Moody's Corp at William Blair Growth Stock Conference Transcript

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

Question: Andrew Owen Nicholas - William Blair & Company L.L.C., Research Division - Analyst : You typically describe the growth algorithm for MIS as a combination of growth and issuance volumes, coverage and price. I'd love to talk to the various factors affecting issuance trends in a little bit. I think price is relatively self-explanatory. But I was hoping you could maybe start us off by talking about coverage expansion as a growth driver and which areas have the potential to really move the needle for MIS as a whole.

Question: Andrew Owen Nicholas - William Blair & Company L.L.C., Research Division - Analyst : Great. That's very helpful color. And kind of as a segue, you talked about maybe longer-term growth trends for issuance, but maybe a little bit shorter term. At the end of April, you lowered your guidance for MIS revenue to a high single-digit decline compared to 2019, which I believe embeds a low double-digit decline in global debt issuance. I was hoping you could maybe unpack the different components of that guidance a bit further. And then maybe more importantly, speak to how the debt markets have performed relative to your expectations thus far in the second quarter and maybe more specifically over the past month or so.

Question: Andrew Owen Nicholas - William Blair & Company L.L.C., Research Division - Analyst : Got it. No, that's helpful. Helpful detail. Maybe moving past issuance for a little bit, I'd like to spend some time on some of the key growth initiatives you've identified and been investing in over the past several years. First, I was hoping we could kind of start with the firm's ESG capabilities. How big is that business today? How fast is it growing? And how do you kind of think about Moody's capabilities in ESG compared to the other large primary competitors in that space?

Question: Andrew Owen Nicholas - William Blair & Company L.L.C., Research Division - Analyst : All right. That's helpful. That makes sense. Particularly given the relationships you already have with these companies and these management teams, it makes sense that you have that kind of avenue already opened up. Obviously, I mean, you mentioned it briefly, but another growth initiative that you've identified and talked to decent bit about is commercial real estate. You bought Reis in late 2018. For investors who are less familiar, can you walk through the CRE assets, how they fit within the broader MA portfolio and how you're thinking about the size of that opportunity?

Question: Andrew Owen Nicholas - William Blair & Company L.L.C., Research Division - Analyst : Got it. Yes. Great, great detail. I appreciate that. Kind of sticking with the M&A front and as a growth driver in MA, I mean, earlier this year, you acquired Regulatory DataCorp, or RDC, in an effort, I believe, to expand your capabilities in the KYC space, which is obviously fast-growing and something that you've talked about in the past. Can you talk a little bit about that RDC asset, how it's synergistic to your earlier acquisition in '17 of BvD and the market opportunity there? And then -- and I know this is a long-winded question, but if there's any early takeaways or color you can add in terms of the integration of RDC and how that's progressing, that'd be helpful.

Question: Andrew Owen Nicholas - William Blair & Company L.L.C., Research Division - Analyst : Got it. Got it. Well, certainly, a lot of different investment areas that seem promising. Kind of moving to maybe the expense side a little bit. Despite the more challenging environment for top line growth, we've talked about the issuance headwinds a little bit. You're still guiding to adjusted operating margins of 46% to 48% in 2020, which isn't too far off from the high 40s long-term target. So kind of with that in mind, I was hoping you could speak to the different cost actions that you've undertaken concerning margin in the current environment. And then also maybe more importantly, what are some of the ongoing efficiency initiatives that you have underway that could potentially drive margins beyond that long-term target or that existing target threshold of high 40s in years to come?

Question: Andrew Owen Nicholas - William Blair & Company L.L.C., Research Division - Analyst : Great. Great. We've also -- we've already talked about some of the growth opportunities that have kind of presented themselves via M&A and acquisitions over the past couple of years. I guess I'm interested in -- and I realize that in the second quarter, right this instant, things are a little choppy. But looking towards the back half of the year or beyond, do you continue to expect M&A to be a major part of the growth story of the company? And of the numerous different adjacencies you've identified, whether it be CRE, ESG, I think we haven't talked about it, but cyber is another one that you've talked about in the past, is there one area where growth via acquisition makes the most sense? Or how are you kind of thinking about that opportunity set?

Question: Andrew Owen Nicholas - William Blair & Company L.L.C., Research Division - Analyst : Great. Great. Maybe squeeze one more in. I think we have a minute or 2 left. Kind of going back to the first question I asked about coverage, I think you mentioned the opportunity in China. Just kind of curious how the recent tensions between U.S. and China impacted the outlook for that business, for the expansion of ratings in the region and whether it changes your opinion in terms of operating through CCXI or potentially considering an organic build somewhere down the line. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 09, 2020 / 3:40PM, MCO.N - Moody's Corp at William Blair Growth Stock Conference

Question: Andrew Owen Nicholas - William Blair & Company L.L.C., Research Division - Analyst : Outstanding. Well, thank you very much, Rob, for your time today. I hope you have a great rest of the day. And we'll be in touch.