Q1 2025 Moody's Corp Earnings Call

April 22, 2025

Operator: Good day, everyone, and welcome to the Moody's Corporation Q1 2025 earnings call. 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 questions and answers following the presentation. I will now turn the call over to Shivani Kak, Head of Investor Relations. Please go ahead.

Speaker Change: Good day, everyone, and welcome to the Moody's Corporation First Quarter 2025 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 questions and answers following the presentation. I will now turn the call over to Shivani Kak, Head of Investor Relations. Please go ahead. Thank you.

Noemie Heuland: Thank you.

Shivani Kak: Thank you.

Thank you.

Shivani Kak: Good morning, and thank you for joining us today. I'm Shivani Kak, Head of Investor Relations. This morning Moody's released its results for Q1 2025 as well as our revised outlook for select metrics for full-year 2025. 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 of 1995.

Good morning, and thank you for joining us today. I'm Shivani Kak, Head of Investor Relations. This morning Moody's released its results for Q1 2025 as well as our revised outlook for select metrics for full-year 2025. 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 of 1995.

Speaker Change: Good morning and thank you for joining us today. I'm Shivani Kak, head of Invest Relations.

Speaker Change: I call your attention to the Safe Harbor language, which can be found towards the end of our earnings release.

Shivani Kak: 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 31, 2024, 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 the listen-only mode. Over to you, Rob.

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 31, 2024, 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 the listen-only mode. Over to you, Rob.

Speaker Change: 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 31, 2024.

Speaker Change: 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 Huber Statement, set forth important factors that could cause actual results to differ materially from those contained in any such forward looking statements.

Speaker Change: I would also like to point out that members of the media may be on the call this morning in incident only mode over to you Rob.

Rob Fauber: Thanks, Shivani. Thank you very much, everybody, for joining today's call. This morning I'm going to kick off with some high-level takeaways on Moody's first quarter performance and an update on our 2025 guidance. Then I'm going to share why we're confident in our market position and how we're strengthening the earnings power of the business. After our prepared remarks, as always, Noemie and I will be glad to take your questions. On to the results. I think it's safe to say that the past few weeks have been more tumultuous than many have anticipated at the start of the year. There's certainly a lot of noise in the environment with equity markets demonstrating much greater volatility in a headline-driven environment. Understandably that's making it harder for many businesses to feel confident in making important investment decisions.

Robert Fauber: Thanks, Shivani. Thank you very much, everybody, for joining today's call. This morning I'm going to kick off with some high-level takeaways on Moody's first quarter performance and an update on our 2025 guidance. Then I'm going to share why we're confident in our market position and how we're strengthening the earnings power of the business. After our prepared remarks, as always, Noemie and I will be glad to take your questions. On to the results. I think it's safe to say that the past few weeks have been more tumultuous than many have anticipated at the start of the year. There's certainly a lot of noise in the environment with equity markets demonstrating much greater volatility in a headline-driven environment. Understandably that's making it harder for many businesses to feel confident in making important investment decisions.

Rob: Thanks, Shivani, and thank you very much everybody for joining today's call this morning.

Rob: I'm going to kick off with some high-level takeaways on Moody's first quarter performance.

Rob: and an update on our 2025 guidance. And then I'm going to share why we're confident in our market position and how we're strengthening the earnings power of the business. And after our prepared remarks as always, Noemie and I will be glad to take your questions. Thank you.

So on to the results.

I think it's...

Rob: Safe to say that the past few weeks have been more tumultuous than many have anticipated. Good.

Rob: at the start of the year and there's certainly a lot of noise in the environment with equity markets demonstrating. Thank you very much.

Rob Fauber: But as you've heard me say before on these calls, it is times like these when our customers turn to us the most. And that's because we've got a vast reservoir of proprietary data and insights, mission critical software solutions, and decades of experience in understanding credit impacts to countries, industries, and companies. And we've done this all over the world, across all sorts of economic cycles and geopolitical events. And this time is no different. So amidst this backdrop, we delivered some very strong results. In the first quarter we achieved a record $1.9 billion in Q1 2025 revenue. That was up 8% year over year. In fact, both of our businesses grew revenue at 8% and with some very disciplined expense management. Moody's adjusted operating margin reached 51.7%. That's up 100 basis points from the first quarter of last year.

But as you've heard me say before on these calls, it is times like these when our customers turn to us the most. And that's because we've got a vast reservoir of proprietary data and insights, mission critical software solutions, and decades of experience in understanding credit impacts to countries, industries, and companies. And we've done this all over the world, across all sorts of economic cycles and geopolitical events. And this time is no different. So amidst this backdrop, we delivered some very strong results. In the first quarter we achieved a record $1.9 billion in Q1 2025 revenue. That was up 8% year over year. In fact, both of our businesses grew revenue at 8% and with some very disciplined expense management. Moody's adjusted operating margin reached 51.7%. That's up 100 basis points from the first quarter of last year.

Rob: But as you've heard me say before on these calls, it is times like these when our customers turn to us the most, and that's because we've got a vast reservoir of proprietary data and insights

Rob: Mission Critical Software Solutions, and decades of experience and understanding credit impacts to countries, industries, and companies. And we've done this all over the world across all sorts of economic cycles and geopolitical events, and this time is no different.

So amidst this backdrop, [inaudible]

Rob: We delivered some very strong results in the first quarter. We achieved a record $1.9 billion in first quarter 25 revenue. That was up 8% year-over-year year-over-year-over-year-over-year-over-

In fact, both of our businesses grew revenue at 8% [inaudible]

Rob: and with some very disciplined expense management, Moody's adjusted operating margin reached 51.7%, that's up 100 basis points from the first quarter of last year.

Rob Fauber: Adjusted Diluted EPS grew 14% to $3.83. That really is the power of this franchise shining through. Now turning to MIS, we delivered 8% revenue growth on issuance, growth of 9%, and MIS achieved its highest ever quarterly revenue of $1.1 billion with an Adjusted Operating Margin of 66%, and that was up 140 basis points this quarter. Private Credit was a meaningful contributor to growth, particularly in Structured Finance. In fact, in Q1 2025 we had 143 Private Credit-related deals. That's up from 69 in Q1 2024. Roughly 1/3 of that volume came from Private Credit-backed ABS, CLOs, and RMBS Structured Finance issuance, and then BDCs and Fund Finance was almost another 1/3. In fact, 20% of first quarter revenue growth in Structured Finance was attributable to Private Credit.

Adjusted Diluted EPS grew 14% to $3.83. That really is the power of this franchise shining through. Now turning to MIS, we delivered 8% revenue growth on issuance, growth of 9%, and MIS achieved its highest ever quarterly revenue of $1.1 billion with an Adjusted Operating Margin of 66%, and that was up 140 basis points this quarter. Private Credit was a meaningful contributor to growth, particularly in Structured Finance. In fact, in Q1 2025 we had 143 Private Credit-related deals. That's up from 69 in Q1 2024. Roughly 1/3 of that volume came from Private Credit-backed ABS, CLOs, and RMBS Structured Finance issuance, and then BDCs and Fund Finance was almost another 1/3. In fact, 20% of first quarter revenue growth in Structured Finance was attributable to Private Credit.

Rob: and Adjusted the Looted EPS Group, 14% to $3.83, and that really is the power of this franchise shining through.

Rob: Now, turning to MIS, we delivered 8% revenue growth on issuance growth of 9% and MIS achieved its highest ever quarterly revenue of $1.1 billion with an adjusted operating margin of 66%

Rob: At this quarter, private credit was a meaningful contributor to growth, particularly in structured finance. In fact, in the first quarter of 25, we had 143 private credit-related deals. That's up from 69 in the first quarter of 24.

Rob: Roughly a third of that volume came from private credit backed ABS, CLOs, and RNBS structured finance issuance

Rob: and then BDC's and fund finance was almost another one-third. In fact, 20% of first quarter revenue growth and structure finance was attributable to private credit, so you can see private credit emerging as a tailwind for a ratings business.

Rob Fauber: So you can see private credit emerging as a tailwind for our ratings business, and amidst all the recent market uncertainty, engagement levels for our research and webcast are at a rate two to three times the levels that we normally see in a more stable environment. In fact, last week's ratings webinar on tariffs attracted roughly 3,000 registrants across 89 countries. Now zooming out, the deep currents that I talked about on the fourth quarter call remain intact, and for MIS, that includes private credit, transition finance, AI-driven infrastructure investment in emerging and domestic debt markets. These areas require significant investment in debt financing, and this hasn't changed despite the recent turbulence.

So you can see private credit emerging as a tailwind for our ratings business, and amidst all the recent market uncertainty, engagement levels for our research and webcast are at a rate two to three times the levels that we normally see in a more stable environment. In fact, last week's ratings webinar on tariffs attracted roughly 3,000 registrants across 89 countries. Now zooming out, the deep currents that I talked about on the fourth quarter call remain intact, and for MIS, that includes private credit, transition finance, AI-driven infrastructure investment in emerging and domestic debt markets. These areas require significant investment in debt financing, and this hasn't changed despite the recent turbulence.

Rob: and amidst all the recent market uncertainty, engagement levels for our research and webcasts are at a rate two to three times the levels that we normally see in a more stable environment. In fact, last week's ratings webinar on terror are subtracted.

Roughly 3,000 registrants across 89 countries.

Rob: Now zooming out, the deep currents that I talked about on the fourth quarter call remain intact.

Rob: and for MIS that includes private credit, transition finance, AI-driven infrastructure investment and emerging in domestic debt markets and these areas require significant investment and debt financing and this hasn't changed despite the recent turbulence.

Rob Fauber: In a recent report on private credit, our ratings team highlighted that data center debt issuance in the asset-backed finance market reached $4 billion in Q1 2025 alone versus the $8.4 billion issued for all of 2024. In Q1, we rated a $2 billion data center CMBS deal in the US, and that represents the larger scale we expect to see more frequently to finance digital infrastructure. We're actively evaluating several data center financing structures today across a number of teams and regions, and these financings are early stage, but they are increasing in both their scale and complexity, and they're a good example of a deep current that we expect will drive debt financing volumes for the foreseeable future. Now switching to MA, ARR growth was 9%, again led by Decision Solutions where ARR grew 12%.

In a recent report on private credit, our ratings team highlighted that data center debt issuance in the asset-backed finance market reached $4 billion in Q1 2025 alone versus the $8.4 billion issued for all of 2024. In Q1, we rated a $2 billion data center CMBS deal in the US, and that represents the larger scale we expect to see more frequently to finance digital infrastructure. We're actively evaluating several data center financing structures today across a number of teams and regions, and these financings are early stage, but they are increasing in both their scale and complexity, and they're a good example of a deep current that we expect will drive debt financing volumes for the foreseeable future. Now switching to MA, ARR growth was 9%, again led by Decision Solutions where ARR grew 12%.

Rob: in a recent report on private credit. Our ratings team highlighted that data center debt issuance in the asset back finance market reached $4 billion in the first quarter of 2025 alone.

Rob: And that represents the larger scale we expect to see more frequently to finance digital infrastructure.

Rob: We're actively evaluating several data center financing structures today across a number of teams and regions and these financing are early stage

Rob: But they are increasing in both their scale and complexity, and they're a good example of a deep current that we expect will drive death financing volumes for the foreseeable future.

Rob: Now switching to MA, AERR growth was 9% again led by decision solutions where AERR grew 12%

Rob Fauber: Recurring revenue increased another notch to 96% of total MA revenue, and we continue to make investments in product development, platform engineering, and sales capacity in our strategic growth areas. We're also executing on our ambitious cost efficiency program designed to significantly enhance MA's operating leverage over the coming years. For 2025, we remain on track to deliver a full year adjusted operating margin of between 32% and 33%. Now underpinning the 9% ARR growth was a very strong Q1 in terms of new business execution. I want to share a couple sales wins from this past quarter that illustrate that. First was a multi-million-dollar KYC deal with a major global bank to help them strengthen financial crime compliance.

Recurring revenue increased another notch to 96% of total MA revenue, and we continue to make investments in product development, platform engineering, and sales capacity in our strategic growth areas. We're also executing on our ambitious cost efficiency program designed to significantly enhance MA's operating leverage over the coming years. For 2025, we remain on track to deliver a full year adjusted operating margin of between 32% and 33%. Now underpinning the 9% ARR growth was a very strong Q1 in terms of new business execution. I want to share a couple sales wins from this past quarter that illustrate that. First was a multi-million-dollar KYC deal with a major global bank to help them strengthen financial crime compliance.

Rob: Recurring revenue increased another notch to 96% of total MA revenue.

Rob: and we continue to make investments in product development, platform engineering, and sales capacity in our strategic growth areas.

Rob: We're also executing on our ambitious cost efficiency program designed to significantly enhance M.A.'s operating leverage over the coming years and for 2025, we remain on track to deliver a full year adjusted operating margin of between 32 to 33%.

Rob: Now, underpinning the 9% ARR growth, there's a very strong first quarter in terms of new business execution. I want to share a couple sales wins from this past quarter that illustrate that [inaudible]

Rob: First was a multi-million dollar KYC deal with a major global bank to help them strengthen financial financial crime compliance.

Rob Fauber: We've grown this relationship by more than two times since 2020 by expanding the breadth and depth of our products being used across the bank, from credit rating feeds to economic data to early warning detection. Building on that, we were recently selected as a global Strategic Data Partner for their KYC program based on the high quality of our interconnected data sets. And that's a very strong referential customer for other major global banks. The second was our first Agentic AI sale in the KYC space with a major crypto trading platform that handles about $1 billion a day in trading volume. In Q1, we signed a multi-million-dollar contract across a suite of our solutions and are the first customer using Agent Review, which is our new KYC AI screening agent that helps onboard customers more accurately and quickly.

We've grown this relationship by more than two times since 2020 by expanding the breadth and depth of our products being used across the bank, from credit rating feeds to economic data to early warning detection. Building on that, we were recently selected as a global Strategic Data Partner for their KYC program based on the high quality of our interconnected data sets. And that's a very strong referential customer for other major global banks. The second was our first Agentic AI sale in the KYC space with a major crypto trading platform that handles about $1 billion a day in trading volume. In Q1, we signed a multi-million-dollar contract across a suite of our solutions and are the first customer using Agent Review, which is our new KYC AI screening agent that helps onboard customers more accurately and quickly.

Rob: And building on that, we were recently selected as a global strategic data partner for their KYC program based on the high quality of our interconnected data sets. And that's a very strong referential customer for other major global banks.

Rob: The second was our first agentic AI sale in the KYC space with a major crypto trading platform that handles about a billion dollars a day in trading volume.

Rob: In the first quarter, we signed a multi-million dollar contract across a suite of our solutions [inaudible]

and are the first customer using agent review. Thank you.

Rob: which is our new KYC AI screening agent that helps onboard customers more accurately and quickly. And given all the manual labor in the KYC space, AI agents have a very compelling value proposition and we're excited about this opportunity.

Rob Fauber: And given all the manual labor in the KYC space, AI agents have a very compelling value proposition, and we're excited about this opportunity. So more broadly, let me provide a quick update on our AI strategy across MA, and our focus remains on harnessing the transformative potential of generative AI to drive growth, to enhance customer experiences, and achieve a more efficient operating model on the commercial front. Last quarter I talked about how customers who upgraded to Research Assistant contributed meaningfully to growth in the research and insights business in 2020. Beyond Research Assistant, we've introduced three unique generative AI offerings that highlight the power of integrating our proprietary data to accelerate decision making for our banking and KYC customers: the Automated Credit Memo, Early Warning System, and the KYC AI Agent that I just talked about.

And given all the manual labor in the KYC space, AI agents have a very compelling value proposition, and we're excited about this opportunity. So more broadly, let me provide a quick update on our AI strategy across MA, and our focus remains on harnessing the transformative potential of generative AI to drive growth, to enhance customer experiences, and achieve a more efficient operating model on the commercial front. Last quarter I talked about how customers who upgraded to Research Assistant contributed meaningfully to growth in the research and insights business in 2020. Beyond Research Assistant, we've introduced three unique generative AI offerings that highlight the power of integrating our proprietary data to accelerate decision making for our banking and KYC customers: the Automated Credit Memo, Early Warning System, and the KYC AI Agent that I just talked about.

Rob: So, more broadly, let me provide a quick update on our AI strategy across MA, and our focus remains on harnessing the transformative potential of generative AI to drive growth.

Rob: to enhance customer experiences and achieve a more efficient operating model. On the commercial front, last quarter I talked about how customers who upgraded the research assistant contributed meaningfully to growth in the research and insights business in 2024.

Rob: Beyond Research Assistant, we've introduced three unique generative AI offerings that highlight the power of integrating our proprietary data to accelerate decision-making for our banking and KYC customers . . .

Rob: to the automated credit memo, early warning system, and the KYC AI agent that I just talked about.

Rob Fauber: Additionally, GenAI Navigators, now embedded in over a dozen MA product lines, are enabling on-demand customer support and improving user experiences across our solutions, and these navigators are helping customers maximize the value of our products. We've also deployed generative AI internally across three of our most significant functional job families in MA, including customer service, engineering, and sales. For example, our Customer Service Assistant has enabled a 20% reduction in resources for our support team while significantly improving response times, all without compromising the quality of customer interactions. In engineering, we're rolling out increasingly advanced AI tools to empower our software engineers, setting ambitious adoption targets to accelerate roadmap delivery and drive innovation. And we've recently launched a transformative internally built agentic tool that will act as a sales companion for relationship managers and their specific books of business.

Additionally, GenAI Navigators, now embedded in over a dozen MA product lines, are enabling on-demand customer support and improving user experiences across our solutions, and these navigators are helping customers maximize the value of our products. We've also deployed generative AI internally across three of our most significant functional job families in MA, including customer service, engineering, and sales. For example, our Customer Service Assistant has enabled a 20% reduction in resources for our support team while significantly improving response times, all without compromising the quality of customer interactions. In engineering, we're rolling out increasingly advanced AI tools to empower our software engineers, setting ambitious adoption targets to accelerate roadmap delivery and drive innovation. And we've recently launched a transformative internally built agentic tool that will act as a sales companion for relationship managers and their specific books of business.

Rob: Additionally, GNI navigators, now embedded in over a dozen MA product lines, are enabling on-demand customer support and improving user experiences across our solutions. And these navigators are helping customers maximize the value of our products.

Rob: We've also deployed generative AI internally across three of our most significant functional job families in MA, including customer service, engineering, and sales.

Rob: In engineering, we're rolling out increasingly advanced AI tools to empower our software engineers, setting ambitious adoption targets to accelerate road map delivery and drive innovation.

Rob: We've recently launched a transformative, internally built, agentic tool that will act as a sales companion for relationship managers and their specific books of business. [inaudible]

Rob Fauber: It's designed to act as a catalyst for tailoring our value propositions for streamlining prospecting, meeting preparation, and accelerating buying decisions. As you might imagine, our sales and management teams are very excited about the prospects for productivity gains. These are just a few tangible ways that we're driving greater efficiency and effectiveness in important areas across the flexibility firm. Anchoring this back to where I started my comments just a few minutes ago, Moody's value proposition is especially relevant in times of change and uncertainty, and we're doubling down on improving the earnings engine of our business and delivering strong results in the face of volatility.

It's designed to act as a catalyst for tailoring our value propositions for streamlining prospecting, meeting preparation, and accelerating buying decisions. As you might imagine, our sales and management teams are very excited about the prospects for productivity gains. These are just a few tangible ways that we're driving greater efficiency and effectiveness in important areas across the flexibility firm. Anchoring this back to where I started my comments just a few minutes ago, Moody's value proposition is especially relevant in times of change and uncertainty, and we're doubling down on improving the earnings engine of our business and delivering strong results in the face of volatility.

Rob: It's designed to act as a catalyst for tailoring our value propositions, for streamlining prospecting and meeting preparation and accelerating buying decisions. And as you might imagine, our sales and management teams are very excited about the prospects for productivity gains.

Rob: So these are just a few tangible ways that we're driving greater efficiency and effectiveness in important areas across the firm.

Rob: So anchoring this back to where I started my comments just a few minutes ago, Moody's value proposition is especially relevant in times of change and uncertainty. And we're doubling down on improving the earnings engine of our business and delivering strong results in the face of volatility.

Rob Fauber: While the services that Moody's provides are not directly impacted by tariffs announced to date, we do believe many businesses are being impacted by the uncertainty of impending trade tensions, and this uncertainty in turn leads to customers delaying financing and investment. We've seen this in the first few weeks of April. As I think most of you would expect, we're taking a more conservative approach to guidance given the operating environment. Since we issued our initial guidance earlier this year, we've widened and lowered our guidance range to accommodate a broader range of potential outcomes at this point in the year. I know Amy's going to share more details in her prepared remarks, and I'm sure we'll address this further in Q&A.

While the services that Moody's provides are not directly impacted by tariffs announced to date, we do believe many businesses are being impacted by the uncertainty of impending trade tensions, and this uncertainty in turn leads to customers delaying financing and investment. We've seen this in the first few weeks of April. As I think most of you would expect, we're taking a more conservative approach to guidance given the operating environment. Since we issued our initial guidance earlier this year, we've widened and lowered our guidance range to accommodate a broader range of potential outcomes at this point in the year. I know Amy's going to share more details in her prepared remarks, and I'm sure we'll address this further in Q&A.

Rob: And while the services that Moody's provides are not directly impacted by tariffs announced to date, we do believe many businesses are being impacted by the uncertainty of impending trade tensions.

Rob: and this uncertainty in turn leads to customers delaying financing and investment, and we've seen this in the first few weeks of April . As I think most of you would expect, we're taking a more conservative approach to guidance given the operating environment since we issued our initial guidance earlier this year.

Rob: We've widened and lowered our guidance range to accommodate a broader range of potential outcomes at this point in the year. Noemie is going to share more details in her prepared remarks, and I'm sure we'll address this further in Q&A. Thank you very much.

Rob Fauber: Now, looking beyond the near-term dynamics in the markets, we feel confident about the deep currents that are underpinning the demand for our solutions. First, the evolution of capital markets, including private credit. Second, the digital transformation, automation, and financial services industries. Third, the imperative to know more about who you're doing business with. Fourth, the financial impact of extreme weather events, and fifth, the transformative power of generative AI and the tremendous unlock available from proprietary data. I want to double-click on a few of these for just a moment. I've highlighted the growth coming from private credit. I'm particularly excited about the groundbreaking partnership with MSCI that we announced yesterday, where we're going to be providing independent risk assessments for private credit investment at scale.

Now, looking beyond the near-term dynamics in the markets, we feel confident about the deep currents that are underpinning the demand for our solutions. First, the evolution of capital markets, including private credit. Second, the digital transformation, automation, and financial services industries. Third, the imperative to know more about who you're doing business with. Fourth, the financial impact of extreme weather events, and fifth, the transformative power of generative AI and the tremendous unlock available from proprietary data. I want to double-click on a few of these for just a moment. I've highlighted the growth coming from private credit. I'm particularly excited about the groundbreaking partnership with MSCI that we announced yesterday, where we're going to be providing independent risk assessments for private credit investment at scale.

Now, looking beyond the near-term dynamics in the markets, [inaudible]

Speaker Change: We feel confident about the deep currents that are underpinning the demand for our solutions. First, the evolution of capital markets, including private credit. Second, the digital transformation and automation and financial services industries. [inaudible]

Speaker Change: Third, the imperative to know more about who you're doing business with. [inaudible]

Speaker Change: 4th, the financial impact of extreme weather events, and 5th, the transformative power of generative AI and the tremendous unlock available from proprietary data. And I want to double click on a few of these for just a moment.

Speaker Change: Now, highlighted the growth coming from private credit. I'm particularly excited about the groundbreaking partnership with MSCI that we announced yesterday, where we're going to be providing independent risk assessments for private credit investments at scale. Thank you very much.

Rob Fauber: This partnership brings together our world-leading credit scoring models with MSCI's Very Deep Data on private credit investments, enabling investors to understand the credit profile of companies and individual loans. Together we're serving a critical need for transparency and standards in the private credit market. To support banks in their drive to digitize and streamline their credit and lending workflow flows, we've integrated Numerated's AI-enabled front-end capabilities into our flagship lending solution, CreditLens. CreditLens supports nearly 500 banks with nearly $27 trillion in assets. In fact, CreditLens ARR, which represents over 1/3 of the total banking line of business ARR, grew at 12% over the last 12 months, demonstrating our ability to innovate and enhance our scaled solutions and expand relationships within our core customer base.

This partnership brings together our world-leading credit scoring models with MSCI's Very Deep Data on private credit investments, enabling investors to understand the credit profile of companies and individual loans. Together we're serving a critical need for transparency and standards in the private credit market. To support banks in their drive to digitize and streamline their credit and lending workflow flows, we've integrated Numerated's AI-enabled front-end capabilities into our flagship lending solution, CreditLens. CreditLens supports nearly 500 banks with nearly $27 trillion in assets. In fact, CreditLens ARR, which represents over 1/3 of the total banking line of business ARR, grew at 12% over the last 12 months, demonstrating our ability to innovate and enhance our scaled solutions and expand relationships within our core customer base.

Speaker Change: and together we're serving a critical need for transparency in standards in the private credit market. Thank you.

Speaker Change: to support banks and their drive to digitize and streamline their credit and lending workflows. We've integrated numerated and able AI's front-end capabilities into our flagship lending solution, Credit Lens.

Speaker Change: Credit Line supports nearly 500 banks with nearly $27 trillion in assets.

Speaker Change: In fact, Credit Lens ARR, which represents over a third of the total banking line of business ARR, grew at 12% over the last 12 months, demonstrating our ability to innovate and enhance our stale solutions and expand relationships within our core customer base. [inaudible]

Rob Fauber: On the impact of extreme weather events, Aon reported that Q1 economic losses of $83 billion were well above the 21st century average of $61 billion. In January we closed our acquisition of CAPE Analytics, a leading provider of geospatial AI data and location intelligence for property underwriting. Now we're integrating CAPE into our industry-leading catastrophe model. This is going to give insurers an incredibly high-definition view of property risk, allowing them to insure more confidently and with greater precision. We feel good about the medium-term given these deep currents, and we can and will manage through the short-term. We've got an experienced team and a strong portfolio that's built to weather storms and to provide insight when the market needs us most. With that, Noemi, over to you.

On the impact of extreme weather events, Aon reported that Q1 economic losses of $83 billion were well above the 21st century average of $61 billion. In January we closed our acquisition of CAPE Analytics, a leading provider of geospatial AI data and location intelligence for property underwriting. Now we're integrating CAPE into our industry-leading catastrophe model. This is going to give insurers an incredibly high-definition view of property risk, allowing them to insure more confidently and with greater precision. We feel good about the medium-term given these deep currents, and we can and will manage through the short-term. We've got an experienced team and a strong portfolio that's built to weather storms and to provide insight when the market needs us most. With that, Noemi, over to you.

Speaker Change: In January, we closed our acquisition of Cape Analytics, a leading provider of geospatial AI data and location intelligence for property underwriting. And now we're integrating Cape into our industry-leading catastrophe models.

Speaker Change: and this is going to give insurers an incredibly high definition view of property risk, allowing them to ensure more confidently and with greater precision. Thank you very much.

Speaker Change: So we feel good about the medium term given these deep currents, and we can and will manage through the short term.

Speaker Change: and we've got an experienced team and a strong portfolio that's built to weather storms and to provide insight when the market needs us most. With that, Noemie, over to you.

Noemie Heuland: Thank you, Rob, and hello, everyone. Thank you for joining us today. This morning, I'll start with our first quarter performance, then walk you through how we're thinking about the rest of the year. Starting with Q1, we achieved record financial results. MCO delivered revenue of $1.9 billion, up 8%. MCO adjusted operating margin improved by 100 basis points, and adjusted diluted EPS of $3.83 was up 14%. Year on year, Moody's Analytics achieved quarterly revenue of $859 million, up 8%. Recurring revenue grew 9% in line with ARR growth. Decision Solutions, which include our KYC, insurance, and banking solutions, grew ARR by 12% to nearly $1.5 billion. And this line of business is consistently the fastest growing part of Moody's Analytics with ARR growth of 17%, 11%, and 8% in KYC, insurance, and banking solutions respectively, research and insights, and data and information.

Noémie Heuland: Thank you, Rob, and hello, everyone. Thank you for joining us today. This morning, I'll start with our first quarter performance, then walk you through how we're thinking about the rest of the year. Starting with Q1, we achieved record financial results. MCO delivered revenue of $1.9 billion, up 8%. MCO adjusted operating margin improved by 100 basis points, and adjusted diluted EPS of $3.83 was up 14%. Year on year, Moody's Analytics achieved quarterly revenue of $859 million, up 8%. Recurring revenue grew 9% in line with ARR growth. Decision Solutions, which include our KYC, insurance, and banking solutions, grew ARR by 12% to nearly $1.5 billion. And this line of business is consistently the fastest growing part of Moody's Analytics with ARR growth of 17%, 11%, and 8% in KYC, insurance, and banking solutions respectively, research and insights, and data and information.

Noemie: Thank you Rob and hello everyone, thank you for joining us today. This morning I'll start with our first quarter performance, then walk you through how we're thinking about the rest of the year.

Noemie: MCO adjusted operating margin improved by 100 basis points, and adjusted diluted EPS of $3.83 was up 14% year-on-year.

Recurring revenue grew 9% in line with AR growth. [inaudible]

Noemie: Decision Solutions, which include RKYC, Insurance and Banking Solutions, GRAR by 12% to nearly 1.5 billion dollars.

Noemie: And this line of business is consistently the fastest growing part of Moody's analytics, with AR growth of 17%, 11% and 8% in KYC, insurance and banking solutions respectively.

Noemie: Research and Insights and Data and Information AR growth rates were 7% and 6% year on year.

Noemie Heuland: ARR growth rates were 7% and 6% year on year. You can see this breakdown on Slide 7, double clicking into MA's line of business results first. Within Decision Solutions, KYC led the growth with strong demand for our data analytics and workflow solutions. KYC ARR growth was driven not only by our banking customers, as Rob illustrated earlier, but also by significant deals with corporate customers to vet suppliers and with European government entities to investigate fraud in insurance. Our climate and specialty insurance risk solutions and HD models are key differentiators in the market, driving AR growth of 11%. In Q1, we signed an exciting deal for our cyber risk models with one of the largest global property and casualty insurers, showcasing that we are embedding ourselves in the insurance ecosystem across multiple risk domains.

ARR growth rates were 7% and 6% year on year. You can see this breakdown on Slide 7, double clicking into MA's line of business results first. Within Decision Solutions, KYC led the growth with strong demand for our data analytics and workflow solutions. KYC ARR growth was driven not only by our banking customers, as Rob illustrated earlier, but also by significant deals with corporate customers to vet suppliers and with European government entities to investigate fraud in insurance. Our climate and specialty insurance risk solutions and HD models are key differentiators in the market, driving AR growth of 11%. In Q1, we signed an exciting deal for our cyber risk models with one of the largest global property and casualty insurers, showcasing that we are embedding ourselves in the insurance ecosystem across multiple risk domains.

You can see this breakdown on slide 7.

Double-clicking into MA's line of business results.

Speaker Change: KYC AR Growth was driven not only by our banking customers as Rob Illustrated earlier, but also by significant deals with corporate customers to vet suppliers and with European government entities to investigate fraud [inaudible]

Speaker Change: In insurance, our climate and specialty insurance risk solutions and HD models are key differentiators in the market.

Driving AR Growth of 11%

Speaker Change: In the first quarter, we signed an exciting deal for our cyber risk models with one of the largest global property and casualty insurers showcasing that we are embedding ourselves in the insurance ecosystem across multiple risk domains. [inaudible]

Noemie Heuland: In banking, ARR grew 8% as customers are increasingly engaging with us to automate and digitize their lending workflows. In fact, over the last year we've seen an increase of almost 20% in new business related to our lending solutions. Turning to research and insights, now growing at ARR of 7%, the improved ARR growth rate is primarily driven by the lapping of two attrition events in Q1 of last year. New business generation continues to be strong, up 20% over the last 12 months. Finally, our data and information business grew ARR by 6%. The downtick in the growth rate over the last two quarters continues to be impacted by two dynamics that we've talked about in recent quarters, an adjustment to our ESG strategy, and attrition in sizable contracts with the US government.

In banking, ARR grew 8% as customers are increasingly engaging with us to automate and digitize their lending workflows. In fact, over the last year we've seen an increase of almost 20% in new business related to our lending solutions. Turning to research and insights, now growing at ARR of 7%, the improved ARR growth rate is primarily driven by the lapping of two attrition events in Q1 of last year. New business generation continues to be strong, up 20% over the last 12 months. Finally, our data and information business grew ARR by 6%. The downtick in the growth rate over the last two quarters continues to be impacted by two dynamics that we've talked about in recent quarters, an adjustment to our ESG strategy, and attrition in sizable contracts with the US government.

In banking?

Speaker Change: AR grew 8%, as customers are increasingly engaging with us to automate and digitize their lending workflows.

Speaker Change: Turning to research and insights, now growing at AR at 7% .

Speaker Change: And finally, our data and information business grew AR by 6%.

Speaker Change: The downtick and the growth rate over the last two quarters continues to be impacted by two dynamics that we've talked about in recent quarters.

Speaker Change: An adjustment to our ESG strategy and attrition in sizable contracts with the US government.

Noemie Heuland: Outside of these two areas, ARR growth would have been 10%. Now pivoting to ratings. Record quarterly revenue was driven by corporate finance, especially from investment grade issuers, and by structured finance with continued momentum in CMBS and CLOs as spreads remained tight and relatively stable through Q1. And you can see this on Slide 6. And as Rob mentioned, private credit was a tailwind in the first quarter. First time mandates were almost 200, an increase of 20% year on year, broadly in line with our Q1 expectations. So net net a record first quarter with very strong execution on the backdrop of a constructive issuance environment up to the first week of April. Now, looking beyond the first quarter, we believe it's appropriate to pressure test our initial assumptions against a wider range of scenarios and update our guidance range accordingly.

Outside of these two areas, ARR growth would have been 10%. Now pivoting to ratings. Record quarterly revenue was driven by corporate finance, especially from investment grade issuers, and by structured finance with continued momentum in CMBS and CLOs as spreads remained tight and relatively stable through Q1. And you can see this on Slide 6. And as Rob mentioned, private credit was a tailwind in the first quarter. First time mandates were almost 200, an increase of 20% year on year, broadly in line with our Q1 expectations. So net net a record first quarter with very strong execution on the backdrop of a constructive issuance environment up to the first week of April. Now, looking beyond the first quarter, we believe it's appropriate to pressure test our initial assumptions against a wider range of scenarios and update our guidance range accordingly.

Now pivoting to ratings!

Record Corley Revenue was driven by corporate finance

Speaker Change: especially from investment-grade issuers, and by structure finest, with continued momentum in CNBS and CLOs, as spreads remain tight and relatively stable 3Q1.

Speaker Change: and you can see this on slide six, and as Rob mentioned, private credit was a tailwind.

Speaker Change: In the first quarter, first time mandates were almost 200, an increase of 20% year-on-year, broadly in line with our Q1 expectations.

Speaker Change: So NetNet, a record first quarter, with very strong execution on the backdrop of a constructive issuance environment up to the first week of April

Speaker Change: Now, looking beyond the first quarter, we believe it's appropriate to pressure test our initial assumptions against the wider range of scenarios and update our guidance range accordingly.

Noemie Heuland: The market remains very sensitive to factors including fiscal and monetary policy, yields, flows, economic data, and the potential path and pace of the resolution. Global forecasts for GDP are being revised downwards, and the magnitude and timing of central bank rate cuts remain very much in flux. We currently anticipate high yield spreads will widen over the next 12 months, and the latest forecast for default rates is also wider. On the global and domestic M&A front, earlier expectations have been dampened by trade policy uncertainty. As such, we now expect 15% growth year on year in announced M&A, down from 50% growth in our February assumptions. So how does this all translate into a four-year financial outlook?

The market remains very sensitive to factors including fiscal and monetary policy, yields, flows, economic data, and the potential path and pace of the resolution. Global forecasts for GDP are being revised downwards, and the magnitude and timing of central bank rate cuts remain very much in flux. We currently anticipate high yield spreads will widen over the next 12 months, and the latest forecast for default rates is also wider. On the global and domestic M&A front, earlier expectations have been dampened by trade policy uncertainty. As such, we now expect 15% growth year on year in announced M&A, down from 50% growth in our February assumptions. So how does this all translate into a four-year financial outlook?

Speaker Change: The market remains very sensitive to factors, including fiscal and miniaturized policy news flows.

Economic Data .

and the potential path and pace to a resolution. [inaudible]

Speaker Change: Global forecasts for GDP are being revised downwards and the magnitude and timing of central back rate cuts remain very much in flux.

Speaker Change: We currently anticipate high yield spreads will widen over the next twelve months.

on the Global in Domestic M&A Front.

Earlier expectations have been dampened by trade policy uncertainty.

Speaker Change: As such, we now expect 15% growth year-on-year in announced M&A, down for 50% growth in our February

Speaker Change: So how does this all translate into a four-year financial outlook? [inaudible]

Noemie Heuland: Well, first of all, we are pleased with the fact that Q1 rated issuance was broadly in line with our forecast, but we're now projecting MIS rated issuance to decrease in the low to high single digit range for 2024. Our range accounts for various levels of activity in May and June after a somewhat muted April and for variability in how quickly uncertainty resolves in the back half of the year. The breakdown by asset class is in our slide presentation on Slide 10. Finally, our issuance assumptions account for a relatively short term disruption at the high end and more prolonged uncertainty with muted US GDP growth at the low end.

Well, first of all, we are pleased with the fact that Q1 rated issuance was broadly in line with our forecast, but we're now projecting MIS rated issuance to decrease in the low to high single digit range for 2024. Our range accounts for various levels of activity in May and June after a somewhat muted April and for variability in how quickly uncertainty resolves in the back half of the year. The breakdown by asset class is in our slide presentation on Slide 10. Finally, our issuance assumptions account for a relatively short term disruption at the high end and more prolonged uncertainty with muted US GDP growth at the low end.

Speaker Change: Well, first of all, we are pleased with the fact that Q-1 rated issuance was broadly in line with our forecast. Thank you very much.

Speaker Change: But we're now projecting MIS rated issuance to decrease in the low to high single digit range for 2025.

Speaker Change: Arrange accounts for various levels of activity in May and June after a somewhat muted April .

Speaker Change: and for variability in how quickly uncertainty resolved in the back half of the year.

Speaker Change: The breakdown by asset class is in our slight presentation on slide 10.

Speaker Change: and more prolonged uncertainty was muted US GDP growth at the low end.

Noemie Heuland: While robust deal-making activity in the back half and healthy supply of high-yield issuance in the near term are possible and certainly supported by subdued M&A levels and maturity walls, respectively, we do not consider this a base case at this time. Reflecting our updated issuance outlook, we now expect MIS full-year revenue growth to be in the range of flat to a mid-single-digit percent increase for 2025. MIS adjusted operating margin is expected to be in the range of 61% to 62%. Turning to MA, we are reiterating our revenue growth guidance of an increase in the high-single-digit percent range, and we are adjusting the high end of our prior ARR growth guidance, with four-year ARR growth now expected to be in the high-single-digit percent range. There are two reasons for the ARR guidance adjustment.

While robust deal-making activity in the back half and healthy supply of high-yield issuance in the near term are possible and certainly supported by subdued M&A levels and maturity walls, respectively, we do not consider this a base case at this time. Reflecting our updated issuance outlook, we now expect MIS full-year revenue growth to be in the range of flat to a mid-single-digit percent increase for 2025. MIS adjusted operating margin is expected to be in the range of 61% to 62%. Turning to MA, we are reiterating our revenue growth guidance of an increase in the high-single-digit percent range, and we are adjusting the high end of our prior ARR growth guidance, with four-year ARR growth now expected to be in the high-single-digit percent range. There are two reasons for the ARR guidance adjustment.

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Speaker Change: While Robis deal-making activity in the back half, and healthy supply of high yield insurance in the near term are possible, and certainly supported by subdued MNA levels and maturity walls respectively.

Bye-bye.

There are two reasons for the AR Guidance Adjustment.

Noemie Heuland: First, we want to acknowledge that the fluidity of the external environment drives uncertainty with customers and could lead to delays in decision making as the year progresses. Although it's important to note, this has not been the case so far. Second, we are reflecting higher than expected attrition with the US Government than originally anticipated. This includes the impact of what was realized in the Q1 and an increase in probability of attrition for contracts scheduled for renewal in the balance of the year. Having said that, we continue to build a solid pipeline of new business and believe the recent customer wins demonstrate Moody's Analytics' strong value proposition even in this environment. On the margin front, the efficiency program we announced in our Q4 call sets us up very well.

First, we want to acknowledge that the fluidity of the external environment drives uncertainty with customers and could lead to delays in decision making as the year progresses. Although it's important to note, this has not been the case so far. Second, we are reflecting higher than expected attrition with the US Government than originally anticipated. This includes the impact of what was realized in the Q1 and an increase in probability of attrition for contracts scheduled for renewal in the balance of the year. Having said that, we continue to build a solid pipeline of new business and believe the recent customer wins demonstrate Moody's Analytics' strong value proposition even in this environment. On the margin front, the efficiency program we announced in our Q4 call sets us up very well.

Speaker Change: First, we want to acknowledge that the fluidity of the external environment drives uncertainty with customers and could lead to delays in decision making as the year progresses. [inaudible]

Speaker Change: Although, it's important to note, this has not been the case so far.

Second.

Speaker Change: We are reflecting higher than expected detrition with the US government than originally anticipated.

Speaker Change: This includes the impact of what was realized in the first quarter and an increase in probability of attrition for contract schedule for renewal in the balance of the year.

Having said that,

Speaker Change: We continue to build a solid pipeline of new business and believe the recent customer wins demonstrate Moody's analytics strong value for position even in this environment.

Speaker Change: On the margin front, the efficiency program we announced in our Q4 call sets us up very well.

Noemie Heuland: It provides us with the capacity to continue investing to capture demand from the multi-year deep currents Rob highlighted and deliver on our commitment to scale margins. Bringing this all together with our adjustments to MIS revenue guidance, we expect full-year 2025 MCO revenue growth in the mid-single-digit range with an adjusted operating margin expanding by about 100 to 200 basis points to a range of 49% to 50%. Our adjusted diluted EPS guidance range is a range of $13.25 to $14, representing 9% growth at the midpoint versus last year. Now for modeling purposes, we expect the calendarization of top line and margin for MIS to be below the normal seasonal pattern for Q2.

It provides us with the capacity to continue investing to capture demand from the multi-year deep currents Rob highlighted and deliver on our commitment to scale margins. Bringing this all together with our adjustments to MIS revenue guidance, we expect full-year 2025 MCO revenue growth in the mid-single-digit range with an adjusted operating margin expanding by about 100 to 200 basis points to a range of 49% to 50%. Our adjusted diluted EPS guidance range is a range of $13.25 to $14, representing 9% growth at the midpoint versus last year. Now for modeling purposes, we expect the calendarization of top line and margin for MIS to be below the normal seasonal pattern for Q2.

Speaker Change: It provides us with the capacity to continue investing to capture the man from the multi-year deep currents Rob highlighted and deliver on our commitment to scale margins.

bringing this all together.

Speaker Change: with our adjustments to MIS revenue guidance. We expect for your 2025 MCO revenue growth in the mid-single digit range.

Speaker Change: with an adjusted operating margin, expanding by about 100 to 300 basis points, to a range of 49 to 50%.

Speaker Change: Our Adjusted Deal with the EPS Guidance Range is a range of $13.25 to $14, representing 9% growth at the midpoint versus last year.

Thank you.

Speaker Change: Now for bottling purposes, we expect the counterization of top line and margin for MIS to be below the normal seasonal pattern for Q2, following the strong Q1 results and considering April issuance volumes.

Noemie Heuland: Following the strong Q1 results and considering April issuance volumes, we anticipate that revenue will remain stable between the second and third quarter before declining in the fourth quarter sequentially in line with historical normal for MA. We expect our year-over-year total revenue growth to be in the high single-digit percent range with sequential quarterly increases consistent with the prior year. Turning to operating expense and excluding the impact from restructuring and asset abandonment charges, we expect expenses to ramp by about $15 million from the first quarter to the second quarter and gradually increase sequentially in the back half of the year in line with historical trends. The expected savings associated from our efficiency program will partially offset annual salary increases and variable costs as the year progresses.

Following the strong Q1 results and considering April issuance volumes, we anticipate that revenue will remain stable between the second and third quarter before declining in the fourth quarter sequentially in line with historical normal for MA. We expect our year-over-year total revenue growth to be in the high single-digit percent range with sequential quarterly increases consistent with the prior year. Turning to operating expense and excluding the impact from restructuring and asset abandonment charges, we expect expenses to ramp by about $15 million from the first quarter to the second quarter and gradually increase sequentially in the back half of the year in line with historical trends. The expected savings associated from our efficiency program will partially offset annual salary increases and variable costs as the year progresses.

Speaker Change: We anticipate that revenue will remain stable between the second and third quarter before declining in the fourth quarter sequentially in line with historical norms.

Speaker Change: For MA, we expect our year-over-year total revenue growth to be in the high single-digit percent range, with sequential quarterly increases consistent with the prior year.

Speaker Change: Turning to operating expense and excluding the impact from restructuring and asset abandonment charges, we expect expenses to rub by about $15 million from the first quarter to the second quarter and gradually increase sequentially in the back half of the year in line with historical trends. [inaudible]

Noemie Heuland: Turning to our balance sheet and capital return, we have a strong financial profile and will continue to return capital to shareholders. We are maintaining our prior share repurchase guidance of at least $1.3 billion for 2024. Capital return represents approximately 80% of our free cash flow, which is now expected to be in the range of $2.3 billion to $2.5 billion for the full year 2025. Echoing what Rob shared, we believe we are well positioned at the center of important deep currents and we are operating from a position of financial strength. And with that, I'd like to thank all our colleagues around the world for their contributions to another record quarter for Moody's. And with that operator, we'd be happy to take any questions.

Turning to our balance sheet and capital return, we have a strong financial profile and will continue to return capital to shareholders. We are maintaining our prior share repurchase guidance of at least $1.3 billion for 2024. Capital return represents approximately 80% of our free cash flow, which is now expected to be in the range of $2.3 billion to $2.5 billion for the full year 2025. Echoing what Rob shared, we believe we are well positioned at the center of important deep currents and we are operating from a position of financial strength. And with that, I'd like to thank all our colleagues around the world for their contributions to another record quarter for Moody's. And with that operator, we'd be happy to take any questions.

Speaker Change: Turning to our balance sheet and capital return, we have a strong financial profile and will continue the return capital to shareholders.

Speaker Change: Capital Return represents approximately 80% of our free cash flow, which is now expected to be in the range of $2.3 billion to $2.5 billion for the four year 2025.

Speaker Change: A going what Rob Shaird, we believe we are well positioned at the center of important deep currents and we are operating from a position of financial strengths. [inaudible]

Speaker Change: And with that, I'd like to thank all our colleagues around the world for their contributions to another record quarter of Moody's. And with that operator, we'd be happy to take any questions.

Operator: Thank you. If you would like to ask a question, please dial STAR1 on your telephone keypad. If you are on a speakerphone, please pick up your handset and make sure that your mute function is turned off so that your signal reaches our equipment. We ask that you please limit yourself to one question. The option to rejoin the queue will be unavailable. Again, that is Star One to ask a question. Our first question comes from the line of Andrew Steinerman with JP Morgan. Please go ahead.

Speaker Change: Thank you. If you would like to ask a question, please dial star one on your telephone keypad. If you are on a speaker phone, please pick up your handset and make sure that your mute function is turned off so that your signal reaches our equipment. We ask that you please limit yourself to one question. The option to rejoin the queue will be unavailable. Again, that is star one to ask a question. If you would like to ask a question, please dial star one on your phone. If you would like to ask a question, please dial star one on your phone.

Speaker Change: Our first question comes from the line of Andrew Steinerman with JP Morgan. Please go ahead.

[Analyst]: Hi everybody, this is Alex Hesson for Andrew Steinerman. Just real quick, can you walk us through your assumptions around what acquisitions were included in the prior guidance versus now? Specifically, was Cape Analytics factored into previous guidance and how much do you expect to contribute this year? Thank you.

Alex Hess: Hi everybody, this is Alex Hesson for Andrew Steinerman. Just real quick, can you walk us through your assumptions around what acquisitions were included in the prior guidance versus now? Specifically, was Cape Analytics factored into previous guidance and how much do you expect to contribute this year? Thank you.

Speaker Change: Hi, everybody. This is Alex Haas, song for Andrew Steinerman. Just real quick, can you walk us through your assumptions around what acquisitions were included in the prior guidance verses now specifically was?

Speaker Change: Cape Analytics factored into previous guidance and how much do you expect to contribute this year. Thank you. Yeah, there's no change in our MNA assumptions with respect to our M.A. revenue guidance. Thank you.

Noemie Heuland: Yeah, there's no change in our M&A assumptions with respect to our MA revenue guidance. That was already included before and it continues to be the case now.

Noémie Heuland: Yeah, there's no change in our M&A assumptions with respect to our MA revenue guidance. That was already included before and it continues to be the case now.

Speaker Change: That was already included before, and it continues to be the case now. [inaudible]

[Analyst]: Thank you.

Alex Hess: Thank you.

Thank you.

Operator: Our next question comes from the line of Ashish Sabhadra with RBC Capital Markets. Please go ahead.

Speaker Change: Our next question comes from the line of Ashish Sabadra with RBC capital markets. Please go ahead.

[Analyst]: Thanks for taking my question. Maybe just a question on the issuance guidance. I just wanted to better understand when you reduce that guidance, just given some of the uncertainty, what were the key assumptions that were made in terms of M&A volume? I believe original guidance was expecting M&A volumes to be up 50%. So what were the new assumptions and have you also made any changes in any terms of assumptions for the refinancing volume? Maybe just a follow-up there would be just how much visibility do you have for the issuance guidance for the rest of the year? Thank you.

Ashish Sabhadra: Thanks for taking my question. Maybe just a question on the issuance guidance. I just wanted to better understand when you reduce that guidance, just given some of the uncertainty, what were the key assumptions that were made in terms of M&A volume? I believe original guidance was expecting M&A volumes to be up 50%. So what were the new assumptions and have you also made any changes in any terms of assumptions for the refinancing volume? Maybe just a follow-up there would be just how much visibility do you have for the issuance guidance for the rest of the year? Thank you.

Ashish Subhadra: Act for taking my question. Maybe just a question on the issuance guidance. I just wanted to better understand when you reduce that guidance, just given some of the uncertainty, what were the key assumptions that were made in terms of M&A volume. I believe original guidance was expecting M&A volumes to be up 50% so whatever the new assumptions. And have you also made any changes in any terms of assumptions for the refinancing volume. Maybe just a follow up there would be just how much responsibility? Let's go to the next slide.

Thank you.

Rob Fauber: Thanks, Ashish. Hey, thanks for the question. So maybe just to zoom out when we're thinking about how we're thinking about issuance and the outlook, obviously tariffs have been impacting how companies are thinking about spending and investment decisions. So it's created some uncertainty, and we've seen some of that already in April in terms of just a delay in issuance. You know, spreads have widened out a bit. We've had some risk off days. You know, you might recall last year it was basically blue sky days the entire year. But as I mentioned, we're in a much more of a headline driven environment at the moment. So we have had some new issuance days, and you know, now there, you know, kind of pace and trajectory of rate cuts through the balance of the year.

Robert Fauber: Thanks, Ashish. Hey, thanks for the question. So maybe just to zoom out when we're thinking about how we're thinking about issuance and the outlook, obviously tariffs have been impacting how companies are thinking about spending and investment decisions. So it's created some uncertainty, and we've seen some of that already in April in terms of just a delay in issuance. You know, spreads have widened out a bit. We've had some risk off days. You know, you might recall last year it was basically blue sky days the entire year. But as I mentioned, we're in a much more of a headline driven environment at the moment. So we have had some new issuance days, and you know, now there, you know, kind of pace and trajectory of rate cuts through the balance of the year.

Jesus, hey, thanks for the question.

Ashish Subhadra: So maybe just to zoom out when we're thinking about. Um.

You know, how we're thinking about issuance and the outlook.

Ashish Subhadra: You know, obviously, you know, tariffs have been impacting, you know, how companies are thinking about, you know, spending an investment decision so it's created some uncertainty and.

Ashish Subhadra: and we've seen some of that already in April in terms of just a delay in issuance. Spreads have widened out a bit. We've had some risk off days. You might recall last year it was basically Blue Sky Days the entire year.

Ashish Subhadra: But as I mentioned, we're in a much more of a headline driven environment at the moment, so we have had some no issuance days.

and now there are questions about...

Ashish Subhadra: the kind of patient trajectory of rate cuts through the balance of the year. So there's just a number of things that are going in.

Rob Fauber: So there's just a number of things that are going into to create some uncertainty for issuers. In regards to M&A, we've gotten off to a more modest start. We had thought that it was going to be primarily second-half loaded, but I'd say it was more muted than we had thought. And so we've adjusted our own M&A assumptions down. I think we had 50%. We still believe there'll be growth in M&A off of a low volume, lower levels last year, you know, something like 15%. And again I think we would think that that'll be, you know, generally back-end loaded. Really no change to how we're thinking about, you know, the maturity walls. So those continue to be, I think very supportive of future issuance. Hopefully that gives you a sense.

So there's just a number of things that are going into to create some uncertainty for issuers. In regards to M&A, we've gotten off to a more modest start. We had thought that it was going to be primarily second-half loaded, but I'd say it was more muted than we had thought. And so we've adjusted our own M&A assumptions down. I think we had 50%. We still believe there'll be growth in M&A off of a low volume, lower levels last year, you know, something like 15%. And again I think we would think that that'll be, you know, generally back-end loaded. Really no change to how we're thinking about, you know, the maturity walls. So those continue to be, I think very supportive of future issuance. Hopefully that gives you a sense.

to create some uncertainty for issuers. [inaudible]

Ashish Subhadra: in regards to M&A. We've gotten off to a more modest start. We had thought that it was going to be primarily second half loaded, but I'd say it was...

Ashish Subhadra: More muted than we had thought, and so we've adjusted our own M&A assumptions down it. We had 50%, we still believe there'll be growth in M&A off of a low volume. Lower levels last year, something like 15%. [inaudible]

Ashish Subhadra: And again, I think we would think that that'll be generally back and loaded. Really no change to how we're thinking about the maturity walls, so those continue to be supportive of future issuance.

Hopefully that gives you a sense.

[Analyst]: That's very helpful, thank you. Thanks a lot.

Ashish Sabhadra: That's very helpful, thank you. Thanks a lot.

That's very helpful. Thank you. Thanks a lot.

Operator: Our next question comes from the line of George Tong with Goldman Sachs. Please go ahead.

Speaker Change: Our next question comes from the line of George Tongue with Goldman Sachs. Please go ahead.

[Analyst]: Hi. Thanks. Good morning. In your MA business you saw research and insights growth of 7%, data and information up 6%. Can you, for these two sub segments of MA, talk about how sensitive they are to banking and asset manager trends that you're seeing in the current macro environment? And what could be the catalysts for accelerated growth for these two subsegments?

George Tong: Hi. Thanks. Good morning. In your MA business you saw research and insights growth of 7%, data and information up 6%. Can you, for these two sub segments of MA, talk about how sensitive they are to banking and asset manager trends that you're seeing in the current macro environment? And what could be the catalysts for accelerated growth for these two subsegments?

Hi, thanks good morning.

Speaker Change: In your MA business, you saw research and insights growth of 7% data and information up to 6% Can you, for these two sub segments of MA, can you talk about how sensitive they are to banking and asset manager transit you're seeing in the current macro environment and what would be the catalyst for accelerated growth for these two sub segments? Yes, I am, I am, I am, I am,

Noemie Heuland: Maybe I could take that, and Rob, feel free to chime in too. But for research and insight, the growth is actually mainly coming from our CreditView product suite which includes Research Assistant, as you know, as well as credit analytics models, and economic data. We continue to expect low- to high-single-digit growth for 2025. Obviously we're keeping a close eye on CreditView renewals in our asset manager customer base because they remain under cost pressure. But we're having more conversations now with banks about growth. We're expanding the dialogue just beyond just risk and regulation. So we think that there's some interesting dialogue with banks around efficiency generated from Research Assistant and CreditView that we think will be supportive for research and insights going forward, and then for data and information.

Noémie Heuland: Maybe I could take that, and Rob, feel free to chime in too. But for research and insight, the growth is actually mainly coming from our CreditView product suite which includes Research Assistant, as you know, as well as credit analytics models, and economic data. We continue to expect low- to high-single-digit growth for 2025. Obviously we're keeping a close eye on CreditView renewals in our asset manager customer base because they remain under cost pressure. But we're having more conversations now with banks about growth. We're expanding the dialogue just beyond just risk and regulation. So we think that there's some interesting dialogue with banks around efficiency generated from Research Assistant and CreditView that we think will be supportive for research and insights going forward, and then for data and information.

Speaker Change: Yeah, maybe I can take that and Rob's for to chime into, but for research and insight, the growth is actually...

Speaker Change: Maley coming from our Credit View product suite which includes research assistant as you know as well as credit analytics models and economic data. Thank you very much.

Speaker Change: We continue to expect a low end of high single-digit growth for 2025. Obviously we're keeping a close eye on credit-view renewals in our asset manager customer base because they remain under cost pressure.

But we're having more conversations now with banks about growth.

Speaker Change: We're expanding the dialogue just beyond just risk and regulation. So we think that there's some interesting dialogue with banks around efficiency generated from research assistant and credit view that we think will be supportive for our research and insights going forward.

Noemie Heuland: We had a bit of a slower growth in Q1, as I noted in my remarks, from elevated attrition from US Government. We also had the effect of the ESG partnership that we signed last year. We talked about extensively in 2024. In terms of outlook for the remainder of the year, we expect high single-digit AR growth in that line. We've made some investments in data quality and interoperability. We also have made some investments in our corporate go-to-market, which we'll expect will influence our data and information business as well as KYC. We're very encouraged by the dialogue we're having with our corporate customers around Maxite. We expect this will be again a support for the AR growth in data information in the remainder of the year.

We had a bit of a slower growth in Q1, as I noted in my remarks, from elevated attrition from US Government. We also had the effect of the ESG partnership that we signed last year. We talked about extensively in 2024. In terms of outlook for the remainder of the year, we expect high single-digit AR growth in that line. We've made some investments in data quality and interoperability. We also have made some investments in our corporate go-to-market, which we'll expect will influence our data and information business as well as KYC. We're very encouraged by the dialogue we're having with our corporate customers around Maxite. We expect this will be again a support for the AR growth in data information in the remainder of the year.

Speaker Change: We've made some investments in data quality and interoperability. We also have made some investments in our corporate go-to-market, which we'll expect will influence our data and information business, as well as KYC.

Speaker Change: We're very encouraged by the dialogue we're having with our corporate customers around MacSites and we expect this will be again a support for the AR growth in data and information in the remainder of the year.

[Analyst]: Very helpful, thank you.

George Tong: Very helpful, thank you.

Very helpful. Thank you.

Operator: Our next question comes from the line of Russell Quelch with Redburn Atlantic. Please go ahead.

Speaker Change: Our next question comes from the line of a Russell Quelch with red-burned Atlantic. Please go ahead.

[Analyst]: Thanks for having me on. Just wanted to ask around the guidance for MIS again. Could you square the guidance for a decrease in issuance versus flat to increase revenue growth for 2025? Is there a positive mix effect here coming from somewhere?

Russell Quelch: Thanks for having me on. Just wanted to ask around the guidance for MIS again. Could you square the guidance for a decrease in issuance versus flat to increase revenue growth for 2025? Is there a positive mix effect here coming from somewhere?

Rob Fauber: Yeah. Hey Russell, you know, so I, you know, you think about kind of the building blocks to go from issuance to revenue, and we do have, you know, our annual pricing initiatives, and we always talk about that being, you know, kind of 3% to 4% on average across the firm, and that continues to be intact. There's actually a positive mix shift from what we believe will be a decrease in bank loan repricing activity as a percent of total. Just given we really have minimal economics on repricings. As I said, we do still expect a modest improvement in MA in the back half of the year, and that typically is mix positive. And then if we think about recurring revenue, we think that will be up mid single digits, and so.

Robert Fauber: Yeah. Hey Russell, you know, so I, you know, you think about kind of the building blocks to go from issuance to revenue, and we do have, you know, our annual pricing initiatives, and we always talk about that being, you know, kind of 3% to 4% on average across the firm, and that continues to be intact. There's actually a positive mix shift from what we believe will be a decrease in bank loan repricing activity as a percent of total. Just given we really have minimal economics on repricings. As I said, we do still expect a modest improvement in MA in the back half of the year, and that typically is mix positive. And then if we think about recurring revenue, we think that will be up mid single digits, and so.

Speaker Change: Yeah, hey, Russell, you know, so you know, you think about kind of the building blocks to go from issuance to...

Speaker Change: to Revenue, and we do have, you know, our annual pricing initiatives, and we always talk about that being, you know, kind of three to four percent on average across the firm, and that continues to be intact.

there's actually a positive mixed shift from...

Speaker Change: What we believe will be a decrease in bank loan repricing activity as a percent of total. Just given we really have minimal economics on repricings, as I said, we do still expect

Speaker Change: Modest improvement in M&A in the back half of the year, and that typically is...

Speaker Change: is mixed positive, and then if we think about recurring revenue, we think that'll be up mid-single digits, and so that'll also be supportive in terms of going from issuance volume to total rating revenue.

Rob Fauber: So that'll also be supportive in terms of going from issuance volume to total rating revenue.

So that'll also be supportive in terms of going from issuance volume to total rating revenue.

[Analyst]: Deepa, that's great. Thank you.

Robert Fauber: Deepa, that's great. Thank you.

Super, that's great, thank you.

Operator: Our next question comes from the line of Craig Huber with Huber Research Partners. Please go ahead.

Craig Huber: Our next question comes from the line of Craig Huber with Huber Research Partners. He's go ahead!

[Analyst]: Great, thank you. Can you just talk a little bit further about the costs? I was pretty pleased with your cost containment this last quarter. Obviously, your restructuring charges the last two quarters were higher than normal. But just talk about in a little more depth about where you're pruning the costs out here between the two different divisions. Maybe also touch on your outlook for incentive comp for the year and stuff. Just some more color, please. Thank you.

Craig Huber: Great, thank you. Can you just talk a little bit further about the costs? I was pretty pleased with your cost containment this last quarter. Obviously, your restructuring charges the last two quarters were higher than normal. But just talk about in a little more depth about where you're pruning the costs out here between the two different divisions. Maybe also touch on your outlook for incentive comp for the year and stuff. Just some more color, please. Thank you.

Craig Huber: Great, thank you. Can you just talk a little bit further about the costs? I was pretty pleased with your costs. Containment is the last quarter. Obviously your restructuring charges the last two quarters were higher than normal, but just talk about in a little more depth about where you're pruning the costs out here between the two different divisions. Maybe also touch on your outlook for incentive comp for the year and stuff. Just some more comp.

Noemie Heuland: Yeah, so we've, you pointed out we've announced an efficiency program in the fourth quarter. We're executing on that program as we planned. We've talked about the areas where we think we can generate efficiencies within our MA business this year, and also a little bit within our corporate functions, leveraging technology and automation. We are, through the integration of our acquired entities that has generated some efficiency gains in the Moody's Analytics. And just to give you a bit of color on the margin outlook for the remainder of the year, we expect to be now in the range of 49 to 50% for the full year. That's up 100 to 200 basis points. We already had some improvements in the first quarter.

Noémie Heuland: Yeah, so we've, you pointed out we've announced an efficiency program in the fourth quarter. We're executing on that program as we planned. We've talked about the areas where we think we can generate efficiencies within our MA business this year, and also a little bit within our corporate functions, leveraging technology and automation. We are, through the integration of our acquired entities that has generated some efficiency gains in the Moody's Analytics. And just to give you a bit of color on the margin outlook for the remainder of the year, we expect to be now in the range of 49 to 50% for the full year. That's up 100 to 200 basis points. We already had some improvements in the first quarter.

All are police.

Thank you. Thank you. Thank you.

Craig Huber: You pointed out we've announced a efficiency program in the fourth quarter. We're executing on that program as we planned. We've talked about the areas where we think we...

Craig Huber: can generate efficiencies within our MA business this year and also a little bit within our corporate functions, leveraging technology and automation. We are through the integration of our acquired entities that has generated some efficiency gains in the Moody's analytics. Thanks.

Craig Huber: We already had some improvements in the first quarter. That's largely due to the transactional revenue growth, a little bit of effect from the efficiency program that we have initiated, but that will materialize more meaningfully in the remainder of the year.

Noemie Heuland: That's largely due to the transactional revenue growth, a little bit of effect from the efficiency program that we have initiated, but that will materialize more meaningfully in the remainder of the year. The margin improvement we expect will mostly come from MA for the remainder of the year. We expect the MA margin to ramp sequentially into the mid-30s range by the fourth quarter. The other thing to note for the margin for modeling purposes is the level and timing of incentive comp accruals in MIS, which we've provided details on throughout last year. We're currently forecasting for funding close to target, whereas in 2024 we accrued above through the second half. So that will affect the quarterly margin comparison for the upcoming quarters.

That's largely due to the transactional revenue growth, a little bit of effect from the efficiency program that we have initiated, but that will materialize more meaningfully in the remainder of the year. The margin improvement we expect will mostly come from MA for the remainder of the year. We expect the MA margin to ramp sequentially into the mid-30s range by the fourth quarter. The other thing to note for the margin for modeling purposes is the level and timing of incentive comp accruals in MIS, which we've provided details on throughout last year. We're currently forecasting for funding close to target, whereas in 2024 we accrued above through the second half. So that will affect the quarterly margin comparison for the upcoming quarters.

Craig Huber: The other thing to note for the margin for modeling purposes is the level of timing of incentive comp accruals in MIS.

which provided details on throughout last year. [inaudible]

Noemie Heuland: To your question about incentive comp, we now expect incentive compensation to be between $400 million and $425 million for the full year 2025. In Q1 we've recorded $109 million. So we're forecasting about $100 million for each of the quarters for the remainder of the year.

To your question about incentive comp, we now expect incentive compensation to be between $400 million and $425 million for the full year 2025. In Q1 we've recorded $109 million. So we're forecasting about $100 million for each of the quarters for the remainder of the year.

Craig Huber: And to your question about Incentive Comp, we now expect in compensation to be between 400,000,000 and 425,000,000 for the 4-year 2025.

Craig Huber: In the first quarter we recorded 109 million, and so we're forecasting about 100 million for each of the quarters for the remainder of the year.

[Analyst]: Great. Thank you.

Craig Huber: Great. Thank you.

Great, thank you.

Operator: Our next question comes from the line of David Motemaden with Evercore ISI. Please go ahead.

Speaker Change: Our next question comes from the line of David Motemaden with Evercore ISI. Please go ahead.

Rob Fauber: Hey, thanks. Good morning. Just another question. Just on the MIS outlook, wondering if you could talk about some of the sensitivities. If we got more Fed rate cuts, how you think about that potentially impacting your issuance outlook as well as on the M&A side, if we had flat M&A this year versus the up 15%, how we should think about that impacting your outlook? Hey, David, thanks for the question. You know, I guess I would say the rate cuts are kind of a mixed bag. You know, you hear us talk a lot on this call about, you know, one of the fundamental drivers of issuance is economic growth. Right. This is companies that are investing.

David Motemaden: Hey, thanks. Good morning. Just another question. Just on the MIS outlook, wondering if you could talk about some of the sensitivities. If we got more Fed rate cuts, how you think about that potentially impacting your issuance outlook as well as on the M&A side, if we had flat M&A this year versus the up 15%, how we should think about that impacting your outlook?

David Modimattin: Hey, thanks. Good morning. Just another question just on the MIS outlook.

David Modimattin: More federate cuts, how do you think about that potentially impacting your issuance outlook, as well as on the M&A side if we had flat M&A this year versus the up 15% how we should think about that impacting your outlook. Thank you very much.

Robert Fauber: Hey, David, thanks for the question. You know, I guess I would say the rate cuts are kind of a mixed bag. You know, you hear us talk a lot on this call about, you know, one of the fundamental drivers of issuance is economic growth. Right. This is companies that are investing.

Hey David, thanks for the question.

David Modimattin: I guess I would say the rate cuts are kind of a mixed bag. You hear us talk a lot on this call about one of the fundamental drivers of issuance is economic growth, right? This is companies that are investing. And if we have decelerating economic growth, which is...

Rob Fauber: If we have decelerating economic growth, which is, you know, we have shaped our growth forecasts, we, you know, we've thought that tariffs are going to take about a percentage off of global GDP growth. If we've got decelerating economic growth that's leading to Fed rate cuts, again, I'd say it's kind of a mixed bag. The negative impact of decelerating fundamental growth versus the benefit of lower rates. Now that may impact things like pull forward from the maturity walls and things like that. But I would say it's, you know, it'll be mixed for M&A. I think we had talked about on the last call that, you know, kind of every 10% of M&A we thought would be about, you know, call it $35 million in rating revenue. So that gives you a sense of the sensitivity to that assumption.

If we have decelerating economic growth, which is, you know, we have shaped our growth forecasts, we, you know, we've thought that tariffs are going to take about a percentage off of global GDP growth. If we've got decelerating economic growth that's leading to Fed rate cuts, again, I'd say it's kind of a mixed bag. The negative impact of decelerating fundamental growth versus the benefit of lower rates. Now that may impact things like pull forward from the maturity walls and things like that. But I would say it's, you know, it'll be mixed for M&A. I think we had talked about on the last call that, you know, kind of every 10% of M&A we thought would be about, you know, call it $35 million in rating revenue. So that gives you a sense of the sensitivity to that assumption.

You know, we have shaved our growth forecasts.

David Modimattin: We've thought that tariffs are going to take about a percent, also global GDP growth. If we've got decelerating economic growth, that's leading to Fed rate cuts, again I'd say it's kind of a mixed bag. It's a negative impact of...

David Modimattin: of decelerating, you know, fundamental growth versus the benefit of, you know, lower rates. Now that may impact things like, you know, pull forward from, you know, the maturity walls and things like that, but I would say it's a...

David Modimattin: and in rating revenue. So that gives you a sense of the sensitivity to that assumption, but I guess what I'd say is...

Rob Fauber: I guess what I'd say is, you know, MA is one assumption among many at this point that, you know, you have to look at in terms of thinking about what's going to go on with it. Issuance.

I guess what I'd say is, you know, MA is one assumption among many at this point that, you know, you have to look at in terms of thinking about what's going to go on with it. Issuance.

David Modimattin: You know, M&A is one assumption among many at this point that you know you have to look at in terms of thinking about what's going to go on with issuance. [inaudible]

Thank you for watching. And I'll see you next time.

Operator: Our next question comes from the line of Manav Patnaik with Barclays. Please go ahead.

Speaker Change: Our next question comes from the line of Manav Patnaik with Barclays. Please go ahead.

[Analyst]: Thank you, Rob. Just on private credit, you know, just hoping maybe it's a little bit of a broader question, but obviously you said a lot of the growth showed up in structured finance. Was just curious, you know, where, which other line within your Moody's reporting segments do you think you have initiatives where you think that could pop up? And obviously that's all good news. I was hoping you just help us balance that with all the headlines in the near term, I guess, around how the banks are obviously frozen and private credit is in the headlines taking deals here and there. So just balance with some of the negatives out there too, if you could.

Manav Patnaik: Thank you, Rob. Just on private credit, you know, just hoping maybe it's a little bit of a broader question, but obviously you said a lot of the growth showed up in structured finance. Was just curious, you know, where, which other line within your Moody's reporting segments do you think you have initiatives where you think that could pop up? And obviously that's all good news. I was hoping you just help us balance that with all the headlines in the near term, I guess, around how the banks are obviously frozen and private credit is in the headlines taking deals here and there. So just balance with some of the negatives out there too, if you could.

Manav Patnaik: Thank you. Rob, just done a private credit. You know, just so hoping maybe it's a little bit of a broader question, but obviously you said a lot of the growth showed up in...

Speaker Change: Structured Finance, we're just curious, you know, where, which other lines?

Speaker Change: You know, within the Moody's reporting segments, you think you have an issue there's where? [inaudible]

Speaker Change: You think that could pop up and obviously that's all you know good news that I was hoping you just help us balance that but you know all the headlines in the near term I guess around how you know the bank the banks obviously frozen and private credit is in the headlines taking deal here this just you know balance with some of the negatives out there too if you could. [inaudible]

Rob Fauber: Yeah. All right, so let me, let me kind of work my way through that, Manav. Great, great question. So first of all, I'd say, you know, it's in times where you've got some volatility in the public markets that we've seen that private credit can step in. We've seen that with, you know, we started with, you know, post-financial crisis, but we really saw it with, with COVID. And then in 2023 when we saw some stress in the US banking system, we saw private credit again step in there as a funding source. I think you got to balance that with. There are going to be increasing issues around asset quality across the private credit portfolios. Right. These are highly leveraged, typically the direct lending or highly leveraged loans. And you know, we're seeing it in a few places, right?

Robert Fauber: Yeah. All right, so let me, let me kind of work my way through that, Manav. Great, great question. So first of all, I'd say, you know, it's in times where you've got some volatility in the public markets that we've seen that private credit can step in. We've seen that with, you know, we started with, you know, post-financial crisis, but we really saw it with, with COVID. And then in 2023 when we saw some stress in the US banking system, we saw private credit again step in there as a funding source. I think you got to balance that with. There are going to be increasing issues around asset quality across the private credit portfolios. Right. These are highly leveraged, typically the direct lending or highly leveraged loans. And you know, we're seeing it in a few places, right?

Manav Patnaik: Yeah, all right, so let me kind of work my way through that, Manav, great, great question. So first of all, I'd say, you know, it's in times where you've got some...

Manav Patnaik: Volatility in the public markets that we've seen, that private credit can step in, we've seen that with, you know, we've started with, you know

Post-Financial Crisis, but we really saw it with... [inaudible]

Manav Patnaik: with COVID and in the 2023 when we saw some stress in the US banking system, we saw private credit again.

step in there as a funding source.

Manav Patnaik: You know, I think you got to balance that with there are going to be, you know, increasing issues around asset quality across the private credit portfolios, right? These are, you know, highly leveraged, typically, you know, the direct lending or, you know, highly leveraged. [inaudible]

Loans,

Manav Patnaik: and we're seeing it in a few places. We talked about structured finance, you're seeing a lot of asset-backed finance.

Rob Fauber: We talked about structured finance, so you're seeing a lot of asset-backed finance from, you know, private credit sponsors rolling through. We also see it in fund finance that may not be issuance per se. At times we've got ratings on different alternative asset managers, fund entities, and other things. So it's not always showing up in the issuance numbers, but you see it in the first-time mandates. So you know, the growth of our FIG first-time mandates is importantly, you know, there's important contribution from private credit-related entities, and you know, within FIG. When we talk about fund finance, you know, it's everything from, you know, ratings on alternative asset managers and BDCs. But you've also got, I think of some of that as what you might call related to direct lending. Right? Those are direct lenders.

We talked about structured finance, so you're seeing a lot of asset-backed finance from, you know, private credit sponsors rolling through. We also see it in fund finance that may not be issuance per se. At times we've got ratings on different alternative asset managers, fund entities, and other things. So it's not always showing up in the issuance numbers, but you see it in the first-time mandates. So you know, the growth of our FIG first-time mandates is importantly, you know, there's important contribution from private credit-related entities, and you know, within FIG. When we talk about fund finance, you know, it's everything from, you know, ratings on alternative asset managers and BDCs. But you've also got, I think of some of that as what you might call related to direct lending. Right? Those are direct lenders.

Ab, David, David,

Manav Patnaik: from private credit sponsors rolling through. We also see it in fund finance. That may not be issuance per se at times. We've got ratings on different alternative asset managers and fund entities and other things so it's not always showing up in the issuance numbers. [inaudible]

But you see it in the first time mandates, so...

Manav Patnaik: The growth of our FIG first-time mandates is important contribution from private credit-related entities and within FIG when we talk about fund finance it's everything from ratings on alternative asset managers and BDCs

but you've also got...

Manav Patnaik: I think of some of that as what you might call related to direct lending, right? Those are direct lenders.

Rob Fauber: And then you've got true fund finance where you've got things like subscription lines, NAV loans, and rated feeders and all of that. So those are the two places where we're seeing the most of this flow through. The last thing I would say, Manav, is and I imagine most of you saw our announcement with MSCI that I mentioned in my remarks. But there's more and more investor desire to understand and have a third party view of credit risk of the investments that they're invested in through these private credit funds. And it's interesting because when we made this announcement we've gotten some very good inbound from people saying ah, you know, this is interesting, tell me more. I'm interested in understanding how I can get this independent view of credit risk. So I think you're going to see in MA through our credit scoring tools.

And then you've got true fund finance where you've got things like subscription lines, NAV loans, and rated feeders and all of that. So those are the two places where we're seeing the most of this flow through. The last thing I would say, Manav, is and I imagine most of you saw our announcement with MSCI that I mentioned in my remarks. But there's more and more investor desire to understand and have a third party view of credit risk of the investments that they're invested in through these private credit funds. And it's interesting because when we made this announcement we've gotten some very good inbound from people saying ah, you know, this is interesting, tell me more. I'm interested in understanding how I can get this independent view of credit risk. So I think you're going to see in MA through our credit scoring tools.

Manav Patnaik: And then you've got true fun finance where you've got things like subscription lines and NAV loans and rated feeders and all of that.

Speaker Change: So those are the two places where we're seeing the most of this flow through. The last thing I would say, Manav is, and I imagine most of you saw our announcement with MSCI that I mentioned in my remarks.

Speaker Change: But there's more and more investor desire to understand and have a third party view of credit risk of the investments that they're invested in through these private credit funds.

Speaker Change: and it's interesting because when we made this announcement, we've gotten some very good inbound from people saying, ah, you know, this is interesting. Tell me more, I'm interested in understanding how I can get this independent view of credit risk. So I think you're going to see NMA.

Speaker Change: through our credit scoring tools. I think you'll see that as a revenue opportunity for us as well to capitalize on private credit.

Rob Fauber: I think you'll see that as a revenue opportunity for us as well to capitalize on private credit.

I think you'll see that as a revenue opportunity for us as well to capitalize on private credit.

Operator: Our next question will come from the line of Jeff Silber with BMO Capital Markets. Please go ahead.

Speaker Change: Our next question will come from the line of Jeff Silber with BMO Capital Markets. Please go ahead.

[Analyst]: Thanks so much for taking my question. Wanted to circle back to MA. I know you slightly reduced your ARR guidance. You talked about the federal government exposure. I understand that. Beyond that, are you seeing any other kind of slowdown or uncertainty in those businesses? Because some of the metrics kind of look like they are slowing down a bit. Thanks.

Jeffrey Silber: Thanks so much for taking my question. Wanted to circle back to MA. I know you slightly reduced your ARR guidance. You talked about the federal government exposure. I understand that. Beyond that, are you seeing any other kind of slowdown or uncertainty in those businesses? Because some of the metrics kind of look like they are slowing down a bit. Thanks.

Jeff Silber: Thanks so much for taking my question. I wanted to circle back to M.A. I know you slightly reduced your A.R.R. God as you talked about the federal government exposure. I understand that but beyond that, are you seeing, you know, any other kind of slow down or uncertainty in those businesses because some of the metrics kind of look like they are slowing down a bit. Thanks.

Rob Fauber: Yeah, I'll take a crack at that. Not really. I mean we talked about the two things that primarily were impacting ARR in the quarter, and obviously that impacts our guidance for the year. And that was, as you know, noted, Federal government. Not surprising, I think to many people. We had some ESG-related attrition as customers are, you know, some customers are actually going straight to MSCI. You know, I think we, you know, kind of, you know, anticipated and understood, understood that I would say, you know, in regards to, you know, we get questions about pipeline and sales cycle, and we've had a number of questions over the years as we go into these, you know, periods of turbulence about, you know, are the sales cycles extending? And I would say say no, not at the moment, but it's early. Right.

Robert Fauber: Yeah, I'll take a crack at that. Not really. I mean we talked about the two things that primarily were impacting ARR in the quarter, and obviously that impacts our guidance for the year. And that was, as you know, noted, Federal government. Not surprising, I think to many people. We had some ESG-related attrition as customers are, you know, some customers are actually going straight to MSCI. You know, I think we, you know, kind of, you know, anticipated and understood, understood that I would say, you know, in regards to, you know, we get questions about pipeline and sales cycle, and we've had a number of questions over the years as we go into these, you know, periods of turbulence about, you know, are the sales cycles extending? And I would say say no, not at the moment, but it's early. Right.

Thank you.

Yeah, I'll I'll take a crack at that [inaudible]

Knut!

Jeff Silber: Really? I mean, we talked about the two things that primarily were impacting…

Jeff Silber: ARR in the quarter. And obviously that impacts our guidance for the year. Thank you very much.

Jeff Silber: And that was, as you know, as you noted, federal government not surprising, I think to many people we had some ESG related attrition as some customers are actually going straight to MSCI

Jeff Silber: I think we kind of anticipated and understood that. Thank you very much.

Jeff Silber: I would say in regards to, we get questions about pipeline and sales cycle and we've had a number of questions over the years as we go into these periods of turbulence about, are the sales cycles extending? I would say...

Jeff Silber: No, not at the moment, but it's early, right? And so, in 2023 when we saw stress with regional banks in the United States,

Rob Fauber: And so in 2023, when we saw stress with the regional banks in the United States, it's not so much that we saw the sales cycles extend, but we saw some of the sales cycles push farther out in the calendar year. Right. Where banks just said, hey, look, I'm not ready to make a decision yet. I need to get more certainty about the operating environment, and let's revisit some of this. So the second thing is our pipeline across MA is quite robust. It's up double digits from the same time last year. So the pipeline is good.

And so in 2023, when we saw stress with the regional banks in the United States, it's not so much that we saw the sales cycles extend, but we saw some of the sales cycles push farther out in the calendar year. Right. Where banks just said, hey, look, I'm not ready to make a decision yet. I need to get more certainty about the operating environment, and let's revisit some of this. So the second thing is our pipeline across MA is quite robust. It's up double digits from the same time last year. So the pipeline is good.

Jeff Silber: It's not so much that we saw the sales cycles extend, but we saw some of the sales cycles push...

farther out in the calendar year.

Jeff Silber: Right where where banks just said hey look. I'm not ready to make a decision yet. I need to get more certainty about you know the operating environment and and let's revisit some of this so The second thing is the pipeline is you know our pipeline across MA is quite robust You know it's up. You know double digits from the same time last year, so the pipeline is good

Rob Fauber: We're not seeing at the moment delays in sales cycles, but when we think about our guidance for the year, I think you're seeing us just acknowledge that it's a possibility we want to acknowledge in an environment of heightened uncertainty. It's possible we could see some of this push out. And we're also acknowledging these two, you know, attrition kind of themes from the first quarter.

We're not seeing at the moment delays in sales cycles, but when we think about our guidance for the year, I think you're seeing us just acknowledge that it's a possibility we want to acknowledge in an environment of heightened uncertainty. It's possible we could see some of this push out. And we're also acknowledging these two, you know, attrition kind of themes from the first quarter.

We're not seeing at the moment delays and sales cycles.

But when we think about our guidance for the year...

Jeff Silber: I think you're seeing as just acknowledged that it's a possibility. We want to acknowledge in an environment of heightened uncertainty, it's possible we could see some of this push out, and we're also acknowledging these two, you know, attrition kind of themes from the first quarter. [inaudible]

[Analyst]: I appreciate the candor. Thanks so much.

Jeffrey Silber: I appreciate the candor. Thanks so much.

I appreciate the candor. Thanks so much.

Operator: Our next question comes from the line of Alex Kramm with UBS. Please go ahead.

Speaker Change: Our next question comes from the line of Alex Kram with UBS. Please go ahead.

[Analyst]: Yes. Hey, good morning everyone.

Alex Kramm: Yes. Hey, good morning everyone.

Rob Fauber: Coming up.

Alex Cram: Yes, hey, good morning, everyone. Just coming back to MIS for a second. Thank you very much.

Coming up.

[Analyst]: Coming back to MIS for a second, I didn't fully understand the commentary you made from a seasonal pattern perspective. So maybe you can just give a little bit more detail there. What you said about the second and the third quarter. I think you said second to third is stable, but I think from a second quarter perspective, you didn't really say much in terms of what you expect following this poor April. Are you expecting May and June to get better or what exactly should we be thinking about here from a seasonal perspective? Sorry about the short term focus, but clearly a lot of influx.

Coming back to MIS for a second, I didn't fully understand the commentary you made from a seasonal pattern perspective. So maybe you can just give a little bit more detail there. What you said about the second and the third quarter. I think you said second to third is stable, but I think from a second quarter perspective, you didn't really say much in terms of what you expect following this poor April. Are you expecting May and June to get better or what exactly should we be thinking about here from a seasonal perspective? Sorry about the short term focus, but clearly a lot of influx.

Speaker Change: I didn't fully understand the commentary you made from a seasonal pattern perspective so maybe you can just...

Speaker Change: Pulling this poor April , are you expecting May and June to get better? Or what exactly should we be thinking about it from a seasonal perspective? Sorry about the short-term focus, but clearly a lot in flux.

Rob Fauber: Yeah, no, I'll start and Amy, feel free to jump in. I think the way we've thought about this, obviously we're incorporating the soft start to April obviously in our Q2 and when we kind of think about the quarters, the biggest adjustment that we made in terms of thinking about about revenues for the ratings business is in the second quarter and we don't know exactly how long some of this turbulence is going to last. I can talk a little bit about the current pipeline if people are interested, kind of what we're seeing. But I would say the biggest adjustment was to revenues was in the second quarter and then less in the third and less in the fourth.

Robert Fauber: Yeah, no, I'll start and Amy, feel free to jump in. I think the way we've thought about this, obviously we're incorporating the soft start to April obviously in our Q2 and when we kind of think about the quarters, the biggest adjustment that we made in terms of thinking about about revenues for the ratings business is in the second quarter and we don't know exactly how long some of this turbulence is going to last. I can talk a little bit about the current pipeline if people are interested, kind of what we're seeing. But I would say the biggest adjustment was to revenues was in the second quarter and then less in the third and less in the fourth.

Speaker Change: Yeah, no, I'll start, Noemie, feel free to jump in. I think the way we've thought about this, obviously we're incorporating the soft start to April , obviously in our 2Q, and when we kind of think about the quarters. Let's go to the quarters.

but I would say the biggest adjustment was...

Rob Fauber: So we're thinking ratings is going to be down somewhere in the kind of ratings revenue, down somewhere in kind of the mid single digit range in Q2, down in kind of the low single digit range in Q3, and up in the mid single digit range in Q4. That gets us to somewhere between flat to mid single digit revenue growth for the year.

So we're thinking ratings is going to be down somewhere in the kind of ratings revenue, down somewhere in kind of the mid single digit range in Q2, down in kind of the low single digit range in Q3, and up in the mid single digit range in Q4. That gets us to somewhere between flat to mid single digit revenue growth for the year.

Speaker Change: Down in kind of the low single digit range in the third quarter and up in the mid single digit range in the fourth quarter and that gets us to somewhere between flat and mid single digit revenue growth for the year. [inaudible]

[Analyst]: Helpful, thank you.

Alex Kramm: Helpful, thank you.

helpful thank you.

Operator: Our next question comes from the line of Faiza Alwy with Deutsche Bank. Please go ahead. Yes, hi.

Operator: Our next question comes from the line of Faiza Alwy with Deutsche Bank. Please go ahead.

Speaker Change: Our next question comes from the line, Faiza Alwy was Deutsche Bank. Please go ahead.

Faiza Alwy: Yes, hi.

Noemie Heuland: Thank you. I wanted to ask about MIS margins and, you know, expenses more broadly. I think Rob, you had talked about some, you know, gen related efficiencies more broadly in the business. I think you might be talking about ma. But I'm curious, you know, to the extent the environment, you know, worsens from an issuance perspective relative to how you're thinking about it at the moment, how much flexibility do you have in terms of, you know, whether it's pulling back on investments or just, you know, some of these efficiencies that are coming through.

Thank you. I wanted to ask about MIS margins and, you know, expenses more broadly. I think Rob, you had talked about some, you know, gen related efficiencies more broadly in the business. I think you might be talking about ma. But I'm curious, you know, to the extent the environment, you know, worsens from an issuance perspective relative to how you're thinking about it at the moment, how much flexibility do you have in terms of, you know, whether it's pulling back on investments or just, you know, some of these efficiencies that are coming through.

Faiza Alwi: Yes, hi, thank you. I wanted to ask about MIS margins and, you know, expenses more broadly. I think Rob, you had talked about, you know, Jenny, I related efficiencies more broadly in the business. I think you might be talking about MA, but I'm curious.

Faiza Alwi: You know, to the extent the environment, you know, worsens from an issuance perspective relative to how you're thinking about it at the moment. How much flexibility do you have in terms of, you know, whether it's pulling back on investments or just, you know, some of the little these efficiencies that are coming through. [inaudible]

Rob Fauber: Yeah, Faiza. Hey, thanks. There's two things I'd say here. First of all, you know, we've managed through all these air pockets over the years. I can't tell you how many of these calls I've been on where there's some turbulence in the markets, and you know, we get these questions about how are we thinking about being able to manage expenses. And the reality is that we've got what I'd call kind of the traditional levers that we're able to pull. So if we see cyclical declines in issuance, typically we're very effective at managing headcount and all of that kind of stuff. That's the first thing that we would look at. And that's what you would expect us to do in a declining issuance environment. Only if there's structural changes would we say, hey look, we need to fundamentally think about the resourcing of any particular.

Robert Fauber: Yeah, Faiza. Hey, thanks. There's two things I'd say here. First of all, you know, we've managed through all these air pockets over the years. I can't tell you how many of these calls I've been on where there's some turbulence in the markets, and you know, we get these questions about how are we thinking about being able to manage expenses. And the reality is that we've got what I'd call kind of the traditional levers that we're able to pull. So if we see cyclical declines in issuance, typically we're very effective at managing headcount and all of that kind of stuff. That's the first thing that we would look at. And that's what you would expect us to do in a declining issuance environment. Only if there's structural changes would we say, hey look, we need to fundamentally think about the resourcing of any particular.

Yeah, Faiza, hey, thanks.

Faiza Alwi: There's two things I'd say here. First of all, we've managed through all these air pockets over the years. I can't tell you how many of these calls have been on where there's some...

Faiza Alwi: turbulence in the markets and we get these questions about how are we thinking about being able to manage expenses and the reality is that we've got what I'd call kind of the traditional levers. Let's see what we can do.

that were able to pull, so if you see...

If we see cyclical declines...

Faiza Alwi: In issuance, typically we are, you know, very effective at managing head count and, you know, all of that kind of stuff.

Faiza Alwi: Structural changes. Would we say, hey, look, we need to fundamentally think about the resourcing of any particular, but in this case, I think we definitely think this is a cyclical issue. So there's the traditional lovers of just being able to manage hiring very effectively, which we've done over the years. And then second. Again.

Rob Fauber: But in this case I think we definitely think this is a cyclical issue. So there's the traditional levers of just being able to manage hiring very effectively, which we've done over the years, and then second, we talked about this idea of becoming increasingly volume agnostic within a range of a band of issuance while maintaining strong controls. And we've really been working at doing that by, it's not just the AI tools, those are helpful, but it's also about building modern applications for our analysts: analytical applications, rating workflow applications, those kinds of things that deliver efficiency to them so that over time we're able to actually be able to handle, handle more credits per analyst. Right, that's obviously the goal, and to be able to do that with consistent rating quality, engagement with the market, and high quality research.

But in this case I think we definitely think this is a cyclical issue. So there's the traditional levers of just being able to manage hiring very effectively, which we've done over the years, and then second, we talked about this idea of becoming increasingly volume agnostic within a range of a band of issuance while maintaining strong controls. And we've really been working at doing that by, it's not just the AI tools, those are helpful, but it's also about building modern applications for our analysts: analytical applications, rating workflow applications, those kinds of things that deliver efficiency to them so that over time we're able to actually be able to handle, handle more credits per analyst. Right, that's obviously the goal, and to be able to do that with consistent rating quality, engagement with the market, and high quality research.

Faiza Alwi: a band of issuance while maintaining strong controls, and we've really been working at doing that by-

Faiza Alwi: It's not just the AI tools, those are helpful, but it's also about

Faiza Alwi: Right, so that over time we're able to actually be able to handle more credits per analyst, right? That's obviously the goal and to be able to do that, you know, with...

Faiza Alwi: Consistent rating quality and engagement with the market and high quality.

Rob Fauber: The advent of AI gives us the opportunity to deploy more tools to the analyst. But of course we have to make sure we do that in a way that respects our regulatory environment and has the right control environment around it. So like many banks, you know, we're more deliberate in how we deploy AI in the rating agency, you know, because we need to make sure we have transparency on how we're using AI across the agency.

The advent of AI gives us the opportunity to deploy more tools to the analyst. But of course we have to make sure we do that in a way that respects our regulatory environment and has the right control environment around it. So like many banks, you know, we're more deliberate in how we deploy AI in the rating agency, you know, because we need to make sure we have transparency on how we're using AI across the agency.

High Quality Research .

the advent of AI. Bye.

Faiza Alwi: gives us the opportunity to deploy more tools to the analysts but of course we you know have to make sure we do that in a way that you know respects our regulatory environment and has the right to control environment around it. So like many banks

Faiza Alwi: You know, we're more deliberate in how we deploy AI in the rating agency, you know, because we need to make sure we have transparency on how we're using AI across the agency.

Operator: Thank you. Our next question comes from the line of Owen Lau with Oppenheimer. Please go ahead.

Thank you [inaudible]

Speaker Change: Our next question comes from the line of Owen Lau with Oppenheimer. Please go ahead!

Rob Fauber: Hi, good morning. Thank you for taking my question. So going back to your partnership with MSCI, could you please add more color on the revenue model of the independent risk assessments? What are the use cases, what are your clients are looking for, and also.

Owen Lau: Hi, good morning. Thank you for taking my question. So going back to your partnership with MSCI, could you please add more color on the revenue model of the independent risk assessments? What are the use cases, what are your clients are looking for, and also.

Hi, good morning. Thank you for taking my question.

Speaker Change: So, going back to your partnership with MSCI, could you please add more color on the revenue model of the independent risk assessments, what are the use cases, what are your clients looking for, and also how big these opportunities can become longer term. Thanks.

[Analyst]: How big this opportunity can become longer term. Thanks.

How big this opportunity can become longer term. Thanks.

Rob Fauber: Yeah, Owen, thanks for the question. We haven't disclosed kind of the revenue model or opportunity, but I think we all understand that the private credit market market is significant and growing rapidly. And what I would say is, you know, in our engagement with investors and you know, that includes, you know, everything from pension funds and long-only investors to insurance companies who are big allocators to private credit. We've heard that there's a lot of desire to have a, you know, rigorous third-party credit assessment of the investments that these entities are invested in. So if you think about, about how we're serving the private credit market, we serve the alternative asset managers and GPs and we also now have an opportunity to really serve the investors.

Robert Fauber: Yeah, Owen, thanks for the question. We haven't disclosed kind of the revenue model or opportunity, but I think we all understand that the private credit market market is significant and growing rapidly. And what I would say is, you know, in our engagement with investors and you know, that includes, you know, everything from pension funds and long-only investors to insurance companies who are big allocators to private credit. We've heard that there's a lot of desire to have a, you know, rigorous third-party credit assessment of the investments that these entities are invested in. So if you think about, about how we're serving the private credit market, we serve the alternative asset managers and GPs and we also now have an opportunity to really serve the investors.

Speaker Change: Owen, thanks for the question. We haven't disclosed the revenue model or opportunity, but I think we all understand that the private credit market...

Speaker Change: is significant and growing rapidly. And what I would say is, you know, in our engagement with

Speaker Change: Investors, and that includes everything from pension funds and long only investors to insurance companies who are big allocators to private credit.

We've heard that there's a lot of desire.

to have a rigorous third party.

Speaker Change: you know, how we're serving the private credit market. We serve the alternative asset managers and GPs, and we also are now have an opportunity to really serve.

Rob Fauber: And so what we're doing with MSCI, they have, by virtue of their current platform, they have some very rich in-depth data on private credit investments across the fund universe. And now they have the ability to leverage our models to be able to provide our EDF-X, our quantitative credit risk scores to those investors over time. I think you would imagine that as we have the opportunity to provide these scores, the customers are going to opt in, and over time you can imagine working together to build benchmarks, research, and indices and all sorts of other things that continue to provide additional transparency and insight into the private credit market. Thanks a lot.

And so what we're doing with MSCI, they have, by virtue of their current platform, they have some very rich in-depth data on private credit investments across the fund universe. And now they have the ability to leverage our models to be able to provide our EDF-X, our quantitative credit risk scores to those investors over time. I think you would imagine that as we have the opportunity to provide these scores, the customers are going to opt in, and over time you can imagine working together to build benchmarks, research, and indices and all sorts of other things that continue to provide additional transparency and insight into the private credit market.

Speaker Change: The Investors, and so, you know, what we're doing with MSCI, they have, by virtue of their current platform, they have some very rich...

in-depth data on private credit investments across

Speaker Change: You know, the fund universe, and now they have the ability to leverage our models to be able to provide, you know, our EDFX.

Credit Risk Scores to those...

Speaker Change: to those investors. Over time, I think you would imagine that...

Speaker Change: You know as we have the opportunity to provide these scores so you know the customers are going to opt in and over time you can imagine you know working together to build you know benchmarks and research and indices and all sorts of other things that continue to provide additional transparency and insight into the private credit market. Thank you.

Owen Lau: Thanks a lot.

Thanks a lot.

Operator: Our next question comes from the line of Pete Christiansen with Citi. Please go ahead.

Speaker Change: Our next question comes from the line of Pete Christiansen with City, please go ahead.

[Analyst]: Thank you. Good morning, and thanks for the question. I was just curious if we just drilled down into the assumption on first time mandates. I guess there's a lot of momentum there that's going to continue throughout the year. Just curious if you could just walk us through your confidence in that number throughout the year. Thank you.

Peter Christiansen: Thank you. Good morning, and thanks for the question. I was just curious if we just drilled down into the assumption on first time mandates. I guess there's a lot of momentum there that's going to continue throughout the year. Just curious if you could just walk us through your confidence in that number throughout the year. Thank you.

Pete Christensen: Thank you. Good morning and thanks for the question. I was just curious if we just drove that into the assumption on first-time mandates, I guess there's a lot of confidence there that's going to continue throughout the air. Just curious if you could just walk us through your confidence in that number throughout the year. Thank you.

Rob Fauber: Yep, you're right. First-time mandates have actually continued to be, you know, the momentum that we had in 2024 has continued into Q1. Q1 FTMs, first-time mandates, you know, we're almost 200; that was up 20% versus the prior-year quarter, and we saw growth in really all regions except Asia Pacific. Corporate finance was the largest source of first-time mandates. But I would also say that, you know, and I mentioned this with private credit, there's this new dynamic now where we're seeing much more first-time mandate growth coming out of our financial institutions franchise related to private credit. Credit. Right. So, these are again BDCs, asset managers, private credit funds, all of these kinds of things that are getting rated for the first time.

Robert Fauber: Yep, you're right. First-time mandates have actually continued to be, you know, the momentum that we had in 2024 has continued into Q1. Q1 FTMs, first-time mandates, you know, we're almost 200; that was up 20% versus the prior-year quarter, and we saw growth in really all regions except Asia Pacific. Corporate finance was the largest source of first-time mandates. But I would also say that, you know, and I mentioned this with private credit, there's this new dynamic now where we're seeing much more first-time mandate growth coming out of our financial institutions franchise related to private credit. Credit. Right. So, these are again BDCs, asset managers, private credit funds, all of these kinds of things that are getting rated for the first time.

First quarter, FTM's first time mandates.

Pete Christensen: We're almost 200. That was up 20% versus the prior year. Thank you very much for your time.

Pete Christensen: Quarter, and we saw growth in really all regions except Asia Pacific.

Pete Christensen: Corporate Finance was the largest source of first-time mandates but I would also say that I mentioned this with private credit. There's this new dynamic now where we're seeing much more first-time mandate growth coming out of our financial institutions franchise related to private credit. [inaudible] I would also say that I mentioned this with private credit. I would also say that I mentioned this with private credit.

Pete Christensen: Right, so these are, again, BDC, asset managers, private credit funds, all of these kinds of things that are getting rated for the first time. In fact, you know, I think something like a third of our first time mandates. [inaudible]

Rob Fauber: In fact, you know, I think something like 1/3 of our first-time mandates in FIG were serving the private credit market both in the US and to a lesser extent in EMEA. So you know, we haven't changed the guidance at this time. Obviously a lot of first-time mandates are related to leveraged finance. So that is something, you know, something to watch. But we have a bit of a tailwind, you know, in the FIG franchise.

In fact, you know, I think something like 1/3 of our first-time mandates in FIG were serving the private credit market both in the US and to a lesser extent in EMEA. So you know, we haven't changed the guidance at this time. Obviously a lot of first-time mandates are related to leveraged finance. So that is something, you know, something to watch. But we have a bit of a tailwind, you know, in the FIG franchise.

Pete Christensen: in FIG where we're serving the private credit market both in the US and to a lesser extent in Ameya.

Pete Christensen: So we haven't changed the guidance at this time, obviously. A lot of first time mandates are related to leverage fanats. So that is something to watch, but we have a bit of a tailwind in the fig franchise. Thank you guys.

[Analyst]: Thank you.

Peter Christiansen: Thank you.

Thank you [inaudible]

Operator: Our next question comes from the line of Sean Kennedy with Mizuho. Please go ahead.

Speaker Change: Our next question comes from the line of Sean Kennedy with Mizzouho. Please go ahead.

[Analyst]: Good morning. Thank you for taking my question. So it was nice to see strong growth in KYC this quarter and you.

Sean Kennedy: Good morning. Thank you for taking my question. So it was nice to see strong growth in KYC this quarter and you.

Good morning, thank you for taking my question [inaudible]

Sean Kennedy: So, it was nice to see strong growth in KYC this quarter and you touched on this on the prepared marks but I was wondering if tariffs and heightened macro uncertainties acting as a catalyst for helping penetrate the corporate market and could you also touch on the total opportunity and go to market strategy there.

Rob Fauber: Touched on this on the prepared remarks.

Touched on this on the prepared remarks.

[Analyst]: I was wondering if tariffs and heightened macro uncertainties acting as a catalyst for helping penetrate the corporate market, and could you also touch on the total opportunity and go-to-market strategy there?

I was wondering if tariffs and heightened macro uncertainties acting as a catalyst for helping penetrate the corporate market, and could you also touch on the total opportunity and go-to-market strategy there?

Rob Fauber: Yeah. Hey Sean, good to have you on the call. So it's interesting, you know, this point about, you know, your question about are tariffs actually driving some have the potential to drive some demand for our solutions around KYC, supply chain, and supplier risk. I think the answer is potentially yes because we've talked about on the call before that this massive amount of company data and then we've been enriching it with these other data sets to serve these various use cases. Right. It started with KYC. It's a very high growth scale use case for us. But we talked about this corporate platform that we've deployed, we call it Maxite, where we're not just serving KYC, but we're also now serving, for instance, supplier risk and elements of supply chain and so on.

Robert Fauber: Yeah. Hey Sean, good to have you on the call. So it's interesting, you know, this point about, you know, your question about are tariffs actually driving some have the potential to drive some demand for our solutions around KYC, supply chain, and supplier risk. I think the answer is potentially yes because we've talked about on the call before that this massive amount of company data and then we've been enriching it with these other data sets to serve these various use cases. Right. It started with KYC. It's a very high growth scale use case for us. But we talked about this corporate platform that we've deployed, we call it Maxite, where we're not just serving KYC, but we're also now serving, for instance, supplier risk and elements of supply chain and so on.

Yeah, hey Sean, good to have you on the call.

Sean Kennedy: So it's interesting, you know, this point about, you know, your question about our tariffs actually driving some, have the potential to drive some demand for, you know, our solutions around KYC and supply chain and supplier risk and I think the answer is, is potentially yes.

Sean Kennedy: because, you know, we've talked about in the call before that... [inaudible]

Sean Kennedy: These various use cases, right? It started with KYC. It's a very high growth scale use case for us.

Sean Kennedy: But, you know, we talked about this corporate platform that we've deployed, we call it an excite, where we're not just serving, you know, KYC, but we're also now serving, for instance, supplier risk and elements of supply chain, and so on.

Rob Fauber: So we launched that platform in Q1 for corporates, got something like 150 quoted opportunities in the pipeline. So there's a lot of really good dialogue with customers around these kinds of use cases. And we're seeing some early traction in that dialogue in areas like kind of logistics, healthcare, and TMT. So I think again, when we see areas where there's uncertainty, what you see is customers wanting to try to work through that uncertainty, get additional tools, get additional data insights, and I think that's part of what we're seeing. Got it.

So we launched that platform in Q1 for corporates, got something like 150 quoted opportunities in the pipeline. So there's a lot of really good dialogue with customers around these kinds of use cases. And we're seeing some early traction in that dialogue in areas like kind of logistics, healthcare, and TMT. So I think again, when we see areas where there's uncertainty, what you see is customers wanting to try to work through that uncertainty, get additional tools, get additional data insights, and I think that's part of what we're seeing.

We launched that platform in the first quarter for corporates.

Got something like...

Sean Kennedy: Use Cases, and we're seeing some early traction in that dialogue in areas like, you know, kind of logistics and health care and TNT.

Sean Kennedy: You know, I think, again, when we see areas where there's uncertainty, what you see as customers wanting to try to work through that uncertainty, get additional tools, get additional data site, and I think that's part of what we're seeing here.

Sean Kennedy: Got it.

Speaker Change: Got it. Very helpful. Very helpful. Thank you. Good luck with the rest of the year.

[Analyst]: Very helpful, thank you. Good luck with the rest of the year.

Very helpful, thank you. Good luck with the rest of the year.

Rob Fauber: Thanks.

Robert Fauber: Thanks.

Thanks.

Operator: Our next question comes from the line of Joshua Dennerlein with Bank of America. Please go ahead.

Joshua Dinnerline: Our next question comes from the line of Joshua Dinner Line with Bank of America. Please go ahead.

[Analyst]: Yeah. Hey guys. Rob, just trying to tie some of your comments today on expense management and margin versus maybe what we've seen in your history. If I look back to 2022, we saw like a fairly significant slowing in MIS revenues and margins really compressed. Is that not a good analogy to what might happen if MIS revenues slow a lot more than you expect this year?

Joshua Dennerlein: Yeah. Hey guys. Rob, just trying to tie some of your comments today on expense management and margin versus maybe what we've seen in your history. If I look back to 2022, we saw like a fairly significant slowing in MIS revenues and margins really compressed. Is that not a good analogy to what might happen if MIS revenues slow a lot more than you expect this year?

Yeah, hey guys.

Speaker Change: Rob, just try to tie some of your comments today on expense management and margin, versus maybe what we've seen in your history. If I look back to 2022, we saw like a fairly...

Joshua Dinnerline: significant slowing in misrevenues and margins really compressed. Is that not a good analogy to what might happen if misrevenues slow a lot more than expect this year?

Rob Fauber: Hey, Joshua, thanks for the question. I'll see if Noemi wants to double click on this. But I think there's a difference between 2022 and what we're, you know, where we believe we are now. In 2022, we had revenues that were down something like 30% ish off the top of my head. So, you know, 30% decline in the span of one year. You know, it's difficult to preserve a lot of that margin. So we saw the margins, you know, come down below historical levels. But I would say within a general range we have more ability. You know, obviously we have incentive comp, which flexes up and down and we have, as I said, some of these what I'd say, kind of traditional levers that allow us to, to preserve more of the operating leverage within a band is how I would think about it.

Robert Fauber: Hey, Joshua, thanks for the question. I'll see if Noemi wants to double click on this. But I think there's a difference between 2022 and what we're, you know, where we believe we are now. In 2022, we had revenues that were down something like 30% ish off the top of my head. So, you know, 30% decline in the span of one year. You know, it's difficult to preserve a lot of that margin. So we saw the margins, you know, come down below historical levels. But I would say within a general range we have more ability. You know, obviously we have incentive comp, which flexes up and down and we have, as I said, some of these what I'd say, kind of traditional levers that allow us to, to preserve more of the operating leverage within a band is how I would think about it.

Joshua Dinnerline: Joshua, thanks for the question. I'll see if Noemie wants to double-click on this, but I think there's a difference between 2022 and where we believe we are now. In 2022, we had revenues that were down, something like 30%-ish.

off the top of my head. So...

You know, 30% decline in the span of one year.

Um...

Joshua Dinnerline: You know, it's difficult to, you know, preserve a lot of that margins, so we saw all the margins.

Joshua Dinnerline: You know, come down below historical levels, but I would say within a general range we have more ability, you know obviously we have incentive comp which flexes up and down and we have as I said some of these.

Joshua Dinnerline: What I'd say, kind of traditional levers that allow us to, you know, preserve more of the operating leverage within a band, is how I think about it. Yeah, that's the key. It's within the band of issues. If you look at our guidance, we've adjusted our operating margin guidance, where I'm biased by just a notch. We're now guiding for 61 to 62 percent, which is still... We've adjusted our operating margin guidance, where I'm biased by just a notch. We've adjusted our operating margin guidance, where I'm biased by just a notch.

Noemie Heuland: Yeah, that's the key. It's within the band of issuance. If you look at our guidance, we've adjusted our operating margin guidance for MIS by just a notch. We're now guiding for 61% to 62%, which is still pretty significant year on year increase. And then that's to Rob's point, we're being cautious with discretionary spend, and we also continue to invest in our digital workflows and analytical tools. I think it's important to continue to equip our analysts with the technology that will help us be volume agnostic in the future as well. But again, we're not forecasting at this point anything like 2022 scenario.

Noémie Heuland: Yeah, that's the key. It's within the band of issuance. If you look at our guidance, we've adjusted our operating margin guidance for MIS by just a notch. We're now guiding for 61% to 62%, which is still pretty significant year on year increase. And then that's to Rob's point, we're being cautious with discretionary spend, and we also continue to invest in our digital workflows and analytical tools. I think it's important to continue to equip our analysts with the technology that will help us be volume agnostic in the future as well. But again, we're not forecasting at this point anything like 2022 scenario.

Joshua Dinnerline: But again, we're not forecasting at this point anything like 2022 scenario.

Rob Fauber: Yeah, I think just when I kind of zoom out, you kind of look at the financial profile, the margins and so on. This is still a very strong financial profile for the business.

Robert Fauber: Yeah, I think just when I kind of zoom out, you kind of look at the financial profile, the margins and so on. This is still a very strong financial profile for the business.

Joshua Dinnerline: Yeah, I think, you know, just when I kind of zoom out, you know, you kind of look at the financial profile, the margins and so on, you know, it's just still a, you know, a very strong financial profile for the business.

[Analyst]: Thanks guys.

Joshua Dennerlein: Thanks guys.

Thanks guys.

Operator: Our next question will come from the line of Jason Haas with Wells Fargo. Please go ahead.

Jason Haas: Our next question will come from the line of Jason Haas with Wells Fargo. Please go ahead.

[Analyst]: Hi, good morning. This is Jimmy on for Jason Haas. Just wanted to follow up on the KYC question earlier. Curious to what extent you consider the current MA profile as cyclical, countercyclical, and other. Are there any other specific subsegments that hold up better than others during downturns, maybe like insurance? Thank you.

Jimmy Leffew: Hi, good morning. This is Jimmy on for Jason Haas. Just wanted to follow up on the KYC question earlier. Curious to what extent you consider the current MA profile as cyclical, countercyclical, and other. Are there any other specific subsegments that hold up better than others during downturns, maybe like insurance? Thank you.

Joshua Dinnerline: Hi, good morning. This is Junyi on for Jason Haas. Just wanted to follow up on the KYC question earlier. Curious to what extent you consider the current MA profile is countercyclical and other, are there any other specific sub-segments that hold up better than others during downturns, maybe like insurance? Thank you.

Rob Fauber: Hey, thanks for the question. You know, we've talked about over the years. You know, in general, I'd say much of the MA portfolio tends to be. I don't know if I'd say countercyclical, but it tends to weather these. Acyclical may be a way to think about it. That's probably the right word, probably acyclical. You've seen 68 quarters of growth, consecutive growth through all sorts of different periods where ratings revenue has gone up and down. If you think about why is that, it's because think about the use cases that we're serving across the various businesses. So in banking you've got customers using not only our software, but our data for everything from lending, stress testing, CECL, impairment testing, and ALM. That stuff is just very, very sticky, as you'd imagine.

Robert Fauber: Hey, thanks for the question. You know, we've talked about over the years. You know, in general, I'd say much of the MA portfolio tends to be. I don't know if I'd say countercyclical, but it tends to weather these. Acyclical may be a way to think about it. That's probably the right word, probably acyclical. You've seen 68 quarters of growth, consecutive growth through all sorts of different periods where ratings revenue has gone up and down. If you think about why is that, it's because think about the use cases that we're serving across the various businesses. So in banking you've got customers using not only our software, but our data for everything from lending, stress testing, CECL, impairment testing, and ALM. That stuff is just very, very sticky, as you'd imagine.

Joshua Dinnerline: Hey, thanks for the question. You know, we've talked about over the years, you know, in general, I'd say much of the MA portfolio

Tens to be, I don't know if I'd say counter-cyclical, but it tends to weather these [inaudible]

Joshua Dinnerline: You know, different periods where ratings revenues go on up and down [inaudible]

Joshua Dinnerline: and if you think about why is that, it's because...

Joshua Dinnerline: You think about the use cases that we're serving across? What's up, boss?

Joshua Dinnerline: you know, the various, you know, businesses. So, in banking, you've got customers, you know, using our, not only our software, but our data for everything from lending to stress testing, to sea sold, to impairment, you know, impairment testing, and ALM, and that stuff is just very, very sticky. Thank you.

Rob Fauber: These are not things that you just unwire when you hit an air pocket. In fact, if anything, we'll see the usage oftentimes go up, up. Same with our research. There's more demand in these environments to access the research, access our analysts, and get our insights in these kinds of markets. Insurance, same thing. If you think about what's going on with the extreme weather events, there's nothing to do with financial markets. It's completely uncorrelated. So this need to be able to invest in these tools to, to better be able to understand and address physical risk and underwriting needs is not really in that case correlated to the market. So last thing, I'd say you asked specifically about KYC. There's another great example. What we do see are banks trying to become two things, more efficient and more effective.

These are not things that you just unwire when you hit an air pocket. In fact, if anything, we'll see the usage oftentimes go up, up. Same with our research. There's more demand in these environments to access the research, access our analysts, and get our insights in these kinds of markets. Insurance, same thing. If you think about what's going on with the extreme weather events, there's nothing to do with financial markets. It's completely uncorrelated. So this need to be able to invest in these tools to, to better be able to understand and address physical risk and underwriting needs is not really in that case correlated to the market. So last thing, I'd say you asked specifically about KYC. There's another great example. What we do see are banks trying to become two things, more efficient and more effective.

Joshua Dinnerline: as you'd imagine. These are not things that you just unwire when you hit an air pocket. In fact, if anything, we'll see the usage oftentimes go up, same with our research. There's more demand in these environments to access the research and access our analysts and get our insights in these kinds of markets.

Joshua Dinnerline: Insurance, you know, same thing, you know, if you think about what's going on with the, you know, extreme weather events there's nothing to do with financial markets. [inaudible]

Joshua Dinnerline: It's completely uncorrelated, so this need to be able to invest in these tools to better be able to understand and address physical risks and underwriting needs.

Joshua Dinnerline: What we do see our banks trying to become two things, more efficient?

Rob Fauber: So there's no question that that is going forward on. But what we don't see is banks saying, hey, KYC is somehow less important. I don't need to invest in it. This is a place that I'm going to cut. You do that and next thing you know, you have a fine or a consent order. And so, you know, I think banks have been very clear. They want to make sure they have regulatory compliance, but they also want to make sure they can get more and more efficiency. And that's why I mentioned this AI screening agent, because that is a fantastic opportunity to help banks with compliance, to be more effective, to reduce false positives, but to be much more efficient. And so I think we're expecting to see some good demand there. Very helpful.

So there's no question that that is going forward on. But what we don't see is banks saying, hey, KYC is somehow less important. I don't need to invest in it. This is a place that I'm going to cut. You do that and next thing you know, you have a fine or a consent order. And so, you know, I think banks have been very clear. They want to make sure they have regulatory compliance, but they also want to make sure they can get more and more efficiency. And that's why I mentioned this AI screening agent, because that is a fantastic opportunity to help banks with compliance, to be more effective, to reduce false positives, but to be much more efficient. And so I think we're expecting to see some good demand there.

Joshua Dinnerline: and more effective, so there's no question that that is going on.

Joshua Dinnerline: But what we don't see is a bank saying, hey, KYC is somehow less important. I don't need to invest in it. This is a place that I'm going to cut.

Joshua Dinnerline: You do that and next thing you know, you have a fine or a consent order and so you know I think banks have been very clear they want to make sure they have regulatory compliance but they also want to make sure they can get more and more efficiency and that's why I mentioned this AI screening agent. [inaudible]

Joshua Dinnerline: because that is a fantastic opportunity to help banks with compliance, to be more effective, to reduce false positives, but to be much more efficient. And so I think we're expecting to see some good demand there. Thank you for your time.

Jimmy Leffew: Very helpful.

[Analyst]: Thank you.

Thank you.

Very helpful, thank you [inaudible]

Operator: That will conclude our question and answer session. I will now turn the call back to Rob for any closing remarks.

Rob: and that will conclude our question and answer session and I will now turn the call back to Rob for any closing remarks.

Rob Fauber: Okay, well, thank you very much for the questions and we look forward to speaking with you on the next call. Have a good day, everybody.

Robert Fauber: Okay, well, thank you very much for the questions and we look forward to speaking with you on the next call. Have a good day, everybody.

Joshua Dinnerline: Okay, well thank you very much for the questions and we look forward to speaking with you on the next call. Have a good day everybody.

Shivani Kak: Thank you.

Noémie Heuland: Thank you.

Operator: This concludes Moody's Corporation Q1 2025 earnings call. As a reminder, immediately following this call, the company will post the MIS revenue breakdown under the Investor Resources section of the Moody's IR homepage. Additionally, a replay will be made available after the call on the Moody's IR website. Thank you. You may now disconnect.

Thank you.

Speaker Change: This concludes Moody's Corporation First Quarter 2025 earnings call. As a reminder, immediately following this call, the company will post the MIS revenue breakdown under the investor resources section of the Moody's IR homepage. Additionally, a replay will be made available after the call on the Moody's IR website. Thank you, you may now disconnect.

Rob Fauber: Please wait, wait.

Robert Fauber: Please wait, wait.

Noemie Heuland: The conference will begin shortly. Sam.

Noémie Heuland: The conference will begin shortly. Sam.

Please wait, the conference will begin shortly.

[Analyst]: Sa.

Alex Hess: Sa.

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