Moody's Corp at Oppenheimer Technology, Internet & Communications Conference (Virtual) Transcript

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

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : For the people who are listening to the webcast, please feel free to submit your questions online. We will do our best to address your questions at the end. But Steve, as a starting point, could you please talk about what kind of software business MA is today? And where you want to be in five years?

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : Got it. So Moody's reported results in late July. MA results were pretty good, and it was the seventh quarter of double-digit ARR growth. But we will see -- likely see moderation of the growth, and you lower the 2024 guidance a little bit. Could you please expand a little bit more on the three factors I cited on the earnings call?

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : Got it. So you talked about ARR has been growing at 10%, but we have also observed differences between the ARR calculation and revenue, like the reported revenue number in several segments. For example, data information for which ARR has been consistently growing in the low double digits over the past four quarters, but revenue declined from 13% in the first quarter to 7% in the second quarter. What was the driver of that?

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : Got it. So focus on ARR, not revenue. Got it. Got it.

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : So MA has been on a SaaS transition journey over the last couple of years. Can you please update us on how far through the transition you are? And when do you anticipate the transition to be complete? I remember there was a slide a couple of years ago, but now we --

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : Got it. Got it. So you just talked about your partnership with MSCI, and it looks like a great partnership. Last quarter, MSCI talked about the partnership, but this partnership in specific has already generated kind of a noticeable impact on the net new sales. Has there been any impact for MA as of yet? Can you please unpack how MA can monetize this partnership when MSCI leverage all this database and sell the product? Can -- I mean I just -- I think we want to understand how you monetize it. Are you going to share any revenue with MSCI?

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : Got it. And then you kind of alluded to in previous question, but I want to make sure we understand this. So why was this partnership will impact your year-end renewal? And why would it potentially result in a reduction of the sales pipeline? Can you maybe dive a little bit deeper on that?

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : Got it. So just a minor detail follow-up. Any part of your existing like Moody's ESG and climate business can survive like you talk about MSCI will replace any part of it?

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : Very clear. We didn't understand, okay, just the ESG score itself, but you have like some other energy transition and others and stuff you preset -- okay. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 12, 2024 / 1:05PM, MCO.N - Moody's Corp at Oppenheimer Technology, Internet & Communications Conference (Virtual)

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : Got it. And then other than private company data for ESG, what are the data in Orbis database that MSCI can potentially leverage to create new products?

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : Got it. So let's move to another like maybe one of the key segments within MA, which is the KYC segment. It has an ARR of 18%. And based on my math, I think it's probably the fastest-growing segment in MA. Could you please talk about -- like unpack the drivers of the growth rate and how sustainable it is because this is one of the most common questions we got?

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : Got it. So can you also talk about -- or even remind us the competitive dynamic and competitive landscape in the KYC? Like in this space, have you seen any change? Who are your major competitors right now? And what is the value proposition? Why people still use data?

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : Got it. So we have like eight minutes left. Again, if you have any questions, feel free to submit your questions online. I do want to cover a couple of more different topics, insurance, AI, and also the margin guidance a little bit. So let's talk about RMS. You talked about RMS. We didn't talk about RMS in our last earnings call. I don't think we have talked about RMS for the last maybe one or two quarters. Maybe Steve, can you talk about -- like I think the growth has been quite well. I don't want to like ignore the whole thing. I think ARR for that segment was 6% last year. And then it accelerated to 14% last quarter. Just could you please talk about the driver of that acceleration? Do you expect it can accelerate further? Or how should we think about the trajectory from here?

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : Got it. I want to go back to the like MA segment margin. Again, like I know we shouldn't focus too much on revenue growth, but your first half revenue growth in MA was 7.9%. You expect the growth to accelerate or improve in the second half of this year driven by, I think two things, Research Assistant and CreditView. And correct me if I'm wrong on this. But could you please expand a little bit more on these two drivers?

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : Got it. So I think we have like two minutes left. I think final question for me on the margin. Again, like first half, 29.1% for MA. And I think you still guided to 30% to 31% for the full year. It implies a big jump in the second half. Could you please unpack a little bit what's the driver for that?

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : Got it. I think we are running out of time. Any final words for us, Steve and Shivani?

Question: Owen Lau - Oppenheimer & Co. Inc. - Analyst : I agree. Again, thanks a lot for your time, both of you. I hope you all have a good day.