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

All right. Good morning, everybody. Thank you for being here at day 3 of our Financial Services Conference. For those of you who don't know me, I'm Manav Patnaik, I'm Barclays' information services analyst. And I'm very pleased to have with us here Moody's new CFO, Noemie, and I got permission not to butcher her last name, so just Noemie. And so Noemie, thank you for being here. Really appreciate it.

Thanks, Manav. Happy to be here.

So this is your first public conference, I believe. It's been about 6 months, I think, since you've joined. So maybe I think a good place to start with is just to get a quick background of yourself and where you came from.

Yes. Thanks, Manav. So it's the first public conference here at Moody's. Happy to be back in a jampacked hotel room for a day. So I joined Moody's as of April 1 so a little bit less than 6 months. My background has been in -- mostly in tech. I've been a CFO at SAP for over a decade in different business units, first in Europe and then in Latin America. Worked also in Eastern Europe and Asia a little bit so a bit of an international background. I'm originally from France but moved to the U.S. about 10 years ago and was most recently CFO at Dayforce, HCM and payroll vendor, who's also gone through, like SAP, some transformation from a more legacy on-premise solution stack into a SaaS, full SaaS solution provider. So quite excited and familiar with large tech companies going through transformation, multinational, and very, very excited to be here at Moody's and working with the management team, and also take this opportunity to hear from our investors today about what they -- how they're looking at our business, what disclosures they like and what we could do differently. That's also very important for me.

Got it. And then perhaps, I mean, given your tech background and your software background, why Moody's?

Yes, it's a question I got a lot. So I was an issuer myself at Dayforce. I came to the building pretty frequently. I was always very impressed by the depth and breadth of the analysis that -- and the discussion I've had with the ratings analysts there. And I must say after 6 months in, the people I've met hasn't called in question that choice. It's a very exciting place to be very smart people, very focused on research and data and decisions based on data, which as a finance professional really resonates with me. So a lot of excitement around getting to know the Ratings business a little bit more beyond what I could see as an issuer. And on the analytics side, I think we have built, over 100 years, a set of incredible data assets, but we're very well poised to leverage by gen AI and other software solutions that we're building. And that's also a very exciting place for me to be using my technology background. So the combination of those 2 things, I think, makes it a very unique place. The management team, I've been very impressed by Rob and his leadership team, the Board. So all in all, very happy to be here and have joined.

Got it. Before we talk about some of the business trends and dynamics, maybe just from, again your seat, your perspective, if you go by division, maybe from what you've -- I know it's been only under 6 months but just some sneak peek into your plans and what you plan to bring to the table. Maybe on Ratings, it feels like it's already a nicely humming engine. What can we expect there from your end?

Yes. I think my priorities are very much aligned with the priorities of the firm is to continue to capitalize on our brand that we've established over 100 years being the trusted adviser to the capital markets, so continuing to build on that franchise. And especially in the ratings space, you've all seen the tremendous start of the year in issuance. We've been able to capture that surge in issuance with the investments we've made in our ratings, workflow, and standardization of those. So continue to build efficiencies, leveraging new tools and technology to continue to make our analysts' lives easier so that they can focus on continuing to provide thought leadership and strong research as well as the credit ratings that have been the bread and butter of Moody's for the past 100 years. So very, very eager to continue and support that. And then on M&A, there's a lot of exciting things that we could do leveraging, again, that data estate, continuing to invest in the right places to leverage that data estate, and we can talk a little bit about more of the investments we're making. So a very thoughtful approach to capital allocation, continuing what has been done at Moody's for the past few years and really investing for fueling the growth of that business but also returning capital to our shareholders and, again, committed to continue to do that.

Got it. And just on MA, I think the impression most of us have is given your background, I think maybe not a vast majority but a majority of your time will be focused on MA. Is that a fair assumption?

I think it's probably both, I would say. Again, the beauty, what really attracted me to Moody's is the combination of the 2, the Ratings franchise, the brand and the reputation we've established. That allows us to capitalize on that and continue to grow and leverage the data estate, to continue to serve our customers and help them manage risks that go beyond credit risk. If you think about the different types of risks they are exposed to in terms of knowing who they're doing business with, knowing what the cyber attack might have as an effect on their financial statements. So how do you translate all those different risks into financial risk? I think as, again, as a finance professional, that really resonates with me. And I think there's a natural combination of those 2 elements that makes it very exciting. So I wouldn't say I've spent more time on one or the other. Those to me are 1 part of a single purpose, which is helping our customers to manage their risks and make sense of all the data and information they're getting as they're making decisions about their businesses.

Okay, fair enough. And then since you brought it up, maybe we just touch on it now. You mentioned capital allocation. Your philosophy compared to what Moody's has been doing or anything different you bring to the table.

Yes, I think we're -- first and foremost, we'll focus on continuing to invest to the growth of our business. You've seen, again, the issuance environment in the ratings. We've been able to capture that surge in issuance and continue to increase our margins simply because we've made some investments in our rating workflow. And we've become more efficient at addressing that surge so that we don't have to add as many bodies as we may have had in the past. So that continues to be a big area of focus for us, to invest in our rating workflow and continue to work with our regulators to address new markets like sustainable finance, like private credit. And so that's an area of investment. On MA, you've seen us invest in bolt-on companies to acquire like either tech talent in data scientists, engineers, modelers with the acquisition of RMS. So we'll continue to do that and invest to expand the breadth of our offering in MA. And then, of course, continuing to return capital to our shareholders. You've seen us increase our guidance for share repurchase earlier in July, and we're aiming to return 90% of our capital to shareholders this year.

Got it. And just 1 follow-up on the M&A side. Your appetite or maybe just your personal views towards larger deals?

So we've really been focused on more bolt-on acquisitions in the recent past. You've just seen us last week announcing Praedicat, which is a pretty exciting acquisition in the insurance space that will broaden our offering there and allow us to cross-sell to their casualty market. And so we can talk a little bit about that as well. So that's an example of things we're really focused on is building -- extending the capabilities of our MA offering. We've also made some investments in the domestic market in Ratings with the acquisition of -- completing our acquisition of GCR, the leading agency in Africa, which is present in 25 countries. And then if you think about, I think 6 of the 10 economies, fast-growing economies are in Africa. So that's another area where we're really excited to invest. So that's why you'll continue us to see and as far as always looking for opportunities to continue to expand our offering and big deals, we'll see what comes in the market.

Okay, fair enough. All right. Let's move to some of the business trends then. You mentioned you guys have the capability to capture the surge in issuance. There has been a nice surge in issuance this year. S&P put out some of the numbers in July, it was a crazy number. And August, September seemed good. So just your thoughts on the current environment? Like how you would characterize that and whether that was also contemplated in your guidance?

Yes. So you called it out, a very strong first half and second quarter, we raised -- we were above $1 billion in MIS revenue, which I think is the second largest quarter on record so very pleased with our performance there. We've seen -- the interesting statistical thing for me, we've seen the transaction revenue for the first half of 56% growth going higher than the issuance, the 43%. So back to the point about being able to capture that surge and really grow even beyond that. So that's obviously very exciting. We've seen strong performance across our asset class. We've raised our guidance for most of those asset classes as well. We've -- in terms of what we're seeing, and I'm not going to obviously reiterate or provide additional guidance here, but we've always said even in the beginning of the year that we would expect the second half to be more muted. That continues to be true. We expect the month of November and December to be more muted simply because our issuers have been advised by their banking partners to go to the market earlier this year. So we've seen some pull forward from 2024 in-year maturity. And as we've said and so that's why we've raised our -- we've taken a softer approach for the second half. Having said that, we've also done, in July, taking into account the strong performance that we've seen in the beginning of the year. We've actually rolled out into the full year guidance and we've upped primarily our Q3. So that's the reason why we raised our guidance in MIS. So I think overall, it's a great environment. You've talked about what you've seen in the last week post Labor Day, and so we're pretty excited about what we see.

Got it. And just on the Q4, I think your peers have taken the same approach to be conservative. I'm guessing some of that is election volatility that they're advising against. But barring that, there's no -- there are no macro reasons to believe issuance will suddenly slow.

Typically, you see the first half issuance historically has been typically higher than the second half, so that's just a natural follow-on to that. And as you said, we want to be more cautious and acknowledge some of the uncertainties around the U.S. elections.

Got it. And then before we get into the more medium-term view, you mentioned 43% issuance with 56% kind of revenue growth or whatever. What is that 13-point delta? Is it a combination of pricing and other things or how should we think of that?

Yes. So we're focused on transaction revenue, which is something we -- driven by the activity. We have also a recurring revenue, which is more on the frequent issue of pricing and the price increases that we're doing. I think it's an interesting -- so let me give you a bit of color on the different elements that play around the mix. Obviously, we've seen in Corporate Finance, a very strong growth in the first half. That was driven primarily by leveraged loan. And those are typically more repricing and refinancing activities, so less favorable to the revenue mix. However, investments -- but those can be also sometimes priced with a premium if they're really complex, but mostly those that would typically be more repricing and refinancing types of activity. On investment-grade, this quarter, we've seen a pretty strong M&A activity, deals related to M&A so that's obviously favorable to the mix for us. And then spec-grade loans is typically where we're able to charge a premium so that's more favorable to our mix. So that's kind of the best way to think about it. If you want to summarize it, Manav, I think what's more favorable to our revenue mix is obviously spec-grade, issuance, M&A-related transaction, our rating assessment services, which is -- precedes M&A transaction. That's also a pretty high premium that we can charge for that. And then less favorable is more like the refinancing and repricing activity, which we've seen in the corporate sector.

Got it. You mentioned M&A. You're starting to see some signs that are already in the second quarter. I think majority of the year has been refi. So just on the M&A front, like I know you guys have the Rating Evaluation Service that gives you a little bit of a leading indicator. Are you seeing any signs there?

Yes. Before I go there, I want to call out also the -- in the Financial Institutions group, which I should have mentioned in the revenue mix. We also have the infrequent issuers. That also is usually more favorable to our mix. That's why you saw the performance in our Financial Institutions group in the first half. We've seen a record amount of frequent issuer in that space coming to market in the first half so that's obviously helped the activity, especially in the insurance space. So I just wanted to call that out. Now in terms of new money on M&A, we've seen signs of M&A activity. I've talked about what happened in investment-grade in the second quarter. That stays below historical levels. So we have yet to see a rebound there and that's obviously an upside for us down the road. We have private equity funds that are firms that are really sitting on -- have a lot of dry powder. So when that's going to be deployed, we'll see a pickup in that in terms of issuance as well. But corporate had a lot of cash that they have to put to good use as well so obviously, that's another potential tailwind for M&A activity. And we have yet to see the IPO market in the U.S. really pick up so that's also another element that could affect activity going forward.

Got it. You mentioned pricing initiatives earlier. And I think the more complex a deal, the higher the price that makes sense. I think you referenced frequent issuers before. So just curious, was there anything new in terms of the pricing and frequent issuers, just your broader pricing.

We have -- and that's something I was very interested in coming in and I participate in those. We have ratings pricing committees. So where the commercial team and very separated from the Ratings group actually reviews our offering and the pricing of such and we take a very thoughtful and long-term approach to those. We haven't changed our approach there. We still have roughly 3% to 4% increase based on the market and the actual CPI.

Got it. In terms of the -- to my earlier point on barring election volatility, there can always be more pull forward, right? So maybe just some thoughts on the maturity wall looking ahead. They look pretty robust.

Yes. We'll publish our maturity wall study, I think, Shivani, sometime in October so we'll talk more about that obviously at that time. In terms of pull forward, I think we've seen, obviously, in-year, 2 types of pull-forward that we typically see. One is the pull forward related to the in-year calendar year maturity. We've seen definitely some of that, as I said earlier, with issuers being advised by their partners to go early in the market. So we've definitely seen some of that. That's what drove the first half performance. We've also seen some pull forward from 2025 maturity. And I would say that from spec-grade issuers -- and that's not uncommon. That's pretty common to see. You don't want to wait until a maturity to go to market to risk a risk-off period in the market. So we've looked at historical trends, and we haven't seen any that's out of the norm. Those pull forward from subsequent maturities are within historical levels. There's just simply a lot more debt to be refinanced so the stock of debt has actually increased. And so that's what is driving some of the outlook for 2025. We haven't published anything yet, but we will publish our maturity wall. And the other thing I would say is if you think about leveraged loans, think for 2020 and 2021, there's about $1.15 trillion that was issued. 70% of that matures in 2027 so those won't come to market until the rates come down because they were issued at such a tight spread. On the other hand, there's about another $1 trillion that was issued in 2022 and '23, and those might be candidates for pull forward because they were issued at a higher rate. So that kind of gives you some color about how we're thinking about it.

Okay, fair enough. Is there anything to call out in terms of the recent surge from a geographic perspective? I think the assumption is U.S. and Europe is most of the activity, but you mentioned GCR, you have Latin America, any of these emerging areas?

Those are like on the domestic market, I think those are more like areas of investment and future opportunities to continue to grow our business. They're part of the MIS growth algorithm. There's nothing out of, again, what I want to call out here is just areas that we're really focused on to give investors access to domestic markets and provide the same level of transparency there that we've been providing in the U.S.

Okay. And then just maybe lastly on Ratings margins question. It's a very healthy margin. You've mentioned a few times, efficiencies, the opportunity with gen AI to do more. So it sounds like there probably is no ceilings and the margin is effectively strong. Just your thoughts on how we should calibrate the model.

Yes. We've published our medium-term guidance for MIS margins that, I'll stand by that. I think it's a very interesting operating leverage, especially for me coming from places where that might have been the case in the past. We're making some investments, as I said, in our ratings workflow. I want to say on gen AI, though, to clarify for the crowd that we're not using gen AI in our ratings yet. We obviously have dialogue and discussions with our regulators, but that's not something we embed in the way in our methodology today, just to be very clear about that. But we're investing in modernizing our ratings workflow and digitalizing our platforms and so on. So I think it makes it for -- it allows us to say it different ebbs and flows in issuance, and that's the ultimate goal is to get to those margin levels with maybe less of a favorable issuance environment. And we can talk more about that later next year when we talk about our medium-term targets. But that's really where we're focused on. It's a great business. And the other thing I would say on margin is we've raised our guide for the full year, taking into account the performance for the first half. The other thing we've changed on the expense side is obviously our incentive comp and some of the true-ups on the legal accrual for the communication.

Got it, okay. Maybe we can move on to Moody's Analytics. So maybe I'll start with just a very high-level question. I mean, those of us who've been following Moody's for a year, I think we have an idea of what Moody's Analytics is, right? But often when I think a new person looks, it's a lot of different things. So how would you, new to the seat, try and explain high level what Moody's Analytics is?

Yes. I think to the -- back to the point I made earlier about being a -- helping customers manage the variety of risks that they're exposed to, I think Moody's has been doing this for over 100 years with credit risk. And now leveraging those capabilities and that brand and that franchise, we're now able to do that beyond just credit risk. And I think that's kind of the way I would start. We have a depth and breadth of data that comes from our Ratings group, but also we work with over 130 vendors to enrich our data and provide data unrated names and other private companies. So leveraging that data, we curate that data based on the use case and the needs and the risk you're trying to address. So take a cyber risk and how that would affect my financial profile or we have an investment in BitSight that's a leading provider of credit risk, or climate risk with the modeling around that we -- the acquisitions we've made with RMS. We're able to explain or articulate how a catastrophic event might affect either your suppliers, facilities, and as such, your supply chain or your portfolio, if there's a hurricane in a specific area where you have some properties. Those are kind of -- we are able to address all those different use cases with the data sets that we have and some of the modeling and research capabilities that we've built over the years. And then the last layer of it is, if you need to, if you want to, you have Decision Solutions tools that allow you to leverage that data, that feeds some of those models to be able to make decisions on how you're going to approach a particular risk. Is that a risk that I'm going to -- where is that risk coming from? What's the magnitude of that risk? How do I dimension it? Then under which condition am I willing to accept to take that risk and what's going to be the financial consequence for me to take that risk being in the insurance space, in the banking space, or even in corporate with KYC and doing business with a certain person? And then the last thing is how do you report on those risks not only internally to be able to sustain the decision you've made about approaching a particular risk, but also to your regulator or whatever compliance requirements you have to be able to document and report on how you manage those risks? And I think -- so there's a variety of use cases where those principles apply, but that's probably the way, at least I, like to think about it and what I found very interesting again as CFO.

Okay. We'll break it down a little bit more. But first, I think you kind of alluded to it, gen AI seems to be a little bit more of an MA focus at the moment. So can you just help us appreciate what the gen AI initiatives there are?

Yes. And just on the MA focus point, I think we're not using, again, gen AI in our ratings work for, but we're also obviously talking a lot with our regulators in the ratings space about the use of gen AI and how that affects the Ratings, I just want to call that out. We've been -- it's interesting -- it was interesting for me to see coming in not only externally, we could talk about our gen AI offering, but just start internally. We have rolled out Copilot and a lot of different tools internally and everybody is using it. That was a big finding for me coming in from coming from a tech world where I was more accustomed to seeing that. I wasn't expecting necessarily Moody's employees to be so up to speed and using those tools. We have hackathons that we run where we have very strong ideas about internal efficiencies as well. So that's a pretty exciting place to be in that regard. Now in terms of our gen AI opportunities for our customers in our MA offering, if you think about what feeds gen AI and large language models today, it's really about the data that you have. And so we're doing a lot of investments to make and render those data sets that I talked about in different areas interoperable so that they can be applied and leverage with gen AI capabilities to address any use case that you may want to. So let me give you a couple of examples. You've heard about Research Assistant in MA, and that's part of our research -- in our Research & Insights group where we've developed some gen AI capabilities to make the life of our research analysts easier. You can have also a credit memo that are produced in a more -- much more rapid fashion. So that elevates the discussion with our customers. We're talking now about significant savings across company-wide as opposed to maybe selling a particular product at a given price point. So that's a very interesting value proposition there. We've also recently launched the early warning, and that's pretty exciting, I've seen a demo of this the other day. It tells you basically using, again, a lot of different data elements internally but also externally, news feeds, telling you a retailer is going to exit a particular location or geographical area. That immediately alerts you to see if you have any of those leases in any of your particular real estate -- commercial real estate portfolio associated with that particular retailer as a tenant. And then it can tell you scenario modeling around vacancy rates and things like that and probability of losses. So that's another example of use case that we've recently launched with gen AI and that's, again, very exciting.

Got it. Maybe just a few quick ones before we go broader as well. Last quarter, I think you had widened the range on the Moody's Analytics business. I think from my recollection, there were 2 main factors. One was market environment and then there were some nuances with the MSCI partnership. So let's just take the market environment first. Can you just remind us what you saw and perhaps any update on if things have stabilized?

So for the ARR guidance that you're referring to, we've -- MA has been consistently around 10%, 10.4% in Q2 growth in ARR. We've widened our guidance range for the full year a little bit. I would say, though, that the midpoint of our guide is still in that high single-digit number so just to set expectations there. We've called out a couple of things that are happening at the same time and that we think will affect a bit the way we're looking at it for the balance of the year. The first, you talked about the partnership with MSCI, where we and we can talk about more about this. But on the market question, we obviously have a significant footprint with banks and financial institutions and asset managers. And we've continued to see a little bit of cost pressure, and I'm sure you guys are probably facing this as well in your own firms around decision-making around investments. And so we continue to see a bit of cost pressure from that category of customer segment. Having said that, the performance in the first half of 2024 was stronger than the first half of 2023. So we start to see this picking up. We also have our Research Assistant product that we expect will drive further growth in the back half of the year and subsequently. And the other element we've called out to kind of explain and articulate the widening of the range is some of the large contracts with a few government entities and, obviously, in an election year, depending on budget decisions, those renewals can swing from 1 year to the other. So just wanted to acknowledge those comments.

And just one quick follow-up on the cost pressures you talked about. From your standpoint, does that seem to be more of a cyclical factor or is there something else going on out there?

I think it's more like if you think about, and I'm sure Barclays is in the same boat, like large financial institutions and asset managers who have traditionally been our customer base, they will have a long journey of digitalization to go through. So I think there's an overall tailwind to growth in the future. I think we're just seeing a bit of an air pocket with some of the consolidation that we've seen in last year. But if I'm looking at some of the conversations we're having with our large customers in banks and financial institutions, there's a lot of appetite and excitement around making the work more efficient, leveraging, again, data sets that you guys probably are dealing with every day. And how do you make sense of those data sets to free up capacity for you guys to be working on something more meaningful? So I think overall, there's a large opportunity there. We continue to see that customer segment as a port to what we do. So there's -- I wouldn't say there's -- it doesn't call that into question for sure.

Fair enough. Let's just touch on the MSCI partnership then. Maybe 2 parts. First, just if you could remind us the impact in the quarter from the partnership. And then maybe just a broad -- from the headlines, it seems like a potentially very attractive partnership longer term. I think you guys put it out in the holiday week so it didn't get much attention, but just some thoughts on your end from there.

Yes. So let me step back. MSCI is obviously the leading provider of ESG content and scoring and we just wanted to offer to our customers the best data set. So we're incorporating those data sets now into our product in MA. So that's what this partnership is about. We also, on the other side, we are going -- working with them to expand their coverage with private companies that are using Orbis. They also have a very significant footprint with the asset manager segment. And so we're excited about the opportunity to leverage to provide access to our Orbis database to those types of customers and embed that in their -- in the way MSCI market their product. On the financial aspect for the quarter, we've called out, obviously, some people action that we've made for people who are working on building that ESG content. And we also have an asset write-down that we've talked about for the second half of the year that's embedded in our guide. It's noncash and operating charge.

Yes. We had asked Andy at MSCI as the CFO there's the same question yesterday, and he was very excited about the 2. So aside from the Orbis database access, I guess that they're getting, from a distribution capability, what are you bringing to the table there for them to?

So I think, again, we have Orbis. We have over 525 private and public company names in there so that obviously allows them to expand their coverage and provide additional scoring to companies that they may not have rated and provided scores in the past. And that obviously has a lot of interest for their existing customer base. So that's 1 example. There's a lot of other things. If you think about KYC, potentially that they can leverage from Orbis and having an understanding of the hierarchical and corporate structures of those companies. So there's a lot of different use cases. We're in the -- obviously, in the infancy of building that with MSCI, but there's a pretty good excitement on both sides.

Got it. Maybe if you can move on to the Praedicat M&A you referred to? And maybe just -- I guess we can start there, but how does that fit in with the RMS acquisition and then I just had a follow-up on RMS.

Yes. It's actually expanding the depth and breadth of our insurance offering. You've seen insurance ARR growth pretty nicely going up this quarter so that's definitely an area where we're excited. We are now tapping into the casualty market, which is, I think, probably an equivalent size of the property market. So that's obviously a very exciting acquisition for us. There was a rapid growth in litigation, financing have increased. The raising cat losses for insurers have also increased. So bringing those capabilities is actually enhancing the breadth of our portfolio in insurance. And we have now the ability to cross-sell our solutions to the casualty insurers as well, which we may have not had the ability to do so easily in the past. So that is overall a very nice complement to our insurance offering.

So where do you think with RMS is the property model and then Praedicat?

Well, RMS has a lot of different catastrophic models that -- around property and losses associated with catastrophic events. So as -- again, as insurers are facing different levels of risks and different losses associated from a variety of risks, I think that's a very complementary offering and we're pretty excited about it.

Got it. The high growth in insurance that you referred to falls into that Decision Solutions line item and then there's banking and KYC as well. And I believe KYC is also growing really nicely. So can you just maybe tell us why that's the case?

Yes. If you think about KYC, it's almost -- it started with know your customer but almost getting into know your everything now, right? You want to know who you're doing business with in terms of companies. Are they subject to any sanctions? Or are they -- do they have, as part of their corporate hierarchy, any link to Russia or other types of entities? And I think that's a very important aspect of our KYC offering. I would give you an anecdote. I was -- when I was at Dayforce, we used to obviously manage payroll funds for our customers, and we would put those funds in a trust. We opened a National Trust Bank to be the trustee of those customer funds so it opened up a lot of regulations around KYC and know your customer, know your party. And we were doing a lot of that research and figuring out every time we're signing a customer manually and how -- are we allowed to have to do business with that customer because the funds that are coming to pay the employees of our customer are going to be held in a trust that is regulated by the OCC? And I remember going with my team and having a lot of headcount dedicated to doing that manually. Had I known at the time that we had a very good offering to do it, I would probably have come to Moody's earlier. And so that's just an example of how those are very cumbersome manual tasks that can be easily solved through the use of our technology, leveraging the data that we have in Orbis, but also using our 130 providers outside of the U.S. And I think that's good use cases for significant efficiencies. The other thing I would say is we're expanding and we're working on -- that's part of the investments we're making this year on the data variability to be able to have those use cases around KYC to the corporate segment as well for supply chain. We know whether -- which vessel a specific company uses, where the facilities are located. So that allows us to have a very strong insight into risk associated with third-party risk management, with supply chain, et cetera.

Got it. And just to round that segment off, just on banking. Can you talk about that solution set and what's proprietary or unique?

Yes, we have a very strong decision and modeling around solutions to help banking in the lending space. We recently acquired Able AI, a very small player to complement our offering in lending with documentation, et cetera. So that's very exciting. So we've been -- that's been really where we've seen a lot of historical growth. We have a strong credit and solutions for our banking partners. And again, that's a sector that will continue to grow.

Got it. I failed to ask the question on private credit in the Ratings section. But I think I want to ask it more from the Moody's Analytics side view because I think Rob and many others have said before that the data and analytic opportunity is much larger than what could be just a rating opportunity. So can you just talk about some of the -- that statement and what that means for Moody's Analytics?

Yes. So for private credit, it's interesting with -- in the Ratings space, first of all, we've set up a team earlier in 2023 that really is well connected to the private credit players, private equity funds and so on. And so we've had a very successful conference early May, where we had an audience full of large -- the large funds and the large players. We continue to have those dialogues. So we're really excited to really do what we've been doing for the public debt market over the 100 years and expand that to give more transparency to the private credit market. And then on the Ratings -- on the Analytics side, again with Orbis and we've expanded the coverage on rated names as well so companies that we don't rate. And that gives, again, a lot of data sets for different lenders, investors to understand more about who they're doing business with and who they can lend money to.

Got it. And then just to wrap that up on the Ratings side, I think most of the investors have gotten comfortable that it's not necessarily pure competition. So just your take there.

Yes, that's an interesting -- I think if you had heard Rob maybe a few quarters ago, he was a bit more cautious in terms of how -- is that going to be a replacement of some other sources of funding? I think we feel more comfortable now that it's an additional -- it's incremental to what we've -- versus what we thought in the past. So we're pretty excited about the opportunity to work with those private equity players. We've seen also in the first quarter typically some of that private debt coming back to the public market. So there's also that cycle that naturally provides a bit of a tailwind as well.

Got it. And then maybe last question. I think high single-digit ARR growth in Moody's Analytics, really strong issuance on the Ratings side. I think the stock, the multiple reflects like some high expectations. So the question is more, when rates start getting cut, how do you think that impacts both sides of the business?

So just on the ARR, we've grown by 10.4% in the second quarter it's important if you -- had Steve in the room, that would be something very important as well. I think we've said -- and just to your question on rate cuts, not for the actual valuation but on the business in general, we've said we were pretty agnostic to a rate cut decision this year. What really matters to us is economic growth and GDP growth. And so that's -- as long as we continue to see strong economic growth, I think we'll continue to see strong debt issuance and activity that fuels our businesses. So we're -- again, we're not accounting for any significant -- the rate cut decision is not going to affect materially our business. And listen, it's a great business to be in. Again, I think we've demonstrated that we can capture the environment that we're seeing and still delivering strong operating leverage. That also gives us opportunity to invest in the business in MA to fuel sustainable, durable subscription growth in our SaaS solution and make the investments required in the data sets in our infrastructure to be able to have a sustainable growth in MA in the future. And that's really what I think is reflected in the current sentiment around the stock. And that's certainly how I feel about the company and the reasons I joined.

Okay, perfect. Well, I think we'll end it there. Thank you so much, Noemie, for being here. Appreciate it, and welcome aboard.

Thank you.

Thank you, everybody.