10-KPeriod: FY2017

MOODYS CORP /DE/ Annual Report, Year Ended Dec 31, 2017

Filed February 27, 2018For Securities:MCO

Summary

Moody's Corporation's 2017 10-K report details a strong year driven by significant revenue growth across both its core credit rating services (MIS) and its data and analytics segment (MA). The acquisition of Bureau van Dijk for €3.0 billion in August 2017 was a major strategic move, substantially expanding the MA segment's capabilities and contributing significantly to overall revenue growth. Despite a substantial settlement charge in the prior year (2016), the company demonstrated robust operational performance in 2017, with increased operating income and improved margins. Key drivers for revenue growth included strong leveraged finance issuance, increased demand for credit research and data subscriptions, and successful integration of acquired businesses. The company continues to invest in strategic growth opportunities, focusing on expanding its data and analytics offerings and leveraging its brand in emerging markets. While facing regulatory scrutiny and competitive pressures inherent in the financial information industry, Moody's strategy appears focused on defending its ratings business while actively building out its analytics and data solutions.

Financial Highlights

57 data points
Beta

Revenue

$4.20B

71.1% Gross Margin

Net Income

$1.00B

23.8% Net Margin

EPS (Diluted)

$5.15

Total Assets

$8.59B

Cash & Equivalents

$1.07B

Free Cash Flow

$664.00M

Financial Statements
Beta
Revenue$4.20B
Cost of Revenue$1.22B
Gross Profit$2.99B
R&D Expenses$42.00M
SG&A Expenses$986.00M
Operating Expenses$2.38B
Operating Income$1.82B
Net Income$1.00B
EPS (Basic)$5.24
EPS (Diluted)$5.15
Shares Outstanding (Basic)191.10M
Shares Outstanding (Diluted)194.20M

Key Highlights

  • 1Total revenue increased by 17% to $4.20 billion in 2017, driven by strong performance in both the MIS and MA segments.
  • 2The acquisition of Bureau van Dijk for €3.0 billion significantly boosted the MA segment's revenue and expanded its data and analytics capabilities.
  • 3MIS revenue grew by 17%, primarily due to strong leveraged finance issuance and increased demand across various rating lines.
  • 4MA segment revenue increased by 16%, with notable growth in Research, Data, and Analytics (RD&A) driven by credit research subscriptions and data licensing.
  • 5Operating income surged to $1.81 billion, a substantial increase from $638.7 million in 2016, significantly impacted by a settlement charge in the prior year.
  • 6Diluted EPS grew to $5.15 from $1.36 in 2016, reflecting improved profitability and strategic execution.
  • 7The company repurchased shares worth $199.7 million in 2017, demonstrating a commitment to returning value to shareholders.

Frequently Asked Questions

Moody's revenue growth in 2017 was primarily driven by strong leveraged finance issuance within the Corporate Finance Group (CFG), increased demand for credit research subscriptions and data licensing within the Research, Data, and Analytics (RD&A) business, and the significant contribution from the acquisition of Bureau van Dijk.

The acquisition of Bureau van Dijk, completed in August 2017, was a major event for Moody's. It significantly expanded the capabilities and offerings of the Moody's Analytics (MA) segment, contributing approximately $92 million in revenue and approximately seven percentage points to the MA segment's overall growth in 2017. It also led to a substantial increase in goodwill and intangible assets on the balance sheet.

Moody's outlook appears positive, with the company highlighting strong secular trends supporting long-term growth in global fixed-income markets. Key growth drivers identified include global GDP growth, continued disintermediation in fixed-income markets, and increased demand for data, analytics, and risk management solutions, particularly as institutions seek to leverage technology for business insights and efficiencies.

In 2016, Moody's incurred a significant Settlement Charge of $863.8 million related to civil claims concerning its credit rating business. In 2017, while the settlement charge was absent, the company incurred Acquisition-Related Expenses of $22.5 million related to the Bureau van Dijk acquisition, and amortization of intangible assets acquired from the acquisition also increased expenses.