What was the primary reason for the significant drop in net income in 2016?

The significant decrease in net income was primarily due to an $863.8 million settlement charge related to civil claims and investigations concerning credit ratings assigned by Moody's Investors Service (MIS) during the period leading up to the 2008 financial crisis. This charge impacted operating income and consequently net income and earnings per share.

How did the Moody's Analytics (MA) segment perform in 2016?

The MA segment demonstrated strong performance, with revenue increasing by 7% to $1.25 billion. This growth was driven by increases in Research, Data and Analytics (RD&A) and Enterprise Risk Solutions (ERS), including revenue from the acquisition of GGY. Excluding unfavorable foreign exchange impacts, MA revenue grew by 10%.

What is Moody's strategy for shareholder returns?

Moody's is committed to returning value to shareholders through a combination of share repurchases and dividends. In 2016, the company repurchased approximately $738.8 million of its common stock and paid dividends totaling $1.49 per share. The company also has an ongoing share repurchase authorization with approximately $727 million remaining at the end of 2016.

What were the key risk factors highlighted in the filing?

Key risk factors highlighted include the significant impact of U.S. and international laws and regulations on the credit rating industry, exposure to litigation and government regulatory proceedings related to rating opinions, increased pricing pressure from competitors, potential damage to reputation and credibility, and changes in the volume of debt securities issued in capital markets.

MCO 10-K FY2016 Annual Report — Revenue, Net Income, EPS

Summary

Moody's Corporation (MCO) reported strong revenue growth in 2016, driven by its Moody's Analytics (MA) segment, which saw a 7% increase, and a modest 2% rise in its Moody's Investors Service (MIS) segment. The company's overall revenue grew by 3% to $3.6 billion. However, operating income was significantly impacted by an $863.8 million settlement charge related to civil claims, resulting in a 57% decrease in operating income and a sharp decline in net income and diluted EPS compared to the previous year. Despite the substantial settlement charge, adjusted operating income and adjusted diluted EPS showed modest year-over-year growth, indicating underlying business resilience. Moody's continued its strategic focus on investing in growth opportunities, including acquisitions like GGY for its MA segment, and returning capital to shareholders through share repurchases and dividends. The company's strong recurring revenue base from its MA segment provides a buffer against the cyclicality of MIS revenue.

Financial Highlights

55 data points

Beta

Revenue

$3.60B

Net Income

$266.60M

0.1% Net Margin

EPS (Diluted)

$1.36

Total Assets

$5.33B

Cash & Equivalents

$2.05B

Free Cash Flow

$1.14B

Financial Statements

Beta

Revenue	$3.60B
R&D Expenses	$40.10M
SG&A Expenses	$931.20M
Operating Expenses	$2.95B
Operating Income	$650.90M
Net Income	$266.60M
EPS (Basic)	$1.38
EPS (Diluted)	$1.36
Shares Outstanding (Basic)	192.70M
Shares Outstanding (Diluted)	195.40M

Key Highlights

1Moody's Corporation reported total revenue of $3.6 billion in 2016, a 3% increase from 2015, primarily driven by growth in the Moody's Analytics (MA) segment (+7%) and modest growth in Moody's Investors Service (MIS) segment (+2%).
2Operating income declined significantly by 57% to $638.7 million, largely due to an $863.8 million settlement charge related to civil claims with the DOJ and 21 U.S. States.
3Net income attributable to Moody's decreased by 72% to $266.6 million, resulting in diluted EPS of $1.36.
4Excluding the settlement charge and other one-time items, Adjusted Operating Income increased by 3% to $1.64 billion, and Adjusted Diluted EPS grew by 5% to $4.81.
5Moody's continued to return capital to shareholders through share repurchases totaling $738.8 million in 2016 and declared dividends totaling $1.49 per share.
6The company made strategic acquisitions, including GGY in March 2016, to enhance its Moody's Analytics offerings.
7Moody's retained strong operating cash flow of $1.2 billion, supporting its business investments and shareholder returns.

MOODYS CORP /DE/ Annual Report, Year Ended Dec 31, 2016

Summary

Financial Highlights

Key Highlights

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