Moody’s at Barclays Americas Conference: Strategic Focus on Growth Amid Challenges

On Wednesday, 07 May 2025, Moody’s Corporation (NYSE:MCO) participated in the Barclays Americas Select Franchise Conference 2025, where CFO Noemi Highland shared insights into the company’s strategic focus and financial performance. While Moody’s remains optimistic about its long-term growth drivers, the company is navigating macroeconomic uncertainties, adjusting its guidance, and leveraging technological innovations such as GenAI to enhance efficiency.

Key Takeaways

• Moody’s Analytics reported 9% growth in Annual Recurring Revenue (ARR) in Q1, driven by Decision Solutions.
• Moody’s Investors Service adjusted its guidance due to macroeconomic volatility, expecting tempered issuance and M&A activity.
• The company is modernizing banking workflows and expanding into the corporate sector.
• GenAI is being integrated to improve both customer-facing products and internal efficiencies.
• Moody’s remains committed to high single-digit revenue growth for the year.

Financial Results

• Moody’s Analytics (MA):

- ARR grew by 9% in Q1, with Decision Solutions increasing by 12% to reach over $1.4 billion.

- The company reaffirmed high single-digit revenue growth for the full year, though it has slightly lowered the high end of its ARR guidance due to potential customer decision-making delays.

- Target ARR growth in the low double digits is expected from 2022 to 2027, with margin expansion aimed at the mid to high-30s from the current 30% range.

• Moody’s Investors Service (MIS):

- Reported $1.065 billion in revenue for Q1.

- Reduced expectations for issuance and M&A growth for the year, with M&A growth expectations lowered from 50% to 15%.

- Expects Q4 to show year-on-year growth compared to the previous year.

Operational Updates

• Moody’s Analytics (MA):

- Investing in modernizing operations and integrating recent acquisitions to drive margin expansion.

- Transitioning banking customers to cloud platforms to eliminate technology debt.

- The sales pipeline has grown significantly, with a 4x increase in Numerated and MA cross-sell opportunities.

• Moody’s Investors Service (MIS):

- Monitoring market uncertainties, particularly regarding high yield and speculative-grade issuers.

- Actively exploring private credit opportunities and asset-backed finance growth.

Future Outlook

• Moody’s Analytics (MA):

- Expects ARR growth to continue in the range seen in Q1, with potential for low double-digit growth driven by lending, insurance workflows, and corporate sector expansion.

- Aims to expand margins to the mid to high-30s by 2027.

• Moody’s Investors Service (MIS):

- Anticipates a strong Q4 performance.

• General:

- Plans to reinvest for growth and return capital through dividends and share repurchases.

- Focuses on infrastructure and transition finance as key growth areas.

Q&A Highlights

• Noemi Highland clarified that while the revenue growth for MA remains in the high single digits, the ARR guidance has been slightly lowered.
• The company’s pipeline has increased fourfold, particularly in Numerated and MA cross-sell opportunities.
• Moody’s exposure to the US federal government is minimal, at less than 1% of its business.
• A new partnership with MSCI for ESG represents a joint IP go-to-market approach.
• Moody’s is providing its default prediction model, EDFX, to over 14,000 companies in private credit funds to help assess credit risk.

For more detailed insights, readers are invited to refer to the full transcript below.

Full transcript - Barclays Americas Select Franchise Conference 2025:

Unidentified speaker, Analyst, Barclays: Cover business and information services with Barclays. We’re very pleased to have with us Moody’s again this year, but Noemi Highland, who’s the CFO. This is her first time, so thank you for being here. Appreciate it. And and maybe we’ll just start there, Naomi, if that’s okay.

You know, you’ve been here about a year, I think, now at Moody’s.

Noemi Highland, CFO, Moody’s: That’s

Unidentified speaker, Analyst, Barclays: right. So maybe just for for some background for some of the newer people in the audience, like, where did you come from? How’s year one gone so far?

Noemi Highland, CFO, Moody’s: Yeah. Thank you. I’m happy to be here. I’ve been at Moody’s for about a year now, April 1. I’ve spent my career for most of the time in technology prior to joining Moody’s as well as in at PwC, companies with IPOs, transactions, etcetera, across different geographies in Europe where I’m from, and then, and then in The US, in Canada.

And I was CFO for Dayforce, which is a regulated entity processing payroll for customers in Canada and The US as well. The first year has been a very interesting interesting time to join Moody’s. We sit at the intersection of a lot of deep currents, transformation of banks, you know, knowing who you’re doing business with on the vendor and customer side, unlocking the power of GenAI using our proprietary database. So

Unidentified speaker, Analyst, Barclays: a

Noemi Highland, CFO, Moody’s: lot of very exciting things in our business. We’ve I was pretty impressed with how Moody’s has evolved over the recent past. You know, I I was very familiar with the ratings business coming in. Was a day force with the issuer, so I would come to the building once a year talking to the analysts, and I was expecting coming in a very robust analytical, you know, a lot of depth in the thinking, and I I actually that that was very true, expected based on what we do. But perhaps a a pleasant surprise was the level of innovation that spans across Moody’s, not only in the ratings but also in the analytics space.

A lot of innovation around GenAI. We just had a a piece in the hardware business review about a month ago, how Moody’s has leveraged GenAI internally as well as externally with customers. So that’s something I I wasn’t expecting to the same degree. We’ve invested also in a lot of our workflow application to serve a variety of different use cases beyond the traditional research business over the recent past. So those are a lot of exciting drivers and a great culture at Moody’s.

Unidentified speaker, Analyst, Barclays: Got it. And in terms of, you know, what you’re looking forward to contributing to Moody’s, like, you know, what are some of the areas that you’re looking to further improve upon or perhaps the areas to fix as well?

Noemi Highland, CFO, Moody’s: Yeah, I think finance and my role in general is really the objectives are very much in line with the company’s objective of growing in the areas where we think we have a right to win in the again I mentioned the modernization of banking workflows, Insurance companies also are starting to digitize and modernize their workflows and their own processes leveraging technology. So what I try to do internally, not only in finance where we obviously look at our own processes, how to gain efficiencies with automation, compliance, and enhanced risks and controls, is helping, you know, internally more broadly the company to grow and becoming more efficient and leveraging the same technology that we sell to our customers. We’ve done a lot of interesting things recently within our Moody’s Analytics and Ratings division to invest in modernizing our operations to generate operating leverage, and I think that transpired into our margin numbers. So I I think there’s, again, a lot we we we continue to do here, and that’s very exciting.

Unidentified speaker, Analyst, Barclays: Got it. And and given your software background, I mean, I think, you know, the assumption is there’s a lot of of value I think you’re gonna try to contribute on the Moody’s Analytics side. Is that fair? And if so, like, what are some of the key focus areas specific to, Moody’s Analytics?

Noemi Highland, CFO, Moody’s: So for Moody’s Analytics, we, we’ve grown, in the first quarter, which is pretty indicative of of the growth of that business over the recent past. We’ve growth our annual recurring revenue, which is a forward looking metric to assess the growth of our business about nine percent, which has been pretty consistent. Within that, there’s the decision solution, which is our workflow business that’s growing at 12%. It’s now over a billion 4 in ARR. And as I said earlier, that’s where the company is really investing in different workflows, in banking, in the lending space.

We were very prominent in the back office with the compliance and regulatory aspects. Now we’re helping customers also simplify and automate the front office with lending, embedding KYC in the process as well. So as part of doing that, there’s a lot of exciting things around commercialization of those software solutions. How do we price? How do we go to market?

We’re trying to simplify a bit the approach and have a more end to end approach catered to specific customer segment. You know, we may have been known in the past for coming in with a product led approach to, sales where we would come in with a compliance product or a model for a catastrophe prediction of weather events and their impact on credit. We’re trying to get a holistic view now of the end to end solution we can provide to a specific customer and within a bank, whether it’s a large financial institutions or a smaller tier two or tier three bank, we’re evolving our go to market to serve the needs of that bank as opposed to coming in with products. That’s something I’ve seen done very successfully at places like SAP and I think we can continue to simplify and articulate our value proposition end to end as opposed to coming with a product lens. And that’s just one example of things we’ve been working on with Steve recently.

Unidentified speaker, Analyst, Barclays: Got it. And and just for the benefit of the audience, the 9% ARR that already reported, how does that compare with your long term target? And perhaps you could also give us a comparison on margins versus the target.

Noemi Highland, CFO, Moody’s: Yeah. So we’ve we’ve we’ve updated our our medium term guidance recently, which has the base year of 2022 to 2027. And our ARR growth is expected to be in that range that we just printed in the first quarter with an upside to go in the low double digit growth with lending, insurance workflows, and KYC, as well as more penetration with corporate customers. We’ve historically been very present with banks and financial institutions and insurance, now we’re expanding into the corporate sector, so that’s helping us to drive growth on the upside of that range. And then on the margin side, we’ve been so we’ve been investing to deliver on that, as I said, with some recent m and a, but also some product capabilities and enhancements as well.

And on the margin side, we’ve also increased our projection to the mid-30s now, mid to high-30s from 30% -ish where we are today. That’s a business where I think has potential to deliver obviously more than what it does today in terms of margin. We are now through integration of most of our large acquisitions that we’ve made in the recent past, so there was opportunity to start consolidating certain functions in marketing, in product engineering, in sales go to market. That’s what’s behind the efficiency plan that we we announced in q four, and that’s what’s partially going to drive margin expansion. But there’s also beyond that natural scale of the business.

If you think about our banking segment, for example, our banking customers, there’s still a pretty sizable portion of those customers who are on on premise version of our products. So as those customer gradually migrate into our platform and cloud platform, that generally, naturally generate scale and, and eliminate some technology debt. So that’s another component of the margin expansion for through 2027 and beyond that.

Unidentified speaker, Analyst, Barclays: Got it. You know, in terms of some of the impacts that companies are seeing, you know, with the environment out there today from Moody’s perspective, and maybe let’s just talk Moody’s analytics, Maybe a good way to frame it would be why you lowered kind of the MA revenue numbers for the year.

Noemi Highland, CFO, Moody’s: So the revenue number is hasn’t changed. It’s still a high single digit growth for the full year. What we’ve slightly lowered at the high end is the AR guide, which is again a forward looking metric representative of our book of business and the future recurring revenue. What we’ve acknowledged here after a very strong first quarter where we had very nice wins in KYC as well as in banking and research and insights as well is just the fact that there’s potential for our customers to take more time in making a decision about a large investment. We haven’t seen that in the first quarter, as I said, but at times of market disruptions, what we’ve historically observed and what I’ve observed in my past life as well is decision making tend to be a bit more subject to the macroeconomic headlines or some other projects taking a driver a front seat in customers’ priorities.

So we’ve we’ve shortened we’ve shaped the high end of our guide a little bit to account for that possibility. 40% of our business in general is generated in the fourth quarter, typically which is pretty typical for companies in our space, And we just wanted to acknowledge the possibility that some of that may be pushed to the next year depending on how the macro uncertainty, settles.

Unidentified speaker, Analyst, Barclays: Got it. So just to be clear, it was just you’re anticipating a potential weakness as opposed to seeing anything. And and and if that’s true, can you just also talk a little bit about your pipeline and your visibility?

Noemi Highland, CFO, Moody’s: Yeah. The pipeline’s been growing. It’s very strong. We have a pipeline that went up forex, for example, between numerated and and MA cross sell opportunities. That’s just one example.

We also have the number of meetings per sales rep, which is a metric that we track religiously has gone up significantly year over year. The average deal size interestingly is also going up. So even though there might be a little bit more times to close a specific transaction, the average deal size is going up because the the magnitude of the the effect and the ROI as well as the transformation potential for that project out of customers is much higher than it was before by looking at just a product. So that went that takes a little bit more time in terms of, you know, sales cycle. But all the metrics around our sales activity are are green, are tracking very well.

And and, again, it’s it’s a matter of are those customers going to make that decision in May, June, or July that will drive AR for this year or later in 2024, which will have a limited impact.

Unidentified speaker, Analyst, Barclays: Got it. Perhaps the one area you don’t have as much visibility is your federal contracts. Think you had mentioned a little bit. So maybe just help us, you know, what’s the exposure there? What are you hearing and what do you’ve assumed for that?

Noemi Highland, CFO, Moody’s: So our exposure to the US federal government is less than 1% of our book of business. We had modeled some attrition in our initial guidance in February to account for some of the possibility that those contracts wouldn’t be renewed. We had we experienced a little bit more attrition in the first quarter than we anticipated. Initially, that’s one of the reasons we shaped a bit the high end of our ARR guide as well. Having said that, we still have some very good business with non US federal government in The US but as well as with European government entities.

We had some very strong good wins in Europe with fraud detection, sanction screening and large transactions with public sectors, so that continues to be an area of growth, but we’ve acknowledged that some of those contracts that we had initially in our pipeline wouldn’t be renewed, and that’s what’s behind the the change in our guidance as well.

Unidentified speaker, Analyst, Barclays: And I think even last quarter, I think you’d also called out the MSCI partnership and some impact there from the ESG side. If you could just help clarify what that was.

Noemi Highland, CFO, Moody’s: Yeah. We in the second or third quarter of twenty twenty four, I think it was second quarter, we entered into a partnership with MSCI where we gave access to our customers their ESG content, and that has obviously a bit of a attrition effect on our pipeline because customers were not sourcing our ESG content any longer, but were rather going with the ESG from MSCI. That’s reflected now fully in our in our, ARR, and that’s, that’s also why we had a little bit of downtick in in the growth rates in some of our areas in in in MA this quarter. But all of that is, already factored in, and, and I think it’s, it’s the right thing to do for the customers.

Unidentified speaker, Analyst, Barclays: Fair enough. Let I guess, let’s continue with the MSCI partnership. You know, part one was ESG. Mhmm. Part two, you guys just announced was, you know, more on the private credit side.

So can you just help us with what is it exactly that Moody’s is contributing? What’s MSCI contributing?

Noemi Highland, CFO, Moody’s: Yeah. MSCI has a vast universe of private capital data. They have data over 200 2,800 private credit funds, over 14,000 companies. And so we’re providing our default prediction model, EDFX, to those private company to help investors assess the risk the credit risk associated with those those those assets. And though that’s a very interesting opportunity, you can imagine further collaboration later on with indices, benchmarks, etcetera.

So that’s a partnership to your point that started late last year and that will enhancing now with this new opportunity and there’s probably further down the road.

Unidentified speaker, Analyst, Barclays: Got it. So so the first partnership with ESG almost sounded sounded like a swap for products, but is the is this current one and future ones gonna be kind of joint IP go to market?

Noemi Highland, CFO, Moody’s: There’s gonna be those are going to be accessed through both the MSCI and Moody’s platforms. It’s gonna be brand cobranded. So, yeah, there’s that’s that’s right.

Unidentified speaker, Analyst, Barclays: Got it. And just one question. You know, we had a lot of questions on what’s the the EDFX model you mentioned. Like, you know, what is the real value with that? I I guess most equity investors don’t appreciate it.

I know some credit investors know exactly what EDFX is.

Noemi Highland, CFO, Moody’s: It’s a probability of default, model, that’s based on our proprietary algorithm and and depth and breadth of research and data. So that provides a good point in time assessment of a probability of default of a of a company or an asset.

Unidentified speaker, Analyst, Barclays: Got it. Okay. Going back to decision solutions, you know, you said that’s the fastest growth area where the most investments is. Maybe just to help, frame, what are the key solutions in that business and why is it growing so fast?

Noemi Highland, CFO, Moody’s: Yeah. So and we’re simplifying that a little bit going forward. We’ll talk a lot about more about our what we do for banks, insurance, and corporate. We’re not there yet, but right now the workflows that we provide that either get fed from our research and insights or from data that’s coming from Orbis or data that’s coming from third party sources or customer data, those workflows are embedded in what we call decision solutions, which is about a billion 4 in AR from Moody’s Analytics, growing to a point 12% in the first quarter. You have workflows for banks and we were traditionally very strong in compliance, regulatory, asset and liability management, and now we’re expanding in the front office, as I said, with the acquisition of Numerated, where we’re now trying to automate and simplify the loan processing and loan origination process, embedding KYC in there as well.

That’s one. In the insurance space, we were initially very strong in life insurance, and now we’re moving into property and casualty underwriting. So we’ve acquired a company called Predicate. We recently acquired Cape Analytics, which has data on actual properties and infrastructure, roofs, building infrastructure that helps ensure getting more granular in their pricing and underwriting of risks. So that’s again, we had some existing joint go to market and partnership initially that we now now that we integrate them in our insurance risk platform, that provides additional data sources for insurance to underwrite their risk.

And then finally in KYC, which is initially was an offering catered for banks, but we now start to see use cases for corporate. We had some very nice wins in the first quarter with corporates around, again, sanction screening or things like that. And we’re expanding those into third party risk management beyond just know your customer. If you think about vendor risk management, supplier risk management supply chain, those are areas that leverage the Orbis database and the KYC workflow that we’ve now made available through a platform for our corporate customers as well to configure their their use case, their the access to their data and their workflow based on the party and the risk they’re trying to address.

Unidentified speaker, Analyst, Barclays: Got it. So, you know, I think you mentioned earlier as well for the MA margins to go up, your your acquisitions integration is complete and it’s leveraged on the top line. So is decision solutions the key area where all that is happening basically?

Noemi Highland, CFO, Moody’s: It’s across the board. I think there’s, also, if you think about our our research and data and information, are investing to make our data more interoperable. So those are investments, but that also translates into efficiency gains and less technology debt in those areas as well. And more broadly, think if you build a you saw us do that very successfully with the insurance risk platform, and now we have the ability to embed those data elements into that platform for customers to configure their workflows based on their needs. So it’s a it’s a I would say it’s almost like an end to end MA play.

It’s not just centered around the workflows. It’s also centered around the the enablers to the those workflows, which are our research and our data estate as well.

Unidentified speaker, Analyst, Barclays: Got it. And maybe a good, way to digress into an m and a the m and a strategy. You know, I think Moody’s has done a pretty regular stream of smaller deals, midsize deals. But in terms of the pipeline, in terms of the ambitions, are there more RMSs out there? Are there bigger deals?

Like, how should we think about that?

Noemi Highland, CFO, Moody’s: So we’ve recently the recent acquisitions have been a complement to our existing capabilities. I talk about Numerated, Cape, some other smaller ones like Able AI at the beginning of the year that complements our lending offering very nicely. So we’re always looking to for companies or assets that have industry and logic. And the question is always, you know, are we building the the platform ourselves? Are we building those capabilities?

Are we building the software ourselves, or is there a company out there that’s better that we think we can acquire? And what we’ve done in the recent past is partnering with those companies to to really prove the go to market, get the customer’s reaction, and and before deciding to acquire, like, Numerated or Predicate even, for that matter. And I think you would expect us to continue to do that, in the near future.

Unidentified speaker, Analyst, Barclays: Got it. And so just just a quick follow-up on on the larger size of deals, like, that’s, I mean, that would be opportunistic, but nothing that

Noemi Highland, CFO, Moody’s: That would be opportunistic, and we have, you know, large hurdle rates as you would expect us to do, to have, to to before we make a decision to to invest.

Unidentified speaker, Analyst, Barclays: Got it. And and maybe just to round this question up, like, broader capital allocation priorities and strategies, especially, you know, with you taking over the last year, any any updates there?

Noemi Highland, CFO, Moody’s: We’ve always been reinvesting for growth. I talked about some of the areas where we’re making investments in our lending workflow, but also in our ratings business, we’re also investing to automate, and modernize some of our workflows internally within the ratings business as well. We’ve acquired, domestic rating agencies as well in Africa, in Latin America, to complement, you know, our existing, offering in in the rating space and cater to the local domestic market. So those are examples of of of investments, and we’ll continue to do that as a priority and then return capital in the form of dividends, steady growth, year over year, and then share repurchases as as well.

Unidentified speaker, Analyst, Barclays: Got it. A good time to move to the ratings business then. So let’s just start with, you know, obviously, you made a lot of changes to your guidance in the first quarter when you reported. So maybe just, help catch us up on what those changes were. Mhmm.

Noemi Highland, CFO, Moody’s: So we had a a very strong first quarter building on the momentum that we saw in the fourth quarter, especially around structured finance, investment grade. And but we also took a look at the macroeconomic volatility. The it’s a very much headline driven market right now. And we also had the insights of the first couple of weeks of April when we came to to publish our results, which had led us to to temper our expectations a bit for issuance and MIS revenue. Having said that, we still continue to see, like, in the long term upside with, you know, the maturity walls, private credit, domestic markets, transition finance, and the need to fuel investments to to to invest in in infrastructure finance, will then generate debt.

So those are things we’re looking at, like, beyond the current quarter, but you’re right in we just want to acknowledge the the fact that the high yield and spec grade, issuers are are it’s more of a question mark how and when they’re going to to come to market this year. The majority of the adjustments we’ve made is in the second quarter, a little bit in the third quarter as well. We still expect the fourth quarter to grow year on year versus Q4 last year. There’s still pent up demand for M and A. We’ve tempered that expectation down as well.

We had expectations for announced M and A growth of 50% In February, we’re taking that down to 15% gross, 15%, for announced M and A, which translates into flat rated M and A growth year on year. That’s another input to our guide, but overall just reflecting the uncertainty. And we are not accounting for a recession. We’re still expecting, U. GDP and global GDP to grow, albeit by a smaller percentage point.

And, the other thing I would say if you try to zoom out and look at, you know, the puts and takes of that, we’ve looked at years where there was a market disruption, to kinda understand the universe of outcomes. A good year was 2018 where we had a first very strong start and then a muted, second half, that year where rating revenue declined a little bit. And then we looked at 2022 where we was pretty much, hands off in in q four and and risk off period. We’re not planning for anything like that, but that’s also something we obviously look in the range of visible universe. But, again, as I said, there’s still expectation for m and a to ramp up in the back half.

And if market settles, and high yield issuance environment is more constructive, then you could see some activity picking back up in the back half of the year.

Unidentified speaker, Analyst, Barclays: Got it. Just to follow-up on the, you know, the 15% m and a announced m and a versus flat rated m and a. Can you just help appreciate the difference between those two? Because I think initially there was a view that even 15% sounded

Noemi Highland, CFO, Moody’s: the year. So announced m and a is just the by definition by the term it’s announced and what becomes rated. The difference is either the m and a transaction doesn’t happen or, we don’t rate it. That’s that’s delta.

Unidentified speaker, Analyst, Barclays: But the And is that delta just a typical spread you’ve seen historically? Is that why? Yeah. I would think so. Mhmm.

Okay. Fair enough. And then just maybe one more. Since you’ve taken over in the seat, like, how would you describe the visibility into issuance? Like, how much, you know, visibility do you really have?

Noemi Highland, CFO, Moody’s: If you think about our first quarter, we were pretty much right where we delivered on exactly what we said we would on a billion and 65,000,000 of rev on a billion 65 revenue for MIS, which is pretty remarkable given the the different inputs to the model. So we have a lot of data from different sources. We talk with, obviously, our our banking partners, different players. We have very strong dialogue with issuers as well across the different sectors. Our ratings group publishes research around macroeconomic outlook, sector insights, subsector insights as well.

We use all those inputs to inform our view of what the issuance environment’s gonna look like. There’s uncertainty, and that’s why we’ve widened the range a little bit to account for the the ranges of outcome, and we’ll continue to update that throughout the year as we see.

Unidentified speaker, Analyst, Barclays: Got it. You know, you mentioned private credit earlier, and, obviously, for the last several years, we’ve been getting, you know, a lot of questions on whether it is a threat, a competition, etcetera. So just, you know, first broad based, you know, the views, you know, a couple of years on from Moody’s perspective.

Noemi Highland, CFO, Moody’s: I think we’ve we’ve talked about it most more recently as a tailwind and a potential to bring more transparency to the private credit market participants. We’ve been traditionally in in our FIG franchise, financial institution group franchise, being, you know, present in fund financing. We’ve also developed methodology for subscription lines as well. So that’s been something we’ve been very present in, and we have also a large the largest franchise in BDC in the ratings, in the FIG asset class group. Now what we see is interesting development and growth area is around asset backed finance, you know, assets that are coming off bank’s balance sheet that require more transparency.

Investors of those assets like insurance companies, pension funds are requiring more transparency and signposts to assess, you know, the credit profile of those investments. And that’s where I think the rating agencies have a role to play and and the large private market participants acknowledge that as well.

Unidentified speaker, Analyst, Barclays: Got it. In in the quarter, you provided some stats on, you know, how much private credit is contributing to growth and so forth. So Mhmm. A, maybe you could talk about that, but also b, you know, I think over the last several years, Moody set up its own private credit team, I guess. So can you just help us does that encompass both MIS, MA, or how does that work?

Noemi Highland, CFO, Moody’s: Yeah. So we we had a the number of private credit deals in the first quarter has doubled from the first quarter of twenty twenty four. That’s just one example of of the contribution of of that that private credit into our numbers. In terms of how we approach it, at Moody’s in in we’ve set up a private credit team that spans, asset classes. So we really are having a dialogue with the players in that market, the big PE companies, to really understand their needs, the fund flows to between across the different asset class.

And to your point, we also have offerings that may not be public or private ratings per se credit ratings, but just credit scores, appreciation of the credit worthiness of the company through different types of offering within Moody’s Analytics that we can certainly offer as well that could then, pave the way for expanded relationship in the ratings when and if, that company or that instrument comes for a public rating.

Unidentified speaker, Analyst, Barclays: Got it. So it’s fair to say private credit is one of the key focus investment areas for Moody’s then?

Noemi Highland, CFO, Moody’s: It’s a it’s one of them and we have, again, a lot of dialogue, with our our market participants to really understand the flow, what the market demands and where we can play a role and where and where we don’t want to play a role as well.

Unidentified speaker, Analyst, Barclays: Got it. And and also just to clarify, think in the long term model, I think you guys typically talk about GDP plus price plus emerging and private credit would be in that emerging?

Noemi Highland, CFO, Moody’s: That’s correct. We have the growth algorithm for Moody’s rating. You have the pry the the GDP growth, which is the the the primary driver for our business in ratings. Then you have the what we call the value proposition of a Moody’s rating allows us to to get price increase of three to 4% a year. And then the remainder is emerging markets.

You mentioned private credit. We also have transition finance, domestic markets. I talked about the things we’re doing with, Moody’s Local in Latin America, for example, or, with local, domestic rating agencies in Africa and India. So that’s another contributor to growth. Infrastructure financing as well, those are examples of additional incremental to our existing revenue model.

Unidentified speaker, Analyst, Barclays: Got it. One more on MIS. I mean, I guess in terms of more longer term visibility, it’s the maturity walls. So can you just talk about what the maturity walls look like over the next several years and how you guys factor that in?

Noemi Highland, CFO, Moody’s: Yeah. We’re looking at, in the last we published our maturity wall study around the month of September, and those have increased by 11% from September 2023. If you look at speculative grade in The US, that’s even higher percentage of 27%. So there’s good that bodes well for the issuance in the subsequent years. Twenty twenty eight is obviously the largest refinancing whole year with a post pandemic paper that was issued that needs to be refinanced.

The question is how much of that will be pulled forward in previous year will depend on on the yield and the macroeconomic environment at that time. But, yes, those maturity walls are very healthy and have grown, since the last study.

Unidentified speaker, Analyst, Barclays: Got it. You know, one of the questions we get a lot in our universe, and and you guys have talked about a lot, is just the topic of GenAI. Mhmm. So maybe just first broader question, what is Moody’s approach and strategy with GenAI?

Noemi Highland, CFO, Moody’s: Yeah. So I would separate I would talk about it in two different ways. One is customer fit what we’re doing for our customers, which also builds on what we do internally, and then how we use GenAI internally to drive some efficiency and improve and enhance our control. So on the customer side, we there was a piece in the Harvard Business Review that I mentioned that I I think was very interesting about talking about the approach and how we’ve we’ve we’re kind of a front runner in in building, JNI, embedding JNI in everything we do at Moody’s, which was one of the great surprise for me coming in, a positive surprise. But for our customers, we have different we now have JNI capabilities embedded in over dozens of our product, in the form of navigators to help our customers, make the best use of our product, get more efficient in how they consume, the workflows on the data.

And then we have add add on modules that we sell on top of our existing offering like research assistant, which we released in the in the last days of 2023. We have automated credit memo. We have early warning for our banks and insurance to, you know, give a a view of the impact of specific news event on their portfolio of assets. If you have a tenant or a retailer that announces that they exit a certain location, what would that have as an impact in terms of your portfolio of leases and portfolio of assets where that particular customer might be a tenant? So those are things that can be automated and and flagged pretty quickly through our product, and that’s another example.

We have, KYC. We just sold our first, AgenTeq, KYC product in, first quarter. So if you think about KYC, that’s a very labor intensive, time consuming process for our banks, insurance, and corporate customers. There’s a lot of opportunities with GenAI and AgenTeq workflows to simplify and have customers gain efficiency from using that. So those are just examples of how we embed GenAI in our offering.

Within internally, we’ve talked about some efficiencies we were able to gain already and where the opportunity resides. You have the traditional use cases around customer support, which we’ve talked about 20% efficiency gains in that function by just using a GenAI and tools in our customer success group. Engineering, we’ve deployed Copilot GitHub across our engineering population that helps accelerate, you know, coding, quality assurance around the codes before they get released, those types of things. And then most recently, a very promising use case that is currently for sales, but I think can be expanded beyond the sales group is around the preparation for sales meeting where we have a tool that takes all the external and internal data pertaining to a particular prospect, be it their investor’s presentation, their communication, their priorities, a news feed about that particular customer, what they’ve sold in the past using our Salesforce or other tools, database, the contract universe, how they’re consuming our our product, gather all those and and determine themes and topics that may be of interest to the prospect. And coming having worked with a lot of salespeople in the past and still now, that’s part of the work is is very time consuming and that time that takes them away from being with their customers.

So that’s a good example of efficiency gain in the sales organization that I think can be replicated across, you know, various functions within Moody’s as well. The last thing I’d say is on the so that was more for Moody’s analytics. On the rating side, we are a regulated business, obviously, so we are very mindful in working with our regulators, our compliance department before we deploy GenAI enabled, capabilities to our analysts, but we’re also modernizing our workflows, the time between a issuer comes to us, to request a ratings on a particular transaction all the way to the point where that rating is published on moodys.com. There are a lot of different steps within that workflow, a lot of quality controls that we absolutely need to maintain, and some of that is being enhanced through automation, in in various forms.

Unidentified speaker, Analyst, Barclays: Got it. Maybe just one follow-up on each of those. So first from the commercial side, you know, the re the, research assistant and all the other stuff you mentioned, is that contributing to revenue growth? Can you give us any numbers to help us visualize how how it’s doing?

Noemi Highland, CFO, Moody’s: So we’ve talked about two different modernization aspects to that. First of all, for the standalone modules that we sell like research assistant, we’ve talked about how the customers with an existing CreditView license when they renew and and add to their existing, solution research assistant, how that’s contributed to growth in the first quarter, in the fourth quarter of twenty twenty four. So we said it’s about 25% of the research and insights ARR growth in the fourth quarter was coming from those existing customers of CreditView who renewed and upgraded to research assistance. So that’s just one example. It’s still a modest contribution.

I think where we see that, transpiring in our numbers as well is if you look at our retention rate, mid nineties, very strong NPS scores across the board. Having those navigator embedded as part of our offering now actually helps us maintain a high renewal rate and high retention rates, as well as allows us to price to increase our prices of subscription, embedding innovation as part of our price increase as well.

Unidentified speaker, Analyst, Barclays: And then maybe a similar question, but on all the internal use cases Mhmm. You know, I guess there’s a thesis broadly that Jenny should help costs and efficiencies and margins. Like, how should we think about how that might play out at Moody’s?

Noemi Highland, CFO, Moody’s: Yeah. We we already saw that in in the first quarter and and we that’s some of that is embedded in our guide. A lot of it’s coming from efficiency from just the operating model in MA and then later on from more broadly spans and layers and things like that, but also the scale of our existing Moody’s Analytics business moving from legacy platforms into the cloud. And, of course, the use of JN AI in back office function. We have a lot of use cases in finance, and I know Shivani, for example, in investors relation has a lot of exciting, use cases around, the use of Jain AI by pulling, you know, a lot of research summaries, in our treasury group.

We, as you can imagine, have access to a lot of data around issuance to model all the things we talked about in guidance. We leverage a lot of data. And so how do you take those large language models and GenAI capabilities to simplify and accelerate your production of your forecast? And that’s true across the board in back office function and that’s part of the drive for margin expansion.

Unidentified speaker, Analyst, Barclays: Got it. And maybe just last question, follow-up to that. On MIS itself, I mean the margin’s already pretty nice there and, you know, with volume, it goes up. But, you know, can Ginii materially change that trajectory?

Noemi Highland, CFO, Moody’s: As I said, we’re working with with our regulator. We’re very mindful about embedding Ginii capabilities within our ratings business. Our analysts have access to some of the tools to make their job easier in aggregating the data that comes from our, again, the different research pieces. But we also have invested over the past few years in automating our workflow. As you can imagine, for a company of over a hundred years old, there’s still a lot of there were still a lot of legacy technology.

Each asset group had their own, you know, methodology for spreading, analytical tools that we’re now modernizing to give them more time to be with issuers. As you can imagine, times like this, our issuer our analysts are in high demand to help issuers and and the market make sense of the macroeconomic headlines. And so we wanna give them the more time to do that as opposed to, you know, repeating and keying numbers in different types of workflows or or tools along the the different journey. So that’s an example where where we’re investing in in automation for our analysts to become what we call volume agnostic, but still within a certain band of issuance. And I think we’ve been doing that quite successfully.

Unidentified speaker, Analyst, Barclays: Very great. We’re just about out of time. So thank you so much, Naomi. Appreciate it. Thank you, everybody.

Noemi Highland, CFO, Moody’s: Thank you.

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