Moody's Corp at Goldman Sachs U.S. Financial Services Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : So NoTmie, as Moody's new CFO, can you describe your top financial priorities for the company, and perhaps, how you expect to run the company differently than your predecessor?

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Right. Makes sense. Moody's is guiding to approximately $1 billion in buybacks this year, which is the highest level it's been since really 2015. Where would you say share buybacks fit on the overall spectrum of capital allocation, and what are your overall capital allocation priorities?

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Yeah. At Moody's last Investor Day in 2022, the company established some medium-term targets that included 10% plus revenue growth, low-50s

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Makes sense. Let's dive a little bit further into the MIS business. So recently, with 3Q results, Moody's increased its MIS revenue growth outlook from high-teens to high-20s, reflecting not only the strong performance in the third quarter, but also an improved outlook for 4Q. Where do you see the most positive momentum as you look at the debt issuance landscape? And are there any areas of concern that really pop out for you?

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Maybe sticking on the topic of issuance for next year. How do you think about the impact of a Trump administration on the debt capital markets? What could it mean for the, I guess, the broader macro and issuance environment? And how do you think about ratings performance in that backdrop?

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Right. And then let's switch gears and talk a little bit about the refi pipeline. You touched on this earlier. There has been a pull forward in both investment grade and high-yield issuance, a little bit more in spec grade, a little bit less in investment grade. So you sort of see the two balance out. And I think previously, you had mentioned that if you look at the one-year forward issuance pipeline, refinancing pipeline, it's up something like mid-teens. So how much visibility does the refi pipeline give you for 2025? How much debt issuance would you say is in the bag because of the refi pipeline?

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Right. Now, the refinancing pipeline is not only strong for 2025, but also quite strong for 2026. To what extent could there be a pull forward from '26 into '25 that would lift '25 debt issuance? And what would be the circumstances that would cause that to happen?

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Got it. Private credit, big topic for many investors and for Moody's. It's been gaining momentum in recent years. How do you expect private credit to impact ratings revenue at Moody's and MA revenue to the extent that there's impact there as well?

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Makes sense. We talked about some of the puts and takes with 2025 debt issuance. If you look longer term, what would you say is a reasonable medium-term growth rate for MIS revenues? And what megatrends do you think will serve as key growth drivers?

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Makes sense. Now, MIS operating margins are currently running in the high-50s. To what extent do you think margins can expand further from current levels and what are the drivers? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 7:20PM, MCO.N - Moody's Corp at Goldman Sachs U.S. Financial Services Conference

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Let's switch gears and talk a little bit more about Moody's Analytics. Most recently, if you look at the data and information subsegment of MA, ARR decelerated a little bit from low-double digits to high-single digits. I think the impact cited were the election cycle affecting government spending. You also had the impact of the MSCI partnership. So how long lasting do you expect these headwinds to be -- and is there a path for data and

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Right. And then within MA Research and Insights, you're also seeing a little bit of headwinds there from both the buy side and the sell side, asset managers and banks expecting some budget difficulties. Similar question, when would you expect the environment there to improve? What are the catalysts? What's the timeframe?

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Yeah. Let's talk a little bit more about GenAI. You touched on Research Assistant. That certainly sounds like it's gaining a lot of good traction. Can you talk about the pipeline for GenAI, what additional products they have in development? And what has overall customer receptivity been broadly to GenAI?

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Right. It seems most of the GenAI products are sitting in the MA segment. What kind of role do you see GenAI playing in the MIS business? Is it really just a productivity enhancer? Or are there some potential revenue benefits there as well?

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Makes a lot of sense. I'm going to pause there and see if there are any questions from the audience before I continue. We have one there. Let's wait for the mic. Unidentified Participant You mentioned (inaudible - microphone inaccessible) can you talk just generally about how your (inaudible - microphone inaccessible)

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Great. Any other questions? Okay. Let's return to our conversation on GenAI. We touched a little bit on monetization, but can we dive a little bit more into potential ways you might look to monetize GenAI? Is this a cost plus? Is this an add-on? Is this an upsell consumption-based pricing? What are your thoughts there? And then how much impact or lift to revenue do you think GenAI can provide over the near term and over the medium term?

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : At this point, would you say it's still too early to measure the materiality in revenue impact? It's less than 1%.

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Makes sense. And then last question on MA margins. This year, you're guiding to segment margins in the low-30s, which is relatively stable and unchanged from 2023. How do you think about the puts and takes with balancing reinvestments in MA with driving more margin flow-through?

Question: George Tong - Goldman Sachs & Company, Inc. - Analyst : Wonderful. Well, really appreciate the time and the insights. Please join me in thanking NoTmie.