10-KPeriod: FY2015

MOODYS CORP /DE/ Annual Report, Year Ended Dec 31, 2015

Filed February 25, 2016For Securities:MCO

Summary

Moody's Corporation (MCO) reported a solid year in 2015, with a 5% increase in revenue to $3.48 billion, driven by growth in both its Moody's Investors Service (MIS) and Moody's Analytics (MA) segments. Excluding foreign exchange impacts, revenue grew by a stronger 9%. MIS saw revenue rise by 3% (8% ex-FX), supported by changes in fee mix, pricing initiatives, and increased issuance volumes for investment-grade corporate debt and structured finance. MA revenue grew 8% (12% ex-FX), primarily due to strong performance in Enterprise Risk Solutions (ERS) and Research, Data & Analytics (RD&A), offset by a decline in Professional Services. The company managed its expenses effectively, with operating income increasing by 2% to $1.47 billion, although operating margin slightly decreased due to investments and acquisitions. Moody's continued to return capital to shareholders through share repurchases and dividends, repurchasing approximately $1.1 billion in shares and paying out $1.39 per share in dividends.

Financial Highlights

54 data points
Beta

Revenue

$3.48B

Net Income

$941.30M

27.0% Net Margin

EPS (Diluted)

$4.63

Total Assets

$5.10B

Cash & Equivalents

$1.76B

Free Cash Flow

$1.11B

Financial Statements
Beta
Revenue$3.48B
R&D Expenses$29.10M
SG&A Expenses$921.30M
Operating Expenses$2.01B
Operating Income$1.47B
Net Income$941.30M
EPS (Basic)$4.70
EPS (Diluted)$4.63
Shares Outstanding (Basic)200.10M
Shares Outstanding (Diluted)203.40M

Key Highlights

  • 1Revenue increased by 5% to $3.48 billion in 2015, driven by broad-based growth across segments.
  • 2Moody's Investors Service (MIS) revenue grew 3% (8% ex-FX), benefiting from fee structure changes, pricing, and increased issuance in investment-grade corporate debt and structured finance.
  • 3Moody's Analytics (MA) revenue increased by 8% (12% ex-FX), with strong contributions from ERS and RD&A, despite a decline in Professional Services.
  • 4Operating income grew 2% to $1.47 billion, with an operating margin of 42.3%.
  • 5The company repurchased approximately $1.1 billion of its common stock in 2015, demonstrating commitment to shareholder returns.
  • 6Moody's Analytics (MA) has a significant portion of recurring revenue (74% in 2015), providing a stable revenue base.
  • 7The company is subject to significant regulatory oversight and litigation risks, particularly related to credit ratings and business practices, as detailed in the Risk Factors section.

Frequently Asked Questions

Moody's revenue growth in 2015 was driven by a combination of factors across its two main segments. For Moody's Investors Service (MIS), growth was attributed to changes in the mix of fee types, new fee initiatives, pricing increases, and higher issuance volumes for investment-grade corporate debt and structured finance. For Moody's Analytics (MA), growth was fueled by strong performance in its Enterprise Risk Solutions (ERS) and Research, Data & Analytics (RD&A) businesses, supported by recent acquisitions.

Moody's reported a 2% increase in operating income to $1.47 billion in 2015, resulting in an operating margin of 42.3%. While expenses increased due to higher compensation costs, investments in IT infrastructure, and acquisition-related costs, the company managed these by increasing revenue and benefiting from share repurchases which reduced diluted EPS dilution. The company also highlighted that excluding foreign exchange impacts, revenue growth was stronger, indicating underlying business momentum.

Moody's corporate strategy focuses on defending and enhancing its core ratings and research business (MIS) and building its position as a leading provider of risk management solutions (MA). Key initiatives include investing in product enhancements, expanding participation in strategic alliances, growing headcount to meet demand, making selective acquisitions, and expanding its presence in emerging markets. The company aims to leverage its brand and thought leadership to capitalize on global debt capital market expansion and increased focus on credit risk analysis.

Moody's faces several significant risks. These include the rapidly evolving and stringent U.S. and international regulations affecting the credit rating industry, which could increase costs and impact demand for ratings. The company is also exposed to extensive litigation and government regulatory proceedings related to its rating opinions and business practices, particularly stemming from the financial crisis. Other key risks include competition, cybersecurity threats, reliance on third-party technology, currency fluctuations, and potential loss of key employees. The company's financial performance is also significantly dependent on the volume of debt securities issued in the capital markets.