- 2Q15 revenue up 5% from 2Q14 to $918.1
million; up 10% on a constant currency basis
- 2Q15 operating income up 2% from 2Q14
to $419.3 million; up 7% on a constant currency basis
- 2Q15 EPS of $1.28 up 14% from 2Q14
non-GAAP EPS of $1.12, which excluded the $0.36 ICRA Gain
- Reaffirming FY 2015 GAAP EPS guidance
of $4.55 to $4.65
Moody’s Corporation (NYSE:MCO) today announced results for the
second-quarter 2015.
SECOND-QUARTER 2015
HIGHLIGHTS
Moody’s Corporation reported revenue of $918.1 million for the
three months ended June 30, 2015, up 5% from $873.5 million for the
same period of 2014.
Operating expenses totaled $498.8 million, up 8% from $461.8
million, and operating income was $419.3 million, up 2% from $411.7
million. Adjusted operating income (operating income before
depreciation and amortization) was $447.2 million, up 3% from
$434.0 million. Operating margin for the second-quarter 2015 was
45.7% and adjusted operating margin was 48.7%.
EPS of $1.28 was up 14% from second-quarter 2014 non-GAAP EPS of
$1.12, which excluded a $103 million non-cash, pre-tax gain, or
$0.36 per share, resulting from Moody’s acquisition of a
controlling interest in ICRA Ltd. in the second-quarter of 2014
(the “ICRA Gain”).
“Moody’s achieved 5% revenue growth in the second quarter due to
strong US performance, partially offset by challenging European
conditions,” said Raymond McDaniel, President and Chief Executive
Officer of Moody’s. “We are reaffirming our 2015 earnings per share
guidance of $4.55 to $4.65 despite uneven global growth and foreign
currency volatility.”
MCO SECOND-QUARTER 2015 REVENUE UP
5%
Moody’s Corporation reported global revenue of $918.1 million
for the second-quarter 2015, up 5% from the second-quarter 2014.
Foreign currency translation unfavorably impacted revenue by 5%. US
revenue was $545.9 million, up 18% from $461.1 million, while
non-US revenue was $372.2 million, down 10% from $412.4 million.
Revenue generated outside the US constituted 41% of total revenue,
versus 47% in the year-ago period.
MIS Second-Quarter Revenue Up
2%
Global revenue for Moody’s Investors Service (MIS) for the
second-quarter 2015 was $639.2 million, up 2% from the prior-year
period. Foreign currency translation unfavorably impacted MIS
revenue by 5%. US revenue was $412.0 million, up 17%, while non-US
revenue was $227.2 million, down 17%.
Global corporate finance revenue was $319.6 million, essentially
flat to the prior-year period. This result reflected strong US
investment-grade issuance primarily from increased M&A
activity, largely offset by lower levels of non-US speculative
grade issuance as well as a challenging prior-year comparable in
Europe. US corporate finance revenue increased 18%, while non-US
revenue decreased 25%.
Global structured finance revenue totaled $121.2 million, up 10%
from a year earlier, primarily the result of strength in US
structured credit, RMBS and commercial real estate finance.
Structured finance US revenue was up 20%, while non-US revenue was
down 10%.
Global financial institutions revenue was $90.4 million, down 2%
compared to the prior-year period. US financial institutions
revenue was up 10%, while non-US revenue was down 9%.
Global public, project and infrastructure finance revenue was
$99.9 million, up 2% over the prior-year period. Increased US
public finance issuance was partially offset by a decline in global
project and infrastructure revenue against a strong prior-year
comparable. US public, project and infrastructure finance revenue
was up 10%, while non-US revenue was down 11%.
MA Second-Quarter Revenue Up
12%
Global revenue for Moody’s Analytics (MA) for second-quarter
2015 was $278.9 million, up 12% from second-quarter 2014. Foreign
currency translation unfavorably impacted MA revenue by 6%. MA’s US
revenue was $133.9 million, up 23%, and its non-US revenue was
$145.0 million, up 4%.
Global revenue from research, data and analytics (RD&A) was
$157.5 million, up 11% from the prior-year period. Growth was
mainly due to the October 2014 acquisition of Lewtan Technologies
as well as strong performance in the credit research and content
licensing businesses. US RD&A revenue was up 19%, while non-US
revenue was up 2%.
Global enterprise risk solutions (ERS) revenue of $83.2 million
was up 24%, resulting from strong project delivery across all
product offerings as well as the July 2014 acquisition of WebEquity
Solutions. US ERS revenue was up 44%, while non-US revenue was up
14%.
Global revenue from professional services of $38.2 million was
down 4% from the prior-year period, primarily due to the
year-over-year decline of the Canadian dollar as well as the effect
of exiting certain Copal Amba product lines in late 2014. US
professional services revenue was up 10%, while non-US revenue was
down 10%.
SECOND-QUARTER 2015 EXPENSE UP
8%
Second-quarter 2015 expense for Moody’s Corporation was $498.8
million, up 8% from the prior-year period, primarily due to
expenses from our 2014 acquisitions as well as compensation costs
associated with new hires and merit increases. Foreign currency
translation favorably impacted expense by 5%.
Operating income was $419.3 million, up 2% from $411.7 million.
Foreign currency translation unfavorably impacted operating income
by 5%. Adjusted operating income of $447.2 million increased 3%
from the prior-year period. The operating margin was 45.7%, down
from 47.1%. The adjusted operating margin was 48.7%, down from
49.7%. These margin declines resulted from the added expense of our
2014 acquisitions as well as the unfavorable impact of foreign
currency translation.
Moody’s effective tax rate was 30.4% for second-quarter 2015,
compared with 33.1% for the prior-year period. The year-over-year
reduction was due to a favorable tax ruling from New York State and
a change in the New York City tax law regarding income
apportionment.
MCO FIRST HALF 2015 REVENUE UP
9%
For Moody’s Corporation overall, global revenue was $1.8 billion
for the first half of 2015, up 9% from the first half of 2014.
Foreign currency translation unfavorably impacted revenue by 5%. US
revenue was $1.1 billion, up 18%, while non-US revenue was $0.7
billion, down 2%.
MIS First Half Revenue Up
8%
Revenue at MIS totaled $1.2 billion for the first half of 2015,
up 8% from the prior-year period. Foreign currency translation
unfavorably impacted MIS revenue by 5%. US revenue was $783.5
million, up 17%. Non-US revenue was $458.0 million, down 6%, and
represented 37% of MIS revenue, down from 42% in the first half of
2014.
MA First Half Revenue Up
11%
MA revenue totaled $542.2 million for the first half of 2015, up
11% from the prior-year period. Foreign currency translation
unfavorably impacted MA revenue by 6%. US revenue of $262.2 million
increased 20%. Non-US revenue was $280.0 million, up 4%, and
constituted 52% of MA revenue, down from 55% in the first half of
2014.
FIRST HALF 2015 EXPENSE UP
11%
Expense for Moody’s Corporation for the first half of 2015 was
$993.1 million, up 11% from the prior year. Foreign currency
translation favorably impacted expense by 4%.
Operating income was $790.6 million, up 6% from the first half
of 2014. Foreign currency translation unfavorably impacted
operating income by 6%. Adjusted operating income of $847.1 million
increased 7% from the prior-year period. Moody’s operating margin
was 44.3%, down from 45.4%, and its adjusted operating margin was
47.5%, down from 48.2%.
The effective tax rate for the first half of 2015 was 31.5%,
consistent with the first half of 2014.
2015 CAPITAL ALLOCATION AND
LIQUIDITY
2.2 Million Shares Repurchased in
Second-Quarter
During second-quarter 2015, Moody’s repurchased 2.2 million
shares at a total cost of $234.9 million, or an average cost of
$107.35 per share, and issued 0.4 million shares as part of its
employee stock-based compensation plans. Over the first half of
2015, Moody’s repurchased 6.0 million shares at a total cost of
$600.7 million, or an average cost of $99.61 per share.
Outstanding shares as of June 30, 2015, totaled 200.3 million,
down 5% from the prior year. As of June 30, 2015, Moody’s had $1.0
billion of share repurchase authority remaining.
At quarter-end, Moody’s had $3.1 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 $2.0 billion, up $88.2
million. Free cash flow in the first six months of 2015 was $553.7
million, up 32% from the first six months of 2014, primarily due to
changes in working capital.
ASSUMPTIONS AND OUTLOOK FOR FULL-YEAR
2015
Moody’s outlook for 2015 is based on assumptions about many
macroeconomic and capital market factors, including interest rates,
foreign currency exchange rates, corporate profitability and
business investment spending, mergers and acquisitions, consumer
borrowing and securitization, and the amount of debt issued. These
assumptions are subject to some degree of uncertainty, and results
for the year could differ materially from our current outlook. Our
guidance assumes foreign currency translation at end-of-quarter
exchange rates. Specifically, our forecast reflects exchange rates
for the British pound (£) and the euro (€) of $1.57 to £1 and $1.11
to €1, respectively.
Certain components of Moody’s 2015 guidance have been modified
to reflect the Company’s current view of business conditions, as
follows:
Global MIS revenue for full-year 2015 is still expected to
increase in the mid-single-digit percent range. However, US revenue
is now expected to increase in the low-double-digit percent range,
while non-US revenue is now expected to be approximately flat.
Within MIS, structured finance revenue is now expected to grow in
the mid-single-digit percent range and public, project and
infrastructure finance revenue is now expected to increase in the
low-double-digit percent range.
Global MA revenue for full-year 2015 is still expected to
increase in the mid-single-digit percent range. Within MA,
professional services revenue is now expected to decrease in the
high-single-digit percent range.
The effective tax rate is now expected to be approximately 31%
to 32% and capital expenditures are now expected to be
approximately $100 - $110 million.
A full summary of Moody’s guidance as of July 24, 2015 is
included in Table 12 - 2015 Outlook at the end of this press
release.
CONFERENCE CALL
Moody’s will hold a conference call to discuss second-quarter
2015 results as well as its 2015 outlook on July 24, 2015, at 11:30
a.m. EDT. Individuals within the US 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. EDT. 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. EDT, August 22, 2015.
A replay of the teleconference will be available from 3:30 p.m.
EDT on July 24, 2015 until 3:30 p.m. EDT on August 22, 2015. The
replay can be accessed from within the US and Canada by dialing
+1-888-203-1112. Other callers can access the replay at
+1-719-457-0820. The replay confirmation code is 2759861.
*****
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 $3.3 billion in 2014,
employs approximately 10,200 people worldwide and maintains a
presence in 35 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 2015 and other
forward-looking statements in this release are made as of July 24,
2015, 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 US and abroad; the uncertain effectiveness and possible
collateral consequences of US and foreign government initiatives to
respond to the current world-wide credit market disruptions and
economic slowdown; concerns in the marketplace affecting Moody’s
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 US,
state and local legislation and regulations, including provisions
in the Financial Reform Act and regulations resulting from that
Act; the potential for increased competition and regulation in the
EU and other foreign jurisdictions; exposure to litigation related
to Moody’s rating opinions, as well as any other litigation,
government and regulatory proceedings, investigations and inquiries
to which the Company may be subject from time to time; provisions
in the 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
Moody’s 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; exposure to potential criminal
sanctions or civil remedies if the Company fails to comply with
foreign and US laws and regulations that are applicable in the
jurisdictions in which the Company operates, including sanctions
laws, anti-corruption laws and local laws prohibiting corrupt
payments to government officials; the impact of mergers,
acquisitions or other business combinations and the ability of the
Company to successfully integrate acquired businesses; currency and
foreign exchange volatility; the level of future cash flows; the
levels of capital investments; and a decline in the demand for
credit risk management tools by financial institutions; and other
risk factors as discussed in the Company’s annual report on Form
10-K for the year ended December 31, 2014 and in other filings made
by the Company from time to time with the Securities and Exchange
Commission.
Table 1 - Consolidated Statements of Operations
(Unaudited) Three
Months Ended Six Months End June 30, June
30, 2015 2014 2015 2014
Amounts in millions, except per share amounts
Revenue $ 918.1 $
873.5 $ 1,783.7 $
1,640.7 Expenses: Operating 243.9 222.1
488.3 438.1 Selling, general and administrative 227.0 217.4 448.3
412.5 Depreciation and amortization 27.9 22.3
56.5 45.4
Total expenses
498.8 461.8 993.1 896.0
Operating income
419.3 411.7
790.6 744.7 Non-operating
(expense) income, net Interest (expense) income, net (31.9 )
(26.0 ) (61.2 ) (49.8 ) Other non-operating (expense) income, net
(8.2 ) (3.3 ) (5.7 ) (0.9 ) ICRA Gain - 102.8
- 102.8 Total non-operating
(expense) income, net (40.1 ) 73.5
(66.9 ) 52.1
Income before provision for income
taxes 379.2 485.2 723.7 796.8
Provision for income taxes 115.1 160.8
228.3 250.7 Net income 264.1 324.4
495.4 546.1 Less: net income attributable to noncontrolling
interests 2.4 5.2
3.6 8.9
Net income attributable to
Moody's Corporation $ 261.7 $
319.2 $ 491.8 $
537.2 Earnings per share
attributable to Moody's common shareholders Basic $ 1.30 $ 1.51
$ 2.43 $ 2.52 Diluted $ 1.28 $ 1.48
$ 2.39 $ 2.47
Weighted average number of shares
outstanding
Basic 201.3 212.0 202.0 213.0 Diluted 204.4
215.7 205.4
217.1
Table 2 - Supplemental
Revenue Information (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, Amounts in millions
2015 2014 2015 2014
Moody's Investors Service Corporate Finance $ 319.6 $ 320.9
$ 618.3 $ 585.3 Structured Finance 121.2 110.6 222.5 205.9
Financial Institutions 90.4 92.2 184.2 177.6 Public, Project and
Infrastructure Finance 99.9 98.0 200.6 178.7 MIS Other* 8.1 3.3
15.9 6.6 Intersegment royalty 23.7 21.9
46.0 43.4 Sub-total MIS 662.9 646.9
1,287.5 1,197.5 Eliminations (23.7 ) (21.9 )
(46.0 ) (43.4 ) Total MIS revenue 639.2
625.0 1,241.5 1,154.1
Moody's Analytics Research, Data and Analytics 157.5 141.4
307.1 279.0 Enterprise Risk Solutions 83.2 67.2 160.3 127.0
Professional Services 38.2 39.9 74.8 80.6 Intersegment revenue
3.1 3.3 6.4 6.6
Sub-total MA 282.0 251.8 548.6 493.2 Eliminations
(3.1 ) (3.3 ) (6.4 ) (6.6 ) Total MA revenue
278.9 248.5 542.2
486.6
Total Moody's Corporation revenue $
918.1 $ 873.5 $
1,783.7 $ 1,640.7
Moody's Corporation revenue by geographic area United States
$ 545.9 $ 461.1 $ 1,045.7 $ 886.7 International 372.2
412.4 738.0 754.0
$ 918.1 $ 873.5 $
1,783.7 $ 1,640.7
*Pursuant to the acquisition of ICRA Ltd. (ICRA) in 2014, the
Company realigned certain components of its presentation of revenue
by LOB. Beginning in the fourth quarter of 2014, ICRA’s non-ratings
revenue was combined with non-ratings revenue associated with
Moody’s majority ownership of Korea Investors Service (KIS) to form
the “MIS Other” LOB. Non-ratings revenue from KIS was previously
reported in MA’s RD&A LOB. Expenses relating to ICRA’s and
KIS’s non-ratings revenue are now reported in the MIS segment. The
prior year comparative results have been reclassified to reflect
this realignment.
Table 3 - Supplemental Revenue
Reclassification (Unaudited)
The following table summarizes the 2014 impact of the
reclassification of non-ratings revenue associated with Moody's
majority ownership of KIS, which was formerly reported in MA's
RD&A LOB, to the MIS Other LOB.
Three Months Ended Six Months
Ended
June 30, 2014
June 30, 2014
Amounts in millions
As Reported
Reclassification As Reclassified As Reported
Reclassification As Reclassified
Moody's Investors Service Corporate Finance $
320.9 $ -
$
320.9
$
585.3
$
-
$ 585.3 Structured Finance 110.6 - 110.6 205.9 - 205.9 Financial
Institutions 92.2 - 92.2 177.6 - 177.6 Public, Project and
Infrastructure Finance 98.0 - 98.0 178.7 - 178.7
MIS Other
- 3.3 3.3 -
6.6 6.6 Total MIS revenue 621.7
3.3 625.0 1,147.5
6.6 1,154.1
Moody's
Analytics Research, Data and Analytics 144.7 (3.3 ) 141.4 285.6
(6.6 ) 279.0 Enterprise Risk Solutions 67.2 - 67.2 127.0 - 127.0
Professional Services 39.9 -
39.9 80.6 - 80.6
Total MA revenue 251.8 (3.3 )
248.5 493.2 (6.6 ) 486.6
Total Moody's Corporation revenue $ 873.5
$ -
$
873.5
$
1,640.7
$
-
$ 1,640.7 Table
4 - Selected Consolidated Balance Sheet Data (Unaudited)
June 30, December 31, 2015
2014 Amounts in millions Cash and cash equivalents $
1,538.6 $ 1,219.5 Short-term investments 508.9
458.1 Total current assets 3,064.0 2,686.4 Non-current assets
1,935.5 1,982.6 Total assets 4,999.5 4,669.0 Total current
liabilities 1,124.8 1,199.7 Total debt (1) 3,106.1 2,547.3 Other
long-term liabilities 872.0 879.1 Total shareholders' (deficit)
equity* (103.4 ) 42.9 Total liabilities and shareholders' equity
4,999.5 4,669.0 Actual number of shares outstanding 200.3
204.4
* The decrease primarily reflects share
repurchases and FX translation losses partially offset bynet income
in the first six months of 2015.
June 30, December 31, (1) Total debt consists
of the following:
2015 2014 Series 2007-1 Notes due
2017 $ 300.0 $ 300.0 2010 Senior Notes due 2020 (a) 504.7 503.8
2012 Senior Notes due 2022 (b) 497.0 496.9 2013 Senior Notes due
2024 (c) 497.6 497.5 2014 Senior Notes due 2019 (d) 451.3 450.7
2014 Senior Notes due 2044 (e) 298.4 298.4 2015 Senior Notes due
2027 (f) 557.1 -
Total debt $ 3,106.1 $
2,547.3 (a) 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
$6.5 million and a $5.8 million adjustment relating to the fair
value of an interest rate hedge at June 30, 2015 and December 31,
2014, respectively (b) 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 (c)
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 (d) 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 $1.9 million and a $1.4 million adjustment relating to
the fair value of an interest rate hedge at June 30, 2015 and
December 31, 2014, respectively (e) 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
(f) Represents €500 million of 1.75% publicly traded Senior Notes
which mature on March 9, 2027
Table
5 - Non-operating (expense) income, net
Three Months Ended Six Months Ended June
30, June 30, 2015 2014 2015
2014 Amounts in millions
Interest expense,
net: Expense on borrowings
$ (30.7 ) $
(25.6 )
$ (59.0 ) $ (51.7 ) Income
2.3
1.7
4.2 3.3 UTPs and other tax related liabilities
(3.5 ) (2.1 )
(6.7 ) (1.5 ) Interest
Capitalized
- -
0.3 0.1
Total interest expense,
net $ (31.9 ) $ (26.0 )
$
(61.2 ) $ (49.8 )
Other non-operating (expense)
income, net: FX gain/(loss)
$ (12.2 ) $
(7.1 )
$ (12.2 ) $ (6.1 ) Joint venture income
(loss)
3.4 3.5
5.3 5.3 Other
0.6
0.3
1.2 (0.1 )
Other
non-operating income (expense), net (8.2 )
(3.3 )
(5.7 ) (0.9 ) ICRA Gain
- 102.8 - 102.8
Total non-operating (expense) income, net $
(40.1 ) $ 73.5
$ (66.9 )
$ 52.1
Table 6 - 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 June
30, 2015 2014 MIS MA
Eliminations Consolidated MIS
MA Eliminations
Consolidated Revenue
$ 662.9 $
282.0 $ (26.8 ) $ 918.1 $
646.9 251.8 (25.2 ) $ 873.5
Operating, selling, general and
administrative expense
287.0 210.7 (26.8
) 470.9 271.7
193.0 (25.2 ) 439.5 Adjusted operating
income
375.9 71.3 -
447.2 375.2 58.8
- 434.0
Depreciation and
amortization
15.8 12.1 -
27.9 11.4 10.9
- 22.3 Operating income
$
360.1 $ 59.2 $ -
$ 419.3 $ 363.8 $ 47.9 $ -
$ 411.7 Adjusted operating margin
56.7%
25.3 % 48.7 % 58.0 %
23.4 % 49.7 % Operating margin
54.3% 21.0 % 45.7 % 56.2
% 19.0 % 47.1 % Six
Months Ended June 30, 2015 2014 MIS
MA Eliminations Consolidated MIS
MA Eliminations Consolidated Revenue
$
1,287.5 $ 548.6 $ (52.4 )
$ 1,783.7 $ 1,197.5 493.2 $ (50.0 ) $ 1,640.7
Operating, selling, general and
administrative expense
568.3 420.7 (52.4
) 936.6 520.3
380.3 (50.0 ) 850.6 Adjusted operating
income
719.2 127.9
- 847.1 677.2
112.9 - 790.1
Depreciation and
amortization
31.8 24.7 -
56.5 22.8 22.6
- 45.4 Operating income
$
687.4 $ 103.2 $ -
$ 790.6 $ 654.4 $ 90.3 $ -
$ 744.7 Adjusted operating margin
55.9%
23.3 % 47.5 % 56.6 %
22.9 % 48.2 % Operating margin
53.4% 18.8 % 44.3 % 54.6
% 18.3 % 45.4 %
Table 7 - Transaction and Relationship
Revenue:
The tables below summarize the split between transaction and
relationship revenue. In the MIS segment, excluding MIS Other,
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, shelf
registrations and other non-rating subscription based revenue. In
MIS Other, transaction revenue represents revenue from professional
services and outsourcing engagements and relationship revenue
represents subscription based revenues. 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 outsourced
research and analytical engagements.
Three
Months Ended June 30, 2015 2014
Transaction Relationship Total Transaction
Relationship Total Corporate Finance $232.8 $86.8 $319.6
$238.5 $82.4 $320.9 73% 27% 100% 74% 26% 100% Structured Finance
$80.3 $40.9 $121.2 $70.0 $40.6 $110.6 66% 34% 100% 63% 37% 100%
Financial Institutions $32.8 $57.6 $90.4 $32.5 $59.7 $92.2 36% 64%
100% 35% 65% 100% Public, Project and Infrastructure Finance $62.2
$37.7 $99.9 $61.8 $36.2 $98.0 62% 38% 100% 63% 37% 100% MIS Other
$4.1 $4.0 $8.1 - $3.3 $3.3 51% 49% 100% - 100% 100%
Total
MIS $412.2 $227.0 $639.2 $402.8 $222.2
$625.0
64% 36% 100% 64% 36% 100%
Moody's
Analytics $67.1 $211.8 $278.9 $58.8 $189.7
$248.5
24% 76% 100% 24% 76% 100%
Total
Moody's Corporation $479.3 $438.8 $918.1
$461.6 $411.9 $873.5
52% 48% 100% 53% 47% 100%
Six Months Ended June 30,
2015 2014 Transaction
Relationship Total Transaction Relationship
Total Corporate Finance $446.3 $172.0 $618.3 $426.3 $159.0 $585.3
72% 28% 100% 73% 27% 100% Structured Finance $142.1 $80.4 $222.5
$125.8 $80.1 $205.9 64% 36% 100% 61% 39% 100% Financial
Institutions $70.6 $113.6 $184.2 $61.5 $116.1 $177.6 38% 62% 100%
35% 65% 100% Public, Project and Infrastructure Finance $126.7
$73.9 $200.6 $104.8 $73.9 $178.7 63% 37% 100% 59% 41% 100% MIS
Other $7.4 $8.5 $15.9 - $6.6 $6.6 47% 53% 100% - 100% 100%
Total
MIS $793.1 $448.4 $1,241.5 $718.4 $435.7
$1,154.1
64% 36% 100% 62% 38% 100%
Moody's
Analytics $127.7 $414.5 $542.2 $113.3
$373.3 $486.6
24% 76% 100% 23% 77% 100%
Total Moody's Corporation $920.8 $862.9
$1,783.7 $831.7 $809.0 $1,640.7
52% 48%
100% 51% 49% 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.
Table 8 - Non-GAAP diluted earnings per
share attributable to Moody's common shareholders:
The Company presents this non-GAAP measure
to exclude the impact of the ICRA Gain in the second 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
June 30, Six Months Ended June 30,
2015 2014 2015 2014
Diluted EPS - GAAP $ 1.28 $ 1.48 $ 2.39 $ 2.47 ICRA Gain
- (0.36) - (0.36)
Diluted EPS -
Non-GAAP $ 1.28 $ 1.12 $ 2.39 $ 2.11
Table 9 - 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 Ended
June 30,
Six
Months
Ended
June
30,
(amounts in millions)
2015
2014 2015 2014 Operating
income $
419.3 $ 411.7 $
790.6 $ 744.7 Depreciation &
amortization
27.9 22.3
56.5 45.4
Adjusted
operating income $
447.2 $ 434.0 $
847.1 $ 790.1
Operating margin
45.7% 47.1%
44.3% 45.4%
Adjusted operating
margin 48.7% 49.7%
47.5% 48.2%
Full-Year Ended December 31,
2015
Operating margin guidance Approximately 43% Depreciation and
amortization Approximately 3% Adjusted operating margin guidance
Approximately 46%
Table 10 - 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.
Six Months Ended
June 30,
(amounts in millions)
2015 2014 Net
cash flows from operating activities $
594.4 $
458.0 Capital additions
(40.7)
(38.8)
Free cash flow $
553.7 $
419.2
Net cash used in investing activities $
(91.8)
$ (113.4)
Net cash used in financing activities $
(157.6) $ (501.2)
Full-Year Ended December 31,
2015
Net cash flows from operating activities guidance Approximately
$1.1 billion Capital additions guidance Approximately $100 - $110
million Free cash flow guidance Approximately $1.0 billion
Table 11 - Constant Currency
Measures:
The Company presents revenue and expense
growth on a constant currency basis because management deems this
metric to be a useful measure of assessing the operations of the
Company in times of foreign exchange rate volatility. Constant
currency measures exclude the impact of changes in foreign exchange
rates on operating results. The Company calculates the dollar
impact of foreign exchange as the difference between the
translation of its current period non-US dollar functional currency
results using prior comparative period weighted average foreign
exchange translation rates and current year as reported results.
Growth rates on a constant currency basis are determined based on
the difference between current period revenue and expenses
translated using prior period comparative weighted average exchange
rates and prior period as reported results divided by prior as
reported results. Below is a reconciliation of the Company’s
reported revenue and expense changes to the changes on a constant
currency basis:
Three Months Ended June 30, 2015
MCO MCO
Revenue Operating Income
$ % $
% Reported change
44.6
5% 7.6
2% FX impact
42.8
5% 22.1 5%
Constant currency change
87.4
10% 29.7 7%
Table 12 - 2015 Outlook
Moody’s outlook for 2015 is based on assumptions about many
macroeconomic and capital market factors, including interest rates,
foreign currency exchange rates, corporate profitability and
business investment spending, merger and acquisition activity,
consumer borrowing and securitization, and the amount of debt
issued. These assumptions are subject to some degree of
uncertainty, and results for the year could differ materially from
our current outlook. Moody’s guidance, which is presented in the
table below, assumes foreign currency translation at end-of-quarter
exchange rates.
Full-year 2015 Moody's Corporation
guidance MOODY'S CORPORATION Current
guidance as of July 24, 2015 Last publicly
disclosed guidance on May 1, 2015 Revenue growth
in the mid-single-digit percent range NC Operating
Expenses growth in the mid-single-digit percent range NC
Depreciation & amortization Approximately $120 million NC
Operating Margin Approximately 43% NC Adjusted Operating Margin
Approximately 46% NC Effective tax rate Approximately 31% - 32%
Approximately 32% - 33% GAAP EPS $4.55 to $4.65 NC Capital
expenditures Approximately $100 - $110 million Approximately $110 -
$115 million Free cash flow Approximately $1 billion NC Share
repurchases
Approximately $1 billion (subject to
available cash, marketconditions and other ongoing capital
allocation decisions)
NC
Full-year 2015 revenue guidance MIS
Current guidance as of July 24, 2015
Last publicly disclosed guidance on May 1, 2015 MIS global
growth in the mid-single-digit percent range NC MIS U.S. growth in
the low-double-digit percent range growth in the high-single-digit
percent range MIS Non-U.S. Approximately flat growth in the
low-single-digit percent range Corporate finance
growth in the mid-single-digit percent
range
NC Structured finance growth in the mid-single-digit percent range
growth in the low-single-digit percent range Financial institutions
growth in the low-single-digit percent range NC Public, project and
infrastructure finance growth in the low-double-digit
percent range growth in the high-single-digit percent
range
MA MA global
growth in the mid-single-digit percent range NC MA U.S. growth in
the low-double-digit percent range NC MA Non-U.S. growth in the
low-single-digit percent range NC Research, data and analytics
growth in the high-single-digit percent range NC Enterprise risk
solutions growth in the mid-single-digit percent range NC
Professional services decrease in the
high-single-digit percent range decrease in the
low-single-digit percent range
NC- There is no difference
between the Company's current guidance and the last publicly
disclosed guidance for this item.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150724005083/en/
Michael AdlerSenior Vice PresidentCorporate
Communications212.553.4667michael.adler@moodys.comorSalli
SchwartzGlobal Head of Investor
Relations212.553.4862sallilyn.schwartz@moodys.com
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