10-QPeriod: Q3 FY2020

MOODYS CORP /DE/ Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 30, 2020For Securities:MCO

Summary

Moody's Corporation (MCO) reported a strong third quarter of 2020, demonstrating robust revenue growth and improved profitability. Total revenue increased by 9% year-over-year to $1.36 billion, driven by significant contributions from both the Moody's Investors Service (MIS) and Moody's Analytics (MA) segments. MIS saw an 11% increase in external revenue, largely due to higher corporate debt issuance, while MA's external revenue grew by 7%, supported by demand for KYC and compliance solutions, as well as insurance and credit assessment products. The company also achieved substantial margin expansion, with the operating margin increasing to 47.3% from 44.3% in the prior year. This improvement was attributed to strong revenue growth coupled with disciplined cost management, including lower travel expenses due to the COVID-19 pandemic, which offset increased compensation and technology infrastructure investments. Diluted EPS rose by 24% to $2.47, reflecting the improved operational performance. Moody's also announced an increased long-term debt position to enhance liquidity, reflecting proactive financial management during the uncertain economic climate.

Financial Highlights

54 data points
Beta

Revenue

$1.36B

73.2% Gross Margin

Net Income

$467.00M

34.4% Net Margin

EPS (Diluted)

$2.47

Total Assets

$11.67B

Cash & Equivalents

$2.49B

Free Cash Flow

$490.00M

Financial Statements
Beta
Revenue$1.36B
Cost of Revenue$364.00M
Gross Profit$992.00M
SG&A Expenses$271.00M
Operating Expenses$714.00M
Operating Income$642.00M
Net Income$467.00M
EPS (Basic)$2.49
EPS (Diluted)$2.47
Shares Outstanding (Basic)187.80M
Shares Outstanding (Diluted)189.30M

Key Highlights

  • 1Total revenue increased 9% to $1.36 billion for the third quarter of 2020 compared to the same period in 2019.
  • 2Moody's Investors Service (MIS) external revenue grew 11%, driven by strong corporate debt issuance.
  • 3Moody's Analytics (MA) external revenue increased 7%, supported by demand for compliance solutions and credit assessment tools.
  • 4Operating margin improved to 47.3% from 44.3% in the prior year, reflecting revenue growth and effective cost management.
  • 5Diluted Earnings Per Share (EPS) increased by 24% to $2.47 for the quarter.
  • 6The company ended the quarter with a strong cash and cash equivalents balance of $2.49 billion, up from $1.83 billion at the end of 2019.
  • 7Moody's added $700 million in long-term borrowings in the first nine months of 2020 to bolster liquidity during the COVID-19 uncertainty.

Frequently Asked Questions

Revenue growth was primarily driven by strong corporate debt issuance, benefiting Moody's Investors Service (MIS), and increased demand for Know Your Customer (KYC) and compliance solutions, as well as insurance and credit assessment products, benefiting Moody's Analytics (MA). Favorable foreign currency translation also had a positive impact on non-U.S. revenue.

Moody's implemented disciplined cost management, leading to operating expenses being largely in line with the prior year. This included reduced travel costs due to the COVID-19 pandemic. These savings helped offset increased compensation expenses and investments in technology infrastructure.

Moody's ended the quarter with a robust cash and cash equivalents balance of $2.49 billion. To enhance liquidity during the uncertain economic climate, the company increased its long-term borrowings by $700 million in the first nine months of 2020 and temporarily suspended its share repurchase program. The company anticipates resuming its share repurchase program in the fourth quarter of 2020.

While Moody's experienced some disruption in early 2020, the company reported strong results in Q3 2020. However, management noted that the duration and severity of the pandemic create uncertainties, with potential impacts including reduced revenue and cash flows, additional credit losses, and asset impairment charges. The company has implemented measures to maximize liquidity and manage discretionary spending.