MOODYS CORP /DE/ Q3 FY2024 earnings call

Rob Fauber highlighted strong Q3 results with 23% revenue growth, 48% adjusted operating margin, and 32% growth in adjusted diluted EPS. The rating business had a 41% revenue increase, driven by strong September issuance. MA had 7% overall revenue growth, with Decision Solutions growing at 12%. RMS acquisition progress was discussed, including integration into Insurance Solutions and partnerships. Noémie Heuland noted a record third quarter revenue, updated guidance for MIS revenue and operating margin, and details on different business segments' revenue growth and ARR trends.

The Ratings business saw a 41% increase in revenue, with transactional revenue up 70% driven by first-time and infrequent issuers, outpacing global rated issuance growth of 51%. MA delivered 7% overall revenue growth, 9% growth in ARR and recurring revenue, with year-to-date customer retention at 93% and adjusted operating margin of 30.3%. Decision Solutions (banking, insurance, KYC) had $1.4 billion ARR, growing at 12%. The RMS acquisition is integrated into Insurance Solutions, with ARR growth mid-teens and over 250 customers on the cloud platform.

MIS revenue growth is raised to the high 20s percentage range. MIS adjusted operating margin is raised to 59%-60%. Full year issuance growth is revised to the mid-30s percentage range. Adjusted diluted EPS guidance is increased to $11.90-$12.10.

Macroeconomic factors that could impact issuance, election-related market volatility, geopolitical events, and settlement of a regulatory matter which is a headwind to operating margin.

Q: Toni Kaplan asked about data and information ARR slowdown.

A: Noémie Heuland responded about government contract renewals at lower value and customer transitions to MSCI.

Q: Ashish Sabadra asked about near and midterm issuance tailwinds and 2025 outlook.

A: Rob Fauber discussed tailwinds like refunding walls, M&A, private credit, and transition finance, with cautious optimism on 2025.

Q: Scott Wurtzel asked about debt velocity.

A: Rob Fauber talked about improving debt velocity and historical issuance trends.

Q: Andrew Nicholas asked about Research and Insights ARR growth.

A: Noémie Heuland and Rob Fauber discussed slower acceleration due to sales cycle and Gen AI adoption challenges.

Q: Manav Patnaik asked about MA revenue vs ARR growth.

A: Shivani Kak explained revenue growth dynamics with recurring revenue and different business component trends.

Q: Owen Lau asked about private credit assessments.

A: Rob Fauber discussed private credit revenue flowing through ratings and analytics, with focus on BDCs and fund finance.

Q: Faiza Alwy asked about MA medium-term targets.

A: Rob Fauber talked about land and expand strategy in financial services and corporates.

Q: David Motemaden asked about pull forward and 2025 issuance.

A: Rob Fauber discussed pull forward in spec grade and impact on 2025 outlook.

Q: Craig Huber asked about spread and incentive comp.

A: Rob Fauber talked about favorable mix and Noémie Heuland discussed incentive comp accruals.

Q: George Tong asked about 4Q issuance and 2025 proxy.

A: Rob Fauber explained updated issuance outlook and 2025 implications.

Q: Shlomo Rosenbaum asked about AI product progress.

A: Rob Fauber discussed AI enablement of products and adoption challenges.

Q: Jeff Silber asked about 4Q adjusted EPS and margins.

A: Noémie Heuland explained guidance and margin considerations.

Q: Jason Haas asked about MA ARR and acceleration.

A: Noémie Heuland and Rob Fauber discussed pipeline and new product launches in KYC.

Q: Jeff Meuler asked about KYC ARR deceleration.

A: Noémie Heuland explained lower growth due to federal government contract renewals.

Q: Andrew Steinerman asked about Praedicat.

A: Rob Fauber discussed Praedicat as a casualty space bolt-on.

Q: Russell Quelch asked about private credit assessments.

A: Rob Fauber discussed private credit revenue and ongoing conversations with Apollo and Blackstone.

Q: Alex Kramm asked about MA margin and future expansion.

A: Noémie Heuland and Rob Fauber discussed Q4 margin seasonality and long-term margin expansion plans