Moody’s(US:MCO)2024-02-13 16:00Financial Performance - Moody's reported a significant increase in recurring revenue, driven by subscription-based services, which accounted for a substantial portion of total revenue[10]. - The company achieved a net income of $1.2 billion for the fiscal year, reflecting a year-over-year increase of 15%[12]. - Moody's total revenue for the year ended December 31, 2023, was $5,916 million, reflecting an 8% increase compared to $5,468 million in 2022[148]. - Operating income rose by 13% to $2,137 million, while adjusted operating income increased by 12% to $2,597 million[149]. - Diluted EPS increased by 17% to $8.73, and adjusted diluted EPS rose by 16% to $9.90, primarily due to growth in operating income[148]. - Total non-operating expenses increased by 64% to $(202) million, largely due to higher realized losses on interest rate swaps and increased foreign exchange losses[149]. - The effective tax rate (ETR) decreased by 500 basis points to 16.9%, reflecting tax benefits recognized from the resolution of uncertain tax positions[158]. Revenue Segmentation - Moody's Analytics (MA) segment revenue grew by 10% year-over-year, reaching $1.5 billion, supported by strong demand for data and analytics solutions[15]. - MA external revenue increased by 10% to $3,056 million, driven by sustained demand for KYC solutions and growth in insurance products and SaaS-based banking offerings[148]. - Moody's Investors Service (MIS) generated $2.3 billion in revenue, with a 5% increase attributed to higher demand for credit ratings and research services[20]. - MIS external revenue grew by 6% to $2,860 million, supported by increased investment-grade and speculative-grade corporate debt issuance[148]. - Corporate Finance revenue grew by 11% to $1,404 million, driven by higher leveraged finance and investment-grade rated issuance volumes[185]. - Structured Finance revenue decreased by 12% to $405 million, impacted by lower securitization activity across most asset classes[192]. Market Expansion and Strategy - The company plans to expand its market presence through strategic acquisitions and partnerships, focusing on enhancing its technology capabilities[27]. - Moody's is focused on expanding customer relationships and addressing new use cases to drive growth in its MA segment[53]. - Moody's expanded its domestic ratings footprint into new markets, including investments in affiliates in Costa Rica and Vietnam[66]. - The company has made acquisitions, including RMS, to enhance its climate data and analytics capabilities[45]. Sustainability and Corporate Responsibility - The company has committed to sustainability initiatives, receiving recognition as a CDP Supplier Engagement Leader on Climate Action for the third consecutive year[27]. - Moody's aims to achieve net-zero emissions across its operations and value chain by 2040, with a decarbonization plan that includes procuring 100% renewable electricity[44]. - Moody's is integrating sustainability-related performance metrics into the compensation structure for senior executives, aligning with its long-term strategic goals[27]. - The company is committed to equitable pay and inclusive benefits, with a focus on transparency in compensation[35]. Workforce and Employee Engagement - As of December 31, 2023, Moody's total employee count increased by 10% to 7,853 from 7,122 in 2022[31]. - The U.S. workforce saw a 3% increase, while the non-U.S. workforce grew by 6%[31]. - Employee engagement is monitored through periodic surveys, with a focus on improving work/life balance and development opportunities[42]. - Voluntary turnover rates decreased to 7% in 2023, reflecting a stronger labor market compared to 2022[43]. Regulatory Environment and Compliance - Moody's is subject to extensive regulation in the U.S. and EU, impacting its operations and profitability, with new regulations on ESG ratings expected to be adopted in the first half of 2024[67]. - The company is actively assessing the potential impact of new regulations on its operations and market demand for its products and services[67]. - Future regulations in the EU and U.K. could impact the demand for credit ratings, increase competition, and impose additional operational costs on Moody's[82]. - Moody's faces exposure to litigation and regulatory proceedings related to its ratings actions, which could result in significant legal costs and adverse judgments[83]. Competition and Market Risks - The company faces competition from various financial information and enterprise risk software providers, as well as other credit rating agencies[66]. - Moody's faces increased pricing pressure due to competition in credit rating and research markets, with a challenging business environment impacting customer demand[93]. - Competition from non-traditional credit rating agencies, which may impact its market share and revenue[92]. - The introduction of competing products and technologies may negatively impact Moody's market position and growth prospects[96]. Cybersecurity and Data Protection - Cybersecurity risks related to the protection of confidential information are a significant concern for Moody's operations[100]. - The Company faces significant cybersecurity risks, including unauthorized access and data breaches, which could adversely affect customer trust and business operations[101]. - The Company is subject to various data protection laws, including GDPR and CCPA, with non-compliance potentially resulting in penalties up to 4% of annual worldwide revenue[103]. - The Company's cybersecurity program is integrated into its enterprise risk management framework and is regularly tested against emerging threats[107]. Financial Assets and Goodwill - The company has $5,956 million in goodwill and $2,049 million in intangible assets, with 95% of these assets allocated to the MA business[98]. - Moody's evaluates its goodwill for impairment annually, with the last evaluation conducted on July 31[126]. - The Company performed qualitative assessments for all four reporting units as of July 31, 2023, concluding that it was not more likely than not that the fair value of any reporting unit was less than its carrying amount[127].