MCO - Earnings call transcript Q2 2018

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Operator

Good day and welcome ladies and gentlemen to the Moody's Corporation Second Quarter 2018 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participant lines are in a listen-only mode. At the request of the Company, we will open the conference for question-and-answers following today's presentation. I will now turn the conference over to Steve Maire, Global Head of Investor Relations and Communications. Please go ahead, sir.

Stephen Maire

you. Thank XXXX. and second us well quarter current for everyone to this as for outlook Moody's discuss XXXX full-year thanks morning on joining teleconference our Good results as Investor I Relations am Global Steve Head and Maire, Communications. of This quarter XXXX second outlook full as for current of year our morning, XXXX. released as Moody's results for the its well earnings release and teleconference on available both at press a ir.moodys.com. this The our are presentation to Web-site accompany this Moody's President Executive morning's and conference lead McDaniel, Ray Officer, call. Chief will

will we view GAAP and to call, During non-GAAP To GAAP was presenting refer this adjusted figures. that be the or please this release nearest figures morning. our filed equivalent earnings reconciliations,

Risk available Ray out like turn on point now a also in over mode. Management's Annual our made to begin, which the Reform remarks differ to the the may earnings Safe Web-site. in materially Before December from of other will Company, would Analysis the SEC morning section attention that your could contained contain the XXXX. results your Harbor actual set forward-looking direct I of XXXX statements call any can year to of Litigation toward In that language, attention this the listen-only discussed cause found the the accordance Securities Harbor on within by also our with forth Discussion on the such which statements. in forward-looking may XX-K statement, Private the of and for to call release. to and These, I members media filings we be XX, on meaning be and are Form Safe Act, Act Today's Factors in Web-site with the SEC's the ended I the call end and McDaniel. Report our together the important factors those I'll

Raymond W. McDaniel

quarter quarter Moody's begin Steve. After record thank today's Good quarter, and our you I and our $X.X will everyone summarizing to expenses, highlights. was for to points Operating the will I operating $XXX questions. income including from $XXX assets, contribution of XXXX of Van of happy be Adjusted of with prior XX XX% follow conclude million Steve details income financial billion, then activity your and primarily you, by achieved quarter acquired quarter Analytics of period, results. first second attributable percentage of Moody's credits. the Van reflected attributable monitored loan In additional call. XX% XXXX Moody's for Dijk. Moody's obligation and collateralized performance rating new second loan or the up totaled XXXX. second the prepared Maire joining by up revenue year financial expenses This remarks, Operating bank second Thank was second nonrecurring on for Bureau revenue XXXX. to as million, CLO XX% as will comments half morning to driven the respond XXXX. performance second strong outlook current we'll with result from at to from record operating Investor and up intangible from recurring became was amortization robust Dijk operating mandates million, Bureau acquisition-related XX%. Service growth market as expenses. XXXX's up $XXX quarter well

$X.XX, and share for quarter XX% up up acquisition-related XXXX. quarter and share, the intangible assets amortization and translation EPS per was Moody's $X.XX from the related The the each. and the currency XX.X%. quarter of to margin $X.XX excludes per diluted operating diluted by XX% income operating Foreign impacted X% was favorably of income Adjusted expenses. second EPS operating for margin acquired adjusted operating was adjusted XX.X% was

XXXX currency gain. hedge adjusted foreign EPS $X.XX a quarter diluted Second excludes primarily

the from period, up of X%, XXXX performance, of billion, U.S. to half including half $X.X percentage Moody's growth was was XX%. attributable and for X revenue revenue Bureau Dijk. Turning up the revenue to XX% $X.X Van year first non-U.S. prior first $X.X billion, up points was billion,

Foreign first revenue prior was from was billion X%, up Moody's year $X.X Service currency period. U.S. half impacted revenue up and revenue X% Moody's was Investors of million, by translation X%. revenue XX%. non-U.S. $XXX $XXX million, up the favorably

up Foreign year. currency of non-U.S. $XXX the X% for Analytics revenue up of U.S. $XXX million revenue impacted million translation first was MIS revenue over XX%. Moody's a favorably by of half increase prior the million, was revenue XX% $XXX X%. XXXX was and

first the favorably million, XX expenses Foreign impacted XXXX $XXX year half the by X% currency for XXXX Dijk of including translation were Moody's the prior acquired period, expenses, Van intangible revenue was to MA the and attributable period. operating first from related revenue prior up percentage of for MA Organic nonrecurring year from X%. Bureau $X.X Corporation acquisition expenses. half billion, operating assets, amortization points XX% of up

up billion, half translation the income $X.X impacted currency first was by Foreign operating Operating Adjusted XXXX. XX% income billion up X%. XX%. unfavorably of was of from $X expenses

lower was operating translation and rate each. favorably its settlement. tax statute prior U.S. the from half first for audit rate income operating margin currency related expiration tax benefits of net XXXX position period. Moody's uncertain a X% limitations due to Foreign and The and down XX.X%, adjusted operating was margin effective in of XX.X% The XX.X% by income decline operating impacted statutory adjusted was tax was XX.X%. the year primarily and to

further results $X.XX $X.XX EPS. our are diluted diluted updates. $X.XX to guidance on of turn for $X.XX We other financial our EPS commentary provide full-year the adjusted call to per over and back will reaffirming now to and I to XXXX Steve

Stephen Maire

begin with Company level. the at revenue I'll Ray. Thanks

second million revenue and Moody's $XXX was of was Recurring $XXX for total XX% up revenue. was of revenue. up XX%. attributable represented $XXX up million represents up XX%, and growth the $X.X Non-U.S. of total U.S. X revenue Moody's points of XX% percentage Ray XX% XX% revenue of As was billion, including total Bureau Dijk. quarter million a revenue Van mentioned, to record of

X%. favorably translation currency Foreign revenue impacted Moody's by

revenue Investors up our the Moody's for XX% million with million. to of $XXX of and XX%. Looking of Service. represented starting XX% U.S. now revenue. X% revenue MIS increased was Total MIS was at Non-U.S. revenue quarter total million, up $XXX $XXX each businesses,

Foreign currency MIS by favorably impacted translation X%. revenue

lines MIS; for and to X%. $XXX million, revenue bonds. result U.S. up strong was partially business offset approximately XX% the was first, a and Europe, in finance of in quarter up U.S. was finance bank corporate This Moving corporate revenue U.S. and reflected revenue for non-U.S. flat. second decline grade the issuance the high-yield by global investment loan

structured up XX% respectively. securitization broad strong and revenue finance structured and revenues totaled in Second, strength markets, up contribution finance particularly were $XXX XX% XX%, driven CLOs. U.S. by non-U.S. with a million, from

revenue revenue of issuers, contributions as finance U.S. institutions financial non-U.S. $XXX and while by million and infrastructure respectively. and a $XXX offset Fourth, public U.S. decline result finance from in U.S. was by XX%. infrastructure by up X%, and and banking financial sectors. driven Third, sector U.S. up revenue X%. million Asia sovereign the issuance. strong This was and municipal XX% of primarily project was contribution up insurance revenue sub-sovereign institutions were XX% public was revenue was driven was This infrastructure partially global XX%. non-U.S. down from and as EMEA well up the result finance project

was was MA million revenue represented for of U.S. total Analytics, up $XXX now Non-U.S. million XX% XX%. to XX% up up revenue $XXX MA $XXX Moody's XX%. revenue of of Turning and total million revenue. was of

translation $XXX currency quarter revenue impacted X%. favorably was the by Foreign MA second MA for up X% of Organic from revenue the XXXX period. million, prior-year

of $XXX or up RD&A million, and and analytics to doubled. van business deferred adjustment non-U.S. Organic MA; Bureau first, for $XX $XXX reduction the revenue RD&A million, required more U.S. under credit lines from research. million of million was data $XXX $X data research, ratings, and driven now feeds, RD&A was up the Moving revenue by of Dijk's XX%, contribution XX%. of revenue revenue was rules. acquisition million a revenue in was approximately revenue up strength and $XXX RD&A million reflects of accounting than XX%, sales

the strong of subscription driven in demand X% million year analytics solutions period. risk ERS particularly or U.S. for was ERS This products, $XXX insurance risk enterprise revenue was segments. up continued Second, and by result from the prior revenue was by sales shift ERS Trailing mix while affected X% the to up non-U.S. XX-months X% increased and is ERS was higher-margin approximately performance business sales the The revenue revenue in flat. for were up products. XX%.

prior of SaaS to this transition, to continues one-time licenses impact progress base or recurring there As To a and into subscriptions, our profitable further revenue. is will this stable provide more the service type. sales subscriptions inclusive period, trailing on perpetual conversion second a down call with trailing near-term starting software-as-a-service to This revenue larger, software transition from of quarter on overall more results. transparency fees are contribute our the sales by XX-month are disclosing licenses XXXX, At are contract and and subscription this one-time while XX-month XX% end XX%. perpetual of up versus the earnings of sales we year

same the period, XX-month one-time up X%. subscriptions ERS revenue was XX% from rose and revenues During

professional improved were U.S. respectively. revenues Moving X% and customer professional up new services, non-U.S. retention. was to up and by revenue $XX strong sales X%, of driven on services million and X%

increase XX Turning million, increases growth additional points this and operating of of expense merit operating included intangible expenses, up Other were of drivers quarter attributable for assets, Bureau now the acquisition to hiring. $XXX XX%. expenses. to amortization related operating expenses, Dijk percentage acquired Van expenses and second were Moody's expense compensation

X%. and of the by is January X, the of be ASC Foreign XXX quarter Corporation the approach. in standard impact currency modified revenues expenses XXX impact XXXX. expected immaterial operating Corporation ASC The unfavorably was half in of in remainder expenses and adopted retrospective the second XXXX, new On Moody's of to year. Moody's The the accounting the the using immaterial translation to impacted Company first to revenue adoption

create the business it line quarterly level. of expenses or segment However, could in at or revenues volatility

from was decline in As and was was tax quarter for U.S. tax operating effective XX.X%. reflects Ray statutory lower the Moody's the prior operating year XX.X%, in The primarily Moody's the rate. period. a down margin mentioned, margin the XX.X% adjusted rate rate tax XX.X%

update capital allocation. I'll on provide Now an

dividend cost per August common of the of of its the via million, to XXX,XXX quarter a of Moody's XX, $XX at payments second Moody's per share. or business as repurchased of quarterly declared also shares on during of XXXX, XXXX at million This close $X.XX September share XXX,XXX on of Board an payable record shareholders be Moody's During of issued on part compensation shares dividend Directors returned Moody's second $XX Xth, quarter dividend $XXX.XX XXXX. to employee XXXX, stock. plans. cost regular approximately the the stock-based average XX, will of approximately its July of stockholders and total

net of part XXX,XXX Moody's a compensation first totaled a shares as XXXX. to payments June taxes. of an shares average a shares Moody's withheld or half million, of its payroll $XX $XXX.XX The net for stock-based at the amount of and $XXX Outstanding employee also includes during XXXX, of Over XXX.X X.X via repurchased million cost half ago. XX, the shares as XXXX returned issued cost share, dividend approximately employee shareholders of total million approximately year per million, flat to its plan. first

a available with XXXX investments Ray. outstanding outside first and Moody's the held XXXX the year notes cash quarter And of due XXXX, debt of and million share Total payments authority As negative $XXX that, general. and the quarter period. largely due for a from with to call Cash first outstanding approximately to negative were made $XX $XXX had At of billion, flow portion were the additional its Moody's XXXX, repurchase of pursuant operations settlement flow Free X.XX% its short-term used These approximately Justice facility. million U.S. $XXX XXXX. the debt attorneys was half loan. the million over June issued increase turn $XXX an end, of the cash increases flow revolving half $XXX to XXXX, in of in at various Company term $X.X increase proceeds equivalents of of the June the will half $XX credit capacity were XX, quarter-end unsecured million In back billion cash I Moody's which in Department of states XXXX for million, XX% of from million, was of first of repay million first XXXX the had from a to prior cash, an in an remaining. senior with $X.X under

Raymond W. McDaniel

Dijk Van I'd activities. highlights Steve. provide like integration our Bureau Thanks some on to with synergy and progress

shared align service Bureau As sales resource the we The practices centralize on operations the approach of and we legacy Van human Van to continues perform activities and our acquisition, Dijk Dijk August activities track. as Bureau finance integration business anniversary such well remain as management.

geopolitical enhancements, rates, leveraging fruit outlook very Moody's both to conditions is spending, functionality on of wins business foreign These currency Table BankFocus efforts and press quarter first the progress and recent the the materially is significant and Investor are U.S. Moody's second our our and bear XXXX sales full-year joint for invest in to Van release, XXXX. of transaction. assumptions rebranded half ir.moodys.com. included discuss macroeconomic Asia. differ the the we Web-site in with Dijk's consumer to in continued of are debt legacy we list be acquisitions, interest Our our pleased subject of Moody's content and for for we found that In borrowing corporate rates, XXXX Bureau year XX business on capital the XXXX, bank the and synergies exchange Moody's anticipated the assumptions can outlook. profitability market Analytics now and issued. guidance product earnings based marketing at could to uncertainty with Relations and mergers financials and starting many are A certain and announced expertise. performance when Moody's WE from results we amount of making guidance investment factors, will about of complete the I securitization, are which components against including the and current

end currency Our exchange outlook assumes foreign of rates. quarter translation at

X. XX% to in Operating revenue X adjusted Full rates Specifically, is euro strong XX% reflecting single-digit expectations to operating margin guidance and operating our to EPS to are to the $X.XX $X.XX single-digit high exchange EUR expected now and in now at $X.XX reaffirmed for reflects be British of $X.XX percent for also XXXX EPS, margin Operating $X.XX now to expects to high the forecast pound year to for range. diluted is the adjusted range. $X.XX performance. expected XX%. now and continued percent approximately increase for increase for GBP of Moody's the Moody's be is expected to expenses diluted

that the a or few social Moody's to corporate Q&A, of as CSR strategy a turning as awards Before we highlight like I provide updates responsibility have well won. to couple on would recently

people create communities their earlier environment. strategy, for detailing annual the around delivering CSR of better Moody's world week future report, Moody's published on First, this on and Company's the to its progress CSR a its the goal themselves, empowering and

sustainable Moody's empowerment and employees financial an bringing other people to their our passion. As well its of Moody's with help recently on around initiatives empowering activating Moody's The knowledge, support overcome small Tomorrow, business details an young its reach ongoing thank time, through challenges to enterprises. Reshape as financial part of their people each focus of to initiative areas announced as I for with potential. to environmentally some of future CSR growing of and life purpose organizations partner expertise, focus, want the their to the world report owners helping

report, information or moodys.com/CSR. on CSR see release visit and press issued please July more For XX the to that we view the

mention Finally, market. credit some have poll. All-America row I this seventh Service received Moody's in agency Institutional the we This in a year our winning recognition the to am that recently Fixed-Income marks positive XXXX was rating Investor's proud #X Investors Research title. named in

and Moody's our represents Rating FinTech the was International. was stress and In in the leader Best for credit balance product credit was in Credit in Analytics Technology work provider credit American credit three prestigious by data, MA recently and Awards, as three named XXXX Latin Capital in wholesale category recognized management. CECL Quadrant first MIS areas, XXXX testing. This technology, Finance Additionally, in modeling, Quadrant award Agency the areas, in year the RiskTech Mexico named such of risk, Chartis also region. Risk sheet

Data For year regulatory best reporting asset a two implementation risk and Provider Banker at MA's structured Awards. the compliance The Year year CLO the the in row, technology the portal management. as liability the U.S. GlobalCapital areas, finance in Moody's cited second Securitization Analytics of of was named And Asian

me both pleased Steve Moody's So, of MIS the Fauber, President are This congratulations President Moody's our Rob colleagues Mark to Almeida, remarks, question-and-answer We'd Analytics, may joining have. you take any to and our prepared at and Service. concludes be for questions and of MA. and Investors session

Operator

Barclays. first Instructions] go [Operator at Patnaik We'll to Manav

Manav Patnaik

the My first sounds led little just on It the Moody's revenue question a is bit Company total is business. revisions guidance. to touch like by the growth Analytics

expected why organic there? I lower. because the I going would obviously the So, of have on total if was through go something FX, is could is you but in just there wondering else growth

Raymond W. McDaniel

really we to colleagues beginning almost most my rates. And have revenue with them important want to let all been the offer, compared made, and they any adjustments has have with about think color XXXX, compared any of of it FX exchange of QX but Manav, favorable we weigh year that while is FX. of I the discussion that element that made, I'll unfavorable starts for assumptions a in our to the or

that our in EPS guidance, continue and existing both revenue on has adjustments project on because are and the moved to expense, so driven within lines have ranges to in had it's So, tandem. an the they multiple of and able we impact

Stephen Maire

guidance was additional at the some impacting, how in first it just so on we FX, the the rate euro. February, using highlight context to the were that was Manav, put time to when spot it's $X.XX the we out Just which our rate

currently of forecast what updated Our $X.XX. rates are spot is now using

and So, it down it rather came then $X.XX. $X.XX to was

you average half if driving year. as in come so last the the then thing have meaningfully strengthened to So look it $X.XX we've I the would other the the second that's would in of And off and out guidance year, half our February, it. put $X.XX of point the well, and the pretty about euro part averaged $X.XX euro then of at in price first it year, since performance

in and are both ends, seeing So, a that's reflected us, for you on it's been what the been on challenge guides.

Manav Patnaik

And I that points so what that, the Moody's reduction in and all Analytics the imply I was guess growth follow-up organic to And then FX? guess, by does total Company how FX answer many in just on is impact, also also segment? the

Raymond W. McDaniel

is of primarily ERS, FX, the is for story the adjustment but yes. a Manav. FX, rest There It's small

Mark E. Almeida

the down Yes, It's million it's entirely we It's took Mark. of a dollars FX. We Manav. to almost XXX% so had that’s business, that right, due but FX. ERS couple substantially underlying

Manav Patnaik

assumption the line? FX And how points is of many hitting just the

Stephen Maire

in got or So, revenue favorable current on forecast, and you’ve our op income expense. on X% unfavorable about X% about and X%

less of it So, tailwind was than a year. into coming the

Manav Patnaik

can when Got the like going results, it. like is fluctuate in S&P's FIG And something me, that one unique for that at one quarter. last one it to of or is Moody's to on it the sounds you quarter then standout Is things just look here that so quarter? sounds it those was --

Raymond W. McDaniel

I'll we in sector. let Rob parts are correct, of the Rob? strength in did sector you on banking in comment the important financial have that, but both insurance institutions, and

Robert Fauber

Yes, that's right.

as like, have recent as remember the we issuers, on by revenue first-time a so to by and in have In banking, asset particularly was and Asia, we signed but through first-time as some more M&A the had institution some we the XQ issuance LeaseCos, this grown years I Ray to added then financial over non-bank the variety the we customer resource strong base driven beyond management and out of and traditional as growth companies have activities. XXXX. have and added space, driven a a that as give FTMs talked some and globally by noted, XXX in and of we first from about, factors non-bank that's described and and of sheet year mandates, increased insurance to contributed think here. expanded sector, you Asia, balance had that we've traditionally I just a some bit supply the bank in both One Southeast good was last U.S. solid was, in segment, issuers insurers, growth this in and the dedicated financial as managers half financial a because relationship-based terms focus FIG companies franchise, more issuance infrequent just story commercial we saw of such and sense, well those FinCos that we’ve segment,

Raymond W. McDaniel

mandates. First-time

Robert Fauber

Yes, first-time mandates, sorry.

Manav Patnaik

for Thanks great. right, color All the there.

Operator

UBS. We'll to go next at Alex Kramm

Alex Kramm

just to guidance switch bit minute, on should moved they staying Just little me can where of have in particular guidance a Investment little brought sense or around the for obviously in Services bit for visibility? bit, that of bit revise a you outlook, you a where little thought a today your more you things room maybe be to us may may Can give there. we if a had a to less conservative finance a the couple investors you Moody's The have that structured thing more there. up some little more have you

wondering there? So conservative you particular out feel you're seeing if just being like what area that's where in an or you're

Robert Fauber

Alex, I'll take that one.

said accurate the decrease In think our of that trend a the first we'll in issues a the XXXX, activity being finance in high-yield driven infrastructure tend be with CLOs, by PFG conditions corporate seen I bit You're continued U.S. some the in public, structured to with I overall we're we project bit and surge and that that finance see as U.S. segment a don't that's segment, -- corporate range. we've parts well quarter we within was trying further Ray CLOs, of from continuation past as market obviously In trend at was We're think unfavorability right, level as digit and conservative. to to few kind of of the terms and a in MIS the guidance. us Day. We've the that we changes get can Labor combination finance, kept And coming had the saw a as mid-single a mentioned support we've here. once the FX of quarter strength we for had probably we primary of tailwind seen conditions the again projected. than in finance, some we've In first weaker to softness FX less projected to it's again led and kind we Greater FX FX little the segments that along and that similar just theme, our market, factored XXXX, and had no that touched into the in that in our in in the we saw China, that's and that of guide to second back all we that there. versus the guidance. modest But on, in in benefit April overall, benefit expect, Ray had half of impacts little of

Stephen Maire

me This Moody's hearing a a categorization. now. as we And banks that's just with financial market the first slide Alex, we're views these provide banks them doesn't of and they are and align let up slide mentioned Views investment non-financial. in, on do this and variety they typically jump update are saying. a are and of and the the from where around give calls, to revenue investment go is, their that on U.S. current from from what from both query what necessarily handful dollar is I Webcast which It's we

you it's apples apples this hopefully a a little what sense the give of but are not So bit will to banks seeing. for

the investment been been markets, volatility in that's the some down not a earlier sidelined to had X% There's from big and approximately on full to that's where aware, as be everyone grade, expecting year is increased shift So they XX%, in year. issuers.

far XX. XXXX average of for been XX. was the VIX put all color so increase has of XXXX average to Just some for the volatility, The around

beginning significant standard. total so XX, environment has by low volatility up in historical been but market the So, still the spreads the move pretty terms relatively Credit of remain since there. just widened have XXXX of year,

relatively XX is of are the But market cash were sector, still that, I where seeing about into currently market, is market, there, a but average, the that been out so XX there. of of the hit tech off the particularly we Bank the portion Looking and points on corporate at it's been reports points XX-year surprising Barclays Day, few you also basis are post typically expecting which the M&A. below context non-financial that year, issuance basis would Agg, still have some we coming Labor in post XX attractive. They've we're strong are Bloomberg not wide to again some pipeline comment the they repatriaters earnings the basis we were where recently some trend historical access points weeks from seen see. for the sitting ago. wides a comprised the they large basis has

So down moving to to interest and equity market has primarily that volatility, on XX%, and issuance issuance yield has they the class, slowed high asset been also hikes seen have X% due this in rate story have refinancings. despite with of widened loans, High-yield out has the spreads beginning into rotation of this light for year. The really pipelines some been the are the year limited so which far issuance. bonds

rising on in attractive record product. just rate be robust. quoting very and coming a here widened have being still environment, the in Ray, drivers by refinancing that's market bit, is continued their and It the The we're activity So, that's high-yield spreads loans, a but this for Leveraged Primarily off to of remains new to issuance to forecast high largest. market. driven a XXXX that's issuance in for main remain base. Repricings full grade. the blockbuster investment flat clearly have which next down, of was year does is similar issuance to a loan lot U.S. M&A the But size

our got front. thing class. year and I we're for would slightly as full could We be X year-to-date M&A some that the what on XXXX fund well there billion point billion One based full compares I on but on this down, said, XX upside seeing here So levels asset out XXXX. to from year as flows into

coming continues this asset there be been supporting to a of class, into it. which has capital So lot

in relatively the plan comment move so is grade although don't still is down to end Moving is The expected far that's to the issuance to pipeline year, market, they that Europe, on although by end side, did soft. year-to-date. they rates The yesterday investment the Their double-digits the ECB spreads encouraging dependent. tight earliest, to historical profits, have remain and continue GDP the summer which but in of next standards, of and course U.S. the of data at course. in growth they by moved year, the still and until see wider, is similar the beginning to of corporate market

widened on seeing, the trade in increased then fundamentally high-yield market. the political M&A, faced that markets we're it, though for described sound, XXXX On have driver historical protectionism spreads are both attractive they comps be pipeline, there. side, their leveraged seems and basis. over in loan tough that and spec remain rate caution Healthy levels what also we uncertainty, issuance causing saw are to And potential some but

don't that out hope little you Rob, bit, to and round I if to add. want else anything you have know, helps a So

Robert Fauber

of Yes, view at higher to our your into our high corporate, and so on view yield answer think be year try yield far just Steve towards probably end the street loans. estimates, and in around from probably maybe to Alex, kind just yield, I be seeing own rotation high the given sort high the this gave end on of bank on those where we'd that of we're lower you bank question to loans, at estimates just

Alex Kramm

out would I adding look analyze shifting parse maybe had think and had recognition that math, pieces growth, it, That's and XX I you, against I maybe BVD, last meaning last FX revenue When adjusted then Thank you work be did to it's quarter nice if think, here million quickly And the to just the which it you I quarter, was moving something this Mark, million also great. on but you saw. slip. gears the you. numbers, think A, XX.X at you back you helpful is quarter double-digit

little are give story right seeing maybe year? double how would rates a just of what about of us now, it feel accelerating, the you a the the bit kind like that short, is of growth clean digits, you're can view healthy long remainder you So,

Mark E. Almeida

growth dollars, nice But noise Dijk's constant half to to add-back Alex, there's very just is rate haircut. over to apples, prior the FX Bureau of happy in growth over Company's with So, that. that's pleased do so That's and the having there. in improvement our we're revenue XX%, XX%. reflects Apples a Van first It the acquired. no

very any So just there. well. all, very is fact don't in with what's performing on the opposite. underlying going We pleased at We're business sluggishness the see very,

Alex Kramm

you. Thank Great.

Operator

We'll next Kaplan Stanley. at to Morgan Toni go

Toni Kaplan

respect us you the on you widening bit cautious, give on continuing? issuance widening that Can about more in also, spreads that a you spreads with talk do you to what And you can update has whether sort the MIS of think guidance your see going see you an made discussed, pull-forward? is just

Raymond W. McDaniel

our around perhaps to more going forward have widen interest default I rate XX this been Ray. continue markets on are out It's perform months for the remain consensus basis. rates we're we a rates a have, bit, as low, see think If do two to view to forecast to continue however year. increases declining expected as a spreads they default has

to So that is help going spread constrain widening. substantial any

for So, conditions attractive. but we're an remain spreads basis expecting wider also absolute we're expecting to on borrowing

in would XXXX. pull been In have terms into of maturing lot of pulled debt largely pull-forward, forward yes, XXXX. have a XXXX, was That we had what forward of

been market in capital tick expenditure bit So, pull have a for see forward or will of XXXX, this an supporting we're of activity broadly rising see. repurchase, for environment corporations whether will it a rates XXXX choose and to are ride year just out, going what's et up more expectations to as well. borrowing where there maturities into is share we Whether cetera, M&A really the to

So, we pay to that. obviously close will attention

Toni Kaplan

was structured going talk you've is as in now. That's wondering I is if within add probably well mentioned to about the leverage see there's the when most staff finance. you And it operating as U.S. you a if much you the Thanks. business past need helpful. could leverage the market and operating get in that how corporate

Raymond W. McDaniel

it operating my comes lot terms environment leverage more a also or been, there. markets finance, institutions structured is we borrowing have it their leverage first of that relationships, operating say, in operating mandates, of to nature we additional up of comment is. to and what operating with first-time transactional I issuers, opportunity. activity, of is are would the do of nature of we're because relationships issuance our there I we getting there ramping capital rating. refinancing are adding of credits by leverage are have lines the new those guess to new with If of staff out less tends If that because address they that leverage those the is less the any rating has lot activity we first-time as a business already have

the of rate increases, transactions number As those transactions. again more we need to people

I business think volumes condition a get operating that's leverage of increase. don't So there that finance, are natural can in as we additional circumstances where but structured

Operator

next from Cantor Foresi at question is Our Fitzgerald. Joseph

Michael Reid

Joe. Mike Reid for on is This

into wondering Just QuantCube detail there? the some could on if investment and you

Robert Fauber

data small We work focuses we insights both them of a have we and we're to artificial alternative with started also this some QuantCube macro, into a that working quarter. social a minority Rob. and This them around initiatives investment They models are firm platform big with that environmental, with and and and is around data building in underway. the collecting made intelligence on governance

ultimately kind technology way partner a capabilities to So, and that into get and research. work and it can some for augment our our some we interesting of company was innovative us we with analytics data think our an

Michael Reid

Okay. us if new out? And call detail and in outlook and you could Asia there give progress anything to then, on any there's the

Raymond W. McDaniel

doing well. business the Asia is Yes, overall

Asia focus. particular saw quarter. benefited more an of You institutions in this in we area structurally, that in to I the continues from guess China be financial area important

the delays will of invested bond only uncertain. Chinese be could approved and in are pace in will number that areas for a ultimately the the front We macro not which market. foreign impact of license geopolitical be a it's to the whether and breakthroughs in an but which at on uncertainty China environment there opening comes and the ourselves the for applying any Chinese from some on rate is of firms or evaluated have process The of on the environment honestly, entry pace hopefully that of application in and of market. pace And also, domestic

Operator

Jaffray. at to Peter Appert We'll Piper next go

Peter Appert

from like ungrateful lag at risk to expect revenue gains margin sounding in the of So relative Mark, the the we and Analytics for BVD. your of to the performance might feels given contribution magnitude incremental hard what continues work, it

in So, about talk trajectory the margins? can you

Mark E. Almeida

Dijk Dijk spending I helping on the the Yes. Van money see up the Bureau to it despite company fact top bring also is Peter. Bureau accounting. definitely that's it's MA the public margin, and continued to standards that due differently, to we've are line got Van guess and we we haircut that that despite

just is For XX%. standalone a year, its is of at XX%, of look you Van six months on just margin and MA basis, Dijk this north legacy Bureau Bureau first the ignoring if the Dijk about Van business

So, aggregate about in XX%. the we're

that up margin see So we are be if up Dijk. not seeing Dijk's take Bureau year-to-date, haircut from MA And Van for XX%, of would deferred you'd $XX that and million some would lift above revenue good Bureau over XX. Van

that we we of expense year And just P&L. what Van impact our equity expected. a we've Bureau from is and public money Dijk hit the owned keep a as Also, the than revenue company of the owned that consistent in starting all company. unit So, P&L being are you we've only less again, move synergies I'd to to and mind, of with company are them spending private remind at a for

impact Dijk, year. Van think I positive lot especially there's from more see as to get next So Bureau we're going that into a margin we

of revenue this for mind six it to the of first far Van also thus in represents, represents less year. Bureau MA You bear have Dijk, that total than XX% months

Van has it's not much having impact Dijk having So, that impact. as It profitable is, good just as yet. Bureau

As very to there's gradual to we'd because add I us pleased I'd to how we a adjusted trajectory margin. And the basis margin with it's then look bit at expand what expense rest continuing continue things XX-months on it's to impact think on We're steady, expected. make looking of is steady the a and there. raise little the work we a discrete margin. at quarter. the our on in to also we're and progress with operating continuing than very that I'd steady in are on the like Again, we're basis, said, rather very for do have idiosyncrasy of on line make trailing to going unusual runway we're on consistent and more the XX-months good, standalone We're basis, our to Moody's Analytics any again, But to a trailing progress progress. expect given not we remind you quarters margin making there

Raymond W. McDaniel

processes Bureau Peter, I that are it's even ones expenses. its public to We're not and point also one-off make grows. investment comments of Dijk a about are not a and Bureau sure with grow emphasis, as in would continue, to Mark's as the expenses, making Van consistent Van underscore Those Dijk Just the initial asset, company we're systems will it's that going overall to coming to those our going to model, forward base see, expecting this is performance Van that's going the are And Bureau a taking acquisition and have an installed consistent is we have we've on grows. all going with emphasize, that the also that that expense to form and I been would business grow now as doesn't through. Dijk

Mark E. Almeida

that the company. when we course about synergies also And the we talked acquired Right. of

Peter Appert

points. for you very helpful. those That's all Thank great. Right,

should implication step-up we in the dramatic the So revenue as half, follow-ups, to The then quarter pretty Mark. issue I guess, and quick through I second deferred see just we of margin performance. would year-to-year a the two be terms cycle quarter guess in

like basis earlier, XX% So something, BVD, was one. but from to closer sounds said what I perhaps Point I'm then like margin. BVD of that XXX something from that it is, incorrectly, margin was maybe two pre-acquisition points so point remembering specifically you thought incremental

in being dramatic company? a the of incremental So cost of part is from margin public that the haircut

Mark E. Almeida

we kinds do, was to feel the is the at we that and awful line. in point, growth I business continue at of operating it Bureau think about run that Dijk realized that business earlier, nature there short or coming of accelerate confident is Van margins knew very as the top the have particularly is running like to we were I lot to sustaining was seen this we was an as Ray's and work the Again, owned private was on not going the expect there it did the We nature leverage that line acceleration, when that the but over of anything such, mentioned the equity. years. to be intend by top We've good run, such to of

the at but equity, be will in when we'll to the and at it that a profitable was of be know that nicely don't the hands of additive company very levels was I overall. MA business So, private it the margin

Stephen Maire

there accounting, apple And and GAAP apples would were number citing comparison, and the to as make IFRS was one some it's exact an in that because not on IFRS well, impact between are it differences comment the U.S. I Peter, margin. accounting you

expensed were and meet they of GAAP. the under criteria. are Specifically, software the It developing capitalized IFRS doesn't under costs

there. points off So a of what saw you the couple that versus margin shaved

is exactly it's to not So one apples apples, I the would guess I point make.

Peter Appert

okay. Yes, Thank you.

Operator

BMO move Capital next Silber at Markets. to Jeff We'll

Jeffrey Silber

your perhaps this isn't curious your but Are on know with impact on any to noise you uncertainty your business debt I'm or being a the of seeing part issue wars going and affected? part tariffs. around uncertainty any I the of business pushback about have to going or and more direct other the trade clients

Raymond W. McDaniel

start would of moving war, this. trade of that sit our though a that decide and X.X% at And have can the would sidelines And were sense the so our toward discussed as tariffs you have Trade of the very, tariffs is implications impact issued X.X%. GDP frictions. different Armageddon, that What X.X%. can as to debt to very add in from been of for implemented, If who economists result forecast, announced, just the to of elements had a in full-out but their the we implemented estimation, tariffs a been [ph], other would economists minimal that kinds of impact It's had in another if dimension not our are [say] us give might forecast what tell already look scenarios. trade we terms specifically on trade otherwise hard or who

Jeffrey Silber

that tied I very can and remember changes Right. helpful, if you've always be more That's issuance think GDP, said I correctly. to trends the in

Raymond W. McDaniel

time, it link Over what would that's correct. absolutely, think we I to, Yes.

Jeffrey Silber

if your guidance Is little then sorry this us guidance, you you just could took something so back it just color? but much. question to that's year, And one more great. is next down year. deferred and go Thanks CapEx Okay, a being minor, to bit give the more to for

Raymond W. McDaniel

going projects are of a the some essential them in the we're take to not take modularize in those deferring couple and pieces. and probably business, We're to of projects on of that growth them,

of So we our we're that the going and and in to just paused budgeting. context at planning XXXX be looking

Jeffrey Silber

Okay, so fair Thanks enough. much.

Operator

We'll at go next to Tim McHugh Blair. William

Timothy McHugh

I Just little the softer guess a being reasons ERS one the than question planned? had you maybe, for

Mark E. Almeida

we're basis Yes, we Tim, realizing seeing the it's from selling earlier these The have Mark. there It's than were if very this much are is SaaS license basis a as just we level the much basis. on selling we subscription Steve at and when situation to a a perpetual a a model, as been transition you're license make on traditional fees on more implementation what lower doing selling trade-off fees described would perpetual call. the projects is software the moving large sold that first on year

four-year make we're we Now, charging ahead out, we over that. and and or because up we subscription those pull are period fees after year so year a three over a in then of that even year couple period

So, one-time ramp-up the as what more in the fees. that transition in is occurring, happening bit the we're is a quickly those that than little fees seeing is decline subscription we're seeing

guidance same fees realizing we and based getting not the of had pace thing subscription at timing our the not the just really it's on. So the that quite fees one-time

said, together us the the a bring has million impact caused FX there. couple dollars and that down to So, so with as outlook ERS line, I on that's of the

Operator

today next Research. our at Huber Huber Craig take We'll from question

Craig Huber

outlook into Rob, above you what a the you the will the said thinking, the or expecting give you how think guys little the second I would impact on were business? have you. sector we half more the and were I year, of just of it follow-up. Ray ratings outlook second your investment Thank banks the on do Then what of us guess update loan in bit half bank beyond a year,

Raymond W. McDaniel

you Rob, want to take that?

Robert Fauber

loans first note of and half loan in first driven in quarter In the of with percent the There's of declined of of nice half in acquisition a first for M&A also versus continue proceeds similar the year focus the first last the We've year some this of of very Getting the issuance very about speculation shifted paper. CLOs. has and of significantly extend I'd we of mentioned, as while of leverage picked have financing, We're note, bid interest of in trend M&A us. are bank the experienced that has from of for terms saw and in bank that use European a obviously we Steve that the I'd on quarter year. area particularly the the team. has we've And the this strong notable Europe, rates So, been strong that quarter first rotation which CLO pretty pickup floating-rate got half half XXXX. drivers U.S. amended in demand just leveraged bank backlog seeing out high-yield total. certainly financing a – financing, versus pretty seen I more from think first loans, in all, this up XXXX. finance very real where into a a space. a finance refi

this market, focusing demand. all we're specifically to and U.S. the commercial the in sure some make added both addressing have to that resource on We loan Europe,

saw It's of first the a in fairly when of half second deceleration did kind loan mentioned of from issuance XXXX we actually half. meaningful bank interesting what the second at that You view in last half issuance year, the for we look XXXX.

expecting we've That by to going activity year, revenue talked shift that mix I less is that driven and something half a to can from see in we the that half similar this revenue volumes our means year the about. period this That do then And over in included we first basis, this growth a to back despite growth guidance. the this so, the on second the issuance And think refi. M&A last of year. also shift supported we're ties sequential decline in be same of more and

in We EMEA. and especially U.S. in true have the said that's

Craig Huber

lot debt Ray there, you any high-yield there, or it'd search My various you some ask, are the are or what's seeing there's please? other there's at investors, seeing with market, Europe, the U.S. there's too worries of there, Thanks. much or signs investment-grade corporate out anything be in I ratios sector much in the Rob, on out update all, somebody guess CFO And with question, too debt whether should corporate of out course? that an the

Raymond W. McDaniel

been levels, open leverage Craig, for increase have anything again, are credits. to lower respect point With increasingly a that we not rated the seeing leverage. would indicate in To markets dramatic though, your definitely

And rating and are see getting by category, into the will not lower seeing obviously. though increasing riskier market, be we even names rated leverage so, those credits we may

up. So, that's it how we're lining

As make think as announcement be in position I is an to search CFO far shortly. concerned, we'll a

Craig Huber

Great. Thank you.

Operator

Let's take our Warmington at Fargo. Wells next question from Bill

William Warmington

going just to some in ask was initially it couple questions Asia there, mentioned U.S. back, and of ain't done if a for your BVD. So, and on some color wins, it. for comments, don't you've you sales Ray, I and you hold bragging

Raymond W. McDaniel

going as let I'll long we're As credit, do that. claim to Mark

Mark E. Almeida

sales identified was and That talking potential recognition we're and about Bureau more synergy, Van the than by than being in Analytics given Van customers markets nice among true those of our what was deeper our U.S. wins Bill, in area those resonance seeing Dijk. those markets brand we're and the Dijk, very having Bureau distribution capacity leveraging customer with that in there Moody's Asia. some an a we as is, relationships

in markets some happening what's we've feel we very both there. So, had and wins nice sizable very about good

with just the outset. were the because, as highlight we those consistent project they from this we into of to some So wanted said, had going plans I

Raymond W. McDaniel

of And that in Dijk's Europe. of XX% you'll business Van was about time the Bureau recall acquisition, at

getting for sales area for strength us. Van that is outside interesting And so, particularly of of Bureau real Dijk historically

Mark E. Almeida

Dijk a And competed that well. ERS. offer had should that that a in Yes. product product, as product I a add Van to we with has Bureau

have We joined there. forces

both where wins proposal Analytics to we Van well as Bureau in Dijk had the recently had the went there. the win Asia One and very as offering big we market a successful with was option option, of Moody's joint a we

seeing progress with different Dijk on a our couple Bureau collaboration through Asia. So, we're of fronts in Van good

So pleased we're very that. with

William Warmington

had You also BankFocus. the on the the ask market Bank strategy XXXX had I Analytics interbank the you an Is talked was update hoping there? the rebranding then launch. targeting still Focus on Orbis go-to-market that initially. Moody's also for as about mentioned to And credit

Mark E. Almeida

Yes, as early that's with would doing a fundamental I part characterize BankFocus. of what we're it days.

the market, them I our there, reaching making of progress product. to getting I of by product, some mean knowhow on to the adding Moody's Analytics customers, introducing out new are both think we to product applying customers and both and some front Analytics the again, good our functionality relationships, Moody's features the to in that

well work days think early And continue I to the I there. So, both is about there and going development on sales like on opportunity trajectory as but product as the good side. the said, side be it's bullish we as we the

William Warmington

very thank much I wish weekend. and right, a All you good everybody

Operator

Autonomous. Hung at next Vincent to go We'll

Vincent Hung

what for mandates us Just one categories? issuer the the first-time FIG, ratings trends for other for me, like so you the gave

Raymond W. McDaniel

see me give on that. if to Let I color some get can Rob you

Robert Fauber

both XXXX. year. We're also that into year X,XXX sequential looking the strong versus the new had quarter, like up prior half now for have year basis. the of a now from continued We the new through XXX mandates prior second quarter full and we of year at, something mandate so last the quarter, Very first growth the over first year on a

did the pace So of earlier environment into from rate these a little bit the obviously rising longer of pull-forward. half pull-forward of may half We mandates second spreads get seen first-time first a XXXX in first We the of very question the about narrowing. XXXX. a and strong amidst have half no

but versus conditions the So primarily corporate mandates of of in the overall, growth very same in the the pull-forward and second Greater what kind slowed there period half declined pretty strong. the The down and quarter outside pace may year, U.S. good year, saw regions story. a from year, we a been of China But that's the last market have of of in torrid within cooling bit first first APAC actually interestingly, for that last very of time a was XXXX little as XXXX. finance calendar in

Operator

I'll no turn things Mr. And questions time, McDaniel, to sir. you, over additional with at back this

Raymond W. McDaniel

look you joining Okay, just the you again today's call want Thanks. speaking thank with to forward in we fall. and all to for

Operator

And once again, this Quarter does Call. Second today's conclude Conference XXXX Earnings Moody's

breakdown reminder, XXXX call, Second section the IR Moody's will MIS revenue under homepage. following Quarter Earnings the post the of the this Company immediately As a

Additionally, call replay of Thank this joining you concludes available Eastern call. us. Time Web-site. for the will a be IR after that today's X.XX Moody's Once on again,

Moody's (MCO) 27 Jul 182018 Q2 Earnings call transcript