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Moody’s Corporation Reports Results for First Quarter 2022

2 Maggio 2022

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

NEW YORK–(BUSINESS WIRE)–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 31 Marzo 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 31 Marzo 2022 was $2.6 billion, up 25% as compared to 31 Marzo 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 26 Aprile 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 10 Giugno 2022 to stockholders of record at the close of business on 20 Maggio 2022.

Outstanding shares as of 31 Marzo 2022 totaled 184.5 million, down 1% from 31 Marzo 2021. As of 31 Marzo 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 31 Dicembre 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 2 Maggio 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 2 Maggio 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 2 Maggio 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 31 Maggio 2022.

A replay of the teleconference will be available from 3:30 p.m. ET, 2 Maggio 2022 until 3:30 p.m. ET, 31 Maggio 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.

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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 31 Dicembre 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.
²Refer 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 31 Marzo 2022 amount includes $501 million related to the current portion of long-term debt.
⁽²⁾The 31 Marzo 2022 and 31 Dicembre 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:	31 Marzo 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

	31 Dicembre 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	%