Moody's Corporation (MCO) Earnings Call Transcript & Summary

[Operator Instructions]

Perfect. Good morning, everyone. Welcome to the second day of the virtual Bernstein Strategic Decisions Conference. For those who don't know me, I'm Christian Bolu. I cover the capital market stocks out of Autonomous. I'm very pleased to welcome Moody's Corporation for the first time to the SDC. With us from Moody's is Ray McDaniel, the President and CEO of Moody's Corporation. Welcome, Ray, and thank you for participating in our conference.

Thank you very much for having us. We appreciate being here virtually.

Virtual handshake to you. Before we get started, some quick housekeeping for viewers of the webcast. [Operator Instructions] Also, at the end of the session, please fill out the short Procensus poll, and you'll be able to get immediate access to the results.

Okay. So let's get started here. Ray, a really good place to start is just on the current environment. It's really been an unprecedented year so far, created a lot of operational challenges for many companies. Maybe just talk about how your company has coped with the challenges? Maybe what you've learned about your business through this period?

Sure. And again, thank you for having us. The operating environment and the challenges that we face, I think, are probably similar to what many, many other firms are addressing. But first of all, our employees have done a tremendous job, just phenomenal. The work that we've been doing, we haven't missed a beat on ratings, on product delivery, on research. It's actually a high watermark for the amount of productivity that we've been able to demonstrate to the market. So between the research, the rating reviews and rating actions, the product innovation that's been going on at a very rapid rate in Moody's Analytics to address some of the current challenges that market participants are facing has been better than, frankly, I would have imagined or could have hoped for. So we made that transition to working remotely in a very brief period of time, as I know many firms have. But right now, we've got all 11,000 employees worldwide working remotely. We are in the process of reopening a couple of our offices in the Asia Pacific region. But that process is a careful one, a slow one. And so far, our other offices around the world are all operating remotely. So I'm actually thrilled with how we've performed. And the first and most obvious lesson learned is that we have the capacity to work effectively from home, from remote locations as an organization in our totality.

Perfect. Maybe a longer-term question. This is a question we're asking every one of CEOs attending the SDC this year. As you kind of think through and beyond the pandemic, how do you expect maybe your priorities to shift, whether it relates to how you think about cutting cost and expense management or increasing levels of investment?

Well, on the cost side, certainly there are a number of actions that are appropriate to take for the near term. We've had a really restriction on hiring, only hiring a few critical positions. We've had reductions in incentive compensation based on our outlook for the year. The travel and entertainment costs, obviously, are way down. And so those are the kinds of things that are creating some tailwind on the cost side of the business in the near term. Longer term, I think we'll -- we are prioritizing keeping our workforce intact. Our people are very busy. This is not a situation where we're looking at any material COVID-related layoffs, and the prioritization of keeping our workforce intact is a point of emphasis. That being said, we are already learning lessons about how we can work remotely. Can we work remotely on an indefinite basis? What does that mean for our real estate footprint around the world? Again, I don't think this is really different from what a lot of other firms are experiencing and now thinking about, but we're in that group of firms. And so while it's early days, we may very well find that we have an opportunity to work in a more flexible way, including remote work, that really can be applied indefinitely and will allow us to take other kinds of actions around our cost base, such as real estate, and give us some longer-term savings and efficiencies. So I think that's the silver lining coming out of this is that what we might have learned in a 2-year period about our ability to use technology and make our work environment something different than it's been in the past, that what might have been a 2-year journey all of a sudden became a 2-week journey. And so we're -- I think we're going to benefit from that in a structural way in the longer term.

Okay. Maybe just think about just the long-term growth algorithm of the firm. I think over the last 5 years, you've put up fairly impressive results. Top line has expanded around 8% per year, EPS more like mid-teens, around 15%. As you kind of look at the next 5 years, help us think about like sort of the firm's growth prospects over the next 5 years. Maybe what are the key opportunities you think can help either sustain that growth rate or even potentially accelerate it?

Yes. Happy to address that. It's interesting because if you had asked me 6 months ago about the long-term drivers of our business, I would have had an answer that many listeners have probably heard before about disintermediation and growth of debt capital markets in line with GDP growth. And frankly, that's the same answer today as it would have been 6 months ago. Structurally, I don't see a change in the deep current drivers of the business. Outside of cyclical ups and downs, the debt in the market has grown in line with GDP over decades. And at the same time, the capital markets portion of that global debt has been expanding. So if you think about it as a growing pie in terms of debt outstanding in the market and a growing slice of that pie in terms of the capital market component of debt, I think those drivers are fully intact. They have been -- and you can see from the slide that this has been a long-term phenomenon in terms of refunding and the growth in rate of debt. So the point here is that I don't think the answer changes because of COVID. It will change cyclically. I mean there's a rush to issue debt today that's associated with building up the balance sheets. There's a rush to be more liquid, have more cash on hand. Those are cyclical phenomenas associated with coronavirus and its impact on the global economy. But when we get through that, I think the drivers of growth in the ratings business are intact. And we can talk about this a bit more, but what we've seen in the markets in the last couple of months in terms of it is that pull-forward, is it something different than a pull-forward of normal refinancing of debt, I think, are interesting cyclical questions. On the Moody's Analytics side of the business, the opportunities are actually blossoming. And talk about a silver lining from this virus. The focus on risk and the holistic approach to risk assessment and risk management is growing rapidly. We've had success with product innovation in this area. Our know-your-customer products that come out of Bureau van Dijk and RDC, the company we recently acquired, are 2 very strong examples, very high-growth areas for the business. But we're also looking at other things in terms of growing Moody's Analytics that I think are going to be long-term opportunities for the firm such as Know Your Supplier. We're making that available currently to the medical community for free as a service so that in acquiring personal protection equipment, hospitals and other medical establishments are not being subject to frauds and scams, which are rife in this area. So we're able to repurpose the databases that we acquired with the Bureau van Dijk and with the RDC acquisitions to provide a Know Your Supplier platform. That's another example of the -- more holistic nature of risk assessment and risk management that I think is going to be coming out of the recovery from the coronavirus that is going to play right into the sweet spot of where we have pivoted over the last 3 to 4 years.

It's perfect. I'd love to dig into some of those topics. Maybe I could go into the long-term issuance outlook question first. Because I think I hear what you say, but, on the other hand, I think there are concerns around the level of corporate leverage already today, potential changes to just corporate capital management philosophies. People want to be more -- folks want to be more prudent and have things like less buybacks. Potentially, you could argue lower capital demand because of areas like commercial real estate or transport or energy just having less just demand and hence less capital needs. As you think about those dynamics, does that color your view in any way around sort of long-term prospects for issuance?

Sure. And I think you're raising some important issues but issues that I would, for the most part, characterize as cyclical phenomena. Clearly, over the last few years, with the very low interest rate environment and the opportunity to raise capital by highly leveraged, weak credits, that is a cyclical phenomenon. So we were -- we reached the point where B2 and below corporate debt represented the majority of issuance coming into the market. And a number of those firms, many of those firms, particularly in more challenged sectors like oil and retail, are going to struggle, in some cases mightily, in this kind of an environment where the demand for their products, their services is -- has collapsed so quickly and so dramatically. So yes, we are going to see higher default rates. We are going to see less opportunity for the most leveraged companies to access capital. We're already seeing that the slowdown in leveraged loans is greater than the slowdown in the broader spec-grade market is greater than the slowdown, which is actually not even a slowdown, in the investment-grade market. So there are good reasons to be cautious about what the second half of 2020 and going into 2021 look like. With higher default rates probably will come higher credit spreads. There will be certain industries, as I said, that are going to be under particular stress. But again, coming out of that, it's not as though we've had -- let me put it this way. There are many lessons to be learned from COVID. But unlike what we saw in the financial crisis, I'm not sure the enduring lessons are to be learned about debt and the debt markets. They're lessons we already understood. Highly leveraged entities that access capital are going to be riskier when there's a downturn, and firms that invest in those securities know that and are trying to get the proper return to make sense of the risk they're taking on. So I don't see that as being a fundamental structural change. And you can see from the slide we've put up the debt leverage and the interest coverage in the U.S. or North America and in Europe has not moved dramatically. There has been access to capital for increasingly low-rated credits. But that is different from, say, investment-grade credits having additional leverage and still holding investment-grade ratings. So that has not been a dramatic uptick. And so I think we have to separate the idea that low-rated credits have had access to capital versus a general leveraging up in the corporate debt markets.

Perfect. So I'm going to just stick with the spec-grade market in particular for a little bit here and more nearer term. As you mentioned, we've seen some pickup in U.S. high yield. But other parts of the speculative market, whether it's leveraged loans even in Europe, high yield has not picked up. Any sense in terms of like how long do you think it'll take before those markets start to show real life?

Yes. We -- as you know, Christian, we, at our earnings call at the end of April, talked about our expectations for investment-grade issuance to be up 10%, spec-grade bonds to be down 20% and leveraged loans to be down 40% on the year. So we had what I think is an appropriately conservative outlook on issuance in the spec-grade sector. Now that being said, I've actually been a little surprised at the degree of access that spec-grade names have had in recent weeks. And we're talking very near term, so I don't know what the longer-term trend may prove to be. Leveraged loans have been soft as we expected, but there has been access in the bond market to spec-grade names, even some that are deep speculative grade. And so that has not shut down as much as one might have imagined in this kind of environment. And of course, investment-grade has been very active, record months of activity in March and April, and there's continued to be strong issuance in May. So the difference between the investment-grade and the spec-grade sectors are being revealed quite visibly at this point.

Okay. And then a question on the -- on your point of the outlook. I think you're forecasting for the year down 10% for issuance despite what has been a really robust year so far. So what are you seeing in the data or what are you expecting? Or just point as to why you expect what has to be a material drop-off in the back half?

Yes. It's interesting because firms have been borrowing for liquidity and balance sheet resilience. And in fact, the number of mentions since COVID, the number of mentions in bond offering documentation about use of proceeds has risen 48% in terms of the reference to liquidity. And so firms are saying, look, we want to be in cash, we want to have a fortress balance sheet. That's why we're borrowing right now. What is very interesting is what happens to that longer term. Are firms going to want to stay more liquid? Are they going to want to be further in cash? Or is this a pull-forward of refinancing, that this cash is going to get repurposed into refinancing existing debt? My guess is it's going to be a bit of both. So the borrowing we're seeing right now is in part on top of what refinancing needs are going to be going into the second half of 2020 and 2021. But I also think it's a contingent pull-forward that firms are going to be using the proceeds that they've raised in the first and second quarters of this year to pay down maturing debt later in the year or in 2021. So that's part of what's informing our view that a slowdown is likely in the back half of this year, because firms will be at least partially using the funds they've raised in the last couple of weeks, months to refinance maturing debt that would have been done later in the year or would have been done in the first half of 2021 under other circumstances.

Okay. Maybe one other question around issuance. The Fed obviously has backstops, the U.S. market. As you kind of think about longer term, are there any implications for effectively the Fed backing credit? Does that have any negative implications or somehow erode the relevance of credit ratings if more or less everything is guaranteed by the Fed?

No. Well, if everything were guaranteed by the Fed and that were not a temporary situation, I think I might agree with you. But this is a transient phenomenon. The Fed is not going to continue to backstop markets on a long-term basis. And the idea that there are not going to be defaults, I think, is overly optimistic. We're expecting defaults to rise to between 11% and 16% by this time next year, and that's dramatically above the historical default rate. So as long as there are firms that are in distress, at risk, we're going to see, I think, a demand for ratings and high-quality research. And I guess I would also just add that -- and I'm not speaking about the Fed alone, but many governmental institutions have been using ratings and using the services and products that we offer as part of their control environment for the stimulus that's being made available to make sure that it's getting to the right places and not going to the wrong places. So the use of Moody's as a resource is probably at a high watermark by governmental officials. So I think the relevance of the ratings similarly is at a high watermark because of the very visible and ubiquitous use of ratings, not only by the private sector but by the public sector. So I'm actually quite optimistic about how we are going to be positioned coming out of this because we have been a resource and a valuable one, whether it's for small business lending, whether it's been part of the initial stimulus, the $2 trillion that was made available. It's being used outside the United States. There's a Bank of England program that is using our ratings. So there are multiple new channels for use of ratings that I think are going to benefit us in the longer run.

Okay. Perfect. Now switch over to one of the big opportunities, China. Obviously a big market, lots of hype around it. You have a JV there. I think you're exploring also to go alone if you can. Again, update us on kind of where you are in China? But more importantly, kind of how do you think about the long-term opportunity? And sort of what sort of time line should investors be expecting in terms of meaningful payoff financially?

Well, yes, China is a very interesting opportunity. It seems to be a bit of a volatile opportunity at the moment. But it's the second-largest bond market in the world. It's growing at a double-digit rate, and it has been for a number of years. So the opportunity is clear. As you know, we have a joint venture with CCXI is the name of the firm. That is the largest domestic rating agency in China. We have a 30% stake. We're very pleased with that. It is -- as I said, it's the largest domestic rating agency. It's the most profitable domestic rating agency, and it is growing at a double-digit rate. So that is a very nice opportunity for us. We also rate comprehensively in the cross-border market. So we're -- we feel that we're very well positioned as Moody's in the cross-border market and through CCXI in the domestic market. What we have to pay attention to is growing our other risk services coming out of Moody's Analytics and thinking about how we can best support policy objectives with our risk tools and risk solutions and making sure that it's not just about ratings, but it's also about what we can do with our other capabilities. And we are very focused on that. I think there's also going to be opportunities to use data that we have on both sides of the organization in new and helpful ways to the domestic Chinese market. We currently have -- as you can see on the slide, we currently have about $176 million in annual revenue coming from the cross-border ratings business and from Moody's Analytics, and we have $17 million in attributable income coming from CCXI. So it's already a very substantial opportunity for us. It's going to continue to grow. We're looking forward to that. We do have to hope that the current tensions between the U.S., China, Hong Kong are going to stabilize so that those frictions don't get in the way of an attractive market opportunity.

Just a couple of questions on that. On the CCXI piece, can you talk about -- I mean I think a peer has a slightly different approach, going alone. You have the JV with CCXI. Can you talk about kind of how you think about that JV in terms of potentially owning the whole piece and be more in control or maybe going on your own and taking the approach your competitor is taking? And if you could just help us understand the pros and cons of sort of both approaches.

Yes. I mean the -- obviously, the pro component of going alone is you have a 100% ownership both from a control and a financial perspective. The main pro financially of being in our joint venture with CCXI is we are already in a very profitable business. And it would be years and years for us to get to the point where we had this kind of income on a go-it-alone basis. So the fact that we are profitable now, that we are profitable to a notable level, it's not a huge amount of money, $17 million, but it gets our attention and it's a good asset. So yes, to answer your question, it's something we would consider taking a larger stake in. It's something that would require discussion with our joint venture partner as well as with the authorities in China. But it's -- if we like the asset at 30%, we would -- I think it'd be fair to say we like the asset at a larger percent. There is nothing happening in the very short run in part because of COVID and the inability to meet face-to-face and have those kinds of discussions, but we would certainly consider that. So we're happy with the position. We're happy with the optionality it gives us to either continue with our stake or increase our stake or potentially even reduce our stake and seek our own license if we wish to. But that optionality, I think, is valuable. And in the meantime, we're in a profitable domestic business in China.

And then just give us more insights around the domestic market in China. I think most of the market is a government or quasi-government-guaranteed market. So where is CCXI seeing demand for paid ratings? Any particular sectors? Any particular industries that -- where it's actually profitable to monetize a ratings business?

Well, the business is -- they provide ratings comprehensively in China. And as you point out, there are sectors that have more direct support, whether it's state-owned enterprises or sectors that are viewed as strategically important that are more likely to have government support. But defaults had been occurring in China, corporate defaults in the energy sector, in the commercial real estate sector. And so the development of that market is showing progress in terms of allowing risk to be realized, if you want to think of it that way. Certainly, if the government were to be committed to supporting all capital market participants, I think you could say, well, what is the value proposition of having a rating? There's simply a government guarantee on everything. But the reality is the likelihood of government support varies by industry, sector, even individual names. And so there's a risk assessment that goes with that. And there is less support in some areas than others on a direct basis. So there's plenty of risk in the market that needs to be assessed. And in particular, if China is going to attract foreign capital into the domestic market, that foreign capital wants to understand those risks. And that's where I think we can be particularly helpful, whether it's through CCXI or whether it's providing research and analytics on our own to international investors that are interested in putting money to work in the domestic renminbi market.

Perfect. Let's move on to the other big opportunity for Moody's, ESG. I think you have a unique portfolio of a number of assets acquired or built over time around things like green bond ratings, Seven data analytics, et cetera. Maybe help us first understand sort of how big the ESG business is today in aggregate. Any data on how fast it's growing? And then more importantly, sort of how you think about what particular niches, opportunities you have to sort of grow that business over time?

Sure. First of all, viewers can see the slide here. We have a number of statistics about what we're doing in the ESG area. And I won't run through those, but you should read them. There are some impressive numbers. To cut to the punchline, earlier this year, our Chief Operating Officer, Rob Fauber, on our earnings call back in February for 2019 said that we expect to have $15 million to $20 million in revenue coming from ESG this year and that, that is going to be a growing number. I think we're particularly interested in certain areas of environmental and climate risk assessment, physical property risk assessment, which we're able to do through our acquisition of the Four Twenty Seven company, which is based in California, and the ability to integrate our assessments of physical risk to real estate with our other real estate data to provide investors in commercial real estate with more sophisticated views about what they have in their portfolios, what their risks are. Think about whether it's insurance companies or other kind of portfolio managers that are in the real estate sector as well as informing our ratings in areas such as commercial mortgage-backed securities. So we are going to have more sophisticated analytics that's spread across the firm because of what we're doing in the ESG sector. We've also made an investment in SynTao Green Finance in China, which has assessments on 1,200 public companies in China and environmental assessments. And that is a big market potentially in China. They are very active in the green bond sector. We expect green bonds to be about $300 billion this year, and that has been a growing sector. So the interesting thing, I think, as an investor in Moody's, to think about here is to understand that we are looking at some markets that are already pretty well established in the ESG sector such as green bonds. And we're looking at other markets that are -- really think of it as non-geographic emerging markets, and there's the opportunity to get into those markets early. And for example, physical risk assessment of properties, of municipalities, both for municipal debt or corporate debt, I think, is a tremendous opportunity, but it is not deeply monetized yet. It is an emerging market. And we'll see how big that market becomes, and we'll see how valuable what we can provide with our datasets and analytics on top of the datasets in those areas. But definitely an area to be excited about. It's going to be high growth. It's difficult to imagine that climate risk, environmental risk is going to become less of a concern for investors in debt markets in the future than it is today. It's going to attract -- environmental risk is going to attract regulation, it's going to attract other kinds of activism. And that means that risk assessments are going to become more important because they're going to matter to the viability of firms and the risk profile that investors are putting in their portfolios.

Perfect. Let's switch over to the Analytics business. That business is actually coming off really strong top line growth and, quite frankly, margin expansion over the last couple of years. But in the first quarter, you did lower the short-term sort of guidance or forecast for that business, going from high single digits to low single digits. Still an impressive growth rate for an environment, I have to say. But as you kind of think about some of the challenges, how do you take comfort that some of these things are more short-term as opposed to sort of longer-term issues for the business?

Yes. Very interesting question, Christian. First of all, we did pull back on our growth expectations a bit for 2020, not materially, but we did move to mid-single-digit percent growth range as opposed to high single digit. The reason for that is with the COVID crisis, our sales cycles have become somewhat more attenuated and we're having to do more sales calls and marketing calls remotely. You can see here that the number of in-person meetings in March was down 50%, but the number of virtual meetings was up 400%. This is -- I mean that's great news, but both we and our customers have got to move to a condition where virtual sales are considered more the norm and people are comfortable with that and that, that can be as effective, if not more effective, than the traditional in-person meeting. We'll see how that goes. But at a minimum, we think that this is lengthening the sales cycle. You can imagine firms, right now you call on them and the reaction might very well be, look, yes, this is important, but can you come back to us in 3 months? We're dealing with this coronavirus situation, and we need a little time. So the sales cycles in this area, which are already fairly long, 9 to 12 months, we think, are going to extend by some number of months. And that is going to -- the sales being a leading indicator of revenue, that's going to create a bit more drag on the revenue side. So that's what's informing our reduction in guidance. That being said, it's a remarkable set of products that come out of Moody's Analytics, and it has a very strong recurring revenue base. It's a subscription-based business, for the most part. So as you can see, we have 89% recurring revenue, and we have very stable retention rates in the low to mid-90% range in terms of renewals of subscriptions. So there's a lot of ballast here coming out of the Moody's Analytics business, and that's terrific in a volatile marketplace. Part of what we've seen and part of the growth opportunities coming out of Moody's Analytics are looking at areas of risk that traditionally we wouldn't have looked at. And so this is a very high-growth business is know your customer. We're in that business because of our acquisition of Bureau van Dijk, and then we're even further in the business because of our acquisition of Regulatory DataCorp, RDC. And those databases that we acquired are comprehensive. I mean Bureau van Dijk has data on 360 million entities. Bureau -- Regulatory DataCorp has information on over 10 million individuals. And they are able to combine those databases to provide a very powerful know-your-customer offering. And as I mentioned back at the beginning of our remarks, just with COVID, we have been able to roll out a Know Your Supplier platform. We're making it available to the medical community right now. It's going to be a product. Imagine coming out of coronavirus the additional attention that's going to be paid to supply chain management, customer management. Just the risk management profiles of companies are going to -- whether it's through legislation or whether it's through just risk management committees and the attention to being more resilient in terms of supply chains, in terms of customer relationships, tremendous opportunity for us in Moody's Analytics. And this is on top of everything we're doing in the research sector, what we're doing with commercial real estate. But those are the kinds of opportunities we're most excited about. The know-your-customer sector has been growing at about an 18% compound annual growth rate over the last 5 years. And Bureau van Dijk has been doing better than that. They've actually just about doubled that growth rate. And if you put together -- on a pro forma basis, if you look back at 2019 and you put Bureau van Dijk's know-your-customer business together with Regulatory DataCorp's, that is already about a $150 million business growing at -- for Bureau van Dijk, growing in the mid-30s percent range each year and for the market growing at an 18% range. So either number is very attractive. But even if we just look at the 18%, we're talking about a $900 million addressable market. And if we then take one more step and look at what we can be doing to alleviate all the manual work that firms engage in for know your customer, Know Your Supplier, that could be another $10 billion on top of the $900 million. If we can apply some artificial intelligence, some automation to allow firms to do the necessary work to have the right customer relationships managed in the right way and it can be done automatically, that's a tremendous opportunity.

Interesting. Just to touch on that point, I think you mentioned $10 billion addressable market. Is there -- are there any sort of investments or additional datasets that you need to have to be able to fully attack the opportunity?

I think really, it's about building out the analytical platform that allows us to use that data or allow -- would allow a customer to use that data in a very automated way. And so that's -- as opposed to us just applying them with our solution, we can give them the platform and allow them to -- I'm exaggerating but allow them to push a button and do all the diligence and compliance work that they need to do and that they are currently doing with a lot of manual intervention.

Fascinating. Another part, I think, that's an opportunity for Moody's is maybe on lending automation. I think all the issues we've seen with PPP and just how manual and all the frictions involved in the sort of bank credit life cycle management processes has been interesting to see. I know you have a product, CreditLens, that can also tack onto the KYC stuff. So maybe talk about your opportunity around that opportunity as well.

Well, actually, Christian, you've done a very good job of just explaining the opportunity for me. But no, it's -- for small businesses, small and medium-sized enterprises, again automation and automation built off of very robust datasets is going to allow for more efficiency, more speed in the market for private company loans. And that efficiency, that speed, obviously, is highly desirable, but it's also providing better analytics. And I think the point here is really building the platforms, I don't want to minimize this but is relatively easy if we have the data, the data is comprehensive and the data is curated. I think the whole theme of trusted information, trusted data is going to be a big trend coming out of coronavirus. And it was a trend anyway just in terms of who do you trust and why can you trust them. But with the datasets we have through our acquisitions primarily, we've got the raw material on which to build the solutions. And those solutions are going to be best-in-class solutions because they're powered, they're trained, if you want to think of it that way, they're trained by these unique datasets that no one else can replicate.

We're getting to some time here, Ray, so let me move over to a couple of questions from the audience. The first one is, "Tax rates -- potentially, there could be higher tax rates depending on what administration wins in the U.S. in November. What do you think or how do you think higher tax rates impacts sort of the debt markets and debt issuance?

Yes. I mean I think it's -- we're going to have to say it's a headwind if there are higher taxes. We saw the tailwind when there was a tax reduction coming a couple of years ago. So it's a fair point. But it also depends on a lot of other things that go around potentially higher tax rates in terms of what's other elements of debt. What's tax deductible? To what degree is it tax deductible? What is not? And so what comes out of post election, of the potential for a different administration is going to be dependent not just on where do taxes go but what about all the other attributes around a higher tax rate environment. Does it affect the municipal sector? In what way? Does it affect the high-yield sector in some particularly material way? So I know I'm giving kind of a push the can down the road or kick the can down the road answer. But without having a more comprehensive understanding of what the most likely changes are, I do feel like I've got to kick the can a bit.

Okay. On the buyback, the Board halted the buyback despite pretty strong sort of free cash flow generation for the firm. So maybe how should we think about what you need to see to restart the buyback?

I think we need to see stability in the markets, more stability in the markets. You're correct, we do have very strong free cash flow generation. That being said, we don't know how bad, bad may become. I hope that we look back at this and say we were being excessively cautious. But there's no time limit that we've set. We can go back into the market in very short order if we decide that we were too cautious or the markets recover more quickly than we might anticipate. That being said, I think probably the more useful answer is our thinking about capital allocation and share repurchase dividends has not changed as a result of the coronavirus. Our longer-term view of share repurchase is still going to be a prominent use of our free cash flow on a going forward basis. So nothing about this has changed our fundamental thinking about return of capital to shareholders.

Okay. And then just lastly, I think you kind of answered this but maybe tie it up in a ball here. What do you think is the biggest structural opportunity for Moody's as a result of COVID?

As a result of COVID?

Yes. Sort of like, yes.

I think it's going to be the marketplace moving to a more holistic view of risk where the ability to integrate different elements of risk analytics and then providing risk solutions on a more comprehensive basis, whether it's cyber or environmental, climate, other elements of ESG, know your customer, Know Your Supplier, that's all going to be emerging as who can provide the best product, which is the simplest to use, which is built off of the best data, that's going to be the opportunity coming out of this.

Perfect. Thank you very much, Ray. That was very insightful. I appreciate your time on our conference.

Thank you, Christian. And again, thank you for inviting us to participate.

Great. Thanks.