Yahoo Finance

Robert Fauber

Thanks, Shivani, and thank you very much everybody for joining today's call this morning. I'm going to kick off with some high-level takeaways on Moody's first quarter performance and an update on our 2025 guidance. And then I'm going to share why we're confident in our market position and how we're strengthening the earnings power of the business. And after our prepared remarks, as always, Amy and I will be glad to take your questions.
So on to the results. I think it's safe to say that the past few weeks have been more tumultuous than many have anticipated at the start of the year, and there's certainly a lot of noise in the environment with equity markets demonstrating much greater volatility in a headline-driven environment. And understandably that's making it harder for many businesses to feel confident in making important investment decisions.
But as you've heard me say before on these calls, it is times like these when our customers turn to us the most, and that's because we've got a vast reservoir of proprietary data and insights, mission critical software solutions, and decades of experience and understanding credit impacts to the countries, industries and companies, and we've done this all over the world across all sorts of economic cycles and geopolitical events, and this time is no different.
So amidst this backdrop, we delivered some very strong results in the first quarter. We achieved a record $1.9 billion in first quarter '25 revenue. That was up 8% year-over-year. In fact, both of our businesses grew revenue at 8%.
And with some very disciplined expense management, Moody's adjusted operating margin reached 51.7%. That's up 100 basis points from the first quarter of last year. And adjusted diluted EPS grew 14% to $3.83 and that really is the power of this franchise shining through.
Now turning to MIS, we delivered 8% revenue growth on issuance growth of 9%, and MIS achieved its highest ever quarterly revenue of $1.1 billion with an adjusted operating margin of 66%, and that was up 140 basis points.
At this quarter, Private Credit was a meaningful contributor to growth, particularly in structured finance. In fact, in the first quarter of '25, we had 143 Private Credit related deals. That's up from 69 in the first quarter of '24. Roughly a third of that volume came from Private Credit backed ABS, CLOs, and RMBS structured finance issuance, and then BDCs and Fund Finance was almost another one-third.
In fact, 20% of first quarter revenue growth in structured finance was attributable to Private Credit. So you can see Private Credit emerging as a tailwind for our Ratings business.
And amidst all the recent market uncertainty, engagement levels for our research and webcasts are at a rate 2x to 3x the levels that we normally see in a more stable environment. In fact, last week's ratings webinar on tariffs attracted roughly 3,000 registrants across 89 countries.
Now zooming out, the deep currents that I talked about on the fourth quarter call remain intact, and for MIS that includes Private Credit, transition finance, AI-driven infrastructure investment, and emerging in domestic debt markets. And these areas require significant investment in debt financing, and this hasn't changed despite the recent turbulence.
In a recent report on Private Credit, our Ratings team highlighted that data center debt issuance in the asset-backed finance market reached $4 billion in the first quarter of 2025 alone versus the $8.4 billion issued for all of 2024.
In the first quarter of '25, we rated a $2 billion data center CMBS deal in the US and that represents the larger scale we expect to see more frequently to finance digital infrastructure. We're actively evaluating several data center financing structures today across a number of teams and regions, and these financings are early stage, but they are increasing in both their scale and complexity, and they're a good example of a deep current that we expect will drive debt financing volumes for the foreseeable future.
Now, switching to MA, ARR growth was 9%, again led by Decision Solutions where ARR grew 12%. Recurring revenue increased another notch to 96% of total MA revenue and we continue to make investments in product development, platform engineering, and sales capacity in our strategic growth areas.
We're also executing on our ambitious cost efficiency program designed to significantly enhance MA's operating leverage over the coming years. And for 2025, we remain on track to deliver a full year adjusted operating margin of between 32% to 33%.
Now underpinning the 9% ARR growth is a very strong first quarter in terms of new business execution, and I want to share a couple of sales wins from this past quarter that illustrate that.
First was a multi-million dollar KYC deal with a major global bank to help them strengthen financial crime compliance. And we've grown this relationship by more than 2x since 2020 by expanding the breadth and depth of our products being used across the bank from credit rating feeds to economic data to early warning detection.
And building on that, we were recently selected as a global strategic data partner for their KYC program based on the high quality of our interconnected data sets, and that's a very strong referential customer for other major global banks.
The second was our first agentic AI sale in the KYC space with a major crypto trading platform that handles about a $1 billion a day in trading volume. In the first quarter, we signed a multi-million dollar contract across a suite of our solutions, and they're the first customer using agent review, which is our new KYC AI screening agent that helps onboard customers more accurately and quickly. And given all the manual labor in the KYC space, AI agents have a very compelling value proposition, and we're excited about this opportunity.
So more broadly, let me provide a quick update on our AI strategy across MA. Our focus remains on harnessing the transformative potential of Generative AI to drive growth, to enhance customer experiences, and achieve a more efficient operating model.
On the commercial front, last quarter I talked about how customers who upgraded to Research Assistant contributed meaningfully to growth in the Research and Insights business in 2024. Beyond Research Assistant, we've introduced three unique generative AI offerings that highlight the power of integrating our proprietary data to accelerate decision making for our banking and KYC customers. It's the automated credit memo, early warning system, and the KYC AI agent that I just talked about.
Additionally, Gen-AI navigators, now embedded in over a dozen MA product lines, are enabling on-demand customer support and improving user experiences across our solutions, and these navigators are helping customers maximize the value of our products.
We've also deployed Generative AI internally across three of our most significant functional job families in MA including Customer Service, Engineering, and Sales. For example, our Customer Service assistant has enabled a 20% reduction in resources for our support team, while significantly improving response times, all without compromising the quality of customer interactions.
In Engineering, we're rolling out increasingly advanced AI tools to empower our software engineers, setting ambitious adoption targets to accelerate roadmap delivery and drive innovation. And we've recently launched a transformative internally built agentic tool that will act as a sales companion for relationship managers and their specific books of business.
It's designed to act as a catalyst for tailoring our value propositions, for streamlining, prospecting and meeting preparation and accelerating buying decisions. And as you might imagine, our sales and management teams are very excited about the prospects for productivity gains. So these are just a few tangible ways that we're driving greater efficiency and effectiveness in important areas across the firm.
So anchoring this back to where I started my comments just a few minutes ago, Moody's value proposition is especially relevant in times of change and uncertainty, and we're doubling down on improving the earnings engine of our business and delivering strong results in the face of volatility.
And while the services that Moody's provides are not directly impacted by tariffs announced to date, we do believe many businesses are being impacted by the uncertainty of impending trade's tensions, and this uncertainty in turn leads to customers delaying financing and investment, and we've seen this in the first few weeks of April.
As I think most of you would expect, we're taking a more conservative approach to guidance given the operating environment since we issued our initial guidance earlier this year. We've widened and lowered our guidance range to accommodate a broader range of potential outcomes at this point in the year. I know Amy's going to share more details in her prepared remarks, and I'm sure we'll address this further in Q&A.
Now looking beyond the near term dynamics in the markets, we feel confident about the deep currents that are underpinning the demand for our solutions. First, the evolution of capital markets, including Private Credit. Second, the digital transformation and automation and financial services industries.
Third, the imperative to know more about who you're doing business with. Fourth, the financial impact of extreme weather events. And fifth, the transformative power of Generative AI and the tremendous unlock available from proprietary data.
And I want to double click on a few of these for just a moment. I've highlighted the growth coming from Private Credit. I'm particularly excited about the groundbreaking partnership with MSCI that we announced yesterday, where we're going to be providing independent risk assessments for Private Credit investments at scale.
And this partnership brings together our world leading credit scoring models with MSCI's very deep data on Private Credit investments, enabling investors to understand the credit profile of companies and individual loans, and together, we're serving a critical need for transparency and standards in the Private Credit market.
To support banks in their drive to digitize and streamline their credit and lending workflows, we've integrated numerated enable AI's front-end capabilities into our flagship lending solution, CreditLens. CreditLens supports nearly 500 banks with nearly $27 trillion in assets.
In fact, CreditLens' ARR, which represents over a third of the total banking line of business ARR, grew at 12% over the last 12 months, demonstrating our ability to innovate and enhance our scaled solutions and expand relationships within our core customer base.
On the impact of extreme weather events, EON reported that first quarter economic losses of $83 billion were well above the 21st century average of $61 billion. In January, we closed our acquisition of CAPE Analytics, a leading provider of geospatial AI data and location intelligence for property underwriting, and now we're integrating CAPE into our industry leading catastrophe models, and this is going to give insurers an incredibly high-definition view of property risk, allowing them to insure more confidently and with greater precision.
So we feel good about the medium term given these deep currents, and we can and will manage through the short term. And we've got an experienced team and a strong portfolio that's built to weather storms and to provide insight when the market needs us most. With that, Noemie, over to you.

Noemie Heuland

Thank you, Rob, and hello, everyone. Thank you for joining us today. This morning, I'll start with our first quarter performance, then walk you through how we're thinking about the rest of the year.
Starting with Q1. We achieved the record financial results. MCO delivered revenue of $1.9 billion, up 8%. MCO adjusted operating margin improved by 100 basis points, and adjusted diluted EPS of $3.83 was up 14% year-on-year.
Moody's Analytics achieved quarterly revenue of $859 million, up 8%. Recurring revenue grew 9%, in line with ARR growth. Decision Solutions, which includes our KYC, insurance and banking solutions, grew ARR by 12% to nearly $1.5 billion. And this line of business is consistently the fastest-growing part of Moody's Analytics, with ARRs of 17%, 11% and 8% in KYC, insurance and banking solutions, respectively.
Research & Insights and Data & Information ARR growth rates were 7% and 6% year-on-year. You can see this breakdown on slide 7.
Double-clicking in MA's line of business results. First, within Decision Solutions, KYC led the growth with strong demand for our data, analytics and workflow solutions. KYC ARR growth was driven not only by our banking customers, as Rob illustrated earlier, but also by significant deals with corporate customers to vet suppliers and with European government entities to investigate fraud.
In Insurance, our Climate and Specialty Insurance Risk Solutions and HD models are key differentiators in the market, driving ARR growth of 11%. In the first quarter, we signed an exciting deal for our cyber risk models with one of the largest global property and casualty insurers, showcasing that we are embedding ourselves in the insurance ecosystem across multiple risk domains.
In banking, ARR grew 8%, as customers are increasingly engaging with us to automate and digitize their lending workflows. In fact, over the last year, we've seen an increase of almost 20% in new business related to our lending solutions.
Turning to Research & Insights, now growing at ARR at 7%. The improved ARR growth rate is primarily driven by the lapping of two attrition events in the first quarter of last year. New business generation continues to be strong, up 20% over the last 12 months.
And finally, our Data & Information business grew ARR by 6%. The downtick in the growth rate over the last two quarters continues to be impacted by two dynamics that we've talked about in recent quarters, an adjustment to our ESG strategy and attrition in sizable contracts with the US government. Outside of these two areas, ARR growth would have been 10%.
Now pivoting to Ratings. Record quarterly revenue was driven by Corporate Finance, especially from investment-grade issuers and by Structured Finance is continued momentum in CMBS and CLOs, as spreads remain tight and relatively stable for Q1. And you can see this on slide 6, and as Rob mentioned, Private Credit was a tailwind.
In this quarter, first-time mandates were almost 200, an increase of 20% year-on-year, broadly in line with our Q1 expectations. So net-net, a record first quarter with very strong execution on the backdrop of a constructed issuance environment up to the first week of April.
Now looking beyond the first quarter, we believe it's appropriate to pressure test our initial assumptions against the wider range of scenarios and update our guidance range accordingly. The market remains very sensitive to factors, including fiscal and monetary policy news flows, economic data and the potential path and pace to a resolution.
Global forecast for GDP are being revised downwards and the magnitude and timing of Central Bank rate cuts remained very much in flux. We currently anticipate high-yield spreads will widen over the next 12 months, and the latest forecast for default rates is also wider.
On the global and domestic M&A front, earlier expectations have been dampened by trade policy uncertainty. As such, we now expect 15% growth year-on-year in announced M&A, down for 50% growth in our February assumption.
So how does this all translate into a full year financial outlook? Well, first of all, we are pleased with the fact that Q1 rated issuance was broadly in line with our forecast, but we're now projecting MIS rated issuance to decrease in the low to high single-digit range for 2025.
Our range accounts for various levels of activity in May and June after a somewhat muted April and for variability in how quickly uncertainty resolves in the back half of the year. The breakdown by asset class is in our slide presentation on slide 10.
Finally, our issuance assumptions account for a relatively short-term disruption at the high end and more prolonged uncertainty with muted US GDP growth at the low end. While robust deal-making activity in the back half and healthy supply of high-yield issuance in the near term are possible, and certainly supported by subdued M&A levels and maturity walls respectively, we do not consider this a base case at this time.
Reflecting our updated issuance outlook, we now expect MIS full year revenue growth to be in the range of flat to a mid-single-digit precent increase for 2025. MIS adjusted operating margin is expected to be in the range of 61% to 62%.
Turning to MA. We are reiterating our revenue growth guidance of an increase in the high single-digit percent range, and we are adjusting the high end of our prior ARR growth guidance, with full-year ARR growth now expected to be in the high single-digit percent range.
There are two reasons for the ARR guidance adjustments. First, we want to acknowledge that the fluidity of the external environment drives uncertainty with customers and could lead to delays in decision-making as the year progresses. Although it's important to note this has not been the case so far.
Second, we are reflecting higher-than-expected attrition with the US government than originally anticipated. This includes the impact of what was realized in the first quarter and an increase in probability of attrition for contracts scheduled for renewal in the balance of the year.
Having said that, we continue to build a solid pipeline of new business and believe the recent customer wins demonstrate Moody's Analytics strong value proposition even in this environment.
On the margin front, the efficiency program we announced in our Q4 call sets us up very well. It provides us with the capacity to continue investing, to capture demand from the multiyear deep currents Rob highlighted and deliver on our commitment to scale margins.
Bringing this all together, with our adjustments to MIS revenue guidance, we expect full year 2025 MCO revenue growth in the mid-single-digit range, with an adjusted operating margin expanding by about 100 basis points to 200 basis points to a range of 49% to 50%. Our adjusted diluted EPS guidance range is a range of $13.25 to $14, representing 9% growth at the midpoint versus last year.
Now for modeling purposes, we expect the calendarization of top line and MIS -- and margin for MIS to be below the normal seasonal pattern for Q2 following the strong Q1 results and considering April issuance volumes. We anticipate that revenue will remain stable between the second and third quarters before declining in the fourth quarter sequentially, in line with historical norms.
For MA, we expect our year-over-year total revenue to be in the high single-digit percent range, with sequential quarterly increases consistent with the prior year.
Turning to operating expense, and excluding impact from restructuring and asset abandonment charges, we expect expenses to ramp by about $15 million from the first quarter to the second quarter and gradually increase sequentially in the back year in line with historical trends. The expected savings associated from our efficiency program will partially offset annual salary increases and variable costs as the year progresses.
Turning to our balance sheet and capital return. We have a strong financial profile and we'll continue to return capital to shareholders. We are maintaining our prior share repurchase guidance of at least $1.3 billion for 2025. Capital return represents approximately 80% of our free cash flow, which is now expected to be in the range of $2.3 billion to $2.5 billion for the full year 2025.
Echoing what Rob shared, we believe we are well positioned at the center of important deep currents and we are operating from a position of financial strength.
And with that, I'd like to thank all our colleagues around the world for their contributions to another record quarter for Moody's. And with that, operator, we'd be happy to take any questions.

Question and Answer Session

Operator

(Operator Instructions)
Andrew Steinerman, JPMorgan.

This is Alex on for Andrew Steinerman. Just real quick, can you walk us through your assumptions around what acquisitions were included in the prior guidance versus now? Specifically, was CAPE Analytics factored into previous guidance? And how much do you expect it to contribute this year?

Noemie Heuland

Yes. There is no change in our M&A assumptions with respect to our MA revenue guidance, that was already included before and it continues to be the case now.

Operator

Ashish Sabadra, RBC Capital Markets.

Ashish Sabadra

Maybe just a question on the issuance guidance. I just wanted to better understand when you reduce that guidance, just given some of the uncertainty, what were the key assumptions that were made in terms of M&A volume?
I believe original guidance was expecting M&A volumes to be up 50%. So what were the new assumptions? And have you also made any changes in any terms of assumptions for the refinancing volume?
Maybe just a follow-up there would be just how much visibility do you have for the issuance guidance for the rest of the year?

Robert Fauber

Ashish, thanks for the question. So maybe just to zoom out when we're thinking about -- how we're thinking about issuance and the outlook. Obviously, tariffs have been impacting how companies are thinking about spending and investment decision, so it's created some uncertainty, and that we've seen some of that already in April in terms of just a delay in issuance.
Spreads have widened out a bit. We've had some risk off days. You might recall, last year, it was basically blue-sky days the entire year. But as I mentioned, we're in a much more of a headline-driven environment at the moment, so we have had some new issuance days.
And now there are questions about kind of pace and trajectory of rate cuts through the balance of the year. So there's just a number of things that are going in to create some uncertainty for [issuers].
In regards to M&A, we've gotten off to a more modest start. We had thought that it was going to be primarily second half loaded. But I'd say it was more muted than we had thought and so, we've adjusted our own M&A assumptions down. I think we had 50%. We still believe there'll be growth in M&A off of a low volume, lower levels last year, something like 15%.
And again, I think we would think that, that will be generally back-end loaded. Really no change to how we're thinking about the maturity walls. So those continue to be, I think, very supportive of future issuance. Hopefully, that gives you a sense.

Operator

George Tong, Goldman Sachs.

George Tong

In your MA business, you saw Research & Insights growth of 7%, Data & Information, up 6%. Can you -- for these two subsegments of MA, can you talk about how sensitive they are to banking and asset manager trends that you're seeing in the current macro environment? And what would be the catalyst for accelerated growth for these two subsegments?

Noemie Heuland

Maybe I can take that, and Rob can further chime in, too. But for Research & Insights, the growth is actually mainly coming from our credit view product suite, which includes Research Assistant, as you know, as well as credit analytics models and economic data. We continue to expect a low end of high single-digit growth for 2025. Obviously, we're keeping a close eye on Credit View renewals in our asset manager customer base because they remain under cost pressure.
But we're having more conversations now with banks about growth. We're expanding the dialogue just beyond just risk and regulation. So we think that there's some interesting dialogue with banks around efficiency generated from Research Assistant and Credit View that we think will be supported for Research & Insights going forward.
And then for Data & Information, we had a bit of a slower growth in the first quarter, as I noted in my remarks, from elevated attrition in -- from US government. We also had the effect of the ESG partnership that we signed last year, which we talked about extensively in 2024.
And in terms of outlook for the remainder of the year, we expect high single-digit ARR growth in that line. We've made some investments in data quality and interoperability. We also have made some investment in our corporate go-to-market, which we'll expect will influence our Data & Information business, as well as KYC.
We're very encouraged by the dialogue we're having with our corporate customers around max side, and we expect this will be, again, a support for the ARR growth in Data & Information in the remainder of the year.

Operator

Russell Quelch, Redburn Atlantic.

Russell Quelch

Just wanted to ask around the guidance. Remind us again, could you square the guidance for a decrease in issuance versus flat to increase revenue growth for 2025? Is there a positive mix effect here coming from somewhere?

Robert Fauber

Yes. Russell, so you think about kind of the building blocks to go from issuance to our revenue, and we do have our annual pricing initiatives, and we always talk about that being kind of 3% to 4% on average across the firm, and that continues to be intact. There's actually a positive mix shift from what we believe will be a decrease in bank loan repricing activity as a percent of total, just given we really have minimal economics on repricings.
As I said, we do still expect modest improvement in M&A in the back half of the year, and that typically is mix positive. And then if we think about recurring revenue, that -- we think that will be up mid-single digits. And so that will also be supportive in terms of going from issuance volume to total rating revenue.

Operator

Craig Huber, Huber Research Partners.

Craig Huber

Great. Can you just talk a little bit further about the costs? I was pretty pleased with your cost containment this last quarter. Obviously, your restructuring charges in the last two quarters were higher than normal. But just talk about -- in a little more depth about where you're putting the cost out here between the two different divisions.
Maybe also touch on your outlook for incentive comp for the year and stuff. Just some more color, please.

Noemie Heuland

Yes. So we've -- you pointed out, we've announced an efficiency program in the fourth quarter. We're executing on that program as we planned. We've talked about the areas where we think we can generate efficiencies within our MA business this year and also a little bit within our corporate functions, leveraging technology and automation. We are through the integration of our acquired entities that has generated some efficiency gains in the Moody's Analytics.
And just to give you a bit of color on the margin outlook for the remainder of the year, we expect to be now in the range of 49% to 50% for the full year. That's up 100 basis points to 200 basis points. We already had some improvements in the first quarter. That's largely due to the transactional revenue growth, a little bit of a pause effect from the efficiency program that we have initiated, but that will materialize more meaningfully in the remainder of the year.
The margin improvement we expect will mostly come from MA for the remainder of the year. We expect the MA margin to ramp sequentially into the mid-30s range by the fourth quarter. The other thing to note for the margin for modeling purposes is the level and timing of incentive comp equals in MIS, which we've provided details on throughout last year.
We're currently forecasting for funding close to target. Whereas in 2024, we accrued above through the second half. So that will affect the quarterly margin comparison for the upcoming quarters.
And to your question about incentive comp, we now expect incentive compensation to be between $400 million and $425 million for the full year 2025. In the first quarter, we recorded $109 million, and so we're forecasting $100 million for each of the quarters for the remainder of the year.

Operator

David Motemaden, Evercore ISI.

David Motemaden

Just a another question just on the MIS outlook. Wondering if you could talk about some of the sensitivities, if we got more Fed rate cuts, how you think about that potentially impacting your issuance outlook as well as on the M&A side, if we had flat M&A this year versus the up 15%, how we should think about that impacting your outlook?

Robert Fauber

David, thanks for the question. I guess I would say the rate cuts are kind of a mixed bag. You hear us talk a lot on this call about one of the fundamental drivers of issuance is economic growth, right? This is companies that are investing. And if we have decelerating economic growth, which is we have shaped our growth forecast, we thought that tariffs are going to take about 1% off of global GDP growth.
If we've got decelerating economic growth, that's leading to Fed rate cuts, again, I'd say it's kind of a mixed bag. The negative impact of decelerating fundamental growth versus the benefit of lower rates. Now that may impact things like pull forward from the maturity walls and things like that. But I would say it's -- it will be mixed.
For M&A, I think we had talked about on the last call that kind of every 10% of M&A we thought we'd be about, call it, $35 million in rating revenue. So that gives you a sense of the sensitivity to that assumption. But I guess what I'd say is M&A is one assumption among many at this point that you have to look at in terms of thinking about what's going to go on with issuance.

Operator

Manav Patnaik, Barclays.

Manav Patnaik

Rob, just on Private Credit, just hoping maybe, it's a little bit of a broader question. But obviously, you said a lot of the growth showed up in structured finance. I was just curious which other lines within your Moody's reporting segments do you think you have initiatives where you think that could pop up?
And obviously, that's all good news. I was hoping you just help us balance that with all the headlines in the near term, I guess, around how the banks have obviously frozen and Private Credit is in the headlines taking deals here and there.
So just a balance with some of the negatives out there, too, if you could.

Robert Fauber

Yes. Let me work my way through that, Manav. Great question. So first of all, I'd say it's in times where you've got some volatility in the public markets that we've seen that Private Credit can step in. We've seen that with -- we started with post financial crisis, but we really saw it with COVID. And then in 2023, when we saw some stress in the US banking system, we saw Private Credit again step in there as a funding source.
I think you got to balance that with -- there are going to be increasing issues around asset quality across the Private Credit portfolios, right? This is -- these are highly leveraged, typically the direct lending or highly leveraged loans. And we're seeing it in a few places, right? We talked about structured finance. You're seeing a lot of asset-backed finance from Private Credit sponsors rolling through.
We also see it in fund finance. That may not be issuance per se at times. We've got ratings on different alternative asset managers and fund entities and other things. So it's not always showing up in the issuance numbers, but you see it in the first-time mandates. So the growth of our FIG first-time mandates is importantly -- there's an important contribution from Private Credit related entities.
And within FIG, when we talk about fund finance, it's everything from ratings on alternative asset managers and BDCs, but you've also got -- and I think of some of that is what you might call related to direct lending, right? Those are direct lenders. And then you've got true fund finance, where you've got things like subscription lines and NAV loans and rated feeders and all of that.
So those are the two places where we're seeing the most of this flow through.
The last thing I would say, Manav, is -- and I imagine most of you saw our announcement with MSCI that I mentioned in my remarks. But there's more and more investor desire to understand and have a third-party view of credit risk of the investments that they're invested in through these Private Credit funds.
And it's interesting, because when we made this announcement, we've gotten some very good inbound from people saying, ah, this is interesting. Tell me more. I'm interested in understanding how I can get this independent view of credit risk. So I think you're going to see, in MA, through our credit scoring tools, I think you'll see that as a revenue opportunity for us as well to capitalize on Private Credit.

Operator

Jeff Silber, BMO Capital Markets.

Jeff Silber

I wanted to circle back to MA. I know you slightly reduced your ARR guidance. You talked about the federal government exposure, I understand that. But beyond that, are you seeing any other kind of slowdown or uncertainty in those businesses? Because some of the metrics kind of look like they are slowing down a bit.

Robert Fauber

Yes. I'll take a crack at that. Not really. I mean we talked about the two things that primarily were impacting ARR in the quarter. And obviously, that impacts our guidance for the year.
And that was, as you noted, federal government, not surprising, I think, to many people. We had some ESG-related attrition as customers are -- some customers are actually going straight to MSCI. I think we kind of anticipated and understood that.
I would say in regards to -- we get questions about pipeline and sales cycle. And we've had a number of questions over the years as we go into these periods of turbulence about are the sales cycles extending. I would say no, not at the moment. But it's early, right?
And so in 2003, when we saw stress with the regional banks in the United States, it's not so much that we saw the sales cycles extend, but we saw some of the sales cycles push farther out in the calendar year, right, where banks just said, hey, look, I'm not ready to make a decision yet. I need to get more certainty about the operating environment and let's revisit some of this.
So the second thing is the pipeline is -- our pipeline across MA is quite robust. It's up double digits from the same time last year. So the pipeline is good. We're not seeing, at the moment, delays in sales cycles. But when we think about our guidance for the year, I think you're seeing us just acknowledge that it's a possibility.
We want to acknowledge in an environment of heightened uncertainty, it's possible we could see some of this push out, and we're also acknowledging these two attrition kind of themes from the first quarter.

Operator

Alex Kramm, UBS.

Alex Kramm

Just coming back to MIS for a second. I didn't fully understand the commentary you made from a seasonal pattern perspective. So maybe you can just give a little bit more detail there, what you said about the second and the third quarter. I think you said second to third is stable. But I think from a second quarter perspective, you didn't really say much in terms of what you expect pulling this towards April.
Are you expecting May, June to get better? Or what exactly should we be thinking about it from a seasonal perspective? Sorry, what the short-term focus, but clearly a lot in flux.

Robert Fauber

Yes. No, I'll start, and Noemie feel free to jump in. I think the way we've thought about this, obviously, we're incorporating the soft start to April, obviously, in our 2Q. And when we kind of think about the quarters, the biggest adjustment that we made in terms of thinking about revenues for the Ratings business is in the second quarter. And we don't know exactly how long some of this turbulence is going to last. I can talk a little bit about the current pipeline if people are interested in kind of what we're seeing.
But I would say the biggest adjustment to revenues was in the second quarter and then less than third and less in the fourth. So we're thinking Ratings is going to be down somewhere in the kind of -- Ratings revenue down somewhere in kind of the mid-single-digit range in the second quarter, down in kind of the low single-digit range in the third quarter, and up in the mid-single-digit range in the fourth quarter, and that gets us to somewhere between flat to mid-single-digit revenue growth for the year.

Operator

Faiza Alwy, Deutsche Bank.

Faiza Alwy

I wanted to ask about MIS margins and expenses more broadly. I think, Rob, you had talked about some Gen-AI related efficiencies more broadly in the business. So I think you might be talking about MA. But I'm curious, to the extent the environment worsened from an issuance perspective relative to how you're thinking about it at the moment, how much flexibility do you have in terms of whether it's pulling back on investments or just some of these efficiencies that are coming through?

Robert Fauber

Yes, Faiza, thanks. There's two things I'd say here. First of all, you manage through all these air pockets over the years. I can't tell you how many of these calls I've been on where there's some turbulence in the markets, and we get the sense about how are we thinking about being able to manage expenses. And the reality is that we've got, what I'd call, kind of the traditional levers that we're able to pull.
So if you see -- if we see cyclical declines in issuance, typically, we are very effective at managing headcount and all of that kind of stuff. And that's the first thing that we would look at, and that's what you would expect us to do in a declining issuance environment.
Only if there's structural changes, would we say, hey, look, we need to fundamentally think about the resourcing of any particular. But in this case, I think we definitely think this is a cyclical issue. So there's the traditional levers of just being able to manage hiring very effectively, which we've done over the years.
And then second, we talked about this idea of becoming increasingly volume agnostic within a range of a band of issuance while maintaining strong controls, and we've really been working at doing that by -- it's not just the AI tools. Those are helpful.
But it's also about building modern applications for our analysts, analytical applications, rating workflow applications, those kinds of things, that deliver efficiency to them, right, so that over time, we're able to actually be able to handle more credits per analyst, right? That's obviously the goal, to be able to do that with consistent rating quality and engagement with the market and high-quality research.
The advent of AI gives us the opportunity to deploy more tools for analysts. But of course, we have to make sure we do that in a way that respects our regulatory environment and has the right and control environment around it. So like many banks, we're more deliberate in how we deploy AI and the Rating agency because we need to make sure we have transparency on how we're using AI across the agency.

Operator

Owen Lau, Oppenheimer.

Owen Lau

So going back to your partnership with MSCI, could you please add more color on the revenue model of the independent reassessments? What are the use cases? What are your clients looking for? And also how big deals in it can become longer term?

Robert Fauber

Yes. Owen, thanks for the question. We haven't disclosed kind of the revenue model or opportunity, but I think we all understand that the Private Credit market is significant and growing rapidly. And what I would say is in our engagement with investors, and that includes everything from pension funds and long-only investors to insurance companies who are big allocators to Private Credit, we've heard that there's a lot of desire to have a rigorous third-party credit assessment of the investments that these entities are invested in.
So if you think about how we're serving the Private Credit market, we serve the alternative asset managers and GPs, and we also now have an opportunity to really serve the investors. And so what we're doing with MSCI, they have -- by virtue of their current platform, they have some very rich in-depth data on private credit investments across the fund universe.
And now they have the ability to leverage our models to be able to provide our EDF-X, our quantitative credit risk scores to those investors. Over time, I think you would imagine that as we have the opportunity to provide these scores, so the customers are going to opt in. And over time, you can imagine, working together to build benchmarks and research and indices and all sorts of other things that continue to provide additional transparency and insight into the Private Credit market.

Operator

Pete Christiansen, Citi.

Pete Christiansen

I was just curious if we could just drill down into the assumption on first-time mandates, I guess there's a lot of confidence there that's going to continue throughout the year. Just curious if you could just walk us through your confidence in that number throughout the year.

Robert Fauber

Yes. You're right, first-time mandates have actually continued to be the momentum that we had in 2024 has continued into the first quarter. First quarter FTMs, first-time mandates, were almost 200. That was up 20% versus the prior year quarter. And we saw growth in really all regions, except Asia Pacific. Corporate Finance was the largest source of first-time mandates.
But I would also say that -- and I mentioned this with Private Credit, there's this new dynamic now where we're seeing much more first-time mandate growth coming out of our financial institutions franchise related to Private Credit, right? So these are, again, BDCs, asset managers, Private Credit funds, all of these kinds of things that are getting rated for the first time.
In fact, I think something like one-third of our time mandates in FIG were serving the private credit market, both in the US and to a lesser extent, in EMEA. So we haven't changed the guidance at this time. Obviously, a lot of first-time mandates are related to leverage finance. So that is something to watch, but we have a bit of a tailwind in the FIG franchise.

Operator

Sean Kennedy, Mizuho.

Sean Kennedy

It was nice to see strong growth in KYC this quarter. And you touched on this on the prepared remarks, but I was wondering if tariffs and heightened macro uncertainties are acting as a catalyst for helping penetrate the corporate market. And could you also touch on the total opportunity and go-to-market strategy there?

Robert Fauber

Yes. Sean, good to have you on the call. So it's interesting. This point about -- your question about are tariffs actually driving some, have the potential to drive some demand for our solutions around KYC and supply chain, supplier risk. And I think the answer is potentially yes.
Because we've talked about it on the call before that this massive amount of company data, and then we've been enriching it with these other data sets to serve these various use cases, right?
It started with KYC, it's a very high-growth scale use case for us. But we talked about this corporate platform that we've deployed, we call it Maxsight, where we're not just serving KYC, but we're also now serving, for instance, supplier risk and elements of supply chain and so on.
So we launched that platform in the first quarter for corporates, got something like 150 quoted opportunities in the pipeline. So there's a lot of really good dialogue with customers around these kinds of use cases, and we're seeing some early traction in that dialogue in areas like kind of logistics and health care and TMT.
So I think, again, when we see areas where there's uncertainty, what you see is customers wanting to try to work through that uncertainty, get additional tools, get additional data site, and I think that's part of what we're seeing here.

Operator

Joshua Dennerlein, Bank of America.

Joshua Dennerlein

Rob, just trying to tie some of your comments today on expense management and margin versus maybe what we've seen in your history. If I look back to 2022, we saw like a fairly significant slowing in MIS revenues and margins really compressed. Is that not a good analogy to what might happen if MIS revenue slow a lot more than you expect this year?

Robert Fauber

Joshua, thanks for the question. I'll see if Noemie wants to double click on this. But I think there's a difference between 2022 and where we believe we are now. In 2022, we had revenues that were down something like 30%-ish, off the top of my head. So 30% decline in the span of one year, it's difficult to preserve a lot of that margin.
So we saw the margins come down below historical levels. But I would say in a general range, we have more ability. Obviously, we have incentive comp, which flexes up and down. And we have, as I said, some of these, what I'd say, kind of traditional levers that allow us to preserve more of the operating leverage within a band is how to think about it.

Noemie Heuland

Yes. That's the key. It's within the band of issuance. If you look at our guidance, we've adjusted our operating margin guidance for MIS by just a notch. We're now guiding for 61% to 62%, which is still pretty significant year-on-year increase.
And then that's -- to Rob's point, we're being cautious with discretionary spend. And we also continue to invest in our digital workflows and analytical tools. I think it's important to continue to equip our analysts with the technology that will help us be volume agnostic in the future as well. But again, we're not forecasting, at this point, anything like 2022 scenario.

Robert Fauber

Yes. And I think just when I kind of zoom out, you kind of look at the financial profile, the margins and so on, this is still a very strong financial profile for the business.

Operator

Jason Haas, Wells Fargo.

This is Jimmy on for Jason Haas. Just wanted to follow up on the KYC question earlier. Curious to what extent you consider the current MA profile is countercyclical? And are there any other specific subsegments that hold up better than others during downturns, maybe like insurance?

Robert Fauber

Thanks for the question. We've talked about over the years, in general, I'd say much of the MA portfolio tends to be -- I don't know if I'd say countercyclical. But it tends to weather these acyclical, maybe a way to think about it, that's probably there were probably acyclical. And you've seen 68 quarters of growth, consecutive growth, through all sorts of different periods where ratings revenue has gone up and down.
And if you think about why is that? It's because think about the use cases that we're serving across the various businesses. So in banking, you've got customers using not only our software but our data for everything from lending, to stress testing, to CECL, to impairment testing and ALM. And that stuff is just very, very sticky, as you'd imagine. These are not things that you just unwire when you hit an air pocket. And in fact, if anything, we'll see the usage oftentimes go up.
Same with our Research. There's more demand in these environments to access the research and access our analysts and get our insights in these kinds of markets. Insurance, same thing. If you think about what's going on with the extreme weather events, there's nothing to do with financial markets, right? It's completely uncorrelated.
So this need to be able to invest in these tools to better be able to understand and address physical risk and underwriting needs is not really, in that case, correlated to the market.
So the last thing I'd say, you asked specifically about KYC. There's a great -- there's another great example. What we do see are banks trying to become two things: more efficient and more effective. So there's no question that, that is going on. But what we don't see is our banks saying, hey, KYC is somehow less important. I don't need to invest in it. This is a place that I'm going to cut.
You do that, and next thing you know you have a fine or a consent order. And so I think banks have been very clear. They want to make sure they have regulatory compliance, but they also want to make sure they can get more efficiency. And that's why I mentioned this AI screening agent, because that is a fantastic opportunity to help banks, with compliance, to more effective, to reduce false positives but to be much more efficient. And so I think we're expecting to see some good demand there.

Operator

That will conclude our question-and-answer session. And I will now turn the call to Rob for any closing remarks.

Robert Fauber

Okay. Well, thank you very much for the questions, and we look forward to speaking with you on the next call. Have a good day, everybody.

Noemie Heuland

Thank you.

Operator

This concludes Moody's Corporation first quarter 2025 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. You may now disconnect.