Moody's Corporation

Good day, everyone, and welcome to the Moody Corporation fourth quarter and full year 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 question and answers following the presentation. I will now turn the call over to Shivani Kok, Head of Investor Relations. Please go ahead.

Thank you. Good morning and thank you for joining us today. I'm Shivani Kok, Head of Investor Relations. This morning, Moody's released its results for the fourth quarter and full year 2024, as well as our outlook for full year 2025 and updates to our medium-term guidance. 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 US 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 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 31st, 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 harbor 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, and thanks very much, everybody, for joining today's call. After our prepared remarks, Steve Tolenko, the president of Moody's Analytics, and Mike West, president of Moody's Investor Service, are going to join Noemi and me for the Q&A portion of the call, and that's something that we've done for a few years now. Before I get into our results, I just want to acknowledge that it's been a difficult few weeks for many members of our team following the tragic loss of our dear friends and Moody's colleagues, Chris Collins and Melissa Nakandri, in the Washington, D.C. plane crash. They really were cherished members of our team, and their loss leaves an immeasurable void. And our thoughts are with their families during this incredibly difficult time. Now, on to our results. Booty's delivered a record year in 2024. We grew revenue by 20% to over $7 billion, with strong growth across both businesses. And through disciplined cost management, we expanded our adjusted operating margin by over 400 basis points. And that translated into a 26% adjusted diluted EPS growth, all while executing on strategic investments across both of our businesses. So MIS finished the year on a real high note, 18% total revenue growth powered by 29% transactional revenue growth in the fourth quarter. And our ratings teams were really active. And it wasn't just in the fourth quarter, but throughout the year, delivering 33% revenue growth for ratings and over 500 basis points of adjusted operating margin expansion for the full year. Moody's Analytics also had a strong finish to the year with 10% recurring revenue growth in the fourth quarter and 9% ARR growth. Decision Solutions continued to lead the way with 1.4 billion in ARR growing at 12%. And as we look to the future, we're continuing to invest to deliver market leading growth and attractive shareholder returns. And there are some very powerful deep currents that are driving demand across our business. And we've been making investments to ensure that we can capitalize on that demand. Thinking about the future, as we enter the third year since we introduced our medium term targets, today, Noemi and I are going to provide an update on our key metrics and what underpins our higher adjusted diluted EPS growth range. So as we set out this time last year, on last year's fourth quarter call, 2024 was a year in which we really doubled down on our investments in order to help us capitalize on some big opportunities that are in front of us. And we executed on those foundational investments that we called out on that earnings call at the start of last year. And those included platforming and modernizing. It included new products and also gen AI. And we focused on the accessibility of our data state and also enhancements to our risk and resilience posture. And we continue to invest in the rating agency and our positioning as the agency of choice for investors and issuers. And I have to say, I'm really proud that we were named best rating agency for an impressive 13th year in a row by Extel, formerly institutional investor. It's our experienced analysts, insightful research, and active market engagement that really reinforce our leadership position in the market. And that allows us in turn to capitalize on robust periods of issuance like this past year. We've also made investments to address the big shifts that are going on in the capital markets. The first of those is private credit. And I'm not just talking about direct leverage lending, which is a roughly $1.5 trillion market and growing, but also fund finance, infrastructure debt, and asset-backed finance, to name a few. And with dedicated analytical and commercial focus on private credit, we've made some really good progress in this space this past year. rating nearly 400 private credit related transactions in 2024. Similarly, we have a product suite to serve transition finance, and we issued over 150 second party opinions and more than 20 net zero assessments in 2024. And we have a very strong pipeline there as well. We also have a coordinated commercial and analytical initiative focused on digital infrastructure and data centers to ensure that we are the agency of choice in this space for the years to come. Now our strong financial performance this year allowed us to accelerate the build out of MIS's technology applications for our analytical, commercial, and operational teams. And these investments are driving improvements in operational efficiency and are allowing us to be increasingly volume agnostic within a range of issuance. And you can see this come through in our 60% margins in 2024 and our guidance for 2025. So I thought I'd just put this in perspective for you for a moment. rated nearly 6.2 trillion of issuance in 2024. That's an increase of 42% compared to 2023. And Mike West has given me an interesting statistic that throughout last year, our ratings teams issued a press release related to a credit opinion on average every 20 minutes. And that's without needing to meaningfully increase our analytical staffing levels. And very importantly, we did this while maintaining the robust controls that the market and our regulators expect from us. And as you've heard me say, we're always looking for ways to invest inorganically in ratings because it's a great business. And if you recall, in mid 2024, we invested further in GCR. That's the leading domestic credit rating agency in Africa, taking our ownership up to almost 100%. And in November, We expanded Moody's Local again, this time into six more countries across Central America. And we're really pleased with the growth that we're seeing in Moody's Local revenues up 16% in 2024. And we signed several hundred first time mandates. So that's a great expansion of the rated portfolio across the region and really bodes well for the future. So let me turn to Moody's Analytics for a few moments. We've invested there to enhance our product platforms and go-to-market strategy as we continue to deepen our relationships with our traditional customer base, banks and insurers. We've also expanded our data coverage and workflow solutions to serve large corporate customers in in-demand third-party risk domains. That includes things like KYC, supplier risk, trade credit, transfer pricing, and master data management. And within the last six months, We also made three important acquisitions that have enhanced our offerings in our banking and insurance businesses and added valuable data and analytics to our risk operating system. And those include Numerated, which extends our loan origination system for banks, Credit Cat, which adds to our capabilities in casualty underwriting and analytics, and most recently in January, Cape Analytics, which enriches our insights on properties and will integrate with our cat risk models. Just a little bit more enumerated for a moment. We've been collaborating with their team on joint offerings for some time, and that really highlighted the great fit between our respective lending workflow solutions. So there was an obvious industrial logic to this, and we've had some really encouraging response from our customers. In fact, we've already had a few noteworthy wins with Tier 2 and Tier 3 banks in the fourth quarter with our enhanced end-to-end commercial lending offerings And it's really resonating with our customers. Switching over to insurance, over the last several years, we've talked about the foundational investments that we've made in our cloud-based intelligent risk platform. We call that IRP. And these investments are now delivering meaningful ARR growth for our insurance business. In fact, in 2024, we grew the number of customers on the IRP by almost 20%. And migrating to the IRP then enables insurers to reduce, sometimes by as much as half, the time that they need to model complex scenarios across billions of property locations. And as our platform hosts the most modern, sophisticated, high-definition models, our customers are able to better measure and quantify their financial exposure, as well as monitor the evolving risk in their portfolios at scale. And this is helping to deepen our relationships with our customer base and expanding our strategic relationships with the largest global insurers, reinsurers, and brokers in the world. And I'd be remiss if I didn't mention that for the third consecutive year, Moody's was ranked number one in the Chartist Risk Tech 100, providing market validation of our best-in-class solutions, serving nearly 15,000 analytics customers. So a lot to be proud of in 2024. And while we had a strong 2024, I'm very excited about 2025 and beyond due to a set of deep currents that are changing the way that businesses and markets operate. And given the investments that we've made over the last several years, we really are well positioned to ride those deep currents. And there are five that we are particularly focused on. First, the ongoing expansion and evolution of the debt capital markets that I just touched on. Second, the increasing pace of digital transformation and automation across banks and insurers. Third, the imperative for businesses to know more about who they're doing business with. Fourth, the growing needs across industries to understand the financial impact of extreme weather events and a changing climate. And fifth, the transformative power of generative AI and the potential unlock for owners of proprietary data and insights. Let me just double click on the impact of extreme weather for a moment because this has been so much in the headlines lately. And on past calls, we've talked about the need to better understand the physical risk relating to extreme weather events and climate change. And when we announced the acquisition of RMS a few years ago, some folks asked us, why did we think it was important to have these capabilities? Well, after Hurricanes Helene and Milton and the LA wildfires, I don't think anyone is questioning the need to better understand this. I really believe we are at an inflection point. In fact, the issue of insurability of assets, both whether insurance is available and what the cost will be over time, has become a very important issue in property and financial markets. And we've witnessed the increasing frequency and severity of extreme weather events combined with ongoing property development and inflation, which have made these events even more costly. And the demand to better understand these risks, not just by insurers, but by banks, investors, companies, governments, is only going up. And that's why we acquired Cape Analytics. Their AI-powered technology delivers address-level risk insights, which are a natural complement to our catastrophe models. And these sophisticated models, combined with our really rich and deep data and insights on credit and economics and properties, means that we are uniquely positioned to be the authoritative voice on quantifying the financial impacts of physical risk. And we see this need continuing for years into the future. So we feel good about these deep currents as durable demand drivers for our business. And Noemi is going to walk you through our full year 25 guidance assumptions in a moment. And as we look forward after delivering a remarkable performance in 2024, we're going to provide an update on the progress against our medium-term targets, but let me give you the bottom line. We have fundamentally strengthened the earnings power of this business, and that should support Moody's as a serial compounder in the years ahead. So with that, Noemi, over to you.