10-QPeriod: Q2 FY2021

MOODYS CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2021

Filed July 30, 2021For Securities:MCO

Summary

Moody's Corporation (MCO) reported strong financial results for the second quarter and first half of 2021, demonstrating robust revenue growth driven by both its Moody's Investors Service (MIS) and Moody's Analytics (MA) segments. Total revenue increased by 8% year-over-year for the quarter to $1.55 billion and by 16% for the first half to $3.15 billion. This growth was fueled by strong performance in leveraged finance and structured finance issuance for MIS, and broad-based growth across research, data, analytics, and enterprise risk solutions for MA. The company also saw significant improvement in profitability, with operating income rising 13% in the quarter and 27% in the first half, leading to diluted EPS of $3.07 for the quarter and $6.98 for the first half. Moody's Analytics demonstrated particularly strong growth, with external revenue up 15% for the quarter and 15% for the first half, driven by acquisitions and organic demand for KYC/compliance solutions and data. The company maintained healthy operating margins across both segments, with MIS achieving a 64.6% operating margin and MA achieving a 24.5% operating margin in the quarter. The company also highlighted strong free cash flow generation and a commitment to returning capital to shareholders through dividends and share repurchases.

Financial Highlights

54 data points
Beta

Revenue

$1.55B

76.5% Gross Margin

Net Income

$577.00M

37.2% Net Margin

EPS (Diluted)

$3.07

Total Assets

$12.55B

Cash & Equivalents

$2.81B

Free Cash Flow

$564.00M

Financial Statements
Beta
Revenue$1.55B
Cost of Revenue$365.00M
Gross Profit$1.19B
SG&A Expenses$327.00M
Operating Expenses$752.00M
Operating Income$801.00M
Net Income$577.00M
EPS (Basic)$3.09
EPS (Diluted)$3.07
Shares Outstanding (Basic)186.70M
Shares Outstanding (Diluted)187.90M

Key Highlights

  • 1Total revenue increased by 8% year-over-year in Q2 2021 to $1.55 billion and by 16% for the first half of 2021 to $3.15 billion.
  • 2Moody's Investors Service (MIS) saw revenue growth of 4% in Q2 2021, driven by strong leveraged finance and structured finance issuance, partially offset by declines in investment-grade issuance.
  • 3Moody's Analytics (MA) reported a strong 15% revenue increase in Q2 2021, fueled by demand for KYC/compliance solutions, research and data, and inorganic growth from acquisitions.
  • 4Operating income increased by 13% to $801 million in Q2 2021, and by 27% to $1.65 billion for the first half of 2021.
  • 5Diluted EPS rose by 14% to $3.07 in Q2 2021 and by 32% to $6.98 for the first half of 2021.
  • 6The company generated robust Free Cash Flow of $1.27 billion for the first half of 2021.
  • 7Moody's continues to return capital to shareholders, with a quarterly dividend declared and approximately $1.3 billion remaining under share repurchase authorizations as of June 30, 2021.

Frequently Asked Questions

Moody's revenue growth was driven by strong performance in both its segments. For Moody's Investors Service (MIS), growth was primarily due to increased leveraged finance issuance, benefiting from favorable market conditions for debt refinancing and M&A activity, and strong growth in structured finance, including CLOs and CMBS. Moody's Analytics (MA) saw robust growth from its Research, Data, and Analytics (RD&A) and Enterprise Risk Solutions (ERS) offerings, including demand for KYC and compliance solutions, credit research and data feeds, and inorganic growth from recent acquisitions.

Profitability improved significantly. Operating income for the second quarter of 2021 increased by 13% to $801 million, and for the first six months of 2021, it rose by 27% to $1.65 billion. This led to a substantial increase in diluted EPS, which grew by 14% to $3.07 for the quarter and by 32% to $6.98 for the first half of the year. The expansion in operating margins reflects strong revenue growth outpacing the increase in operating expenses.

Moody's remains committed to returning capital to shareholders. The company declared a quarterly dividend of $0.62 per share. As of June 30, 2021, there was approximately $1.3 billion remaining under its share repurchase authorizations. The company also indicated strong operating cash flow and a strategy to invest in growth initiatives, both organic and inorganic, while returning excess capital through dividends and share repurchases.

The report notes several acquisitions completed in late 2020 and early 2021, including Cortera (March 2021), RDC (February 2020), Acquire Media, ZM Financial Systems, and Catylist. These acquisitions contributed to the revenue growth in the Moody's Analytics segment, particularly in RD&A and ERS. There was a minor loss of $9 million reported in the prior year period related to the divestiture of MAKS.