- 4Q15 revenue of $865.9 million down 1%
from 4Q14; up 2% on a constant currency basis
- 4Q15 EPS of $1.09 down 3% from
4Q14
- FY 2015 revenue of $3.5 billion up 5%
from FY 2014; up 9% on a constant currency basis
- FY 2015 GAAP EPS of $4.63 versus $4.61
in FY 2014; FY 2015 non-GAAP EPS of $4.60 up 9% from FY 2014
- Projected FY 2016 EPS of $4.75 to
$4.85
Moody’s Corporation (NYSE:MCO) today announced results for the
fourth quarter and full year 2015, as well as set its outlook for
full year 2016.
“Despite difficult market conditions in 2015, Moody’s achieved
revenue and EPS growth for the sixth consecutive year,” said
Raymond McDaniel, President and Chief Executive Officer of
Moody’s. “Although we expect continued market volatility, we
are projecting mid-single-digit percent revenue growth in 2016 as
well as EPS of $4.75 to $4.85.”
FOURTH QUARTER AND FULL YEAR 2015
HIGHLIGHTS
Moody’s Corporation reported revenue of $865.9 million for the
three months ended December 31, 2015, down 1% from $877.5 million
for same period of 2014, but up 2% on a constant currency
basis.
Operating expense totaled $532.8 million, flat to the prior year
period, and operating income was $333.1 million, down 3% from
$344.7 million. Adjusted operating income (operating income before
depreciation and amortization) was $361.8 million, also down 3%
from the prior year period. The operating margin for the fourth
quarter of 2015 was 38.5% and the adjusted operating margin was
41.8%.
EPS of $1.09 was down 3% from the fourth quarter of 2014.
For full year 2015, Moody’s Corporation reported revenue of $3.5
billion, up 5% from $3.3 billion in 2014, or up 9% on a constant
currency basis.
Operating expense was $2.0 billion, up 6% and operating income
was $1.5 billion, up 2%. Adjusted operating income was $1.6
billion, up 3%. The operating margin for full year 2015 was 42.3%
and the adjusted operating margin was 45.5%.
Full year 2015 GAAP EPS of $4.63 was up from $4.61 in 2014.
Non-GAAP EPS of $4.60 was up 9% from $4.21 in 2014. In both years,
non-GAAP EPS excluded a $0.03 benefit from legacy tax matters. Full
year 2014 non-GAAP EPS also excluded a $0.37 gain resulting from
Moody’s acquisition of a controlling interest in ICRA Ltd. in the
second quarter of 2014.
MCO FOURTH QUARTER 2015 REVENUE DOWN
1%
Moody’s Corporation reported global revenue of $865.9 million
for the fourth quarter of 2015, down 1% from the fourth quarter of
2014, but up 2% on a constant currency basis.
US revenue was $481.2 million, up 1% from the prior year period.
Non-US revenue was $384.7 million, down 4% from $398.8 million, but
up 4% on a constant currency basis. Revenue generated outside the
US constituted 44% of total revenue, versus 45% in the year-ago
period.
MIS Fourth Quarter Revenue Down
4%
Global revenue for Moody’s Investors Service (MIS) for the
fourth quarter of 2015 was $544.6 million, down 4% from the prior
year period, but flat on a constant currency basis. US revenue was
$338.3 million, down 2%. Non-US revenue was $206.3 million, down 7%
but up 2% on a constant currency basis.
Global corporate finance revenue was $246.1 million, down 7%
from the prior year period, or down 4% on a constant currency
basis. This result reflected lower levels of non-US investment
grade and global speculative grade bond issuance, partially offset
by improved levels of US and European bank loan issuance. US
corporate finance revenue increased 1%, while non-US revenue
decreased 20%.
Global structured finance revenue totaled $114.1 million, down
4% from the prior year period, but flat on a constant currency
basis. Increased activity across most areas of structured finance
partially offset lower collateralized loan obligation (CLO)
issuance. US structured finance revenue was down 3% and non-US
revenue was down 5%.
Global financial institutions revenue was $91.9 million, up 8%
from the prior year period, or up 13% on a constant currency basis.
This result was driven primarily by the US insurance and European
banking sectors. US financial institutions revenue was up 7% and
non-US revenue was up 8%.
Global public, project and infrastructure finance revenue was
$85.2 million, down 5% versus the prior year period, or down 2% on
a constant currency basis, primarily as a result of decreased US
public finance activity. US public, project and infrastructure
finance revenue was down 10%, while non-US revenue was up 4%.
MA Fourth Quarter Revenue Up
3%
Global revenue for Moody’s Analytics (MA) for the fourth quarter
of 2015 was $321.3 million, up 3% from the fourth quarter of 2014,
or up 6% on a constant currency basis. MA’s US revenue was $142.9
million, up 6%. Non-US revenue was $178.4 million, up 1% or up 6%
on a constant currency basis.
Global revenue from research, data and analytics (RD&A) was
$161.4 million, up 8% from the prior year period, or up 11% on a
constant currency basis. Growth was mainly due to strong new sales
and product upgrades, coupled with record customer retention. US
RD&A revenue was up 10%, while non-US revenue was up 5%.
Global enterprise risk solutions (ERS) generated record revenue
of $121.5 million, up 1% from the prior year period, or up 4% on a
constant currency basis. Growth was driven by strength in the
credit assessment and originations and stress testing businesses.
US and non-US ERS revenue were each up 1%.
Global revenue from professional services of $38.4 million was
down 10% from the prior year period, or down 6% on a constant
currency basis. This result was primarily due to lower net new
business at Copal Amba as well as the unfavorable impact of foreign
exchange on the credentials and licensing business. US professional
services revenue was down 7%, while non-US revenue was down
11%.
FOURTH QUARTER 2015 OPERATING EXPENSE
FLAT
Fourth quarter 2015 operating expense for Moody’s Corporation
was $532.8 million, flat to the prior year period. Foreign currency
translation favorably impacted operating expense by 3%.
Operating income was $333.1 million, down 3% from the fourth
quarter of 2014, but up 1% on a constant currency basis. Adjusted
operating income of $361.8 million was also down 3% from the prior
year period. Moody’s operating margin was 38.5%, down from 39.3%,
and its adjusted operating margin was 41.8%, down from 42.4%.
Moody’s effective tax rate was 29.4% for the fourth quarter of
2015, compared with 28.1% for the prior year period. This increase
was primarily due to a reduced percentage of income in the quarter
from lower tax rate jurisdictions, partially offset by the
favorable resolution of tax audits.
MCO FULL YEAR 2015 REVENUE UP
5%
For Moody’s Corporation overall, global revenue was $3.5 billion
for full year 2015, up 5% from 2014, or up 9% on a constant
currency basis. US revenue was $2.0 billion, up 11%. Non-US revenue
amounted to $1.5 billion, down 3% but up 7% on a constant currency
basis.
MIS Full Year Revenue Up
3%
Revenue at MIS totaled $2.3 billion for full year 2015, up 3%
from the prior year period, or up 8% on a constant currency basis.
US revenue was $1.5 billion, up 10%. Non-US revenue was $859.9
million, down 7% but up 4% on a constant currency basis. Non-US
revenue represented 37% of MIS revenue, down from 41% in 2014.
MA Full Year Revenue Up
8%
MA revenue totaled $1.2 billion for full year 2015, up 8% from
full year 2014, or up 12% on a constant currency basis. US revenue
of $534.7 million increased 13%. Non-US revenue was $615.6 million,
up 3% or up 11% on a constant currency basis. Non-US revenue
constituted 54% of MA revenue, down from 56% in 2014.
FULL YEAR 2015 OPERATING EXPENSE UP 6%;
NON-GAAP EPS UP 9%
Full year 2015 operating expense for Moody’s Corporation was
$2.0 billion, up 6% from the prior year. Foreign currency
translation favorably impacted operating expense by 4%.
Operating income was $1.5 billion, up 2% from 2014, or up 8% on
a constant currency basis. Adjusted operating income of $1.6
billion increased 3% from the prior year. Moody’s operating margin
was 42.3%, down from 43.2%, and its adjusted operating margin was
45.5%, down from 46.0%.
The effective tax rate for full year 2015 was 31.2% versus 31.1%
in 2014.
Full year 2015 GAAP EPS of $4.63 was up from $4.61 in 2014.
Non-GAAP EPS of $4.60 was up 9% from $4.21 in 2014. In both years,
non-GAAP EPS excluded a $0.03 benefit from legacy tax matters. Full
year 2014 non-GAAP EPS also excluded a $0.37 gain resulting from
Moody’s acquisition of a controlling interest in ICRA Ltd. in the
second quarter of 2014.
2015 CAPITAL ALLOCATION AND
LIQUIDITY
Quarterly Dividend Up 9%
On December 15, 2015, Moody’s increased its quarterly dividend
by 9% from $0.34 to $0.37 per share of common stock. During 2015,
Moody’s returned $272.1 million to its shareholders via dividend
payments.
2.0 Million Shares Repurchased in the
Fourth Quarter
During the fourth quarter of 2015, Moody’s repurchased 2.0
million shares at a total cost of $192.6 million, or an average
cost of $100.09 per share, and issued 0.3 million shares as part of
its employee stock-based compensation plans.
For full year 2015, Moody’s repurchased 10.9 million shares at a
total cost of $1.1 billion, or an average cost of $101.14 per
share, and issued 3.2 million shares as part of its employee
stock-based compensation plans. Outstanding shares as of December
31, 2015, totaled 196.1 million, down 4% from the prior year.
In the fourth quarter of 2015, the Board of Directors authorized
a $1 billion share repurchase program which will commence following
completion of the existing program. Including this incremental
program, Moody’s had $1.5 billion of share repurchase authority
remaining as of December 31, 2015.
Full Year 2015 Free Cash Flow Up
13%
On November 13, 2015, Moody’s issued $300 million of 5.25%
senior unsecured notes due 2044. At year-end, Moody’s had $3.4
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
$2.2 billion, up $554.6 million from December 31, 2014. Free cash
flow for full year 2015 was $1.1 billion, up 13% from full year
2014, primarily due to changes in working capital.
ASSUMPTIONS AND OUTLOOK FOR FULL YEAR
2016
Moody’s outlook for 2016 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.
Moody’s guidance assumes foreign currency translation for the
British pound (£) of $1.42 to £1 and for the euro (€) of $1.09 to
€1. For all other currencies, Moody’s assumes end-of-2015 exchange
rates.
MCO Full Year 2016
Outlook
Moody’s expects full year 2016 revenue and operating expense to
each grow in the mid-single-digit percent range. Moody’s projects
an operating margin of approximately 42% and an adjusted operating
margin of approximately 45%. The effective tax rate is expected to
be 32% to 32.5%.
The Company expects 2016 EPS of $4.75 to $4.85.
Free cash flow is expected to be approximately $1.1 billion.
Moody’s expects share repurchases to be approximately $1 billion,
subject to available cash, market conditions and other capital
allocation decisions. Capital expenditures are expected to be $125
million to $135 million. These investments are expected to continue
over the next several years. Depreciation and amortization expense
is expected to be approximately $130 million.
MIS Full Year 2016
Outlook
For MIS, Moody’s expects 2016 revenue to grow in the
mid-single-digit percent range. Both US and non-US MIS revenue are
also expected to increase in the mid-single-digit percent
range.
Corporate finance revenue is expected to be flat. Structured
finance revenue and public, project and infrastructure finance
revenue are each expected to grow in the high-single-digit percent
range. Financial institutions revenue is expected to grow in the
mid-single-digit percent range.
MA Full Year 2016
Outlook
For MA, 2016 revenue is expected to increase in the
mid-single-digit percent range. US revenue is expected to grow in
the high-single-digit percent range and non-US revenue is expected
to be flat.
Research, data and analytics revenue is projected to grow in the
mid-single-digit percent range.
Enterprise risk solutions revenue is expected to grow in the
low-single-digit percent range, following earlier than anticipated
recognition of revenue in the fourth quarter of 2015.
Professional services revenue is expected to decline in the
low-single-digit percent range. Lower net new business at Copal
Amba in 2015 as well as ongoing foreign exchange headwinds in the
credentials and licensing business are expected to continue to
impact revenue in 2016.
CONFERENCE CALL
Moody’s will hold a conference call to discuss fourth quarter
and full year 2015 results as well as its 2016 outlook on February
5, 2016, at 11:30 a.m. EST. 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. EST. The passcode for the call is “Moody’s Corporation.”
The teleconference will also be webcast with an accompanying
slide presentation which can be accessed through Moody's Investor
Relations website, http://ir.moodys.com under “Events and
Presentations.” The webcast will be available until 3:30 p.m.
Eastern Time on March 5, 2016.
A replay of the teleconference will be available from 3:30 p.m.
EST, February 5, 2016 until 3:30 p.m. Eastern Time, March 5, 2016.
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 6337202.
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 $3.5 billion in 2015,
employs approximately 10,400 people worldwide and maintains a
presence in 36 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 2016 and other
forward-looking statements in this release are made as of February
5, 2016, 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
Year Ended
December 31,
December 31,
2015
2014
2015
2014
Amounts in millions, except per share
amounts
Revenue
$
865.9
$
877.5
$
3,484.5
$
3,334.3
Expenses:
Operating 251.9 255.5 976.3 930.3 Selling, general and
administrative 252.2 250.3 921.3 869.3 Depreciation and
amortization 28.7 27.0 113.5 95.6
Total expenses
532.8
532.8
2,011.1
1,895.2
Operating income
333.1
344.7
1,473.4
1,439.1
Non-operating (expense) income, net
Interest (expense) income, net (28.1) (29.3)
(115.1) (116.8) Other non-operating (expense) income, net 7.3 20.4
21.3 35.9 ICRA Gain - - - 102.8
Total non-operating (expense) income,
net
(20.8)
(8.9)
(93.8)
21.9
Income before provision for income
taxes
312.3
335.8
1,379.6
1,461.0
Provision for income taxes 91.9 94.4 430.0 455.0
Net income
220.4
241.4
949.6
1,006.0
Less: net income attributable to noncontrolling interests
2.5 5.1 8.3 17.3
Net income attributable to Moody's
Corporation
$
217.9
$
236.3
$
941.3
$
988.7
Earnings
per share attributable to Moody's common shareholders Basic $
1.11 $ 1.14 $ 4.70 $ 4.69 Diluted $ 1.09 $ 1.12 $
4.63 $ 4.61
Weighted average number of shares
outstanding Basic 197.0 206.5 200.1 210.7 Diluted 200.2
210.5 203.4 214.7
Table 2- Supplemental Revenue Information (Unaudited)
Three Months Ended Year
Ended December 31, December 31, Amounts in
millions
2015 2014 2015 2014
Moody's Investors Service Corporate
Finance $ 246.1 $ 263.3 $ 1,112.7 $ 1,109.3 Structured Finance
114.1 118.5 449.1 426.5 Financial Institutions 91.9 85.3 365.6
354.7 Public, Project and Infrastructure Finance 85.2 90.1 376.4
357.3 MIS Other 7.3 7.9 30.4 18.0 Intersegment royalty 24.0
21.9 93.5 87.6 Sub-total MIS 568.6 587.0
2,427.7 2,353.4 Eliminations (24.0) (21.9)
(93.5) (87.6) Total MIS revenue 544.6 565.1
2,334.2 2,265.8
Moody's Analytics
Research, Data and Analytics 161.4 149.5 626.4 571.8 Enterprise
Risk Solutions 121.5 120.4 374.0 328.5 Professional Services 38.4
42.5 149.9 168.2 Intersegment revenue 3.4 3.2
13.1 13.3 Sub-total MA 324.7 315.6 1,163.4 1,081.8
Eliminations (3.4) (3.2) (13.1) (13.3)
Total MA revenue 321.3 312.4 1,150.3
1,068.5
Total Moody's Corporation revenue $
865.9 $ 877.5 $ 3,484.5 $
3,334.3
Moody's
Corporation revenue by geographic area United States $
481.2 $ 478.7 $ 2,009.0 $ 1,814.5 International 384.7
398.8 1,475.5 1,519.8
$ 865.9
$ 877.5 $ 3,484.5 $
3,334.3
Table 3 - Non-operating (Expense)
Income, Net
Three Months Ended
Year Ended
December 31,
December 31,
2015
2014
2015
2014
Amounts in millions
Interest (expense) / income,
net:
Expense on borrowings (a)
$ (31.8) $ (28.3)
$
(120.6) $ (118.4) Income
2.7 1.6
9.7 6.7
Legacy Tax (b)
- -
0.7 0.7 UTPs and other tax related
liabilities(c)
1.0 (2.6)
(5.3) (5.8) Interest
capitalized
- -
0.4 -
Total interest (expense) income,
net
$
(28.1)
$
(29.3)
$
(115.1)
$
(116.8)
Other non-operating (expense) income,
net:
FX gain/(loss)
$ 3.6 $ 18.8
$ 1.1 $
20.3 Legacy Tax (b)
- -
6.4 6.4 Joint venture income
(loss)
3.0 1.7
11.8 9.6 Other
0.7
(0.1)
2.0 (0.4)
Other non-operating (expense) income,
net
7.3
20.4
21.3
35.9
ICRA Gain
- -
-
102.8
Total non-operating (expense) income,
net
$
(20.8)
$
(8.9)
$
(93.8)
$
21.9
(a) The full-year 2014 amount includes approximately
$11M in net costs related to the prepayment of the Series 2005-1
Notes. (b) Reflects the favorable resolution of legacy tax matters.
(c) The 2015 amounts include benefits from the resolution of
certain domestic and international tax matters.
Table 4 - Selected Consolidated Balance Sheet Data
(Unaudited) December 31,
December 31, 2015 2014 Amounts in millions
Cash and cash equivalents $ 1,757.4 $ 1,219.5 Short-term
investments 474.8 458.1 Total current assets 3,243.1 2,686.4
Non-current assets 1,880.3 1,982.6 Total assets 5,123.4 4,669.0
Total current liabilities 1,218.5 1,199.7 Total debt (1) 3,401.0
2,547.3 Other long-term liabilities 836.9 879.1
Total shareholders' (deficit) equity *
(333.0) 42.9 Total liabilities and shareholders' equity 5,123.4
4,669.0 Actual number of shares outstanding 196.1 204.4
* The decrease primarily reflects share repurchases and FX
translation losses partially offset by net income in 2015.
December 31, 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) 507.8 503.8 2012 Senior
Notes due 2022 (b) 497.2 496.9 2013 Senior Notes due 2024 (c) 497.7
497.5 2014 Senior Notes due 2019 (d) 451.8 450.7 2014 Senior Notes
due 2044 (e) 603.4 298.4 2015 Senior Notes due 2027 (f)
543.1 - Total debt $ 3,401.0 $ 2,547.3
(a) Represents $500 million of 5.5%
publicly traded Senior Notes which mature on September 1, 2020; the
notes were offeredto the public at 99.374% of the face amount and
include a $9.4 million and a $5.8 million adjustment relating to
the fair value ofan interest rate hedge at December 31, 2015 and
2014, respectively.
(b) Represents $500 million of 4.5%
publicly traded Senior Notes which mature on September 1, 2022; the
notes were offeredto 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 tothe 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 thepublic at 99.838% of the face amount and
include a $2.3 million and a $1.4 million adjustment relating to
the fair value of aninterest rate hedge at December 31, 2015 and
2014, respectively.
(e) Represents $600 million of 5.25%
publicly traded Senior Notes which mature on July 15, 2044; the
initial $300 millionissuance of the notes in 2014 were offered to
the public at 99.462% of the face amount; the additional $300
millionissuance in 2015 were offered to the public at 101.663% of
the face amount.
(f) Represents €500 million of 1.75%
publicly traded Senior Notes which mature on March 9, 2027.
Table 5 - Financial Information by
Segment:
The table below presents revenue, adjusted
operating income and operating income by reportablesegment. The
Company defines adjusted operating income as operating income
excludingdepreciation and amortization.
Three Months Ended December 31, 2015
2014 MIS MA Eliminations
Consolidated MIS MA
Eliminations Consolidated Revenue
$
568.6 $ 324.7 $ (27.4) $
865.9 $ 587.0 $ 315.6 $ (25.1) $ 877.5
Operating, selling,general
andadministrative
283.9 247.6 (27.4)
504.1 292.6 238.3 (25.1) 505.8
Adjusted operating income
284.7 77.1 -
361.8 294.4 77.3 - 371.7
Depreciation andamortization
17.3 11.4 -
28.7 15.0 12.0 - 27.0 Operating
income
$ 267.4 $ 65.7 $ -
$ 333.1 $ 279.4 $ 65.3 $ - $ 344.7
Adjusted operating margin
50.1%
23.7%
41.8%
50.2%
24.5%
42.4%
Operating margin
47.0%
20.2%
38.5%
47.6%
20.7%
39.3%
Year Ended December 31, 2015
2014 MIS MA Eliminations
Consolidated MIS MA Eliminations
Consolidated Revenue
$ 2,427.7 $
1,163.4 $ (106.6) $ 3,484.5 $
2,353.4 $ 1,081.8 $ (100.9) $ 3,334.3
Operating, selling,general
andadministrative
1,120.3 883.9 (106.6)
1,897.6 1,076.2 824.3 (100.9)
1,799.6
Adjusted operatingincome
1,307.4 279.5 -
1,586.9 1,277.2 257.5 - 1,534.7
Depreciation andamortization
66.0 47.5 -
113.5 49.4 46.2 - 95.6 Operating
income
$ 1,241.4 $ 232.0 $
- $ 1,473.4 $ 1,227.8 $ 211.3 $ - $ 1,439.1
Adjusted operating margin
53.9% 24.0% 45.5%
54.3%
23.8%
46.0%
Operating margin
51.1% 19.9% 42.3%
52.2%
19.5%
43.2%
Table 6 - 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.
Transaction
and Relationship Revenue
Three Months Ended December 31, 2015
2014 Transaction Relationship Total Transaction Relationship
Total Corporate Finance $ 160.8 $ 85.3 $ 246.1 $ 175.7 $ 87.6 $
263.3 65% 35% 100% 67% 33% 100% Structured Finance $ 76.0 $
38.1 $ 114.1 $ 78.5 $ 40.0 $ 118.5 67% 33% 100% 66% 34% 100%
Financial Institutions $ 35.2 $ 56.7 $ 91.9 $ 27.6 $ 57.7 $ 85.3
38% 62% 100% 32% 68% 100% Public, Project and Infrastructure
Finance $ 47.8 $ 37.4 $ 85.2 $ 52.8 $ 37.3 $ 90.1 56% 44% 100% 59%
41% 100% MIS Other $ 2.8 $ 4.5 $ 7.3 $ 3.8 $ 4.1 $ 7.9 38%
62% 100% 48% 52% 100%
Total MIS $ 322.6
$ 222.0 $ 544.6 $
338.4 $
226.7 $ 565.1 59% 41%
100% 60% 40% 100% Moody's
Analytics $ 97.7 $ 223.6 $
321.3 $
95.6 $ 216.8 $
312.4 30% 70% 100% 31%
69% 100% Total Moody's Corporation
$ 420.3 $ 445.6 $ 865.9 $
434.0 $ 443.5 $ 877.5 49%
51% 100% 49% 51% 100%
Year Ended December 31, 2015
2014 Transaction Relationship Total
Transaction Relationship Total Corporate
Finance $ 768.8 $ 343.9 $ 1,112.7 $ 782.0 $ 327.3 $ 1,109.3 69% 31%
100% 70% 30% 100% Structured Finance $ 287.9 $ 161.2 $ 449.1
$ 264.8 $ 161.7 $ 426.5 64% 36% 100% 62% 38% 100% Financial
Institutions $ 136.6 $ 229.0 $ 365.6 $ 123.8 $ 230.9 $ 354.7 37%
63% 100% 35% 65% 100% Public, Project and Infrastructure
Finance $ 225.9 $ 150.5 $ 376.4 $ 208.9 $ 148.4 $ 357.3 60% 40%
100% 58% 42% 100% MIS Other $ 13.2 $ 17.2 $ 30.4 $ 3.8 $
14.2 $ 18.0 43%
57%
100% 21% 79% 100%
Total MIS $ 1,432.4
$ 901.8 $ 2,334.2 $
1,383.3
$ 882.5 $ 2,265.8
61% 39% 100%
61% 39% 100%
Moody's Analytics $
296.9 $ 853.4 $ 1,150.3 $
283.2 $ 785.3 $ 1,068.5
26% 74%
100% 27% 73% 100%
Total Moody's
Corporation $ 1,729.3 $ 1,755.2
$ 3,484.5 $
1,666.5 $ 1,667.8
$ 3,334.3 50% 50% 100%
50% 50% 100%
Non-GAAP Financial Measures:
The tables below reflect certain adjusted results that the
SEC defines as "non-GAAP financial measures" as well as a
reconciliation of each non-GAAP measure to its most directly
comparable GAAP measure. Management believes that such non-GAAP
financial measures, when read in conjunction with the Company's
reported results, can provide useful supplemental information for
investors analyzing period-to-period comparisons of the Company's
performance, facilitate comparisons to competitors' operating
results and to provide greater transparency to investors of
supplemental information used by management in its financial and
operational decision-making. These non-GAAP measures, as defined by
the Company, are not necessarily comparable to similarly defined
measures of other companies. Furthermore, these non-GAAP measures
should not be viewed in isolation or used as a substitute for other
GAAP measures in assessing the operating performance or cash flows
of the Company.
Table 7 - 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 as well asbenefits from the
resolution of Legacy Tax Matters to allow for a more meaningful
comparison ofMoody’s diluted earnings per share from period to
period. Below is a reconciliation of this measureto its most
directly comparable US GAAP amount:
Year Ended December 31,
2015 2014 Diluted EPS - GAAP $
4.63 $ 4.61 ICRA Gain - (0.37) Legacy Tax (0.03)
(0.03)
Diluted EPS - Non-GAAP $ 4.60 $ 4.21
Table 8 - 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
December 31,
Year Ended
December 31,
2015 2014 2015
2014 Operating income $ 333.1 $ 344.7
$ 1,473.4 $ 1,439.1 Depreciation & amortization
28.7 27.0
113.5
95.6
Adjusted operating income $ 361.8
$ 371.7
$ 1,586.9 $ 1,534.7
Operating margin 38.5% 39.3%
42.3% 43.2%
Adjusted operating margin 41.8% 42.4%
45.5%
46.0%
Year Ended
December 31,
2016 Operating Margin Guidance Approximately 42%
Depreciation and amortization Approximately 3%
Adjusted
Operating Margin Guidance Approximately 45%
Table 9 – 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.
Year Ended
December 31,
2015 2014 Net cash flows from
operating activities $
1,154.0 $ 1,018.6 Capital
additions
(89.0) (74.6)
Free cash flow
$
1,065.0 $ 944.0
Net cash used in investing
activities $
(92.4) $ (564.9)
Net cash provided by
(used in) financing activities $
(461.0) $ (1,064.5)
Year Ended
December 31,
2016 Net cash flow from operating activities guidance
Approximately $1.2 Billion Capital additions $125 - $135 million
Free cash flow guidance Approximately $1.1 Billion
Table 10 - Constant Currency
Measures:
The Company presents revenue and operating income 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-USD 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 operating income 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 as reported
revenue and operating income changes to the changes on a constant
currency basis:
Three Months Ended December 31, 2015
CFG SFG FIG PPIF
Total MIS MIS Non-US
Revenue Revenue Revenue Revenue
Revenue Revenue $ % $ %
$ % $ % $ % $
% Reported change (17.2) (7%) (4.4) (4%) 6.6 8% (4.9) (5%)
(20.5) (4%) (15.1) (7%) FX impact 7.0 3% 4.8 4% 4.3 5% 3.0 3% 19.4
4% 19.7 9%
Constant currencychange
(10.2) (4%) 0.4 - 10.9 13% (1.9) (2%) (1.1) - 4.6 2%
RD&A ERS PS Total MA MA
Non-US Revenue Revenue Revenue
Revenue Revenue $ % $ %
$ % $ % $ % Reported
change 11.9 8% 1.1 1% (4.1) (10%) 8.9 3% 1.0 1% FX impact 4.2 3%
4.3 3% 1.5 4% 10.0 3% 10.0
5%
Constant currencychange
16.1 11% 5.4 4% (2.6) (6%) 18.9 6% 11.0
6%
MCO MCO Non-US MCO Revenue
Revenue Operating Income $ % $
% $ % Reported change (11.6) (1%) (14.1) (4%)
(11.6) (3%) FX impact 29.4 3% 29.7 8% 15.7 4%
Constant currencychange
17.8 2% 15.6 4% 4.1 1%
Year Ended December 31, 2015
MCO MCO MCO Non-US Revenue Operating
Income Revenue $ % $ %
$ % Reported change 150.2 5% 34.3 2% (44.3) (3%) FX
impact 149.5 4% 75.9 6% 145.8 10%
Constant currencychange
299.7 9% 110.2 8% 101.5 7%
Total MIS MIS
Non-US Total MA MA Non-US Revenue
Revenue Revenue Revenue $ %
$ % $ % $ % Reported
change
68.4 3% (64.9) (7%) 81.8 8% 20.6 3% FX impact
102.2 5% 99.1 11% 47.3 4% 46.7 8%
Constant currencychange
170.6 8% 34.2 4% 129.1 12% 67.3 11%
Table 11 - 2016 Outlook
Moody’s outlook for 2016 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 with the exception of the British pound (£) and the
euro (€) which assume foreign currency translation of $1.42 to £1
and $1.09 to €1, respectively.
Full Year 2016 Moody's Corporation
Guidance as of February 5, 2016
MOODY'S CORPORATION Revenue growth in the
mid-single-digit percent range Operating expense growth in the
mid-single-digit percent range Depreciation & amortization
Approximately $130 million Operating margin Approximately 42%
Adjusted Operating margin Approximately 45% Effective tax rate 32%
- 32.5% EPS $4.75 to $4.85 Capital expenditures $125 - $135 million
Free cash flow Approximately $1.1 billion Share repurchases
Approximately $1 billion (subject to
available cash, marketconditions and other ongoing capital
allocation decisions)
Full Year 2016 Revenue Guidance as of
February 5, 2016
MIS MIS global growth in the mid-single-digit percent
range
MIS US
growth in the mid-single-digit percent range
MIS non-US
growth in the mid-single-digit percent range CFG flat SFG growth in
the high-single-digit percent range FIG growth in the
mid-single-digit percent range PPIF growth in the high-single-digit
percent range
MA MA global growth in the
mid-single-digit percent range
MA US
growth in the high-single-digit percent range
MA non-US
flat RD&A growth in the mid-single-digit percent range ERS
growth in the low-single-digit percent range PS decline in low
single-digit percent range
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160205005169/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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