Investor Presentation 2Q 2016

Transcription

1 Investor Presentation 2Q 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 July 22, 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 2Q16 revenue of $3.4 billion; operating income of $1.4 billion» 65% of total MCO revenue» 83% of total MCO operating income» 35% of total MCO revenue» 17% 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* Ratings relationships with ~11,000 corporate issuers, ~20,000 public finance issuers and has rated and currently monitors ~68,000 structured finance obligations* Research, data and software for financial risk analysis and related professional services Customers in 140 countries** 4,700 institutional clients; business with 86 of top 100 global banks** Note: All financial data is for the trailing twelve months ended June 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 2Q16 Revenue by Business TTM 2Q16 Revenue by Geography MIS MA Public, Project & Infrastructure 11% Financial Institutions 11% Structured Finance 12% Corporate Finance 30% MIS Other 1% Research, Data & Analytics 19% Enterprise Risk Solutions 12% Professional Services 4% US EMEA 26% TTM 2Q16 Revenue by Type Non-US Asia-Pacific 10% Americas 6% United States 58% Recurring Transaction MCO MIS MA 47% 59% 26% 53% 41% 74% Note: All financial data is for the trailing twelve months ended June 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* Potential Operating Income Margin Expansion Ongoing Share Repurchases* Long-Term EPS Growth Opportunity: Low-Teens to High-Teens % (on average)** *Subject to market conditions and other ongoing capital allocation decisions. **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 Moody s has Consistently Delivered Strong Performance Revenue $4.0 $3.0 $2.0 $1.0.0 Low-singledigit % growth F** EPS* $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $2.46 $2.99 $3.65 $4.21 $4.60 $4.55 to $ F** Operating Margin Performance 5-year Average Free Cash Flow Conversion**** 50% Operating Margin Adj. Operating Margin*** Moody's.30 45% 40% 35% 44.7% 46.0% 45.5% ~45% 42.4% 43.3% 43.2% 42.3% 41.5% ~41% 39.0% 39.5% F** $1 of Revenue Select Peers***** S&P * represents non-gaap EPS. 2016F represents GAAP EPS. **Guidance as of July 22, Expecting to be toward the lower end of the EPS range. ***Adjusted Operating Margin is a non-gaap measure. See appendix for reconciliation from non-gaap to GAAP. **** As of July 2016, over last five available years. Free Cash Flow is a non-gaap financial measure. Source: FactSet. *****Includes CLGX, DNB, EXPN, FDS, IHS, MORN, MSCI, SPGI, TRI, VRSK. 9

10 Dec-10 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 $ Millions 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: ~$125 million*» Aligned with strategy» Opportunistic; ideally able to use offshore cash» TTM 2Q 2016 payout ratio was ~30%**» Current dividend yield of 1.4% (as of 8/2/16)» FY 2016 share repurchase guidance: ~$1 billion***» Average annualized net share count reduction of ~3% from 2011 to 2Q 2016 Share Repurchases and Dividends Paid Share Repurchases (L) Dividends Paid (L) Share Count (R) Annualized Dividend Per Share (Last 5 Years) $1, $1.60 $1,457 $1,370 $1,400 $ $1.40 $1,200 $1,090 $ $1.20 $1,000 $197 $ $1.00 $630 $600 $455 $1,221 $ $893 $1, $400 $121 $ $143 $ $200 $334 $ H 2016 *Guidance as of July 22, **Dividend payout ratio is defined as TTM 2Q 2016 dividends per share/non-gaap EPS. ***Guidance as of July 22, 2016 (subject to available cash, market conditions and other ongoing capital allocation decisions). $

11 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 US 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 Moody s Analytics Revenue Growth Moderates Variability of Moody s Ratings Revenue Growth Year-over-Year % Change MIS MA MCO 50% 40% 30% 23% 20% 16% 19% 15% 13% 12% 11% 9% 10% 0% 3% 6% 5% 7% 5% 1% 2% -10% (2%) 1% 1% (6%) (2%) (13%) -20% 11

12 $ Millions $ Millions $ Millions $ Millions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Revenue and Operating Income have Historically Followed a Saw Tooth Pattern MCO Revenue MIS Revenue $1,000 $900 $800 $816 $929 $700 $600 $525 $626 $700 $500 $600 Q1 Q2 Q3 Q4 MCO Operating Income $450 $410 $350 $304 $250 $400 Q1 Q2 Q3 Q4 MA Revenue $350 $303 $291 $300 $250 $200 $150 Q1 Q2 Q3 Q4 $150 Q1 Q2 Q3 Q Year Average ( ) 7-Year Average ( ) 12

13 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Full Year 2016 Guidance as of July 22, 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 * : Approximately 45%» Effective Tax Rate: 32% %» Earnings Per Share: $ $4.65*» Share Repurchases: Approximately $1 billion (subject to available cash, market conditions and other ongoing capital allocation decisions)» Capital Expenditures: Approximately $125 million» Depreciation & Amortization: Approximately $130 million» Free Cash Flow**: Approximately $1 billion *Expecting to be toward the lower end of the range. **Amount is a non-gaap measure. See Appendix for a reconciliation of this non-gaap measure to its comparable US GAAP measure. 13

14 2 Capital Markets Overview 14

15 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Attractive Funding Costs in US and Europe as Benchmark Rates and Spreads Resume Decline Interest Rates 7% 6% 5% 4% 3% 2% 1% -1% 10 yr. US Treasury Yield % 10 yr. German Bund Yield % 1.5% -0.1% High Yield Decline since peak (316) bps 500 (183) bps 400 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Bond Spreads 2,150 1,850 1,550 1, US Investment Grade US High Yield Euro Investment Grade Euro High Yield » Spreads peaked in mid-feb 2016 Investment Grade Decline since peak (86) bps (66) bps 90 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Source: Moody s Analytics, Barclays. Bond Spreads are for non-financial corporates. All data is through August 1,

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 4.5x 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 Outside of Commodities, Default Rates are Contained Default Rates for Global Corporate Rated Issuance* US Speculative Grade Default Rates** 14.0% High Yield Historical Average 12.0% 10.0% Total 1.8% 5.1% 2014 TTM 2Q % 6.0% 4.0% 4.2% historic average Commodities 2.0% 23.8% 2.0% 0.0% Non- Commodities 1.7% 2.3%» Global speculative-grade default rate expected to finish 2016 at 4.9% before settling back to 4.2% in mid-2017, helped by improved market conditions and fewer commodity defaults *Moody s rated corporate global speculative grade default historical average of 4.2% since and 2017 forecasts for trailing twelve months ended 12/31/16 and 6/30/17, respectively. **Commodities sector includes Oil & Gas and Metals & Mining. Source: Moody s Investors Service. 17

18 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 US 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 48% 4 8 % 52%» European companies have historically relied more on banks than their US counterparts, but are increasingly turning to the bond market 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 May North American data is through June

19 # of new mandates Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Disintermediation a Key Driver of Moody s Global New Rating Mandates Global New Rating Mandates* 1, EMEA United States Rest of World 1, H 2016» In 2Q 2016, Moody s new rating mandates increased to 173, up 5% from 164 in 1Q 2016 *Rated by Moody s Investors Service. Source: Moody s Investors Service. 19

20 3 Moody s Investors Service 20

21 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 Dedicated, experienced analytical teams A process that brings together analytical views A common language of credit risk A long institutional memory of credit A comprehensive view of credit risk in the capital markets based on unparalleled coverage» For issuers, MIS ratings may provide tangible financing benefits, broaden access to global capital markets, and help inform the formulation of internal capital plans and funding strategies» For other market participants, MIS provides independent, globally comparable, transparent and industry-leading analysis of credit risk 21

22 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Investors Service Financial Profile TTM 2Q 2016 Revenue: $2.2 billion* Recurring 59% Transaction US Non-US 36% Corporate Finance 47% MIS Other 1% Public, Project, & Infrastructure Finance 17%» 34% recurring revenue» 41% recurring revenue 41% 64% Structured Finance 19% Financial Institutions 16%» 64% recurring revenue» 39% recurring revenue 2016 Revenue Guidance as of July 22, 2016 Global low-single-digit % range US low-single-digit % range Non-US low-single-digit % range Corporate Finance low-single-digit % range Structured Finance high-single-digit % range Financial Institutions mid-single-digit % range Public, Project & Infrastructure Finance mid-single-digit % range *All financial data for this section is for the trailing twelve months ended June 30,

23 $ 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* 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, Feb-16. Note: Data represents US & 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 Source: MIS, Jul-16. $41 $71 $81 $52 $56 $62 $62 $ CAGR Investment Grade Bonds: (5%) Speculative Grade Bonds: 25% Speculative Grade Bank Loans: 9% *Amount reflects total maturities identified in the above sourced reports. Investment Grade Bonds Speculative Grade Bonds Speculative Grade Bank Loans 23

24 % 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* Debt Refinancing M&A Capital Spending Shareholder Payments 9% 12% 9% 4% 11% 24% 22% 17% 19% 18% 17% 18% 22% 20% 16% 16% 5% 7% 8% 7% 8% 7% 8% 45% 63% 53% 31% 30% 25% 31% 41% 54% 49% 73% 62% 52% 83% 71% 74% 78% 71% 65% 54% 57% H 2016 *% 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%. Source: Moody s Capital Markets Research Group (CMRG). 24

25 $ Millions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Investors Service s Recurring Revenue* 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 2Q 2016 As a % of MIS revenue 43% 38% 38% 39% 39% 41%» Drivers of MIS recurring revenue include growth in monitoring fees and select elements of pricing» Recurring revenue averages ~40% of total MIS revenue *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. 25

26 4 Moody s Analytics 26

27 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 and management - Portfolio analytics - Stress testing - Risk-Weighted Assets (RWA) calculation and reporting» Outsourced research & consulting» Financial training & education In-house training, seminars, and on-line learning Professional certification 27

28 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Analytics Financial Profile TTM 2Q 2016 Revenue: $1.2 billion* Recurring Transaction US Non-US» > 95% recurring revenue» 96% retention rate 26% 74% 53% Research, Data and Analytics 54% Enterprise Risk Solutions 33%» 63% recurring revenue 47% Professional Services 13%» Combination of one-off contracts and semi-recurring revenue 2016 Revenue Guidance as of July 22, 2016 Global mid-single-digit % range US low-double-digit % range Non-US low-single-digit % range Research, Data & Analytics high-single-digit % range Operating Margin» Expect operating margin to grow to the mid-20 s percent range over the next several years 18.1% 19.9% 19.5% Enterprise Risk Solutions high-single-digit % range Professional Services low-single-digit % range % 17.5% *All financial data for this section is for the trailing twelve months ended June 30,

29 Revenue $ millions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Analytics Has Multiple Platforms for Growth $1,200 $1, Revenue and CAGR ~65% organic 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 $

30 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 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 Millions of jobs $ Millions Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix RD&A Revenue has Grown Despite Flat Financial Services Employment RD&A Revenue vs. Financial Services Employment US and UK Financial Services Employment* (L) TTM RD&A Revenue (R) $700 $650 $ $550 $500 $450 $ $350 *Source: US Bureau of Labor Statistics and the UK Office for National Statistics. Available data through September 30,

31 TTM 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 15% $300 $250 $200 $150 $100 $50 Recurring Revenue: Subscriptions & Maintenance Non-Recurring Revenue: License and Services 16% CAGR 12% CAGR 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» 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» Focus on higher-value, more profitable business supports margin expansion; some top-line offset due to slower growth in low-margin services 31

32 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Professional Services Overview Knowledge process outsourcing» Leading provider of offshore research and analytic services» 2,500 employees; 6 delivery centers» 150+ institutional clients in global financial and corporate sectors Certificates, designations & 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 Financial services training» Provider of global learning capabilities to banks, asset managers, regulators and non-bank financial institutions» Multiple delivery channels, including classroom instruction, web classes and e-learning» Signature Commercial Lending program available in universal and IFRS; translated and localized for several regions 32

33 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Analytics: Well-Positioned to Drive Growth» Strong operating track record 34 consecutive quarters of year/year revenue growth revenue CAGR of 11% 22 quarters of double-digit revenue growth 2015 operating margin of 19.9%» Solid market position supporting risk management at financial institutions Rich product portfolio supported by unique, differentiating features Product offering focused on delivering need-to-have products and services Good penetration of customer base, with plenty of opportunity ahead 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 strong cash flow conversion Revenue CAGR of 11% non-gaap EPS* 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 *See appendix for reconciliation of non-gaap EPS to GAAP EPS. 35

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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 $76 $77 $63 Historical Revenue* Mix: By Quarter $62 $55 $39 $37 $34 $45 $67 $63 $61 $80 $87 $84 $48 $44 $41 $33 $27 $30 $63 $71 $66 $105 $105 $112 $104 $108 $105 $104 $103 $105 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Other** Investment Grade Speculative Grade Bank Loans Historical Revenue* Mix: By Year $69 $51 $79 $242 $204 $212 $504 $800 $183 $79 $353 $425 $354 $155 $219 $1,500 $229 $221 $329 $411 $405 $329 $600 $120 $194 $305 $595 $65 $330 $36 $28 $273 $96 $230 $1,000 $120 $193 $134 $250 $400 $27 $143 $197 $169 $293 $108 $84 $137 $1,129 $68 $1,125 $1,073 $1,043 $1,120 $109 $500 $69 $66 $119 $200 $682 $763 $641 $750 $275 $312 $363 $420 $421 $173 $179 $178 $ US Speculative-Grade Bank Loan Origination Other** Investment Grade Speculative Grade Bank Loans Global Non-Financial Speculative-Grade Bond Issuance *Historical data has been adjusted to conform with current information and excludes intercompany revenue. Global Non-Financial Investment-Grade Bond Issuance **Other includes: monitoring, commercial paper, medium term notes, and ICRA. ***Sources: Moody s Capital Markets Research Group, Dealogic; US Speculative-Grade Bank Loan Origination represents Moody s rated new US bank loan programs. Note: Debt issuance categories do not directly correspond to Moody s revenue categorization. $600 $500 $400 $300 $200 $100 $2,000 $117 $141 $278 Global Rated Non-Financial Bonds and US Speculative Grade Bank Loans (Quarterly)*** $114 $90 $182 $52 $74 $285 $75 $120 $109 $99 $343 $331 $95 $62 $75 $48 $237 $209 $71 $53 $317 $345 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 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 US Speculative Grade Bank Loans (Annually)*** $99 $99 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* Distribution: Geography 65% 66% 62% 62% 64% 68% 70% 70% 68% 72% 68% 35% 34% 38% 38% 36% 32% 30% 30% 32% 28% 32% 100% 80% 60% 40% 20% Revenue* Distribution: Recurring vs. Transaction 29% 26% 27% 30% 28% 27% 35% 35% 31% 37% 29% 71% 74% 73% 70% 72% 73% 65% 65% 69% 63% 71% 0% 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 Non - US US Transaction Recurring Revenue* Distribution: Product 100% 18% 18% 21% 15% 22% 21% 19% 18% 18% 17% 22% 80% 18% 23% 23% 20% 21% 19% 13% 11% 16% 13% 17% 60% 21% 25% 29% 27% 23% 19% 21% 29% 27% 26% 26% 40% 20% 42% 36% 36% 38% 35% 34% 43% 42% 39% 43% 35% 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 Other** Investment Grade Speculative Grade Bank Loans *Historical data has been adjusted to conform with current information and excludes intercompany revenue. **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 $37 $34 $30 $27 Historical Revenue* Mix: By Quarter $40 $36 $29 $33 $20 $18 $20 $18 $41 $32 $22 $36 $37 $19 $30 $38 $23 $1 $22 $28 $21 $24 $23 $22 $21 $26 $21 $24 $20 $1 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 ABS RMBS CREF Structured Credit Other $1 $30 $33 $21 $27 $350 $300 $250 $200 $150 $100 $50 $47 $26 $116 $108 Global Rated Structured Finance (Quarterly)** $41 $33 $39 $47 $34 $54 $25 $30 $38 $44 $32 $32 $27 $41 $58 $30 $28 $63 $21 $58 $70 $76 $73 $81 $64 $74 $62 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 ABS RMBS CREF Structured Credit $12 $24 $61 $88 $16 $1,000 $800 $600 $400 $200 Historical Revenue* 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)** $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 *Historical data has been adjusted to conform with current information and excludes intercompany revenue. **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* Distribution: Geography Revenue* Distribution: Recurring vs. Transaction 100% 100% 80% 47% 54% 64% 66% 70% 72% 70% 66% 69% 66% 65% 80% 48% 42% 40% 38% 39% 34% 38% 33% 36% 45% 39% 60% 60% 40% 20% 53% 46% 36% 34% 30% 28% 30% 34% 31% 34% 35% 40% 20% 52% 58% 60% 62% 61% 66% 62% 67% 64% 55% 61% 0% 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 Non - U.S. U.S. Transaction Recurring Revenue* Distribution: by Product 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 1% 1% 80% 60% 40% 20% 0% 23% 24% 25% 32% 28% 34% 32% 26% 31% 24% 26% 20% 25% 30% 28% 33% 27% 33% 33% 31% 30% 30% 26% 22% 19% 18% 18% 18% 17% 20% 18% 23% 19% 31% 29% 26% 22% 21% 21% 18% 21% 20% 22% 24% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 ABS RMBS CREF Structured Credit Other *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 $100 $80 $60 $40 $20 Historical Revenue* Mix: By Quarter $2 $2 $2 $2 $2 $3 $3 $4 $4 $4 $5 $3 $4 $4 $4 $4 $24 $27 $25 $21 $19 $26 $24 $30 $24 $64 $61 $60 $63 $62 $58 $61 $59 $60 $500 $400 $300 $200 $100 $80 $338 $38 $286 Global Rated Financial Bonds (Quarterly)** $32 $241 $42 $379 $42 $28 $24 $285 $262 $268 $26 $368 $30 $316 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Banking Insurance Managed Investments Other 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* 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)** $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 *Historical data has been adjusted to conform with current information and excludes intercompany revenue. **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* Distribution: Geography Revenue* Distribution: Recurring vs. Transaction 100% 100% 80% 40% 41% 42% 40% 44% 42% 45% 39% 43% 42% 45% 80% 60% 60% 66% 63% 65% 65% 60% 64% 65% 62% 63% 61% 67% 40% 40% 20% 60% 59% 58% 60% 56% 58% 55% 61% 57% 58% 55% 20% 34% 37% 35% 35% 40% 36% 35% 38% 37% 39% 33% 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 Non - US US Transaction Recurring 100% 80% Revenue* Distribution: Product 0% 0% 0% 1% 2% 3% 2% 3% 3% 3% 3% 6% 6% 5% 5% 4% 5% 4% 5% 4% 4% 5% 25% 24% 26% 26% 27% 23% 29% 26% 26% 31% 26% 60% 40% 69% 70% 69% 68% 67% 69% 65% 66% 67% 62% 66% 20% 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 Banking Insurance Managed Investments Other *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* Mix: By Quarter $45 $46 $54 $45 $42 $45 $40 $56 $44 $44 $48 $54 $46 $46 $57 $37 $55 $55 $120 $100 $80 $60 $40 $20 $107 Long-Term Rated US Municipal Bond Issuance (Quarterly)** $84 $74 $94 $107 $84 $74 $94 $114 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Public Finance and Sovereign Project & Infrastructure Finance Other $400 $350 $300 $250 $200 $150 $100 $50 Historical Revenue* 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 US Municipal Bond Issuance (Annually)** $345 $350 $355 $374 $248 $302 $307 $364 $ Public Finance and Sovereign Project & Infrastructure Finance Other *Historical data has been adjusted to conform with current information and excludes intercompany revenue. **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* Distribution: Geography Revenue* Distribution: Recurring vs. Transaction 100% 100% 80% 80% 42% 39% 40% 42% 36% 38% 44% 44% 40% 41% 35% 60% 64% 65% 63% 63% 65% 68% 64% 63% 65% 67% 67% 60% 40% 20% 36% 35% 37% 37% 35% 32% 36% 37% 35% 33% 33% 40% 20% 58% 61% 60% 58% 64% 62% 56% 56% 60% 59% 65% 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 Non - US US 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 Transaction Recurring 100% 80% Revenue* Distribution: Product 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 44% 44% 49% 51% 44% 46% 49% 46% 46% 40% 51% 60% 40% 20% 0% 56% 56% 51% 49% 56% 54% 51% 54% 54% 60% 49% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 Public Finance and Sovereign Project & Infrastructure Finance Other *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 $40 Historical Revenue* Mix: By Quarter $45 $67 $81 $43 $120 $37 $77 $38 $37 $83 $92 $38 $122 $37 $38 $90 $98 $141 $143 $150 $150 $158 $158 $161 $165 $168 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Revenue* Distribution: Product 100% 9% 13% 13% 16% 14% 14% 13% 12% 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% Historical Revenue* 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% 56% 100% 80% 60% 40% 20% 0% Revenue* Distribution: Geography 42% 43% 45% 44% 49% 48% 45% 44% 46% 49% 48% 58% 57% 55% 56% 51% 52% 55% 56% 54% 51% 52% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 Non-US US *Historical data has been adjusted to conform with current information and excludes intercompany revenue. Percentages have been rounded and may not total to 100%. 0% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 100% 80% 60% 40% 20% 0% Revenue* Distribution: Recurring vs. Transaction 80% 77% 77% 73% 77% 76% 75% 70% 74% 76% 76% 20% 23% 23% 27% 23% 24% 25% 30% 26% 24% 24% FY11 FY12 FY13 FY14 1Q15 2Q15 3Q15 4Q15 FY15 1Q16 2Q16 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)* $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% % *10-yr Treasury Yields are represented by the rate at the end-of-period. Source: 47

48 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Analytics Global Banking Regulatory Radar EMEA Revised SA operational risk Restrictions use internal models for CR RWA Revised SA approach CR CVA review Concentration & Large Exposures BoE/PRA ST IRRBB review TLAC 2 Revised SA approach CR Revised SA operational risk CVA review FRTB Restrictions use internal models for CR RWA Concentration Large Exposures TLAC 2 IFRS 9 Leverage Ratio IRRBB review FRTB NSFR New securitization framework BoE/PRA ST Leverage Ratio IFRS 9 Vickers reform 2020 and beyond and beyond Source: Moody s Analytics market research as of May The implementation of the LCR in the EU will be: 60% in 2015, 70% in 2016, 80% in 2017 and 100% in In the US, advanced-approach banks will have to meet 80% of the LCR by January 1, 2015 and 100% of the ratio by Jan The G-SIB surcharge will expand the conservation buffer, subject to a 3 year phase in period. G-SIBs will be required to hold a minimum Total Loss-Absorbing Capacity (TLAC) of at least 16% from 2019 and 18% by The new standardized approach (SA-CCR) replaces both the Current Exposure Method (CEM) and the Standardized Method (SM) in the capital adequacy framework. 4. Regulatory framework for domestic systemically important banks in Australia 5. Phase 2 was implemented in 2015, focused on liquidity and Phase 3 will be implemented in 2016 and will focus on additional balance sheet data. banks (G-SIBs). NSFR Enhanced P3 disclosures New securitization framework Surcharge 2 LCR 1 ECB Anacredit NCUA RBC rule for large credit unions CCAR / Reg cap CCP DFAST SA-CCR 3 TLAC 2 exposures Enhanced P3 LCR 1 SA-CCR 3 disclosures BoE/PRA ST Leverage CCAR / EBA Liquidity Ratio G-SIB DFAST Enhanced P3 Surcharge 2 monitoring Reg cap CCP NSFR Revised SA disclosures Financial exposures approach CR D-SIB CECL BCBS 239 conglomerates FSB Data framework 4 SA-CCR 3 Reporting fin. BoE/PRA ST ST Initiative 5 CCAR / IFRS 9 conglomerates FSB Data SEC Liquidity rules DFAST EU-wide ST Capital rules to CA res. mortgage Initiative 5 (ETF, mutual funds) Supplementary large foreign banks leverage ratio Reg cap CCP BCBS PRA CAD/Pillar 2 SSFA for CCAR /DFA ST IRRBB exposures 239 LCR 1 securitizations Concentration FBO ST BCBS 239 LCR 1 review Large Exposures FSB Data G-SIB FDSF Initiative 5 Surcharge 2 G-SIB LCR, LCR 1 New securitization NSFR framework FRTB Restrictions use internal models for CR RWA CVA review Revised SA operational risk 48

49 $ 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 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**** TTM* 2Q EBITDA** (L) Debt Outstanding*** (L) Gross Debt/EBITDA (R) x 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 program» $1 billion of additional debt capacity available under revolving credit facility *Trailing twelve months. **Amount is a non-gaap measure. See Appendix for a reconciliation of this non-gaap measure to its comparable US GAAP measure. ***Debt outstanding at end of period. ****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. 49

50 Introduction Financial Overview Capital Markets Overview Moody s Investors Service Moody s Analytics Conclusion Appendix Moody s Global Presence 3,442 7,372 10,814 US employees non-us employees total employees* 3,257 6,906 10,163 US employees non-us employees total employees** *As of June 30, **As of June 30,

51 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* Projected Operating Margin - GAAP Approximately 41% Projected impact from Depreciation & Amortization Approximately 4% Projected Adjusted Operating Margin Approximately 45% *Guidance as of July 22, Moody's Corporation Free Cash Flow Guidance Reconciliation (in $ millions) 2016F* Cash Flow from Operations Approximately $1.1 billion Less Capital Expenditures Free Cash Flow Approximately $125 million Approximately $1.0 billion 51

52 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* Diluted EPS - GAAP $2.15 $2.49 $3.05 $3.60 $4.61 $4.63 $ $4.65 Legacy Tax (0.02) (0.03) (0.06) (0.09) (0.03) (0.03) - Impact of litigation settlement ICRA Gain (0.37) - - Diluted EPS Non-GAAP $2.13 $2.46 $2.99 $3.65 $4.21 $4.60 $ $4.65 *Guidance as of July 22, Expecting to be toward the lower end of the EPS range. Note: Table may not sum to total due to rounding. 52

53 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 2Q 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 $889.4 Provision for Income Taxes $506.6 $415.0 $268.2 $239.1 $201.0 $261.8 $324.3 $353.4 $455.0 $430.0 $411.5 Interest Expense, Net ($3.0) $24.3 $52.2 $33.4 $52.5 $62.1 $63.8 $91.8 $116.8 $115.1 $122.3 Depreciation & Amortization $39.5 $42.9 $75.1 $64.1 $66.3 $79.2 $93.5 $93.4 $95.6 $113.5 $118.1 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 $1,541.3 Note: Table may not sum to total due to rounding. 53

54 Website: