- 1Q16 revenue of $816.1 million down 6% from 1Q15
- 1Q16 EPS of $0.93 down 16% from 1Q15
- FY 2016 EPS guidance now $4.55 to $4.65, including $0.02 dilution from the acquisition of GGY
FIRST QUARTER 2016 HIGHLIGHTS
Moody’s Corporation reported revenue of $816.1 million for the three months ended March 31, 2016, down 6% from $865.6 million for the same period of 2015. Operating expense totaled $512.0 million, up 4% from $494.3 million, and operating income was $304.1 million, down 18% from $371.3 million. Adjusted operating income (operating income before depreciation and amortization) was $334.0 million, down 16% from $399.9 million in the prior-year period. Operating margin for the first quarter of 2016 was 37.3% and adjusted operating margin was 40.9%. EPS of $0.93 was down 16% from the first quarter of 2015.
US revenue was $480.0 million, down 4% from $499.8 million, while non-US revenue was $336.1 million, down 8% from $365.8 million. Revenue generated outside the US constituted 41% of total revenue, versus 42% in the prior-year period.
Global revenue for Moody’s Investors Service (MIS) for the first quarter of 2016 was $525.1 million, down 13% from $602.3 million in the prior-year period. Foreign currency translation unfavorably impacted MIS revenue by 1%. US revenue was $336.0 million, down 10%, while non-US revenue was $189.1 million, down 18%.
Global corporate finance revenue was $240.3 million, down 20% from the prior-year period. This result reflected lower levels of global speculative-grade issuance as well as a decline in the number of investment-grade bond offerings. US corporate finance revenue decreased 10%, while non-US revenue decreased 36%.
Global structured finance revenue totaled $90.6 million, down 11% from a year earlier, as US securitization activity slowed, primarily within the CMBS and CLO markets. US structured finance revenue was down 15%, while non-US revenue was flat.
Global financial institutions revenue was $94.9 million, up 1% compared to the prior-year period. US financial institutions revenue was down 3%, while non-US revenue was up 4%.
Global public, project and infrastructure finance revenue was $91.5 million, down 9% from the prior-year period as US project finance activity and European infrastructure-related issuance fell amid choppy market conditions. US public, project and infrastructure finance revenue was down 6%, while non-US revenue was down 14%.
Global revenue for Moody’s Analytics (MA) for the first quarter of 2016 was $291.0 million, up 11% from the first quarter of 2015. Foreign currency translation unfavorably impacted MA revenue by 2%. MA’s US revenue was $144.0 million, up 12%, and its non-US revenue was $147.0 million, up 9%.
Global revenue from research, data and analytics (RD&A) was $164.9 million, up 10% from the prior-year period. Growth was mainly due to strong new sales of research and data as well as record customer retention. US RD&A revenue was up 14%, while non-US revenue was up 5%.
Global enterprise risk solutions (ERS) revenue of $89.5 million was up 16%, primarily from accelerated project deliveries. US ERS revenue was up 14%, while non-US revenue was up 17%.
Global revenue from professional services of $36.6 million was flat to the prior-year period. US professional services revenue was down 6%, while non-US revenue was up 3%.
ASSUMPTIONS AND OUTLOOK FOR FULL YEAR 2016
Moody’s outlook for 2016 is based on assumptions about many macroeconomic and capital market factors, including interest rates, foreign currency exchange rates, corporate profitability and business investment spending, mergers and acquisitions, consumer borrowing and securitization and the amount of debt issued. These assumptions are subject to uncertainty, and results for the year could differ materially from our current outlook. Our guidance assumes foreign currency translation at end-of-quarter exchange rates. Specifically, our forecast reflects exchange rates for the British pound (£) of $1.44 to £1 and for the euro (€) of $1.14 to €1.
MCO Full Year 2016 Outlook
Moody’s full year 2016 revenue is now expected to increase in the low-single-digit percent range.
In response to this revised revenue outlook, Moody’s has reduced its projected base business spending for the year by approximately $50 million through expense management actions and reduced incentive compensation. These savings allow the Company to maintain guidance for operating expenses to increase in the mid-single-digit percent range despite the addition of GGY’s operating expenses and the negative impact of foreign currency translation.
Moody’s now projects an operating margin of approximately 41%, while adjusted operating margin is still expected to be approximately 45%. The effective tax rate is still expected to be 32% to 32.5%.
The Company now expects 2016 EPS of $4.55 to $4.65, inclusive of $0.02 dilution from the March 2016 acquisition of GGY.
Free cash flow is now expected to be approximately $1 billion. Moody’s still expects share repurchases to be approximately $1 billion, subject to available cash, market conditions and other ongoing capital allocation decisions. Capital expenditures are now expected to be approximately $125 million. Depreciation and amortization expense is still expected to be approximately $130 million.
Source: Moody’s Earnings Release