Moody’s Corporation reported revenue of $1.5 billion for the three months ended September 30, 2021, up 13% from the prior-year period. Foreign currency translation favorably impacted Moody’s revenue by 1%.

Moody’s Investors Service (MIS) Third Quarter Revenue Up 12%.  Revenue for MIS in the third quarter of 2021 was $925 million, up 12% from the prior-year period. The impact of foreign currency translation was negligible.

Corporate finance revenue was $488 million, up 6%. This was driven by a surge in U.S. leveraged loans for both M&A transactions and increased refinancing activity, partially offset by a decline in global investment grade and high yield bond issuance compared to a strong prior-year period.

Financial institutions revenue was $153 million, up 14%, as bank and insurance issuers opportunistically secured low-cost funding given the attractive rate and spread environment.

Public, project and infrastructure finance revenue was $130 million, down 2%, due to lower supply from U.S. public finance issuers as their immediate financing needs had been largely addressed in prior periods.

Structured finance revenue was $143 million, up 63%. Ongoing favorable market conditions, including historically tight spreads, drove continued growth in collateralized loan obligation refinancing activity, as well as commercial and residential mortgage-backed security issuance.

Moody’s Analytics (MA) Third Quarter Revenue Up 13%

Revenue for MA in the third quarter of 2021 was $601 million, up 13% from the prior-year period. Recurring revenue grew 18% and comprised 94% of total MA revenue, up from 90%. Organic MA revenue was $573 million, up 8%, and excluded the impact of acquisitions completed in the prior twelve months. Foreign currency translation favorably impacted total MA revenue by 1%.

Research, Data and Analytics (RD&A) revenue was $445 million, up 15%. This increase was driven by continued new business demand for KYC and compliance solutions, as well as data feeds, and was further supported by strong renewal yields for our credit research products. Organic RD&A revenue was $431 million, up 12%, and excluded revenue from the acquisitions of Acquire Media, Catylist and Cortera.

Enterprise Risk Solutions (ERS) revenue was $156 million, up 8%. Organic ERS recurring revenue grew 13%, driven by our banking and insurance solutions, while ERS transaction revenue declined due to an expected decrease in one-time sales as the strategic focus remains on recurring revenue. As a result, organic ERS revenue, which excluded revenue from the acquisitions of ZM Financial Systems and RMS, was $142 million, down 2%.

Third Quarter Operating Expenses and Operating Income

Third quarter 2021 operating expenses for Moody’s Corporation totaled $850 million, up 19% from the prior-year period. Approximately fifteen percentage points of this increase were attributable to operational and transaction-related costs associated with recent acquisitions, including RMS, as well as higher incentive and stock-based compensation accruals and a $16 million charitable contribution via The Moody’s Foundation. Organic strategic investments, as well as hiring and annual salary increases further elevated expenses by 7 percentage points, but were partially offset by ongoing efficiency initiatives. Foreign currency translation unfavorably impacted operating expenses by 1%.

Operating income of $676 million was up 5%. Adjusted operating income of $737 million was up 2%, and excluded depreciation and amortization, as well as the prior-year period’s restructuring-related charges. The impact of foreign currency translation was negligible for both operating income and adjusted operating income. Moody’s operating margin was 44.3% and the adjusted operating margin was 48.3%. The MIS adjusted operating margin was 60.0% and the MA adjusted operating margin was 26.0%.

Moody’s effective tax rate for the third quarter of 2021 was 23.4%, up from 22.0%. This increase was primarily due to a tax benefit associated with a non-U.S. corporate reorganization in 2020 that did not recur in 2021.

Source:  Moody’s Earnings Release