10-KPeriod: FY2013

MOODYS CORP /DE/ Annual Report, Year Ended Dec 31, 2013

Filed February 27, 2014For Securities:MCO

Summary

Moody's Corporation (MCO) reported strong performance in its 2013 10-K filing, driven by growth across both its credit rating services (MIS) and analytics (MA) segments. The company demonstrated resilience and strategic execution, with a notable increase in revenue and operating income, signaling a positive recovery and growth trajectory following the broader market disruptions experienced in prior years. Key financial highlights include significant revenue growth, improved operating margins, and a strong free cash flow generation, which supported increased shareholder returns through share repurchases and dividends. The company's diversified business model, with both recurring revenue from analytics and transaction-based revenue from ratings, appears well-positioned to navigate market dynamics and capitalize on opportunities in global financial markets.

Financial Highlights

55 data points
Beta

Revenue

$2.97B

Net Income

$804.50M

27.1% Net Margin

EPS (Diluted)

$3.60

Total Assets

$4.40B

Cash & Equivalents

$1.92B

Free Cash Flow

$884.50M

Financial Statements
Beta
Revenue$2.97B
R&D Expenses$22.80M
SG&A Expenses$822.10M
Operating Expenses$1.74B
Operating Income$1.23B
Net Income$804.50M
EPS (Basic)$3.67
EPS (Diluted)$3.60
Shares Outstanding (Basic)219.40M
Shares Outstanding (Diluted)223.50M

Key Highlights

  • 1Moody's Corporation reported a 9% increase in total revenue to $2.97 billion in 2013, up from $2.73 billion in 2012, driven by growth in both MIS and MA segments.
  • 2Operating income increased by 15% to $1.23 billion in 2013, with operating margin improving to 41.5% from 39.5% in 2012.
  • 3Moody's Analytics (MA) segment revenue grew 8% in 2013, with particularly strong performance in Research, Data, and Analytics (RD&A) and Enterprise Risk Solutions (ERS), reflecting demand for regulatory compliance tools.
  • 4Moody's Investors Service (MIS) segment revenue increased by 9% in 2013, primarily driven by strong issuance volumes in high-yield corporate debt and bank loans, alongside pricing initiatives.
  • 5The company repurchased approximately $893 million of its common stock in 2013, significantly increasing its share buyback activity compared to the previous year.
  • 6Moody's maintained a strong financial position, ending 2013 with $1.92 billion in cash and cash equivalents and generating $884.5 million in free cash flow.
  • 7The company reported a significant increase in diluted Earnings Per Share (EPS) to $3.60 in 2013, up from $3.05 in 2012, excluding certain one-time items.

Frequently Asked Questions

Moody's revenue growth in 2013 was primarily driven by an increase in rated issuance volumes for speculative-grade corporate debt and bank loans within the MIS segment. Additionally, the MA segment saw strong demand across all its lines of business, particularly in RD&A for data and analytics, and ERS, driven by financial institutions' need for regulatory compliance solutions.

Moody's managed its expenses effectively, with total expenses increasing at a slower pace than revenue. While expenses were impacted by the settlement of certain litigation matters and increased compensation costs due to headcount growth, these were offset by lower incentive compensation. This careful expense management contributed to an expansion of both operating margin (to 41.5%) and adjusted operating margin (to 44.7%).

Moody's projected a positive outlook for 2014, expecting overall revenue to grow in the high-single-digit percent range. The company anticipated operating expenses to increase in the mid-single-digit percent range, leading to projected operating margins between 42-43% and adjusted operating margins between 45-46%. Diluted earnings per share were forecasted to be between $3.90 and $4.00.

Moody's identified several key risks, including the evolving U.S. and international regulatory landscape for credit rating agencies, potential litigation related to rating opinions, competition, cybersecurity threats, and the impact of general economic conditions and volatility in financial markets on debt issuance volumes.