MCO - Earnings call transcript Q3 2019

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Operator

Good day, and welcome, ladies and gentlemen to the Moody's Corporation Third 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-answer following the presentation.

I will now turn the conference over to Shivani Kak, Head of Investor Relations. Please go ahead.

Shivani Kak

you. Thank year and third 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 Investor I'm Shivani Relations. Kak, of Head

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

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

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

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

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

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

Ray McDaniel

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

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

with its quarterly has ever strength attaining nine achieved in eight growth second well revenue Analytics now growth Service highest as Moody's as of revenue delivered past substantial in Moody's Investors Moody's the result which has quarters. double-digit First, continued

Second, the to was of margin adjusted operating period. compared XXX XX.X% prior basis as year up points the

to adjusted growth of light guidance EPS disciplined expense range $X.XX. and diluted our management, in $X.XX stronger-than-anticipated full Next top-line to year we're raising

we finally, our regional on opportunities. product targeted last And expansion in of call, since earnings our long-term and continue to investment execute strategy

am pleased bolstered its disclosure. I addition, In Moody's and in ESG has leadership that engagement

to in from XX% MA. Moody's third overall growth $XXX of grew of strong Adjusted year income from million the was by quarter was increase points. XX.X% business MIS XX% in the XX% across operating up on driven XXXX revenue Robust basis diluted adjusted Moving up a business segments performance. resulted operating margin period prior performance XX% results. EPS both by XXX adjusted driven and and XX% Moody's growth in

We areas. and has continue adjacent review line the few pyramid and across credit last into to strategic key geographies with months to minutes the down analytics in a priorities. enhance Moody's corporate our and growth opportunities take businesses, in few several product while strategic like both core undertaken new our pursuing to ratings I'd initiatives

high CCXI our market low percent XXs China America. XXXX. speak And Starting the our to with up I'll from XXs the $XXX regional the we China market share speak industry-wide have generate enhanced in of in -- venture, and joint I'll approximately first to domestic Latin range ratings for to forecast revenue XXXX. during presence in million

XX% ownership year-to-date. largest which with well-positioned XX domestic approximately rating ratings approximately rated CCXI stake are new has customers public With agency, in including X,XXX China's we

to announced acquired listed earlier green Green companies and bond to we corporate policy provide advances green that Seven in to addition, investment we China recent stake finance Chinese data and publicly this a more research environmental minority SingTel in risks. evaluating of from complements organizations. week in obtains data X,XXX In SingTel verification establishing solutions global The ESG analytics banks, than our SingTel for and Four investors, institutional Finance. commitment standards Twenty acquisitions Eiris stakes transparent majority and and Vigeo our

month expanding governments Panama financial our and launched Subject look forward for domestic Moody's Local, markets sectors domestic Local. To further presence this provide Bolivia. new ratings Moody's to region. corporates, regulatory will to Moving and Last other Latin local foundation, in learn From and America. across more institutions, the platform research please we to visit approvals Peru, this about moodyslocal.com. in we

our into Shifting and adjacencies. we to enhance pyramid to our expansion credit down portfolio. added third capabilities business the further In new product the quarter,

an van Compliance platform to analysis, X, anti-bribery facilitating anti-money First, with and rules launched identity enhanced we regulations. customer at Dijk, Catalyst related compliance laundering, Bureau know-your-customer, streamline and

ABS administer analytics operational asset-backed tools. this mortgage-backed securities programs. and and month, report by software issuers acquisition This and serving markets, and issuers dealers we investors position acquired with platform MA's securitized and on Suite, used Second, in strengthens a earlier data trustees leading to

and credit ability data U.S. and stress into government public Twenty to Seven analytics data This local integrate risk. from analysis to analyze finance and research. rating use MIS's ESG demonstrates Third, credit exposure heat group Four our

plans more assets. closed the of RiskFirst, solution than pension than more with provides a platform, which July, Finally, leading for our acquisition XXXX trillion sponsors, and MA PFaroe asset in managers in award-winning in $X.X plan supporting

Issuance growth third simulating a after disciplines, driver and analytical key of business. enhancing performance. consecutive assets activity and demonstrate an relevance quarter of range our decline liabilities. unique and of long-dated of and the ability commitment for Moody's management advanced analytics These increased of offers brand to and four new extensive to of data our the quarters prospects was capabilities our RiskFirst ever-expending operating

delivering overcoming falling corporate and MIS bank Central was third Strong various robust issuer M&A-related global MIS' significant in market the in Corporate conditions, uncertainty and and geopolitical forecasts. driven growth by driver performance. growth issuance, rate friendly bond year-over-year a actions finance financing, benchmark fixed of created continued rates quarter. aided opportunistic

to third in minute loan market investment another than and like well as by third grade in bank the quarter. strong Due was all yield on the issuance as issuance high-yield XXX% classes, spend across in the drove more investment quarter, respectively. bond of increases lower financing fixed XX% issuance and U.S. I'd income curve and bond costs So the high-yield issuance relatively grade to flattening asset

taken is that capacity, steps in ensure cost, year-over-year important have U.K. appropriate XXXX, declines operational in Moody's to June has reversing prior a of referendum loans, reiterate rate of in floating year-over-year to increased has that four of the string XX%, Issuance Brexit, both the which EU we slightly by since In XX delayed light the quarters. U.K. it financing the and higher a

processes XX of carry We of adjusted in of and prepared the to conduct ready have short, the we In for the activities Brexit EU no-deal outcome also rating operations the credit without the our MIS is are event out in interruption, the Brexit, delayed And U.K. process. to a irrespective effectively and scenario.

recent few future. initiatives to review sustainable like to a that our I'd a commitment underscore

consistent published Moody's includes inaugural announce with to Sustainability objectives. Board proud on moodys.com/csr, Standards Accounting its SASB's index has that am I information First, which

deployed events in tools Assembly multiple carbon senior related to Second, hosted New in and UN MIS the also to week. UN York it. with Initiative during Climate transition Compact ESG Global participated financial a and during Climate General City of on partnership briefing pace Week management Bonds cost facilitate

Eiris Vigeo will MIS on themes markets. together Third, hosting where Four share is industry Seven, on conference in ESG an with key and insights important next ESG global London Twenty their the impact credit week, and figures

entrepreneurs a growing initiative America's Pathway overcome business. small Small Prosperity, to affiliate Development collaboration Moody's financial Business our Pathway to and a to the announced challenges of dedicated empowerment Prosperity between a Finally, Centers. is Finagraph helping

I'll call for third XXXX. our to over Mark Kaye performance on and updated quarter now further turn outlook provide our the details to

Mark Kaye

Thank you, Ray.

revenue due quarter favorable to debt XX% up overall third was of the a the in period mix year XX% debt MIS, from increase issuance and For above prior issuers.

rates. infrequent of mentioned elevated earlier, Ray towards fixed-rate benchmark growth issuance by skewed results among bolstered levels activity, interest Moreover, lower As borrowing issuers. given was were

public also XXXX. basis increases Organic up reflecting Strong XX MA of finance taxable in points year rate compared issuance, basis of the business was XXX of This XX%, achieved the strong U.S. in revenue period. third quarter. strong including contributions MA margin each points transactions. in performance to adjusted of revenue from the adjusted overall quarter third benefited operating an prior in expansion refunding from supply growth resulted XX% from MIS margin the business. enabled improvement operating

sales as Bureau van address feeds. XX% ratings as grew that revenue well and of requirements to due RD&A customer Dijk credit demand for data identity solutions research strong

of delivered by products enable led grew for banks credit XX%. organic and In ERS along growth organically strong our compliance platform origination for an double-digit insurers. XX% standards and new On loan new demand with with RD&A basis quarter for that revenue accounting XX% assessment or revenue the

up months were XX was ERS revenue XX%. Trailing sales while X%, up

mentioned now grown recurring revenue of revenue. performance I'd in XXXX remains this growth MA the significant has thus has since MA of $XXX of eight ERS year. increase Ray far earlier, robust a in base, ERS quarters. The highlight to As double-digit like the million delivered by nine last which driver

while and will future X%. quarter, the business was third XX% total on shift in sales trailing Recurring MA. This basis demonstrates of subscription quarter. shift the leverage revenue third the increased strategic the as through ongoing products a scalability a The one-time trailing services XX-month in mix. the our ERS of share and declined to drive basis business continuing XX-month subscription as On expand a of operating business support sales ERS XX%,

to expenses acquisitions operating XX% We expenses year divestiture and company related within an charge related drive in increased to total attributable remain impairment a operating approximately points captive performance. expenses operating disciplined percentage quarter, last settlement of the Max. XX planned the to incentive strong compensation insurance third with the to managing completed In

approximately related expenses insurance incentive settlements and the nine restructuring Max increased percentage charge. operating accruals to to company the expenses points captive impairment charge, Year-to-date with attributable the high total acquisitions, for compensation, operating XX%

Details filing week. litigation that our to previously in be upcoming matter our Form in on reflect disclosed settlement XX-Q the filings disclosure regarding will insurance the updated plan captive were company this later we XX-Q and that Form

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

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

guidance U.S. reflects British pound $X.XX. the planned rates range insurance the in and XXXX We of related remainder captive with amortization, increase euro to operating and percent Max of single-digit and expenses. the for exchange for charges, expense reflecting restructuring anticipate and forecast and for impairment revenue our that Specifically, acquisition-related now expenses of depreciation $X.XX the operating the Moody's charge company high both settlement will divestiture

to year we be to rate be $XXX anticipated in net to The do significant now the note, realize is restructuring expenses of approximately of We're expense to respectively. the be fourth quarter full are ramp-up XX% savings XX% The first a expect full million. the not XXXX range Of interest adjusted forecast to and operating program. we tax from operating targeting XX.X% in XX.X%. effective and margins approximately from as year the XXXX

Diluted forecast approximately to $X billion. increase to to anticipated adjusted $X.XX and Share to $X.XX EPS $X.XX to diluted $X.XX are repurchases are be EPS and respectively.

XX our list For our of table full release. guidance refer of earnings to please

U.S. increase we have spoke in to of our range. the outlook We be For in mid-single-digit is increase anticipate range, low single-digit due earlier. in mid-single-digit the conditions to year revised about that percent the MIS, full to the Non-U.S. to revenue market range. percent forecast revenue support now Ray revenue percent

continued as approximately funded stronger compared fixed-rate the Our public activity from bonds as M&A. XXXX. We flat when to forecast from XXXX corporate estimate is debt support sector for debt issuance well in

and ongoing assume and rates We rate expect from monetary accommodative bank benchmark lower loans and policy. CLOs conditions floating low

adjusted Our for operating to MIS approximately is The first-time expectation mandates XX% achieve XXX in still approximately remains estimate XXXX margin XXXX. on track.

by For given bolstered revenue. sales the anticipate revenue in across percent business growth MA, range lines double-digit to increase we strong all recurring low stable total

points Max. basis the expect to We of margin announced impact MA well continue to to XXX year expand XXXX. operating as in adjusted divestiture XXXX reflects to the guidance Full to the XX% XX% the aggregate planned acquisitions XXX range as of

like would to to Before back a the Ray business emphasize continues turning grow. few Moody's from to over takeaways quarter. call the I key core

geographies. extension we into As pursuing actively in regional and innovation business adjacencies noted are earlier,

enhance and our MIS raise revenue and to growth commitment These and prospects we management. adjusted pleased EPS the are to and to ability stronger-than-anticipated MA. guidance, disciplined both efforts expense reflect due of growth, relevance Last, diluted

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

Ray McDaniel

Thanks Mark.

Before November few Moody's the a assume role turning of X like minutes to will Effective Q&A, to Analytics. take and the of President I'd Moody's incoming to presence Service. Moody's Tulenko of Investors Analytics Steve introduce

joined Steve held led And since he Director and M&A. XXXX. role marketing a he of Executive Moody's sales, service currently the customer is has previously for XXXX. in He ERS,

to and role roles sales, Prior with to various the this and MIS. expertise. product experience held MA, product development, he leadership formation Steve of deep strategy comes at domain

Mike will assuming with of Service. he joined Mike is Rob the Rob of Moody's succeed Chief MIS, in Investors Officer, West currently Head Moody's & of Operating X, Ratings Research. November XXXX. Also effective the And role President as Fauber

as the region. the European Finance, Earlier for his and Previously Africa Structured career, businesses Head the led and strategy in that, Ratings Global research of Mike before East for of served Corporate, for the was both Corporate responsible Finance. Middle he

to their business. Corporates would Mark extensive him new I roles. to and makes European on experience and Steve suited leadership MIS Steve new business. congratulate -- in Mike's leveraged EMEA the the Mike finance like their ratings on ideally in lead

that with Operating Officer. role, in I'm as Fauber confident Chief new his Rob

promote support clarity, insights We and progress, knowledge, decisions to are trusted thereby fairness. continue And to through ability standards. that strengthening informed positioned Moody's offer and

on Boston Tulenko Barclays slide that TMT Steve York next Global we two in City, the in months Investors attend Conference the in at Francisco. Listed are conferences to be will San this New the mid-December. to expect and meet able

Please at meeting request contact to these management with your bank Moody's events. a representative

March everyone XXXX that next New to will in I'd XX City. like hosting remind on be Investor York its Finally, Moody's Day,

from of question-and-answer session The will management Mark This And and and event, concludes important live, be showcase and which prepared remarks. webcast the business. Rob our aspects feature company's Kaye Mark for will presentations joining the are Fauber. me, Almeida

pleased be Operator? questions, to We'd take your

Operator

[Operator with Our ahead. comes you. Please Michael Instructions] question go JPMorgan. first from Cho Thank

Michael Cho

maybe debt question taking you're issuance. hoping of some morning. Thanks your in was good the update some I outlook my And Hi, the I for well? you appreciate assumptions, there commentary baking provide on XXXX can XXXX the as today?

Ray McDaniel

offer for turn happy Rob, issuance be commentary. Sure. to I'll We'd some preliminary comments. to

Rob Fauber

Yeah.

were October. So same year, like like ends a up. issuance current -- see for like we talked the we of year were can end and the so about we We get XXXX, asked question the year the we in to ago, where to

then in what own And terms seeing be their with And our of forecast both Street, we're triangulate to build. bottoms-up from The forecast. able

last tailwinds said, to see two both that issuance. the really So, as years for and we headwinds

similar And issuance, at to rates what roughly this in levels macro We think we've got be to backdrop. benchmark obviously, global leads as a seen -- low that year. very us of kind weaker low could amidst that but XXXX

in we've mix way the may say, And to see is this year. important mid-single-digit and recent see few if also next year, growth our into we issuance, also revenues. I'd of issuance end years, next our as of in towards quite the we overall able into be heading seen things, year a But to

amidst would think threat picture remove the resolution settled sentiments, clearly includes policy. global And and uncertainty. an monetary in that A U.S. some Europe Brexit to is accommodative slightly growth. more tensions improvement of a of trade that what I the And escalation includes that China the key growth in

existing for more forward And from potential walls. also maturity the pull the

growth the particularly, see in market. to be us more whether going with looking we're corporate So comfortable this gets to

kind or course, end risks headwinds. around the of of risk any some cycle recession of provide global of downside And of could concerns sentiment widening spreads,

next a we'll So, kind our out earnings But provide more that's saddle on of fulsome -- of call. a reaction. view

Michael Cho

Okay. color. Thanks. Great. That's great

made the I to along follow-up some the progress strategic of guess key just that in wanted and you highlighted months Just Moody's recent initiatives recent years I the take if, does reinvestments I be you mean change M&A? on of when topline term priorities. certainly categories a as priorities thinking about and well in your organic trends in that step favorable as to near seems back posture Ray,

Ray McDaniel

No. really It doesn't.

is aligned have that pursuing tightly with initiatives The strategy view. we been Our built with strategy. long-term are a that

favorable conditions so we've while market enjoying really into the now we're it's And looking whether -- future, organic longer-term investment the or opportunities seen. is the inorganic

much the it's So, approach. very course stay

Michael Cho

you. Thank

Operator

from Barclays. is question next Our from Manav Patnaik

Manav Patnaik

much. very you Thank

could pointed just Moody's sustainable into there number question any my not organic XX% looking maybe future? you growth you the reason been as on Analytics, first Is is has consistent that the pretty ask out. So out that double-digit

Mark Almeida

thanks good over and aware of of the you I seeing revenues. would short say about question. it's would of I do periods say bullish business the the we're need on very the ERS Manav, feel business. for that, be some Mark patterns time, quarterly in we the performance we're to of

If back the you XXXX, introduced. XXX introduced, behavior. back actually more ASC sensitive that when interesting standard new product beginning than and pretty to you standard of frankly when the anticipated at accounting we revenue is some ERS to going go look was was The mix see

ERS ups growth And XXX. you in see some from quarter-to-quarter downs so, and the under

over a the from a feel see going MA run So we the very about I double-digit accounting the noise But long the in status again outlook think to bit I you're good that in as run, growth and standard. little for think short -- business. of its

Manav Patnaik

Got it.

side local put I in guess on I by the -- just China? did if putting America Ray, ultimately mean you brand is the could China that mean I plan the Moody's like I the ask for Latin you on Okay. what And that up slide

Ray McDaniel

us the China. concerned the And CCXI brand emphasize important an investment very a in the of our joint character is well-known in I in of think China. for element CCXI favorable investment also the approach Right domestic as has would I as most now that Chinese we're far is venture, there.

CCXI level retain so And change the using current for investment. would or anticipate brand whether the the our we stake foreseeable our I of future

Manav Patnaik

you. Thank it. Got

Operator

question comes go Toni Morgan from Our next Kaplan Please with Stanley. ahead.

Your line is open.

Toni Kaplan

little takes you change. puts guidance about hoping could and talk just the the Ray, of a bit

terms quarter expecting is you're a of solid or rate that the raised quarter? else quarter, this had modestly. of call out sort you'd guidance because Was You only the tax fourth higher in that what anything of there for the but

Ray McDaniel

number turn this might as commentary. there Mark to color puts I'll over you for imagine. Well of and But takes are Kaye some

Mark Kaye

I are in think -- we Toni. two that really to in mind here there here want keep

is FX. First

We look the are or visited of as $X.XX upper results emerging the completing anticipate in incurring or Max The end results saying as then of roughly we FX a the so. of $X.XX comparable month from feel indications we early year. that the comfortable probably probably we're headwind probably our of period we worth at year. in last where range, guidance And September the of that another assumption delay in X/X emerge more October, is

Toni Kaplan

given potential you the on and structure on going And you're debates business would overall any agencies rating right And as the Yes. any of comments about change business the in now environment? then about regular the sort market great. the some It's or expect model, usual? political regulatory thinking of the just how back news in

Ray McDaniel

at ratings authorities the all examined that been And for be in closely. it's emphasis last market by transparency compliance really that think and multiple SEC. context, best by the been inspection And that regulatory decade Well, the model to review the be the and the that scrutinized all the to industry jurisdictions. occurs compliance business should in participants. certainly conclusion assure remember the best very participants. it's important has over looked I for to model was that business regulation outcome and was the determined on for that market with And And existing

have the there with many, have of who've have with conflicts in call the acknowledged in different market managed, why have participants are interest or see adhering be that's of inherent they we review. of been industries. we're past interest years, disagree methodologies The disclosure analytical I we with have they you this approach of whether as are And published. models that -- those on conflicts whether public many which approach. that always to business can can there They to model analytical our business I our can agree see

good, no that. credit model for free is public the for to market ratings model of business is big allows allows other us important in that simultaneous So, very engage a small. or the which participants to release all There

And analysis good of can really the so, managing the the from and business is or able care conclusions doesn't in and conflicts. find Unless who check, that. model find our us that we write conflict to a inherent that comes or business not the our be we going interest our emphasize about still research public of that someone, wants doesn't we're have some a to to

Toni Kaplan

Very helpful. Thank you.

Operator

from Our Blair. William Andrew next Nicholas Please comes with question go ahead.

Your line is open.

Andrew Nicholas

I I announced finance Hi. want morning. you to SingTel Good start acquisition green guess this with just week.

more broadly demand if in curious And in about talk ESG where where see it maybe relative Just and is that. bit a kind of could frame Europe in U.S.? to little you the could for if you more China you

Ray McDaniel

been has Rob this. closest Yeah. to

him I'm of make couple to So, going a invite to remarks.

Rob Fauber

Yeah.

in China over market to small disclosures government billion is companies recently requirements at the the globally, our minority second XXXX. a there investment. ESG. year. the U.S. in make risks both efforts listed really intersection of starting It's And and ESG some for issuance around publicly after it's green the of China new bond $XX So, last It's largest announced

and that ESG growing. first the were the China, SingTel fact in X,XXX principles and They're signatory Chinese investment. data on they're of but on So, in responsible focused is number for companies of finance green based collect listed They They China. is over a currently Chinese and normally data UN's analytics. provider

It we market pretty to Chinese its around content going Moody's this be think adoption in accelerate also give to going is sets going ESG. participants. access offerings. to investment to global Chinese and its is valuable enhance some serve to think and Chinese is and what rich the help going ESG And us SingTel to So, I coverage market ability it's

We market China. one finance green in the see as important an

clear As policy The it's analytics its infancy. in serving I a that and market focus. is said, data

So of CCXI with what much player kind we're this into a we getting is a we nascent like ago pretty excited the with years in the market Chinese did -- rating about stages think in prominent business.

Andrew Nicholas

you. Thank of color. a helpful housekeeping Great. That's items. just And then, couple

you do on you an First, have sale update Max close? when the expect to

And you delivery size then hoping second, I in the one-time license ERS quarter? the could in was

Ray McDaniel

With respect to Max, I think we would anticipate November. it closing in the first half of

Mark Kaye

ERS, As to wouldn't guidance relates the I delivery license that. to enough out say the in specifically is provided. break it the we we directional that material influence don't numbers

Andrew Nicholas

Perfect, and thank you.

Operator

comes with Wells Fargo. next ahead. Please go Our from question Bill Warmington

Your line open. is

Bill Warmington

afternoon, Good everyone.

on And Peru, little America us talk to Moody's there? So a is just to wanted the thought revenue you currently? could whether And -- here for timing? how know the a with growth to out about the bit much ability maybe coming share question Bolivia. if an Panama revenue accelerate Latin you what's of and behind Local, is

Ray McDaniel

ahead Go Sure. Rob.

Rob Fauber

Local America. it's Rob. earlier wanted one in have the with Moody's And subsidiaries These Bill, Yeah. done are CCXI Latin branding. -- I draw wholly-owned between to that we we've and question the with distinction thing what and I

from look it's region to bond -- markets. Latin take of a decided the bond the approach and overall in the meaningful at rating the a opportunity is of part a America, domestic around we've because coming So, interesting you that domestic in new markets, bit

be us opportunity local is name is ratings as And to as rebranded local the and to better to needs. says, local that in we region. across the capture think meet going Moody's help going the we this So domestic providing Local specific rating revenue language focus

The terms the itself America of fairly market. But the I serve in Latin best our to the coming expand on small I months to a would revenues. was platform is think Moody's actually the to XX MIS overall Latin revenues Local XX for going -- platform that is that see the of overall repositioning businesses. quite total say, the of equilibrium America the of small. you're in us continue step here to first And part

Bill Warmington

ask going wanted on the introduced And success Reis, ask also that then and in after some my to I on for products -- new follow-up about just you're seeing market? have been bank U.S. check if

Ray McDaniel

product Yes. work much expected. around we is recognized when just We a that like we tremendous business that moving and work we of But there. a you very was amount feel Reis strategy. performing Reis some I'll We've done remind we effort acquired some forward that did as are that require particularly nicely.

in could more provided the and data analytical we our we to Reis risk things very in commercial tools. foundation One customers very we that, it's apply And that's because of is estate. exactly real bought of better estate spending analytical the the they about management a there which demand why is we're that advanced real solutions thought that Reis as time clear in lot we're more with space, the skills more commercial really upgrade excited practice for data of and

work frankly still there's a expected. moving on business. to-do but for there. a remain we very to lot as opportunity do the there's bullish it's So our We've We and there's We lot think much excited But a there. of about accomplished yet list. us a big lot

Bill Warmington

Yes.

wanted promotions. say And the Mike, Mark just Steve, to So on happy trails. to congratulations you. I and on to a Almeida, Thank Rob and great congratulations run

Ray McDaniel

Thank it. you, sir. Appreciate

Operator

question Christian Research. Autonomous next go Please ahead. Bolu from comes with Our

open. Your line is

Christian Bolu

Good on morning. ESG. Maybe

opportunity you around And years? ESG. efforts color of how main to over kind next three efforts revenue evolves us the speak about to time? your of lot target two these around think over plan kind the monetize your to in any of offering sort also Maybe a competitor? sort Help compares of then aggregate spoke understand you You how how to

Ray McDaniel

Yes.

if anything. the ESG see my and space. start I'll me then When Let we're at want add looking colleagues to

much First of markets that the were operate market than of fragmented core some looking all we more at in. a

There of is There move a to are competitors. think sector. a I standards towards there not large for standards. that the established of So going number are helpful lot ESG is be

I E the out separate S looking the at from obviously, from to think it's G. very And the important ESG,

area. environmental We have in the made efforts, particularly

particular, some just in rather broader provide Eiris Vigeo ESG Although, than assessment environmental.

other products or Twenty sector. SingTel support Moody's whether in And Moody's Service. more and other also that and Four But it's Investors are developing we're the environmental in work we're doing Seven that Analytics

see Rating I some Seven in are Twenty real temper both to can for estate just very that we some that at expectations you that So to our of Moody's would also just monetize. point agency in markets beginning Four out Analytics. commercial nicely example, in the aligns are ways looking efforts and with

of bullish in the space there will a why evolve. markets will we're businesses ultimately sector other do addressable that, about stranded those what that the each amount We be reasons the how think become work might uncertainty one what. has it. the so of core this of investments regardless is to and we fair And matter is around our no in relevance ESG not Nonetheless,

Rob Fauber

Maybe just tools is this exactly R&D and bit carbon build to a new topic rolled little on we've agency of a and rating and sector-specific. Exactly. are meets income ways good corporate investors. transition when investment Ray. out the needs think And governance into as that's we some the assessment that right, that some In that tools, fixed

in bond the through MA been that And to through into think I and that really green the we've to monetizing be growth broadly I more I just a that into in Maybe -- is of bond data integration acquired, both this also bit. Ray market, analytics started little what the as the sustainability. the of services both then, going call we're And growing I'll think the beyond has the spotlight quite but And rapidly. market businesses there's MIS. mean right. in also has gone and products labeled market but

like to going So are this billion label something year. of $XXX volumes hit issuance bond

billion, to $XX is green sustainability. and bonds another Something billion is in billion social like $XXX of and $XX $XXX that billion in

So an And $XX you've that's in loans. that's like something then And another billion. area. probably emerging sustainability green-linked got

got compliant you issuance. you've about to demand few So for see ESG of this drivers are billion And can there investor way securities. your bond labeled that $XXX for

market their You've demonstrate to risk sustainability and got issuers wanting got climate the also own focus you've credentials. on

us Eiris to leadership a to the the space with because build we position really continue placed So we're label given in acquisition, think bond this on. going we're in well that that's market Vigeo

quarters a you a we first did XXX Eiris year. a signed sense of to little second-party give opinion XX the of Vigeo mandates this all year, through Just three over last

actually finance the actually Eiris a Latin Panama. gender on America. And In second-party first opinion quarter, in that's going we in to Vigeo this past bond -- SMEs issued winter-led

us. So over Ray leverage in next general, all fragmented as to it's opportunity and to front think But should market the said, evolves pretty how see To see of we're three excited the we we're this have some one, about years. growth. going the of two, I in

Christian Bolu

stake Moody's issue Thanks earlier recent of maybe the quick for Chinese suggesting answers. terms in a on an there's just very then comprehensive Bloomberg I in believe And having Great. recent question in article China. CCXI. government follow-up a on with

the around JV how So that get going fully with accurate like the your Chinese not sure around on going sort government for relationship any would is, be comment the to And peers? versus thoughts it great CCXI? updated plans stand-alone but of a

Raymond McDaniel

Chinese areas that relationship government. with us relationship the been the other continues of so authorities to regulatory and always than is with the be. really And the regulatory authorities Well policymakers has authorities with more in for constructive

the able dialogue the hearing able be level at at leadership level and our major both we're have views. candid sharing regulatory to their in the think views institutions. And and and thoughts thoughts and good I to at staff are pretty

to level. That from the going on difficult being separate think said, with I the it's at geopolitical completely relationship what's authorities a

into are continue in how we'll and to of terms We providing in financial in opportunity stake very Moody's CCXI. the we're ratings conservatively and so. nature to markets We our pace to institutions committed do behaving with to satisfied about remain committed services we're CCXI. we're large Analytics China China. research And and there. the proud of the cross-border remain good and so thinking in the be a and in And products It's business we

Christian Bolu

Okay. Thank you much. very

Operator

comes Foresi ahead. question Joseph next Our Please from go Cantor with Fitzgerald.

is line Your open.

Joseph Foresi

drivers? can move do we How Can update about talked And in the profile past get Maybe heading first you continuing margin remind us business My the I margins. the analytics know Hi. their the is just up. an is of think there? into margins you XXXX? potentially to of some question we've about on

Mark Kaye

talk MA broader MCOs I'll for about view Mark to start with specifically. and I'm Almeida ask going the to

worth both mind. there's As that we sort about are really and quarter items of two think margins in for year-to-date, keeping third the

the points First the basis quarter. The inorganic impacts XXX really basis. is in bps. third been margin XX and quarter by margin organic around acquisitions expansion in third the have made an would that we've on ongoing It obviously investments year-to-date negatively in and

of the movements depending keep different tend FX margins swing thing directions mind the The in across periods sort in movements and they rates themselves. is second to time on I'd underlying

forward, And expectation certainly the this try primary in and the really be by quarter underlying driven the of performance I periods. business itself. margins think are the -- growth primary the our driver to in is to principally driver performance of in As future that's been

use growth lastly, that capital to ongoing through then activities the margins, we do and our accretion. we opportunity And have but have not necessarily management the EPS tools through to drive

us our interest and certainly the in management rate with first XXXX. seen You've three take some those portfolio of the steps quarters of debt of

Ray McDaniel

I a in of just couple MA, would notes. So, make

a deliver to margin basis. of months this latest and continue nine and consecutive on MA. on trailing expansion in expansion we've a XX margin quarters year-on-year We gradual With now delivered consistent both quarter,

up And of points. over period than nine by margin more quarters, basis taken we've that XXX the

come margin we're operating in adjustments of very -- we're leverage done MA with there. realizing making seeing the Also grows, are we doing We're We're positive So, as what in from impact we're product happy ways. different a we've portfolio. it certainly our number ongoing through.

operation. to think the we're our business would across expect disciplined And third We the to to on and people apply business. oversight rigor operational we to we of continue improvements execute continue

them. So, contributing working a of we and to margin going continue number expansion things at to all see we're to be of

Joseph Foresi

Okay. then perspective you do separate the your subsidiaries? the question Thanks. world? ventures rest view second how of liability versus I region just is And Are -- risk my the joint And in part your to the they second follow-up the my China. is What's that in then ratings guess entities? on of that from a

Ray McDaniel

company. is Yes. I mean separate CCXI a

We investor. are a XX%

So, minority don't CCXI. We have control. in obviously, a shareholder management

done employees Moody's is ground are not not employees. the by are at the that CCXI being on We ratings directing who

so. assistance should you do the form respect that We're where of the us obviously the think as a in for in it's But entity. happy of appropriate entity. in research financial to So, not controlling that's to provide investor ratings or

done China domestic domestic you are -- their international global than agencies the in what generally rating have ratings the rating agencies from well of of see we all would terms They performance, ratings as the know in higher market the in providing a on market scale.

But what are the credits ranking that I in importance force is would receiving context that the emphasize ratings. of correctly

entities the lower of end upper risk rating the higher default lower the has entities risk the those levels assigned. regardless that end absolute the of the spectrum default and has So, ratings almost are

the job that's at for, that forced look stages to I rating doing the domestic of a we So, domestic think of market least, is that see what in early of industry development ranking. that good

Joseph Foresi

you. Thank

Operator

line Our Huber open. your is comes Research Partners. Huber Craig from with next ahead, question go Please

Craig Huber

questions. quick Two housekeeping you. Thank

costs a follow-up. be year first in the ago? incentive hear the you say fourth quarter quarter? what level? it was Mark I the thought for would And comp First, that correctly similar likely the was to also I have quarter you What then did a

Mark Kaye

we control expenses expecting quarter the third the Craig. we XXXX, third $XX an The both for from $XX and was level comparable first million. less below was expense quarter second start quarter the that for XXXX the ramp cost to And expect million. $XX perspective, fourth the program number restructuring be fourth other we're Incentive do compensation to as of XXXX initiatives. quarter Thanks the third and From realize than savings to of obviously quarter of million. from

Craig Huber

on issuance And spreads the you environment? Okay. the sort issuance and for you think sort environment of about now you U.S. your Then outlook about Europe sort rates default Ray -- the when now I how of you of outlook? credit wanted economic in right sense if the to in ask debt what the you your debt updated thoughts think then

Ray McDaniel

rates, an good Rob of this low interest especially offered we debt are the There debt are environment But what I accommodative seeing rates United is call. negative think interest some attributes obviously to for the outside earlier increasingly look in markets. where thoughts important on States of we're positive the as limits very the feature issuance.

very is growth. or it's to low a I reason headwind rates interest observe negative market And negative that for policy characterize and negative tailwind, I interest as opposed a actually would for because a the would as rates to response expectations

a I count negative to and while And would rates as low ultra-low this least trend have are so to think, headwind. -- rates, rates count would I at we -- interest it positive,

to be, That XXXX It's in though we've XXXX even good default market in very correct, be issuance view is this being low. favorable in rate that XXXX. seen debt our to of conducive said, going our if interesting activity. the average, to in uptick forecast still -- it's It mix in continues. is see What continues whether going will is

be infrequent more shifts very continues been XXXX we interested the a refinancing, seen we've opportunistic to the year this have XXXX issuers, will in acting characteristic profile. or And cetera. less frequent mix whether market debt issuers Obviously, that observers et opportunistically that of as to

Craig Huber

could then, I last my And question, Ray, ask. if

you to historically again EPS case for $X.XX mean, part here guidance the guidance year guys the updated that seems outlook. like conservative your to -- adjusted with the $X.XX. typically of year. of It me I Your remaining in might this the are be

you quarters to the range wondering fourth $X.XX $X.XX months the done area as adjusted meaningful? basically sensing? for top be I quarter. versus what example, what two let's in quarters, I'm as you your had in of because, revenues, just just What's three what here the math fairly ratings of forecasting of budget look nine far are $X.XX the mean, only you've the through down you $X.XX, middle and in your Decently at EPS to of first say, transaction each below you're EPS make had, the

Ray McDaniel

have a offered takes to are add And mean, that Max. there of for as earlier going Yes. early some encouraging. divestiture quarter Mark expect. solid FX, on the number would the that, I and expect puts of of to And a you commentary Kaye fourth are hopeful quarter. The October and I we're we're numbers impact would that to about the this

pull looking although And $X.XX for what to to go the more they as leaning as for closing we us September-October end that say would've opposed could we're Mark $X.XX as have what right, are said, go numbers, preliminary, upper the out If as of year. those to in November wrong saw come early to from range. are could anticipating period that would I much into strength not a people may see forward what December, are we if the and

couple So goes the amount of important obviously an is months opportunistic on of last financing these that factor. in

unless Mark So add to I'll that at Kaye anymore. wants it leave

so… And

Craig Huber

where better what's positive to though of the But positive the intentionally? that What this of top case things the than that negative about could of on range here? your top case come in

Ray McDaniel

wants fourth offer it the Moody's side of Rob refinancing, can be could No, on be pipeline can certainly helpful. timing I of the form Analytics looks influential the a the That product that Maybe, the especially be couple on could. help by might We sales like. continue and what to have in quarter. comments infrequent The issuers would opportunistic for mean, of business. to some Yes. of very strength the beneficial

Rob Fauber

Ray. Sure, Yes.

I'd So strong U.S., the we're investor seeing pretty market the in appetite. investment-grade still that in say,

mid-sized saw this You week earlier that acquisition finance deal get was a done heavily oversubscribed.

active also where grade have to pretty to weeks here into same the going got the issuers in are given say good My see. the Europe, We've we're in market, strong States. pipeline. United U.S. tap for that's looking rates I'd So there. sense is, Thanksgiving heading investment to euro

really finance, some sentiments. we've and bifurcation both U.S. leveraged seen For in Europe, of market the

index the it in saw was lows you for the in Europe We And for issuers with record in spec Ba a that a the that ever you've space. very terms larger at of in category. BaX demand high-yield yield. So strong see well-known coupon the more print name, Ba got can recent lowest grade

expect I Ray December. early pull also pipeline and into that November to continue in slide I'd general, in the could QX. potential, about in the deals So, forward. the guess, There's talked issuance some

well conditions next year. for into Just accommodative continue expectation given the to

taxable very debt. low issuance taxable to costs So the U.S. the are with got debt market, refunding exempt in because the saw that refunding of active. would be we which I means funding And of finance favoring mention is -- that this trend economics and public seeing continues is the good we're very thing other you've tax that this quarter

So that could see keep maybe outlook. that up provide some to if upside we our

Craig Huber

Great. Thank you.

Operator

comes with Goldman question go Tong ahead. next from Our Sachs. George Please

Your line is open.

George Tong

comment issuers? and be infrequent is mid-single that flat on flat if you Hi, year on thanks up change good And among morning. issuance to how digits. Can be Global track you rating volume depending mentioned and power possibly on year. this issuance the next to growth, volumes you've especially pricing seen should could pricing environment improving

Ray McDaniel

think I the terms both and of about of three the contribution market the talked No, profile infrequent a issuance in first debt points static frequent issuers. mix all impact that – volumes and pricing well, price assuming when of of we of from that's

growth, priced in transactional opposed as get infrequent for because on basis. on see basis being to benefit we when a long-term are issuers a they So example, we more

by because though it's relatively of And relate mix pricing why talk in even we by -- being down a some does materially issuance bonds both to potentially and way, simple at or up about pricing a the that's the pricing can impacted actually relatively issued.

And there's so price not, they're impact. if no

are mix on And don't insurance watch and what we'll around XXXX. from So and that the impact to course I any see change that. in have in to see price carefully levels the

Rob Fauber

Yeah.

is it think -- I thinking now be there. believe year. for The flattish to have commented you clarify, what able get other around add next to was thing I we just where mid-single-digit sit to on our would more And to initial I'd when

George Tong

it. that margins indicated be the XXs. On in helpful. you've long-term high previously margin Got That's EBITDA should

factors currently, or that term margins margins that already Your that have above that? in are you XX% a go do prevent range there longer so can view are could

Ray McDaniel

relatively rate factor expanding few business lower last than years. the still And Moody's higher biggest the margin think would I Moody's year-on-year credit the obviously, consistently the growth out been of coming margins Analytics well, Analytics. over prevent a that that It's it's be would rating agency.

accelerated too margins growth keep expanding to So act aggressively. should from its

George Tong

it. Got you. Thank

Operator

with Chien Our next Please ahead. from BMO. Henry comes question go

is line open. Your

Henry Chien

a to related to market? morning. any outlook ask looking on as the know I bond investment in I follow-up was sizable whether an be guess offshore hear Good the on wanted I I the thanks. opportunity Hey, the to CCXI. that's to as for as And curious exciting. opportunity thoughts there's China. updated somewhat

Ray McDaniel

corporate China's private we institutions robust including mean surprisingly have market in largest the is part cross-border and most financial enterprises. I for state-owned Not China. this out both very the business Yeah. coming of a and bond with

may That additional and been least get rated coming relative stream. cross-border mandates is a coming balance whether have cyclically and try it's continue out If rating pretty mandates for rating and of We good at to economic that And global just from growth and China the commentary little. I China because of in new thinking some for some both obviously. already going a slow by standards about China new entities steady that sluggishness activity are its relative they has want to raise debt. to emphasize that to

helpful economy. And have global the would negotiations So as completed to cross-border be of we'll just watch It positive way a a to see. trade also would be having Chinese result, in that to helpful some to I the economy. the business. helpful kind think Obviously our and

Henry Chien

much. so you Thank okay. Yeah,

Operator

Rosenbaum last is go Please Shlomo line take Stifel. we' now your And our with from question open. ahead

Shlomo Rosenbaum

in. for Hi, me thank you squeezing

a there kind Is could anything on repos really bit to acquisitions just items or would start. you reason the little want good The for to expected. point numbers to X.X I come any X.X housekeeping range cash from guidance why flow from tweaked better has to deployed than of X. are X just of down more I couple a saw that been to Mark, and the is company to there Has Just down. from ask the -- of terms the that? for down in

Mark Kaye

the for thanks question. Shlomo,

changed. allocation priorities capital Our haven't

this in repatriation our our consistency cash the think reflection a efforts manage is as way needs. of of cash evaluation I an well that we global as

this for give expect Let's that guidance. amount the we'll exact finalize make and the incremental later year we point $XXX XXXX million that differential when the we to do be

Shlomo Rosenbaum

are And rates and paid talk about Moody's rates also these what want hold as get interest a company opportunities the from to Mark, to negative Okay. negative into -- to interest money? someone for just tap else's just those

Mark Kaye

treasure manage one's I'd think rates definitely opportunity Sure. own an individual interesting provide a debt negative perspective, from portfolio. to interest

seen We place earlier Yankee taking lot a certainly of year. have reverse issuance this

So actively you in treasurers market. that see can engaged

it mentioned look potentially something about of to acquisitions. U.S. reinvestment Maybe back to is think we we growth to And as opportunities. And for It in course, we then, able management additional at. here, have they're the being to capital pivot opportunities way deploy the don't bring growth. first to back higher-yielding extent opportunities again foremost that to investing that really and then Ray the

capital. either of hurdles they capital, which that we dividends that don't shareholders or sure meet back making our It's share Either to don't meet return not financial our through repurchase. good strategic objectives a for to capital it's through raising or have use just matter

Shlomo Rosenbaum

Okay.

one initiatives I can any China for mind about more Just in talking there was no incremental of don't in some Ray? squeeze for perspective change the you terms If the There growth the or next you're no there in in If that of any ESG from be outlook material over company talking you're is for today three years. Would about. incremental initiatives in performance? growth of this Ray.

Ray McDaniel

mean You financial growth?

Shlomo Rosenbaum

same everything if just things years? several this company's realistically, to change you next in two those did mean, guys the I growth rate much is going the if in not stayed Yeah. -- very

Ray McDaniel

going think to itself three-year ESG it's don't the in turn a organization. is the the to to be respect over dial that With period I space, it going enough large and for of

these to of ratings if that have number our growth there is even relevance yet going of really enhance it's monetized and research good sectors and analysis. think our robust credit I and not the products But themselves. a in

as actually think that's process I in going to whole. Moody's terms a for dial of longer-term a turning Corporation be the

Shlomo Rosenbaum

that's for China same And initiatives and Okay. any the of thing there? the

Ray McDaniel

and come domestic market Analytics of solutions I the that Moody's Investors China, is of a in out would Moody's out demand products the be is out increasingly there. come more -- a come large of Service analytical China Certainly, of little and guess, bond that for wildcard.

markets participating. for The it's the in all So mind question focused three, investors that looking market the market own. domestic investors. that in in to through domestic how CCXI and fully of capital for keeping we're and work our true put we're China cross-border market domestic And a on other to in is really the domestic on international the market. participating And participating market

Shlomo Rosenbaum

Thanks. Okay.

Operator

the there Mr. time. like appears questions conference at turn closing now It are remarks. any this additional McDaniel would back Ray further I for and no to to

Ray McDaniel

Okay.

for First Mark I joining. the of for team want thank And Almeida Mark skillful of the all, organization everyone Moody's. personally I service thank for really I very many for secondly, on thank want decades myself for as to whole. to leadership a of behalf

a service as he's an tremendous growth XX executive And of us, He Analytics provided -- outstanding last and a for executive work has the has plus that. just has Moody's the kept great been friend. for been consistently before in years

to this we very So, forward. best the thank your with Mark. and transition you going appreciate And much you help

Mark Almeida

Ray. Thank you,

Ray McDaniel

again for you talk everyone the Year. in Thanks to Okay. We'll joining. New

Operator

This call. quarter concludes third Moody's XXXX earnings

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

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

Moody's (MCO) 30 Oct 192019 Q3 Earnings call transcript