UBS Financial Services Virtual Conference - Michael West, President, Moody's Investors Service
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UBS Financial Services Virtual Conference Michael West, President, Moody’s Investors Service August 12, 2020
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 uncertainty as companies transition away from LIBOR and Brexit; 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.
MIS 2Q 2020 Overview - August 12, 2020 2
Company Overview
Leading global provider of credit
Independent provider of rating opinions, insight and tools Provides financial intelligence
credit rating opinions and for financial risk measurement and analytical tools
related information for over and management supporting our customers’
100 years growth, efficiency and risk
management objectives
Revenue of Adjusted Operating
$5.2 billion Income of $2.6 billion
Proven ratings accuracy and
deeply experienced analysts Solutions address diverse
needs and customers
MIS MA MIS MA
62% 38% 78% 22%
Expanded sales and
marketing activities in Extending brand into new
Commercial group Adjusted markets and deepening
Operating Margin customer relationship
MIS MA
60.5% 28.2%
Note: Financial data for the trailing twelve months ended June 30, 2020.
MIS 2Q 2020 Overview - August 12, 2020 3
Agency of Choice Strategy Makes us a Market Leader
Rating Quality Research Award-winning
Proven rating accuracy and and Insight Globally and locally acknowledged
deeply experienced analysts Focus on research for award winning expertise in credit
leadership ratings, research and risk analysis.
#1 Global Credit Rating Agency: 2019
#1 US Credit Rating Agency: 2012-2018
Multi-award winner including best rating
agency categories: 2015-2019
Engagement Value Proposition Multi-award winner: 2015-2018
and Service Expanded sales and marketing
Analytical and activities in Commercial Group
Multi-award winner including best rating
commercial outreach agency categories: 2015-2019
Multi-award winner: 2015-2018
MIS 2Q 2020 Overview - August 12, 2020 4
Managing Ratings in Turbulent Times
Transparency and relevance of credit ratings through the cycle
Order sectors by degree Order issuers by Reassess all Reassess ratings Monitor credit profiles Coordinate Take account of
of exposure vulnerability ratings in the most of the most associated with all other analytical views government policy
within each sector vulnerable sectors vulnerable issuers ratings and reassess those and sequencing measures designed to
in the moderately with special situations of rating actions soften the effects
vulnerable sectors that merit prompt of coronavirus
reconsideration
Mar 1 – June 30, 2020
Top 10 sectors Global corporate default rates ended June 20202
most affected
by COVID-191
Aaa 0.0%
Aa 0.0%
A 0.0%
Baa 0.1%
Ba 0.3%
B 2.4%
Caa_C 10.7%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
1. Includes all publicly-rated nonfinancial corporate entities; excludes subsidiaries and project finance-related corporations.
2. Trailing twelve months; Source: Moody’s Investors Service.
MIS 2Q 2020 Overview - August 12, 2020 5
MIS: Robust IG Issuance Drove Results
Issuance1
MIS Revenue YoY Change
$2,000.0
$938
$ Billions
$1,500.0
$1,000
$10 $1,000.0
$900 23%
1,785
$739 $133 $500.0 1,168
$800
$700
$6 $142 14% $0.0
$108 2Q19 2Q20
$600 $81 (28%)
$ Millions
$125 MIS Adjusted Operating Income and Margin
$500
$112 +390bps 64.0%
$400 $700 64.8%
64.7%
64.6%
64.5%
64.4%
$650 60.1%
64.3%
64.2%
64.1%
64.0%
63.9%
63.8%
63.7%
63.6%
63.5%
63.4%
63.3%
63.2%
63.1%
$600 (42)
63.0%
62.9%
62.8%
62.7%
62.6%
62.5%
62.4%
62.3%
62.2%
62.1%
62.0%
$300 $572 47% $550
$500 $201 $623
61.9%
61.8%
61.7%
61.6%
61.5%
61.4%
61.3%
61.2%
61.1%
61.0%
60.9%
60.8%
60.7%
60.6%
$ Millions
60.5%
60.4%
60.3%
60.2%
60.1%
60.0%
59.9%
59.8%
59.7%
59.6%
59.5%
$450 59.4%
59.3%
59.2%
59.1%
59.0%
58.9%
58.8%
58.7%
58.6%
58.5%
58.4%
58.3%
$200 $388 $400 58.2%
58.1%
58.0%
57.9%
57.8%
57.7%
57.6%
57.5%
57.4%
57.3%
57.2%
57.1%
$350 $464 57.0%
56.9%
56.8%
56.7%
56.6%
56.5%
56.4%
56.3%
56.2%
56.1%
56.0%
55.9%
$300 55.8%
55.7%
55.6%
55.5%
55.4%
55.3%
55.2%
55.1%
55.0%
54.9%
54.8%
54.7%
$100 $250 54.6%
54.5%
54.4%
54.3%
54.2%
54.1%
54.0%
53.9%
53.8%
53.7%
53.6%
53.5%
$200 53.4%
53.3%
53.2%
53.1%
53.0%
52.9%
52.8%
52.7%
52.6%
52.5%
52.4%
52.3%
$150 52.2%
52.1%
52.0%
51.9%
51.8%
51.7%
51.6%
51.5%
51.4%
51.3%
51.2%
51.1%
$0 $100 51.0%
50.9%
50.8%
50.7%
50.6%
50.5%
50.4%
50.3%
50.2%
50.1%
50.0%
49.9%
$50 49.8%
49.7%
49.6%
49.5%
49.4%
49.3%
49.2%
49.1%
49.0%
48.9%
48.8%
48.7%
2Q19 2Q20 $0 48.6%
48.5%
48.4%
48.3%
48.2%
48.1%
48.0%
CFG SFG FIG PPIF MIS Other 2Q19 MIS Adjusted MIS Revenue MIS Expense 2Q20 MIS Adjusted
Operating Income Increase 2 Increase 2 Operating Income
» CFG benefitted from liquidity-driven issuance and attractive » PPIF issuance was very strong, but contributed to the less
refinancing rates, leading to record supply in 2Q 2020 favorable issuance mix in the quarter
» SFG remains weak: lack of asset supply constraining CLO » Revenue growth outpaced personnel expense to drive
and CMBS formation 390 bps increase in adjusted operating margin
1. MIS rated issuance, excludes sovereign debt issuance.
2. Includes intercompany revenue and expenses.
MIS 2Q 2020 Overview - August 12, 2020 6
Record 2Q 2020 Issuance, Mix Shift
Investment grade bond High yield bond Bank loan CFG transactional revenue growth Y/Y Issuance volume growth Y/Y
$660
85%
65%
41% 37% 37%
36%
40%
$358
25%
-3%
$278
$264 -7% $256
$210
-12% $186
$170 $171
-12%
$138 $135 $135
$114 $113 $119
$101 $103 $103
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20
Note: MIS rated issuance. Issuance figures displayed in billions.
MIS 2Q 2020 Overview - August 12, 2020 7
Moody’s Investors Service Financial Profile
2Q 2020 TTM Revenue: $3.2 billion
» 25% recurring revenue
Recurring U.S. » 32% recurring revenue
Transaction Non-U.S. MIS Other
1%
38% Corporate Public, Project,
Finance & Infrastructure
66% 56% Finance
15%
Financial
62% Institutions
16%
34%
Structured » 52% recurring revenue
Finance
12%
» 48% recurring revenue
Note: The revenue reclassification of REITs to Corporate Finance from Structured Finance is reflected in the full year 2019 calculations. Percentages have been rounded and may not total to 100%.
MIS 2Q 2020 Overview - August 12, 2020 8Liquidity and Refinancing Prominent Drivers of Issuance in 1H
2020, While M&A Declined
Uses of Funds from USD High Yield Bonds and Bank Loans1
Debt Refinancing M&A Capital Spending Shareholder Payments Liquidity / Working Capital
100%
5% 9% 8% 8% 8% 15%
16% 17% 13% 15% 13%
5% 5% 5% 7%
80%
6% 7% 4%
39% 28%
% of Mentions
49% 35%
60% 54% 41%
40%
71% 68% 72%
64% 62%
20% 54%
0%
2015 2016 2017 2018 2019 1H20
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.
MIS 2Q 2020 Overview - August 12, 2020 9Refunding Needs1 Support MIS Long-term Fundamentals
>$2.3 Trillion in Debt Maturities: North America Moody’s-Rated Corporate Bonds and Loans2
$677
$565
$490
$ Billions
342
$360 239 Speculative Grade Bank Loans
$241 140
58 97 Speculative Grade Bonds
8 58 127 142
30 Investment Grade
203 245 253 199 193
2020 2021 2022 2023 2024
>$1.8 Trillion in Debt Maturities: EMEA Moody’s-Rated Corporate Bonds and Loans3
$504 $490
$405 $412 64 69
$ Billions
39 46 84 72 Speculative Grade Bank Loans
28 39
Speculative Grade Bonds
Investment Grade
338 327 356 349
2020 2021 2022 2023
1. Non-financial corporates.
2. Source: Moody’s Investors Service, January 2020. Data represents U.S. & Canadian MIS rated corporate bonds & loans.
3. Source: Moody’s Investors Service, July 2019.
MIS 2Q 2020 Overview - August 12, 2020 10Disintermediation of Credit is an Ongoing Trend
in the Global Capital Markets
European Non-Financial Corporate Bonds vs. U.S. Non-Financial Corporate Bonds vs.
Bank Loans Outstanding Bank Loans Outstanding
Bonds Loans
Bonds Loans
€7,000 $9,000
€6,000 $7,500
50%
€5,000
74% $6,000
4 4
$ Billions
€ Billions
€4,000
8 8
$4,500
€3,000 % %
€2,000 $3,000
50%
€1,000 26% $1,500
€0 $0
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 May 2020 and U.S. data is through June 2020.
MIS 2Q 2020 Overview - August 12, 2020 11Debt Leverage and Interest Coverage in
North America and Europe
Credit Metrics: North American Speculative Grade Companies
Debt / EBITDA EBITDA / Interest Expense
5.7x
Interest Coverage
6.0x 5.1x 5.3x 5.4x 5.3x 5.4x
4.8x 4.8x 5.1x
5.0x 4.6x 4.6x 4.5x 4.4x 4.5x 4.6x
4.0x
3.0x 2.9x 2.9x 3.1x 3.0x 2.9x 3.0x 2.9x 3.0x 3.0x 2.8x 2.8x
2.6x 2.7x 2.7x
2.4x
2.0x
1.0x
0.0x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20201
Credit Metrics: European Speculative Grade Companies
Debt / EBITDA EBITDA / Interest Expense
Interest Coverage
6.0x 5.6x
5.0x 5.2x 5.3x
4.6x 4.6x 4.8x 4.5x 4.6x 4.5x
5.0x 4.1x 4.2x 4.2x 4.4x
4.1x
4.0x
3.4x 3.5x 3.7x 3.5x 3.5x 3.4x
3.0x 2.9x 2.9x 3.0x 3.2x 3.2x 3.1x 3.1x 3.2x
2.7x
2.0x
1.0x
0.0x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20201
1. Trailing twelve months ended June 30, 2020.
Source: Moody’s Investors Service.
Note: Historical figures may change due to timing differences in issuer reporting deadlines.
MIS 2Q 2020 Overview - August 12, 2020 12MIS Guidance: Strong 1H 2020 Driving Improved Outlook1
Revenue Adjusted Operating Margin1
FY 2020 Issuance Guidance1
Low-single-digit
$3,000 % increase 58.0% Approximately 58%
Investment Grade +50% $2.9B
$2,800
High Yield Bonds +5% $2,600
Bank Loans -20% $2,400
$2,200
Structured -40% $2,000
$1,800
Total Issuance2 Low-double-digit % increase 1
2019 2020F 1 2019 2020F
Key drivers of MIS FY 2020 outlook1
» Issuance2 expected to grow in the low-double-digit percent » Approximately 550 first time mandates
range from $4.6T in 2019 » Refinancing and liquidity driven issuance, reduced M&A activity
- Expecting issuance to slow down in 2H 2020, reflecting a » Recurring revenue provides stable support
mid-teens decline » Higher expectation for incentive compensation, though still
» Shift in issuance mix lower year-over-year
1. Guidance as of July 30, 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. Total issuance includes CFG, SFG, FIG and PPIF. Excludes sovereign debt.
MIS 2Q 2020 Overview - August 12, 2020 13Harnessing Technologies to Drive Operating
Efficiencies and Value
Infusing technologies Innovation with purpose
into our processes Delivering value to the market
Insourcing and investing in tech and operations talent
Production » Rating precision
» Speed to market
Surveillance Operational process New York and Charlotte
improvement incubator engineering centers » Improved data and analytics
» Data and advanced analytical tools » Enhanced digital capabilities
Distribution
» Machine learning and predictive analytics
» Interactivity
» Natural language processing and generation
Interaction » Robotic process automation
» DevOps and cloud engineering
MIS 2Q 2020 Overview - August 12, 2020 14Broad Coverage Serves Global Needs
MIS 2Q 2020 Overview - August 12, 2020 15Moody’s in Greater China
2nd Largest Onshore Bond Market at $15 Trillion 2019 Revenue and Attributable Income from China2
Total debt securities outstanding 2012–20191 MIS Cross Border Revenue Total MA Revenue Attributable Income from CCXI
2012 2019
200
$176
50 3%
40 150
$ Millions
30 100
20% -2%
20 1% 1%
50
10 $17
0 -
US China Japan UK France MIS Cross Border and Total MA Attributable Income from CCXI
Cross Border Market Domestic Market
Estimated China Ratings Market Size: Domestic and Cross Border3
~$290M3 ~$280M
» 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 37% 42%
63% 58%
development of China’s domestic credit markets
» Continuing to foster constructive relationships and partnerships with issuers,
regulators and other market participants
Rest of Market Moody's Share Rest of Market CCXI's Share
1. Percentage growth numbers are rounded compound annual growth calculations. Source: Bank for International Settlements’ latest data available as of 4Q19.
2. Greater China: Mainland, Hong Kong and Macau.
3. Revenue as of full year 2019; USD 1 = RMB 6.92 RMB exchange rate as of December 31, 2019 is used for conversion for domestic CRAs’ estimated revenue. Note: These are high level estimates based on MIS & CCXI full year 2019
revenue/market coverage in domestic market; in cross border, market share is coverage/sum of coverage for three major CRAs.
MIS 2Q 2020 Overview - August 12, 2020 16Moody’s ESG: Driving Standards Beyond Credit
Market Trends Key Stats2 OUTREACH
» Moody’s forecasts global green, social » Over 500 media engagements
and sustainability bond issuance to be 38,000+ 5,000+ in 1H 2020 driven by Moody’s Events and
$275 to $325 billion in 20201 Credit ratings ESG assessments research
ESG assessments integrated into Covering 266 unique
» Coronavirus crisis expected to accelerate » Strategic relationships with industry organizations
Moody’s Investors Services (MIS) ESG data points
credit-relevant ESG trends with increased credit ratings and influencers across sustainable finance
impact to credit2
» Moody’s ESG & Climate Risk hub: A one stop-
6,000+ 250+ Global shop for everything ESG at Moody’s
Climate risk scores Sustainable bonds (moodys.com/esg)
Spanning countries, counties, cities, Green, Social, Sustainability
companies & real estate assets globally Bonds and Sustainability-
linked loans and bonds
30+ 1000+
Years of ESG experience MIS research reports
Our affiliate Vigeo Eiris has Related to ESG
been a pioneer in ESG considerations in 1H 2020,
Moody’s ESG Solutions analysis since the 1990s 70% COVID-related research
25+
ESG related events
Delivered in 1H 2020 through Moody’s
global event program
1. Moody’s Investors Service “Sector in-depth: Sustainable Finance – Global – Coronavirus fallout dampens 1Q 2020 green bond volumes while spurring social bonds”, May 5, 2020.
2. As of June 30, 2020; combined for all Moody’s entities including affiliates.
MIS 2Q 2020 Overview - August 12, 2020 17Appendix
Moody’s Corporation Financial Profile
2Q 2020 TTM Revenue: $5.2 billion
MIS Other
1%
Recurring Transaction U.S. Non-U.S.
PPIF
9%
RD&A1
45% 45% FIG MIS
28%
10%
MA
SFG
7%
ERS
55% 55% CFG 11%
34%
Full Year 2020 Guidance as of July 30, 20202
Revenue » Increase in the low-single-digit % range Effective Tax Rate » 19.5% - 21.5%
Operating Expenses » approximately flat Diluted EPS » $8.15 - $8.55
Operating Margin » 43% - 44% Adjusted Diluted EPS3 » $8.80 - $9.20
Adjusted Operating Margin3 » 48% - 49%
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 Second Quarter 2020” from July 30, 2020 for Moody’s full 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.
2Q 2020 Investor Presentation, July 30, 2020 19MA Guidance1: Top-line Growth and Margin Improvement
Remain on Track
Revenue Adjusted Operating Margin1
Mid-single-digit Approximately 30%
% increase
$2.0B 27.8%
1
2019 2020F 2019 2020F
1
Key drivers of MA FY 2020 outlook1
» Strong recurring revenue mitigates COVID-19 impact » RD&A growth driven by strong demand for KYC and compliance
solutions, followed by research and data feeds
» MAKS divestiture weighs on revenue growth, partially offset by
RiskFirst, ABS Suite and RDC acquisitions » ERS: Strength in software and analytics sales supports steady
growth; modest impact from delays of IFRS 17 and CECL
– FY revenue guidance includes an unfavorable 2% - 3% implementations
impact from inorganic activity and FX
» Margin improvement primarily driven by operating leverage and
cost management initiatives
1. Guidance as of July 30, 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.
2Q 2020 Investor Presentation, July 30, 2020 20Financial Performance1
Revenue1 Adjusted Diluted EPS3
$ Billions $ Per Share
MIS Revenue MA Revenue $10.00 $8.80 - $9.20
$6.0 Low-single-digit % $9.00
$4.8 growth $8.00
$5.0 $4.2 $4.4
$3.5 $3.6 $7.00
$4.0 $2.0
$1.4 $1.7 $6.00
$3.0 $1.2 $1.2
$5.00 $8.29
$2.0 $7.39
$2.9 $4.00 $6.07
$2.3 $2.4 $2.8 $2.7 $4.71 $4.94
$1.0 $3.00
$0.0 $2.00
2 2
2015 2016 2017 2018 2019 2020F 2015 2016 2017 2018 2019 2020F
Operating Margin4 Free Cash Flow3
3 $ Millions
Operating Margin Adj. Operating Margin
$1,900
60% $1,500 - $1,700
$1,700
50%
$1,500
48% - 49%
40%
43% - 44%
$1,300
43.3%
42.8%
18.1%
42.0%
47.4%
41.4%
30%
47.6%
47.6%
46.0%
45.9%
$1,100 $1,606
20% $1,370
$900
$1,109 $1,144
10% $700
0% $500
$664
2
2015 2016 2017 2018 2019 2020F 2015 2016 2017 5 2018 2019 2020F 2
1. Totals may not sum due to rounding.
2. Guidance as of July 30, 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.
2Q 2020 Investor Presentation, July 30, 2020 21Capital Allocation Strategy Capital allocation levers
Prudent approach in uncertain times INVESTING IN GROWTH OPPORTUNITIES
Reinvestment
Capital allocation goals
Acquisitions
RETURN OF CAPITAL
Dividends
Share repurchase
Considerations around
share repurchase program
COVID-19 uncertainty
Anchored around Ensure adequate Provide Meet return Manage risk Economic indicators
a BBB+ rating financial flexibility necessary capital thresholds and
to pursue growth create long-term Market volatility
opportunities value for
shareholders
Free cash flow
2Q 2020 Investor Presentation, July 30, 2020 22BvD + RDC Makes Us a Leading Global Player in KYC
Improved accuracy and streamlined decisions
» Bureau van Dijk accelerating growth with Moody’s. BvD post acquisition
BvD
revenue growth1 of ~16% and adjustment operating margin2 of ~52%
» BvD + RDC creates a leading provider of data for compliance-related use
375M+ 195M+ 188M
cases
» The KYC space is a $900M market with ~18% 5-yr CAGR3
PUBLIC & PRIVATE ACTIVE OWNERSHIP SHAREHOLDERS
» 2019 pro forma combined compliance product sales of ~$150M4 ENTITIES LINKS
– Expect combined sales to more than double by 20235 +
» Complementary assets: RDC
12.5M+ 1,000 1.7M+
– RDC’s Global Risk Information Database (GRID): over 12 million profiles of
risk-related organizations and individuals
– Worldwide entity and ultimate ownership data from BvD’s Orbis database RISK PROFILES MONITORED LISTS POLITICALLY
and Compliance Catalyst tool 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.
2Q 2020 Investor Presentation, July 30, 2020 23Strongly Positioned in Emerging Markets
Emerging Markets - Domestic TAM MIS Emerging Markets Revenue1
Others MIS Affiliate (majority)
MIS Affiliate (minority)
South Africa Moody’s Local $342M
Argentina
Brazil National Scale Ratings
Other Emerging Markets
Mexico
Peru China
Egypt
Chile
Israel $700 M
Size of domestic
CRA markets
$94M
South Korea
2009 2019
India
Emerging Asia Latin America Middle East CEE/CIS Africa
Note: Size of pie represents the estimated total CRA revenue from domestic markets ($700 million). 1. Includes revenue from cross border issuance.
2Q 2020 Investor Presentation, July 30, 2020 24Macro Assumptions Underpinning Our Outlook1
Base Case Developments since April 30th
Expect continuing economic recovery in 2H 2020 ACCELERATE
Continued global fiscal support
and monetary stimulus actions
2020 GDP Benchmark interest rates
remain low; high-yield Surge of investment grade capital
-6% United States spreads peak above raising for liquidity purposes
650 bps Rebound in high yield bond issuance
-9% Euro Zone amid tighter spreads
-5% Global Robust equity markets and sharp
decline in VIX index
Signs of global economic recovery
U.S. unemployment rate High yield default rate
of ~10% by year-end rising to ~9%2
DECELERATE
COVID-19 cases continued to increase
at rapid pace in the U.S., with some
states rolling back re-opening measures
1. All assumptions and guidance as of July 30, 2020.
2. By the end of 2020.
Sources: “June 2020 Default Report” and “Global Macro Outlook 2020-2021 (June 2020 Update)” from Moody’s Investors Service.
2Q 2020 Investor Presentation, July 30, 2020 25Historically, Moody’s Revenue and Interest
Rates Have Not Been Strongly Correlated
MCO Revenue and Interest Rates
MIS Revenue (L) MIS Revenue Guidance MA Revenue (L) MA Revenue Guidance MCO Revenue (L) 10-yr U.S. Treasury Yield (R)1
$6,000 9%
7.8% +120bps 8%
$5,000
7%
6.5% +100bps
$ Millions
$4,000 6%
5.8%
5%
$3,000
+200bps 4.7%
3.3% 4%
3.0%
$2,000 +180bps 3%
2.3% 2%
$1,000 1.8% 1.9%
1%
$0 0%
2
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
2020F
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 July 30, 2020.
Source: www.treasury.gov.
2Q 2020 Investor Presentation, July 30, 2020 26Default Rate Forecast Rises in Wake of
Unprecedented Turmoil
Default Rates for Speculative-Grade Speculative-Grade Covenant Quality Indicators2
Corporate Rated Issuance1
Global U.S. Europe U.S. Loans U.S. Bonds European Bonds Weakening
16% 5.0
14% 4.54x
12% 4.5
12% 4.23x
10% 4.1% global 9% 4.0
3.91x
historic average1
8% 6% 3.5
6%
3.0
4%
2% 2.5
0% 2.0 Improving
1. Moody’s rated corporate global speculative grade default historical average of 4.1% from 1983 through June 30,2020. 2020 forecast for TTM ended December 31, 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.
2Q 2020 Investor Presentation, July 30, 2020 27Moody’s Priorities for Strategic Growth
Enhance technology infrastructure to enable automation, innovation and efficiency
Foster employee engagement and creative solutions through our diverse workforce and inclusive environment
Global Integrated Risk Assessments Moody’s Core Strengths Expand into New Geographies
and Strategic Adjacencies
Credit
REGIONAL EXPANSION
Trusted brand Proprietary data and
STANDARDS,
SOLUTIONS
» integrated analytics
» EMEA Asia Pacific Latin America
BUSINESS ADJACENCIES
& INSIGHTS
Data Analytics
Business-credit Extended global
products customer base Commercial Know Your ESG
Real Estate Customer
2Q 2020 Investor Presentation, July 30, 2020 28Investor Relations
ir.moodys.com
ir@moodys.com
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MIS 2Q 2020 Overview - August 12, 2020 30You can also read
