Loading...
01/10 16:37
Loading...
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Moody's reported record revenue growth, improved margins, and a successful AI strategy, alongside a promising partnership with MSCI. Despite some challenges in Banking ARR and slower MA growth, the overall sentiment from the earnings call is positive. The Q&A section highlighted strong private credit growth and effective cost management. The guidance for revenue, operating margin, and EPS remains optimistic, supported by robust free cash flow and a significant share repurchase plan. These factors suggest a likely positive stock price movement in the short term.
Revenue Second quarter Moody's revenue of $1.9 billion grew 4% year-over-year. This growth was achieved despite a challenging comparable period last year when revenue grew 22%. The growth was attributed to improved market conditions in May and June after a slow April, as well as a favorable issuance mix and growth in products and services not tied to issuance.
Adjusted Operating Margin Adjusted operating margin was 50.9%, up 130 basis points from a year ago. This improvement was driven by disciplined expense management.
Adjusted Diluted EPS Adjusted diluted EPS was $3.56, up 9% year-over-year and 60% growth from the same quarter three years ago. This reflects the growing earnings power of the business.
MIS Revenue MIS revenue was flat year-over-year at $1 billion, or down 1% when adjusted for FX effects. Growth was supported by a favorable issuance mix, private credit contributions, and pricing initiatives.
Private Credit Revenue Revenue related to private credit grew 75% year-over-year in the second quarter, driven by increased private credit-related transactions and deals, although from a relatively low base.
Moody's Analytics Revenue Moody's Analytics revenue grew 11% year-over-year, with recurring revenue growing 12%. This was driven by strong performance in Decision Solutions and contributions from acquisitions and FX.
Decision Solutions ARR Decision Solutions ARR grew 10%, supported by strong demand for banking, insurance, and KYC solutions.
Adjusted Operating Margin for Moody's Analytics Moody's Analytics delivered an adjusted operating margin of 32.1%, a 360 basis point improvement year-over-year. This was achieved through prioritizing investments, optimizing vendor relationships, and deploying productivity tools.
KYC ARR KYC ARR grew 15% year-over-year, driven by strong demand for data, analytics, and workflows. Growth was slightly moderated due to the strategic termination of a redistribution partnership.
Insurance Solutions ARR Insurance Solutions ARR grew 9% year-over-year, with growth dampened by an account loss following a merger and tough comparables from record new business in the prior year.
Private Credit Ratings: Private credit-related transactions accounted for nearly 25% of first-time mandates, with a 50% year-over-year increase in private credit-related deals. Revenue related to private credit grew 75% in the second quarter.
Lending Origination Solution: The newly launched lending origination package featuring Numerated was adopted by several renewing customers, with an average contract value increase of nearly 15%.
Insurance Solutions: Enhanced underwriting capabilities and integrations with CAPE Analytics led to a 10% ARR growth since acquisition. CAPE's AI-enabled geospatial intelligence is strengthening catastrophe models.
Latin America Expansion: Acquisition of ICR Chile, a leading provider of domestic credit ratings in Chile, was completed. Moody's Local new mandates year-to-date increased by more than 30% year-over-year.
Partnerships with Technology Firms: Partnerships with SAP, Coupa, and Databricks were announced, enhancing data integration and distribution channels.
Revenue Growth: Moody's Analytics delivered 11% revenue growth, with recurring revenue holding steady at 96% of total revenue.
Margin Expansion: Adjusted operating margin for Moody's Analytics improved to 32.1%, a 360 basis point increase year-over-year.
GenAI Deployment: Approximately 40% of products now include GenAI enablement. Customers adopting GenAI solutions show stronger engagement, with ARR nearing $200 million and growing at twice the rate of Moody's Analytics overall.
Microsoft Partnership: Moody's data is now integrated into Microsoft's operations, enhancing risk management and AI innovation.
Macroeconomic and Geopolitical Uncertainty: Uncertainty around tariffs, central bank interest rate policy, inflation, credit spreads, and M&A activity could impact issuance volumes and overall financial performance. Geopolitical tensions, such as those in the Middle East, and European defense spending also pose risks.
Private Credit Market Growth: While private credit is a growth driver, its reliance on favorable market conditions and the need for transparency and comparability could pose challenges. Additionally, the market's evolution may require significant ongoing investment.
Regulatory and Legal Risks: The company faces regulatory and legal risks, as evidenced by a prior legal reserve related to a regulatory matter. These risks could impact financial performance and operational focus.
Market Volatility and Issuance Activity: Market volatility, such as the April issuance air pocket, can lead to periods of no issuance, impacting revenue. Wider spreads and subdued M&A activity also contribute to revenue challenges.
Operational Efficiency and Cost Management: While cost management efforts are yielding results, the company faces challenges in maintaining efficiency amidst rising compensation expenses and the need for ongoing investments in technology and innovation.
Customer Attrition and Partnership Termination: The strategic termination of a long-standing redistribution partnership and customer attrition, such as in the U.S. government sector, could impact recurring revenue growth.
Dependence on Key Growth Drivers: The company’s growth is heavily reliant on sectors like AI, private credit, and digital transformation. Any slowdown in these areas could adversely affect performance.
MIS Revenue Growth: Full year MIS revenue growth is expected in the low to mid-single-digit percent range. The midpoint of guidance anticipates MIS revenue to decline in the low single digits year-over-year in Q3, followed by mid-single-digit growth in Q4.
MA Revenue and ARR Growth: Moody's Analytics (MA) revenue and ARR growth are expected in the high single-digit percent range for the full year, consistent with prior outlook.
Adjusted Operating Margin: Full year adjusted operating margin guidance for MIS remains at 61% to 62%, and for MA, it is reaffirmed at 32% to 33%. At the MCO level, adjusted operating margin is expected in the 49% to 50% range.
Adjusted Diluted EPS: Updated adjusted diluted EPS guidance range implies 10% growth at the midpoint versus last year.
M&A-Related Issuance: 15% growth in announced M&A is expected, with flat rated issuance. However, macroeconomic and geopolitical uncertainties could impact this aspect of issuance.
Efficiency Program Savings: Annualized savings of over $100 million have been executed, helping offset annual salary increases and variable costs.
Private Credit Growth: Private credit-related transactions accounted for nearly 25% of first-time mandates in Q2, with private credit-related deals increasing by 50% year-over-year. Revenue related to private credit grew 75% in Q2.
GenAI Adoption: Approximately 40% of Moody's products (measured by ARR) now include some form of GenAI enablement. Total spend by customers adopting GenAI solutions is approaching $200 million, growing at twice the rate of MA overall.
Strategic Partnerships: Partnerships with MSCI, SAP, and Microsoft are expected to enhance Moody's capabilities in private credit, data integration, and AI innovation.
The selected topic was not discussed during the call.
The earnings call reveals several positive aspects: strategic partnerships with major companies, strong private credit growth, and GenAI adoption. Moody's Analytics is performing well, with high single-digit growth expected. While there are concerns about macroeconomic uncertainties, the company has maintained strong financial metrics and efficiency savings. The Q&A section also highlighted constructive issuance outlook and strong demand for banking solutions. Despite some vague responses, the overall sentiment is positive, suggesting a likely stock price increase.
Moody's reported record revenue growth, improved margins, and a successful AI strategy, alongside a promising partnership with MSCI. Despite some challenges in Banking ARR and slower MA growth, the overall sentiment from the earnings call is positive. The Q&A section highlighted strong private credit growth and effective cost management. The guidance for revenue, operating margin, and EPS remains optimistic, supported by robust free cash flow and a significant share repurchase plan. These factors suggest a likely positive stock price movement in the short term.
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
