Moody’s(US:MCO)2025-10-22 14:00Financial Data and Key Metrics Changes - Moody's achieved record quarterly revenue exceeding $2 billion for the first time, marking an 11% increase from the same quarter last year [6] - Adjusted operating margin reached almost 53%, up over 500 basis points year-over-year, indicating strong operating leverage [7] - Adjusted diluted EPS was $3.92, reflecting a 22% increase from the previous year, and more than doubling from three years ago [7] Business Line Data and Key Metrics Changes - The Ratings business (MIS) reported a 12% revenue growth, surpassing $1 billion in quarterly revenue for the third consecutive quarter [8] - Transaction revenue in MIS rose 14%, with corporate finance transaction revenue increasing by 13% [28][30] - Moody's Analytics (MA) saw a 9% year-over-year revenue growth, with ARR reaching nearly $3.4 billion, up 8% from last year [15][38] Market Data and Key Metrics Changes - The issuance pipeline remains robust, with demand for debt financing strong in private credit, AI-powered data center expansion, and infrastructure development [9][10] - Refunding needs over the next four years are projected to exceed $5 trillion, representing a compound annual growth rate of 10% from 2018 to 2025 [11] - Spec grade maturities in the U.S. increased by over 20%, indicating a favorable backdrop for future issuance [12] Company Strategy and Development Direction - Moody's is focused on investing in scalable recurring revenue businesses and simplifying its product suite, as evidenced by the sale of its Learning Solutions business [17] - The company is expanding its footprint in emerging markets, acquiring a majority interest in Meris, a leading ratings agency in Egypt [23][24] - The strategy includes leveraging AI capabilities to enhance customer workflows and embedding data into partner ecosystems, such as Salesforce [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the issuance environment heading into 2026, citing tight spreads and potential Fed easing as positive factors [78] - The company anticipates continued growth in private credit and infrastructure investments, particularly in digital infrastructure and data centers [82] - Risks include ongoing tariff negotiations and the potential impact of a prolonged government shutdown on market conditions [37] Other Important Information - Moody's is increasing its full-year guidance across almost all metrics, reflecting strong growth and operating leverage [5][27] - The company expects free cash flow to reach approximately $2.5 billion and plans to return over 85% of free cash flow to shareholders [48] Q&A Session Summary Question: Thoughts on AI in Analytics Business - Management indicated that AI is an opportunity for growth, with plans to embed AI into various workflow solutions and develop agentic solutions [51][52][55] Question: Impact of Record Issuance in Q3 - Management noted that pull forward activity is more common in spec grade than investment grade, with healthy maturity walls expected [58][60] Question: Proprietary Data in KYC Business - Management highlighted unique datasets in KYC solutions, including Orbis and politically exposed persons data, which provide a comprehensive view for customers [62][66] Question: Refi Walls and Market Conditions - Management clarified that the article referenced a decline in U.S. spec grade, while overall maturities remain healthy, with a positive outlook for refinancing [68][70] Question: Issuance Expectations for 2026 - Management anticipates more tailwinds than headwinds for issuance in 2026, driven by tight spreads and a robust M&A environment [76][78] Question: Growth in Moody's Analytics - Management confirmed that MA growth is tracking as expected, with a strong pipeline for Q4 and a focus on high single-digit growth [86][88] Question: Health of Private Credit Market - Management acknowledged concerns in the private credit market but emphasized the importance of independent credit assessments and the potential for demand for insights [91][94]