- 3Q14 revenue up 16% from 3Q13 to $816.1
million
- 3Q14 operating income up 20% from 3Q13
to $349.7 million; adjusted operating income up 18% to $372.9
million
- 3Q14 GAAP EPS up 20% from 3Q13 to
$1.00; non-GAAP EPS up 17% from 3Q13 to $0.97
- Maintain FY 2014 non-GAAP EPS guidance
range of $3.95 to $4.05
Moody’s Corporation (NYSE:MCO) today announced results for the
third quarter 2014.
SUMMARY OF RESULTS FOR THIRD QUARTER 2014
Moody’s reported revenue of $816.1 million for the three months
ended September 30, 2014, up 16% from $705.5 million for the third
quarter of 2013. Operating expenses for the third quarter of 2014
totaled $466.4 million, a 13% increase from the prior-year period.
Operating income for the quarter was $349.7 million, a 20% increase
from $291.5 million for the same period last year. Adjusted
operating income, defined as operating income before depreciation
and amortization, was $372.9 million, an 18% increase from $314.9
million last year. GAAP EPS of $1.00 increased 20% against the same
period last year. Non-GAAP EPS of $0.97, which excludes a $0.03
benefit from the resolution of a legacy tax matter, increased 17%
from the third quarter of 2013.
"Moody’s achieved strong financial results in the third quarter,
with record revenue growth in Moody’s Analytics, and double-digit
revenue growth in nearly every line of business in both Moody’s
Investors Service and Moody’s Analytics,” said Raymond McDaniel,
President and Chief Executive Officer of Moody’s. “Based on our
strong year-to-date performance, we are reaffirming our EPS
guidance in the range of $3.95 to $4.05.”
THIRD QUARTER REVENUE
For Moody’s Corporation overall, global revenue of $816.1
million for the third quarter of 2014 was up 16% from the third
quarter of 2013. U.S. revenue of $449.1 million and non-U.S.
revenue of $367.0 million increased 15% and 17%, respectively, from
the third quarter of 2013. Revenue generated outside the U.S.
represented 45% of Moody’s total revenue for the quarter,
consistent with the year-ago period.
Global revenue for Moody’s Investors Service (“MIS”) for the
third quarter of 2014 was $543.1 million, up 14% from the
prior-year period. The impact of foreign currency translation on
MIS revenue was negligible. U.S. revenue of $329.1 million and
non-U.S. revenue of $214.0 million increased 13% and 14%,
respectively, from the year-ago period.
Within MIS, global corporate finance revenue of $260.7 million
in the third quarter of 2014 increased 12% from the prior-year
period, reflecting a favorable mix of bond and bank loan issuance
within the quarter, as well as additional monitoring revenue
associated with new ratings customers. Corporate finance U.S. and
non-U.S. revenue were up 8% and 19%, respectively, compared to the
third quarter of 2013.
Global structured finance revenue totaled $102.1 million for the
third quarter of 2014, a 22% increase from a year earlier,
primarily reflecting increased rating activity for collateralized
loan obligations (CLOs). Structured finance U.S. and non-U.S.
revenue grew 31% and 7%, respectively, from the year-ago
period.
Global financial institutions revenue of $91.8 million in the
third quarter of 2014 increased 16% compared to the prior-year
period. U.S. revenue increased 9% primarily due to increased
issuance by insurance companies. Non-U.S. revenue increased 22% due
to higher levels of bank issuance from China and Europe.
Global public, project and infrastructure finance revenue was
$88.5 million for the third quarter of 2014, an increase of 7% from
the third quarter of 2013. U.S. revenue was up 15% primarily due to
increased rating activity in public finance and project finance.
Non-U.S. revenue decreased 5% from the prior-year period primarily
due to lower infrastructure issuance in Europe.
Global revenue for Moody’s Analytics (“MA”) for the third
quarter of 2014 was $273.0 million, up 20% from the third quarter
of 2013. Foreign currency translation favorably impacted MA revenue
by 2 percent. U.S. revenue of $120.0 million and non-U.S. revenue
of $153.0 million for the third quarter of 2014 increased 19% and
21%, respectively, from the prior-year period.
Revenue from research, data and analytics of $146.8 million
increased by 10% from the prior-year period, driven by strong sales
of credit research and content licensing. Enterprise risk solutions
revenue of $81.1 million was up 26% over the prior-year period
primarily due to growth in subscription and services revenue.
Revenue from professional services of $45.1 million was up 54% from
the prior-year period, primarily reflecting the December 2013
acquisition of Amba Investment Services.
THIRD QUARTER OPERATING EXPENSES, OPERATING INCOME, AND
EFFECTIVE TAX RATE
Third quarter 2014 operating expenses for Moody’s Corporation
were $466.4 million, 13% more than the prior-year period. This
increase was primarily due to higher compensation and real estate
costs attributable to additional headcount, as well as increased
incentive compensation accruals. The impact of foreign currency
translation on operating expenses was negligible. Operating income
of $349.7 million for the quarter increased 20% from $291.5 million
for the same period last year. Adjusted operating income, defined
as operating income before depreciation and amortization, was
$372.9 million, an 18% increase from $314.9 million last year. The
impact of foreign currency translation on operating income was
negligible. Moody’s operating margin for the third quarter of 2014
was 42.9%, up from 41.3% in the third quarter of 2013. Adjusted
operating margin of 45.7% for the third quarter of 2014 was up from
44.6% for the same period last year.
Moody’s effective tax rate was 33.5% for the third quarter of
2014, an increase from 29.1% for the prior-year period, primarily
due to higher U.S. and non-U.S. taxes on foreign income and certain
discrete items that reduced the effective tax rate in 2013.
YEAR-TO-DATE RESULTS
Moody's Corporation revenue for the first nine months of 2014
totaled $2,456.8 million, an increase of 12% from $2,193.3 million
for the same period of 2013. The impact of foreign currency
translation on revenue for the first nine months was negligible.
Revenue at MIS totaled $1,690.6 million for the first nine months
of 2014, an increase of 10% from the same period in 2013. MA
revenue rose 17% from the first nine months of 2013 to $766.2
million.
Expenses for the first nine months of 2014 totaled $1,362.4
million, 7% higher than the year-ago period, which included costs
associated with a first quarter 2013 litigation settlement. The
impact of foreign currency translation on expenses for the first
nine months was negligible. Year-to-date operating income of
$1,094.4 million grew 19% from $922.7 million for the same period
of 2013. Adjusted operating income of $1,163.0 million was up 17%
from the prior-year period. Moody’s operating margin for the first
nine months of 2014 was 44.5%, up from 42.1% for the first nine
months of 2013. Adjusted operating margin of 47.3% for the first
nine months of 2014 was up from 45.3% for the same period last
year.
GAAP EPS of $3.48 for the first nine months of 2014 increased
31% from $2.66 for the same period in 2013. Non-GAAP EPS of $3.09
for the first nine months of 2014 grew 10% from $2.80 for the same
period in 2013. Year-to-date 2014 non-GAAP EPS excludes a $0.36
gain resulting from Moody’s acquisition of a controlling interest
in ICRA Ltd. in the second quarter and the $0.03 legacy tax benefit
in the third quarter. Year-to-date 2013 non-GAAP EPS excludes the
first quarter litigation settlement charge of $0.14.
CAPITAL ALLOCATION AND LIQUIDITY
During the third quarter of 2014, Moody’s repurchased 3.5
million shares at a total cost of $320.5 million, and issued 0.9
million shares under our annual employee stock-based compensation
plans. Outstanding shares as of September 30, 2014 were 208.6
million, a 3% decline from a year earlier. As of September 30,
2014, Moody’s had $1.0 billion of share repurchase authority
remaining under its current programs. At quarter-end, Moody’s had
$2.5 billion of outstanding debt and $1.0 billion of additional
debt capacity available under its revolving credit facility. Total
cash, cash equivalents and short-term investments at quarter-end
were $2.1 billion, an increase of $60.9 million from a year
earlier. Free cash flow for the first nine months of 2014 of $653.0
million increased $30.5 million, or 5%, from the same period a year
ago.
ASSUMPTIONS AND OUTLOOK FOR FULL-YEAR 2014
Moody's outlook for 2014 is based on assumptions about many
macroeconomic and capital market factors, including interest rates,
corporate profitability and business investment spending, merger
and acquisition activity, consumer borrowing and securitization,
and the amount of debt issued. There is an important degree of
uncertainty surrounding these assumptions, and, if actual
conditions differ, Moody's results for the year may differ
materially from the current outlook. Our guidance assumes foreign
currency translation at end-of-quarter exchange rates.
Moody’s full-year 2014 non-GAAP EPS guidance remains in the
range of $3.95 to $4.05, which excludes the $0.36 gain resulting
from Moody’s acquisition of a controlling interest in ICRA Ltd. in
the second quarter and the $0.03 legacy tax benefit in the third
quarter.
Certain components of Moody’s 2014 revenue guidance have been
modified to reflect the Company’s current view of business
conditions. While global MIS revenue for full-year 2014 is still
expected to increase in the high-single-digit percent range,
non-U.S. MIS revenue is now expected to increase approximately 10
percent. Within MIS, corporate finance revenue is now expected to
increase approximately 10%; structured finance revenue is now
expected to increase in the high-single-digit percent range; and
public, project and infrastructure finance revenue is now expected
to increase in the mid-single-digit percent range.
A full summary of Moody’s guidance as of October 24, 2014 is
included in the 2014 Outlook table at the end of this press
release.
CONFERENCE CALL
A conference call to discuss third quarter 2014 results will be
held this morning, October 24, 2014, at 11:30 a.m. Eastern Time.
Individuals within the U.S. and Canada can access the call by
dialing 1-877-400-0505. Other callers should dial +1-719-234-7477.
Please dial into the call by 11:20 a.m. Eastern Time. The passcode
for the call is “Moody’s Corporation.”
The teleconference will be webcast with a slide presentation and
can be accessed on Moody's Investor Relations website,
http://ir.moodys.com, until 3:30 p.m. Eastern Time, November 22,
2014.
A replay of the teleconference will be available from 3:30 p.m.
Eastern Time, October 24, 2014 until 3:30 p.m. Eastern Time,
November 22, 2014. The replay can be accessed from within the
United States and Canada by dialing 1-888-203-1112. Other callers
can access the replay at +1-719-457-0820. The replay confirmation
code is 9971396.
*****
ABOUT MOODY'S CORPORATION
Moody's is an essential component of the global capital markets,
providing credit ratings, research, tools and analysis that
contribute to transparent and integrated financial markets. Moody’s
Corporation (NYSE: MCO) is the parent company of Moody's Investors
Service, which provides credit ratings and research covering debt
instruments and securities, and Moody's Analytics, which offers
leading-edge software, advisory services and research for credit
and economic analysis and financial risk management. The
Corporation, which reported revenue of $3.0 billion in 2013,
employs approximately 9,700 people worldwide and maintains a
presence in 33 countries. Further information is available at
www.moodys.com.
“Safe Harbor” Statement under the Private Securities Litigation
Reform Act of 1995
Certain statements contained in this release are forward-looking
statements and are based on future expectations, plans and
prospects for Moody’s business and operations that involve a number
of risks and uncertainties. Moody’s outlook for 2014 and other
forward-looking statements in this release are made as of October
24, 2014, and the Company disclaims any duty to 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 certain factors 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 current world-wide credit
market disruptions and economic slowdown, which is affecting and
could continue to 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 credit quality
concerns, changes in interest rates and other volatility in the
financial markets; 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 initiatives
to respond to the current world-wide credit market disruptions and
economic slowdown; 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 Financial Reform Act and anticipated regulations resulting
from that Act; 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 to which the Company may be subject from time to time;
provisions in the Financial Reform Act 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; 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; the outcome of those
Legacy Tax Matters and legal contingencies that relate to the
Company, its predecessors and their affiliated companies for which
Moody’s has assumed portions of the financial responsibility; 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; and other risk factors as discussed in the Company’s
annual report on Form 10-K for the year ended December 31, 2013 and
in other filings made by the Company from time to time with the
Securities and Exchange Commission.
Moody's Corporation Consolidated Statements
of Operations (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30, 2014
2013 2014 2013 Amounts in millions, except per
share amounts
Revenue $ 816.1 $
705.5 $ 2,456.8 $
2,193.3 Expenses: Operating 236.7 203.5
674.8 601.4 Selling, general and administrative 206.5 187.1 619.0
599.1 Depreciation and amortization 23.2 23.4
68.6 70.1
Total expenses
466.4 414.0 1,362.4 1,270.6
Operating income 349.7
291.5 1,094.4
922.7 Non-operating (expense) income,
net Interest (expense) income, net (37.7 ) (24.4 ) (87.5 )
(68.1 ) Other non-operating (expense) income, net 16.4 (3.6 ) 15.5
12.9 ICRA Gain - - 102.8
- Total non-operating (expense) income, net
(21.3 ) (28.0 ) 30.8 (55.2 )
Income
before provision for income taxes 328.4 263.5
1,125.2 867.5 Provision for income taxes 109.9
76.7 360.6 261.2
Net income 218.5 186.8 764.6 606.3 Less: net income attributable to
noncontrolling interests 3.3
2.9 12.2 8.5
Net
income attributable to Moody's Corporation $
215.2 $ 183.9 $
752.4 $ 597.8
Earnings per share attributable to Moody's common
shareholders Basic $ 1.02 $ 0.84 $ 3.55 $ 2.70 Diluted
$ 1.00 $ 0.83 $ 3.48
$ 2.66
Weighted average number of
shares outstanding Basic 210.4 217.8 212.1 221.1 Diluted
214.2 222.0
216.1 225.1
Supplemental Revenue Information (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30, Amounts in
millions
2014 2013 2014 2013
Moody's Investors
Service Corporate Finance $ 260.7 $ 233.0 $ 846.0 $ 754.2
Structured Finance 102.1 83.5 308.0 273.7 Financial Institutions
91.8 78.9 269.4 249.9 Public, Project and Infrastructure Finance
88.5 82.7 267.2 258.8 Intersegment royalty 22.3
19.6 65.7 57.5 Sub-total
MIS 565.4 497.7 1,756.3 1,594.1 Eliminations (22.3 )
(19.6 ) (65.7 ) (57.5 ) Total MIS revenue
543.1 478.1 1,690.6
1,536.6
Moody's Analytics Research, Data and
Analytics 146.8 133.7 432.4 393.6 Enterprise Risk Solutions 81.1
64.4 208.1 177.6 Professional Services 45.1 29.3 125.7 85.5
Intersegment revenue 3.4 3.0
10.0 8.5 Sub-total MA 276.4 230.4 776.2 665.2
Eliminations (3.4 ) (3.0 ) (10.0 ) (8.5
) Total MA revenue 273.0 227.4
766.2 656.7
Total Moody's
Corporation revenue $ 816.1 $
705.5 $ 2,456.8 $
2,193.3
Moody's Corporation revenue by geographic area
United States $ 449.1 $ 391.0 $ 1,335.8 $ 1,209.3
International 367.0 314.5
1,121.0 984.0
$ 816.1
$ 705.5 $ 2,456.8
$ 2,193.3
Non-operating (expense) income, net Three
Months Ended Nine Months Ended September 30,
September 30, 2014 2013
2014 2013 Amounts in millions
Interest expense, net: Expense on
borrowings
$ (38.8 ) $ (23.9 )
$
(90.5 ) $ (65.4 ) Income
1.8 1.6
5.1
4.0 Legacy Tax benefit (a)
0.7 -
0.7 - UTPs and other
tax related liabilities
(1.7 ) (2.1 )
(3.2
) (6.7 ) Capitalized
0.3 -
0.4 -
Total interest
expense, net $ (37.7 ) $ (24.4 )
$
(87.5 ) $ (68.1 )
Other non-operating (expense)
income, net: FX gain (loss)
$ 7.6 $ (5.8 )
$ 1.5 $ 6.9 Legacy Tax benefit (a)
6.4 -
6.4 - Joint venture income
2.6 2.5
7.9 7.4
Other
(0.2 ) (0.3 )
(0.3
) (1.4 )
Other non-operating income (expense),
net 16.4 (3.6 )
15.5
12.9 ICRA Gain - -
102.8 -
Total non-operating
(expense) income, net $ (21.3 ) $ (28.0 )
$ 30.8 $ (55.2 ) (a) The 2014 amounts
represent the favorable resolution of a Legacy Tax Matter
Selected Consolidated Balance Sheet Data (Unaudited)
September
30,
December
31,
2014 2013 Amounts in millions Cash and cash
equivalents $ 1,940.8 $ 1,919.5 Short-term investments 164.8 186.8
Total current assets 3,061.9 2,968.8 Non-current assets 1,931.8
1,426.3 Total assets 4,993.7 4,395.1 Total current liabilities
1,041.7 1,141.3 Total debt (1) 2,536.5 2,101.8 Other long-term
liabilities 797.6 724.1 Total shareholders' equity 480.3 347.9
Redeemable noncontrolling interest* 137.6 80.0 Total liabilities,
redeemable noncontrolling interest and shareholders' equity 4,993.7
4,395.1 Actual number of shares outstanding 208.6 214.0
* Represents a noncontrolling interest related to the
November 2011 acquisition of Copal Partners
September
30,
December
31,
(1) Total debt consists of the following:
2014 2013
Series 2005-1 Notes due 2015 (a) $ - $ 310.3 Series 2007-1 Notes
due 2017 300.0 300.0 2010 Senior Notes due 2020 (b) 495.9 497.8
2012 Senior Notes due 2022 (c) 496.8 496.5 2013 Senior Notes due
2024 (d) 497.4 497.2 2014 Senior Notes due 2019 (e) 448.0 - 2014
Senior Notes due 2044 (f) 298.4
- Total debt $ 2,536.5 $
2,101.8 (a) Includes a $10.3 million fair value
adjustment on an interest rate hedge at December 31, 2013
(b) Represents $500 million of 5.5%
publicly traded Senior Notes which mature on September 1, 2020; the
notes were offered to the public at 99.374% of the face amount and
include a $2.1 million reduction relating to a fair value
adjustment on an interest rate hedge at September 30, 2014
(c) Represents $500 million of 4.5% publicly traded Senior
Notes which mature on September 1, 2022; the notes were offered to
the public at 99.218% of the face amount (d) Represents $500
million of 4.9% publicly traded Senior Notes which mature on
February 15, 2024; the notes were offered to the public at 99.431%
of the face amount
(e) Represents $450 million of 2.75%
publicly traded Senior Notes which mature on July 15, 2019; the
notes were offered to the public at 99.838% of the face amount and
include a $1.3 million reduction relating to a fair value
adjustment on an interest rate hedge at September 30, 2014
(f) Represents $300 million of 5.25% publicly traded Senior
Notes which mature on July 15, 2044; the notes were offered to the
public at 99.462% of the face amount
Financial Information by
Segment:
The table below presents revenue, adjusted operating income
and operating income by reportable segment. The Company defines
adjusted operating income as operating income excluding
depreciation and amortization.
Three Months
Ended September 30, 2014 2013
MIS MA Eliminations
Consolidated MIS MA
Eliminations Consolidated Revenue
$
565.4 $ 276.4 $ (25.7) $
816.1 $ 497.7 $ 230.4 $ (22.6) $ 705.5
Operating, selling,general
andadministrativeexpense
260.8 208.1 (25.7)
443.2 235.6 177.6 (22.6) 390.6
Adjusted operatingincome
304.6 68.3 -
372.9 262.1 52.8 - 314.9
Depreciationand amortization
11.5 11.7 -
23.2 12.1 11.3 - 23.4 Operating
income
$ 293.1 $ 56.6 $ -
$ 349.7 $ 250.0 $ 41.5 $ - $ 291.5
Adjusted operatingmargin
53.9% 24.7% 45.7% 52.7% 22.9%
44.6% Operating margin
51.8% 20.5%
42.9% 50.2% 18.0% 41.3% Nine
Months Ended September 30, 2014 2013 MIS
MA Eliminations Consolidated MIS
MA Eliminations Consolidated Revenue
$
1,756.3 $ 776.2 $ (75.7)
$ 2,456.8 $ 1,594.1 $ 665.2 $ (66.0) $ 2,193.3
Operating, selling,general
andadministrativeexpense
775.4 594.1 (75.7)
1,293.8 756.1 510.4 (66.0)
1,200.5
Adjusted operatingincome
980.9 182.1 -
1,163.0 838.0 154.8 - 992.8
Depreciationand amortization
34.3 34.3 -
68.6 34.9 35.2 - 70.1 Operating
income
$ 946.6 $ 147.8 $
- $ 1,094.4 $ 803.1 $ 119.6 $ - $ 922.7
Adjusted operatingmargin
55.9% 23.5% 47.3% 52.6% 23.3%
45.3% Operating margin
53.9% 19.0%
44.5% 50.4% 18.0% 42.1%
Transaction and Relationship
Revenue:
The tables below summarize the split between transaction and
relationship revenue. In the MIS segment, transaction revenue
represents the initial rating of a new debt issuance as well as
other one-time fees while relationship revenue represents the
recurring monitoring of a rated debt obligation and/or entities
that issue such obligations, as well as revenue from programs such
as commercial paper, medium-term notes and shelf registrations. In
the MA segment, relationship revenue represents subscription-based
revenues and software maintenance revenue. Transaction revenue in
MA represents software license fees and revenue from risk
management advisory projects, training and certification services,
and knowledge outsourcing engagements.
Three Months Ended September 30, 2014
2013 Transaction Relationship Total
Transaction Relationship Total
CorporateFinance
$ 180.0 $ 80.7 $ 260.7 $ 163.5 $ 69.5 $ 233.0 69% 31% 100% 70% 30%
100% Structured Finance 60.6 41.5 102.1 45.3 38.2 83.5 59%
41% 100% 54% 46% 100% Financial Institutions 34.7 57.1 91.8
23.5 55.4 78.9 38% 62% 100% 30% 70% 100%
Public, Project
andInfrastructureFinance
51.2 37.3 88.5 47.9 34.8 82.7 58% 42% 100% 58% 42% 100%
Total MIS $
326.5 $ 216.6 $ 543.1 $ 280.2 $
197.9 $ 478.1
60% 40% 100% 59% 41% 100%
Moody's Analytics $ 74.3 $ 198.7
$ 273.0 $ 49.0 $ 178.4 $ 227.4
27% 73%
100% 22% 78% 100%
Total Moody'sCorporation
$ 400.8 $ 415.3 $ 816.1 $
329.2 $ 376.3 $ 705.5
49% 51% 100% 47% 53%
100%
Nine Months Ended September 30, 2014
2013 Transaction Relationship Total Transaction Relationship
Total
CorporateFinance
$ 606.3 $ 239.7 $ 846.0 $ 555.5 $ 198.7 $ 754.2 72% 28% 100% 74%
26% 100% Structured Finance 186.3 121.7 308.0 159.2 114.5
273.7 60% 40% 100% 58% 42% 100% Financial Institutions 96.3
173.1 269.4 87.3 162.6 249.9 36% 64% 100% 35% 65% 100%
Public, Project
andInfrastructureFinance
156.0 111.2 267.2 157.2 101.6 258.8 58% 42% 100% 61% 39% 100%
Total MIS $
1,044.9 $ 645.7 $ 1,690.6 $
959.2 $ 577.4 $ 1,536.6
62% 38% 100% 62% 38%
100%
Moody's Analytics $ 187.6 $
578.6 $ 766.2 $ 134.4 $ 522.3 $ 656.7
24% 76% 100% 20% 80% 100%
Total Moody's
Corporation
$ 1,232.5 $ 1,224.3 $
2,456.8 $ 1,093.6 $ 1,099.7 $ 2,193.3
50% 50%
100% 50% 50% 100%
Non-GAAP Financial Measures:
The tables below reflect certain adjusted
results that the SEC defines as “non-GAAP financial measures” as
well as a reconciliation of each non-GAAP measure to its most
directly comparable GAAP measure. Management believes that such
non-GAAP financial measures, when read in conjunction with the
Company’s reported results, can provide useful supplemental
information for investors analyzing period-to-period comparisons of
the Company’s performance, facilitate comparisons to competitors’
operating results and to provide greater transparency to investors
of supplemental information used by management in its financial and
operational decision-making. These non-GAAP measures, as defined by
the Company, are not necessarily comparable to similarly defined
measures of other companies. Furthermore, these non-GAAP measures
should not be viewed in isolation or used as a substitute for other
GAAP measures in assessing the operating performance or cash flows
of the Company.
Adjusted Operating Income and Adjusted
Operating Margin:
The table below reflects a reconciliation of the Company’s
operating income and operating margin to adjusted operating income
and adjusted operating margin. The Company defines adjusted
operating income as operating income excluding depreciation and
amortization. The Company presents adjusted operating income
because management deems this metric to be a useful measure of
assessing the operating performance of Moody’s, measuring the
Company's ability to service debt, fund capital expenditures, and
expand its business. Adjusted operating income excludes
depreciation and amortization because companies utilize productive
assets of different ages and use different methods of both
acquiring and depreciating productive assets. Management believes
that the exclusion of this item, detailed in the reconciliation
below, allows for a more meaningful comparison of the Company’s
results from period to period and across companies. The Company
defines adjusted operating margin as adjusted operating income
divided by revenue.
Three
Months EndedSeptember 30,
Nine Months
Ended September
30,
(amounts in millions)
2014 2013 2014
2013 Operating income $
349.7 $
291.5 $
1,094.4 $ 922.7
Depreciation & amortization
23.2 23.4
68.6 70.1
Adjusted operating income $
372.9 $ 314.9 $
1,163.0 $ 992.8
Operating
margin 42.9% 41.3%
44.5% 42.1%
Adjusted
operating margin 45.7% 44.6%
47.3% 45.3%
Full-Year Ended December 31,
2014
Operating margin guidance 42% - 43% Depreciation and
amortization 3% Adjusted operating margin guidance 45% - 46%
Free Cash Flow: The table below reflects a
reconciliation of the Company’s net cash flows from operating
activities to free cash flow. The Company defines free cash flow as
net cash provided by operating activities minus payments for
capital additions. Management believes that free cash flow is a
useful metric in assessing the Company’s cash flows to service
debt, pay dividends and to fund acquisitions and share repurchases.
Management deems capital expenditures essential to the Company’s
product and service innovations and maintenance of Moody’s
operational capabilities. Accordingly, capital expenditures are
deemed to be a recurring use of Moody’s cash flow.
Nine Months
Ended September
30,
(amounts in millions)
2014
2013 Net cash flows from operating activities $
709.8 $ 653.5
Capital additions
(56.8 )
(31.0 )
Free cash flow $
653.0
$ 622.5
Net cash used in
investing activities $
(244.6 ) $ (222.8 )
Net
cash used in financing activities $
(393.4 ) $
(343.2 )
Non-GAAP diluted earnings per share
attributable to Moody's common shareholders: The Company
presents this non-GAAP measure to exclude the impact of a
litigation settlement charge in the first quarter of 2013, the ICRA
Gain in the second quarter of 2014 and the benefit from a Legacy
Tax Matter in the third quarter of 2014 to allow for a more
meaningful comparison of Moody’s diluted earnings per share from
period to period. Below is a reconciliation of this measure to its
most directly comparable U.S. GAAP amount:
(amounts in millions)
Three Months Ended September
30,
Nine Months Ended September 30, 2014
2013 2014 2013 Diluted EPS -
GAAP $ 1.00 $ 0.83 $
3.48 $ 2.66 Impact of litigation
settlement charge - - - 0.14 ICRA Gain - - (0.36 ) - Legacy Tax
(0.03 ) -
(0.03 ) -
Diluted EPS - Non-GAAP $ 0.97 $
0.83 $ 3.09 $
2.80
Projected full-year ended
December 31,
2014 Diluted EPS guidance - GAAP $
4.34 - 4.44
ICRA Gain
(0.36)
Legacy Tax
(0.03)
Diluted EPS guidance - Non-GAAP $
3.95 - 4.05
2014 Outlook
Moody’s outlook for 2014 is based on assumptions about many
macroeconomic and capital market factors, including interest rates,
corporate profitability and business investment spending, merger
and acquisition activity, consumer borrowing and securitization,
and the amount of debt issued. There is an important degree of
uncertainty surrounding these assumptions, and, if actual
conditions differ, Moody’s results for the year may differ
materially from the current outlook. The Company’s guidance, which
is presented in the table below, assumes foreign currency
translation at end-of-quarter exchange rates.
Full-year
2014 Moody’s Corporation guidance MOODY'S CORPORATION
Current guidance as of October 24, 2014
Last publicly disclosed guidance as
of September 30, 2014
Revenue growth in the low-double-digit percent range
NC Operating expenses growth in the high-single-digit
percent range NC
Growth in compliance and regulatory
expense
Less than $5 million NC Depreciation & amortization
Approximately $100 million NC Operating margin 42% to 43% NC
Adjusted operating margin 45% to 46% NC Effective tax rate
Approximately 33% NC
Non-GAAP EPS*
$3.95 to $4.05 NC Capital expenditures Approximately $90 million NC
Free cash flow Approximately $900 million NC Share repurchases
Up to $1.25 billion (subject to available
cash,market conditions and other ongoing capitalallocation
decisions)
NC
Full-year 2014 revenue guidance MOODY'S INVESTORS
SERVICE Current guidance as of October 24,
2014
Last publicly disclosed guidance as
of September 30, 2014
MIS global growth in the high-single-digit percent range NC MIS
U.S. growth in the high-single-digit percent range NC MIS Non-U.S.
growth of approximately 10% growth in the low-double-digit percent
range Corporate finance growth of approximately 10% growth in the
low-double-digit percent range Structured finance growth in the
high-single-digit percent range growth of approximately 10%
Financial institutions growth in the mid-single-digit percent range
NC Public, project and infrastructure finance growth in the
mid-single-digit percent range growth in the high-single-digit
percent range
MOODY'S ANALYTICS
MA global growth in the mid-teens percent range NC MA
U.S. growth in the low-double-digit percent range NC MA Non-U.S.
growth in the high-teens percent range NC Research, data, and
analytics growth in the high-single-digit percent range NC
Enterprise risk solutions growth in the mid-teens percent range NC
Professional services growth of approximately 40%
NC
NC- There is no difference between
the Company's current guidance and the last publicly disclosed
guidance for this item.
* Full-Year 2014 GAAP Diluted
EPS guidance is $4.34 to $4.44 and includes the $0.36 ICRA
Gain and the $0.03 Legacy Tax benefit
Michael AdlerSenior Vice PresidentCorporate
Communications212.553.4667michael.adler@moodys.comorSalli
SchwartzGlobal Head of Investor
Relations212.553.4862sallilyn.schwartz@moodys.com
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