MCO - NYSE
Moody's Corporation
MCO·NYSE
$448.39
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Moody's Corporation operates as an integrated risk assessment firm worldwide. It operates in two segments, Moody's Investors Service and Moody's Analytics. The Moody's Investors Service segment publishes credit ratings and provides assessment services on various debt obligations, programs and facilities, and entities that issue such obligations, such as various corporate, financial institution, and governmental obligations, as well as and structured finance securities. This segment provides ratings in approximately 140 countries. Its ratings are disseminated through press releases to the public through electronic media, including the internet and real-time information systems used by securities traders and investors. This segment has rated approximately 5,000 non-financial corporates; 3,600 financial institutions; 16,000 public finance issuers; 145 sovereigns; 47 supranational institutions; 459 sub-sovereigns; and 1,000 infrastructure and project finance issuers, as well as 9,100 structured finance deals. The Moody's Analytics segment develops a range of products and services that support the risk management activities of institutional participants in financial markets; and offers subscription based research, data, and analytical products comprising credit ratings, credit research, quantitative credit scores and other analytical tools, economic research and forecasts, business intelligence and company information products, commercial real estate data and analytical tools, and on-line and classroom-based training services, as well as credentialing and certification services. It also offers offshore analytical and research services with learning solutions and certification programs; and software solutions, as well as related risk management services. The company was formerly known as Dun and Bradstreet Company and changed its name to Moody's Corporation in September 2000. Moody's Corporation was founded in 1900 and is headquartered in New York, New York.
At a Glance
Live SnapshotMarket Cap$78.33B
EPS13.7300
P/E Ratio32.66
Earnings Date07/22/2026
Earnings Call Transcript
MCO • 2024 • Q4
Operator
Good day, everyone, and welcome to the Moody's Corporation Fourth Quarter and Full Year 2024 Earnings 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 questions and answers following the presentation. I will now turn the call over to Shivani Kak, Head of Investor Relations. Please go ahead. Thank you.
Shivani Kak
Good morning, and thank you for joining us today. I'm Shivani Kak, Head of Investor Relations. This morning, Moody's released its results for the fourth quarter and full year 2024, as well as our outlook for full year 2025 and updates to our medium-term guidance. The earnings press release and the presentation to accompany this teleconference are both available on our website, at ir.moodys.com. During this call, we will also be presenting non-GAAP or adjusted figures. Please refer to the tables at the end of our earnings press release filed this morning for reconciliations between all adjusted measures referenced during this call in US GAAP. I call your attention to the Safe Harbor language, which can be found towards the end of our earnings release. Today's remarks may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In accordance with the act, I also direct your attention to the management's discussion and analysis section and the risk factors discussed in our annual report on Form 10-K for the year ended December 31, 2023, and in other SEC filings made by the company. These, together with the Safe Harbor statement, set forth important factors that could cause actual results to differ materially from those contained in any such forward-looking statements. I would also like to point out that members of the media may be on call this morning in a listen-only mode. I'll now turn the call over to Rob.
Operator
Thank you. If you would like to ask a question, please dial. If you are on a speakerphone, please pick up your handset and make sure that your mute function is turned off so that your signal reaches our equipment. We ask that you please limit yourself to one question. The option to rejoin the queue will be unavailable. Again, that is star one to ask a question. Monifin Nayak with Barclays. Please go ahead.
Operator
Our next question comes from the line of Ashish Sabadra with RBC Capital Markets. Please go ahead.
Operator
Our next question comes from the line of Toni Kaplan with Morgan Stanley. Please go ahead.
Steve Talinko
Everything you said there makes good sense. I would say the simplification dynamic is a rich one and I think a very valuable way to think about this. Maybe most importantly, we're concentrating on those use cases and those areas where we perceive the demand to be the richest among our customers. Rob talked about drivers of growth in the future and we're making investments in those concentrating on those, and redeploying toward those sometimes redeploying out of some areas that aren't going to be as fast growing. So that's probably the other big change there. Just to reinforce, Gen AI really is making a difference internally. We're pretty excited about the productivity gains we're seeing in engineering especially. And starting to see some on the sales side as well already seeing some in customer service, so pretty excited about that.
Operator
Our next question comes from the line of Alex Kramm with UBS. Please go ahead.
Alex Kramm
Yes. Hey. Morning, everyone. I guess a good afternoon now. But very quickly on the rating sites, obviously, laid out kinda some of your expectations, but maybe you can dig a little bit deeper for 2025, the puts and takes. On the range, where do you think some upside can come from, for example, M&A? And what do you see as the biggest risk for the outlook here?
Rob Fauber
Hey, Alex. It's Rob. Thanks for the question. So let me give you a little insight into maybe a few of the, you know, some of the key assumptions here in the outlook. I mean, first of all, you know, economic growth, we think, is gonna support broader market activity. Spreads are tight. They may widen a little bit. During the balance of the year, but we'll still be well below historical levels we expect. And we think we're gonna see continued strong investor demand. Refinancing and improved M&A activity are gonna be key drivers. In regards to refi, there's a fairly wide range of assumptions about refi. Volumes for leveraged loans in particular for 2025 when you look across all the banks. And it ranges from, you know, leveraged loan issuance being substantially down to being up, and you could see in our webcast deck, we're kinda somewhere in between you know, down mid-single digits. So that's one. And the second is the second key variable is M&A activity. And we've assumed something like a 50% increase in M&A for 2025 meaning that M&A will be an increasing percent of the use of proceeds and that is favorable to revenue mix. And just to give you a sense of the sensitivity there, if it was something like 20% to 25% increase, that might be you know, two to three percentage points of revenue growth. We also haven't assumed any you know, any risk-off periods, you know, when you've got you know, a forecast that calls for more than $6 trillion of issuance. You know, we've assumed virtually all Blue Sky days. So there are a lot of things obviously that go into issuance. It's not just one assumption. But taken together, Alex, that explains our guidance range for revenues that spans mid to high single digits on low single-digit issuance growth.
Operator
Our next question comes from the line of Scott Wurtzel with Wolfe Research. Please go ahead.
Scott Wurtzel
Hey. Good morning, guys. Thank you for taking my question. I wanted to go back to Moody's Analytics. I'm wondering if you can speak to just the sort of broader demand environment that you're seeing and how sales cycles are trending. I know, you know, go back a quarter or two, maybe on the Gen AI side, there were some longer sales cycles. So wondering if we can get an update on that and just demand more broadly. Thanks.
Operator
Our next question comes from the line of Owen Lau with Oppenheimer. Please go ahead.
Owen Lau
How about guidance? Have you taken any AI and MSCI all these into your guidance?
Rob Fauber
We incorporate those into our plans. I would say the sales pipeline's big enough that they are contributors to the pipeline, but they're not major contributors or material contributors. Across the whole business. Yeah. I would say, though, that so it's all baked in, but Research Assistant has been very helpful to sales in research and insights. And 25% of the growth in research and insight ARR is from customers who subscribed to Research Assistant. And the weighted sales pipeline for Research Assistant is double the total sales for fiscal 2024. So we've got larger opportunities around workflow automation, and we're seeing good momentum. So it's an important contributor to growth even though it's modest in terms of the overall base of revenues.
Owen Lau
Got it. Thanks a lot.
Operator
Our next question comes from the line of Jeffrey Silber with BMO Capital Markets. Please go ahead.
Rob Fauber
Yeah. So I think it's important to kinda zoom out for a moment. And just think about what the world's been through over the last five years and we've had a pandemic. We had a huge negative shock to GDP and employment. Then we had a huge monetary and fiscal stimulus in response. Then that led to record inflation and an interest rate shock. And as the pandemic subsided, we had two military conflicts in key energy-producing regions. But through all of this, the global economy has been surprisingly resilient and it's been able to adapt. I think it's important just to keep that backdrop because, you know, obviously, there's a large volume of executive orders and policy directives that span a number of different issues, but the headlines don't, you know, tell all the story. You know, I think we'll see some impact you know, in certain sectors based on what happens with tariffs, and you can imagine sectors like autos and retail and steel and aluminum, immigration, sectors like agriculture and hospitality and construction. You could see on fossil fuel producers, so they're gonna be, you know, I think some again, some puts and takes here. We may see you know, more broadly a stronger economic environment that's gonna be good for issuance in general. So I think you know, from a also from a rating agency perspective, we're really gonna anchor on the credit impacts of all this and know, we're putting out a lot of research about know, what those impacts could be.
Operator
Our next question comes from the line of David Motemaden with Evercore ISI. Please go ahead.
David Motemaden
Hey. Good morning. I had a question just on the higher medium-term outlook for MIS revenue, the high single to low double-digit growth now. Versus mid to high growth when you guys last updated these medium-term targets. Could you help me think through what's driving that uptick? Were there any big movements in the long-term building blocks that you've given in the past? Or is it just M&A coming back that's driving that? And maybe also if you could just talk about how we should think about the third-party private credit rating assessments contributing to that as well would be helpful.
Rob Fauber
Yeah. So I think maybe the first thing just to anchor on is you know, this is we're still anchoring off of the base year of 2022 and the medium-term targets that we put out. So we're now a couple of years into that. We've got guidance out for the third year, and we're kinda looking out to now where do we think we're gonna be five years out in 2027? So we've got two years in the books. We've got a year of guidance. And two years of unknown. And so what you're seeing is us now just updating, and an important part of that is the performance that we've already achieved. So, you know, that hopefully, that gives you a sense. But, Mike, maybe just talk a little bit about some of the you know, the demand drivers for issuing because I think that also gives some insight into the durability of growth in ratings.
Mike West
Yeah. Thanks. Thanks, Rob. As Rob mentioned earlier, what you've got is a lower rate of M&A over the last few years that we do anticipate to come back because there's large pent-up demand. But if I move away from some of those traditional M&A refunding studies and think a little bit more broadly, about the growth of private credit, whether that is in direct lending, whether that's in securitization, whether that's in fund finance, or whether it's in the broader reallocation of capital into the private market away from the banks. Then on top of that, got to think about some of the drivers in that sustainable and transition finance area. There are clean energy commitments around 93% of global GDP, which is expected to translate in investment needs of about two and a half times by 2030. And Rob also talked about digitalization and digital infrastructure, which again is another multitrillion-dollar market that needs long-term financing for long-term assets, and that could be project financing, could be corporate finance, or it could be some form of securitization. So when we think of that third building block the evolution of the debt capital markets. These are some of the things that we're investing in, are engaging in with market participants and feel very good as part of that medium-term story.
Operator
Our next question comes from the line of George Tong with Goldman Sachs. Please go ahead.
George Tong
Hi. Thanks. Good afternoon. With respect to the MA segment and your medium-term target of high single, low double-digit growth, how are you thinking about growth by subsegments? So decision solutions, research and insights, and data and information, and what do you see as driving the differences in growth? Between those segments?
Steve Talinko
Maybe I'll take a I'll talk to that, George. Thanks for the question. It's Steve. First of all, if you just think about the core franchises, these franchises have been around literally for decades. The data information business, the research and insights business. These businesses have, you know, demonstrated a good track record of solid growth, maybe above average for the industry or above average for a peer group. With ARR numbers in the high single digits, we think that's gonna continue very reliably into the future. You've got continued investments in terms of data quality, data coverage, and as well as tools like the Gen AI tools we've talked about as well. So we believe these to be strong solid performers in the future delivering good retention and good new business numbers. The decision solutions unit where you have some of the higher growing businesses most notably, KYC and third-party risk management work that we do to help people understand who they do business with, that you know, that's put up some really nice numbers in terms of ARR numbers in the recent past and continues to do so. We think, in the future. So you should see higher growth in the decision solutions segment, maybe high single-digit growth in these core franchises that have been around for a long time. High growth in decision solutions driven by a lot of innovation, and a lot of work to make our customers' jobs easier leveraging our data, our analytics, and our software together to solve problems and to help them do their jobs. So I think you'll see a differentiation that way.
George Tong
Very helpful. Thank you.
Operator
Our next question comes from the line of Peter Christiansen with Citigroup. Please go ahead.
Peter Christiansen
Thank you. Good afternoon. Great to be a part of the call. Really nice execution here. I wanna get back on the M&A side. You know, you've had some really good speed to market on some new products, some enhancements. I was just talking just like to hear any color on your ability to pass on value-based pricing across a number of your products and segments subsegments there. Then lastly, just curious how you're thinking about headcount for MIS and growth there potentially. Thanks.
Rob Fauber
Yeah. The one other thing I'd add, you know, double-clicking on Steve's point about you know, the value prop. It's really interesting. You have so many customers who are focusing on efficiency and digitization and automation and all of these things. And I think we've talked a little bit about you know, the example of what's going on with our CreditView offering with research assistant where the value prop itself is changing. So CreditView with no Gen AI enablement is a research subscription product. And CreditView with Gen AI enablement, research assistant, custom AI workflows, those kinds of things, is actually something where people can start to say, how do I change the leverage model for labor in my you know, whether it's my investment team or my research team or whatever it may be, that's a very different conversation and a very different value proposition. Now the cycle time to have those conversations is different, but that's a pretty exciting evolution of that particular product.
Peter Christiansen
Thank you. Compelling narrative. Thank you.
Operator
Our next question comes from the line of Craig Huber with Huber Research. Please go ahead.
Craig Huber
Thank you. Rob or Mike, can you just talk further about private credit, the I'm curious what if you're willing to give this, what percent of your ratings revenue came from private credit last year? How do you see the market growing here to add your ratings growth rates in the coming years here? And then, Noémie, if you could just throw in there what the what's the incentive comp number in the fourth quarter and for the full year, how that changed year over year? Thank you.
Rob Fauber
Craig, yeah, let me give you so we don't know, we don't break out exactly like you're asking, but we can give you some data points to give you an insight into the traction that private credit is getting within the franchise. So I mentioned in my prepared remarks that you know, we had nearly 400 private credit mandates across all of ratings. Now that includes things like ratings on, you know, BDCs, sub-lines, closed-end funds, you know, the suite of fund finance, but also asset-backed finance and middle market CLOs, private ratings for investors. So you know, and that has grown very significantly in the course of one year. And also just to give you a sense, because Fund Finance is certainly a growing area and I think it's gonna continue to grow for a number of years. And fund finance is in our FIG we address that through our FIG rating franchise, in 2024, 30% of our first-time mandates in FIG were private credit related. So again, this goes back to the when you look at it in the total base, it's still modest, but when you look at it as a percent of growth, you can see that this is starting to make a difference. Do you have anything you wanna add just in terms of how we're addressing private credit?
Mike West
Yeah. And thanks for your question, Craig. I mean, as Rob said, we definitely see private credit as a tailwind. It's a rapidly evolving space across all those asset classes. And it's very important when you think about the originator the transparency around the credit quality there, they're looking to move on to the buyer, and then many of the buyers again, want to know their credit quality and an independent view of that credit quality because many of these buyers are sensitive. With regard to regulation and their own capital allocation. So, again, there's many trends that support why independent opinion is very important in a growing asset class. And the way that we've organized ourselves is because it's across all of these different franchises that at the very highest level, we have to organize around leadership so we can engage with all these players that may be touching in these different franchises. And, therefore, we have dedicated commercial people, dedicated analytical teams. But the very good thing is that we have depth and we have experience in each of our lines of business and the appropriate methodologies. So as they start to develop as individual areas of asset class, we are able and available to discuss at a very early stage, and that's what's very important when you have an evolving market like this. So I feel very good about going into 2025 and over the medium term.
Operator
Our next question comes from the line of Jeff Meuler with Baird. Go ahead.
Jeff Meuler
Yeah. Thank you. The medium-term growth guidance, obviously, really good. But as Rob said, a lot's updating for performance already achieved. I think, mathematically, it implies lower growth in 2026 and 2027 relative to what I'd consider your longer-term structural growth, especially in MIS. Are there any specific callouts there? Should we just not read too much into that? I think Rob said there's kinda blue sky assumptions for issuance in 2025. But 2025 MIS doesn't look overly inflated. Any means relative to the long-term trend, and Mike sounded positive on structural growth. If you could just help us reconcile what's implied for 2026 and 2027. Thank you.
Jeff Meuler
Hear you loud and clear. Thank you.
Operator
Our next question comes from the line of Andrew Steinerman with JPMorgan. Please go ahead.
Andrew Steinerman
Okay. Thank you.
Operator
Our next question comes from the line of Russell Quelch with Redburn Atlantic. Please go ahead.
Russell Quelch
Yeah. Hi. Thanks for having me on. In respect of ARR growth, within KYC. Sorry. Had been some expectations that I would mature after the booms post the pandemic and the Ukraine Gaza conflict. Can you talk about what's driving a reacceleration of growth in that area and how sustainable is in the high teens range? And then separately, MSCI said on its conference call, it was having further conversations with you about expanding your partnership, which is currently in ESG. It's perhaps other areas including private credit. Can you provide an update perhaps on that from your perspective?
Steve Talinko
It's the KYC. Yeah. So we are believers that we have a better mousetrap when it comes to KYC and third-party risk management. Whether you're talking about knowing who you're doing business with as a customer or a supplier, and we've made investments across the board, really, in terms of data, in terms of models that would help you make decisions on whether or not you should do business with this customer. As well as software to organize coordinate your thoughts and remember why you decided to work with that customer. So we're releasing those features and those products literally all the time. Those investments we think are gonna be very worthwhile and contribute to this growth rate. This has been a good grower for us, and we could expect it to continue.
Operator
Our next question comes from the line of Shlomo Rosenbaum with Stifel. Please go ahead.
Shlomo Rosenbaum
Hi. Thank you for taking my question. Hey, Rob. It seems like some of the early slowness that we saw in adoption in research assistant has turned around, and it looks like things are really starting to pick up well there. I was wondering if you could update us and some of the other capabilities that you added, like the, you know, the automated credit memo, the early warning system. What are you seeing over there in terms of traction? And do you expect a similar type of adoption path as what you're seeing for research assistance, or do you think that those things could take a little bit longer because the customers might need to do a little bit more on their side in terms of process?
Rob Fauber
Yeah. Maybe a couple of things, and I'm also gonna ask Steve to add on here. First, we have Gen AI enabled a number of our products now through the course of the year. I think we talked about last year, you know, this concept of navigators which helps our customers use AI and as an interface and get more out of our applications. We've done that across eight primary solutions. And that is not an a la carte offering that we sold. That's included in the solution, but that's gonna go to really helping with the overall value prop and retention and pricing opportunity for us. And we know that to be true because we have some really encouraging data points from research assistant where we see customer satisfaction is considerably higher. We see the usage on the platform is considerably higher. So that gives us confidence there. And, you know, you're right. We have launched several other, what I would call, a la carte products. They're early days and anything that, again, is selling into the banks, so there's lots of really good conversation particularly about, you know, early warning. But like research assistant, these sales cycles take time with the bank. Steve, anything you wanna add to that?
Steve Talinko
Well, number one, we have people meeting with some of your colleagues, not you, Shlomo, but some of the people on this call literally today talking about these things. I would say the big institutions are increasingly talking about this as a transformational moment. And we're starting to hear quotes like, Steve, can you help us save one million hours of work by leveraging your tools? Right? Is there a way for us to can we literally have a proposal that is literally intended to displace a knowledge-based outsourcer by using some of these more refined workflows and persona-based Gen AI tools? So the prompt engineering that we're able to do now is progressing to the level where we're able to help people literally do their job and replace some of the labor and we're starting to see that in the pipeline. Starting to see the adoption curve a change in tenure from I need to meet regulations to I'm starting to get confidence that we can let's see if we can develop a business case to do that. So I think there's some pretty exciting green shoots in that respect.
Shlomo Rosenbaum
Thank you.
Operator
Our final question will come from the line of Jason Haas with Wells Fargo.
Jason Haas
Hey. Good afternoon, and thanks for taking my question. I wanted to follow-up on the MIS revenue growth in Q4. It looks like I was looking specifically at the MIS transaction revenue growth. It was up 29% in Q4, but the issuance growth was up 42%. So I was curious what drove that delta like it was maybe on the corporate finance side, but, yeah, maybe you can help explain a little bit better why the revenue is weaker relative to issuance.
Rob Fauber
Yeah. It really relates to bank loans. So there was very robust bank loan issuance by our definition. We include repricings as issuance volume. And so in the fourth quarter, something like 55% bank loan volume was repricings. And that's the highest that we've seen in any quarter for a long time. And the, you know, the economics on repricings are much different for us. So, actually, if you strip out essentially, if you just take out bank loans out of issuance and take bank loans out of transaction revenues, you know, we would have had you know, by our definition issuance of, you know, something like mid-teens percent growth, but we would have had, you know, call it, you know, 30% transaction revenue growth. So that I think that's primarily what was going on there. One other thing I'd add is we do see a lot of repricing activity in January. So strong loan volume, but repricing activities, so keep that in mind.
Operator
And I will now turn the call back to Rob for any closing remarks.
Rob Fauber
Okay. Well, thanks, everybody, for your time and your questions and we look forward to talking to you in the first quarter. Goodbye.
Transcript from February 13, 2025
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