Good day, everyone and welcome to the Moody's Corporation Third Quarter 2024 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 questions and answers following the presentation. I will now turn the call over to Shivani Kak, Head of Investor Relations. Please go ahead.

Thank you. 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 third quarter 2024 as well as our revised outlook for select metrics for full year 2024. The earnings press release and the presentation to accompany this teleconference are both available on our website 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 reconciliations between all adjusted measures referenced during this call in U.S. 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 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, 2023, and in other SEC filings made by the company, which are available on our website and on the SEC's website. These, together with the Safe Harbor statement, 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 Rob.

Thanks Shivani. Good morning or good afternoon. Thanks everybody for joining today's call. I'm really looking forward to discussing our third quarter results with you. And we again delivered some impressive results with a 23% increase in revenue and adjusted operating margin of approximately 48% and 32% growth in adjusted diluted EPS. And one of the key drivers of these great results was our rating business with a remarkable 41% increase in revenue versus the prior year period. September was a particularly strong month for issuance. It included a new record for weekly investment-grade activity with over $85 billion issued across 61 deals in the first week of September. Strength in first time and infrequent issuers drove transactional revenue up 70% for the quarter, and that outpaced global rated issuance growth of 51%. And this growth, combined with ongoing cost discipline, delivered over 600 basis points in adjusted operating margin expansion compared to last year. So, this year has obviously been a very strong issuance environment. In fact, it's likely to be the second strongest on record. And amidst that strength, we see both cyclical and secular tailwinds that are going to drive future growth. And that includes refunding walls, M&A, and other market trends that give us confidence in the medium-term outlook for our Ratings business. In MA, we delivered 7% overall revenue growth and 9% growth for both ARR and recurring revenue, both of which exclude one-time revenue that we're intentionally deemphasizing. Year-to-date customer retention is at 93%, and our adjusted operating margin for the quarter was in line with our expectations at 30.3%. Now, our Decision Solutions line of business and that is banking, insurance, and KYC, that continues to lead MA with almost $1.4 billion of ARR, and that's growing at 12%. And last month, we…

Thank you. [Operator Instructions] Our first question comes from Toni Kaplan with Morgan Stanley. Please go ahead.

Thanks so much. I wanted to pick up on the data and information, ARR slowdown from last quarter. I think, Noémie, you mentioned the government contracts renewing at a lower value. Was this reduction in number of products that were being purchased, or was it pricing or something else? And maybe just what percentage of revenues related to government? Was this federal government? And are there any more renewals with government coming up? Thanks. Noémie Heuland: Yes, thanks. We -- actually, this is something we've kind of signaled in the last earnings call, where we had some large federal government contracts up for renewal in the second half of the year. So what you saw here in decision -- in data and information, we had a lower renewal with one of our large federal government contract, that's associated pretty much their spending patterns. As you know, we're in election year. So they are looking at their overall contract space, and we expect to see some renewals being a little bit more challenged this year, but we've accounted for those in the third quarter, and we don't expect any largest one affecting the remainder of the year. In addition to that, in data and information, the thing that affected a bit the ARR growth this quarter is the transition of some of our customers into the MSCI. And we also signaled that earlier in July when we were on this call. Some of our customers are transitioning and sourcing their sustainability content directly from MSCI. So that's affected a bit the pipeline and the existing renewals of those customers as well.

Thank you.

Your next question comes from the line of Ashish Sabadra from RBC Capital Markets. Your line is open.

Thanks for taking my question. Rob, thanks for flagging both the near and midterm secular and cyclical tailwinds for issuance. But it was also – as you mentioned, the second strongest issuance here. So what we want to understand is can these near-term issuance tailwind help offset the headwinds from tougher comps and the pull forward as well as the revenue tailwinds from the infrequent issuers? Or do we need to normalize before we can start to grow off those levels? Thanks.

Ashish, are we talking about 4Q? Are you talking -- are you starting to look towards 2025?

More 2025. Thanks.

All right. So maybe what I'll do here, Ashish, is just kind of tackle early – very early – too early thoughts on 2025 and maybe what some of the headwinds and tailwinds might be. And I guess, I have to do the health warning of we're not introducing guidance for fiscal 2025 yet. We'll do that on the next earnings call. So I'll just talk about what we know now. Certainly, we don't know exactly how the year is going to finish up. But I would say that I think the balance of tailwinds to headwinds for issuance for next year, is probably in favor of the tailwinds. So we all know that this has been a huge issuance here. Yes, there been some pull forward. I imagine we'll talk about that later on the call. This is probably – you heard me say probably going to be the second biggest year for issuance on record. So it does create some tough comps for sure. And how the year-end finishes up, it definitely factors into that. But I would say that we've got some very constructive issuance conditions. Absent, of course, exogenous events that can create uncertainty and volatility, but that should support issuance. So, let's tick through what those are. First, the spec-grade default rate has actually been declining, and we expect that to decline further into next year. That means that spreads should remain tight. They are very, very tight right now. Spreads are near their all-time lows. The expectation of lower interest rates and combine that with tight spreads, that's going to give a very, I think, favorable environment for new issuance and also for some refi. Then we've got the refunding walls that I talked about, the nearly $5 trillion over the next four years,…

That’s great color. Thanks Rob.

Your next question comes from the line of Scott Wurtzel from Wolfe Research. Your line is open.

Hey good morning. Thanks for taking my questions. Wanted to stick on the topic of the issuance here. And Rob, maybe wondering if you can share just where we are with debt velocity right now? Obviously, I know it's a strong quarter for issuance, but just on the balance of things, where we are with debt velocity and how you're thinking about that? Thanks.

Yes. So, obviously, debt velocity has generally been improving just given the strength of the issuance environment. And -- so it's interesting, if you actually go back and look at -- kind of take a historical look at issuance. So, this year, we're going to be probably just under $6 trillion. And if you go back to, say, 2012, -- and I know a CAGR is not a perfect thing to do in this situation. But you'd have a CAGR of something like 3.5% in terms of the growth of issuance from 2012. I understand it's not linear, but growing a little bit more than GDP growth. But if you look at the stock, the total stock of nonfinancial corporate debt outstanding, that's grown by something more like 7% over that period of time. So it's interesting. The debt -- that means, therefore, that debt velocity has been below kind of the historical averages just because there's so much more debt outstanding. And so we've gotten close to that, closer to that historical average, we look at that as about 14%. We look at nonfinancial corporate debt. Other people look at it different ways. We're still underneath that probably something like 12% for fiscal '24. But I think that indicates just where we are with debt velocity is still below historical averages. To me actually indicates that, that's actually a tailwind when you think about the potential for issuance growth in the future.

Great, very helpful. Thank you.

Your next question comes from the line of Andrew Nicholas from William Blair. Your line is open.

Hi, good morning. I wanted to ask a question on research and insight. I think last quarter, you talked about your expectation that ARR growth would accelerate in the back half of the year. I think you cited the research assistant tool and in some of the release some private credit-oriented products supporting that. It doesn't look like we saw that in the third quarter. Just wondering if there's anything else to unpack in that line particularly and maybe that's an excuse to ask about the broader monetization of Gen AI related tools so far this year. Thank you. Noémie Heuland: Yes, I'm happy to take that. So research and insight for the third quarter grew 6% ARR, which is aligned with the first half. It's also a little lower than the 9% we saw prior to the attrition events that we've talked about in the previous calls. So there continues to be a bit of pressure induced by the stress in the broader banking sector. But as you said, we're investing in research assistant. We have a strong pipeline and research system as we are entering the largest quarter of the year. We also have very interesting usage stats and customer satisfaction scores for our research assistant that are very encouraging, actually the satisfaction NPS score for CreditView users who are using research assistance significantly higher than the CreditView users who aren't using it. So I think that's a very strong driver for pipeline growth. We continue to see a little bit longer than sales cycle that we had expected during the year with -- we have very rapid adoption with the early adopters and those smaller asset management players. But when it comes to large financial institutions, the adoption of Gen AI capabilities has maybe been a little slower than we had expected at the beginning of the year, simply because they're going through their own Gen AI utilization framework and governance. So to your point, there's a lot of pipeline, and we're working very hard to close that in the fourth quarter. And I think on the overall MA and ARR outlook for the full year, we also have some interesting pipeline growth in KYC which we expect would contribute to continued growth in the fourth quarter and beyond.

And Noémie, I think we had expected some acceleration in the second half of the year. I think we still expect to continue to see some modest acceleration, but we'll probably see ARR in the lower end of high single-digit growth rather than our previous expectation of -- at the higher end of high single-digit growth for the fourth quarter just based on some of the things that Noémie just talked about.

And Rob is that – Research and Insights or MA as a whole, just to be clear.

Well, I was specifically referring to Research And Insights in that case.

Okay. Understood. Thank you.

Your next question comes from the line of Manav Patnaik from Barclays. Your line is open.

Thank you. Just to stick on MA. The revenue versus ARR growth keeps widening. So I was just hoping you could just help level set why that is today and then thinking about how that flows into 2025 would be helpful as well.

Yes. So on the revenue, Manav, we have -- we're focused on recurring revenue. If you look at recurring revenue for Decision Solutions, Research & Insights and Data & Information. It's very close, moving closely to the ARR growth. So let me unpack a little bit the revenue growth dynamic for Q3 and the different components of it. Revenue grew 7% on a reported basis in Q3. Recurring revenue, which is 95% of the total revenue in the quarter grew 9%, which is very much in line with the pace of ARR. What's going on there is you have our training and other services revenue that's declining -- that are declining double-digit. And our revenue for multiyear on-prem software remained stable but fluctuates throughout the year based on timing of renewals. So there's a couple of dynamics that I want to call out, they are behind the 9% growth in recurring revenue that should help tie that back to the ARR growth in the longer-term profile of the business. If you look at banking, recurring revenue, banking and insurance, the KYC work flows, what we call Decision Solutions grew 13% in the third quarter. And that's pretty much in line with -- with what we saw in the first half of the year. There's 19% growth in our KYC solution and banking and insurance grew about 10% and 11% recurring, which is again very much in line with ARR. On the Research & Insights, again, we saw -- that's about 30% of our business. We saw recurring revenue growth of 6% in the third quarter. That's actually improved slightly from the 4% we saw in the first half. We've talked about some of the attrition events and some of the pressure in -- with research -- with the asset managers and banks previously. So that's been a bit of a headwind to growth in this business in this year. But the -- again, the recurring revenue growth is very much in line with ARR. And on Data & Information revenue, we grew 7% in the third quarter. I talked about the effects of some of the large renewals with our government -- federal government contract that's now behind us. And we have very significant prospects in the pipeline that should get that growth rate a little bit higher up in the upcoming quarters. So hopefully, that gives you a sense of the revenue growth dynamics in the third quarter. It's again very much broadly in line with the first half except for Decision Solutions, where we had a bit of a tough comp in the large renewals of the government contract that renewed at a little rate this year.

Yes. Noémie I mean maybe -- mean you touched on it just there's the transactional one-time revenue and the recurring revenue. And actually, for fiscal 2023, actually, that one-time revenue actually grew. And this year, obviously, we're seeing a decline. So that would contribute to Manav, some of what you might think of as a little bit of a widening.

Thank you.

Your next question comes from the line of Owen Lau from Oppenheimer. Your line is open.

Hi, good afternoon. Thank you for taking my question. I know we have touched on private credit in the past, but the narrative of public private market convergence is expanding. And Rob, you talked about the Apollo Investor Day. And I think one idea they threw out was so-called standardized credit ratings. So could you please talk about how much appetite for investment-grade issuers to wage that directly from these PE firms and bypass the rating process done by Moody's or the credit rating is so valuable that they will still need it? Thanks.

Yeah. Owen, thanks. So I've had a lot of engagement with many of the most senior players in this market over the over the last, I don't know, call it, over the course of this year. And while I think maybe two years ago, we kind of talked about this defensively. There's a real opportunity here and a real need. There's a real need for independent third-party credit assessment, whether it's through ratings or other tools. And it's interesting because when we engage with the big players like the Apollos and the Blackstones, One of the things that we hear, and again, I referenced, if you look at their Investor Day, they talk about credit rating agencies being an important part of the ecosystem, because we have the ability to provide the data, the analytics, and the ratings that will help people understand the comparability of whether it's public or private credit. And as they are looking at the growth of that market and if you start to think about private credit, not just as leverage direct lending, but you start to think about, Owen, you mentioned investment grade, in many cases, asset-backed finance, the numbers are much bigger than the $3 trillion that I talked about. But there is going to be I believe a need for ratings and third-party credit assessment. And so we have a great dialogue actually with many of the largest players in the market about ways that we can serve those needs. So for instance, Owen, we've got -- we've got -- real a lot of growth in our ratings of BDCs and credit estimates for the exposures in the BDCs. I think we probably have the leading coverage of BDCs in the market. That's contributing to the growth in our FIG franchise. We've got a growing pipeline of fund finance ratings, whether it's feeder funds, credit linked notes, sub lines, all of that. There's a lot of demand for that and a lot of demand for ratings. So again, you're going to see that come through the FIG line in ratings. And then all the asset-backed finance because remember, Owen, where is a lot of that going to? A lot of that is going and sitting on insurance balance sheets and those insurers are rating sensitive. So as this market grows, I think ratings are going to play a really key role. And I think you're going to see actually a lot of that revenue come through the ratings business. So hopefully, that gives you a sense of why we feel optimistic about this. And Owen, the last thing I would say is look, the key for us is to make sure we understand where is the flow coming from, right? Do we have the methodologies in place, rigorous methodology so that we can rate this stuff? Do we have the people right, the resources to be able to do this and play that role in the market?

Thanks a lot for the color, Rob.

Yeah.

Your next question comes from the line of Faiza Alwy from Deutsche Bank. Your line is open.

Yes. Hi. Thank you so much. So I wanted to ask about Moody's Analytics again, just in context of your medium-term targets. I know you referred to them previously as aspirational. I'm curious, if you have an update on that, just given that there has been a little bit of deceleration this year. Maybe if you could highlight what are some of the areas that you're most excited about? And if you expect an acceleration as we think about 2025 and beyond?

Yes, hey, thanks. Great question. So I think absent a real catalyst, we would update those medium-term targets annually. And so I think we'd be prepared to talk about the targets in the February earnings call. But maybe just to give you a sense of -- we've talked about those targets serving as kind of our north star to drive innovation, product development, let me maybe talk to you about where I think the big opportunities are that we're going after to be able to achieve those medium-term targets. So I would say it's really around kind of a land and an expand strategy. So if you think about, and we've got relationships with several thousand banks, probably close to 1,000 insurers, we have a really good customer footprint in financial services, and we have an opportunity to do more for those customers. So that is really an expand strategy in financial services. If you look at the number of products and solutions that many of the customers take, there's still a big opportunity for us to do more for them. We've actually provided that that -- some of data on prior calls, and we've done the spotlight on insurance and banking. And then with corporates, it's really -- really a land strategy. And so I think Noémie just touched on it briefly, but we've got one of the world's largest databases on companies, and that then supports a range of interconnected use cases, including things like trade credit customer onboarding and monitoring and supplier risk. And so we see a pretty big opportunity to go after that. And that means probably a lot more new logos in the corporate space and a lot more cross-sell and upsell in the financial services space. So again, we've still got some things to do to be able to better enable the cross-sell and to be able -- we talked about earlier this year about the investments we're making in building out that platform to serve corporates, but those are the things we're doing to try to get after targets.

Thanks Rob.

Your next question comes from the line of David Motemaden from Evercore ISI. Your line is open.

Hey, thanks. Good afternoon. Rob, could you just give us an updated view on the pull forward that has taken place this year and in 3Q specifically. And if that's lowered your expectations for issuance growth at all in 2025?

Yes. Hey, first of all, welcome to the call. It's good to have you on. So it's actually interesting when you look at pull forward, it's a little bit of a tale of two cities between investment grade and spec grade. And if you get a chance to dig into those refunding studies that we published, you'll see a lot of this in there. But if you look at investment grade, so 2025 investment-grade maturities actually grown by about 9%. They're 18% higher than the one-year forward maturities were last year. So starting the year, the maturities are actually higher than they were last year. But we've seen a good bit of pull forward in spec grade. And if you think about it, that's pretty typical, right? If you're an investment-grade issuer, you generally have market access throughout market cycles. Spec grade issuers are more sensitive to risk on, risk on, risk off and market windows. So you'll see more pull forward typically from spec-grade issuers who don't want to get to a quarter before their maturity. I will say that when we look at the data, it does look like there has been a bit more pull forward in spec-grade then would we – what would be typical than kind of historical averages this year. That's not surprising. I think we had been seeing that, but it's also interesting, again, if you look at just the maturities one year forward, right now, they're about the same level as they were this time last year. And so the other thing I would say is if you actually go to drill down into the US, so some of these refi walls are a little bit more back-end loaded, particularly around spec grade. But about 25% to 30% of spec-grade loan and bond maturities in 2028 were actually issued 2023 and 2024 when rates were elevated. So -- I mean, that tells us if we have a declining rate environment, going forward, we may actually start to see some pull forward from those very elevated maturity walls a little bit out in the future. So when you actually combine investment grade and spec-grade maturities. So as I said, we've had less pull forward investment grade, more pull forward in spec grade actually, on an aggregate basis, the pull forward, the one year – the pull forward from one year forward maturity walls is almost exactly in line with historical averages and the forward maturity is one year out or 15% higher than this time last year. So I think net-net, despite the fact that we've had a heavier spec grade pull forward this year, I actually think this is still a tailwind for us in the near-term.

Your next question comes from the line of Craig Huber from Huber Research Partners. Your line is open.

Thank you. Can you just talk a little bit about the spread that you had between the 70% transaction revenue growth in ratings versus 51% global issuance in the quarter? And then maybe Noémie just throw in there with the incentive comp was in the third quarter and the fourth quarter outlook? Thank you.

Yeah, Craig. So we had favorable mix. We certainly – and Noémie talked about, we had very strong investment-grade issuance, but there was a lot of opportunistic issuance. So if you think about investment-grade issuers, we have two kinds of commercial constructs. We have frequent issuers, and we have infrequent issuers. We saw a lot of volume coming from infrequent issuers, just tapping the market then we had very strong leverage finance growth. Leveraged finance is typically revenue mix friendly. That was certainly the case. And then, of course, we also have – we had a real pickup in first-time mandates. And so they have -- oftentimes, there's fees associated with onboarding first-time issuers, and we had our consistent pricing initiatives, which all contributed to favorable revenue mix relative to issuance. Noémie Heuland: And then on the incentive compensation for the third quarter of 2024, we actually recorded an adjustment to the accruals to reflect the updated full year revenue outlook in MIS specifically. So the incentive compensation accruals were about $150 million in the third quarter, which is higher than prior year by 54%. Just for the full year, we expect incentive compensation overall to be approximately $490 million, and that translates into about $120 million for the fourth quarter.

Great. Thank you.

Your next question comes from the line of George Tong from Goldman Sachs. Your line is open.

Hi, thanks. Good afternoon. I wanted to dive more into your ratings outlook. You mentioned on a net basis, the pull forward of IG and spec-grade is exactly in line with historical averages in the forward maturities, 1 year out is about 15% higher. And yet your updated guide implies about mid-single-digit MIS revenue growth in 4Q, even though comps don't really get any tougher in the fourth quarter. So, can you talk about what leads you to think 4Q issuance growth will moderate meaningfully? And to what extent do you think 4Q MIS growth will serve as a proxy for 2025 MIS growth?

Hey George, so we've, I think, talked about on each of the earnings calls this year, that we believe that issuance is going to decline in the fourth quarter versus the prior year quarter because there's been intra-year pull forward. So, that's within the calendar year, and that's just banks telling issuers, hey, in the event there's any election volatility, why don't you just get ahead of that. And so we're also looking at the strength of the issuance to-date. So, we actually have lifted our outlook for Q4 issuance. So, we -- versus our prior forecast. So, we now expect the fourth quarter issuance to decline in something like the mid-single-digit range, and it was mid-teens percent decline in our prior guidance. So, we've actually lifted the view for the fourth quarter. And that lift, combined with the beat in the third quarter led us to up our full year issuance outlook to mid-30s. And then you triangulate that to revenue where we're looking at something like low single-digit percent growth in revenue over the prior year quarter -- and that's just, again, what contributes to that favorable issuance mix. Some of the things I just talked about with Craig's question. 2025, I think, could be a different ball game. Again, there's just been a lot of -- we believe calendar year pull forward. And I think you are going to know in early November, if we don't see a slowdown in issuance, then there would potentially be some upside to our guidance.

Got it. Very helpful. Thank you.

Your next question comes from the line of Shlomo Rosenbaum from Stifel. Your line is open.

Hi, thank you very much. Rob, can you give us a little bit of an update on some of the progress for the various AI products. So, you had like Navigator skills assistance. Can you talk about where you are in -- both in development and then also in kind of adoption? I know Noemie talked about a little bit of a -- not as fast of an adoption because the clients are setting up their own frameworks. Maybe you could talk about, is there anything that leads you to believe that the pacing is going to be dramatically different from what you thought or the adoption will be very different from what you thought?

Hey Shlomo, thanks for the question. So, let me just kind of tick these off here. So, we talked a little bit about research assistant, which was our first product in the market. So, I'm not going to spend too much time on that. Since then, we've rolled out suite of what we call Navigator. So this is -- think of AI enablement of the existing products, allowing you to kind of get the most out of the products. We've rolled that out across a number of products. And that's going to be helpful to both -- well Noémie mentioned some of the things, customer satisfaction, it's going to be helpful to retention. It's going to be helpful to our ability to price behind those enhancements. We've also started to roll out other AI-enabled products. So research assistant was the first. The second was an AI early warning system leveraging a number of our different data sets. We started with a focus on commercial real estate. We've got a very nice pipeline for that. That's focused primarily on banks. And then we started -- early in the year, we did a very small aqua hire of a company called Able AI, and that brought over a small engineering team that was working on AI enablement for banking workflow. And so when we brought them over, that then accelerated our product road map for banking. And so we've rolled out an automated credit memo offering an automated covenants. So you're going to see more and more AI enablement of our banking workflow, of our insurance workflow, that's one of the benefits of having the IRP as well as insurance, very easy to do the AI enablement. So, just in terms of adoption, it's a mixed bag. And we talked a little bit about it. You've got, in some cases, your smaller firms, the asset managers and others are able to adopt more quickly. When it comes to the big banks, they've all got risk frameworks and regulators and other things that they have to make sure before they're deploying these AI-enabled solutions that they've got a risk and control framework that's going to pass regulatory muster. So, while those conversations are very encouraging because we've elevated the dialogue we're having at many of our customers, they're taking longer. So hopefully, that gives you a sense.

Thank you.

Your next question comes from the line of Jeff Silber from BMO Capital Markets. Your line is open.

Thank you so much. In looking at your guidance for the year and if I try to back into the implied guidance for 4Q adjusted EPS, it looks like you're guiding to that to be flat to potentially down. Are you just being overly conservative? Or is there something specifically going on? Thanks. Noémie Heuland: So we're guiding for -- we've updated the adjusted diluted EPS guidance range based on the updated Q4 implied outlook. So just to give you numbers, we're raising our adjusted diluted EPS guidance range, and we're narrowing it to -- for the full year to $11.90 $12.10, that's still 21% at the midpoint, which is driven by MIS performance. So what we've done here is we flowed through the Q3 beat through our full year guide, and we've increased our ratings revenue outlook for Q4 versus the prior forecast at the high end. So the midpoint of our updated guidance now implies Q4 EPS growth will be relatively flat to slightly down in the Q4 versus the prior period and down approximately 30% sequentially from Q3, which is aligned with what we see in the top line for MIS.

And I guess -- sorry, go ahead.

No, I was just going to ask if there's something specifically going on with margins in the fourth quarter we should focus on. Noémie Heuland: So for the fourth quarter margin, as I said earlier in my prepared remarks, we've accounted for the incentive compensation adjustments in the third quarter to reflect the updated Q4 – to reflect the updated top line outlook. So that's already been accounted for. And if you look at the margins for the Q4, we -- that's really the effect of the incentive compensation, but there's nothing else that we should...

Yes. I mean the MIS margin, I mean, I think primarily, it's just revenues are going to be lower, that we'd expect that margin to be a bit lower. And so as I said, let's watch kind of the starting around the second week of November and see what's going on with issuance, and that will give you a sense of how to think about our guidance.

All right. Fair enough. Thanks so much.

Your next question comes from the line of Jason Haas from Wells Fargo. Your line is open.

Hey, good afternoon. Thanks for taking my question. Appreciate the comments earlier on MA, ARR. It sounds like the Data and Information and Research and Insights is maybe not as strong as expected, but there was no change to the full year guidance there. So I was curious if you're now expecting closer to the high single digits and the low double-digits? And then if not, can you talk about what other areas have been coming in stronger than expected to offset that? And then maybe also any color on what would drive an acceleration from 3Q into 4Q? Thanks. Noémie Heuland: Yes. So on ARR growth in the third quarter was 9%. It was a bit lower than our recent sustained performance of 10%. That was affected by some of the factors we've highlighted on last quarter's call. Stepping back and looking at our performance today, we've had more attrition events in the first quarter, as we said. We had a bit of a lower sales than expected with our banks and asset manager customer segment as they continue to face tight purchasing pattern. And we also had a couple of headwinds from the other factors we've talked about in the last call, that's customer transitioning to MSCI for sustainability solutions and large federal government contracts that renewed at a lower value in Q3. We also want to acknowledge that the new business growth has been a little bit more back-end loaded than we initially thought with 50% more pipeline entering the fourth quarter this year than a year ago. Looking out to the remainder of the year, we're maintaining our outlook of high single-digit revenue growth in ARR of high single to low double digits with a midpoint still in the higher end of the high single digit. That's the guidance for the full year. And we have, as I said, a strong new business pipeline going into the fourth quarter. We have a very large book of renewals for the month of December, which we expect to renew at 93% plus rate in line with what you've seen year-to-date. So again, the good pipeline creation that we saw in the third quarter, which was driven by, I think, an increase of 35% in meeting activity, a lot of those in person that's very significantly up from a year ago. And so as we're heading into the fourth quarter, which is our busiest month of the year -- our busiest quarter of the year, our new business pipeline is very healthy. We have a good mix of large few deals in our KYC and Data and Information businesses. And we also have a large volume of new business and renewals, which is what underpins our outlook.

Yes. And maybe just to double-click -- and by the way, welcome to the call, Jason. It's good to have you on. Just to double click on maybe an area where and there are plenty that we're encouraged by, as Noémie said, we've got a very nice pipeline relative to this time last year. But in KYC, we've got a really good set of product launches. So we've got a new digital investigations product that we've just launched in September. We've got a lot of customer engagement around that. We've got our entity verification offering, which has got a really nice and growing pipeline. And also, there's a really interesting emerging opportunity here to leverage AI build screening agents. And if you think about how much of what is going on around KYC diligence is done by armies of people oftentimes in offshore centers, there's a real opportunity to leverage our -- both our data as well as AI to be able to -- not only be more efficient but actually be even more effective and have a great -- a great audit trail for the regulators. So some very interesting stuff there, I think, in our product recent product pipeline around KYC that leads us to continue to be very optimistic around that business.

Very clear. Thank you.

Your next question comes from the line of Jeff Meuler from Baird. Your line is open.

Yeah. Thank you. So this kind of runs counter to that last answer. But can you just comment on KYC ARR. In the quarter, 40% growth is great, but it decelerated from what your KYC business has historically done. I don't know, if there was any holdback of customers waiting for the new product launches or just any comments on why KYC growth was a little softer for ARR in the quarter. Noémie Heuland: The KYC ARR growth was 14% in the third quarter that was lower than the 19% we saw in Q3 last year. In Q3 last year, we had large transactions with the federal government. As I said earlier, some of those renewed at a little bit lower rate. So that's what explained the lower number for the third quarter. Having said that, we have a strong pipeline, as Rob said, heading into the fourth quarter. So we expect this to be more of an air pocket than a new run rate.

Got it. Thank you.

Your next question comes from the line of Andrew Steinerman from JPMorgan. Your line is open.

Hi, Noémie. I wanted to ask about Praedicat. I think it was the only acquisition that Moody's has done with revenues closed in the last 12 months. Just tell me if I'm correct about that. And specifically about Praedicat, I'd like to know the dollar contribution both to revenues MA and ARR in the third quarter just reported and in the fourth quarter guide?

Hey, Andrew, it's Rob. We did -- maybe you're talking about MA, we did acquire the remaining interest in GCR, which is the African rating agency, and that and that closed in the very beginning of the quarter, had revenues and operating income. I guess, I would say, it's just -- this is immaterial to our overall -- our overall financial results, and I know you're looking for an organic number, I might steer you to ARR. So I would say, first of all, Praedicat is not in our third quarter results. And if you look at ARR, ARR is an organic number. So that will give you a sense of excluding acquisitions.

Okay. Thank you.

The one other -- since we're on the topic of Praedicat, I mean, it was a really nice bolt-on for us to move into the casualty space. RMS very, very strong in the property space and this allowed us to move into the casualty space. And we announced that acquisition right before a huge industry conference in Europe that I went to, and we did literally north of 100 customer meetings, and there were some very strong interest in Praedicat's capabilities and really understanding emerging and long-tailed casualty and mass tort risks. In fact, I think it's something we're going to be able to use across not only analytics but also even it will help inform some of our work in ratings. So we're really excited to have predicate as part of the Moody's family.

Thank you.

Your next question comes from the line of Russell Quelch from Redburn Atlantic. Your line is open.

Hey, thanks for squeezing me in. Rob, I wondered if you could be a bit more specific about the level of growth you're seeing in private credit assessments and how much that's contributing to the revenue today. You mentioned being a early leader perhaps in the rating, the BDCs. So I wondered what else you're doing to position yourself to capture this opportunity. You mentioned conversations with Apollo and Blackstone. I wonder if you could add a bit more flavor to those conversations, if that's leading to immediate revenue opportunities or if this is more stuff for the future?

Yes. So Russell, thanks for the question. Actually, I would say, we're going to see revenue. So we are already seeing revenue from private credit flowing through the rating agency and analytics that's already happening. So it's interesting. I had a conversation with my team the other day, and I said, AI is a fantastic opportunity for us. So as private credit, but private credit is going to manifest itself in the financials faster than AI is going to because of some of the dynamics I just talked about in terms of adoption curves. So we've got some work to do to start to break out from you all and give you a better sense of how we're capturing private credit revenue coming through both the rating agency and the analytics business. And I -- we know we, in some ways, kind of owe that to you all. But what I would say is again, back to a few of my comments earlier, we're already seeing it come through FIG ratings, and that is through the ratings of BDCs and fund finance instruments. And while those numbers are small relative to things like what we're doing, the total revenues that we're getting from rating insurance and banking issuance, it's growing quite fast. In fact, in many cases, growing faster. So what we're doing with BDCs that's growing faster than, for instance, our revenue line for banking, right? So you're going to see it -- you're already seeing it in FIG. We're already seeing it in it in structured finance and the rating of asset-backed finance. And we talked a little bit about that earlier, and there's quite a pipeline for that. We're starting to see our -- even in our project finance area where there's more and more demand for…

Got you. Okay. Thanks.

Your next question comes from the line of Alex Kramm from UBS. Your line is open.

Yes. Hello, everyone. I know it's late in the call. So just a quick cleanup here. On MA margin, can you just talk about what you're expecting in the fourth quarter? I think if I do my math right, I think margin is supposed to pick up in the 4Q. But generally speaking, from a seasonal perspective, costs go up after the 3Q and margin goes down. So I don't know if that's part of the incentive comp you talked about or anything else. And obviously, Praedicat is coming in as well, I think. So just maybe flesh out why this year may be a little bit different. And then sorry, related to that, you talked about investing a lot in MA earlier on the call. So just wondering, if you have any updated thoughts on the margin expansion that you're looking at for that business in the next couple of years? Thanks. Noémie Heuland: Yeah. Thanks. So for the – to get on the Q4 question, this is the seasonality of revenue driven. So as you know, our fourth quarter in MA is the largest quarter in terms of revenue. So given the typical strength in the fourth quarter, we expect the adjusted operating margin in MA to tick up in the fourth quarter to slightly above the range of our guide. There's a little bit of headwinds from Praedicat, but as Rob said, not materially affecting the guide and we're maintaining our 30% to 31% margin for the full year. So that's for Q4. Now looking out in the outer years, as Rob said, will update you later in February, but we've been investing. We've invested in our GenAI capabilities, in our platforming, in our new product development. I'd say we're mostly through that investment cycle, and we'll be really focusing on expanding the margin and continuing to migrate some of those customers from the legacy platforms into the banking and IRP. That will drive our margin expansion in the long run. And we're also making sure we are very disciplined in the management of discretionary spend. Actually, you saw that materializing expansion in operating margin MA in the third quarter despite the fact that revenue remained consistent with the second quarter. So that's really what I can say about the MA margin and still reiterating our guidance range for the full year.

Yeah. To underscore that, we're definitely committed to the medium-term targets for margin for MA. I'm also reflecting on one thing I said earlier about positive mix on leveraged finance, and I lumped bank loans and high yield together in that. Actually, I think because of all the refi and reset activity we had going on, all the refi with loans. That wasn't a favorable mix, but a high yield was. So I just want to make sure that was clear. But on balance, we had a favorable mix from our corporate finance issuance.

And that concludes our question-and-answer session. I will now turn the call back over to Rob and Noémie for some final closing remarks.

All right. Well, thank you, everybody, for the questions and we look forward to talking with you on the fourth quarter earnings call, until then, take care.

This concludes Moody's Corporation third quarter 2024 earnings call. As a reminder, immediately following this call, the company will post the MIS revenue breakdown under the Investor Resources section of the Moody's IR homepage. Additionally, a replay will be made available after the call on the Moody's IR website. Thank you.