MCO - Earnings call transcript Q2 2019

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Operator

Good day, and welcome, ladies and gentlemen, to the Moody's Corporation Second Quarter 2019 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Salli Schwartz, Global Head of Investor Relations and Strategic Capital Management. Please go ahead.

Sallilyn Schwartz

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 Salli Head and Capital Management. Schwartz, Strategic of

ir.moodys.com. teleconference for our release This second as to and to current a quarter update website XXXX. full-year this the outlook morning, presentation an its for as are The XXXX on released our Moody's at both results available well earnings accompany press

Moody's Chief making this remarks morning and McDaniel, Financial morning's conference Senior on this Officer. lead Ray Officer, will Chief Moody's President Executive call President Kaye, call. prepared is and Vice Also Mark the

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

your which earnings toward the meaning begin, to safe XXXX. Securities I we of Today's the remarks language, release. end call the statements may Act contain Private harbor within Before of Reform forward-looking found the attention of be Litigation can our

available could the from such which our and SEC's statements. cause website are discussed Analysis In materially attention to Company, to and XXXX, XX, direct SEC on statements, important accordance results differ made in harbor also the other on filings section those XX-K safe with by annual set any factors our These, actual your the and year the risk Discussion Management's with together forward-looking ended December report the on Act, the factors contained forth website. that Form in the I for and in

over call a that like on to to Ray the morning call now point listen-only in would this of turn maybe members the I'll also McDaniel. I out media mode. the

Raymond McDaniel

Kaye our summarizing strategy. on begin results Salli. Good of results After call. joining details the our an on our your happy and will quarter Mark providing for update thank further quarter by XXXX. prepared then morning, you our we'll to and second financial for on second execution Moody's I'll be comments questions. everyone today's outlook respond Thanks, and remarks, XXXX follow with revised to

highlights like providing select start by quarter. for I'd to

quarter from second with the ended trailing lines Recurring in revenue of reflected growth for MA months Moody's of revenue Moody's Analytics continued XX, strong First, total double-digit June all performance in XXXX. represented XX% contributions MA XX business.

revenue as issuance with half prior excluding in Second, impact translation, we in constructed of year. was record the Moody's Service environment into second is the the move foreign the and period line quarter the currency back Investor the year of

increasing restructuring rate the $XX million Next, largely anticipated and savings charges to to million. run related we complete by are more our are $XX our than program approximately annual

our through since to analytical capabilities in manner long-term disciplined acquisitions on finally, earnings extend Knowledge a as continued of we've the execute targeted as our call, or MAKS. Analytics divestiture assessment Services of businesses and solution planned Moody’s well that And last strategy our

ESG leadership Moody’s and disclosure. I'm pleased has further addition, that in its In strengthened engagement

our and a prior MIS’s X% growth aided period grew period. X% diluted despite share from increase as $XXX resulted the share by income programs. to million year year count the revenue Adjusted a prior repurchase a up XXXX in resilience Moody's of X% in EPS X% operating by from reduction Corporation. revenue of diluted result results. Moody's Double-digit issuance on quarter subdued Moving adjusted MA was second activity for

issuance fundamentals the supported mixed. strong In benchmark conditions. spreads, issuance Falling tighter was and activity second economic quarter, rates,

uncertainty However, sidelines. forecasts, continued declining global growth the lower and issuers investment M&A and activity some on geopolitical kept

issuance investment pipelines Overall floating consecutive however, the bank activity quarter. banks U.S. indicated helped loans. moderate, offset issuance in CLO and rate partially The have fourth are The leveraged fell but that resurgent and corporate activity issuance remains fixed finance weak. global rate weakness for grade

the relatively enable strategic the transactions first the of of offerings Since will MIS priorities. with back Nonetheless, align further quarter growth the our in that us year-over-year to portfolio gives half several confidence have year. that announced deliver our us earnings comparable easier call, we

allow delivered Moody's insights participants make fairness. market and market contributing trusted to to decisions and standards that transparency informed

on and Our analytical our transactions assessments markets resolve we efficiency to to as bring and has clarity led increase solutions. us to execute these risk focus providing

with I you. take the a review recent strategic turn I'll over to minute Mark, call Before to our transactions

Four on First, climate of Twenty of provider and data with risks. physical Seven, a our majority analytics acquisition

ratings. We will credit into significantly environmental economic our bolster capabilities modeling factors to and and risk climate integrate

our Moody's management portfolio SaaS the delivered with market or as on service platform. a reach of leading Second, into RiskFirst software and risk analytics for side buy acquisition extends solutions a

our Third, in TeamX teammates, technology. developing global with Moody's methodologies with in venture combines experience standards cybersecurity established newly and joint expertise

These reflects And finally financial service data, than transactions updated in included of scalable analytical providing intelligence, rather guidance. full-year are focus planned on increasing engagements. the spoke divestiture Max MA's are XXXX strategic our tools oriented and

they expect to diluted of We adjusted a EPS. have diluted will approximately impact $X.XX

on for further I performance will now our to XXXX. Mark to turn the and call review quarter details second our Kaye over provide updated outlook

Mark Kaye

Ray. you, Thank

activity For prior XX% from the MIS, issuance was year down second period. quarter

However, MIS of X%, demonstrating revenue continued is the model. the business in down resilience

interest coming towards issue the key related favorable. issuance activity is with As market additionally, rates of to earlier, fixed given M&A and mix benchmark Ray rates mentioned issuance jumbo infrequent and was low

credit base in revenue supported by decline this also substantially recurring pricing to initiative as issuance. offset well MIS's growth contributed as monitored

lead revenue decline alongside quarter, For adjusted the XX.X%. slight margin, MIS's a to contraction in second growth expense relatively operating was flat which the

growth in rate, XXX basis points. second consecutive operating is aggregate This the For improvement margin MA, XXX enabling of margin. adjusted of quarter adjusted each operating business of year-over-year achievement an improvement contributed to concurrently points basis revenue the of XX%

RD&A XX%. sales basis, delivered feeds organic year Organic the van growth MA On from up research at revenue was sales grew growth revenue and the rating XX% double-digit Bureau of Dijk revenue data and prior acquisition. credit from XX% strong period. by due to Reis contribution an RD&A

drove ERS the strong insurance demand particularly revenue increase. from for X% subscription companies products,

the which signal positive model. benefited revenue growth to training driven were for up SaaS-based XX%. up XX% growth. operating future demand months ERS strong revenue from is revenue a We up was ongoing revenue for X%. Organic solutions. provides of XX transition Professional was by professional sales services The Trailing services also global X%,

updated now guidance. I'll Moody's based not to, foreign for outlook. spending, capital year market assumptions level are and could full-year investment for corporate Moody's results the in macro and profitability acquisitions uncertainty, capital activity. current materially change from to factors business rates, and interest of outlook These many markets and differ discuss and and mergers conditions currency XXXX about the debt limited geopolitical subject our XXXX assumptions including, but is economic on

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

$X.XX XXXX for forecast $X.XX. the our remainder Specifically, of the of euro pound of for exchange the British for rates and reflects

We revenue that to in continue increase the will mid forecast percent single-digit range.

While high anticipating increasingly range. expenses percent single-digit total operating to

charge and guidance amortization, Max and impairment related related charges acquisition and restructuring to expense divestiture includes plan Operating depreciation of the expenses.

Excluding the expense operating single-digit still incremental in the percent increase impairment restructuring would range. an total guidance mid Max charges, been in have

interest operating to forecast from Of we anticipated approximately in of note, is ramp We XXXX, not full-year to adjusted of operating at with margin we approximately fourth now realize are million. XXXX to expense to first $XXX remain The expecting a as XX%. the restructuring margin be XX% approximately program. the the savings the expect expenses start net material quarter from

and range range XX% effective to to tax half XX% the the $X.XX withstanding $X.XX effective in rate is rate full-year Diluted anticipated $X.XX to in $X.X to be of to of of not $X.XX EPS, the to the year. anticipated and adjusted to be forecast in billion. the billion Share The repurchases diluted low first be respectively. $X EPS our

a to XX about full all Please guidance. For Table of list release. earnings refer

percent with half total the of the growth weighted low For easier. increase year year-over-year single-digit full-year comparable MIS, the range, second towards to we expect becomes as in revenue the

range to are mid in corporate stronger from Non-U.S. U.S. We approximately rate remain fixed percent forecast flat. revenue bonds. anticipating revenues contributions with the increase single-digit

remains issuance from continued Our down rate from estimate in M&A comparison that dead support and funded X% lower to loans was XXXX to bank contributions CLOs. floating flat with

time XXXX. track MIS in mandates approximately approximately XXXX. are adjusted in The operating to We XX% remains margin on XXXst at achieve

low we MA, increase double-digit total range. to For in the percent anticipate revenue

benefit as RD&A the and of transition all from core business to As lines, derived growth stability the we recurring SaaS as business ERS revenue ongoing across recognize strong the sales the from base well model.

in basis The of to million XXXX the of the $XXX The MA are XXX took and adjusted we to XXXX to fourth range forecast XX% points previously impact that operating half million essentially related to of XXXX in expand to to XXX The margin the program is $XX quarter $XX the charges our announced restructuring million. aggregate XX% the announced range reflecting first transactions. exceeded of restructuring our total charge complete.

This the annualized million our million half provide to anticipated business from a enable through margin increase of announced previously revising $XX $XX realize second of of savings range pretax midpoint stability. the currently We to reinvest are to $XX as and allowing in move million, us XXXX will $XX the to annual you approximately us million. million $XX savings approximately to

savings financial and options various the our Going margin. create market or capital forward will business bolster additional in reinvest these and to conditions flexibility provide and

insights his call revenue will in execute margins standards while and key few XXXX. to adjacent the We Moody's delivering to growth to over ability deliver provide takeaways. sustain to areas. would back vision to and strategic emerging Before to confident markets trusted I a both note risk Ray, turning on remain Moody’s transparency in like and continue

disciplines to capital free cash shareholders. all the confidence return we flow thoughtful and our in to Finally, of approach and have management

back call remarks. the turn to his now will Ray, final for I over

Raymond McDaniel

Mark. Thanks,

like our the about. strategically societal most honed and program future. in unique to CSR Each a review Moody's our I'd that its to further address has sustainable to help to question-and-answer activities are those our turning passionate of employees a position commitment a on demonstrating that focus Before issues year, to session, are few we recent

Moody's promoting Additionally, on its on the risks financial use month, and ESG, linked adhering which recent opportunities set disclosures, is for available continues global by the directed released measurement toward by is earlier and Moody's report participants. or standards support work to standards specifically this TCFD and otherwise market this taskforce to disclosing presentation TCFD. climate-related most on to climate-related Moody's moodys.com/CSR.

working Accounting SASB. are towards or disclosure Standards Sustainability metrics the out Board, We by also incorporating set

a engage frameworks develop to other and partners and assess evaluate CSR with performance. continue standards of ESG and We or that multitude

our ESG for ir.moodys.com highlighting yesterday, published we details. ongoing release press initiatives, the more at available see Please

This Mark President Mark question-and-answer of President Fauber, me and concludes joining be and Analytics; We'll questions. Service. Investor pleased Moody's And take Rob Kaye your for of Moody's session the our prepared remarks. Almeida, are to

Operator

[Operator Manav Barclays. first Patnaik we go to of Instructions] will And

Manav Patnaik

like and that picked have companies around up, PR you. Good sounds Thank Ray last morning. today how ESG the guys have made your lot can a ESG you just help just point helpful. initiatives, Can of few be a be tuck-in acquisitions size where much would around, a there's well. is That you on it with what as are? maybe us opportunities it

Raymond McDaniel

Sure, Manav.

purposes, ESG In terms the at commercial characterize opportunity might the markets. emerging we sector of we – looking are as in non-geographic for

degree markets that speculative established And might markets pace standards. these will so risk are assessments using of the at which than risk see and monetize you is kinds more more in and various

So we that. acknowledge would

However, areas. the these in we good creation demand are standards of for strong measurement confident there that is tools and

And that. are in providing is This another to example. for so for cybersecurity as true certainly we committed climate,

these ends areas credit and these risk and to our that are both Moody's is really also up and how this what would economic yet ratings. regardless are is Moody's not it a far of in be Service Investor what that the though I good even opportunity Analytics eating that as we contribute feel that our monetized. our going gets doing models being providing sectors going market heavily quickly we're assessments add direct opportunity into in So financial tools and realized, this as to to

and will it our in the products of particular. providing we so that the are enhance credit And ratings of relevance already relevance the

how that's we're about So thinking this.

Manav Patnaik

out CEO here I help And and you Okay. out over you I Got stepped then India. all your me there ratings just exposure what can a in it. had mean, the guess, India is? down it's size quick follow-up, as news just your

wanted just might the big risk see So there? be what's to like I or how

Raymond McDaniel

market? you Yes. When domestic Indian are the exposure, opportunity what to doing the cross border say you our or or referring we're in

Manav Patnaik

it's the so to guidance, down, CEOs rating are around market the fact Well, your there of including had to the there there, is, the a just trying guess today? understand was of the that more around couple step risk what I agency domestic down I issues

Raymond McDaniel

this to Yes, in is been customers, securities that the reported our one sure. SEBI ratings ICRA, they've addressing India, commission With its India. proceeding and matter of in things. relating by were a called affiliate assigned respect couple they a that that's to One subject to are, credit a the initiated of of

And ICRA investigating, into anonymous by forwarded be allegation. an gotten in the and team that proceeding allegation to ICRA Moody's with. unfavorable would they're reported they've SEBI an secondly, outcome don't was anonymous the that investigation continue that and look we'll anyway. to that just and anticipate management board material experts And the were they've the handle and to they outside to let watch that ICRA We dealing

Manav Patnaik

you. thank Okay,

Operator

Toni We will not Kaplan go to Morgan a of Stanley.

Toni Kaplan

you. you you to did, the not drivers a issuance global that understand I'm some price how issuance usually down can I pace the Could explain thinking understand business that but your able wanted looking out XX. there's of? as in Thank at MIS if I delta, us were down you of think of help growth just mix and of maybe piece just has and environment as to well transactional four two

Raymond McDaniel

Sure. Rob?

Robert Fauber

its Toni, Rob.

all, quarter. be first actually a to answering question is of nice this So this

So asking. for thanks

primary are when quarter. it at quarters. did we You're I've look right. Those prior the and drivers really a two issuing was and of this who mix got

So issuance in and the more mix M&A quarter, can a larger to proportion was favorable driven the by of was it first was, financing supplies. because back I driven issuer infrequent comparing QX

comes second what issuers around we them. construct relationship the and degree greater constructs on frequent this issuance kind quarter. pricing contributed commercial or to infrequent based in the to of have Meanwhile, issuers frequent who two be the to decline tend these So versus

and mixed had, on we was price. mean think again, I also it touched I you So

the we had commercial execution think well. nice I as very quarter some

Toni Kaplan

Got continue and as the Would frequent other that clarity. continue did? could that between infrequent it. it the maybe And price expect on less the you to mix

Robert Fauber

financing. It to mean, and certainly infrequent M&A May. sometimes two this things, opportunistic I the the gets environment issuer,

in drop, spread rates tap market. so And tends the and that a infrequent decline spreads, of see when benchmark the tightening we to a out draw to issuers

Toni Kaplan

And MA help last then quantify I'm you general model Extremely, Thanks. to this helpful. much very, you. that'd from just synergies was second strong very Thank if the to BvD and versus there's efficiency shift pieces margin Can SaaS similar missing ERS the question, or be for any quarter great. again, or how my quarter. was other

Raymond McDaniel

Mark?

Mark Kaye

Sure. that business. increase said, Mark. the that of XXX About a that basis in basis couple had Enterprise and from quarter of expansion as of Mark business. points we came the you could margin deconstruct half About of Solutions Well expansion XXX in the core came of into to the work categories. profitability doing the points from we've been Risk

in about We second And year. business van XXX revenue van got haircut we the a had basis from points Dijk of points the from business deferred the Bureau Dijk another in XXX Bureau the last then that aggregate. removal the the a quarter in basis

three how se, are much categories the principle really margin further synergies can't those tell you Dijk to Bureau van I per So give you that to expansion. is but detail any attributable of

Toni Kaplan

helpful. Thank you. really That's

Operator

J.P. Cho question come next of Michael Our Morgan. from will

Michael Cho

morning. good Hi,

first behind the U.S. the was little revenue just could around I in MIS increase is gave. U.S. in question bit a my the the behind more some the give guess guide. change you I of guidance. just you hoping commentary color MIS Just

Raymond McDaniel

Yes. Sure Rob.

MIS outlook low we've touched overall mark got our to – get obviously single-digit the on same issuance to are as components the overall and So we've guide.

we've the said, increased our bond that's guidance outlook that seeing. revenue U.S. expectations given around and environment our we're receptive and you corporate As the for the issuance really

infrastructure for Some finance us offset got that downward us the revisions activity. partially been loans in our project that's we've outlook and small upward CLOs. bank revisions And in by in

revisions. of to these enough U.S. forecast the want to was It obviously single-digits, the overstate don't I mid into push to impact the guide. enough revenue but not broader MIS magnitude So in

Michael Cho

restructuring Okay, program. And just my Thanks. great. follow-up the around is

I reinvest? when so and benefit I rate do and guess expect million think or playing $XX about the you one, expect synergies. you Mark see of full much this that to of $X how $XX run to that this two, mentioned are we the benefits the see overall million million, should year

Mark Kaye

savings total estate Certainly million. some for increase staffing to $XX the optimization the the you acquisition $XX lead the of that think the Thanks was in approximately and really see increasing to charges of correctly the ramp question. an as our Part and and expansion in integration that $XXX how in year. in of for acceleration of our due that these analyzed amount we benefit real through $XX really about restructuring million that note, pretax is you'll that of million coming expense and

$XX up in in only environment amount on very million particular you ramp XXXX. to expansion. from depend margin So much between that as opportunities would a investment and as QX developed expense depending that larger versus specifically XXXX. we're opportunities seen both $X now on an internal we expecting will have the And QX evaluate it vis-a-vis And much the

Michael Cho

Okay, you. great. Thank

Operator

We now question Alex take Kramm will UBS. of from a

Alexander Kramm

the to good talk of I'm from one there's on little kind in morning, these revenue guidance hand, it's included like but updated divestiture don't the slide, say or your I everyone. $X.XX as a what's Max all adjust a Hey, really I wanted the you actually about outlook. on margin the think this you Yes. just impact divestiture. transactions, the unclear

on later still this will this know deal included, year, this guess come question. whole I to I what's that And then is picture maybe when but out clarify closes. supposed close just what's bigger

business margin revenue profile As kind MA that the Thank completely you. How we the XXXX, out. change business? of this this about does and think of like

Mark Kaye

guidance to specific the you lower primarily expense good did and that I'll U.S. range. The in answer adjusted your the our MIS interest here. a start This revenue certainly Mark But we is effected note also guidance with factor question didn't to improvements. was EPS and it increase diluted we morning. update. I'll Alex, due first narrow

operating that a with Max confidence related EBITDA to transaction as not we and material the to margin have itself to a associated around revenue XX% financial of higher around in XXXX forecast the we and In standalone Given a to first half forecast, in absence we particular Max a did $XXX had is Moody's, that. from performance. while be million

Alexander Kramm

great. Okay,

curious this just helpful. a then just MIS to just for Business, your secondly, what that's outlook updated bit, degree obviously the on maybe here And Thank of Now you but that. quickly you or contemplates later kind seeing this to that of that cuts to kind how marketplace. maybe year, potential still or be today happen likely expectations we're the the you in and little the going rate expect may shift what

So eddy guidance to marketplace the is likely think you steady do do given could this kind materially the outlook still change here? what or is of or Fed

Mark Kaye

some U.S., with your to multinationals we'll I'll do hearing given like due I’ll – M&A is our and rates puts activity Alex, internal sort question of issuance and active, slightly from year-to-date about activities externally viewpoint. issuance that maybe a grade saying talk issuance In year-over-year Rob to to Europe some there. lower shifting is down that specifically the over little it's banks the bit here lower banks, are advantage investment take to but of we're takes still follow-up what for deleveraging of turn it and the to from

relayed of second lower bonds and grade yields rate of the activity. issuance issuance Fed financing issuance over The have driving we're environment has And that loans of yield hearing cuts up bond with leverage of high banks for set for does year. from investment then strong the by in yield conversely, XX% what been activity. tightening up the which is supportive down has conditions the that spreads, half been moderately now majority a anticipation year-to-date, acquisition driving and high supported refinancing Now

high through of medium And U.S. bifurcation that We for ongoing of as feedback the turn And names. we that are the Europe, also higher did sort being course turn encourage more market some to comprises of the persist and And to preference expectations below benchmark lower due accentuated. grade continue is from yield to those continues credits of the you've which concerns result, in dynamics quality the dynamics The with growth bond reflected in banks towards about the demand concerns. X%. the hear for by the rates then investment Yankee obviously the to Europe some relative total year-to-date. a market, a XX-year yield issuance, measures to seen rate U.S., the as reverse issuance third further fall that investment but grade

there's the primarily of And that's the expectations. turn update Europe to And high thing banks, from by it higher-end preference I'll And rated then second related in specifically it's sort spec-ed we the refinancing for sort over what issuance in significant last MIS’s U.S., you hearing similarly as activities. in to the yield driven quarter of issuance to on and names. XXXX Rob

Robert Fauber

that Yes. on I'll second. touch in a

of thinking how rate is we've and Let issuance flat touched we're that issuance and a down of loans on me mentioned to just shifted essentially our remainder Mark to issuance follow-up with have expectations less X%. bond floating year. CLOs. his the unchanged issuance, about for kind forecast remarks, and our we includes more in fixed rate the as at And

growth upped We're And new loans outlook loan us significant given outlook the are the for really some refi, the around that quarter, that biggest year the issue issuance refi activity grade and than issuance jumbo conversely, high and then investment in yields our expecting opportunistic in We've bank we're on the for the yield the all seen. now fact see full-year. spreads pipeline But a given we've M&A from all trimmed issuance corporate yield and are outlook first for we've to high activity bond changes seeing. less higher really ago. opportunistic the modestly

there So issuance. declines we expect to significant in see some

constructive I time. the the probably we've what market is most issuer-friendly some conditions call quite very we're seeing benefiting and in would upside would supply I of from downside, Maybe seen just in terms say, conditions,

is elements really As to could some we've going of key I that to here. a anticipated. mentioned lead opportunistic supply earlier, M&A factor more be than

And as some M&A seen I've for get that done. financing continue. is activity expectation jumbo mentioned, of activities ongoing deals Our to we've levels

mean the obviously threat respond forecasts. trade has economic potential few I guess market like, and and Chinese, the the in things. U.S. a the discussion. lower downside, how then surprises that disorderly things On central in, to expectations of I dialed banks There Brexit are

would year. the outlook for at our looking of the a So some we're that those could to be things be wildcard

Raymond McDaniel

Yes.

close Just it's this – Ray. off to

which beneficial you're I growth growth, hearing we're we is remain encouraging action of think now there away tight. still from us is but from what a what in bank spreads scenario that, in bit to scenario, Goldilocks and has slowing or where rates now is that growth the If second we central seeing. slowing, right we're a tip half that more right either challenges have way that's would is

Alexander Kramm

Excellent Thank color. you.

Operator

Craig go Huber will Huber We to of Research Partners. now

Craig Huber

Yes. we if a of China, Ray. if start couple could, could Thank Maybe questions. we you, with

maybe equity sort get but your what I'm me update terms you're done. wrong, out It's if up an your over Correct there there to sense. perspective? up an trying CCXI to process my is operation want of in S&P whole of XX% Just stake where start in from gumming similar to there has this

right you in more that and buy Just where Thank globally, at a guess your their should you. I actually be that operation just could to curious back now? competition, know, have main you're actually that able consolidate? you I licenses top follow-up. what in given January? I'm off so of got least at

Raymond McDaniel

profitable. as quite XX% China. also stake the agency agency, in largest rating It's a We've bit Yes. And a have know talked in you this domestic we about rating little before.

in like satisfied be in and in are part China determined made we're our we decisions position CCXI. if with is policy business. United do, going the further by very between would and we China in States. CCXI and that participating we discussions interested be probably, in that potentially to in Certainly, So That

are in. this we if it our separate position currently licenses CCXI. increasing by down be we held at prepared position And license, we our the the So whether circumstances point, very to selling with or position requesting change, satisfied it's than a other pivot, or would are

successful be to and we going But to patience have that we're in a So in see XX% business. how the just out. are holder very plays a meantime,

Just a to few because little on fair you, give so been let the just amount you of a confusion the size sort more and of think a bit opportunity color this give me around there's of numbers. I

before on all, largest. of we've talked And it's market. becoming about second being onshore China bond third closing First quickly the the largest, very

Euro market, have We markets. large in or the market. CCXI Chinese U.S. we the to going the rate bond And cross-border companies both the in domestic

So the market ratings XX% revenue the that have high we are cross-border so in share, share. the revenue of XXs about

about XX% But rating markets. We have a it's multiple coverage.

that cross-border So a approximately And that's a into share. high XXs revenue about turns million markets. $XXX

you what revenue gives that So a of sense the cross-border opportunity is.

million. And market, coincidentally coincidentally, $XXX of also revenue CCXI is percent, has a share high a Chinese about XXs then the domestic which

we've total both So cross-border share in XX% $XXX million ratings high revenue. got revenue both in and domestic and markets are about

China related about which that can contribution gives be, currently revenue, do math the comes income from $XXX $XX So CCXI, excluding another million the million. would in about us be you that would

Craig Huber

the economy about about maybe sort rates, spreads a mean ask, could there the out market issuance can you of the if absolute then conditions you little environment about this forward base half as of also and this back and And they sense Thank a bit potential Ray. talk that pull just you you are? I low debt Europe M&A I for that well? you. here, for when how and touched think rate, for Thank the further bit, on the little but year? the Just

Raymond McDaniel

what add to whole a sure, we before. about not lot talking were Yes, to

terms forward. half of year for In half pull our look of the expectations whether the may of the the include second year. second more But at as we significant

forward pull will internationally. been has phenomenon a it has seeing phenomenon the that in be been U.S. at probably of we again of least think than it I is a more more

have So the not expectations as second pull half. for be it's forward market European characterized don't that and know the the much. I Europe really for optimistic that year-on-year market spec-grade do has a will U.S. historically we spec-grade U.S. we seeing

is forward that of expected question Europe easing the more And same have to. size a so answer see is. the will market significant is U.S. that not that and quantitative A And is to reminder the whether spec-grade as watch in how just in the pull Europe encourages see we market. the

So it is less even would be forward. there pull if material

Robert Fauber

little of of just second I’d the we're maybe into as Ray, the too, bit half add year, Craig. color a now

So strong. second quarter seasonally

it's by talked replenish. to pattern consultative market favorable continued hear pipeline but pretty typical we've say the Our The I'm pipeline from thinking these that supported has, corporate kind I'd perspective, conditions solid. about. has

funds but had positive issuance we'll July slowdowns earnings got as high flows, tight something we're yield, August. grade high bond as in see year yield this added a and U.S. the that And spreads and usually index recovered bond two except all flows month later good a corporate year. in some expecting month substantially widening have bit the like have the that a fund positive years of been in that experienced can U.S. they have it's every softer. investment every level you've flows blackouts, been QX and We've the May. seasonal In got

the funds that's seen that years. we also high to in the in to the last in And five I'm contributing yield level had bond contrast demand and something over like there. outflows six of

despite in leverage firm. flows the believe of and is funds market it's on pipeline outflows, the weeks we've I seen modest the pretty leverage side, the fund positive market, looks the learn loans pretty consecutive the fact flip secondary So XX tone now,

got has market the the said, very jumbo that in active. in markets same M&A first the in pretty We've The low in Europe some quarter. year. still improved that's activity leverage rates. continues good of of And They're half be activity July. has Ray Again, conditions. funded second the finance market from the got and investment for sustained investor supply very as grade seen some Europe, It the demand. soft investor We've in demand first to benchmark and get was to quarter. announced We've been strong good theme the the

saying. So what we're

Craig Huber

you. high revenue if the BvD, I did get I it single-digits, do? BvD Can ask just The was question Thank up a Was you. Thank by could? quick how excluding was asked always I investors, there? currency housekeeping

Raymond McDaniel

we a Dijk I business It's don't it. disclose is teens very, happy typically the It We're as standpoint. the constant Bureau say standpoint very basis. both there can been growing standalone the very on well. dollar sales organic low-to-mid on is from a and know. Well, results But performing with in revenue Sure. you basis that van a a

good So Dijk. about Bureau we feel very what's van in happening

Craig Huber

Great. Thank you, guys.

Raymond McDaniel

point, Yes. good can Then Mark's look Bureau getting from more van without a it's rate just contribution reinforce and you getting detail, to growth Dijk. the see the that at RD&A into

Mark Kaye

is just across much strong Yes. fair, story it's not RD&A a But van the to Dijk pretty RD&A. in be board. Bureau

Craig Huber

Thank you.

Operator

take And from of now Foresi we'll Joseph Cantor question a Fitzgerald.

Joseph Foresi

protect to a wanted opportunity, you think against I back go do China the you there that there's my I to the that fraud the Hi. around I but higher in how is, for yourself of risk the understand China? second. geography rest do guess a question world? And ratings in versus

Raymond McDaniel

very the entities companies, are less active cross financial in a in quality internationally transparency The public fraud of that in for consistent might financial ratings than China, mean have some there market risk, the example. on more of higher are see which and they companies well largest border reporting. Chinese is about thinking information though you on U.S. available Joe, terms I and for the do understood in it's certainly

concern. less So that's of a

is the the if address much looking make numbers is particular In information financial way to it in there it how And – the the is, placed simply a how terms rating intuitive to the of across are make of the rating worthiness in is is. be or the through in financial a participate choices with the information, a market, entity about and at score. should credit lack not of assumptions conservative the or ratings clarity where amount it complete Do statements? domestic the sense of comfort to how the challenge,

to like interest or in there I going going Moody's for interest financial financial is transparency. quality, assessing think to be firms itself Moody's in assessing There's Analytics. in statement quality in that provides building and continued continued opportunities be statement

Joseph Foresi

Got it.

one, just then but I to with a And Okay. different China. guess two ask here. get I we was only I'll maybe stick going

what gauge out goes they favorable they interest Moody's kind rates potential could you the can would of possible reputation of entity U.S. measure other Thanks. region. kind In sort that I'm do And because of early with a rate company, typically get benefit when associated way and more So Chinese you words, stage benefit? that? trying in – a to same how internationally just of wondering come demand Moody's just that I'm do

Raymond McDaniel

in In the constraints certainly time see are in domestic issuer issuers Well, there to what the side issuers or that the debt. less benefit point clear the we – Western the cross is because and among this more the border buy of European on U.S. similar at market, on market, are issuers. on would dynamics

according where market in that again, is because so best dynamics. And of capital I And its still channeling we that improving that's of more risk think opportunity terms see to the a is reward the Chinese the the for risk of which efficiently, channeled should officials. of really these be entities over policy to end quality for goals allow one assessments capital is of day time at the adolescent more the

Joseph Foresi

you. Thank

Operator

coming And our will Sachs. of Goldman question Tong George be next from

George Tong

to want back Thanks. MIS the I go segment. to

slightly You've but a unchanged range. X% guidance your MIS flat down X%. global to holding overall you're for forecast is to issuance the flat The increased wide relatively revenue your full-year, at down

the global really So would you just because your Moody's at of stronger issuance environment at changing MIS? say would on So you view view say it's mix that's rate the increment, your of issuance? fixed is

Raymond McDaniel

it's I well – think two things.

move also down in on more half the that continue the modestly first probably outside half. the I but seen to point say we've where X% that X% of that we in anticipating would second to positive would the mix not we're range. are And favorable We issuance, certainly will

George Tong

bps strong Got segment, quarter. operating it. MA In That's XXX helpful. expanded you're year-over-year margins the in a the

operating changing You've for in segment? full-year. margin guidance you the a Can by talk view your what's in diminished point about to lowered the margins on a cause MA business the

Raymond McDaniel

M&A guidance margin is M&A have for and would been activity adjusted announced, and Sure. The related MA obviously driven divestiture which not costs, we've Max Max. acquisition. primarily The that RiskFirst transaction by both the RiskFirst includes change it unchanged, where

George Tong

helpful. Got it. you. Thank That's

Operator

will go Markets. to now BMO And Capital of Silber we Jeff

Henry Chen

Hey, guys. It's for Jeff. Chen, morning. calling Henry Good

making. of wanted could looking talk At been tie level, guess how I together strategically acquisitions? of a through, what kind talk I of the in in maybe future and terms you you've Thanks. high to some sort acquisitions cinematically that at of that just areas Just you're how at sort of to all about you're looking

Raymond McDaniel

turn the the Mark to strategic remarks, in and analytics we our assessments Rob want perspective we're I'll solutions, in extend starting risk this comment said expanded their units. provide to Sure. each we of to But from that offerings. prepared as over analytics and data and solutions,

can our at part. data from out unit Investors Moody's analytics Analytics or measures most where the Moody’s risk are provide, of risk assessments And independent non-credit and coming solutions analysis, may to a is that The but also acquisition really the looking opportunities. are contribute for the MA Service the credit coming assessments

Mark, I you anything say RiskFirst. on don't if want know to

Mark Kaye

are of note shared problems Yes. that set I the are view highly Analytics would targeted that capabilities RiskFirst at we acquisition, a that important It's specialized a by customers. of just Moody's as many kind that business. classic analytical

in this plan, around Management cetera. capabilities the that a data data specialized in case, et Investment a of sets. to liability those structures, get unique They case highly historical the In returns this relates the pension assets, built are segment,

owners sponsors, and The as the as pension the insurers, ecosystem, the consultants. buy endowments they the solutions effects benefit including network managers The serve is foundations investment investment that side themselves. RiskFirst offers plan that from well as ultimate asset

on purchase And is that running network which after SaaS the fact platform, product this readily a effects can implemented, is have customers quickly very are making very it decision. those up stimulated a by and

adoption ease use the of of the platform. So the speeds

effects so from again enhances that And this that thing. the network get we

work product the with doing very been we've some are important there And in space. synergies that insurance the in RiskFirst the

GGY, up our about acquired recall insurers relevance management years analytical ramped substantially ago, liabilities. the three which to You'll we of

RiskFirst us on companies. very of now important some the asset gives the insurance capabilities side

So that insurance very a to be companies. wide building we're solve out very problems of you a can start to able substantial see range to for position

Henry Chen

Got it.

Raymond McDaniel

Rob, you comment Twenty Seven? want Four to on

Robert Fauber

Yes.

both looking what increasingly with relevant to the we're markets insights and mean be able analytics in said, for dovetailing broadly institutions, is is Ray Seven and areas financial market are and assess great even investing Four and where markets I Twenty So capital to credit example. more a that the risks to

agency modeling and expertise. leverage rating wildfires things you've got this And the to companies, associated going able analytics, water all issuers, importantly focusing scarcity, level very sea to allow that's that's climate MA. be both across well Twenty insurance us investors, some Seven like So very That's on Four the And increasingly as to Moody's. us on. And content with physical climate. so risks or data banks, rise as bring robust

again, to ESG unique going think you broader know, some all and capabilities in into really and content part integrate our the that's investment to And climate we've analytics our space. we've on differentiate this an offerings. of got sets acquired us that we that's and And ability focus

very also – our on world gotten good would that some has gotten has small some around And and deal, while into that space. logic we've and that industrial the good very say some move I feedback, press market from

Henry Chen

super for color. cool. Thanks. helpful. Thanks very the That's Okay,

Operator

William now Timothy of McHugh And we to go Blair. will

Timothy McHugh

One comp the Thanks. us you the to I on Can to then of the the a plan. quarter? ESG. And follow-up guess, going a there kind are quickly of a guess guess other pieces as integrate questions. of Moody's how give for any ultimate feel just missing I branded you two one. I numbers that secondly, things recent to type acquisitions. are strategy that's your you offering ESG some if the after incentive are

Mark Kaye

the question. million quarter quarter was that's that expectation million answer $XX XXXX. The compensation Tim, second of XXXX for per numbers the $XX incentive the for consistent with the I'll approximately

Robert Fauber

Yes.

Rob. is this So

think the some scarcity climate and assets the some I of space. value there's and to ESG

ESG. So in for really we've majority obviously and data Eiris, scores investors acquired Vigeo stakes which in is

assessment and they analytics. financial climate institutions. Twenty Four data for And then investors, also on about focused a just We're platform bond I very green nice issuers. Seven, have talked

within So ESG we good We're agency. the think about some explicit kind ESG ratings. also how more into we've producing thinking gotten and of content rating very being we about considerations the factor assets. Increasingly,

a of ESG across be will is wide part packaged of of see Moody's branded Moody's think time, And all the will you'll over needs will Suite be broader a And content; this they offerings. range I I think customer then meet what ESG to Corporation. of you see

needs very the customer agency, of both the rating MAs needs the broad base. customers As Four Eiris, the and a of of Vigeo I said, Twenty Seven needs and

Timothy McHugh

Thanks.

Operator

And Dan now Instinet. of Nomura to we'll go Dolev

Dan Dolev

question. guys, Appreciate for it. my using Hey thanks

I you. second no So just XXX estimate here down implied want this the revenue you I half. And to understand on or there's we a on the basis points the Thank about slow RiskFirst, one? in Moody's sure why just as didn't of growth guidance in Analytics raise kind make

Mark Kaye

Dan, it's Mark.

the deferred the into overstating I bit maybe because of probably And we'll RiskFirst think haircut. you're consideration not accounting that revenue have That you're… why taking it's be it. treatment a scale you're on the may

Dan Dolev

looking contribution? pounds. Got at it. have you have. I XX.X don't million Right? was but think you the mean, disclosed Which I disclosed,

Mark Kaye

Yes.

We have that. disclosed not

Max any the fourth the revenue thing quarter, other by that assuming need we The will you in the we to is get to not keep we're have business. mind from time

going other that's the way. So

Dan Dolev

Got it.

is there just So it's the M&A. implied no no slow implied, down,

Mark Kaye

Absolutely correct. right. Absolutely

Dan Dolev

Got it.

Mark Kaye

extremely business underlying is The well. performing

Dan Dolev

guys and I about just there's mean, are you because In being talked in late kind of our services question. And Thanks. lot of I a sound about get the issuance not cycle, a to you confusion. issuance. talk et you we lot upbeat think comment very you from cetera. we maybe the where right a there of seems space business about follow-up space, now mean, agree. can I issuance be macro our withstanding the a

Raymond McDaniel

the Well with the half year, a had are from relatively to and quarter not of expecting of but respect half growth be XXXX. it's we just we fourth to easy second comparable a lot compared particularly issuance, the of this that to clear, first

that's really our informing So commentary.

reforecast to mention the in U.S., basis interest the growth easing, down that Yes, been steady with cycle, cuts quantitative on slowing has cycle a globally I long with question. slow As growth far been down to number the a a of here for trade somewhat IMF discussions. that we broader it's have in not obvious about Europe everybody think global late discussion rate as and and growth that renewed in expected

So slowing growth. yes, you can look at late cycle, at you look can

deal On slowing and policy this right could in the with of resolved be could air which be being up hand, are the are too, as deployed act Brexit number now tools catalyst favorably there that renewed that to are growth and discussions to other to things a trade growth. going

things to So positive break and cautious bit in wary in a of this but still appropriate a I cycle, think where can a be are bit we way.

Dan Dolev

a Got it. Thanks lot. Great quarter.

Operator

we'll Securities. Warmington Fargo Wells from of Now question a take Bill

William Warmington

everyone. afternoon, Good

strategy. So the I wanted cybersecurity to ask about

strategic a got investment You've with TeamX.

You thought announced I an opportunity to was the if the so, expanded ultimate if JV develop what wanted and rating – And if ask with there the were you company. for a to Moody's? was standalone cybersecurity

Raymond McDaniel

Yes.

this are I see research scores think going about available may also standardized to market we score, an information with be associated providing to other analytics And based publicly kind assessments as very whether is we open on rating, participants. where what measurements. some best or minded area probably, of it's the in helpful some both offering be and space, cybersecurity the

we for cetera, this really real to on methodology to this And private risk a play it's directions et whether role providing are risk believe management then vendor developing of with and analytical the science There committees of boards with can a a assessments, we're or number here. go. TeamX And directors, what focused area. methodology bring that the goes may some is that engine

William Warmington

the about my follow-up pruning in portfolio? you're question for doing that And Max then divestiture. thinking Any the on other

Raymond McDaniel

comfortable with No, portfolio. pretty the I we're think

William Warmington

Excellent. thank much. very you Well,

Raymond McDaniel

you. Thank

Operator

We will Shlomo of to now go Rosenbaum Stifel.

Shlomo Rosenbaum

amongst about, kind the but annualized Would you growth I of of, to rates put with those And Twenty very able up bought that XXXX, what then just make be JV in kind the and is there put three? RiskFirst the over some you're you should RiskFirst. much Four then annualized the squeezing were in the And guess we like, there for the together, the well. some of wanted an Seven Pounds disclose is assumption as an you you that of there talking Thank three to businesses Hi. on basis. that revenue you if me

Raymond McDaniel

Yes.

would be expertise outlook our companies, not immediate I your as think say to that companies. what are of of these from assessing capabilities These purposes it's as for modeling the return much and is. and young this acquisition fair material financial

Shlomo Rosenbaum

Okay. all? it Max really was or how fast does growing, And at growing wasn't

Raymond McDaniel

It we growing. profile EBITDA was business million overall. growing year. not it that than for about And this about the we slower XXX been at margin. had If forecast transaction, – Max Yes, had MA in but would've the was the it XX% said, had revenue we been growing, as had a done

Shlomo Rosenbaum

Thank Okay. you.

Operator

would does like to back Ray this question-and-answer to I conclude things turn And McDaniel. over today's session.

Raymond McDaniel

and Thanks. with forward all Okay. Thank to we call. for in speaking joining call look you you today's again the

Operator

This concludes call. second XXXX quarter Moody earnings

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

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

Moody's (MCO) 31 Jul 192019 Q2 Earnings call transcript