Moody's Corporation

Good day, everyone, and welcome to the Moody's Corporation second quarter 2024 earnings call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open the conference up for questions and answers following the presentation. I will now turn the call over to Shivani Kok, Head of Investor Relations. Please go ahead.

Thank you, and good afternoon, and thank you for joining us today. I'm Shivani Kok, Head of Investor Relations. This morning, Moody's released its results for the second quarter 2024, as well as our revised outlook for select metrics for full year 2024. The earnings press release and the presentation to accompany this teleconference are both available on our website at ir.moody's.com. During this call, we will also be presenting non-GAAP or adjusted figures. Please refer to the tables at the end of our earnings press release filed this morning for reconciliations between all adjusted measures referenced during this call in U.S. GAAP. I call your attention to the safe harbor language, which can be found towards the end of our earnings release. Today's remarks may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In accordance with the Act, I also direct your attention to the management's discussion and analysis section and the risk factors discussed in our annual report on Form 10-K for the year ended December 31, 2023, and in other SEC filings made by the company, which are available on our website and on the SEC's website. These, together with the safe harbour statement, set forth important factors that could cause actual results to differ materially from those contained in any such forward-looking statements. I would also like to point out that members of the media may be on the call this morning in a listen-only mode. I'll now turn the call over to Rob.

Thanks, Shivani. Good afternoon, and thanks, everybody, for joining today's call. I'm looking forward to talking about this quarter. 22% revenue growth, an adjusted operating margin of almost 50%, and 43% adjusted diluted EPS growth. That's great stuff. And as I have said before, and I'm very proud to say it again, MIS is one of the world's great businesses. And when issuance activity ramps up, like it did in the first half of this year, and you maintain such a strong position with investors and issuers like we do, as well as our ongoing discipline approach to costs, we generate a tremendous amount of operating leverage. And for the second quarter, MIS delivered 36% revenue growth and a 63.2% adjusted operating margin, up 730 basis points from the second quarter of last year. And following another consecutive quarter of robust performance, we're again raising our guidance for both revenue growth and margin. On the MA side, we delivered a seventh consecutive quarter of 10% ARR growth with a 94% retention rate. ARR growth continues to be led by Decision Solutions, which grew by 13% this quarter. That said, and while we see a strong pipeline for the second half of the year, We are widening our ARR guidance to account for the potential for a bit more uncertainty in the buying environment in the second half. And Noemi will expand more on our thinking around this later, and I'm sure we'll discuss it in Q&A. In addition to the MIS guidance raise, we're also increasing several of our Moody's Corporation metrics, including upping our expectation for share repurchases for the year from $1 billion to $1.3 billion. and raising and narrowing our adjusted diluted EPS guidance to a range of $11 to $11.40. And we continue to innovate and invest, launching new products, expanding coverage, extending our partnerships, all to spur growth and position Moody's for long-term sustainable success. Now, speaking of growth, MIS has truly established itself as the agency of choice, and that allows us – to really capitalize on a market environment like we experienced this past quarter. For the first half of the year, we grew transaction revenue by 56%. That outpaced issuance growth of 43%. And that was particularly evident in our corporate finance and financial institutions rating groups, which both delivered transactional revenue growth rates north of 65%. And when considering recurring revenue, Overall, total revenue grew by 35%. And the investments we're making to streamline and automate our workflows enabled us to meet the surge in issuance, and that's double-digit growth across all asset types while maintaining discipline around expenses. And even considering these investments, we're delivering adjusted operating margin up 760 basis points through the first half of the year. Now, moving to MA, we had a strong first half, generating 8% revenue growth, and as I mentioned earlier, the seventh consecutive quarter of double-digit ARR growth. We continue to focus on high-growth SAS and subscription products, which are delivering mid-'90s retention rates and now represent 95% of total revenue. And taking a deeper dive into MA, the businesses within Decision Solutions continue to deliver very good growth, and that includes sales. KYC, which is delivering new and innovative features and functionality, and remains the fastest-growing business with ARR growth at 18% as of the end of the quarter. Insurance ARR growth was 6% at this time last year. It's now 14%. And banking delivered 9% ARR growth, and for its purely SaaS offerings, a mid-teens ARR growth rate. Meanwhile, data and information delivered its fourth consecutive quarter of double-digit ARR growth, And research and insights ARR growth remains at 6%, but we continue to expect the growth rate will improve in the second half of the year with the expectation of high single-digit percent growth range by year-end. And that's benefiting from the momentum with Research Assistant and our unrated company's coverage expansion in credit view. So how are we achieving all this? I mean, pretty simply, we're delivering mission-critical solutions, tapping into our risk operating system, with massive data sets and analytic engines, all helping our customers navigate an increasingly complex and interconnected environment. Now, last quarter, I gave you a glimpse into our Gen AI product roadmap, and I'm excited to share that we launched two new skills this past quarter. And the first of those is an automated credit memo, which saves bankers hours of work by assembling a credit memo, leveraging the bank's in-house content, Moody's content and third-party content. Second is our early warning system, which is a cutting-edge Gen AI-powered solution that's initially focused on commercial real estate that we launched last week. And this solution monitors breaking news. It alerts our customers, and that includes lenders, insurers, and asset managers, to risks that could affect their portfolio and allowing them to query a broad range of Moody's data and models to quickly understand the potential impact of a given event. We've got a number of institutions using both of these solutions in private preview mode, and we're receiving some very encouraging feedback. And they're both great examples of more ways that we are unlocking the power of our data, our analytics, our insights, leveraging Gen AI. In KYC, regulation continues to drive demand for new and targeted solutions. And this past quarter, we launched our sanctioned security screening tool, which allows asset managers to look through the ownership hierarchies of their holdings to the ultimate parent and flag those that are sanctioned. We also launched the European Sanctions product. That was something that we actually launched in under a month, and it will help our banking customers manage new European reporting requirements on certain types of money transfers. And both of these solutions provide critical, timely, and trusted data to our customers that helping them avoid potential reputational or regulatory issues. And they're great examples of how we're broadening the use cases we serve, leveraging our massive company, people, and news data sets. Now, these products wouldn't be possible without the investments we've been making in our Orbis database, which we believe is the world's best curated database of public and private companies. And we've more than doubled the number of entities we cover since we first acquired Bureau Van Dyke. We added more than 20 million companies this year alone. And this past quarter, we reached a pretty incredible milestone with over half a billion companies in our Orbis database. And this massive coverage is a great source of competitive advantage for us. Now, turning to our ratings business, I always say that if there's an opportunity to invest in one of the world's great businesses, we're going to do it. And that's why I'm thrilled to announce that in early July, we completed our acquisition of GCR. That's the leading African domestic credit rating agency covering 25 countries across the region. And GCR really is a fantastic franchise. They've got a very impressive management team, and this investment continues to reinforce our leadership in domestic rating markets around the world. We've got a 30% stake in the leading rating agency in China. We've got very strong positions across Asia, in India, in Korea, Malaysia, and most recently, Vietnam. We've been enjoying great success with our Moody's Local strategy across Latin America, and now we've established a leadership position across the African continent. Now, we've also achieved an important milestone in our sustainable finance franchise in ratings this quarter, when we delivered our 200th second-party opinion in MIS, and we've got a healthy pipeline for the rest of the year. With the more recent launch of our net zero assessment, we now have, I think, a very compelling set of offerings to support sustainable and transition finance, and those are clear growth areas for the foreseeable future. You may recall back on the third quarter call last year, I talked about how we'd established a framework for third-party partnerships really to drive the ubiquity of our content in more and more platforms where people are making decisions about risk, investment, and opportunity. And this past quarter, we had some exciting announcements on that front. First is our strategic collaboration with MSCI around ESG and private credit. And we really are excited to offer our customers MSCI's market-leading ESG scores and data through a range of our solutions. And MSCI will leverage Moody's Orbis database to extend its private company ESG coverage. And together, we're going to explore solutions that will leverage our company data and credit scoring models and MSCI's distribution and expertise with the global investment community to provide greater insight into the private credit markets. And just to be clear, our collaboration does not impact our ESG work and ratings, nor does it affect our very extensive climate and transition capabilities across the firm. Now, second, in June, we announced a new collaboration with Zillow that further enhances the insights available to both Moody's and Zillow customers, And starting this month, we're adding Zillow's extensive rental property data into Moody's CRE data platform. In exchange, Zillow will gain access to Moody's CRE market analyses, and that will help their customers make confident decisions around their multifamily properties. We're also deepening our relationship with Google. Last month, they announced that they have tapped Moody's to be one of four foundational data providers that will serve as grounding agents for their enterprise Vertex AI platforms. And this grounding opportunity is particularly exciting as it dramatically expands the audience for our content and further establishes Moody's as a trusted data source. And finally, back in May, we announced a first-of-its-kind enterprise risk management dashboard in collaboration with Diligent. And they're a leading governance, risk, and compliance SaaS company. And that's going to be offered as a separate module to their more than 700,000 board and leadership users, again, broadening the audience's for our content. So these kinds of partnerships are expanding the reach and mind share of our data sets and analytics to thousands of key decision makers while enhancing the offerings of our partners and ultimately in the service of helping us accelerate long-term growth. So on that note, let me hand it over to Noemi to talk more about our financial performance for the quarter.