Investor Presentation 3Q 2016

Transcription

1 Investor Presentation 3Q 2016

2 Disclaimer Certain statements contained in this presentation are forward-looking statements and are based on future expectations, plans and prospects for Moody s business and operations that involve a number of risks and uncertainties. Moody s outlook for 2016 and other forward-looking statements in this presentation are made as of October 21, 2016, and the Company disclaims any duty to supplement, update or revise such statements on a going-forward basis, whether as a result of subsequent developments, changed expectations or otherwise. In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the Company is identifying certain factors that could cause actual results to differ, perhaps materially, from those indicated by these forward-looking statements. Those factors, risks and uncertainties include, but are not limited to, the current world-wide credit market disruptions and economic slowdown, which is affecting and could continue to affect the volume of debt and other securities issued in domestic and/or global capital markets; other matters that could affect the volume of debt and other securities issued in domestic and/or global capital markets, including regulation, credit quality concerns, changes in interest rates and other volatility in the financial markets such as that due to the UK s referendum vote whereby the UK citizens voted to withdraw from the EU; the level of merger and acquisition activity in the U.S. and abroad; the uncertain effectiveness and possible collateral consequences of U.S. and foreign government initiatives to respond to the current world-wide credit market disruptions and economic slowdown; concerns in the marketplace affecting our credibility or otherwise affecting market perceptions of the integrity or utility of independent credit agency ratings; the introduction of competing products or technologies by other companies; pricing pressure from competitors and/or customers; the level of success of new product development and global expansion; the impact of regulation as an NRSRO, the potential for new U.S., state and local legislation and regulations, including provisions in the Financial Reform Act and regulations resulting from that Act; the potential for increased competition and regulation in the EU and other foreign jurisdictions; exposure to litigation related to our rating opinions, as well as any other litigation, government and regulatory proceedings, investigations and inquires to which the Company may be subject from time to time; provisions in the Financial Reform Act legislation modifying the pleading standards, and EU regulations modifying the liability standards, applicable to credit rating agencies in a manner adverse to credit rating agencies; provisions of EU regulations imposing additional procedural and substantive requirements on the pricing of services; the possible loss of key employees; failures or malfunctions of our operations and infrastructure; any vulnerabilities to cyber threats or other cybersecurity concerns; the outcome of any review by controlling tax authorities of the Company s global tax planning initiatives; exposure to potential criminal sanctions or civil remedies if the Company fails to comply with foreign and U.S. laws and regulations that are applicable in the jurisdictions in which the Company operates, including sanctions laws, anti-corruption laws, and local laws prohibiting corrupt payments to government officials; the impact of mergers, acquisitions or other business combinations and the ability of the Company to successfully integrate acquired businesses; currency and foreign exchange volatility; the level of future cash flows; the levels of capital investments; and a decline in the demand for credit risk management tools by financial institutions. These factors, risks and uncertainties as well as other risks and uncertainties that could cause Moody s actual results to differ materially from those contemplated, expressed, projected, anticipated or implied in the forward-looking statements are described in greater detail under Risk Factors in Part I, Item 1A of the Company s annual report on Form 10-K for the year ended December 31, 2015, and in other filings made by the Company from time to time with the SEC or in materials incorporated herein or therein. Stockholders and investors are cautioned that the occurrence of any of these factors, risks and uncertainties may cause the Company s actual results to differ materially from those contemplated, expressed, projected, anticipated or implied in the forward-looking statements, which could have a material and adverse effect on the Company s business, results of operations and financial condition. New factors may emerge from time to time, and it is not possible for the Company to predict new factors, nor can the Company assess the potential effect of any new factors on it. 2

3 Table of Contents 1. Financial Overview 2. Capital Markets Overview 3. Moody s Investors Service (MIS) 4. Moody s Analytics (MA) 5. Conclusion 6. Appendix 3

4 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Mission: To be the World s Most Respected Authority Serving Risk-Sensitive Financial Markets Risk Understanding Risk Understanding Risk Understanding Risk Understanding Risk Measurement Risk Management Methodologies Training & Certification Analyst Outreach Ratings Estimated Default Frequency Analytics (EDFs) Market-Implied Ratings (MIRs) Research (from both MIS & MA) Advisory Services Stress Testing Software Moody s is an essential component of the global capital markets, providing credit ratings, research, tools and analysis that contribute to open and integrated financial markets 4

5 1 Financial Overview 5

6 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Overview of Moody s Corporation» Leading global provider of credit rating opinions, insight and tools for financial risk measurement and management» TTM 3Q16 revenue of $3.5 billion; operating income of $1.4 billion» 65% of total MCO revenue» 84% of total MCO operating income» 35% of total MCO revenue» 16% of total MCO operating income Independent provider of credit rating opinions and related information for over 100 years MIS provides ratings in more than 120 countries 1 Ratings relationships with ~11,000 corporate issuers, ~20,000 public finance issuers and has rated and currently monitors ~68,000 structured finance obligations 1 Research, data and software for financial risk analysis and related professional services Customers in 140 countries 2 4,700 institutional customers; business with 86 of top 100 global banks 2 Note: All financial data is for the trailing twelve months ended September 30, As of December 31, As of March 31,

7 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Revenue is Diversified by Business, Geography and Type TTM 3Q16 Revenue by Business TTM 3Q16 Revenue by Geography MIS MA Public, Project & Infrastructure 11% Financial Institutions 11% Structured Finance 12% Corporate Finance 31% MIS Other 1% Research, Data & Analytics 19% Enterprise Risk Solutions 11% Professional Services 4% U.S. EMEA 25% TTM 3Q16 Revenue by Type Non-U.S. Asia-Pacific 11% Americas 6% United States 58% Recurring Transaction MCO MIS MA 48% 60% 26% 52% 40% 74% Note: All financial data is for the trailing twelve months ended September 30,

8 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Long-term Growth Opportunities Intact Despite Nearterm Macro Challenges Debt market issuance driven by global GDP growth ~2-4% Disintermediation of credit markets in both developed and emerging economies driving both issuance and demand for new products and services ~2-3% Growth in Moody s Analytics driven by further penetration of MA s client base and expansion of bank and insurance risk regulatory requirements ~2-3% MA and MIS pricing initiatives aligned with value; affected by business volumes and mix ~3-4% Long-Term Revenue Growth Opportunity: High Single-Digit to Low Double-Digit % (on average) Potential Selective Acquisitions 1 Potential Operating Income Margin Expansion Ongoing Share Repurchases 1 Long-Term EPS Growth Opportunity: Low-Teens to High-Teens % (on average) 2 1 Subject to market conditions and other ongoing capital allocation decisions. 2 Assumes no material change in effective tax rate, foreign exchange rates, leverage profile and/or capital allocation policy. 8

9 $ Billions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Consistently Delivered Strong Performance; 2016 More Challenging Revenue $4.0 $3.0 $2.0 $1.0.0 Low-singledigit % growth EPS 1 $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $ F F 2 $2.46 $2.99 $3.65 $4.21 $4.60 $4.62 to $4.72 Operating Margin Performance 5-year Average Free Cash Flow Conversion 4 50% Operating Margin 3 Adj. Operating Margin Moody's.30 45% 40% 35% 42.4% 43.3% 39.0% 39.5% 44.7% 41.5% 46.0% 45.5% 43.2% 42.3% ~45% ~41% F 2 $1 of Revenue Select Peers S&P Represents Non-GAAP EPS. See appendix for reconciliation from Non-GAAP to GAAP. 2 Guidance as of October 21, Adjusted Operating Margin is a Non-GAAP measure. See appendix for reconciliation from Non-GAAP to GAAP. 4 As of November 2016, over last five available years. Free Cash Flow is a Non-GAAP financial measure. Source: FactSet. 5 Includes CLGX, DNB, EXPN, FDS, IHS, MORN, MSCI, SPGI, TRI and VRSK. 9

10 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix All Areas of the Company Undertaking Actions to Actively Manage Expense Growth Moody s Investors Service» Revised organizational structure» Reengineering analytical support group» Upgrading IT for improved system automation Moody s Analytics» Higher margin product focus» Limited growth of low-margin services» Salesforce efficiency Moody s Shared Services» Staffing shift to low-cost locations» Improved process efficiency through re-engineering and technology enablement» Flattened rate of headcount growth» Increased use of Copal Amba» Compensation management» Performance culture» Real estate densification Expense and best practice initiatives to help drive MCO operating margin to the mid-40s % range over the next several years 10

11 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Millions of Shares Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s has a Disciplined Approach to Capital Allocation Investing in Growth Opportunities Return of Capital Reinvestment Acquisitions Dividends Share Repurchases» Invest in existing businesses to support organic growth» FY 2016 capex guidance: ~$120 million 1» Aligned with strategy» Opportunistic; ideally able to use offshore cash Share Repurchases and Dividends Paid Share Repurchases (R) Share Count (L) $455 $121 $334 $340 $143 $197 $1,090 $197 $893 $1,457 $1,370 $236 $272 $1,221 $1, Dividends Paid (R) $1,086 $215 $679 YTD 3Q 2016 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200» Payout ratio potential is 25% - 30% of net income at current leverage 2» TTM 3Q 2016 payout ratio was ~30% 3 1 Guidance as of October 21, Assumes continued balance of return of capital between dividends and share repurchase subject to available cash, market conditions and other ongoing capital allocation decisions. 3 Dividend payout ratio is defined as dividends per share/non-gaap EPS. 4 Guidance as of October 21, 2016 (subject to available cash, market conditions and other ongoing capital allocation decisions). 5 Year-to-date as of September 30, $ Millions $1.60 $1.40 $1.20 $ » FY 2016 share repurchase guidance: ~$750 million 1,4» Average annualized net share count reduction of ~3% from 2011 to 3Q 2016» YTD 2016 average repurchase price 5 of $95.51 Annualized Dividend Per Share (Last 5 Years) $

12 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s has Returned ~$5 Billion to Shareholders Since 2013 Moody s ( YTD 1 ) Peer Group Average ( YTD 2 ) M&A 7% 5% 16% 30% Capex 17% Dividends Share Repurchase 72% Return of Capital = 88% 17% 36% Return of Capital = 53% 1 Year-to-date as of September 30, Data for DNB, EXPN, SPGI, TRI and VRSK as of June 30, 2016; data for CLGX, FDS, INFO, MORN and MSCI as of September 30, Source: FactSet. Peer group includes: CLGX, DNB, EXPN, FDS, INFO, MORN, MSCI, SPGI, TRI, VRSK. 12

13 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Overview of 2016 Transactions» Automated financial data collection and business intelligence solutions for the SME market» Broadens scope of MA s technology-enabled SME credit risk solutions» Moody s Analytics Risk Quality (MARQ) Score has been well received Full Year 2016 EPS Impact N/A» Advanced actuarial software for the global life insurance industry» Enhances MA s insurance risk offerings and analytical capabilities» Significantly expands presence in the insurance analytics market (.02)» Domestic credit ratings in Korea» Expands MIS presence in Korea and exposure to the AsiaPacific credit ratings markets» KIS has been Moody s Korea-based credit rating affiliate since 2001 N/A» Credit rating agency based in Hamburg, Germany» Leverages Moody s ratings methodology and EH s expertise in analyzing trade credit» Collaboration will launch new SME credit ratings services in Germany in early 2017 N/A 13

14 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Full Year 2016 Guidance as of October 21, 2016» Revenue: Increase in the low-single-digit % range» Operating Expenses: Increase in the mid-single-digit % range» Operating Margin: Approximately 41%» Adjusted Operating Margin 1 : Approximately 45%» Effective Tax Rate: 31% %» GAAP Earnings Per Share: $ $4.86» Non-GAAP Earnings Per Share 1 : $ $4.72» Share Repurchases: Approximately $750 million (subject to available cash, market conditions and other ongoing capital allocation decisions)» Capital Expenditures: Approximately $120 million» Depreciation & Amortization: Approximately $130 million» Free Cash Flow 1 : Approximately $1 billion 1 Amount is a Non-GAAP measure. See Appendix for a reconciliation of this Non-GAAP measure to its comparable U.S. GAAP measure. 14

15 2 Capital Markets Overview 15

16 Interest Coverage Interest Coverage Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Debt Leverage up in North America but Down in Europe; Interest Coverage Remains Reasonable Credit Metrics: North American Speculative Grade Companies 6.0x 5.0x 4.0x 3.0x 2.0x 1.0x 0.0x 3.5x 3.6x 3.9x 4.2x 4.0x 4.0x 4.1x 4.4x 4.5x 4.8x 5.0x 5.0x 2.2x 2.1x 1.7x 1.5x 1.7x 2.0x 1.8x 1.7x 1.7x 1.8x 1.7x 1.7x Q 2016 (EBITDA - Capex) / Interest Expense Debt / EBITDA Credit Metrics: European Speculative Grade Companies 6.0x 5.0x 4.0x 3.0x 2.0x 1.0x 0.0x 4.9x 4.3x 4.5x 4.8x 5.0x 4.9x 4.1x 1.4x 1.8x 1.6x 1.5x 1.5x 1.5x 1.8x (EBITDA - Capex) / Interest Expense Debt / EBITDA Source: Moody s Investors Service. 16

17 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Outside of Commodities, Default Rates are Contained Default Rates for Global Corporate Rated Issuance 1 U.S. Speculative Grade Default Rates % High Yield Historical Average 12.0% 10.0% Total 1.8% 5.4% 2014 TTM 3Q % 6.0% 4.0% 4.2% historic average Commodities 2.0% 28.1% 2.0% 0.0% Non- Commodities 1.7% 2.2%» Global speculative-grade default rate expected to finish 2016 at 4.4% before settling back to 3.3% in September 2017, helped by improved market conditions and fewer commodity defaults 1 Moody s rated corporate global speculative grade default historical average of 4.2% since and 2017 forecasts for trailing twelve months ended December 31, 2016 and September 30, 2017, respectively. 2 Commodities sector includes Oil & Gas and Metals & Mining. Source: Moody s Investors Service. 3 Trailing twelve months ending September 30,

18 $ Billions $ Billions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix North America and EMEA Non-Financial Corporates Have ~$3.1 Trillion of Refunding Needs 1 Debt Maturities: North America Moody s-rated Corporate Bonds and Loans $300 $250 $200 $150 $100 $50 $144 $19 $9 $185 $41 $43 $202 $71 $111 $178 $104 $176 $196 $ Source: MIS, February Note: Data represents U.S. & Canadian MIS rated corporate bonds & loans. $ CAGR Investment Grade Bonds: 8% Speculative Grade Bonds: 71% Speculative Grade Bank Loans: 130% Debt Maturities: EMEA Moody s-rated Corporate Bonds and Loans $300 $250 $200 $150 $100 $50 $196 $190 $176 $166 $41 Source: MIS, July $71 $81 $52 $56 $62 $62 $ CAGR Investment Grade Bonds: (5%) Speculative Grade Bonds: 25% Speculative Grade Bank Loans: 9% 1 Amount reflects total maturities identified in the above sources. Investment Grade Bonds Speculative Grade Bonds Speculative Grade Bank Loans 18

19 % of Mentions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Debt Refinancing and M&A are Most Frequently Stated Uses of Proceeds Uses of Funds from USD High Yield Bonds and Bank Loans 1 Debt Refinancing M&A Capital Spending Shareholder Payments 9% 12% 9% 4% 11% 24% 22% 17% 19% 18% 17% 18% 22% 20% 16% 17% 5% 7% 8% 8% 5% 7% 8% 45% 63% 53% 31% 30% 25% 31% 41% 54% 41% 73% 62% 52% 83% 71% 74% 78% 71% 65% 54% 64% YTD % of mentions for each respective period in bond issue or bank loan program tranche documents. Excludes issues of less than $25 million and general corporate purposes. An issue can have multiple purposes and, as a result, % s do not sum to 100%. 2 As of September 30, Source: Moody s Capital Markets Research Group (CMRG). 19

20 Billions $ Billions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Disintermediation of Credit is an Ongoing Trend in the Global Capital Markets European Non-Financial Corporate Bonds vs. Bank Loans Outstanding U.S. Non-Financial Corporate Bonds vs. Bank Loans Outstanding 7,000 Bonds Loans $9,000 Bonds Loans 6,000 $7,500 5,000 4,000 3,000 2,000 1, % 4 8 % 21% $6,000 $4,500 $3,000 $1,500 47% 4 8 % 53% Sources: ECB, Federal Reserve, BarCap Indices. Europe bank loan data includes Eurozone and UK bank loans. Europe bond data includes euro and sterling denominated bonds. European data is through August U.S. data is through September

21 # of New Mandates Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Disintermediation is a Key Driver of Moody s Global New Rating Mandates Global New Rating Mandates 1 1, EMEA United States Rest of World 1, YTD » In 3Q 2016, Moody s new rating mandates increased to 227, up 24% from 183 in 2Q Rated by Moody s Investors Service. 2 As of September 30, Source: Moody s Investors Service. 21

22 3 Moody s Investors Service 22

23 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Investors Service: A Leading Provider of Credit Ratings, Research and Risk Analysis Proven rating accuracy and deeply experienced analysts Focus on research leadership Rating Quality Research & Insight Expanded sales and marketing activities in Commercial Group Value Proposition Service Level Improving the issuer / investor experience 23

24 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Illustrative Value of a Moody s Rating Example: 10 year $500 million corporate bond Unrated Rated by Moody s $500,000,000 x 4.3% = $21,500,000 x 10 years = $215,000,000 Bond Interest rate Annual interest payments Tenor Lifetime interest expense $500,000,000 x 4.0% = $20,000,000 x 10 years = $200,000,000 $15 million in total interest expense vs. lifetime cost of a rating Note: Illustrative spread differential based on feedback from syndicate desks and FBR & Co. research on Moody s Corporation (January 2014) which stated that obtaining a Moody s rating typically saves approximately 30 basis points per year for investment grade issuers. Many factors go into the pricing of a bond. 24

25 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Continues to Invest in Key International Markets Americas» 2015: Acquired 100% of Equilibrium EMEA» 2013: Opened MIS Warsaw office» 2016: Opened MIS Stockholm office» 2016: Collaboration with Euler Hermes Rating APAC» 2006: Joint venture in China domestic market with CCXI» 2013: Opened MIS Mumbai and Shanghai offices» 2015: Acquired majority control of ICRA» 2016: Increased stake in KIS to 100% 25

26 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Investors Service Financial Profile TTM 3Q 2016 Revenue: $2.3 billion Recurring 60% Transaction US Non-US 37% Corporate Finance 48% MIS Other 1% Public, Project, & Infrastructure Finance 17%» 32% recurring revenue» 39% recurring revenue 40% 63% Structured Finance 18% Financial Institutions 16%» 62% recurring revenue» 39% recurring revenue 2016 Revenue Guidance as of October 21, 2016 Global U.S. Non-U.S. Corporate Finance approximately flat approximately flat approximately flat approximately flat Structured Finance mid-single-digit % range Financial Institutions low-single-digit % range Public, Project & Infrastructure Finance approximately 10% Note: All financial data is for the trailing twelve months ended September 30,

27 4 Moody s Analytics 27

28 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Analytics Provides Essential Insight Serving Global Financial Markets Research Data & Analytics Enterprise Risk Solutions Professional Services» MIS research & data» MIS ratings feeds» Quantitative credit metrics (EDFs)» Economic research, data & models» Structured finance analytics & data» Software solutions and risk management services that assist with: - Financial spreading - Risk scoring - Default modeling - Exposure aggregation & management - Portfolio analytics - Stress testing - Risk-Weighted Assets (RWA) calculation and reporting» Outsourced research & consulting» Financial training & education In-house training, seminars & on-line learning Professional certification 28

29 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Analytics Financial Profile TTM 3Q 2016 Revenue: $1.2 billion Recurring Transaction US Non-US» > 95% recurring revenue» 96% retention rate 26% 74% 52% Research, Data and Analytics 54% Enterprise Risk Solutions 34%» 64% recurring revenue 48% Professional Services 12%» Combination of one-off contracts and semi-recurring revenue 2016 Revenue Guidance as of October 21, 2016 Global mid-single-digit % range U.S. low-double-digit % range Non-U.S. low-single-digit % range Research, Data & Analytics high-single-digit % range Enterprise Risk Solutions high-single-digit % range Professional Services low-single-digit % range Note: All financial data is for the trailing twelve months ended September 30,

30 $ Millions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Analytics has Multiple Platforms for Growth Added ~$600 Million in Revenue in 8 Years $1, Revenue and CAGR ~65% organic $1,000 Professional Services $149.9m, 44% CAGR ~15% organic $800 Enterprise Risk Solutions $374.0m, 18% CAGR ~70% organic $600 $400 Research, Data & Analytics $626.4m, 6% CAGR ~90% organic $

31 Full Year 2013 Full Year 2014 Full Year H 2016 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix RD&A: Growth Driven by Retention, New Sales and Pricing 8.0% 95.1% 7.9% 111.0% Retained Base Upgrades and Price New Sales Business Base Reported Revenue Growth $26.1 million 8.5% 7.0% 96.3% 7.2% 110.5% Retained Base Upgrades and Price New Sales Business Base Reported Revenue Growth $54.6 million 9.5% 95.9% 6.3% 7.5% 109.7% Reported Revenue Growth Retained Base Upgrades and Price New Sales Business Base $52.0 million 10.0% 6.5% 94.7% 6.3% 107.5% Retained Base Upgrades and Price New Sales Business Base Reported Revenue Growth $37.1 million 7.7% Note: The sales growth attributions presented on this slide are related to RD&A subscription sales. Upgrades reflect amendments to existing customer contracts. New Sales reflect new contracts with new and existing customers. Reported revenue growth reflects total RD&A revenue. 31

32 TTM 1 Revenue $ Millions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix ERS: Solid Track Record of Growth Overall CAGR Since 2011 of 14% Recurring Revenue: Subscriptions & Maintenance Non-Recurring Revenue: License and Services $300 $250 $200 $150 $100 $50 16% CAGR 11% CAGR» Growth drivers Regulation and accounting standards driving demand for automated software tools Financial institutions adopting standard approaches and best practices in risk management Expense management pressure shifting FIs away from home-grown technology solutions» Investment in common code base offering rich functionality and streamlined configuration options will drive sales and simplify customer adoption Reminder: While ~2/3 of revenue base is renewable, results are affected by large projects timing may impact sales, revenues, and margin in any one period 1 Trailing twelve months ended September 30, 2016.» Focus on higher-value, more profitable business supports margin expansion; some top-line offset due to slower growth in low-margin services 32

33 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Professional Services: Extending the Brand Into New Markets and Deepening Relationships With Customers Financial services training» Provider of global learning capabilities to banks, asset managers, regulators and non-bank financial institutions» Expansion into new markets: India: Signed MOU with the National Institute of Securities Markets (NISM) to jointly offer certification programs Africa: MA is fast becoming a recognized standard for credit training in the region Certificates, designations and accreditations» Canada s leading provider of financial services education and designations» 270+ courses taken by 800,000+ financial professionals» Endorsed by the Investment Industry Regulatory Organization of Canada (IIROC), Canada s stock exchanges and Canada s securities regulatory commissions Knowledge process outsourcing» Leading provider of research, analytics and business intelligence services to global financial institutions» Bespoke front-office support with client-dedicated analyst teams for 150+ clients» More than 2,600 employees in offices in India, China, Sri Lanka and Costa Rica» 13 years of experience helping clients enhance profitability, increase operational flexibility and drive revenues 33

34 5 Conclusion 34

35 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Why Invest in Moody s?» We strive to be the world s most respected authority serving risk-sensitive financial markets» We have had strong revenue and earnings growth, as well as cash flow conversion revenue CAGR of 11% Non-GAAP EPS 1 CAGR of 17% free cash flow conversion rate of ~30%» We are committed to returning capital to our shareholders returned $4.7 billion, or 107% of free cash flow, to shareholders via share repurchases and dividends» We will selectively invest in strategic growth opportunities Leverage brand to extend our relevance in financial markets Expand our product offerings and geographic influence 1 See appendix for reconciliation of Non-GAAP EPS to GAAP EPS. 35

36

37 6 Appendix 37

38 Revenue $ Millions Issuance $ Billions Revenue $ Millions Issuance $ Billions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Corporate Finance: Revenue and Issuance $350 $300 $250 $200 $150 $100 $50 $1,200 $1,000 $62 $55 $39 Historical Revenue 1 Mix: By Quarter $37 $34 $45 $67 $63 $61 $80 $87 $84 $48 $44 $41 $33 $27 $30 $63 $71 $66 $69 $71 $79 $61 $105 $112 $104 $108 $105 $104 $103 $105 $109 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 2 Other Investment Grade Speculative Grade Bank Loans Historical Revenue 1 Mix: By Year $51 $59 $242 $204 $212 $504 $800 $183 $155 $79 $353 $425 $354 $219 $1,500 $229 $600 $194 $221 $329 $411 $405 $329 $120 $305 $595 $65 $330 $36 $28 $230 $273 $96 $1,000 $120 $193 $134 $250 $400 $27 $143 $197 $169 $293 $108 $84 $137 $68 $1,129 $1,125 $109 $500 $1,073 $1,043 $1,120 $69 $66 $119 $200 $275 $312 $363 $420 $421 $682 $763 $641 $750 $173 $179 $178 $ US Speculative-Grade Bank Loan Origination Other 2 Investment Grade Speculative Grade Bank Loans Global Non-Financial Speculative-Grade Bond Issuance 1 Historical data has been adjusted to conform with current information and excludes intercompany revenue. Global Non-Financial Investment-Grade Bond Issuance 2 Other includes: monitoring, commercial paper, medium term notes, and ICRA. 3 Sources: Moody s Capital Markets Research Group, Dealogic; U.S. Speculative-Grade Bank Loan Origination represents Moody s rated new U.S. bank loan programs. Note: Debt issuance categories do not directly correspond to Moody s revenue categorization. $600 $500 $400 $300 $200 $100 $2,000 $114 $90 $182 Global Rated Non-Financial Bonds and U.S. Speculative Grade Bank Loans (Quarterly) 3 $52 $74 $285 $75 $120 $109 $99 $343 $331 $95 $62 $75 $48 $237 $209 $71 $53 $99 $103 $120 $91 $317 $339 $319 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 US Speculative-Grade Bank Loan Origination Global Non-Financial Speculative-Grade Bond Issuance Global Non-Financial Investment-Grade Bond Issuance Global Rated Non-Financial Bonds and U.S. Speculative Grade Bank Loans (Annually) 3 38

39 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Corporate Finance: Revenue Diversification 100% 80% 60% 40% 20% Revenue 1 Distribution: Geography 65% 66% 62% 62% 64% 68% 70% 70% 68% 72% 68% 67% 35% 34% 38% 38% 36% 32% 30% 30% 32% 28% 32% 33% 100% 80% 60% 40% 20% Revenue 1 Distribution: Recurring vs. Transaction 29% 26% 27% 30% 28% 27% 35% 35% 31% 37% 29% 30% 71% 74% 73% 70% 72% 73% 65% 65% 69% 63% 71% 70% 0% 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 3Q16 FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 3Q16 Non - US US Transaction Recurring Revenue 1 Distribution: Product 100% 18% 18% 21% 15% 22% 21% 19% 18% 18% 17% 22% 23% 80% 60% 40% 18% 23% 23% 20% 21% 19% 13% 11% 16% 13% 17% 20% 21% 23% 19% 21% 29% 26% 25% 29% 27% 27% 26% 20% 20% 42% 36% 36% 38% 35% 34% 43% 42% 39% 43% 35% 36% 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 3Q16 Other 2 Investment Grade Speculative Grade Bank Loans 1 Historical data has been adjusted to conform with current information and excludes intercompany revenue. 2 Other includes: monitoring, commercial paper, medium term notes, and ICRA. Percentages have been rounded and may not total to 100%. 39

40 Revenue $ Millions Issuance $ Billions Revenue $ Millions Issuance $ Billions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Structured Finance: Revenue and Issuance $120 $100 $80 $60 $40 $20 $34 $27 Historical Revenue 1 Mix: By Quarter $40 $36 $29 $33 $18 $20 $18 $1 $41 $32 $22 $36 $37 $19 $30 $38 $23 $1 $22 $28 $21 $23 $22 $21 $26 $21 $24 $20 $1 $30 $33 $21 $29 $33 $19 $27 $23 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 ABS RMBS CREF Structured Credit Other $250 $200 $150 $100 $50 $41 $33 $39 Global Rated Structured Finance (Quarterly) 2 $47 $34 $54 $25 $30 $38 $44 $41 $70 $76 $73 $81 $32 $32 $27 $58 $28 $63 $12 $21 $58 $64 $74 $62 $16 $25 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 $30 ABS RMBS CREF Structured Credit $24 $61 $88 $25 $36 $68 $1,000 $800 $600 $400 $200 Historical Revenue 1 Mix: By Year $339 $179 $2 $142 $78 $91 $96 $137 $135 $177 $55 $99 $82 $70 $95 $116 $122 $140 $74 $46 $53 $59 $65 $90 $85 $73 $76 $81 $174 $133 $101 $91 $107 $110 $98 $92 $ ABS RMBS CREF Structured Credit Other $3,000 $2,500 $2,000 $1,500 $1,000 $500 $391 $373 $1,017 $733 Global Rated Structured Finance (Annually) 2 $107 $36 $93 $59 $39 $65 $159 $132 $30 $24 $36 $94 $73 $120 $114 $117 $766 $355 $396 $371 $231 $189 $238 $200 $346 $296 $220 $319 $335 $317 $319 $ ABS RMBS CREF Structured Credit 1 Historical data has been adjusted to conform with current information and excludes intercompany revenue. 2 Sources: AB Alert, CM Alert, Moody s Corporation. Debt issuance categories do not directly correspond to Moody s revenue categorization. Notes: ABS (Asset Backed Securitization) includes asset-backed commercial paper and long-term asset-backed securities. RMBS (Residential Mortgage Backed Securitization) includes covered bonds. CREF (Commercial Real Estate Finance) includes commercial mortgage-backed securities, real estate finance, commercial real estate CDOs, and real estate investment trusts (REITs). Structured Credit includes CLOs and CDOs. 40

41 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Structured Finance: Revenue Diversification Revenue 1 Distribution: Geography Revenue 1 Distribution: Recurring vs. Transaction 100% 100% 80% 47% 54% 64% 66% 70% 72% 70% 66% 69% 66% 65% 69% 80% 48% 42% 40% 38% 39% 34% 38% 33% 36% 45% 39% 40% 60% 60% 40% 20% 53% 46% 36% 34% 30% 28% 30% 34% 31% 34% 35% 31% 40% 20% 52% 58% 60% 62% 61% 66% 62% 67% 64% 55% 61% 60% 0% 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 3Q16 FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 3Q16 Non - U.S. U.S. Transaction Recurring Revenue 1 Distribution: by Product 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 1% 1% 0% 80% 60% 40% 20% 23% 24% 25% 32% 28% 34% 32% 26% 31% 24% 26% 27% 20% 25% 30% 28% 33% 27% 33% 33% 31% 30% 30% 31% 26% 22% 19% 18% 18% 18% 17% 20% 18% 23% 19% 18% 31% 29% 26% 22% 21% 21% 18% 21% 20% 22% 24% 22% 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 3Q16 ABS RMBS CREF Structured Credit Other 1 Historical data has been adjusted to conform with current information and excludes intercompany revenue. Percentages have been rounded and may not total to 100%. Notes: ABS (Asset Backed Securitization) includes asset-backed commercial paper and long-term asset-backed securities. RMBS (Residential Mortgage Backed Securitization) includes covered bonds. CREF (Commercial Real Estate Finance) includes commercial mortgage-backed securities, real estate finance, commercial real estate CDOs, and real estate investment trusts (REITs). Structured Credit includes CLOs and CDOs. 41

42 Revenue $ Millions Issuance $ Billions Revenue $ Millions Issuance $ Billions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Financial Institutions: Revenue and Issuance $120 $100 $80 $60 $40 $20 $4 $27 $2 $4 $19 Historical Revenue 1 Mix: By Quarter $2 $2 $2 $2 $3 $3 $4 $5 $3 $4 $4 $4 $25 $21 $26 $24 $30 $24 $26 $61 $60 $63 $62 $58 $61 $59 $60 $63 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Banking Insurance Managed Investments Other $3 $4 $500 $400 $300 $200 $100 $38 $286 $32 $241 Global Rated Financial Bonds (Quarterly) 2 $42 $379 $42 $28 $24 $285 $262 $268 $26 $369 $29 $318 $38 $278 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Global Speculative Grade Financial Corporate Bond Issuance Global Investment Grade Financial Corporate Bond Issuance $400 $350 $300 $250 $200 $150 $100 $50 $17 $17 $16 $80 $71 $66 Historical Revenue 1 Mix: By Year $18 $69 $17 $73 $178 $175 $176 $192 $205 $19 $79 $16 $2 $9 $19 $16 $89 $92 $96 $228 $234 $242 $ Banking Insurance Managed Investments Other $2,000 $1,600 $1,200 $800 $400 $58 $32 $80 Global Rated Financial Bonds (Annually) 2 $87 $79 $137 $1,853 $1,779 $1,764 $1,340 $1,266 $1,312 $161 $197 $136 $1,072 $1,247 $1, Global Spec Grade Corporate Bond Issuance Global Inv Grade Corporate Bond Issuance 1 Historical data has been adjusted to conform with current information and excludes intercompany revenue. 2 Sources: Moody s Capital Markets Research Group, Dealogic. Note: Debt issuance categories do not directly correspond to Moody s revenue categorization. 42

43 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Financial Institutions: Revenue Diversification Revenue 1 Distribution: Geography Revenue 1 Distribution: Recurring vs. Transaction 100% 100% 80% 60% 40% 41% 42% 40% 44% 42% 45% 39% 43% 42% 45% 43% 80% 60% 66% 63% 65% 65% 60% 64% 65% 62% 63% 61% 67% 59% 40% 40% 20% 60% 59% 58% 60% 56% 58% 55% 61% 57% 58% 55% 57% 20% 34% 37% 35% 35% 40% 36% 35% 38% 37% 39% 33% 41% 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 3Q16 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 3Q16 Non - US US Transaction Recurring 100% 80% Revenue 1 Distribution: Product 0% 0% 0% 1% 2% 3% 2% 3% 3% 3% 3% 3% 6% 6% 5% 5% 4% 5% 4% 5% 4% 4% 5% 6% 25% 24% 26% 26% 27% 23% 29% 26% 26% 31% 26% 27% 60% 40% 69% 70% 69% 68% 67% 69% 65% 66% 67% 62% 66% 65% 20% 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 3Q16 Banking Insurance Managed Investments Other 1 Historical data has been adjusted to conform with current information and excludes intercompany revenue. Percentages have been rounded and may not total to 100%. 43

44 Revenue $ Millions Issuance $ Billions Revenue $ Millions Issuance $ Billions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Public, Project and Infrastructure: Revenue and Issuance $120 $100 $80 $60 $40 $20 Historical Revenue 1 Mix: By Quarter $45 $46 $45 $42 $57 $45 $37 $45 $40 $56 $44 $48 $54 $55 $55 $60 $46 $46 $120 $100 $80 $60 $40 $20 $84 Long-Term Rated U.S. Municipal Bond Issuance (Quarterly) 2 $74 $94 $107 $84 $74 $94 $114 $105 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Public Finance and Sovereign Project & Infrastructure Finance Other $400 $350 $300 $250 $200 $150 $100 $50 Historical Revenue 1 Mix: By Year $142 $167 $181 $113 $121 $83 $87 $104 $138 $143 $142 $159 $156 $181 $174 $177 $174 $202 $500 $400 $300 $200 $100 Long-Term Rated U.S. Municipal Bond Issuance (Annually) 2 $345 $350 $355 $374 $248 $302 $307 $364 $ Public Finance and Sovereign Project & Infrastructure Finance Other 1 Historical data has been adjusted to conform with current information and excludes intercompany revenue. 2 Sources: Thomson SDC, Moody s Corporation. Note: Debt issuance categories do not directly correspond to Moody s revenue categorization

45 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Public, Project and Infrastructure: Revenue Diversification Revenue 1 Distribution: Geography Revenue 1 Distribution: Recurring vs. Transaction 100% 100% 80% 80% 42% 39% 40% 42% 36% 38% 44% 44% 40% 41% 35% 37% 60% 64% 65% 63% 63% 65% 68% 64% 63% 65% 67% 67% 72% 60% 40% 20% 36% 35% 37% 37% 35% 32% 36% 37% 35% 33% 33% 28% 40% 20% 58% 61% 60% 58% 64% 62% 56% 56% 60% 59% 65% 63% 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 3Q16 Non - US US 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 3Q16 Transaction Recurring 100% 80% Revenue 1 Distribution: Product 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 44% 44% 49% 51% 44% 46% 49% 46% 46% 40% 51% 43% 60% 40% 20% 0% 56% 56% 51% 49% 56% 54% 51% 54% 54% 60% 49% 57% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 3Q16 Public Finance and Sovereign Project & Infrastructure Finance Other 1 Historical data has been adjusted to conform with current information and excludes intercompany revenue. Percentages have been rounded and may not total to 100%. 45

46 Revenue $ Millions Revenue $ Millions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Analytics: Financial Overview $350 $300 $250 $200 $150 $100 $50 $45 $81 Historical Revenue 1 Mix: By Quarter $43 $120 $37 $77 $38 $37 $83 $92 $38 $122 $37 $38 $36 $90 $98 $102 $143 $150 $150 $158 $158 $161 $165 $168 $168 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Revenue 1 Distribution: Product 100% 9% 13% 13% 16% 14% 14% 13% 12% 13% 13% 12% 12% 80% 60% Professional Services Enterprise Risk Solutions Research, Data and Analytics $1,200 $1,000 $800 $600 $400 $200 28% 29% 29% 31% 29% 30% 32% 38% 33% 31% 32% 33% Historical Revenue 1 Mix: By Year $168 $150 $19 $108 $119 $374 $12 $11 $329 $62 $263 $9 $243 $100 $119 $151 $181 $196 $362 $413 $411 $419 $445 $483 $520 $572 $ % 20% 63% 58% 58% 54% 57% 56% 55% 50% 54% 57% 55% 55% 100% 80% 60% 40% 20% 0% Revenue 1 Distribution: Geography 42% 43% 45% 44% 49% 48% 45% 44% 46% 49% 48% 49% 58% 57% 55% 56% 51% 52% 55% 56% 54% 51% 52% 51% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 3Q16 Non-US US 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 3Q16 1 Historical data has been adjusted to conform with current information and excludes intercompany revenue. Percentages have been rounded and may not total to 100%. 100% 80% 60% 40% 20% 0% Revenue 1 Distribution: Recurring vs. Transaction 80% 77% 77% 73% 77% 76% 75% 70% 74% 76% 76% 76% 20% 23% 23% 27% 23% 24% 25% 30% 26% 24% 24% 24% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 3Q16 Transaction Recurring 46

47 $ Millions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Historically, Rising Rates Have not had a Significant Impact on Moody s Revenue MCO Revenue and Interest Rates MIS Revenue MA Revenue MCO Revenue 10-yr U.S. Treasury Yield (R) 1 $4,000 9% $3, % +120bps 8% $3, % 7% $2,500 $2,000 $1, % +200bps 4.7% +180bps +100bps 3.3% 3.0% 6% 5% 4% 3% $1,000 $ % 1.8% 2.2% 2% 1% % 1 10-yr Treasury Yields are represented by the rate at the end-of-period. Source: 47

48 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 U.S. debt ceiling standoff Fears Euro debt crisis may spread to Italy & Spain Crimean crisis Oil prices crash Euro / Greece standoff Global macro concerns Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Revenue Growth by Quarter: MCO, MIS and MA Year-over-Year % Change MIS MA MCO 50% 40% 30% 23% 20% 16% 15% 13% 12% 10% 0% 3% 19% 6% 5% 7% 5% 11% 1% 9% 12% 10% 6% -10% (2%) 1% 1% 2% (6%) (2%) -20% (13%) 48

49 $ Millions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Investors Service s Recurring Revenue 1 Provides Stability MIS Recurring Revenue Corporate Finance Structured Finance Financial Institutions Public, Project, & Infrastructure Finance MIS Other $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $ TTM 3Q As a % of MIS revenue 43% 38% 38% 39% 39% 40%» Drivers of MIS recurring revenue include growth in monitoring fees and select elements of pricing» Recurring revenue averages ~40% of total MIS revenue 1 MIS recurring revenue is typically billed annually and recognized ratably over 12 months. Recurring revenue can also be billed upfront and recognized over the life of the security. 2 Trailing twelve months ended September 30,

50 Issuance $ Trillions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix MIS Revenue vs. Rated Issuance 1 Year-over-Year YTD Percent Change CAGR Issuance 2% 11% 1% 5% -5% 3% 1% Revenue 12% 20% 9% 9% 3% 10% -1% Global Non-Financial Bonds and US HY Bank Loans (L) Global Financial Bonds (L) Global Structured Finance (L) U.S. Municipal Bonds (L) $5.0 $4.0 MIS Revenue (R) $1.90 $1.58 $2.07 $2.27 $2.33 $1.86 $1.84 $2.5 $2.0 $3.0 $2.0 $1.5 $1.0 Revenue $ Billions $ YTD 2015 YTD 2016» In addition to issuance activity levels, MIS revenue is impacted by (i) the mix of issuance activity, (ii) pricing and (iii) growth in monitored credits.0 1 Rated global investment grade bonds, global high yield bonds, U.S. high yield bank loans, global structured finance, and U.S. municipal issuance. 2 As of September 30, Source: Moody s Capital Markets Research Group, Dealogic, AB Alert, CM Alert, Thomson SDC. U.S. High Yield Bank Loans represent Moody s rated new U.S. bank loan programs. 50

51 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix U.S. Regulatory Developments Affecting Securitization» Risk Retention rules (minimum 5% skin in the game ) are causing indigestion for originate to distribute securitization products such as CLOs and CMBS as the markets seek to find viable paths to comply by the December 2016 deadline» FRTB (Fundamental Review of Trading Book) Bank Regulation hurts secondary markets for securitization as banks are now required to hold additional capital against their positions» Basel III Liquidity Coverage Ratio assigns 0% stressed liquidation value to non GSEbacked securitizations held for bank liquidity buffer purposes, while GSE-backed securitizations are granted Tier 2 status» Money Market Fund Reform regulatory constraints and rising costs of compliance have created an incentive for asset managers to refocus debt fund investment strategies out of securitized (and corporate) assets into Treasuries» Impact of U.S. Elections Tailwinds for securitization might include policies that would 1) revisit Dodd-Frank and/or 2) promote a return to more private sector funding for housing and education 51

52 $ in Millions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s is a Seasoned Capital Markets Issuer $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 Private Placement» 2007: $300m 10yr note TTM 1 3Q Public Bond Offerings» 2010: $500m 10yr bond» 2012: $500m 10yr bond» 2013: $500m 10yr bond» 2014: $450m 5yr bond $300m 30yr bond» 2015: 500m 12yr bond $300m 30yr bond 4 EBITDA (L) Debt Outstanding (L) Gross Debt/EBITDA (R) 2.5x 2.0x 1.5x 1.0x 0.5x 0.0x» Successfully issued across the maturity curve and in multiple currencies» Initial maturities ranging from 5-year to 30-year» Debt denominated in USD and EUR» $1 billion of additional borrowing capacity under commercial paper program which is backstopped by an undrawn $1 billion revolving credit facility 1 Trailing twelve months ended September 30, Amount is a Non-GAAP measure. See Appendix for a reconciliation of this Non-GAAP measure to its comparable U.S. GAAP measure. 3 Debt outstanding at end of period. 4 On November 13, 2015, Moody s issued $300 million of 5.25% senior unsecured notes due 2044 in a reopening of its existing series of such notes. 52

53 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Global Presence 3,417 7,440 10,857 U.S. employees non-u.s. employees total employees 1 3,302 6,945 10,247 U.S. employees non-u.s. employees total employees 2 1 As of September 30, As of September 30,

54 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Reconciliation of Non-GAAP Financial Measures to GAAP Adjusted Operating Income and Adjusted Operating Margin Reconciliation (in $ millions) As Reported Operating Income $888.4 $1,077.4 $1,234.6 $1,439.1 $1,473.4 Operating Margin 39.0% 39.5% 41.5% 43.2% 42.3% Add Adjustment: Depreciation & Amortization Restructuring Goodwill Impairment Charge Adjusted Operating Income $967.6 $1,183.1 $1,328.0 $1,534.7 $1,586.9 Adjusted Operating Margin 42.4% 43.3% 44.7% 46.0% 45.5% Moody's Corporation Operating Margin Guidance Reconciliation 2016F 1 Projected Operating Margin - GAAP Approximately 41% Projected impact from Depreciation & Amortization Approximately 4% Restructuring Negligible Projected Adjusted Operating Margin Approximately 45% 1 Guidance as of October 21, Moody's Corporation Free Cash Flow Guidance Reconciliation (in $ millions) 2016F 1 Cash Flow from Operations Approximately $1.1 billion Less Capital Expenditures Free Cash Flow Approximately $120 million Approximately $1.0 billion 54

55 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Reconciliation of Non-GAAP Financial Measures to GAAP (cont.) Moody's Corporation EPS Reconciliation F 1 Diluted EPS - GAAP $2.15 $2.49 $3.05 $3.60 $4.61 $4.63 $ $4.86 Legacy Tax (0.02) (0.03) (0.06) (0.09) (0.03) (0.03) - Impact of litigation settlement ICRA Gain (0.37) - - FX Gain due to Subsidiary Reorganization (.18) Restructuring.04 Diluted EPS Non-GAAP $2.13 $2.46 $2.99 $3.65 $4.21 $4.60 $ $ Guidance as of October 21, Note: Table may not sum to total due to rounding. 55

56 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Reconciliation of Non-GAAP Financial Measures to GAAP (cont.) Moody's Corporation EBITDA Reconciliation ($ Millions) TTM 1 3Q 2016 Net Income attributable to Moody's $753.9 $701.5 $457.6 $402.0 $507.8 $571.4 $690.0 $804.5 $988.7 $941.3 $913.1 Provision for Income Taxes $506.6 $415.0 $268.2 $239.1 $201.0 $261.8 $324.3 $353.4 $455.0 $430.0 $414.1 Interest Expense, Net ($3.0) $24.3 $52.2 $33.4 $52.5 $62.1 $63.8 $91.8 $116.8 $115.1 $131.9 Depreciation & Amortization $39.5 $42.9 $75.1 $64.1 $66.3 $79.2 $93.5 $93.4 $95.6 $113.5 $122.5 EBITDA $1,297.0 $1,183.7 $853.1 $738.6 $827.6 $974.5 $1,171.6 $1,343.1 $1,656.1 $1,599.9 $1, Trailing twelve months ended September 30, Note: Table may not sum to total due to rounding. 56

57 Website: