MCO - Earnings call transcript Q1 2020

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Operator

Good day, and welcome, ladies and gentlemen, to the Moody's Corporation First Quarter 2020 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open the conference up for question-and-answers following the presentation. I will now turn the conference over to Shivani Kak, Head of Investor Relations. Please go ahead, ma'am.

Shivani Kak

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

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

from discussed and XX, could and available These other actual on for filings Form in contained that cause Safe forth which SEC any those language, company, earnings be of risk Discussion the accordance by materially Before Litigation the section together Act, Act on in website results factors end Today's which release. meaning toward Management's Securities Harbor XXXX Reform we forward-looking the Analysis made the such the XXXX. to attention SEC's I on Safe factors of can of your begin, forward-looking the found in with ended year statements our call our and our the and may are attention remarks annual I your In contain to to Private set also important within the statements. report direct December XX-K the website. the Harbor with differ the statement

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

Ray McDaniel

questions. for results. Kaye first by business, slightly comment XXXX. on today's I'll that will be will outlook XXXX Thanks, with financial focused prepared on update your our be the Much our joining of morning, remarks, response. call. a had apologize respond to pandemic for everyone, delay. and effect and preparedness economy Mark for providing we'll quarter the along including you, call business, has Shivani. the delayed Moody's begin our that We Moody's After today's general the COVID-XX and happy to thank Good on then on

technology who how our upgrading hard I'd employees and fundamentals. work like that with turbulent staff, by of across lies it I business continue This to demonstrating Moody's respectively, globe. made dedication to in in for work. start remote were our remain They've infrastructure proud proactive of saying our of am the our and the for resilience times, growth the includes Moody's operating possible our planning long-term these importantly people. confident we Amidst incredibly

has trusted expertise environment, confidence. more provide become to and mission our relied decision critical, this standards in our insights is upon act that with help As increasingly even makers

We healthy balance us liquidity, manage sheet this which will of a have period uncertainty. through ample maintained and help

throughout While earnings, of quarter the to be in second expect had we strong we with pronounced growth a of the implications robust and more both have year. COVID-XX the half first revenue

a assumptions for a guidance, our to to discuss relatively the and which with to material team, communicated of full-year will from case widened base lowered drive reflected adjusted in range this we wide-ranging is the outcomes. contingencies. and previously we After have our is we we our a aligned $X.XX updated EPS change rigorously around consideration, As diluted a management careful prepare scenario $X.XX that guidance, this multitude outlook. This have changes of XXXX

required for health we toll heroic patients, treat aware, to gratitude would professionals. our globally. efforts from It As virus the COVID-XX and express taken like millions has sincere significant everyone is to the community has a these of frontline

and more health have remains the than transitioned continues, remote top XX,XXX we Like our work. of Moody's other to As employees the organizations, priority. safety pandemic

level, our a steps monitor for to authorities, on will adequate Likewise, and continue to are contact environment. relevant can align situation a as tracing. future we testing working guidance the and ensure such taking We provide safe considerations local we from arrangements the work with

wide insights response to In made the markets. content at our research we've which pandemic, the to by contains related to microsite impact moodys.com/coronavirus, its on and creating COVID-XX and the public-at-large accessible a of a range

and our meetings In addition, knowledge market opinions. engaging via we regularly share and participants are with webcasts virtual to

also supporting includes responsibility moodys.com/CSR. employees about donations the long-term social a $X global an key these small with COVID-XX pandemic. our other measures program of providing microsite, charitable announced CSR week, donation in of initial including and both in impacts on and address and and in more virtual to brands recently January of our report other program this that to education of are aid supporting corporate mixture medical and to I initiatives and systems. The other published the our at This China. our local We million the addressing aid you local encourage opportunities earlier relief are impact follows communities, volunteer, the learn humanitarian to in and and businesses immediate

the recovery. lending to makers we our Coronavirus's governments Lastly, impact, are and for to expertise and mitigate policy help plan

stakeholders fiscal inform critical, world. interconnected to has knowledge, clarity, of information example, programs support. Our to commitments purpose Moody's the been analysis allocation in stimulus and for to to our exemplify and These helping bring fairness and and

which been visited from relevant over reports X,XXX customers to of that specifically One aggregates is time published more have to in mentioned, order continue insights with our proactively engage unique example, content includes COVID-XX as across and I times. than XXX,XXX We provide stress. to businesses, this our our microsite,

and online have XX,XXX seen increase usage our participated Coronavirus over in we a XXX% have on website, We that related organized. people in events

investing new existing our enhancing developing customers and in During this we communities and crisis, are products offerings. by

announced the scenarios January, businesses. and a their for helped medical also personal suppliers, its of Portal. Moody's we've our the identify hospitals critical of Supplier project potential scenarios staff have equipment these virus banking also out challenge, tool outbreak hundreds recently remains healthcare the Know on implications aids and and providers invites unfortunately, and built as Analytics and protective This instance, scams. Coronavirus sourcing customers For innovative Your macroeconomic other reflect to and fraud the impact screen of in frontline

MA made enhanced Act. under Finally, to CARES Protection and day its credit borrowers was the to on solutions first lenders the Program banks the underwrite loans decisioning help Paycheck available

In addition our COVID-response. to

initiatives, those We in Moody's and to on you like will customer areas investing are recently, growth. when these coalesce been continued growth ensuring emerge to solutions. powerful we beginning positioned new where strongly update we've strategy situation unique from is on I'd normal, focused a for our also that this remaining key initiatives, into three to of be and

we or KYC, order create recently RDC, a acquired Regulatory Customer, to First, DataCorp, global player leading in Know Your space. in where this

supplier solutions, capabilities hard-to-replicate customer speed together of risks. experience and in and We have AI and of a decades proprietary to improve bringing compelling in screening, databases, suite and effectiveness identifying

well are and in mentioned Know launched that integration the recently Portal I Your process, the earlier We Supplier underway this. demonstrates

new also regarding as continued solutions about they OPAC customers ability customers U.S. KYC, our the will improve owned with add for have the do and of for their product, as well this with Catalyst, list that company create growth and are Compliance to not including whom compliance We to in excited their regulations transact, EU our to sanctions want features remain majority sanctioned prospects enabling searching entities be tools or own efficiency as crucial to by compliance We in a function. to entities individual. new

rolled ESG, both out is and we to for us which moodys.com/ESG. business. Moody's. and site focus Another risk showcases new area across our our ESG of of ESG week, Last embedding Day, across capabilities lines Earth climate risk we hub, are climate The commemorate

and by have and powerful. Vigeo offering customers. for MA's companies' we and alone re analytics SynTao data The bring XXX, with together provided Eiris, core competencies, we products our Finance world-class But unrivaled when these Green immensely MIS

Finally, their think we The investment our under other like is enhance platform. right to our continue now, are to areas, pressure trying market, many through real and the customers portfolios. intense many of impact to commercial estate CRE

continue REIS launching a on new with topic page. our a database, proprietary We dedicated COVID-XX build to recently website

network, with and REIS cases wide a credit, solution With tools customers. our paired expertise help structured comprehensive can use to we ESG, our the in risk, with of range a provide and

focused remain long-term creating growth, optimistic markets. these we for and on So prospects are about our

resulting results, first thought credit in undertaken markets. on global would unemployment our impact to fiscal response, recap reviewing of had I easing the and efforts have quarter negative helpful a unprecedented affected economy, it governments COVID-XX rising in conditions. In widespread Before a has starkly actions. provide The monetary global be the how recessionary virus

of functioning of these market disruption, the dichotomy we've between the economy, also seen markets. on observed and we've somewhat the shocks the real macro impact While credit of the

and instance, their capital April. economic investment uncertainty have levels grade companies and by balances March positions, record to with bond of bolstering For responded issuance in cash

the other contagion in On as activity substantial leverage intensified. curtailed observed the spread finance speculative grade issuance we've markets, hand, widening and

bond rating slower banking of stable, the been credit The the grade market liquidity. to a remained by scale, the for while loan allowing facilities has especially at borrowings under Nevertheless, high-yield end begun of speculative to revolving wave the higher market system seeking has reopen, leveraged corporates recover. has

We've use seen spreads as that during March, as bolster rated finance have We that to in seen underlying yet early the similar structured first institutions, and was slowed in issuance activity, rates notably sector, outside trends CLOs, access retained have concerns. slowdown to quarter, and given the markets, a public names, widen active financial U.S. the in escalated. finance liquidity. notably corporate higher credit credit also access funding

completed financial the through focus sheet companies dichotomy increasingly real I'd this we underlying and strengthening that read economic markets to have highlight and on first may further the credit of initiatives. fundamentals, liquidity quarter. balance until like the institutions economy continue progression As corporate over expect issuance course post-virus severe of and stresses with the their more

see, in given active demand. investor can you quarter, the leverage healthy tight relatively and finance early spreads was As

not However, simultaneous issuance surge in will XXXX. investment inform as than points, on significantly outlook, year widened in These activity our prior since March a which issuance as shortly. tapered more from period. diverging the basis issuance high-yield X,XXX elaborate levels seen contrast, to March exceed Mark trends doubled drew grade The spreads

cost was XX% Adjusted from Moody's prior margin period/ by XX% from $XXX growth growth XXXX with acquisitions business a X% organically, and both strong contributed income to adjusted results, XX.X%. grew XX% prior excluding basis operating up the ongoing operating by to grew EPS first year of diluted MA performance, as year and Moody's exhibited quarter overall XXX Aided of in $X.XX divestitures. segments from Moving X% revenue million points MIS MA. XX%. adjusted by period, increase discipline, the the to the expanded

over will details further the to turn on provide I our now XXXX. to Kaye outlook revised call Mark for

Mark Kaye

over shelter-in-place events our have evolving last rapidly on the the how for was outlook discussing Health several Moody's by March XXXX. begin weeks Europe, leading the investor the policies and Since to World pandemic implementation will I of declared Ray. a most call Organization, the across of U.S., Pacific. COVID-XX you, Thank affected by Asia XX,

XX at to surged over With for now staffing multi-decade materially needs non-essential hit the disruption million reduced high-yield added the businesses This points over lows, oil sectors, of Americans [Indiscernible] XX, across economic and basis has have spreads shutdown markets, impacted far. normal to points. many over X,XXX and widened prices unemployment. extreme and functioning so filed

in as monetary a helping developments credit support mentioned, fiscal and degree allow Ray implemented governments better On hand, function implied economy. the to unprecedented the have than to actions, by what's markets underlying easing other

these of case revised adverse we our effect more assumptions XXXX net the have environment. With reflect base a operating to indicators, downward selectively

stay and Specifically, into quarter. to economic fourth currently decline be to GDP to possibly remaining default activity X.X% European quarter X.X% U.S. unemployment spreads be that assume We between and will high-yield third XXX full-year the relatively weak to excess our high-yield rates of respectively, points, XX%, the XX%. and XX% case basis scenario U.S. in base low benchmark and assumes XXXX with rate approximately and rates remain

of All we materially or in these figures anticipated mid-March. what more negative than and assumptions

to, impact the XXXX increasing disruptions interest both on macroeconomic the and for the on well and markets, individuals, limited COVID-XX the is different the and not as insight effect and credit responses the closely COVID-XX. the the our factors. market the as based gain We about and markets. outlook capital macroeconomic Moody's and markets, include, of of many pandemic update into continue monitor we'll market liquidity, assumptions by assumptions backdrop geopolitical These activity capital we conditions businesses, are pandemic, impact of to governments, in sectors in rates, as but energy the debt to

of spending, current subject investment and and include year the to for outlook. could Our rates, assumptions debt assumptions materially acquisitions, also exchange differ are level and and business capital from markets interest our mergers corporate the These results uncertainty, foreign and profitability activity.

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

and billion is full-year and million billion. $XXX anticipated $X.X in effective of $X.XX, anticipate We're forecast Our and forecast flow to is EPS and of expected full-year exchange XX%. to Moody's be range range the expenses the be in are $X.X interest margin pound be in of to the for rates the to $X.XX mid-single million. the that be $XXX respectively. of to to targeting EPS between for range operating $X.XX to British expense reflects revenue range. and in both The will XX.X%. rate euro the to XXXX The tax XX.X% percent of $X.XX be net XX% is of to cash the to U.S. operating in forecast decline adjusted $X.XX. range We digit diluted adjusted Diluted Free $X.XX

For release. of to of guidance, list Table earnings full our a refer please our XX

mandates. XX% For grade total for that issuance to with will continue. single-digit loans. decline XXX range, bank an and double-digit MIS, XX% XX% in decline a high percent calls the we investment yield forecast in in new increase assume estimated MIS's with revenue issuance decline high percent internal low and in We to issuance driven liquidity a decline anticipate to the for range,

However, fewer will M&A total financings rated reduce issuance.

provide to The to the cost infrequent MIS XX%. leading balance in revenue adjusted be a revenue proportion there will operating margin activity, downwardly issuer The along less expect recurring to lower of forecast we Additionally, for revised with a mix the of of range margin discipline, base, these is favorable issuance. drivers. stable to XX% to be

COVID-XX long-term in confident remain related MIS's despite We fundamentals, headwinds.

steepened refinancing on graphs This future over year, surge four years. corporates the the has few here. show recent of of a at the the following be non-financial and in years needs grade issuance, investment five begun speculative default we $X MIS the new provides charts Furthermore, may I rates the as to trillion the rated likely these years likely in As these slide reduced had time are as the start maturities increase, periods base result. refinancing show, last for to resulted amounts of and periods indicated, or issuance although time previously grade in a the delayed

for a markets point we use capital expect activity. prominent will refinancing, Aside at M&A from that some reemerge as proceeds of debt

robust recent to grow in MA, mid-single contribution due the performance, For business's total This and the percent strong we from impact range, MAKS's revenue the digit forecast growth to organic recurring divestiture. acquisitions. offsetting reflects revenue the base, of

For XXX expand expense operating to approximately XXXX points the MA margin adjusted expect still discipline, over in we basis to strong XX%.

to ability XX% is continued growth As high organic its XXXX I anticipated MA's during to on reported base, just a recurring noted, revenue only by enabled sales. around MAs XXXX revenue from and be new with basis derived of

rates curtailed in-person in and guidelines, COVID-XX have included an had to has sales we history track of MA XX% Research, since higher retaining and stable record of customers ERS, in XX% XX% rates of spans all retention and retention multiple and BvD impact I'd yields highlight our have prudently that the to sales to like distancing XXXX. here new XXXX, had as a related result, a from or between renewal development products strong meetings, and due social disruption forecast. its However, and services.

stability revenue we for with impacts Moody's As will in XXXX. in that such, COVID-XX provide associated expect the MA overall mitigating

has number year compared that of cycle these to and months the period, situation and the of anticipate typical meetings virtual sales as needs has new led meetings MA meetings, substantially the determined, by customers' effectiveness The fully to emphasis of virtual while proactive adapted in total yet increase product holding months. evolving period. enhanced be the XX to prior has extend customer nine the beyond on may to sales through innovation, average to its MA's we During an more which current value this focusing support, propositions, on increasing our features. such,

we to to restructuring related expenses recent mid-single percent our been I'd we in our and on increased $XX our digit guidance like in actively In years, color to additional provide reduce plan the have million range completed mid-XXXX. in benefit expense XXXX. plan the base, managing to

We through of increased savings M&A cost additional also efficiencies assumed cost improved technology. from synergies, utilization million locations, $XX in process lower and

As the marketing, guidance incentive prior now range, percent can low you see in due the Investor substantially The reduced as the decrease in of and that chart, developed we and with guidance I'd investment COVID-XX on the contingency and such that We've during in costs, investing future key Update to on entertainment than in to for case China, incremental in rather travel bottom technologies March in expenses also we areas, opportunities. and Call support lower the and percent savings assumptions on provided the increase investment from significantly. of along range KYC, our was we our our compensation on is a continue spends. the ESG, enabling assume. note reprioritization vary basis, expending an mid-single digit impact single-digit plans XX expect project to growth

to also of our through make high COVID-XX employee supporting maintaining through clear our relevance it priority. our and means insights, base a the remains data heightened that want that stakeholders analytics, I

into expenses we end and the held and credit revolving short-term billion have facility. our we proactively of and not preserving expense quarter, such, factored $X billion and cash on As $X.X material remains undrawn the investments, at maintained liquidity, in strong focused guidance. of reductions headcount Moody's first an managing

our markets, capital is March, point notes, than average In investor our capacity otherwise well our weighted lower Moody's balanced, would it which in times. of five-year have to $XXX the schedule is confidence of benefit even been our issued programs. coupon in without illustrated a percentage the million hedging maturity over while we turbulent access and

We both our capital strength continue the flexibility confidence leverage BBB provide to efficiency. and of plus in of level the indicative And the rating, financial of and we be while business anchored of a have around sheet. to the appropriate balance resilience finally,

extent uncertainty and management. in the liquidity temporarily around repurchases duration prioritizing Given the we COVID-XX, of favor of have suspended share

Before like operate key of to continues the a takeaways. demonstrating I effectively, to impact resilience to Ray, back COVID-XX. emphasize turning would to Moody's call the over few

especially we stress. during engaged insights with We are look and highly key who the stakeholders, of to provide, times our expertise

meet to and adapting actively and sustainable are growth. balance expense connected. well new We current stay for our position long-term strong sheet Last, disciplined technologies products to innovating leveraging the circumstances, management us

I will to now turn the Ray. over back call

Ray McDaniel

you, Mark. prepared Thank concludes remarks. our This

Joining Officer; Mark MIS Operating questions. are session and Mike and West, Tulenko Faber, pleased be me to the in respectively. a and format Steve your take Rob Presidents virtual for special of guests, We'd Chief our MA question-and-answer and the

Operator

Instructions] that will one Thank We yourself you. question you please follow-up. [Operator a with questions your ask to brief limit and

to Cram welcome questions then rejoin are [Operator you for comes queue from And first our Instructions] the with You Please additional may UBS. go ahead. question any have. Alex

Alex Cram

everyone. Hello,

you maybe the color more have month on lot you yield the of started the on seems forecast just flush little gave side. can you The a so but I biggest loans well. a bit has yield, high It levered spreads tightened. and already as a more. out little guidance here, noted bit MIS updated already, mean, very think maybe I yourself, just culprits are like high this

be comes from. any side, Thank And levered the why more color that can that loan different where conservatism reasons on you provide wondering could there. or just you. then So any

- Kaye Mark A

for much very question. thanks Alex, your

the viewpoint. to I'm drivers I'll up we're what similar about we've from the Rob to think of banks, is to it going what issuance some with bit where talk and internal turn over we'll little follow our do done a to here the then that hearing in past I

grade, it's was Before with haven't many a ongoing with seeing I of to yield, issue issuance balance Starting as to general, front Fed's for initial narrower which liquidity, spectrum. to banks benchmark also issuance their are to balance looking tightening their liquidity the the environment. there brought led that, yet additional with showed volatility. probably a worth in high majority updated strong of investment of liquidity the the bonds, to motivated in March later year. favorable at in record the market create official banks for And low improve conditions especially on by end begin, U.S. the for the curve are to mid-March. end The noting spoke was higher we fortify sheet, investment a were longer-dated forecasts, due access partially the opportunistic the spreads. But issuers the uncertain of volumes. with grade start market towards result and But clear issuance temporary the spread of Many considering actions year, issuance with preference of recently more has still the more disruption the the and issuance considering rates,

driven XX% create issuance considerably M&A driven is lower be XXXX, expected to some in decline U.S. could volatility. election than estimating than cycle with M&A more upcoming The also refinancings.

strong where more the for it floating signs March, last as being issuance halt with by two a of year to is grade grade the points. for what is issuance the basis calling still X%. the of note getting the spreads comparative rate After rate have recently, is The So use grade year-to-date U.S. the that we up they issuance down of month-to-date in to to for above issuance in off heard first noted mind the notes. ahead time issuance this obviously important are the demonstrated also widened solid of then there U.S. speculative strength keep some banks that was of fixed financials. came that's to investment X,XXX of One start to most terms a been in outlook, fixed X% from both inclusive banks months and year, be investment year, are to April. banks' And purposes positive

April. a some speculative well, So is handful indications opening in higher of the grade of with the transactions the end preference market, seeing market with the but as of for loan leverage

with March Europe, corporate is purchase grade, sector morning. to European issuance their ECB's investment grade announcement U.S. the investment denominated market COVID-XX, year-to-date banks week of for February, to XX%, start this January effectively the significant has Overall, result pronounced of though been and in the certainly program, dynamics shut European about to with last after off seen Then and the less having a busy. estimate seven similar to dislocation eight last the a getting up the themselves to Turning especially finally, strong that year the the high-yield weeks weeks. volume as

bond are improve have that's recent optimistic The So, impact to the European it. beneficial high-yield in that with has conditions to virus. banks the due conditions correspondingly investment was could could down grade then suppose market a And marking I measures shut to near market future, issuance the solid more pipeline high-yield to impact the in waiting and liquidity I market, first resumed, the ECB stabilize. a encouragingly, since say that the the recently of improve would for issuance the

you update turn Rob MIS's issuance to to expectations. with it I'll that, over on And

Fauber Rob A -

good Great. Thanks, to around build bit I a about. continue for Mark. to a interest answer fulsome want give what the of Thanks our so on Alex. know and I question. there's outlook talked Mark issuance overall

overall global rate at issuance. low we said, and decline As a double-digit looking we're

should really Mark cited, that about for really we're up something For to Mark looking in hitting have liquidity seen April. talk balance sheets. the non-U.S. is see of good the which improvement in far for access investment activity continuation bolstering a market and so that that range grade, some of for We going been and reasons the in of heard some market issuers. you regions think the we've we're issuers to also certainly and We investment-grade see XX%

same to we've Although completely the seen U.S. in the that not degree

Alex, specifically around leverage question was finance. Your

were There of in of honed the to The see rating end see think One, was the few like through for we're issuance improvement headwind lower signs of mind some March there. in particularly of really you said, we're and going leisure Certainly, are I the uptick key year, the the in a I industries our the challenging environment for much in think that sector. but effectively isn't transportation, oil starting an throughout some year. we're means that of reasons after shot finance a issuers slow think see leveraged high market to corporate to to to that. finance going concerns that heard see and much of going an balance issuance for defaults see of think area on uncertainty issuance our and we for gas, to for attrition we M&A Mark default the retail, to That We number scale. are we're at the sectors, talked going of something elevated some talked why more what expecting considered that down. is weigh yield. high going well activity, issuance about. forecast going the range the Really highest rising have twice loan those being leverage Mark than There going to is contract we which those and is about think factors. outlooks leverage loan on risk terms yield. that's as as spreads the you in economic in as of Economic given defaults for a couple reasons keep to be for leverage

the spreads low skewed loan more so that First, issuers loan is heavily means we of should issuance. for end distribution and of more leverage see to the access leverage grade rating reduced defaults, spec market higher

investor current we're CLO the that dampen the for is bid market going leveraged seeing the loans. Second, to in stress

bonds the leverage Third, than the benchmark again, floating high-yield skew expected going towards rate preference fact it rather to very, considerably longer, remain low, got are that very to that for loans. is investor rates we've

continue to some happy I go fallen pause and the there. area high We're and to the see think the BA other into angels me the really the in more yield let we'll but issuance resilient sectors bond space from certainly sectors. of

Alex Cram

bit is guess I'll medium quick a great. term. a follow-up and This more have little I

all is was initially is there's think into we've I of time. I short you will to coming more to municipals done, out will more and other the said struggling is be the think Is balance the going to like, when have There's At the actually easy there minute. a down of in periods world that stimulus. Any also of and few happening years? be in more this, to more debt do to is itself some to to that lot corporate today say a here and to refinancing time do finding are leveraging of a is narrative but the see to versus recessions for in whereof maybe on debt there recession there line the jump okay, for going you massive next and deleveraging debt the crisis raise corporate less But narrative comments. there's or this is the view all going more governments heading be rates well, debt. be that already same as world probably seen going from debt. people going and business There wait a and here eventually, a be conclusion sheets and

Ray McDaniel

obviously narrative today. explained Hi, narratives Alex. is given that is the the in Ray. that Yes. just are higher we the probability There you many that a being but storyline It's think to generally uncertainty and I there have assigned market to

both to today. a move said ability opportunistically people distressed during in they with out as the M&A this. to the better I much the raise coming capital of The in there out allow are out I and think supply financial than for scenario shape case closer The reasons market demands going to think to central a were liquidity, this be will situation of the than crisis. having debt on credit think to for activity of into in coming banks and I the giving generally is probably of range M&A need, I forward sector municipal

Alex Cram

you. Thank helpful. very Okay,

Operator

question next comes ahead. JPMorgan. Michael go Our with from Please Cho

Michael Cho

on we bit Analytics of comment maybe for switch Moody's hoping various Thanks, afternoon. about I'm plays dynamic. good you focus color the and second. nuances a pricing on to was then gears pressure on little through that just how on can going MA yield the guidance revenue a and to renewal talk maybe get think and a bit changes I into when little the more

Rob Fauber

on a renewals the to second. Steve bit Sure. in Rob I'm Hi, this color a little is to going and of ask give

a one-time implies that see of FX As we includes greater of from expect Mark movements. research to the be business you generate a about expect that. to see segment. impacted sales full now to upcoming we impact touched by the analytics be factors I'd we're to from actively in nature in do well a pipeline for growth to mid-single-digit our as little data range sales those going the revenue year X% bit There the that on and ERS to growth due is to which in think unfavorable our on than sales a mitigating new But and quarters. we close the bit of ability as some the ability ways. also say is in reduction opportunities existing just that of couple

First, engaged really impact virtual social ramping the teams customers. very our we're we're of distancing, so up sales sales keeping with meetings these our

in immediate product customer renewals? on our of and features issue around behaviors, and lower said, want our weeks we just this the have Like in incorporate address Second, sales the had a growth generation launch XXXX. for call terms all Steve, we've ERS bit very RD&A the to impact in six sales it under do general. the to new experience of of of to we've campaigns to of Within that remainder needs. these outlook little sales add customer conditions, updated you that purchasing our adapting think we we're I

Steve Tulenko

renewal renewing on going would would of Yes, of opposite at accounts lack our powerful here. that indicator, in much. over have exactly say we years, least very experience maybe the usage. thanks I leading the most a problem a I the say indicator is my in the

as are ever been. usage high they've Our as levels

at we're more showing usage XX% fact, we this than saw year same XX% and last year. the In time

a There XX% big So are very I The quarter-on-quarter BvD yield renew could what renewal that some tried the up of macroeconomic may to that. some products, factors wanted see QX usage presented I XX% most troubles is we've that's board. and few We do of credit bit we acknowledge face earlier. slides confident and board and what everybody to that products point strong schedule. little we'll the usage. macroeconomy our lack in Demand a two not not of to we we driver, of mean in usage be and A say accounts the acknowledge biggest affect or impact an view more would probably but measured that that's and yield much would according is ERS on the renewal the of we're across across a products but the our the and for than

Michael Cho

there just environment? that all taking give more cost Thanks. as nature projects I can out? actions more little and think for economic side the you're call-out a Moody's. a projects costs getting you permanent Can Then you made on investments. that Is about in or more are Great, the efficiencies around investments color type or bucket and on thank we given broadly, the of reprioritized what pushed with saw a you. bit

Mark Kaye

talk your so good and Mike, in then a questions. narrow Maybe and much here, more it's for bit and the Mark thanks morning. question I on broadly little I'll will

I think there are two pieces here.

a million certain previously from The COVID-XX. taken those XXXX put implementation actions this those our of program prepared the We from the to couple restructuring either remarks, expenses from a asides in XXXX-XXXX or of in of cost due to stated a that place first $XX social the of as obviously savings number result arose in is additional reducing cost of mentioned part distancing. the efficiencies. We've

That formats For than virtual person. saves rather to travel be costs. moving more example, meeting obviously in

with the metrics infrastructural down a customers of we more our and focus plans our operating the of on a number process back reprioritization sure as being that We've environment. of also revised spending priority making the a evaluated gone have business end some really with slightly we delayed but some during time. Secondly, that in initiatives this the and through really are

advantage comp our the be year $XX sure in that and we opportunity we the cycle. down There investment equally RDC to make invest continue because in has example, with, started want I'd may and importantly, to quick take For comment the period of that important in KYC, ESG come really That's but incentive China. during continue to we million add. inefficiencies this one of we last the

we to During of that important spoke and a number point so to point that invest. did about just we attributes Investor March year give guidance reduction out to investment, this the waterfall a XX we in a margin XX organic our margin It's will the continue which continuing contribute there. does basis Day we are

Operator

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

Bill Warmington

Good afternoon, everyone.

terms any the first recovery potential Chinese in an on The market markets? on early for the U.S. the question MIS takeaways side, lean of from

Ray McDaniel

macro might been change a terms has growth the the U.S. seeing we're in think GDP have up slowing to for been substantial level, what change a at in of coming Obviously, in we similar the outlook. percent the there of magnitude decline that and percent similar consensus China now Orders I of consider numbers.

recovery this macro see that think we in late fairly possibly respect, in So expectations might in closely into would the follow we gone a that expectations decent again, behind are in there XXXX, level, a But China I at for later. having GDP rebound for XXXX.

standpoint up point. because have economies the either shutdowns reopening some returning the to working Chinese elements We're how two we normal there U.S. That economies. different handling of how the at shutdowns, have the they in taken the approaches said, of think would than being see both approaches or end just have a going the thinking are a pandemic to I the identical to from the about economy and impacting how impact that are to handled not this

is fair So think for I stance TBD both. the

Bill Warmington

seeing having kind I It whether and well. doing wanted was cyclicality. low that would wanted double-digit, to that low teens characteristics been very nice I BvD. as know showing type My of growth. about of countercyclical to some think business how question, Previously, some as has some ask follow-up people that you were

Steve Tulenko

which are is over the very The risk in been BvD size because maybe expectations database go that of ORBIS grown that it's of lead of to Orbis BvD Usage line problem lot has lot and used would a terms is the internally, now. we've would now the very this of year. beginning our size set see the useful. found right growth been counter-cyclical with strong at Hi, and that expected with Bill. much of very has has in know-your-customer availability say what many right the data I'd we add and questions helpful asking hard of been have we've say a simple in well doing availability had so scale customers, product the more people scale years. flagship customers acyclical going very and of accordance product and despite projects with the forth very of we're of I activities we that comment BvD I are year the one words opportunity, the there, and good, or

Operator

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

Andrew Nicholas

Okay. Hi, for morning. Thanks my good taking questions.

whether was in you going on that relationship-based The puts there environment first obviously again the is to this to broad-based. strong to quarter in in speak appeared be and moderation that current could expect the takes line just and I strength one revenue revenue MIS different hoping pretty is the reason and forward. to any

Rob Fauber

growth from FX. mandates that first-time from significant have by good from issuers now initiatives second, had ESG in don't of our could contribution and minimal One, a couple defaults our MIS. very material there Obviously, monitored wouldn't I impact change from some a standard if bit credit businesses. see recurring increase of will climate a things. in attrition be ongoing It's line. difference. in We That's and I we supported any but expect meaningful revenue little growth a very includes Rob. revenue been Also, pricing rated think we

Andrew Nicholas

just thank other you. one Then quick Great, one.

about is of M&A better half potentially are in social across the the the whether rationale outlined? those renewals the or those say you some that terms renewals? and anything not renewal could than reasons of would be distancing the how typical of In the the At year year in quarter least of for and second spread timings timing back there process and you

Steve Tulenko

big spread They to later is a were of don't if I base. a proportion proportionately January of diminishing us. see the There come renewal Sure, for the indications due say, We're and any second well a be personally, our proportion the Those have are would but definitely obvious of we it's real due. or year say bit and two I'll renewals January. quarter in we little news biggest seasonality troubles terms on in in December would do good larger Steve. and two then December of therefore effects months. COVID biggest throughout the are and the year in relatively have

Operator

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

Toni Kaplan

I the far. on I you. talk actions other year. any CLOs structured products about so Fed remainder the for you but of from the for offset color you Thank potential hoping about was and know could the any expectation your talked

Rob Fauber

spreads down in But let a relatively is the think, the of be like of can another area Toni, we to Yes, to XX% think the CLOs, Thanks we general, in the think wants and other going we imagine going be is CMBS I their is It's to new range RMBS in Rob. classes. I neighborhood be something adversely for negatively then, the to impacted. West And probably if going add curtail impacted slow most XX% broadly to will question. more securitization it's is across as with auto going of and space. to really and decline think so what asset leveraged consumer see in loans turn we ABS. spreads, loans. sectors and dampen due anticipate XX%. in just supply CLO to the in we're The recovery well commercial see that line to outlook the much me more the loan space for ask to real be going that leveraged estate That's leveraged that's wider impacted-- answer. for both creation the as to loan Mike going and the mortgages we

Mike West

Yes. Thanks, Rob.

here. there's variables two think key I

one and those have the overall second spreads asset we're obviously work. securitization that And the seeing that creation has some make and to instruments the system on corporate-backed materialize side is First then that’s to the is in to narrow economics the stress particular to and there.

So those there in things the obviously look out assets underlying looking at are we fundamental. that that are two we're and that the through major

gives bit So little that color. more hopefully a

Toni Kaplan

to understand help could I for And many hoping great. How you see quarters program? resuming again Thanks. resuming we the what my with or -- I That's goes was guess those, follow-up, guess. stabilization what about comfortable us do repurchase becoming into of Mark, I need repurchases and

Mark Kaye

we think our our Toni. capital by And strategic a Thanks, steps meet long-term I'll we working took first of that stress not changed to capital under of with environment. what the start XXXX we approach have as reiterating number in maybe allocation. to proactively quarter needs a

of incremental of and unsecured global program. the time really Just new for share million quarter other in liquidity one- consistent done many XXbX, did actions was on we repurchases X-year caution drew point. We of the pause abundance [indiscernible] its we around repurchase as summary out down notes. CP given those, in an we to the share at The first with approximately impact virus senior decision quick prioritize a $XXX companies uncertainty in extent and and the did being three-month cancel issue March, $XXX the this million to economy, the of duration and

Thanks, time. shareholders plan plans growing first our of And add, or look just this repurchasing point term, reduce I we dividend our the remains to cash excess shares. have use by [indiscernible], then, will at to sheet optimize to return scale don't to capital which and back balance Longer the to in we dividends after our any with am going our Toni.

Operator

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

George Tong

Hi thanks morning. good

And issuance clarify you issuance, or forecast outlook of down down between volumes the build it issuance you discuss by mid-single digits if refers can digits difference what for built this Moody's? total your issuance? You to Can to year. if global refers accounts and be this low-double debt issuance and specifically to competitors’ expect your build volumes

Ray McDaniel

the issuance. being that this issuance, rather is in change of course There that by, global a but typically I'll -- And talking anticipation just anticipate issuance, issuance parts Moody's of rated rated. the that are of market. is the that are of introduce not it's Ray, in debt about the we're saying by markets it answer said, -- not not seeing an coverage we total

some know this. to color I So I Rob, this let -- on pass he might have over me -- me let more know

Rob Fauber

add exactly in right. markets, thing other look don't we domestic I that's is would issuance at Yes, typically The well. only as

George Tong

Yes. it. Got

MA. So, split Is year around to compared upside and your cost would between as And MIS my be to expect MIS XX% last year. margin to XX% the in XX% you expect for to your room how follow-up MIS margins ratings there cost business, savings actions? this in you given

Mark Kaye

Sure.

So good -- is George. This morning, Mark here. morning good

the this seen XX-month So XX.X%. quarter-on-quarter we measure that's increase basis, use to around in recover this single we necessarily basis. We XXX revenue to quarter, certainly levels of and better record on sort to do don't a but a by third think later margins expect MIS issuance to able this again quarter re-reach being of have year QX a basis fourth We sort points generally the trailing year. than the anticipate

those in The MIS, to the we're cost similar initiatives MA. that deploying are

similarly it outlook lower So it's mid-single revenue that XXXX ensure and sort from of to to protecting expense a one that Moody's margin. approach. our we And reduction anticipate our to that digit we will actuals contribute offset are

George Tong

you. Thank it. Got

Operator

question next ahead. our And Silber Please from go BMO Markets. comes Capital with Jeff

Jeff Silber

being of in a that points be you there? data prepared mentioned favorable? call, impact less specifically Mark, What you given less margins a what lot so on the were issuance referring Thanks know out would much. favorable mix. had we’ve remarks, you've from Thanks. throughout I to the that but, your

Mark Kaye

Jeff, Good morning.

companies into we It's the prior going have frequent at slightly is market or half the issuance last attribution cash reinvestment mix come and month our definitely and and assumed for raise the who to the core of key liquidity versus because month different a would typically that into of would capital. infrequent motivations that what periods from a raise over we of observed have year, investment certainly necessarily or mix part of to we've the the than primarily into on those As what market basis, the the different is purposes. look coming

of And I guidance outlook. XXXX through point may subtle out change it be that's and so we think part was to go that incorporated worthwhile mix our a as

Jeff Silber

that be? that shift, would mix from sorry, impacts I'm margin the what Again,

Ray McDaniel

it recently When actually are normally outlook in been they who and generally that a issuers issuing, the see captured on fees. to the are bulk add recurring fees have infrequent the can revenue issuers extent are very on You pay so margin doing transactional issuing my currently. on basis frequent The have that. capture that if we fees. to likely of so and or issuers upside And or more do. the we same relationship with recurring any sector downside the want Please the plans be of the to colleagues to don't revenue in transaction-based

Rob Fauber

Yes.

addition rated be Obviously But building bit time a from margin first issuers ratings, more of from see the they because to kind are issuance in tends the be When we of when from to of that more we see and to I'd thing margin other see rated existing The construct. issuers add commercial than issuers. friendly tends the Ray, nature frequency issuance important those credits. we friendly. issuance are portfolio issuers, the first-time when again existing that

Jeff Silber

I what That's to great. so clarify just Okay, much. wanted that. I thought. Thank you

Operator

And next comes Huber our Huber question go with Partners. Please Research ahead. from Craig

Craig Huber

your well. you. could, comp focus can cost outlook I question update What quarter? Thank first for outlook versus just the was you. thank fourth more the incentive want I’ll year? for is importantly, quarter have you please the on as us quarter? part But Great, to your what remaining a cost the year, follow-up if growth I on in for the the first Curious please. of

Mark Kaye

Mark had to to $XX $XX now quarter given accrual $XX guidance Craig. comp the the -- comp quarter here. approximately a is year of The Sure. expect first we quarter previously. million. morning This to accrual We per approximately incentive Good per remainder million for be million Good that morning incentive was $XX the compared the as million

quarter the $XX On we a a quarter to indicated ramp, fourth first million to of million $XX previously expense expense increase. ramp

$XX expecting to decrease for expense a are $XX million year. the We now ramp of million

Craig Huber

fourth versus That's quarter saying? the you’re first quarter

Mark Kaye

That is correct.

Craig Huber

get ratings here like answer through then than would environment of this this we like ask And look a end COVID-XX Ray. XX you think course. long-term sort longer about months, more any to importantly consequences sooner this, negatives it both long-term the helpful side, business, punitive of we doesn't to what say vaccine, also the are or and strategic you of Analytics Moody's to business your get when the actually the Ray, thing, business, and better back last Okay. you side, at on your of positive here on wanted XX and to your but whole if When the in the the

Ray McDaniel

out talked past we back, that of companies a related that of opportunities have as but this cyclical on about cutting we that Well, defaulting, is really powerful really although that catastrophic I of are may mean the COVID. kinds we essential of and risks. data bit people range companies to pretty in the The the downside think are that quite collect, event analytics financial be a put managing well data terms when financially

and of by imposed regulation it risk management -- Some is that policies.

so of good by essential underlying the business your whether innovative your it of customer it's considered credit data whether with know it's, it but ways. all that supplier new goes or for ratings, and use and that practice, products, know in is Some accurate of all

out broader offered a in. were set services of essential considered be than being and coming COVID deeper to going products and going Moody's there's of for the coming think there I are pandemic that

really supplier that's been uptake growing the the with last raw of and developing earlier products, we've see the because the surface can are getting we're we about the is tapping things talking pretty over just rates. as at like terrific. usage was investments years, dramatic the with know the that high have material levels three, four products And Steve your in we've We made demand

to -- add more So there's at risk, anything looking I get frankly, do think got we've you this to to Rob, opportunity than I longer-term, that? want through thing. but

Rob Fauber

agree. certainly mean, things an doing it see understanding seeing of now who couple supply is they're ago, and we it's you and Investor and Ray, like going even better I call want with that bit need of months things risk that at Day And with. chain had like business what I it's to think the I we we're of that credit, cyber, are companies about ESG. a a talked enterprises the with

really, think see that global about consistent integrated back I ever out that the about, is of demand talked expect crisis. with seeing And coming we're assessment. that we -- for we So March direction risk more this in very to than

Operator

And our with next question ahead. go Please, from comes Patnaik Manav Barclays.

Manav Patnaik

just other the to digit exposure just just, in the between decline MIS if could high-single decline, the low-double bridge afternoon, wondering My there the that's outliers digit question been first market, issuance you revenue Thank everybody. has than you. as And on and then maybe comment outlook, more on your is the there Good if is was in pricing historically? [indiscernible]. the I structured anything

Rob Fauber

the algorithm. build Mark, of part from think ask you of just to question than second part that unusual standard that the But question. might hey. ask But issuance again. Rob. to revenues, to if repeat of It's in I have there's no, you terms could I there the second don't of anything kind a

Manav Patnaik

to exposure the my the what mandates which also the of first-time structure. other those -- -- typically in second that if that you XXX at call it on are or anything question it, the what is that while clustered around think this I'm profile you market, is, environment? throw different out I resumed, around the XXX in lose those to mix And than so And housing, there? I'll being around XXX was there's your just Yes, the Sure. more players Is the

Rob Fauber

okay. Yes,

year. more expect So has exposure of Finance, competitive others in market rating remain balance in the our we to very market. That a look, CLO become of Structured the of terms terms soft over perhaps versus the

structured of by finance, any in think don't have but terms -- So sector. I greater broadly exposure we

number first-time Second, from a issuers. historically of first-time leverage loan come good terms mandates, of mandates in

contracting And so that we I as it's not really most, mandates. an expect see we the region. sure to sector different first-time impact mean, I'm have that on by

leveraged to loan We coming of really, down expect going out region, to would mandates first-time be space. but be I that by it's say,

Manav Patnaik

All right. Thank guys. you,

Operator

Huber ahead. comes question Research Huber from next our Partners. go Craig And with Please,

Craig Huber

a could, please. Analytics I this side, of X% on ratings, but normal Yes, also sort Pricing increase? environment get of have hi. that to follow-ups, X% can couple I pretty in Moody's you if do the you're your confident

Ray McDaniel

determined that what Craig, going extent, by Well, is to some be to issuance like. activity looks

the to fees monitoring As of relates like you some know, pricing of pricing and things on debt side, relates some to least at the MIS our issuance.

pricing relationship may to So comment there want on is some between further and issuance activities. that. Rob

Rob Fauber

invest and the there continue proposition, terms approach. we MA be side, any of to the value the And to for value in call we in I of expertise, so going that what on analysts. proposition, right. of hearing is our say us that guess our I all reinforcing we that's services is invest from I on think the for experienced kind MIS continue why what and to That's demand about for products certainly, our to supporting Yes, expect is this on for you're the difference in meaningful analysts our don't both our MIS we're side. research. think And would ongoing very very,

going issuers invest that like staff, that customers. the the the heard when at talk value our investors support to continue to it's past, teams, analytical about our of and times experience You've but of in value and we're so in our proposition and this to really us economic

Craig Huber

that think this default at this be follow-up at of you XXXX, is, about And you. little peak Thank just of compared where recovery here bit rates talk year, how maybe of you high on a end the further question about stage? number to XXXX yield think my levels, how rates last the can sort also it side, you might and

Ray McDaniel

Mike on Yes, he let's, comment let's ask please. this, if would

Mike West

the business 'XX with warning have that of is we the important we regard We've thanks. in here to 'XX, here materially impact there from and a what's a end that have however, been of period, credits before. that overall profile large out lower-rated doesn't Yes, The book to our for questions. on about range differ low got Thanks of XX%. XX% the forecast

different much XX%. pessimistic overall, got So Not low Obviously, we where that's at are. our scenario at end. we've the

Craig Huber

yield -- ask should out I oil-related your I'm sorry was XX% Ray, -- want that, of this companies there, about work? -- the to high did probably --

Ray McDaniel

than have a numbers that. bit lower the Rob? you happen probably it's to or do Yes, Mike,

Mike West

debt talk of add. in about the range to can But I'll outstanding it's the Yes, then and XX% Rob XX%. maybe

Rob Fauber

couple standpoint, that we've from a last somewhere between kind split that's the the of and years. revenue from $XX range Yes, that spec investment the million to million $XX gotten of over grade. sector's in grade historically been transactional And revenue historically

Craig Huber

Thank you very much. Great.

Operator

And Please, James. our with next go Patrick O'Shaughnessy question Raymond comes from ahead.

Patrick O'Shaughnessy

afternoon. good Hey,

the one from debt you noted me, can your in earnings provide Just a release? quick some that on press detail more you reserves bad

Ray McDaniel

Sure. Mark?

Mark Kaye

Patrick?

Ray McDaniel

please. Yes,

Mark Kaye

million mainly from accrual QX the itself the our $XX debts geographies around worth issuance and absent debt sectors adjust incremental expenses, exposures not flat. we which proactively quarter points results. three our bad Patrick, percentage quarter of for to expense chose operating out credit impact Mark. was of the lower item to would quality. this We And recognized have this bad COVID-XX this in which growth been allowance, Actually, resulted is certain in

Patrick O'Shaughnessy

Thank you.

Operator

the Ray call further for no questions over remarks. this at to now turn As closing are will there time, I McDaniel

Ray McDaniel

Okay.

everyone for please, summer. joining thank always. you well. We meantime, to the to call in to everyone as stay you. want in Just speaking Thank the the And look again forward

Operator

earnings XXXX call. quarter first Moody's concludes This

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

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

Moody's (MCO) 30 Apr 202020 Q1 Earnings call transcript