Moody’s Corporation reported revenue of $1.5 billion for the three months ended December 31, 2021, up 19% from the prior-year period. Foreign currency translation unfavorably impacted Moody’s revenue by 1%.

Moody’s Investors Service (MIS) Fourth Quarter Revenue Up 19%

Revenue for MIS in the fourth quarter of 2021 was $871 million, up 19% from the prior-year period. Foreign currency translation unfavorably impacted MIS revenue by 1%.

Corporate finance revenue was $444 million, up 20%, largely driven by robust U.S. and EMEA leveraged loan activity as issuers continued to refinance existing debt and fund M&A transactions. Investment grade issuance further supported growth, which was partially offset by a decline in high yield bond supply.

Financial institutions revenue was $137 million, up 6%, primarily due to issuers continuing to take advantage of the attractive rate and spread environment, and bolstered by acquisition financing.

Public, project and infrastructure finance revenue was $118 million, down 2%. This was the result of increased non-U.S. infrastructure finance activity, offset by lower U.S. public finance and EMEA sub-sovereign supply as issuers’ financing needs had been largely addressed in prior quarters.

Structured finance revenue was $161 million, up 66%. Investors’ search for yield and sustained favorable market conditions, including historically tight spreads, drove growth in both new and refinanced collateralized loan obligation deals, as well as commercial and residential mortgage-backed security issuance.

Moody’s Analytics (MA) Fourth Quarter Revenue Up 20%

Revenue for MA in the fourth quarter of 2021 was $668 million, up 20% from the prior-year period. Recurring revenue grew 22% and comprised 93% of total MA revenue, up from 91%. Organic MA revenue1 and organic MA recurring revenue1 were up 6% and 8%, respectively. Both organic figures excluded the impact of acquisitions completed in the prior twelve months. Foreign currency translation unfavorably impacted total MA revenue by 1%.

Research, Data and Analytics (RD&A) revenue was $454 million, up 12%. This increase was driven by robust demand for KYC and compliance offerings, as well as data solutions, and was further supported by strong renewal yields for subscription products. Organic RD&A revenue1 was $446 million, up 10%, and excluded revenue from acquisitions completed in the prior twelve months.

Enterprise Risk Solutions (ERS) revenue was $214 million, up 42%. ERS recurring revenue comprised 89% of total ERS revenue, up from 81%. Organic ERS recurring revenue1 grew 1% to $124 million, while organic ERS transaction revenue1 declined 29% to $20 million due to the anticipated shift away from one-time sales. As a result, total organic ERS revenue1, which excluded revenue from acquisitions completed in the prior twelve months, was $144 million, down 5%.

Fourth Quarter Operating Expenses And Operating Income

Fourth quarter 2021 operating expenses for Moody’s Corporation totaled $1.0 billion, up 21% from the prior-year period. Operational and transaction-related costs associated with recent acquisitions contributed approximately 15 percentage points of growth. The intentional acceleration of investments in several high priority growth markets drove 9 percentage points of the total increase and higher incentive, commission and stock-based compensation accruals contributed 4 percentage points. Savings from ongoing expense efficiency initiatives lowered expense growth by 3 percentage points. Foreign currency translation favorably impacted operating expenses by 1%.

Operating income of $514 million was up 16% and adjusted operating income1 of $589 million was up 11%, and excluded depreciation and amortization, as well as the prior-year period’s restructuring charges. Foreign currency translation unfavorably impacted operating income and adjusted operating income1 by 2% each. Moody’s operating margin was 33.4% and the adjusted operating margin1 was 38.3%. The MIS adjusted operating margin was 53.6% and the MA adjusted operating margin was 14.9%.

Moody’s effective tax rate for the fourth quarter of 2021 was 17.2%, down from 21.5% in the prior-year period. This decrease was primarily due to the recognition of higher U.S. discrete tax benefits in the fourth quarter of 2021 compared to the prior-year period.

Full Year Revenue Up 16%

Moody’s Corporation reported revenue of $6.2 billion for full year 2021, up 16% from the prior-year period. Foreign currency translation favorably impacted Moody’s revenue by 2%.

MIS revenue totaled $3.8 billion, up 16%. Foreign currency translation favorably impacted MIS revenue by 1%.

MA revenue totaled $2.4 billion, up 16%. Organic MA revenue1 and organic MA recurring revenue1 were up 9% and 12%, respectively. Both organic figures excluded the impact of acquisitions completed in the prior twelve months. Foreign currency translation favorably impacted MA revenue by 2%.

Full Year Operating Expenses Up 13%

Full year 2021 operating expenses for Moody’s Corporation totaled $3.4 billion, up 13% compared to the prior-year period, driven by strategic investments that enhance and broaden Moody’s capabilities to support future growth. Approximately 5 and 7 percentage points of this increase were mainly attributable to organic investments in product development and infrastructure, as well as operational and transaction-related costs associated with recent acquisitions, respectively. Ongoing expense efficiency initiatives reduced expenses by 4 percentage points, offsetting the 4 percentage points of expense growth from higher incentive, commission and stock-based compensation accruals. Foreign currency translation unfavorably impacted operating expenses by 1%.

Operating income of $2.8 billion was up 19% and adjusted operating income1 of $3.1 billion was up 16%. Foreign currency translation favorably impacted Moody’s operating income and adjusted operating income1 by 2% each. Moody’s operating margin was 45.7% and the adjusted operating margin1 was 49.9%. The MIS adjusted operating margin was 62.2% and the MA adjusted operating margin was 26.0%.

The effective tax rate for full year 2021 was 19.6%, down from 20.3% in the prior-year period. This decrease was primarily due to tax benefits resulting from the resolution of uncertain tax positions, as well as higher U.S. discrete tax benefits in 2021 compared to the prior-year period.

Source:  Moody’s Earnings Release