Moody's Corporation's CEO Discusses Q4 2011 Results - Earnings Call Transcript
Moody’s Corporation (
)
Q4 2011 Earnings Call
February 8, 2012 11:30 AM ET
Executives
Salli Schwartz – Global Head, IR
Ray McDaniel – Chairman and CEO
Linda Huber – SVP and CFO
Mark Almeida – President, Moody's Analytics
Analysts
Peter Appert – Piper Jaffray
William Bird – Lazard Capital
Michael Meltz – JPMorgan
Douglas Arthur – Evercore
Craig Huber – Huber Research Partners
Edward Atorino – Benchmark
Presentation
Operator
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Good day, ladies and gentlemen, and welcome to Moody’s Corporation Fourth Quarter and Fiscal Year End 2011 Earnings Conference Call. At this time, I’d 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 for questions and answers following the presentation. I would now like to turn the conference over to Salli Schwartz, Global Head of Investor Relations. Please go ahead.
Salli Schwartz
Thank you. Good morning, everyone, and thanks for joining us on this teleconference to discuss Moody’s results for 2011. I am Salli Schwartz, Global Head of Investor Relations.
Moody’s released its results for the fourth quarter and full year of 2011 this morning. The earnings press release and a presentation to accompany this teleconference are both available on our Web site at ir.moodys.com. Ray McDaniel, Chairman and Chief Executive Officer of Moody’s Corporation, will lead this morning’s conference call. Also making prepared remarks on the call this morning is Linda Huber, Chief Financial Officer of Moody’s Corporation.
Before we begin, I call your attention to the Safe Harbor language, which can be found toward 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 and analysis section and the risk factors discussed in our annual report on Form 10-K for the year ended December 31, 2010 and in other SEC filings made by the company which are available on our Web site and on the Securities and Exchange Commission’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’ll now turn the call over to Ray McDaniel.
Ray McDaniel
Thank you, Salli. Good morning and thank you, everyone, for joining today’s call. I’ll begin by summarizing Moody’s fourth quarter and full year 2011 results. Linda will follow with additional financial detail and operating highlights and I’ll then speak to recent regulatory developments and finish with comments on our outlook for 2012. After our prepared remarks, we’ll be happy to respond to your questions.
Fourth quarter revenue of $567 million was flat as compared to the fourth quarter of 2010. With strong performance by Moody’s Analytics and global structured finance offsetting a decline from the strong prior year period in corporate finance. Operating income for the fourth quarter was $172 million, a 12% decrease from the prior year period. Diluted earnings per share for the quarter of $0.43 decreased 26% year-over-year.
For full year 2011, Moody’s revenue of $2.3 billion was a 12% increase from full year 2010. Foreign currency translation favorably impacted Moody’s Investors Service revenue by $28 million and was negligible for Moody’s Analytics. Operating income of $888 million increased 15% from a year ago and included a $4 million favorable impact from foreign currency translations.
Revenue at Moody’s Investors Service was $1.6 billion, an increase of 12% from last year. Moody’s Analytics revenue was $712 million, 14% higher than the prior year. Diluted earnings per share of $2.49 for 2011 increased 16% and included a legacy tax benefit of $0.03 in the second quarter of 2011 as well as other tax benefits of $0.09 in the second and third quarters of 2011 resulting from a favorable tax ruling in a settlement of state tax audits.
I will now turn the call over to Linda to provide further commentary on our results and other updates.
Linda Huber
Thanks, Ray. I’ll begin with revenue at the company level. As Ray mentioned, Moody’s total revenue for the quarter was essentially flat at $567 million. The impact of foreign currency translation was negligible. U.S. fourth quarter revenue decreased 3% to $286 million, while revenue outside the U.S. grew 4% to $281 million and represented 50% of Moody’s total revenue, up from 48% in the year ago period. Recurring revenue of $318 million represented 56% of the total, compared to 52% in the prior year period.
And looking now at each of our businesses, Moody’s Investors Service revenue for the quarter was $367 million, a 4% decrease year-over-year. U.S. revenue decreased 9% over the prior year period, while outside the U.S. revenue increased 2% and represented 44% of total ratings revenue.
Global corporate finance revenue in the fourth quarter decreased 14% from the year ago period to $141 million. Revenue was down 13% in the U.S. while outside the U.S. revenue was lower by 16% year-over-year. The decline in global corporate finance revenue reflected weaker issuance, primarily in speculative grade bonds and loans in both the U.S. and Europe.
Global structured finance revenue for the fourth quarter was $87 million, 14% above the prior year period. In the U.S., revenue increased 13% year-over-year primarily due to strength in asset-backed securities. Most other areas of U.S. structured finance market remained weak. Non-U.S. structured finance revenue rose 15%, driven primarily by European asset-backed and residential mortgage backed securities, as well as covered bonds in Europe and Asia.
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