NEW YORK--(BUSINESS WIRE)--Moody’s Corporation (NYSE:MCO) today announced results for the second quarter of 2016 and provided its current outlook for full year 2016.

"Moody’s achieved year-on-year revenue growth in the second quarter due to the strong performance of Moody’s Analytics and the recovery in bond issuance from the weak start to the year,” said Raymond McDaniel, President and Chief Executive Officer of Moody’s. “Anticipating heightened market uncertainty outside the US, we expect full year 2016 EPS to be toward the lower end of our guidance range of $4.55 to $4.65.”

SECOND QUARTER 2016 HIGHLIGHTS

Moody’s Corporation reported revenue of $928.9 million for the three months ended June 30, 2016, up 1% from $918.1 million for the same period of 2015.

Operating expense totaled $518.7 million, up 4% from $498.8 million, and operating income was $410.2 million, down 2% from $419.3 million. Adjusted operating income (operating income before depreciation and amortization) was $441.4 million, down 1% from $447.2 million in the prior-year period. Operating margin for the second quarter of 2016 was 44.2% and adjusted operating margin was 47.5%.

EPS of $1.30 was up 2% from the second quarter of 2015.

MCO SECOND QUARTER 2016 REVENUE UP 1%

Moody’s Corporation reported global revenue of $928.9 million for the second quarter of 2016, up 1% from $918.1 million in the second quarter of 2015. The impact of foreign currency translation was negligible.

US revenue was $545.9 million, flat to the second quarter of 2015, while non-US revenue was $383.0 million, up 3% from the prior-year period. Revenue generated outside the US represented 41% of total revenue, consistent with the year-ago period.

MIS Second Quarter Revenue Down 2%

Global revenue for Moody’s Investors Service (MIS) for the second quarter of 2016 was $625.6 million, down 2% from $639.2 million in the prior-year period. The impact of foreign currency translation was negligible. US revenue was $399.0 million, down 3%, while non-US revenue was $226.6 million, flat to the prior-year period.

Global corporate finance revenue was $304.8 million, down 5% from the strong prior-year period. This result primarily reflected lower levels of US speculative grade and Asian investment grade issuance despite increased activity from the first quarter. US and non-US corporate finance revenues were down 4% and 6%, respectively.

Global structured finance revenue totaled $111.5 million, down 8% from the second quarter of 2015. Reduced US CLO and CMBS activity was only partially offset by increased European structured finance activity. US structured finance revenue was down 16%, while non-US revenue was up 14%.

Global financial institutions revenue was $89.7 million, down 1% compared to the prior-year period. US financial institutions revenue was up 7%, while non-US revenue was down 7%.

Global public, project and infrastructure finance revenue was $112.3 million, up 12% over the prior-year period primarily as a result of increased global infrastructure-related issuance. US and non-US public, project and infrastructure finance revenues were up 11% and 16%, respectively.

MA Second Quarter Revenue Up 9%

Global revenue for Moody’s Analytics (MA) for the second quarter of 2016 was $303.3 million, up 9% from $278.9 million in the second quarter of 2015. Foreign currency translation unfavorably impacted MA revenue by 1%. MA’s US revenue was $146.9 million, up 10%, and its non-US revenue was $156.4 million, up 8%.

Global revenue from research, data and analytics (RD&A) was $168.3 million, up 7% from the prior-year period mainly due to strength in sales of credit research and ratings data feeds. US and non-US RD&A revenues were each up 7%.

Global enterprise risk solutions (ERS) revenue of $97.5 million was up 17% from the second quarter of 2015 primarily due to the March 2016 acquisition of GGY as well as growth across all product lines. US and non-US ERS revenues were up 21% and 15%, respectively.

Global revenue from professional services of $37.5 million was down 2% from the prior-year period. US professional services revenue was flat to the prior-year period while non-US revenue was down 3%.

SECOND QUARTER 2016 EXPENSE UP 4%

Second quarter 2016 expense for Moody’s Corporation was $518.7 million, up 4% from the prior-year period. The increase was primarily due to higher compensation costs in MA, reflecting additional headcount to support business growth and the acquisition of GGY. Expense in MIS was down slightly compared to the prior-year period. Foreign currency translation favorably impacted expense by 2%.

Operating income was $410.2 million, down 2% from $419.3 million. Foreign currency translation favorably impacted operating income by 1%. Adjusted operating income of $441.4 million was down 1% from the prior-year period. The operating margin was 44.2%, down from 45.7%. The adjusted operating margin was 47.5%, down from 48.7%.

Moody’s effective tax rate was 31.9% for the second quarter of 2016, compared with 30.4% for the prior-year period.

FIRST HALF 2016 REVENUE DOWN 2%

For Moody’s Corporation overall, global revenue was $1.7 billion for the first half of 2016, down 2% from the prior-year period. Foreign currency translation unfavorably impacted revenue by 1%. US revenue was $1.0 billion, down 2%, while non-US revenue was $719.1 million, down 3%.

First Half MIS Revenue Down 7%

MIS revenue totaled $1.2 billion for the first half of 2016, down 7% from the prior-year period. US revenue was $735.0 million, down 6%. Non-US revenue was $415.7 million, down 9%, and represented 36% of MIS revenue, down from 37% in the first half of 2015.

First Half MA Revenue Up 10%

MA revenue totaled $594.3 million for the first half of 2016, up 10% from the prior-year period. US revenue of $290.9 million was up 11%. Non-US revenue was $303.4 million, up 8%, and represented 51% of MA revenue, down from 52% in the first half of 2015.

FIRST HALF 2016 EXPENSE UP 4%

Expense for Moody’s Corporation in the first half of 2016 was $1 billion, up 4% from the prior-year period. Foreign currency translation favorably impacted expense by 2%.

Operating income was $714.3 million, down 10% from the first half of 2015. The impact of foreign currency translation was negligible. Adjusted operating income of $775.4 million was down 8% from the prior-year period. Moody’s reported operating margin was 40.9%, down from 44.3%, and its adjusted operating margin was 44.4%, down from 47.5%.

The effective tax rate for the first half of 2016 was 32.1%, up from 31.5% in the prior-year period.

2016 CAPITAL ALLOCATION AND LIQUIDITY

$295.3 Million Returned to Shareholders in Second Quarter

During the second quarter of 2016, Moody’s repurchased 2.3 million shares at a total cost of $223.8 million, or an average cost of $96.60 per share, and issued 0.2 million shares as part of its employee stock-based compensation plans. Additionally, Moody’s returned $71.5 million to its shareholders via dividend payments during the second quarter of 2016.

Over the first half of 2016, Moody’s repurchased 5.2 million shares at a total cost of $485.9 million, or an average cost of $92.83 per share, and returned $143.6 million to its shareholders via dividend payments.

Outstanding shares as of June 30, 2016 totaled 192.3 million, down 4% from June 30, 2015. As of June 30, 2016, Moody’s had $1.0 billion of share repurchase authority remaining.

At quarter-end, Moody’s had $3.4 billion of outstanding debt and $1.0 billion of additional debt capacity available under its revolving credit facility. Total cash, cash equivalents and short-term investments at quarter-end were $2.0 billion, down $20.7 million from June 30, 2015. Free cash flow in the first six months of 2016 was $474.5 million, down 14% from the first six months of 2015, primarily due to lower net income.

ASSUMPTIONS AND OUTLOOK FOR FULL YEAR 2016

Moody’s outlook for 2016 is based on assumptions about many geopolitical conditions and macroeconomic and capital market factors, including interest rates, foreign currency exchange rates, corporate profitability and business investment spending, mergers and acquisitions, consumer borrowing and securitization, and the amount of debt issued. These assumptions are subject to uncertainty, and results for the year could differ materially from our current outlook. Our guidance assumes foreign currency translation at end-of-quarter exchange rates. Specifically, our forecast reflects exchange rates for the British pound (£) of $1.34 to £1 and for the euro (€) of $1.11 to €1.

MCO Full Year 2016 Outlook

Moody’s full year 2016 revenue is still expected to increase in the low-single-digit percent range.

Operating expense is still expected to increase in the mid-single-digit percent range.

Moody’s still projects an operating margin of approximately 41% and an adjusted operating margin of approximately 45%. The effective tax rate is still expected to be 32% to 32.5%.

The Company is reaffirming its full year 2016 EPS guidance of $4.55 to $4.65 and expects to be toward the lower end of the range.

Free cash flow is still expected to be approximately $1 billion. Moody’s still expects share repurchases to be approximately $1 billion, subject to available cash, market conditions and other ongoing capital allocation decisions. Capital expenditures are still expected to be approximately $125 million. Depreciation and amortization expense is still expected to be approximately $130 million.

MIS Full Year 2016 Outlook

For MIS, Moody’s now expects 2016 revenue to decrease in the low-single-digit percent range. US revenue is still expected to decrease in the low-single-digit percent range, while non-US revenue is now also expected to decrease in the low-single-digit percent range.

Corporate finance revenue is still expected to decrease in the low-single-digit percent range.

Structured finance revenue is now expected to decrease in the high-single-digit percent range reflecting a reduced outlook for non-US securitization activity for the remainder of the year.

Financial institutions revenue and public, project and infrastructure finance revenue are each still expected to increase in the mid-single-digit percent range.

MA Full Year 2016 Outlook

For MA, 2016 revenue is now expected to increase in the mid-single-digit percent range primarily due to the unfavorable impact of foreign currency translation. US revenue is still expected to increase in the low-double-digit percent range, while non-US revenue is now expected to increase in the low-single-digit percent range.

Research, data and analytics revenue and enterprise risk solutions revenue are each still expected to increase in the high-single-digit percent range.

Professional services revenue is still expected to decrease in the low-single-digit percent range.

ABOUT MOODY'S CORPORATION

Moody's is an essential component of the global capital markets, providing credit ratings, research, tools and analysis that contribute to transparent and integrated financial markets. Moody’s Corporation (NYSE: MCO) is the parent company of Moody's Investors Service, which provides credit ratings and research covering debt instruments and securities, and Moody's Analytics, which offers leading-edge software, advisory services and research for credit and economic analysis and financial risk management. The corporation, which reported revenue of $3.5 billion in 2015, employs approximately 10,800 people worldwide and maintains a presence in 36 countries. Further information is available at www.moodys.com.