- Moody's Corporation 1Q 2022 revenue of $1.5 billion, down just
5% from record 1Q 2021, as its integrated risk assessment offerings
provide increased value during uncertain times
- Moody’s Investors Service revenue of $827 million, down 20%, on
rated issuance decline of 25%; Moody’s Analytics revenue grew 23%
to $695 million, fifth consecutive quarter of double-digit
growth
- 1Q 2022 diluted EPS of $2.68, down 31% from 1Q 2021; adjusted
diluted EPS1 of $2.89, down 29%
- FY 2022 diluted EPS and adjusted diluted EPS1 guidance ranges
reduced to $9.85 to $10.35 and $10.75 to $11.25, respectively
Moody's Corporation (NYSE: MCO) today announced results for the
first quarter of 2022 and updated its outlook for full year
2022.
“Moody’s trusted insights and breadth of integrated risk
assessment solutions are increasingly relevant in times of
heightened uncertainty and market volatility,” said Rob Fauber,
President and Chief Executive Officer of Moody’s. “Growth in our
KYC solutions and credit research led to another impressive quarter
in Moody’s Analytics. This increased demand demonstrates the
benefit of MA’s highly recurring revenue business model, which
balances the more cyclical nature of Moody’s Investors Service.
While we are focused on strong execution across the business, as a
result of MIS’s first quarter performance and our expectation for
continued market volatility, we have lowered our full year 2022
adjusted diluted EPS guidance range to $10.75 to $11.25.”
FIRST QUARTER REVENUE DOWN 5%
Moody's Corporation reported revenue of $1.5 billion for the
three months ended March 31, 2022, down 5% from the prior-year
period. Foreign currency translation unfavorably impacted Moody's
revenue by 2%.
Moody's Investors Service (MIS) First
Quarter Revenue Down 20%
Revenue for MIS in the first quarter of 2022 was $827 million,
down 20% from the prior-year period, as geopolitical concerns,
rising yields and elevated market uncertainty adversely affected
issuance in all asset classes. Foreign currency translation
unfavorably impacted MIS revenue by 1%.
Corporate finance revenue was $417 million, down 31%, largely
due to the decline in leveraged finance issuance following a record
prior-year period. Additionally, while global investment grade
activity slowed in the quarter, there was a notable rebound in
March compared to the first two months of the year.
Financial institutions revenue was $131 million, down 19%. This
was primarily due to a decline in opportunistic issuance from
infrequent U.S. banks and insurers on widening spreads and
increased benchmark rates.
Public, project and infrastructure finance revenue was $123
million, down 14%. This reflected lower infrastructure finance
supply as a result of high levels of cash on issuers’ balance
sheets, combined with challenging market conditions.
Structured finance revenue was $144 million, up 24%. This was
driven by both higher commercial and residential mortgage-backed
security issuance, offsetting a decline in collateralized loan
obligation refinancing activity.
Moody's Analytics (MA) First Quarter
Revenue Up 23%
Revenue for MA in the first quarter of 2022 was $695 million, up
23% from the prior-year period. Annualized Recurring Revenue2 (ARR)
as of March 31, 2022 was $2.6 billion, up 25% as compared to March
31, 2021. Recurring revenue comprised 94% of total MA revenue, up
from 92% in the first quarter of 2021. Both organic revenue1 and
organic ARR2, which excluded the impact of acquisitions completed
in the prior twelve months, grew 9% each. Foreign currency
translation unfavorably impacted both total and organic MA revenue
by 2% each.
Decision Solutions (DS) revenue was $334 million, up 48%.
Organic DS revenue1 was $257 million, up 14%. Growth was led by KYC
and Compliance offerings, and further supported by demand for risk
and finance software solutions.
Research & Insights (R&I) revenue, which is 100%
organic, was $183 million, up 7%, driven by demand for credit
research, analytics and models.
Data & Information (D&I) revenue was $178 million, up
6%. Organic D&I revenue1 was $176 million, up 5%, primarily
driven by new sales of company data and ratings feeds. Foreign
currency translation unfavorably impacted total D&I revenue by
4%.
FIRST QUARTER OPERATING EXPENSES AND
OPERATING INCOME
First quarter 2022 operating expenses for Moody's Corporation
totaled $866 million, up 16% from the prior-year period.
Operational and integration-related costs associated with recent
acquisitions contributed approximately 13 percentage points of
growth. Foreign currency translation favorably impacted operating
expenses by 2%.
Operating income of $656 million was down 23% and adjusted
operating income1 of $734 million, which primarily excluded
depreciation and amortization expenses, declined 20%. Moody's
operating margin was 43.1% and the adjusted operating margin1 was
48.2%. The MIS adjusted operating margin was 58.6% and the MA
adjusted operating margin was 32.1%.
Moody’s effective tax rate for the first three months of 2022
was 18.2%, up from 14.6% in the prior-year period. This increase
was primarily due to the resolution of uncertain tax positions in
the first quarter of 2021 that did not recur to the same extent in
the first quarter of 2022.
CAPITAL ALLOCATION AND LIQUIDITY
Capital Returned to
Stockholders
During the first quarter of 2022, Moody's repurchased
approximately 0.5 million shares at a total cost of $158 million,
or an average cost of $350.60 per share, and issued net 0.5 million
shares as part of its employee stock-based compensation programs.
The net amount included shares withheld for employee payroll taxes.
Additionally, Moody’s completed a $500 million accelerated share
repurchase (ASR) program in April 2022. The ASR commenced in the
first quarter of 2022 and delivered 1.5 million shares. Moody's
returned $130 million to its stockholders via dividend payments
during the first quarter of 2022.
On April 26, 2022, the Board of Directors declared a regular
quarterly dividend of $0.70 per share of MCO Common Stock. The
dividend will be payable on June 10, 2022 to stockholders of record
at the close of business on May 20, 2022.
Outstanding shares as of March 31, 2022 totaled 184.5 million,
down 1% from March 31, 2021. As of March 31, 2022, Moody's had
approximately $1.2 billion of share repurchase authority
remaining.
Sources of Capital and Cash Flow
Generation
At quarter-end, Moody's had $7.8 billion of outstanding debt and
an undrawn $1.25 billion revolving credit facility. Total cash,
cash equivalents and short-term investments at quarter-end were
$1.9 billion, approximately flat as compared to December 31,
2021.
Cash flow from operations for the first three months of 2022 was
$470 million and free cash flow1 was $411 million.
ASSUMPTIONS AND OUTLOOK
Moody’s updated outlook for full year 2022, as of May 2, 2022,
reflects assumptions about numerous factors that could affect its
business and is based on currently available information reviewed
by management through and as of today’s date. These assumptions
include, but are not limited to, the effects of interest rates,
inflation, foreign currency exchange rates, capital markets’
liquidity and activity in different sectors of the debt markets.
This outlook also reflects assumptions about general economic
conditions, global GDP growth, the scale and duration of the crisis
in Ukraine and the impact of COVID-19, as well as the Company’s own
operations and personnel. These assumptions are subject to
increased uncertainty as a result of the crisis in Ukraine, and
actual full year 2022 results could differ materially from Moody’s
current outlook.
This outlook incorporates various specific macroeconomic
assumptions, including: (a) 2022 U.S. and Euro area GDPs to expand
by approximately 3.5% - 4.5% and 2.5% - 3.5%, respectively; (b)
global benchmark rates to increase from historic lows; (c) U.S.
high yield interest rate spreads to widen, moving slightly above
the historical average of approximately 500 bps; (d) inflation
rates to remain elevated and above central bank targets in many
countries; (e) U.S. unemployment to remain low at approximately
3.5%; and (f) the global high yield default rate to initially
decline before gradually rising to approximately 2.7% by the end of
2022.
MIS’s revenue guidance assumes that full year 2022 global rated
issuance will decrease in the mid-teens percent range.
In addition, Moody’s guidance assumes foreign currency
translation. Specifically, our forecast for the remainder of 2022
reflects exchange rates for the British pound (£) of $1.32 to £1
and for the euro (€) of $1.11 to €1.
Full year 2022 guidance assumes share repurchases of at least
$1.5 billion, subject to available cash, market conditions, M&A
opportunities and other ongoing capital allocation decisions.
Full year 2022 diluted EPS is projected to be $9.85 to $10.35.
The Company expects full year 2022 adjusted diluted EPS1 to be
$10.75 to $11.25.
A full summary of Moody's full year 2022 guidance as of May 2,
2022 is included in Table 13 - 2022 Outlook at the end of this
press release.
CONFERENCE CALL
Moody's will hold a conference call to discuss first quarter
2022 results, as well as its full year 2022 outlook on May 2, 2022,
at 11:30 a.m. Eastern Time (ET). Individuals within the U.S. and
Canada can access the call by dialing +1-877-400-0505. Other
callers should dial +1-720-452-9084. Please dial in to the call by
11:20 a.m. ET. The passcode for the call is 4687337.
The teleconference will also be webcast with an accompanying
slide presentation, which can be accessed through Moody's Investor
Relations website, ir.moodys.com within "Events &
Presentations". The webcast will be available until 3:30 p.m. ET on
May 31, 2022.
A replay of the teleconference will be available from 3:30 p.m.
ET, May 2, 2022 until 3:30 p.m. ET, May 31, 2022. The replay can be
accessed from within the U.S. and Canada by dialing
+1-888-203-1112. Other callers can access the replay at
+1-719-457-0820. The replay confirmation code is 4687337.
*****
ABOUT MOODY'S CORPORATION
Moody’s (NYSE: MCO) is a global integrated risk assessment firm
that empowers organizations to make better decisions. Its data,
analytical solutions and insights help decision-makers identify
opportunities and manage the risks of doing business with others.
We believe that greater transparency, more informed decisions, and
fair access to information open the door to shared progress. With
approximately 14,000 employees in more than 40 countries, Moody’s
combines international presence with local expertise and over a
century of experience in financial markets. Learn more at
moodys.com/about.
"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. The forward-looking statements in this
release are made as of the date hereof, and Moody’s 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, Moody’s 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 global
impact of the crisis in Ukraine on volatility in the U.S. and world
financial markets, on general economic conditions and GDP in the
U.S. and worldwide, on global relations, and its potential for
further worldwide credit market disruptions and economic slowdowns;
the impact of MIS’s withdrawal of its credit ratings on Russian
entities and of Moody’s suspension of commercial operations in
Russia; the impact of COVID-19 on world financial markets, on
general economic conditions and on Moody’s own operations and
personnel; future worldwide 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,
inflation and other volatility in the financial markets and
uncertainty as companies transition away from LIBOR; the level of
merger and acquisition activity in the U.S. and abroad; the
uncertain effectiveness and possible collateral consequences of
U.S. and foreign government actions affecting credit markets,
international trade and economic policy, including those related to
tariffs, tax agreements 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; 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 inquiries
to which Moody’s may be subject from time to time; provisions in
U.S. 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; uncertainty regarding the future relationship
between the U.S. and China; 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 Moody’s
global tax planning initiatives; exposure to potential criminal
sanctions or civil remedies if Moody’s fails to comply with foreign
and U.S. laws and regulations that are applicable in the
jurisdictions in which Moody’s 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, such as our acquisition of RMS, or
other business combinations and the ability of Moody’s 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 Moody’s annual report on Form
10-K for the year ended December 31, 2021, and in other filings
made by Moody’s 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 Moody’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 Moody’s business, results of
operations and financial condition. New factors may emerge from
time to time, and it is not possible for Moody’s to predict new
factors, nor can Moody’s assess the potential effect of any new
factors on it.
1 Refer to the tables at the end of this
press release for reconciliations of adjusted and organic measures
to U.S. GAAP.
2 Refer to Table 11 at the end of this
press release for the definition of and further information on the
Annualized Recurring Revenue metric.
Table 1 - Consolidated Statements of
Operations (Unaudited)
Three Months Ended
March 31,
Amounts in millions, except per share
amounts
2022
2021
Revenue
$
1,522
$
1,600
Expenses:
Operating
417
393
Selling, general and administrative
371
293
Depreciation and amortization
78
59
Restructuring
—
2
Total expenses
866
747
Operating income
656
853
Non-operating (expense) income,
net
Interest expense, net
(53
)
(7
)
Other non-operating income, net
6
16
Total non-operating (expense) income,
net
(47
)
9
Income before provision for income
taxes
609
862
Provision for income taxes
111
126
Net income attributable to Moody's
Corporation
$
498
$
736
Earnings per share attributable to
Moody's common shareholders
Basic
$
2.69
$
3.93
Diluted
$
2.68
$
3.90
Weighted average number of shares
outstanding
Basic
185.1
187.2
Diluted
186.1
188.6
Table 2 - Supplemental Revenue Information
(Unaudited)
Three Months Ended
March 31,
Amounts in millions
2022
2021
Moody's Investors Service
Corporate Finance
$
417
$
605
Structured Finance
144
116
Financial Institutions
131
162
Public, Project and Infrastructure
Finance
123
143
MIS Other
12
10
Intersegment revenue
43
40
Sub-total MIS
870
1,076
Eliminations
(43
)
(40
)
Total MIS revenue - external
827
1,036
Moody's Analytics
Decision Solutions
334
225
Research and Insights
183
171
Data and Information
178
168
Intersegment revenue
2
2
Sub-total MA
697
566
Eliminations
(2
)
(2
)
Total MA revenue - external
695
564
Total Moody's Corporation
revenue
$
1,522
$
1,600
Moody's Corporation revenue by
geographic area
United States (U.S.)
$
862
$
885
Non-U.S.
660
715
$
1,522
$
1,600
Table 3 - Selected Consolidated Balance
Sheet Data (Unaudited)
Amounts in millions
March 31,
2022
December 31,
2021
Cash and cash equivalents
$
1,750
$
1,811
Short-term investments
103
91
Total current assets
4,062
4,011
Operating lease right-of-use assets
427
438
Non-current assets
10,677
10,669
Total assets
14,739
14,680
Total current liabilities
2,988
2,496
Total debt (1)
7,786
7,413
Total operating lease liabilities (2)
546
560
Other long-term liabilities
1,444
1,400
Total shareholders' equity
2,582
2,916
Total liabilities and shareholders'
equity
14,739
14,680
Actual number of shares outstanding
184.5
185.6
(1) The March 31, 2022 amount includes
$501 million related to the current portion of long-term debt.
(2) The March 31, 2022 and December 31,
2021 amounts include $106 million and $105 million of current
operating lease liabilities, respectively.
Table 4 - Selected Consolidated Balance
Sheet Data (Unaudited) Continued
Total debt consists of the
following:
March 31, 2022
Amounts in millions
Principal Amount
Fair Value of
Interest Rate
Swaps (1)
Unamortized
(Discount)
Premium
Unamortized
Debt Issuance
Costs
Carrying Value
Notes Payable:
4.875% 2013 Senior Notes, due 2024
$
500
$
—
$
(1
)
$
(1
)
$
498
5.25% 2014 Senior Notes, due 2044
600
(24
)
3
(5
)
574
1.75% 2015 Senior Notes, due 2027
556
—
—
(2
)
554
2.625% 2017 Senior Notes, due 2023
500
2
—
(1
)
501
3.25% 2017 Senior Notes, due 2028
500
(16
)
(3
)
(2
)
479
4.25% 2018 Senior Notes, due 2029
400
(12
)
(2
)
(2
)
384
4.875% 2018 Senior Notes, due 2048
400
(25
)
(6
)
(4
)
365
0.950% 2019 Senior Notes, due 2030
835
—
(2
)
(5
)
828
3.75% 2020 Senior Notes, due 2025
700
(20
)
(1
)
(3
)
676
3.25% 2020 Senior Notes, due 2050
300
—
(4
)
(3
)
293
2.55% 2020 Senior Notes, due 2060
500
—
(4
)
(5
)
491
2.00% 2021 Senior Notes, due 2031
600
—
(8
)
(5
)
587
2.75% 2021 Senior Notes, due 2041
600
—
(13
)
(5
)
582
3.10% 2021 Senior Notes, due 2061
500
—
(7
)
(5
)
488
3.75% 2022 Senior Notes, due 2052
500
—
(9
)
(5
)
486
Total debt
$
7,991
$
(95
)
$
(57
)
$
(53
)
$
7,786
Current portion
(501
)
Total long-term debt
$
7,285
December 31, 2021
Principal Amount
Fair Value of
Interest Rate
Swaps (1)
Unamortized
(Discount)
Premium
Unamortized
Debt Issuance
Costs
Carrying Value
Notes Payable:
4.875% 2013 Senior Notes, due 2024
$
500
$
—
$
(1
)
$
(1
)
$
498
5.25% 2014 Senior Notes, due 2044
600
(7
)
3
(5
)
591
1.75% 2015 Senior Notes, due 2027
568
—
—
(2
)
566
2.625% 2017 Senior Notes, due 2023
500
5
—
(1
)
504
3.25% 2017 Senior Notes, due 2028
500
8
(3
)
(2
)
503
4.25% 2018 Senior Notes, due 2029
400
—
(2
)
(2
)
396
4.875% 2018 Senior Notes, due 2048
400
(7
)
(6
)
(4
)
383
0.950% 2019 Senior Notes, due 2030
853
—
(2
)
(5
)
846
3.75% 2020 Senior Notes, due 2025
700
(9
)
(1
)
(4
)
686
3.25% 2020 Senior Notes, due 2050
300
—
(4
)
(3
)
293
2.55% 2020 Senior Notes, due 2060
500
—
(4
)
(5
)
491
2.00% 2021 Senior Notes, due 2031
600
—
(8
)
(5
)
587
2.75% 2021 Senior Notes, due 2041
600
—
(13
)
(6
)
581
3.10% 2021 Senior Notes, due 2061
500
—
(7
)
(5
)
488
Total long-term debt
$
7,521
$
(10
)
$
(48
)
$
(50
)
$
7,413
(1) The fair value of interest rate swaps
in the table above represents the cumulative amount of fair value
hedging adjustments included in the carrying amount of the hedged
debt.
Table 5 - Non-Operating (Expense) Income,
Net (Unaudited)
Three Months Ended
March 31,
2022
2021
Amounts in millions
Interest:
Expense on borrowings
$
(48
)
$
(41
)
UTPs and other tax related liabilities
(1)
(3
)
35
Net periodic pension costs - interest
component
(4
)
(4
)
Income
2
3
Total interest expense, net
$
(53
)
$
(7
)
Other non-operating income (expense),
net:
FX gain/(loss)
$
—
$
(2
)
Net periodic pension costs - other
components
6
4
Income from investments in
non-consolidated affiliates
2
8
Other
(2
)
6
Other non-operating income (expense),
net
6
16
Total non-operating (expense) income,
net
$
(47
)
$
9
(1) The amount in the first quarter of
2021 includes a $40 million benefit related to the reversal of
tax-related interest accruals pursuant to the resolution of tax
matters.
Table 6 - Financial Information by Segment
(Unaudited)
The table below presents revenue and adjusted operating income
by reportable segment. The Company defines adjusted operating
income as operating income excluding: i) depreciation and
amortization; and ii) restructuring.
Three Months Ended March
31,
2022
2021
Amounts in millions
MIS
MA
Eliminations
Consolidated
MIS
MA
Eliminations
Consolidated
Revenue
$
870
$
697
$
(45
)
$
1,522
$
1,076
$
566
$
(42
)
$
1,600
Operating, SG&A
360
473
(45
)
788
348
380
(42
)
686
Adjusted Operating Income
$
510
$
224
$
—
$
734
$
728
$
186
$
—
$
914
Adjusted Operating Margin
58.6
%
32.1
%
48.2
%
67.7
%
32.9
%
57.1
%
Depreciation and amortization
18
60
—
78
18
41
—
59
Restructuring
—
—
—
—
—
2
—
2
Operating income
$
656
$
853
Operating margin
43.1
%
53.3
%
Table 7 - Transaction and Recurring Revenue
(Unaudited)
The table below summarizes the split between transaction and
recurring revenue. In the MIS segment, excluding MIS Other,
transaction revenue represents the initial rating of a new debt
issuance and other one-time fees, while recurring 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 MIS Other, transaction revenue represents revenue
from professional services and recurring revenue represents
subscription-based revenue. In the MA segment, recurring revenue
represents subscription-based revenues and software maintenance
revenue. Transaction revenue in MA represents perpetual software
license fees and revenue from software implementation services,
risk management advisory projects, and training and certification
services.
Three Months Ended March
31,
Amounts in millions
2022
2021
Transaction
Recurring
Total
Transaction
Recurring
Total
Corporate Finance
293
124
417
487
118
605
70
%
30
%
100
%
80
%
20
%
100
%
Structured Finance
93
51
144
66
50
116
65
%
35
%
100
%
57
%
43
%
100
%
Financial Institutions
61
70
131
90
72
162
47
%
53
%
100
%
56
%
44
%
100
%
Public, Project and Infrastructure
Finance
79
44
123
100
43
143
64
%
36
%
100
%
70
%
30
%
100
%
MIS Other
3
9
12
2
8
10
25
%
75
%
100
%
20
%
80
%
100
%
Total MIS
529
298
827
745
291
1,036
64
%
36
%
100
%
72
%
28
%
100
%
Decision Solutions
43
291
334
41
184
225
13
%
87
%
100
%
18
%
82
%
100
%
Research & Insights
1
182
183
1
170
171
1
%
99
%
100
%
1
%
99
%
100
%
Data & Information
—
178
178
1
167
168
—
%
100
%
100
%
1
%
99
%
100
%
Total MA
44
651
695
43
521
564
6
%
94
%
100
%
8
%
92
%
100
%
Total Moody's Corporation
573
949
1,522
788
812
1,600
38
%
62
%
100
%
49
%
51
%
100
%
Table 8 - Adjusted Operating Income and
Adjusted Operating Margin (Unaudited)
The Company presents Adjusted Operating Income and Adjusted
Operating Margin because management deems these metrics to be
useful measures to provide additional perspective on Moody’s
operating performance. Adjusted Operating Income excludes the
impact of: i) depreciation and amortization; and ii) restructuring.
Depreciation and amortization are excluded because companies
utilize productive assets of different estimated useful lives and
use different methods of acquiring and depreciating productive
assets. Restructuring charges are excluded as the frequency and
magnitude of these items may vary widely across periods and
companies.
Management believes that the exclusion of the aforementioned
items, as detailed in the reconciliation below, allows for an
additional perspective on the Company’s operating results from
period to period and across companies. The Company defines Adjusted
Operating Margin as Adjusted Operating Income divided by
revenue.
Three Months Ended March
31,
Amounts in millions
2022
2021
Operating income
$
656
$
853
Depreciation and amortization
78
59
Restructuring
—
2
Adjusted Operating Income
$
734
$
914
Operating margin
43.1
%
53.3
%
Adjusted Operating Margin
48.2
%
57.1
%
Table 9 - Free Cash Flow (Unaudited)
The table below reflects a reconciliation of the Company's net
cash flow from operating activities to free cash flow. The Company
defines free cash flow as net cash provided by operating activities
minus payments for capital additions. Management deems capital
expenditures essential 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. 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.
Three Months Ended March
31,
Amounts in millions
2022
2021
Net cash provided by operating
activities
$
470
$
676
Capital additions
(59
)
(14
)
Free Cash Flow
$
411
$
662
Net cash used in investing
activities
$
(161
)
$
(194
)
Net cash used in financing
activities
$
(352
)
$
(290
)
Table 10 - Organic Revenue and Growth
Measures (Unaudited)
The Company presents organic revenue and organic revenue growth
(including organic recurring revenue and organic recurring revenue
growth) because management deems these metrics to be useful
measures to provide additional perspective in assessing the revenue
growth excluding the inorganic revenue impacts from certain
acquisition activity.
Below is a reconciliation of MA's reported revenue and growth
rates to its organic revenue and organic growth rates:
Three Months Ended March
31,
Amounts in millions
2022
2021
Change
Growth
MA revenue
$
695
$
564
$
131
23
%
Inorganic revenue from acquisitions
(79
)
—
(79
)
Organic MA revenue
$
616
$
564
$
52
9
%
Decision Solutions revenue
$
334
$
225
$
109
48
%
Inorganic revenue from acquisitions
(77
)
—
(77
)
Organic Decision Solutions
revenue
$
257
$
225
$
32
14
%
Data and Information revenue
$
178
$
168
$
10
6
%
Inorganic revenue from acquisitions
(2
)
—
(2
)
Organic Data and Information
revenue
$
176
$
168
$
8
5
%
MA recurring revenue
$
651
$
521
$
130
25
%
Inorganic recurring revenue from
acquisitions
(75
)
—
(75
)
Organic MA recurring revenue
$
576
$
521
$
55
11
%
Table 11 - Key Performance Metrics -
Annualized Recurring Revenue (Unaudited)
The Company presents Annualized Recurring Revenue (“ARR”) and
Organic ARR for its MA business as supplemental performance metrics
to provide additional insight on the estimated value of MA's
recurring revenue contracts at a given point in time. The Company
uses these metrics to manage and monitor performance of its MA
operating segment and believes that ARR is a key indicator of the
trajectory of MA's recurring revenue base.
The Company calculates ARR and Organic ARR by taking the total
recurring contract value for each active renewable contract as of
the reporting date, divided by the number of days in the contract
and multiplied by 365 days to create an annualized value. The
Company defines renewable contracts as subscriptions, term
licenses, maintenance and renewable services. ARR excludes
transactional sales including training, one-time services and
perpetual licenses. In order to compare period-over-period ARR and
Organic ARR excluding the effects of foreign currency translation,
the Company bases the calculation on currency rates utilized in its
operating budget and holds these FX rates constant for the duration
of all current and prior periods being reported. Additionally,
Organic ARR excludes contracts related to certain acquisitions to
provide additional perspective in assessing ARR growth excluding
the impacts from certain acquisition activity.
The Company’s definition of ARR may differ from definitions
utilized by other companies reporting similarly named measures, and
this metric should be viewed in addition to, and not as a
substitute for, financial measures presented in accordance with
U.S. GAAP.
Amounts in millions
March 31, 2022
March 31, 2021
Change
Growth
MA ARR
$
2,573
$
2,063
$
510
25
%
Organic MA ARR
$
2,246
$
2,063
$
183
9
%
Table 12 - Adjusted Net Income and Adjusted
Diluted EPS Attributable to Moody's Common Shareholders
(Unaudited)
The Company presents Adjusted Net Income and Adjusted Diluted
EPS because management deems these metrics to be useful measures to
provide additional perspective on Moody’s operating performance.
Adjusted Net Income and Adjusted Diluted EPS exclude the impact of:
i) amortization of acquired intangible assets; and ii)
restructuring charges.
The Company excludes the impact of amortization of acquired
intangible assets as companies utilize intangible assets with
different estimated useful lives and have different methods of
acquiring and amortizing intangible assets. These intangible assets
were recorded as part of acquisition accounting and contribute to
revenue generation. The amortization of intangible assets related
to acquisitions will recur in future periods until such intangible
assets have been fully amortized. Furthermore, the timing and
magnitude of business combination transactions are not predictable
and the purchase price allocated to amortizable intangible assets
and the related amortization period are unique to each acquisition
and can vary significantly from period to period and across
companies. Restructuring charges are excluded as the frequency and
magnitude of these items may vary widely across periods and
companies.
Below is a reconciliation of this measure to its most directly
comparable U.S. GAAP amount:
Three Months Ended March
31,
Amounts in millions
2022
2021
Net income attributable to Moody's
common shareholders
$
498
$
736
Pre-tax Acquisition-Related Intangible
Amortization Expenses
$
51
$
35
Tax on Acquisition-Related Intangible
Amortization Expenses
(12
)
(8
)
Net Acquisition-Related Intangible
Amortization Expenses
39
27
Pre-tax restructuring
$
—
$
2
Tax on restructuring
—
—
Net restructuring
—
2
Adjusted Net Income
$
537
$
765
Three Months Ended March
31,
2022
2021
Diluted earnings per share attributable
to Moody's common shareholders
$
2.68
$
3.90
Pre-tax Acquisition-Related Intangible
Amortization Expenses
$
0.27
$
0.19
Tax on Acquisition-Related Intangible
Amortization Expenses
(0.06
)
(0.04
)
Net Acquisition-Related Intangible
Amortization Expenses
0.21
0.15
Pre-tax restructuring
$
—
$
0.01
Tax on restructuring
—
—
Net restructuring
—
0.01
Adjusted Diluted EPS
$
2.89
$
4.06
Note: The tax impacts in the table above
were calculated using tax rates in effect in the jurisdiction for
which the item relates.
Table 13 - 2022 Outlook
Moody’s updated outlook for full year 2022, as of May 2, 2022,
reflects assumptions about numerous factors that could affect its
business and is based on currently available information reviewed
by management through and as of today’s date. These assumptions
include, but are not limited to, the effects of interest rates,
inflation, foreign currency exchange rates, capital markets’
liquidity and activity in different sectors of the debt markets.
This outlook also reflects assumptions about general economic
conditions, global GDP growth, the scale and duration of the crisis
in Ukraine and the impact of COVID-19, as well as the Company’s own
operations and personnel. These assumptions are subject to
increased uncertainty as a result of the crisis in Ukraine, and
actual full year 2022 results could differ materially from Moody’s
current outlook. This outlook incorporates various specific
macroeconomic assumptions, including: (a) 2022 U.S. and Euro area
GDPs to expand by approximately 3.5% - 4.5% and 2.5% - 3.5%,
respectively; (b) global benchmark rates to increase from historic
lows; (c) U.S. high yield interest rate spreads to widen, moving
slightly above the historical average of approximately 500 bps; (d)
inflation rates to remain elevated and above central bank targets
in many countries; (e) U.S. unemployment to remain low at
approximately 3.5%; and (f) the global high yield default rate to
initially decline before gradually rising to approximately 2.7% by
the end of 2022. MIS’s revenue guidance assumes that full year 2022
global rated issuance will decrease in the mid-teens percent range.
In addition, Moody’s guidance assumes foreign currency translation.
Specifically, our forecast for the remainder of 2022 reflects
exchange rates for the British pound (£) of $1.32 to £1 and for the
euro (€) of $1.11 to €1.
Full Year 2022 Moody's
Corporation Guidance as of May 2, 2022
MOODY'S CORPORATION
Current guidance
Last publicly disclosed
guidance
Revenue
Approximately flat
Increase in the high-single-digit
percent range
Operating expenses
Increase in the high-single-digit
percent range
Increase in the low-double-digit
percent range
Operating margin
41% to 42%
44% to 45%
Adjusted Operating Margin (1)
Approximately 47%
49% to 50%
Interest expense, net
$200 to $220 million
NC
Effective tax rate
20.5% to 22.5%
NC
Diluted EPS
$9.85 to $10.35
$11.50 to $12.00
Adjusted Diluted EPS (1)
$10.75 to $11.25
$12.40 to $12.90
Operating cash flow
$2.1 to $2.3 billion
$2.45 to $2.65 billion
Free Cash Flow (1)
$1.8 to $2.0 billion
$2.3 to $2.5 billion
Share repurchases
At least $1.5 billion (subject to
available cash, market conditions, M&A opportunities and other
ongoing capital allocation decisions)
NC
Moody's Investors Service (MIS)
Current guidance
Last publicly disclosed
guidance
MIS global revenue
Decrease in the low-double-digit
percent range
Increase in the low-single-digit
percent range
MIS Adjusted Operating Margin
Approximately 59%
Approximately 62%
Moody's Analytics (MA)
Current guidance
Last publicly disclosed
guidance
MA global revenue
Increase in the high-teens
percent range
NC
Organic MA ARR (2)
Increase in the low-double-digit
percent range
-
MA Adjusted Operating Margin
Approximately 29%
NC
NC - There is no difference between the
Company’s current guidance and the last publicly disclosed guidance
for this item.
Note: All current guidance as of May 2,
2022. All last publicly disclosed guidance is as of February 10,
2022. The Company had not previously disclosed guidance for the
Organic MA ARR metric.
(1) These metrics are adjusted measures.
See below for reconciliation of these measures to their comparable
U.S. GAAP measure.
(2) Refer to Table 11 within this press
release for the definition of and further information on the
Organic MA ARR metric.
Table 13 - 2022 Outlook Continued
The following are reconciliations of the Company's adjusted
forward looking measures to their comparable U.S. GAAP measure:
Projected for the Year
Ended
December 31, 2022
Operating margin guidance
41% to 42%
Depreciation and amortization
5% to 6%
Adjusted Operating Margin guidance
Approximately 47%
Projected for the Year
Ended
December 31, 2022
Operating cash flow guidance
$2.1 to $2.3 billion
Less: Capital expenditures
$250 to $300 million
Free Cash Flow guidance
$1.8 to $2.0 billion
Projected for the Year
Ended
December 31, 2022
Diluted EPS guidance
$9.85 to $10.35
Acquisition-Related Intangible
Amortization
Approximately $0.90
Adjusted Diluted EPS guidance
$10.75 to $11.25
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220502005175/en/
SHIVANI KAK Investor Relations 212.553.0298
shivani.kak@moodys.com MICHAEL ADLER Corporate Communications
212.553.4667 michael.adler@moodys.com moodys.com ir.moodys.com
moodys.com/esg moodys.com/sustainability
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