MCO - Earnings call transcript Q1 2019

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Operator

Good day, and welcome ladies and gentlemen to the Moody's Corporation First Quarter 2019 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open the conference up for question-and-answers following the presentation. I would now turn the conference over to Salli Schwartz, Global Head of Investor Relations and Strategic Capital Management. Please go ahead.

Salli Schwartz

you. Thank year and first us well quarter current for everyone to this as for outlook Moody's discuss XXXX full thanks morning, on joining teleconference our Good XXXX. results, as Head I am Management. Investor and Strategic of Salli Capital Relations Global Schwartz, it's Moody's the for as released as year XXXX. first for current outlook This full XXXX, well results morning, quarter our at The both available are earnings this ir.moodys.com. accompany teleconference press release to and our a website presentation on call. McDaniel, lead conference Ray President this Executive and will Officer, Moody's Chief morning remarks call Chief the is Kaye, prepared morning making and Also President Moody's on Financial Mark this Senior Vice Officer.

adjusted will During filed mentioned this release end and call call, or be during we at our to of also this refer morning figures. this the the measures tables adjusted all GAAP. Please for press non-GAAP a earnings presenting between reconciliation

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

Ray McDaniel

share affect second we over EPS initiated tax by restructuring effective the meaningfully half Analytics of reduction Good incomes and until happy call. a financial morning, interest accelerated P&L activity quarter led our improved In offset Salli. summarizing be in prepared lower fixed meaning contracted expense everyone X% XXXX. joining in to actions follow share Adjusted to today's In of issuance the XXXX expected, quarter you, quarter a XXXX. program. driven to XXXX and X% will Moody's for Mark outlook margin and our with on results. resulting reductions after Corporation growth quarter, the headwinds for issuance tighter then by begin by the repurchase X% first Thank the revenue of remarks, Moody's of we'll rates fourth and I'll respond your Moody's diluted will in count you a lower year not revenue adjusted in XXXX the thank year the Moody's increase the quarter as XXXX following disruption first mid-teens first the fourth from to questions. for to from rate spreads as grew XX.X% operating the nonetheless, comments

Brexit and weakness However, and of caused result the Geopolitical The U.S a mixed on outlook. the issuance to policies. around concerns XXXX uncertainty negotiations weigh inversion market. China issuance to accommodative first quarter. more was to forecasts monetary and business yield treasury environment first These about a economic of levels factors lead continued than U.S. in concern lower uncertain quarter curve the trade and global as fiscal contributed reduced growth

expense mandates recent on pricing, to the fees restructuring into XXXX. revenue corporate down MIS realizing business base of well year-over-year issuance continued a we expenses, move MIS's client monitoring fourth my X% model. MIS further the strength as was to down issuance the from I revenue from expect was while as comment mentioned, start increased counterbalance the quarter provided As initials. improved partial only recurring XXXX, new XX%. from demonstrating supported significantly reductions Similar by of to program as we

led For decline the first in quarter, to operating the margin revenue adjusted to contraction a XX.X%. MIS's

rate minute costs, as focusing performance. and MIS in bank high-yield and first financing a on grade bond would X% longer-term well the trailing to as flattening year-over-year issuance preferences grade yield first floating to high-yield the However, were up quarter, points spend and loan I Due in basis, the like issuance the instruments fixed to of bond of these XX-month drivers XX-basis margins respectively. were as increased curve lowered investment significant while XX.X%. XX% quarter from to investment another market issuance shifted on by

On costs the reduced bank issuance year-over-year. XX% other loan higher by financing hand,

issuance loan activity year intact, prior the versus activity period. While largely muted for remained relatively M&A refinancing was

RD&A and For MA, operating the adjusted total MA revenue which margin. or quarter digit fourth up from each improvement XX% business growth drove ERS XXXX of increase as XX% point revenue transition revenue research MA In on products. model. and growth a We're XX% XXX-basis double this was the an delivered and execute digit contributed continue and by the Software RD&A growth. strong second Service growth, the as a a sales quarter on On Dijk double in encouraged a Organic growth of transition to also period. organic strength to we basis, data XXXX and to execute SaaS first as continue well half to operating sales REE's Bureau the prior acquisition year van at XXXX, strong of core XX% due to revenue in grew contribution from revenue revenue subscription delivered as XX%. the we

a business new of growth revenue $XXX large XXXX trailing Moreover, generation trailing sales de-emphasizing the ownership. customers' of demands drive in and meeting which operating business. to management. similar a to customer the I this applications our completed improve been next key that in moving of introduced moment SaaS-based have MA and Organic of in professional to adjusted component a basis. of take Professional since rates continued highlight in and U.S. October to months priority to solutions from base are revenue. of of up have due ERS revenue XX%, of ERS quarter of XX-month However, grown The access first margin. X%. improvement driver every successfully one-time Indicating a would Since property of of our magnitude The connected MA leading providing increases performance not the strong we CRE will ERS by to research, that up to commercial estate ease XX% a margin the was a Recurring in are REE's we reach quarter. experience, market ongoing then, real services provider take continue, lower of deliberate leverage a for our business network, expansion MA increased revenue well of In This its as and adjacent has acquisitions participants performance the scalability on like we sales products opportunities XXXX, subscription of enhance products the shorten sales the on in and cycle. recent quarter. strong will the X%. is we MA data. are cost CRE we XX% total sales use XXXX. revenue or highlight pursuing the risk platform has by first trend adaption investment made in is growth contribution acquisition I'd to services areas. expecting REE's, contributing and the operating ERS' like a growth product increase driven for support XX mac's was million the the increased revenue been while shift subscription by as of model have will our share strategic Omega resumed

quantitative have advanced broader provider research, soon a ESG also from setter of allowing wide global in core increasing Paris. from we States. location to evaluate platform in offering launched ESG on prior in the data using global body market not and an our This will GRI the established Moody's already a efforts objectives, Vigeo help Moody the operate stake which note, materially parcels think-tank in leading a investors, in And social financial United standard serving reporting over evaluating to our initiatives. affiliate presence the global long zoned initiatives On the week, Eiris on be our participants will meaningful produced release emerging in of CRE ESG data an is resilience, allocation ESG. majority Moody's a and database, Adding foundational commercial X,XXX,XXX credit support or security its responsibility of extensive CRE to efforts we of REE's, space. in in expected results its and that Eiris We annual commercially and Moody's financial October, space. Vigeo Vigeo XXXX to a to TeamX of in to needs is building initiative last is company to its headquarters a data cyber option. Moody's Moody's will capital the space and solution Vigeo Also continue is or MIS the growing risk. strategy with for technologies. for cyber beyond within score asset strategic brings developers the in assessments but investment aligns an ESG that with in This corporate security lenders Moody's suitability report investments which standards Eiris consistent the creation goal building and transaction evolving plans, of specializing become the and and impact is investment our and announced research partners, Eiris product acquired MIS, leading and in announced analysis and ESG

its research sources analysts of our credit thousands reports and unstructured You innovation access to our infrastructure capabilities and tasks application allowing are and customized natural to efficiency. efficiencies Moody's enhancing by our decision-making Underpinning we of will and learning, are to customers to financial also processing capabilities automation, delivering are generate analytical improving strategic supplement small financial loan by enable enhance at analysis. manual issuers. well and CRE on Moodys.com/csr. repeatable technology tools, utilizing be spreading priorities, AI us this our Machine AI data municipal as able and and automate monitoring data Natural alternative language is of to through the training data continuing and approval. report the language as and processing

and Finally, the we the efficient the cater requirements customer cloud an manner. in low-cost across are utilizing to business

continue needs over call the for our to product offerings our embracing XXXX. to enhance outlook will We by to and now processes Mark meet those customers our turn I'll of technological to our and innovation. review

Mark Kaye

mini-geopolitical business conditions interests market about the mergers capital our macroeconomic Thank currency you, subject assumptions are investments Ray. These not profitability but uncertainty assumptions and including XXXX current exchange limited is debt capital and for the in materially and markets to acquisitions outlook year Moody's results and for foreign corporate label spending, could from on the and based factors, rates, differ outlook. to activity. and of

in Our foreign currency rate. guidance assumes and the quarter exchange translation

cost the remainder Specifically, British for Euro, $X.XX Pound reflects of our $X.XX. for the rates XXXX exchange the full of for and

We the fourth expenses ramp approximately the from expense adjusted expenses note, XX% operating are of increase anticipated savings range. to start be restructuring of expecting from The mid-single out still the to guidance the revenue are XXXX amortization, and Operating quarter and restructuring in full and first still XXXX laid as XXXX charges. on program. we are in and affirming the Of We includes XX% the call. operating percent to operating February not acquisition-related metrics and margin realize margin year we expenses expect depreciation digit significant respectively. to earnings guidance we each a

$X.XX effective We the continue toward a $X.XX of is of to $XXX $XXX in EPS to rate XX%, range the the year. net diluted be the to Diluted the $X.XX and and year in expense million tax $X.XX interest adjusted XX% first low to quarter rate respectively. to to actual and rate million expect expected full of notwithstanding of

our we becomes please table towards year continue year single anticipate to guidance, digit For of total comparable weighted in half range increase more list a refer second percent the low the full year-over-year the as with revenue as easier. the [Technical full Difficulty] of growth to

contribution from now bonds a loans public lower CLOs from expecting U.S. from issuance. and to are corporate finance extent higher and lesser U.S. We contribution with

be will issuance in We continue X% believe to to comparison that flat down XXXX.

first-time approximately to mandates We also MIS XX% expect in XXXX. adjusted is XXXX. operating be The XXX expected approximately in margin

XXX sales digit transition from percent of recognize to the the the MA model. revenue to core a to of to low double Triple basis we SaaS-based discussing to growth management. a the term with and long business a For still XXXX. MA, expected increase spend which RD&A to benefit committed to around to margin in strong XX% range capital balances points, like anticipate expand XXX leverage believe still at flexibility. in is Bureau capital XX% operating our cost I'd We in ERS moment we range approach The as total financing our from Dijk rating recurring stability we B+ remain adjusted appropriately the revenue van anchored

coming Our distributed due well debt debt go until September no maturity XXXX. with significant

previously, As disciplined and noted we have allocation. robust approach I've capital a to

in support we or As activities priorities. invest priority, reinvest a strategic first that our

capital our return to that, dividends Following look to share through shareholders excess and repurchases. we

Moody's like and in ability in XXXX. a takeaways. would I to confident stability remain margin deliver We Before note turning growth to to revenue few Q&A,

enhance At growth in corporate the research time, will ratings to new strategic continue opportunities the into areas, defend We and services we businesses. across and and product product, pursuing both geographies credit and down permit our capabilities. remaining technology-enabled grounded and same adjacent keep core

of and our the disciplined approach capital and flow. return we to cash thoughtful free will Finally, maintain management

Ray McDaniel

concludes question-and-answer Investor and of Mark. Rob Mark prepared President This Analytics President Moody's joining Services. and are Almeida, of and the for Mark Thank remarks our you, Fauber, me Moody's session

be will pleased questions take you any have. We to may

Operator

first We take Thank with will you. from [Operator Manav Patnaik Barclays. Instructions] our question

Manav Patnaik

that that risk areas you do morning, other estate what minute it then real adjacencies? credit you My just was makes sense? as me Thank side help ESG, business and maybe question you and those cyber commercial of would you. adjacency guys. just Good had, understand Can consider you a the just business for first know briefly around, and aspect

Ray McDaniel

measure in that Manav, think financial underserved standards areas help manage at form are of Sure. that understand risk. we markets, we're really and where they of looking the to

from interest authorities MIS have result that of drawn regulatory that So, believe financial and of credit areas And a overall community be going and we in cybersecurity increasing institutions for issuer of investors, is that into that to are adjacencies and ESG the certainly Moody's and variety the to for done analysis a important and ESG going risk Analytics as increasingly areas and important, attention as forward folded on serves. certain a investing the basis. things are cybersecurity from are the side

customers efficiency that our So, believe really going what on thesis we're That's what with create products increasingly the and where looking markets at transactions. is are trying and focusing themselves is standards services to and investors and among more align here. in customer we can be implemented really to

Manav Patnaik

And I to allocation, yet, I Okay. think guess you with already said leverage on if the expect slide the that you capital could and Got I just leverage then it. in keep so declining. two times, follow-up

So, and de-leveraging some that so does is the there as well? on M&A mean maybe there's still the focus versus buyback talks

Ray McDaniel

the and to leverage And the commercial little our this over of remainder first decision. quarter operating adjusted other Leverage first capital subject income market quarter thanks question. some a allocation and really year, borrowing. paper Manav of of ticked expect lower in bit we is ongoing decline and do to for up conditions Sure, the the to course, the due

through Our are acquisitions. firstly the followed through or reinvestment investing repurchases. not business exactly, approach to certainly share that. looking either extent dividends growth And to for in through We to or in return those remains the capital they're consistent allocation opportunities then opportunities either through capital with primarily available

Operator

Morgan now Stanley. Kaplan with hear We'll Toni from

Toni Kaplan

think your offset but outside but top line I look the you week and is, rate, later line what you a that that. lower by the results, really know little And were didn't quarter structured ERS, thinking. the with MIS I was strong was bit margins by coming the good where at from sort expectations. And Hi, results guess I I'm of revenue pressured just had MA it's than I offset of decline afternoon. When in first tax was

the So, or for better? get sustain you're year you year, rest expectations benefit expecting contemplate to tax did guidance I through guess did the the your given the of that lowering not

Ray McDaniel

fairest is our the think the remained Toni I expectations largely same. have answer that

XXXX. strong expected to very the be really in as challenge first we had saw in was for welcome, expect a then was Moody's that pretty We and MIS us expected quarter off Obviously, affirmed overall. across fact board to the did not and MIS line from guidance strength a that the Moody's with the first that level. in So, very but much it Analytics and both Corp indicates given whole, the surprise is to we be we that some with quarter where we MA

on in the it confident was of originally of was the know structure of sort and how maybe it you're you expecting what think -- I than be for you. to little less you that like revenue here? commentary give out on expecting based more of quarter; you structured do I from And in. MIS a are mix the came guess Thank or now. sounds guide bit could where guess the us environment of Robbie in of versus Okay. plays going maybe sort different mentioned around maybe you expected that, but are sort you're I MIS worse roughly -- year

Rob Fauber

This is Rob.

says holding held formation up generally I of really finance. first kind the around of on big the year So that new with into bit we again, formation -- and the start would refi's was I in talk think line triple-A really And very say highlight really that for finance, and X%. CLO's continuing that The of you spreads -- it and from be We've in to of CLO's. on seen down April. structure pipeline story weakened saw we -- the That about know expand but and pick was would significant thing resets improving we seen deal the a includes overall really January. generally I said is prior pretty specifically that to issuance saw still activity know quarter restructured activity economics forward up can quarter structured to We've can in decline wider each the this touching outlook slow is to month we we support that a around quarter for say CLO's this March looking little but that structure flat in I guidance and liability a would our we're CLO you CLO in -- corporate improvement into had we reclassification active in -- CLO's. is CLO well

was CLO and We that of you to activity round any finances levels mix kind That The and significantly you smaller increased piece quarter. conduits. but so and first skewed know of big we're CMBS. that the have seeing engagement structure we're the smaller asset size these refi to heavily in deal good resulted towards continuing that single below see pretty in active Bar pipeline there of activity good prior but said continues know in versus some CMBS reveals an sizes reset single be was market deal and other

Operator

Kramm for UBS Alex have next from We question. our

Alex Kramm

are but a saying just the is know increasing low. you expectations they for want hearing know quarter can you CFO as corporate on about yourself little you you to pretty saying know Rob I your issuance broaden maybe think keeping a you deliver environment I ago your this mean for Maybe leverage the bit we asked comments well you

about M&A items leverage they're are form your watching I you are the what you're So, appetites guess and hearing CapEx, levels, thinking etc. for issuers, still how what that

Mark Kaye

we're and then follow provide the thank Rob up particular to and from actually both question. over our who perspective internal turn Alex, I viewpoints. I'll of banks externally for this comment the is hearing Mark. it the I'll some can you question. first Rob, with on This will

banks On supported grade bonds which strong yields devilish the bonds. they investment extent spreads, a faith is lesser the start to commentary, primarily for tightening a still and banking the U.S., year believe the side and in to low high-yield noticed

remain on the in around from yield is tone temporarily quite recession a potentially I'd economic the the by accentuated was say the risk, start banks year, curve. the slowing positive of concern While inversion growth briefly does of which

downside. banks that are towards leverage remain contributed and believe of expectations longer. benchmark the of first around currently remains considerable turn at the Europe rate of issuance mid-XXXX and reverse yield or hovering heard from for As Europe. issuing can potential tenured number some on a If period lower And compared to today but come Correspondingly, high-yield I U.S. a view that a a to they sharp raise the in market high-yield see half issuance the favorable a of grade U.S. the rate relative U.S pickup of buns the value you lastly, in encourage to time recently And in seeing it's This believe issuance bank's this rates result, yanky grade. U.S. slowed in the the lowest and we one supply we factors focus year least decline And benchmarks course, to year is what the a from where right is XX% to companies [ph] market shift issuances bond in stop continue the floating as in now zero. loan banks are and the around is and investment dynamics issuance. since same that the for so banks bond the the obviously seeing has did investment XXXX March. went Brexit negative grade then year-to-date of the investment to dynamics estimated

Mark Almeida

terms in how that, Mark, seen about think I add financing. structural are we've put of together, to a since thinking for shift the don't our Maybe we certainly views companies to year

we're we're to out yield less probably all that to refi, you instruments rotation that's flattening noted to issuance really softness current loan have and to need zero bank regards we're opportunistic the around is and I And to going risk that of to the loans. outlook to said, the of I investor contributing bank spread of an hold bank there. seeing curve that see to further X% down rest biggest the loans in to year. continuing the street As the and think for tightening the some the Mark this improve and issuer volumes views

the So, in for softer decelerate on And amidst Again, with bank in loans, spreads I we along these bank remain outlook CLOs. refi that's decline cautious the about. wider to record loan again, begun space activity that XXXX. talked really

I by in, think some to in and investment coming refinancing. supported spreads grade opportunistic outlook original that's modest well. upside in our activity Again, coming as with rates M&A and

to very the see activity M&A market. continue We healthy underpinning

upside eye the is also the was into high yield advanced that and side public law this we're We U.S. all see refundings. around on know yield. some to an high from flip the finance. And we impacted bank from loans tax Again, the rotation out keeping changes of

As was a into of forward a result, XQ comparable quarter XXXX first 'XX. pretty because had pull modest we

And I bank higher yield. from growth high an area issuance to think the and forward -- been CLS U.S. the outweighing relative to other all-in-all, just expecting higher other risk and from several sectors. So, growth we the grade now, is the probably modestly to think relative think have next I the loans the months where investment that's outsides I as

Alex Kramm

Okay. Thank you for that.

on quickly ERS. very Just

the think little stuff quarter bit my whole one sequentially because a a quarter? and more seasonally the and business move as good but little of a flesh I this, tick? Thank just detail a of it lot more bit. think transactional is quarter. outlook of out why? is And big on I But versus about Was in time-ish question very you missed Maybe bunch maybe that first here a the more this bit happened talk near-term something a I growing assessments, this now it I first there the can Was little about court was consistently in first guess. the down maybe recurring. to gave you. is, second sequential maybe there you

Mark Kaye

no. The answer your is Mark. it's question to short Alex,

very driven results, really first the good The subscription strength by business. the quarter on of was side

So is across that the very strength And drove we really had XX% just the what business. growth. good

the digits. of were All up regions double

double the product digits. were of All lines up

across ERS quite So, we did well first quarter. the in

made year, that side. said a don't the be full being of a like is coming at particularly we'll and subscription runoff growth we a the that said, off now the the a ray year through last sustain But strong we've one-time to year quarter we expect able we year and on first of the are subscription-based As from because is feel expecting year. result by the down the in end ERS, corner transition as strength SaaS-oriented offset we've the very turned business last predominantly in And good we being continued or business. something

use analytics in think data product platforms address analytical good So, and I customer and feel our about strategy to capabilities product specialized that engineer ERS. deliver validates and everybody specific we strategy we ERS just what we we really are the very Moody's it whole remind that the that problems. behind is ERS

got we're capabilities on rather the For Accounting Moody's working to CECL adopt analytics. who in complex. the with customers need United in we've directly that draws And many it analytically very example, specific States that's, Standard

problem. IFRS are bring loan is around who a kind digitization lot has broadly. and having enterprises, with and new particularly And got digitize at adopt a aimed we've a to with insurers We've customer ‘XX there And directly so, situation platform similar more a engineered worked that story ERS lens accounting the similar forthcoming platform credit are who medium and hard our processes, enable efficiency. of small to to origination that their sized working credit to designed in lending banks efficiency standard, assessment and of

are of the strategy seeing that a think really results validation in the we're So, ERS. I you're pursuing

Operator

question. next Piper the has Jaffray with Appert Peter

Peter Appert

Mr. Any currently? seeing go, of could about for BVD. from And the we're you you. Thank in Mark give REE's longer-term you just the then Good can business? the Mark, given morning. I'm and strength thoughts new on talk targets my analytics also and with thinking Almeda. you I'll margin sticking please follow-up terms where advance

continuing BVD you're size those see an Thank new seeing sales you're of at to what REE's momentum Just the terms year. business, in in enjoyed last whether the and you. you of same update the opportunity,

Ray McDaniel

good the about we margin, like feel We Peter, the make progress very feel on margin. good there. to we continue

a The But we strong. think go first have sort we we quarter particularly margin. or specific can set the a target ceiling with not was on of where

pursue efforts continue in to business. to growth management continue what drive We subscription-oriented as is as a well increasingly expense

lots implies scalability. of that So,

on So, line, our able to be can if margins. we to ought continue add the to we expanding growth good drive to top

in Dijk from van the a reporting. that I margin had expansion third So, quarter only elimination think we a last bit about a benefit of of the year. of for we're Frankly, revenue Bureau accounted first deferred haircut that the that

most of rest the was of Analytics the margin coming very business Moody's chunk from was a and that of ERS. So, from significant expansion the

So, the Bureau we as with but we've synergies disciplined I cross-selling will products to to as happy us continue very To pursuing from standalone the doing continue allow best think way what which expansion at trailing basis, path to Again, quarter-to-quarter. continue margin van of the on your see gradual very in going business consistent if been doing, to we're that to well basis, in are it or some look a that get continues way. on line, on Bureau at improvement Dijk, a questions margin expense discreet the we're look some a XX you on good recent respect We're but to first, behavior can either going on trailing van weird in I'll that in because to very to XX will, probably be well. you'll the think basis top get quarter with take Dijk we a will about and line on MA. months -- what's I months in any happening perform business the

So, van Dijk mean, if big look you at perform basis. I'm quarter, currency van we on frankly, Bureau a hit to but continues very well. basis, a pretty the FX BVD growth I constant We underlying Bureau on Dijk. business, in strong the an had still took in on first

going much very much say I business very quite starting underlying So, business to line synergies said, REE's, Within also is and is our expectations. the performing product kick to according are And I'd expectations. that in cross-selling in with our as well.

involvement Moody's they I is specialized offers. to analytic can from to customers hypothesis think are in quite and fully the combine our real of with we that estate data, have interest what REE's extensive a and There's which customers that the business. People, impact in and much the that more business. the very clear unique very about had and Moody's some they commercial we capabilities REE's the subscribed that opportunities very insight more hearing to in indicated is the welcome us that clearly have the to content analytics validate bringing the we've

business. about said we're very grow that we're good still response and do from to that, opportunities very work path the but we us by there, of we're getting Having the there's to So, feel lot encouraged the customers. a for on

Operator

Now, a with from Cantor moving Foresi to question Joseph Fitzgerald.

Joseph Foresi

for the of there change Hi. was an sense as I business take guess, starting I'm with said, was sticking trying and integrated get in analytics, demand. you're being is the whether to BVD some a I Shasta how versus, or change model place. uptick products you of much see is services wondering, the strengthened the general in just to

Ray McDaniel

I would say it's both. definitely

that desires is very practices, kinds underlying in we've for efficiency think that also particularly demand the definitely of model, things of that that and we're doing the deliver that therefore degree, to of to business well. the enabling accounting, profitable is driven of having also more training the as demand that, But improve I some this new some said are important to and lending ERS their are much solutions. us shifts in driven made scalable element by in underlying our business bank's SME

Joseph Foresi

margin How And issuance being margin for on about half this what Is that further top should set then are of the give second could first above line the the of the the I'm be in we better you expansion? second you and the anything the should my half. year? think margins Maybe about side? talked guidance us just the to potentially is on wondering, on the half expectations think we'd than there. from just as would opportunity, and see question we cadence beneficial second a And

Ray McDaniel

relationships the of into they choose the benefit highest back going go be in particularly the come about an have its in terms yes. would Yes. to issuance forward it we mandates new in right. scenario. because new a who the speaking, That margin calls institutions going we a issuers desirability with, of little from We've a that bit, it's mean uptick create But that's on Generally us the relationship if years. previous I about from to issuers, rating already see issuance, friendly talked which margin uptake, market. rated existing

Operator

Wells will next Warmington Our from Bill with question come Fargo.

Bill Warmington

Good afternoon, everyone.

And That sovereign MIS. be issuance, MIS on other if outperformance of assessment. down X%. was feel for other to the some you question down this debt notable market was that first specific it excluding fair quarter seem there. XX%. revenue extraneous Issuance about overall about I you wanted outperform felt see mix factors the or So, excluding market factors? would there a function is you a enabled Are to was of really to

Rob Fauber

take The about got I'll keep revenue in the about that the And quarter quarter provides factors the nice at That this XX% X%. single and minor revenue for a a growing is down revenue XX%. mind recurring digit Rob, to you issuance kind were, you've that of it's call contributor mixed Bill, to that XX% down was allow low ballast. this compared price, Hey, and I of say, to I think that it transaction was delta. would if

Bill Warmington

for the move be it move actually consider if ESG. to ESG Has needle? the start just the question ask you you could to I And frame noted a started on then it. for does it to you what needle? [indiscernible] Got acquisition. When to Moody's. We the opportunity

Ray McDaniel

may I'll then to lead and off Rob want add.

it's opportunity, the of days. terms commercial only In

increasing into it's cyber see commercial customer in The will though growing And We is everywhere. And keep Europe. that. interest to particularly And of translates much opportunity. scoring we have it's in investor ESG, with high as a ESG level cyber robust high. in how in interest forward security, move very informed the we'll you obviously

promising So, to of that about says communicating a that to for us rigorous, that in if high. the with us we likelihood the can developments develop quite opportunity commercial standards, entities if analytically ESG, we can marketplace is a on having develop robust basis consistent, the vocabulary

So, Rob...

Rob Fauber

a a agency evolving to as standalone would industry say fragmented, Ray but That's also still increasingly opportunity it's work I there's across small described, Ray base. right. more standards. it's customer looking relevant the broadly said, relatively mean for in [indiscernible] and commercial the rating for doing as also brought I us that we're

form content. You or ESG professional kind that's increasingly what's companies, all firms in banks, insurance of of driving cyber some corporate And here. interested about it services think

Mark Kaye

when that just And regulatory around interest into maker various I translated other And service us. regulatory would for opportunities of and historically in also ESG product kind add, there disclosure policy increasing has ESG areas, of is push kinds. measuring you get interest in in that factors and

here. would would hopeful be I So, we the see same phenomenon

Operator

Jeff the have will Silber Capital BMO Markets next with question.

Jeff Silber

you Thank could so some was us ratings you've any, you an of I that update the progress much. hoping China. give if made, on in

Ray McDaniel

Sure.

and previous largest coverage It is we've in successful in agency its a think joint rating I It think China, financially. venture CCXI. agency China. of have most both a do terms the as talked rating has the I calls, in called been about on we entity

operate Moody's. make that own are we CCXI clear Chinese have we influence we as us will market would of joint I domestic we very license that into for but views as thinking would the to as just about their or that on and the our staying are we think evolves, with with a very we Moody's this can, opportunity. at interested how as in terms It venture And to joint point. domestic our think see continuing What separate translates the in relationship. a either in that venture uncertain is market, the prefer having operate be interested in through So, to may

the have Chinese we good institutions being internationally. very for markets that coverage in cross-border active Now, still are that said,

expect We growth we've relationships. that good had in And a that of continue. rating stock to

joint exchange as And of licensed that the add the guess all I would top rate last market. just interbank that's the actually continuing it both traded So, thing of it the the is is has market one in is attractions and been. I venture

platform, the makes And that the attractive that interbank to larger, being so, faster exchange And market. market market particularly growing being again, traded us. the

Jeff Silber

this great. Okay, your year. shift I If could outlook gears to for

me, I the anything call compare changes last don't the is table front have out besides in this rates? details your just there me, release but quarter press Forgive FX in quarter, on last the if I to with quarter's the of

Ray McDaniel

today, visit in a provided our are There we in no what changes outlook we're mid-April. or providing guidance that

Operator

question. Research Huber the next Craig with Huber have Partners will

Craig Huber

the pent demand stuff. is little Moody's your a along rating about this up as complicated be batch and lot I'll example, any China, or to out are companies kind come could and how third-party up well. just of China JV a called lines, you being the where have view in called start how things China arrangement you structured of by this talk market, agencies in operate Thank out a preference for to with there's it JV same of when ideal What's be potential further pent there allowed for bit you. there in for, U.S. to all the demand corporate of those ratings have? as your with REE's also separately. And standalone can situation you for

that. for Looking

Ray McDaniel

Craig. Yes.

would probably their terms of is, think rather for lens it's to at the are thinking the I this priorities what best of our Chinese what than the policy in through preference look makers see don't Certainly, participation about nature like participation their to with be. see how respect and in the what market. of that to disruptive they activities to market would want their they

interested like and from foreign hearing into come also institutions and capital, steady capital research. deploying development China participants might in related operating they're solutions And they in such going attracting to foreign that so, be international conscious investors the international the in to capital. And interested related growth risk and market as are that certainly conducive risk Moody's of the that in interested smooth They're be attracting from fact of in in Moody's credit of would about Analytics. institutions are aware market analysis ways

the So, foreign market desire includes capital reform includes includes for agenda that attracting without a stability, disruption.

of There this just that in think to be an mix. trade how but will moves I I we'll still that have days to has placed out. as negotiations factors well, into the as terms is exactly it's into relatively early a that play probably think that of to see honestly, forward. And element All

Craig Huber

and it's first the you on guys three cost you quarter here digits will done be fourth here year the particularly and in year cadence the ask cost if stuff, how was you scheme but -- the on do that the sequentially quarters the cadence the of the last have growth up go up, half for side, remaining quarters versus in about And comp see Thanks being the question please? playing what up a first bit source of couple I be more of market over restructuring ago, out for year cost relative incentive quarter or And this just the sort then is, in also my to it's and back to what have by guess think the helped single year? to things in goes I the normally could quarter one stuff housekeeping full goes then the

Mark Almeida

to for this hiring is impact the periods. and question. expense growth of and merits, this saw factors to due that prior in we and primarily in quarter most Thanks we're hiring the prominent the related The

the spoken Now and our note Omega, restructuring REE's cost obviously that expense charge. to inorganic certainly desire the continue to and to then our is also activity our due and invest we've selectively location. ability about from growth lower in I'd

-- necessarily to the -- be just with expenses in the are think and we $XX quantify from I that specifically expenses the thinking expecting savings this I forward, to we as linearly have between a somewhere not quarter, fourth ramping in ram first don't program. If of around fourth I'd restructuring and from to significant start will Now the first say somewhere realize million the quarter, and is for around this -- quarter. gave item line in on to last incentive approximately expense guidance in And that by a booked was ramp housekeeping per year's February the and the comp, we way around of related the that with $XX million year. quarter the comparison there so we meaningful which quarter this very million is the much million, $XX was amount reduction is $XX

Operator

from next will William come & Company. Timothy Blair McHugh with Our question

Timothy McHugh

guess expense immediately talk me leave timing are just from didn't time taking business side. Yes, taking or about to just the the through. expense help restructuring little I bit on of the phone guess I to aspect I after the guess, savings restructuring; people the it up the a why -- the Is the savings. is understand to I flow guess,

Mark Almeida

to restructuring initiatives.We third are encompasses areas second various of that lead really million we savings people, the the that begin total million Sure, QX be that did restructuring and our push in would that's the thank to restructuring and And larger $XX $XX we booked that what as previously to achieve year. on-track oversight question. relates to in half you the those and would the really $XX in amount year range. because the see for the $XX again that three communicated program relates above we a a and million.And million an updated to say anticipated And the of us now would announced I of of expect we do we ongoing emerge management, time that high-end real I the charge be we may those earlier communicate say projects second to and see vis-à-vis to annualized savings to have of estate would really to restructuring slightly plan saving pretax QX target

committed playing say is to. have exactly and would brief, expected. out we actions in we are that on-track this as the we certainly So, executing are And that we I

Timothy McHugh

the will incremental the simply here now or current flow to savings as spending you of your Okay. of is it investments hiring savings or from later that not in constraining on can I is and as it ramping understand levels ongoing are of I are about about investment simply the investment to year environment. is follow-up, we happen as much that go through this is restructuring any expense we kind it Is the going normal. the and the year. then year. the think And as in Trying charge ongoing rest from I the also we how quickly guess guess as for there change think pace the then across

Mark Almeida

Sure.

what's incentive I on is relatively of will certainly expectation variables will fact impact businesses year are opportunities element certainly is combination ramp of cost flex really an think expense in emerges. there this the to postures. which of the external influencing in ramp vis-à-vis compensation includes the also there a that that especially the think And and and based is obviously both environment is those hiring us actively available how location, both the I utilizing timing the flat, lower which factors we

Operator

take a from question with Tong George Goldman now We'll Sachs.

Unidentified Analyst

you Ryan guidance to thanks issuance Hi, In changes my it to MIS within that discuss revenue? [ph] relates your composition guidance regards you George, have for taking the of for the for could any XXXX you question. reiterated, as on

Ray McDaniel

There of finance adjustments we've internally, volume incremental are and some our that adjustments overall, for so out The it's versus the floating are But made around the offsetting. example, in fixed rate remain expectations rate corporate debt expectations area. netting consistent.

Operator

remarks. gentlemen, or back Ladies over closing McDaniel turn and does any additional for session. this call conclude to I'll Mr. the Ray the question-and-answer

Ray McDaniel

And Okay, just go you everybody. note very thank two items. before I we additional would you much, to like

calendar quarter's that our quarter of quite amending the earnings now quarterly are we of period call. run month from each XXth to First, to the last after

Relations contacting to to meetings timing been Investor please asked I've this request tell So calls. when you to and consider

Chicago, summer. in for with want I in we your management please the to And York, events. listed next here conferences and again speaking in joining forward at two attend expect contact to call with to today's again, and representatives London a we these thank meeting New request Secondly, Moody's the the and to you you months look

Operator

XXXX Moody's concludes quarter first this call. And earnings

immediately As revenue post the the home under quarter breakdown a page. first section the MIS Moody's IR following of XXXX reminder, will earnings Company this call,

of a PM website. this available Thank Moody's you. Additionally, Eastern Time replay call X:XX after IR on be will

Moody's (MCO) 24 Apr 192019 Q1 Earnings call transcript