• Moody’s Corporation reported revenue of $1.3 billion for the three months ended March 31, 2020, up 13% from the prior-year period. Foreign currency translation unfavorably impacted Moody’s revenue by 1%.
  • Moody’s Investors Service revenue of $794 million, up 19%; Moody’s Analytics revenue of $496 million up 5%, excluding acquisitions and divestitures up 9%
  • 1Q20 diluted EPS of $2.57 up 33% from 1Q19; adjusted diluted EPS of $2.73 up 32% 1
  • FY 2020 diluted EPS and adjusted diluted EPS guidance ranges reduced to $7.25 to $7.85 and $7.80 to $8.40, respectively due to anticipated COVID-19 impacts

“I am incredibly proud of the dedication and hard work of our employees, which has enabled us to provide timely services to our customers and insightful information and decision ready analysis to governments, regulators and the broader market. Moody’s purpose of enhancing market transparency and fairness, and promoting progress through better decisions, has never been more important than during these challenging times,” said Raymond McDaniel, President and Chief Executive Officer of Moody’s.

“While we had resilient first quarter performance with impressive growth in both revenue and margins, we expect the economic implications of COVID-19 to be more pronounced through the second half of the year. Consequently, while we believe that Moody’s position and the long-term fundamentals of our business remain strong, we have both lowered and widened our full year 2020 adjusted diluted EPS guidance range to reflect this higher degree of uncertainty.”

Capital Returned to Shareholders

During the first quarter of 2020, Moody’s repurchased 1.1 million shares at a total cost of $253 million, or an average cost of $236.67 per share, and issued net 0.9 million shares as part of its employee stock-based compensation plans. The net amount includes shares withheld for employee payroll taxes. Moody’s also returned $105 million to its shareholders via dividend payments during the first quarter of 2020. In response to the COVID-19 pandemic, the company has suspended share repurchases.

On April 20, 2020, the Board of Directors declared a regular quarterly dividend of $0.56 per share of Moody’s common stock. This dividend will be payable on June 10, 2020 to stockholders of record at the close of business on May 20, 2020.

Outstanding shares as of March 31, 2020 totaled 188 million, down 1% from March 31, 2019. As of March 31, 2020, Moody’s had approximately $1.1 billion of share repurchase authority remaining.

Sources of Capital and Cash Flow Generation

At quarter-end, Moody’s had $6.8 billion of outstanding debt and an undrawn $1.0 billion revolving credit facility. Total cash, cash equivalents and short-term investments at quarter-end were $2.2 billion, up from $1.9 billion on December 31, 2019.

Cash flow from operations for the first three months of 2020 was $345 million and free cash flow was $324 million.

Assumptions and outlook for full year 2020

Moody’s updated outlook for 2020 reflects numerous assumptions about many factors that could affect its business based on information reviewed by management through and as of today’s date, including observations and assumptions regarding the impact of COVID-19, the responses to the pandemic by governments, businesses and individuals, as well as disruptions in the energy markets, the effects on interest rates, capital markets’ liquidity, and activity in different sectors of the debt markets. The outlook also reflects assumptions about general economic conditions and GDP growth in the U.S. and worldwide, and on the company’s own operations and personnel. The outlook assumes economic recovery commences from late 3Q 2020 and incorporates numerous macroeconomic assumptions including: an approximate 6 – 7% decline in both 2020 U.S. and Euro GDP, high yield interest rate spreads in excess of 700 bps, U.S. unemployment averaging 10% and high yield default rates between 11% and 16%.

While the duration and severity of the COVID-19 crisis are unknown, the company has operated effectively to date and Moody’s outlook assumes that the company does not experience any material negative impact to its ability to conduct its operations as a result of COVID-19. The implications of COVID-19 or other situations or developments could affect these and many other factors that also could cause actual results to differ materially from Moody’s outlook, including the effects of government actions in response to economic disruptions caused by the COVID-19 pandemic, interest rates, foreign currency exchange rates, corporate profitability, business confidence and investment spending, merger and acquisition activities, consumer borrowing and securitization, and factors affecting the amount of debt issued. Moody’s ratings revenue guidance assumes MIS’s rated issuance declines in the low-double digit range globally.

These assumptions are subject to uncertainty, and results for the year could differ materially from Moody’s current outlook. In addition, Moody’s guidance assumes foreign currency translation at end-of-quarter exchange rates. Specifically, our forecast for the remainder of 2020 reflects exchange rates for the British pound (£) of $1.24 to £1 and for the euro (€) of $1.10 to €1.

Full year 2020 diluted EPS is expected to be $7.25 to $7.85. The company expects full year 2020 adjusted diluted EPS to be $7.80 to $8.40.

Source: Moody’s Corporation Earnings Release