10-QPeriod: Q1 FY2022

MOODYS CORP /DE/ Quarterly Report for Q1 Ended Mar 31, 2022

Filed May 2, 2022For Securities:MCO

Summary

Moody's Corporation (MCO) reported a 5% decrease in total revenue to $1.52 billion for the first quarter of 2022 compared to $1.60 billion in the prior year. This decline was primarily driven by a significant 20% drop in Moody's Investors Service (MIS) revenue, largely due to reduced rated issuance volumes amidst market volatility, inflation concerns, and rising borrowing costs. Conversely, Moody's Analytics (MA) revenue saw a strong 23% increase, bolstered by recent acquisitions and continued growth in KYC products and subscription-based sales. Net income attributable to Moody's decreased by 32% to $498 million ($2.68 per diluted share) from $736 million ($3.90 per diluted share) in the prior year. This was impacted by lower MIS revenue and increased operating expenses, including integration costs for recent acquisitions. Despite the revenue headwinds in MIS, the company continues to return capital to shareholders through dividends and share repurchases, with approximately $1.17 billion remaining under its share repurchase authorization.

Financial Highlights

55 data points
Beta

Revenue

$1.52B

72.6% Gross Margin

Net Income

$498.00M

32.7% Net Margin

EPS (Diluted)

$2.68

Total Assets

$14.74B

Cash & Equivalents

$1.75B

Free Cash Flow

$411.00M

Financial Statements
Beta
Revenue$1.52B
Cost of Revenue$417.00M
Gross Profit$1.10B
SG&A Expenses$371.00M
Operating Expenses$866.00M
Operating Income$656.00M
Net Income$498.00M
EPS (Basic)$2.69
EPS (Diluted)$2.68
Shares Outstanding (Basic)185.10M
Shares Outstanding (Diluted)186.10M

Key Highlights

  • 1Total revenue decreased by 5% to $1.52 billion, driven by a 20% decline in MIS revenue.
  • 2Moody's Analytics (MA) revenue grew by 23%, fueled by acquisitions and organic growth in key product areas.
  • 3Net income attributable to Moody's declined by 32% to $498 million, with diluted EPS falling to $2.68 from $3.90.
  • 4Operating expenses increased by 16%, partly due to integration costs associated with recent acquisitions.
  • 5The company repurchased $1.95 million shares for approximately $645 million during the quarter, with $1.17 billion remaining on its repurchase authorization.
  • 6The Russia/Ukraine conflict has led to market volatility and adversely impacted MIS rated issuance volumes.
  • 7Moody's continues to manage its capital effectively, with a focus on returning value to shareholders through dividends and buybacks.

Frequently Asked Questions

The primary driver of the revenue decline was a significant 20% decrease in Moody's Investors Service (MIS) revenue. This was mainly attributed to reduced rated issuance volumes in the corporate finance sector due to market volatility stemming from the Russia/Ukraine conflict, inflation concerns, and rising borrowing costs.

Moody's Analytics (MA) showed strong performance with a 23% increase in revenue. This growth was driven by inorganic contributions from recent acquisitions and organic growth, particularly in KYC products and recurring revenue from subscription-based sales to banking and insurance customers.

Moody's remains committed to returning capital to shareholders. During the first quarter, the company repurchased approximately 1.95 million shares for about $645 million. As of March 31, 2022, there was approximately $1.17 billion of remaining share repurchase authority. The company also continues to pay quarterly dividends.

The Russia/Ukraine conflict has led to broader global market volatility, which has adversely impacted rated issuance volumes, particularly for MIS. Moody's has also suspended commercial operations in Russia and withdrawn MIS credit ratings on Russian entities. While Moody's Russian operations are not material, the broader market impact is a concern.