MCO - Moody's Corporation (MCO) Q4 2023 Earnings Call Transcript

2024-02-13 15:20:26 ET

Moody's Corporation (MCO)

Q4 2023 Results Conference Call

February 13, 2024 11:30 AM ET

Company Participants

Shivani Kak - Head of Investor Relations

Rob Fauber - President and Chief Executive Officer

Steve Talinko - President of Moody's Analytics

Mike West - President of Moody's Investor Service

Caroline Sullivan - Interim-CFO

Conference Call Participants

George Tong - Goldman Sachs

Toni Kaplan - Morgan Stanley

Manav Patnaik - Barclays

Faiza Alwy - Deutsche Bank

Ashish Sabadra - RBC Capital Markets

Alex Kramm - UBS

Jeff Silber - BMO Capital Markets

Craig Huber - Huber Research Partners

Owen Lau - Oppenheimer

Scott Wurtzel - Wolfe Research

Shlomo Rosenbaum - Stifel

Seth Weber - Wells Fargo

Steven Pawlak - Baird

Heather Balsky - Bank of America

Craig Huber - Huber Research Partners

Presentation

Operator

Good day, everyone. And welcome to the Moody's Corporation Fourth Quarter and Full Year 2023 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 question and answers following the presentation. I will now turn the call over to Shivani Kak, Head of Investor Relations. Please go ahead.

Shivani Kak

Thank you. And 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 the fourth quarter and full year of 2023, as well as our outlook for full year 2024. The earnings press release and a presentation to accompany this teleconference are both available on our Web site at ir.moodys.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 a reconciliation 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. In accordance with the act, I also direct your attention to the Management's Discussion & Analysis section and the risk factors discussed in our annual report on Form 10-K for the year ended December 31, 2022, and in other SEC filings made by the company, which are available on our Web site and on the SEC's Web site. These, together with the safe harbor statements, 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 a listen-only mode. I will now turn the call over to Rob.

Rob Fauber

Thanks, Shivani. Good morning. And thanks to everybody for joining today's call. We're here from a snowy New York City. I'm going to start with some highlights from 2023 and then discuss our expectations for 2024. And after my prepared remarks, Steve Talinko, who is the President of Moody's Analytics; and Mike West, the President of Moody's Investor Service, will be joining me along with Caroline Sullivan, our Interim CFO for the Q&A portion of the call. And before we get into it, I have some very exciting news. As you may have seen this morning, we announced the appointment of Noemie Heuland as our new Chief Financial Officer, and she's reporting directly to me. And Noemie brings a wealth of knowledge to Moody's after nearly 25 years in senior roles at global public companies, including most recently as CFO of Dayforce, formerly Ceridian, and over a decade with global enterprise application software provider SAP, during which it transitioned to a global software as a service business model. So as CFO, she's going to lead the global finance organization that includes accounting and controllership, financial planning and analysis, financial systems, Investor Relations, strategic sourcing and procurement and tax and treasury. And her firsthand experience in scaling high growth category leading public software companies, along with her extensive global experience, I think, really make her the ideal CFO for Moody's as we invest in and grow our subscription-based analytics businesses and continue to expand our ratings business around the world. So it's an exciting time for Moody's and I look forward to Noemie jumping in beginning April 1st, and of course she's going to be a regular fixture on this call going forward.

Before we get into the results, I also want to thank Caroline Sullivan, who is here with me for her immense contributions and support over the last few months as Moody's Interim-CFO and Caroline will remain as our Chief Accounting Officer and Corporate Controller. So with that, moving on to our results. 2023 really was a defining year for us here at Moody's. We delivered 8% revenue growth, we grew adjusted diluted EPS by 16% and we were an early mover in GenAI adoption and innovation launching our first ever GenAI enabled product in December. And I have to say that the energy and excitement across the organization really was palpable throughout the year as we launched new products, we entered into strategic partnerships with some of the world's leading tech companies and we increased the gap in our Chartis RiskTech100 number one ranking. And as we grew, we also increased our margin by over 100 basis points for the year, all while investing across the firm in technology, in products and in people. And amidst what was a pretty challenging operating environment for our financial services customers, MA delivered ARR growth of 10% with retention rates in the mid-90s. And looking at the three reporting lines of business in MA, that's decision solutions, data and information, and research and insights, we delivered ARR growth of 11%, 10% and 7% respectively. And as we have upped the pace of product development to meet the strong market demand, for tools to better manage risk and to digitize and transform workflows for 2024, we expect MA revenue to grow at approximately 10% with ARR growth in the low double digit percent range....

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