31% 31% 32% 31%25% 25% 26%
13% 16% 13% 12% 12% 11% 10% 9% 10% 9% 9% 9%
0%
20%
40%
60%
80%
100%
FY13 FY14 FY15 FY16 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18
Revenue1: Distribution by Product
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.
Percentages have been rounded and may not total to 100%.
November 6, 2018 49
MIS MA Non-U.S.U.S.
Corporate Finance
31%
Structured Finance
12%
Financial Institutions
10%
Public, Project & Infrastructure
9%
MIS Other1%
Research, Data &
Analytics24%
Enterprise Risk Solutions
10%
Professional Services
3%
Revenue is Diversified by Business, Geography and Type
TTM 3Q18 Revenue by Business
United States53%
EMEA31%
Asia-Pacific11%
Americas5%
TTM 3Q18 Revenue by Geography
TTM 3Q18 Revenue by Type
53%36%
82%
47%64%
18%
MCO MIS MA
Recurring Transaction
November 6, 2018 50
Moody’s Corporate Speculative Grade Credit Cycle
Gauge
Improving Neutral Trending Worse
1. North America long-term average: LSI: from 2002, B3-Neg: from 2007, Refunding: from 2007, Downgrade / Update Ratio: from 2008, Bond CQ score: from 2011, Loan CQ: from
2012, Default rate: from 1990.
2. Europe long-term average: LSI: from 2012, CQ Score: from 2011, B3-Neg: from 2011, Downgrade / Update Ratio: from 2009, Default rate: from 1999.
3. Trailing twelve months (TTM) ended September 30, 2018.
Source: Moody’s Investors Service.
Latest
Metric
1-Year
Ago
Long-Term
Average1
Record
Worst
Latest
Metric
1-Year
Ago
Long-Term
Average2
Record
Worst
Liquidity Stress Index 3.3% 3.0% 6.4% 20.8% 5.6% 8.6% 11.1% 18.5%
B3-Neg / Lower 188 214 194 291 39 48 44 60
% B3-Neg / Lower 12.3% 15.1% 15.0% 26.1% 8.1% 10.8% 11.4% 17.2%
3-Year Refunding Index 3.2x 4.6x 6.1x 1.5x N/A N/A N/A N/A
Downgrade / Upgrade Ratio3 0.6x 0.8x 3.3x 11.7x 2.4x 0.4x 2.3x 20.5x
Bond Covenant Quality Score 4.30 4.47 4.07 4.52 3.79 3.69 3.40 4.85
Loan Covenant Quality Score 4.09 4.08 3.79 4.10 N/A N/A N/A N/A
Default Rate (forecast) 2.0% 3.1% 4.7% 14.7% 2.0% 2.0% 3.7% 13.0%
North America Europe
November 6, 2018 51
Moody’s Global Presence
U.S. employees non-U.S. employees total employees2
U.S. employees non-U.S. employees total employees1
3,743 8,878 12,621
2018
3,566 8,182 11,748
2017
AmericasArgentina Mexico
Brazil Panama
Canada Peru
Costa Rica United States
Europe, Middle East & AfricaAustria Poland
Belgium Portugal
Cyprus Russia
Czech Republic Saudi Arabia
Denmark Slovakia
France South Africa
Germany Spain
Ireland Sweden
Israel Switzerland
Italy UAE
Mauritius United Kingdom
Netherlands
Asia-PacificAustralia Malaysia
China Nepal
Hong Kong Singapore
India Sri Lanka
Japan Thailand
Korea
1. As of September 30, 2018.
2. As of September 30, 2017.
November 6, 2018 52
CSR: Reshape Tomorrow PartnersGlobal Initiative Empowering Entrepreneurs to Overcome the Challenges of Expanding
Their Enterprises
Shanghai-based program helping migrant
women access capital and credit through
tailored training, coaching and networking.
Providing strategic and operational
assistance for global social entrepreneurs
to scale their businesses serving low-
income consumers and lifting them out of
poverty.
Global program to improve social
entrepreneurs’ ability to access credit.
Moody’s will sponsor while cultivating a
community of early stage lenders
committed to social impact.
Training program to help women
business owners access capital and
markets in Canada, Germany and
Nigeria by building more inclusive
global value chains.
Helping 1,000 retail shop owners in
Kenya by providing working capital to
youth and women entrepreneurs in
South Africa to reduce unemployment
and boost local economies.
Capacity building program in Latin
America to give entrepreneurs the
tools to grow successful businesses,
such as team management and
financial planning.
Learn more at moodys.com/csr
November 6, 2018 53
Reconciliation of Adjusted Financial Measures to
GAAPAdjusted Operating Income and Adjusted Operating Margin Reconciliation1
(in $ millions) 2013 2014 2015 2016 2017 TTM 3Q18
Operating Income $1,248.0 $1,449.8 $1,490.7 $650.9 $1,820.8 $1,957.1
Operating Margin 42.0% 43.5% 42.8% 18.1% 43.3% 43.0%
Add Adjustment:
Depreciation & Amortization 93.4 95.6 113.5 126.7 158.3 193.5
Acquisition-Related Expenses - - - - 22.5 9.9
Restructuring - - - 12.0 - -
Goodwill Impairment Charge - - - - - -
Settlement Charge - - - 863.8 - -
Adjusted Operating Income $1,341.4 $1,545.4 $1,604.2 $1,653.4 $2,001.6 $2,160.5
Adjusted Operating Margin 45.1% 46.3% 46.0% 45.9% 47.6% 47.5%
Moody's Corporation Net Debt Reconciliation
1. 2013 - 2017 operating and adjusted operating income have been restated to conform to the new presentation of pension accounting.
(in $ millions) 2010 2011 2012 2013 2014 2015 2016 2017 3Q 2018
Gross debt $1,239.6 $1,243.8 $1,663.5 $2,091.3 $2,532.1 $3,380.6 $3,363.0 $5,540.5 $4,954.5
Less: Cash, cash equivalents and
short-term investments672.3 774.8 1,773.3 2,106.3 1,677.6 2,232.2 2,224.9 1,183.3 1,145.5
Net debt $567.3 $469.0 ($109.8) ($15.0) $854.5 $1,148.4 $1,138.1 $4,357.2 $3,809.0
November 6, 2018 54
Reconciliation of Adjusted Financial Measures to
GAAP (cont.)
Moody's Corporation Operating Margin Guidance Reconciliation
2018F1
Projected Operating Margin - GAAP Approximately 43%
Projected impact from Depreciation & Amortization Approximately 4%
Restructuring Approximately 1%
Projected impact from Acquisition-Related Expenses Negligible
Projected Adjusted Operating Margin Approximately 48%
Free Cash Flow Reconciliation2
(in $ millions) 2013 2014 2015 2016 2017 2018F1
Net cash flows from operating activities $965.6 $1,077.3 $1,198.1 $1,259.2 $740.40 ~$1,600
Less: Capital expenditures 42.3 74.6 89.0 115.2 90.6 ~$85
Free Cash Flow $923.3 $1002.7 $1,109.1 $1,144.0 $649.80 ~$1,500
1. Guidance as of October 26, 2018.
2. In 2017, the Company adopted ASU 2016-09 “Improvements to Employee Share-Based Payment Accounting” on a retrospective basis. In Q1 2018, the Company adopted ASU No. 2016-
15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a Consensus of the Emerging Issues Task Force)” on a retrospective basis.
November 6, 2018 55
Reconciliation of Adjusted Financial Measures to
GAAP (cont.)Moody's Corporation Diluted EPS Reconciliation
2013 2014 2015 2016 2017 2018F1
Diluted EPS - GAAP $3.60 $4.61 $4.63 $1.36 $5.15 $6.95 - $7.10
Legacy Tax (0.09) (0.03) (0.03) - - -
Impact of Litigation Settlement 0.14 - - $3.59 - -
ICRA Gain - (0.37) - - - -
FX Gain due to Subsidiary Liquidation - - - ($0.18) - -
Restructuring - - - $0.04 - $0.10 - $0.15
CCXI Gain - - - - ($0.31) -
Acquisition-Related Expenses - - - - $0.10 $0.02 - $0.03
Purchase Price Hedge Gain - - - - ($0.37) -
Net Acquisition-Related Intangible
Amortization Expenses$0.09 $0.10 $0.11 $0.13 $0.23 ~$0.40
Impact of U.S. tax reform - - - - $1.28 ($0.33)
Net Impact of U.S./European tax change
on deferred taxes - - - - ($0.01) -
Increase to non-U.S. UTPs - - - - - $0.33
Adjusted Diluted EPS $3.74 $4.31 $4.71 $4.94 $6.07 $7.50 - $7.65
1. Note: Table may not sum to total due to rounding.
Guidance as of October 26, 2018.
Investor Relations
ir.moodys.com
moodys.com
November 6, 2018 57
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