• Moody's (1)2Q15 revenue up 5% from 2Q14 to $918.1 million; up 10% on a constant currency basis
  • 2Q15 operating income up 2% from 2Q14 to $419.3 million; up 7% on a constant currency basis
  • 2Q15 EPS of $1.28 up 14% from 2Q14 non-GAAP EPS of $1.12, which excluded the $0.36 ICRA Gain
  • Reaffirming FY 2015 GAAP EPS guidance of $4.55 to $4.65

Moody’s Corporation reported revenue of $918.1 million for the three months ended June 30, 2015, up 5% from $873.5 million for the same period of 2014.

Operating expenses totaled $498.8 million, up 8% from $461.8 million, and operating income was $419.3 million, up 2% from $411.7 million. Adjusted operating income (operating income before depreciation and amortization) was $447.2 million, up 3% from $434.0 million. Operating margin for the second-quarter 2015 was 45.7% and adjusted operating margin was 48.7%.

EPS of $1.28 was up 14% from second-quarter 2014 non-GAAP EPS of $1.12, which excluded a $103 million non-cash, pre-tax gain, or $0.36 per share, resulting from Moody’s acquisition of a controlling interest in ICRA Ltd. in the second-quarter of 2014 (the “ICRA Gain”).

“Moody’s achieved 5% revenue growth in the second quarter due to strong US performance, partially offset by challenging European conditions,” said Raymond McDaniel, President and Chief Executive Officer of Moody’s. “We are reaffirming our 2015 earnings per share guidance of $4.55 to $4.65 despite uneven global growth and foreign currency volatility.”

Moody's Q2 2012 - 2015MCO SECOND-QUARTER 2015 REVENUE UP 5%

Moody’s Corporation reported global revenue of $918.1 million for the second-quarter 2015, up 5% from the second-quarter 2014. Foreign currency translation unfavorably impacted revenue by 5%. US revenue was $545.9 million, up 18% from $461.1 million, while non-US revenue was $372.2 million, down 10% from $412.4 million. Revenue generated outside the US constituted 41% of total revenue, versus 47% in the year-ago period.

MIS Second-Quarter Revenue Up 2%

Global revenue for Moody’s Investors Service (MIS) for the second-quarter 2015 was $639.2 million, up 2% from the prior-year period. Foreign currency translation unfavorably impacted MIS revenue by 5%. US revenue was $412.0 million, up 17%, while non-US revenue was $227.2 million, down 17%.

Global corporate finance revenue was $319.6 million, essentially flat to the prior-year period. This result reflected strong US investment-grade issuance primarily from increased M&A activity, largely offset by lower levels of non-US speculative grade issuance as well as a challenging prior-year comparable in Europe. US corporate finance revenue increased 18%, while non-US revenue decreased 25%.

Global structured finance revenue totaled $121.2 million, up 10% from a year earlier, primarily the result of strength in US structured credit, RMBS and commercial real estate finance. Structured finance US revenue was up 20%, while non-US revenue was down 10%.

Global financial institutions revenue was $90.4 million, down 2% compared to the prior-year period. US financial institutions revenue was up 10%, while non-US revenue was down 9%.

Global public, project and infrastructure finance revenue was $99.9 million, up 2% over the prior-year period. Increased US public finance issuance was partially offset by a decline in global project and infrastructure revenue against a strong prior-year comparable. US public, project and infrastructure finance revenue was up 10%, while non-US revenue was down 11%.

MA Second-Quarter Revenue Up 12%

Global revenue for Moody’s Analytics (MA) for second-quarter 2015 was $278.9 million, up 12% from second-quarter 2014. Foreign currency translation unfavorably impacted MA revenue by 6%. MA’s US revenue was $133.9 million, up 23%, and its non-US revenue was $145.0 million, up 4%.

Global revenue from research, data and analytics (RD&A) was $157.5 million, up 11% from the prior-year period. Growth was mainly due to the October 2014 acquisition of Lewtan Technologies as well as strong performance in the credit research and content licensing businesses. US RD&A revenue was up 19%, while non-US revenue was up 2%.

Global enterprise risk solutions (ERS) revenue of $83.2 million was up 24%, resulting from strong project delivery across all product offerings as well as the July 2014 acquisition of WebEquity Solutions. US ERS revenue was up 44%, while non-US revenue was up 14%.

Global revenue from professional services of $38.2 million was down 4% from the prior-year period, primarily due to the year-over-year decline of the Canadian dollar as well as the effect of exiting certain Copal Amba product lines in late 2014. US professional services revenue was up 10%, while non-US revenue was down 10%.

MCO FIRST HALF 2015 REVENUE UP 9%

For Moody’s Corporation overall, global revenue was $1.8 billion for the first half of 2015, up 9% from the first half of 2014. Foreign currency translation unfavorably impacted revenue by 5%. US revenue was $1.1 billion, up 18%, while non-US revenue was $0.7 billion, down 2%.

MIS First Half Revenue Up 8%

Revenue at MIS totaled $1.2 billion for the first half of 2015, up 8% from the prior-year period. Foreign currency translation unfavorably impacted MIS revenue by 5%. US revenue was $783.5 million, up 17%. Non-US revenue was $458.0 million, down 6%, and represented 37% of MIS revenue, down from 42% in the first half of 2014.

MA First Half Revenue Up 11%

MA revenue totaled $542.2 million for the first half of 2015, up 11% from the prior-year period. Foreign currency translation unfavorably impacted MA revenue by 6%. US revenue of $262.2 million increased 20%. Non-US revenue was $280.0 million, up 4%, and constituted 52% of MA revenue, down from 55% in the first half of 2014.

FIRST HALF 2015 EXPENSE UP 11%

Expense for Moody’s Corporation for the first half of 2015 was $993.1 million, up 11% from the prior year. Foreign currency translation favorably impacted expense by 4%.

Operating income was $790.6 million, up 6% from the first half of 2014. Foreign currency translation unfavorably impacted operating income by 6%. Adjusted operating income of $847.1 million increased 7% from the prior-year period. Moody’s operating margin was 44.3%, down from 45.4%, and its adjusted operating margin was 47.5%, down from 48.2%.

The effective tax rate for the first half of 2015 was 31.5%, consistent with the first half of 2014.

2015 CAPITAL ALLOCATION AND LIQUIDITY

2.2 Million Shares Repurchased in Second-Quarter

During second-quarter 2015, Moody’s repurchased 2.2 million shares at a total cost of $234.9 million, or an average cost of $107.35 per share, and issued 0.4 million shares as part of its employee stock-based compensation plans. Over the first half of 2015, Moody’s repurchased 6.0 million shares at a total cost of $600.7 million, or an average cost of $99.61 per share.

Outstanding shares as of June 30, 2015, totaled 200.3 million, down 5% from the prior year. As of June 30, 2015, Moody’s had $1.0 billion of share repurchase authority remaining.

At quarter-end, Moody’s had $3.1 billion of outstanding debt and $1.0 billion of additional debt capacity available under its revolving credit facility. Total cash, cash equivalents and short-term investments at quarter-end were $2.0 billion, up $88.2 million. Free cash flow in the first six months of 2015 was $553.7 million, up 32% from the first six months of 2014, primarily due to changes in working capital.

Credit rating comparison 2015 Q2ASSUMPTIONS AND OUTLOOK FOR FULL-YEAR 2015

Moody’s outlook for 2015 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 some degree of 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 (£) and the euro (€) of $1.57 to £1 and $1.11 to €1, respectively.

Certain components of Moody’s 2015 guidance have been modified to reflect the Company’s current view of business conditions, as follows:

Global MIS revenue for full-year 2015 is still expected to increase in the mid-single-digit percent range. However, US revenue is now expected to increase in the low-double-digit percent range, while non-US revenue is now expected to be approximately flat. Within MIS, structured finance revenue is now expected to grow in the mid-single-digit percent range and public, project and infrastructure finance revenue is now expected to increase in the low-double-digit percent range.

Global MA revenue for full-year 2015 is still expected to increase in the mid-single-digit percent range. Within MA, professional services revenue is now expected to decrease in the high-single-digit percent range.

The effective tax rate is now expected to be approximately 31% to 32% and capital expenditures are now expected to be approximately $100 – $110 million.

Source: Moody’s Earnings Release