Moody’s(US:MCO)2025-07-24 20:20PART I. FINANCIAL INFORMATION Financial Statements The company reported increased revenue and net income for Q2 and H1 2025, with stable assets and decreased liabilities Consolidated Statements of Operations Highlights (Unaudited) | Financial Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue ($M) | $1,898 | $1,817 | 4.5% | $3,822 | $3,603 | 6.1% | | Operating Income ($M) | $818 | $775 | 5.5% | $1,664 | $1,576 | 5.6% | | Net Income Attributable to Moody's ($M) | $578 | $552 | 4.7% | $1,203 | $1,129 | 6.6% | | Diluted EPS ($) | $3.21 | $3.02 | 6.3% | $6.66 | $6.16 | 8.1% | Consolidated Balance Sheets Highlights (Unaudited) | Balance Sheet Item | June 30, 2025 ($M) | December 31, 2024 ($M) | | :--- | :--- | :--- | | Cash and cash equivalents | $2,174 | $2,408 | | Goodwill | $6,481 | $5,994 | | Total Assets ($M) | $15,487 | $15,505 | | Long-term debt | $6,967 | $6,731 | | Total Liabilities ($M) | $11,379 | $11,778 | | Total Moody's Shareholders' Equity ($M) | $3,949 | $3,565 | Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2025 ($M) | Six Months Ended June 30, 2024 ($M) | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,300 | $1,461 | | Net cash provided by (used in) investing activities | $98 | ($191) | | Net cash used in financing activities | ($1,780) | ($731) | | (Decrease) increase in cash and cash equivalents | ($234) | $505 | Notes to the Consolidated Financial Statements (Unaudited) Notes detail accounting policies, revenue disaggregation, restructuring, and segment performance, including MA's reorganization - In Q1 2025, Moody's Analytics (MA) reorganized its management and reporting structure, resulting in its goodwill being evaluated as a single reporting unit instead of the previous two. This change did not affect the company's reportable segments47 Revenue by Reportable Segment (Six Months Ended June 30) | Segment | 2025 Revenue ($M) | 2024 Revenue ($M) | % Change | | :--- | :--- | :--- | :--- | | Moody's Analytics (MA) | $1,747 | $1,601 | 9.1% | | Moody's Investors Service (MIS) | $2,075 | $2,002 | 3.6% | | Total MCO | $3,822 | $3,603 | 6.1% | - The company initiated the 'Strategic and Operational Efficiency Restructuring Program' on December 19, 2024, to realign operations and improve efficiency. The program is expected to result in annualized savings of $250 million to $300 million and total pre-tax charges of $200 million to $250 million. As of June 30, 2025, cumulative expenses incurred were $105 million9394 - In Q1 2025, the company fully repaid its $700 million 3.75% 2020 Senior Notes upon maturity. As of June 30, 2025, total long-term debt carrying value was $6,967 million108109 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses H1 2025 revenue growth in MA and MIS segments, improved adjusted operating margin, and strong liquidity Results of Operations H1 2025 total revenue grew 6% to $3.82 billion, driven by MA and MIS, with adjusted operating margin expanding 110 bps Q2 2025 vs Q2 2024 Performance Summary | Financial Measure | Q2 2025 ($M) | Q2 2024 ($M) | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $1,898 | $1,817 | 4% | | MA External Revenue | $888 | $802 | 11% | | MIS External Revenue | $1,010 | $1,015 | 0% | | Operating Margin | 43.1% | 42.7% | +40 BPS | | Adjusted Operating Margin | 50.9% | 49.6% | +130 BPS | | Diluted EPS ($) | $3.21 | $3.02 | 6% | | Adjusted Diluted EPS ($) | $3.56 | $3.28 | 9% | H1 2025 vs H1 2024 Performance Summary | Financial Measure | H1 2025 ($M) | H1 2024 ($M) | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $3,822 | $3,603 | 6% | | MA External Revenue | $1,747 | $1,601 | 9% | | MIS External Revenue | $2,075 | $2,002 | 4% | | Operating Margin | 43.5% | 43.7% | -20 BPS | | Adjusted Operating Margin | 51.3% | 50.2% | +110 BPS | | Diluted EPS ($) | $6.66 | $6.16 | 8% | | Adjusted Diluted EPS ($) | $7.38 | $6.65 | 11% | - MA's revenue growth was driven by sustained demand for KYC and insurance offerings, SaaS-based banking solutions, and credit research products. ARR increased by 8%141159 - MIS revenue growth was supported by strong investor demand and tight credit spreads in investment-grade, U.S. public and project finance, and CMBS, partially offset by declines in bank loans due to market volatility and subdued M&A activity211 Liquidity and Capital Resources The company maintains strong liquidity with $2.3 billion in cash, despite decreased operating cash flow, and has $0.9 billion for share repurchases Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2025 ($M) | 2024 ($M) | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,300 | $1,461 | | Net cash provided by (used in) investing activities | $98 | ($191) | | Net cash used in financing activities | ($1,780) | ($731) | | Free Cash Flow (Non-GAAP) ($M) | $1,140 | $1,290 | - The decrease in operating cash flow was driven by $198 million in higher income tax payments and approximately $100 million in higher incentive compensation payments277283 - The increase in cash used in financing activities was primarily due to a $700 million repayment of notes and $273 million more in treasury share repurchases compared to the prior year280284 - As of June 30, 2025, the company had approximately $0.9 billion of remaining authority under its $1.5 billion share repurchase program authorized in October 2024291 Non-GAAP Financial Measures The company utilizes non-GAAP measures like Adjusted Operating Income, Adjusted Diluted EPS, and Free Cash Flow for performance analysis Reconciliation of Operating Income to Adjusted Operating Income (Six Months Ended June 30) | Metric | 2025 ($M) | 2024 ($M) | | :--- | :--- | :--- | | Operating income | $1,664 | $1,576 | | Depreciation and amortization | $233 | $210 | | Restructuring | $60 | $7 | | Charges related to asset abandonment | $3 | $15 | | Adjusted Operating Income ($M) | $1,960 | $1,808 | Reconciliation of Diluted EPS to Adjusted Diluted EPS (Six Months Ended June 30) | Metric | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Diluted EPS | $6.66 | $6.16 | | Net Acquisition-Related Intangible Amortization Expenses | $0.46 | $0.40 | | Net restructuring | $0.25 | $0.03 | | Net charges related to asset abandonment | $0.01 | $0.06 | | Adjusted Diluted EPS ($) | $7.38 | $6.65 | - For the six months ended June 30, 2025, the company's organic constant currency revenue growth was 5% for the total company, 7% for MA, and 3% for MIS306307 Quantitative and Qualitative Disclosures About Market Risk The company's market risk primarily involves FX and interest rate fluctuations, mitigated by derivatives - The company is exposed to market risk from changes in FX rates, particularly the euro, Hong Kong dollar, and Singapore dollar, relative to the U.S. dollar317318 - A hypothetical 10% strengthening of the euro versus the USD would cause a combined unfavorable impact of approximately $580 million to OCI from cross-currency swaps ($433 million) and designated euro-denominated debt ($147 million). This impact would be offset by gains on the hedged net investments322323 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level324 - No material changes in the company's internal control over financial reporting occurred during the three-month period ended June 30, 2025325 PART II. OTHER INFORMATION Legal Proceedings Details on legal proceedings are provided in Note 16, 'Contingencies,' within the financial statements - For details on legal proceedings, the report refers to Note 16 "Contingencies" in Part I, Item 1329 Risk Factors No material changes to risk factors have occurred since the company's 2024 Annual Report on Form 10-K - The company states there have been no material changes from the risk factors disclosed in its 2024 Form 10-K330 Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2025, Moody's repurchased 623,206 shares at an average of $460.76, with $0.9 billion repurchase authority remaining Share Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | April 2025 | 246,913 | $430.63 | | May 2025 | 64,373 | $477.84 | | June 2025 | 311,920 | $480.87 | | Total Q2 | 623,206 | $460.76 | - At the end of Q2 2025, approximately $0.9 billion remained available for future repurchases under the Board's authorization from October 15, 2024332 Other Information No information is reported under this item - Not applicable333 Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents and CEO/CFO certifications - The exhibits filed with this report include CEO/CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and XBRL data files (Exhibits 101 and 104)335