10-KPeriod: FY2018

MOODYS CORP /DE/ Annual Report, Year Ended Dec 31, 2018

Filed February 25, 2019For Securities:MCO

Summary

Moody's Corporation (MCO) reported strong revenue growth in its 2018 10-K filing, primarily driven by its Moody's Analytics (MA) segment, which saw a 21% increase in external revenue. This growth was significantly boosted by acquisitions, including Bureau van Dijk, Reis, and Omega Performance. While Moody's Investors Service (MIS) experienced a slight revenue decline of 2% due to lower corporate and public finance issuance, it was partially offset by favorable product mix and pricing. The company's overall revenue increased by 6% to $4.44 billion, with operating income rising by 3% to $1.87 billion. Moody's also benefited from a lower effective tax rate in 2018, following the U.S. Tax Act, which contributed to a 31% increase in diluted EPS to $6.74. The company continued its strategic investments in growing areas and acquisitions to enhance its data, analytics, and risk management solutions, positioning itself for long-term growth in increasingly complex financial markets.

Financial Highlights

57 data points
Beta

Revenue

$4.44B

72.0% Gross Margin

Net Income

$1.31B

29.5% Net Margin

EPS (Diluted)

$6.74

Total Assets

$9.53B

Cash & Equivalents

$1.69B

Free Cash Flow

$1.37B

Financial Statements
Beta
Revenue$4.44B
Cost of Revenue$1.25B
Gross Profit$3.20B
R&D Expenses$51.10M
SG&A Expenses$1.08B
Operating Expenses$2.58B
Operating Income$1.87B
Net Income$1.31B
EPS (Basic)$6.84
EPS (Diluted)$6.74
Shares Outstanding (Basic)191.60M
Shares Outstanding (Diluted)194.40M

Key Highlights

  • 1Moody's Analytics (MA) segment revenue grew 21% to $1.73 billion, significantly driven by acquisitions (Bureau van Dijk, Reis, Omega Performance).
  • 2Moody's Investors Service (MIS) external revenue declined 2% to $2.71 billion, impacted by lower corporate and public finance issuance, though partially offset by pricing and product mix.
  • 3Total revenue increased 6% to $4.44 billion.
  • 4Operating income increased 3% to $1.87 billion.
  • 5Diluted EPS increased 31% to $6.74, boosted by a lower effective tax rate (21.0% in 2018 vs. 43.6% in 2017) following the U.S. Tax Act.
  • 6The company repurchased shares, with $324 million remaining authority under an existing program and an additional $1 billion authorized.
  • 7Moody's made strategic acquisitions and investments, including Reis (commercial real estate data), Omega Performance (credit training), and minority stakes in QuantCube Technology and ICR Chile, to expand its capabilities and geographic reach.

Frequently Asked Questions

Moody's revenue growth in 2018 was primarily driven by its Moody's Analytics (MA) segment, which experienced a 21% increase in external revenue. This growth was significantly influenced by acquisitions, notably Bureau van Dijk, Reis, and Omega Performance, which expanded the company's data, analytics, and risk management offerings. While Moody's Investors Service (MIS) saw a slight revenue decline, overall revenue grew by 6% to $4.44 billion.

The U.S. Tax Act, enacted in late 2017, significantly lowered the U.S. corporate income tax rate from 35% to 21%. This reduction, along with other tax-related adjustments, led to a substantial decrease in Moody's effective tax rate from 43.6% in 2017 to 21.0% in 2018. This lower tax burden contributed to a 31% increase in diluted Earnings Per Share (EPS).

Moody's strategy focuses on defending and enhancing its core ratings business (MIS) while building its position as a leading provider of data, analytics, and risk management solutions through its MA segment. This involves investing in organic development, strategic acquisitions, new products (e.g., ESG and cybersecurity risk assessments), and expanding its presence in emerging markets to capture growth opportunities in an increasingly complex financial landscape.

In 2018, Moody's made several key acquisitions and investments to strengthen its business. These included the acquisition of Reis, Inc. (commercial real estate data), Omega Performance (credit training), and minority stakes in QuantCube Technology (AI-based analytics) and ICR Chile (domestic credit ratings in Chile). These moves align with Moody's strategy to expand its data and analytics capabilities and geographic reach.