Moody's Corporation (MCO)

Moody's Corporation Q1 2025 Financial Report

Report Date: 2025-04-30
Period Covered: Q1 2025

Executive Summary

• Revenue: $1.924 billion (up 7.7% YoY)
• Net Income: $625 million (up 8.3% YoY)
• Operating Income: $846 million (up 5.6% YoY)
• Adjusted Operating Income: $994 million (up 9.7% YoY)
• EPS (Diluted): $3.46 (up 9.8% YoY)
• Total Debt: $7.52 billion (up 1.2% since Dec 2024)

Profit and Debt Analysis

• Profit Growth: Driven by revenue expansion across both segments, with Moody's Analytics up 7.5% YoY and Investors Service up 7.7% YoY. Improved cost efficiencies lifted adjusted margins.
• Debt: Modest increase reflects financing activity; all covenants comfortably met and liquidity remains robust with over $7.5 billion in cash and short-term investments.

Revenue Drivers

• Moody's Analytics: Strong ARR growth in Decision Solutions and Research Insights SaaS offerings; insurance subscription revenue up ~11%, banking up ~8%.
• Moody's Investors Service: Higher issuance volumes in corporate finance and public project finance; stable structured finance and financial institutions activity.

Pros

• Recurring revenue base with $3.266 billion in ARR.
• Healthy free cash flow ($672 million) funds dividends and buybacks.
• Market leadership in credit ratings and analytics platforms.

Cons

• Revenue sensitive to issuance cycles and macroeconomic volatility.
• Rising SGA costs from headcount growth and technology investments.
• Regulatory and geopolitical risks could affect future issuance and rating volumes.

Conclusion

Moody's delivered a solid Q1 performance, balancing top-line growth, margin expansion, and prudent debt management. Continued focus on recurring-revenue platforms and operational efficiency positions the company for stable mid-term growth.

Moody's Analytics:

• Decision Solutions: $405 M (21% of total rev.)
• Research Insights: $236 M (12%)
• Data & Information: $218 M (11%)
• Analytics Total: $859 M (45%)

Moody's Investors Service:

• Corporate Finance (CFG): $564 M (29%)
• Structured Finance (SFG): $138 M (7%)
• Financial Institutions (FIG): $191 M (10%)
• Public Project Finance (PPIF): $163 M (8%)
• Investors Service Total: $1,056 M (55%)

Geography:

• United States: $1,065 M (55%)
• EMEA: $569 M (30%)
• Asia-Pacific: $167 M (9%)
• Americas (ex-US): $123 M (6%)

Moody's is on a steady growth trajectory, driven by high-margin analytics subscriptions and resilient rating services. Key financial health indicators include 8.6% YoY ARR growth, $672 million free cash flow, and manageable debt levels at 1.2x year-end’s. Future challenges include potential downturns in issuance volumes, rising operating costs, and regulatory shifts. Opportunities lie in AI-driven risk solutions, strategic tuck-in acquisitions (e.g., Cape Analytics), and deeper penetration of subscription analytics platforms.