Rob Fauber
President and Chief Executive Officer at Moody's
Thanks, Shivani. Good morning, and thanks to everybody for joining today's call. I'm excited to share our strong financial results as well as some key business highlights. And that's going to include some notable innovations and investments, progress on our GenAI strategy and a spotlight on our fastest-growing business in MA, that is our Know Your Customer business, or KYC as we commonly refer to it.
And before I get started, I just want to say how proud I am that Moody's has again finished number one in the Chartis RiskTech100. That is the most comprehensive global ranking of risk and compliance technology providers. And it is a great recognition of the breadth and depth of our solutions based on both market research and customer feedback. I also want to take a moment to recognize the incredible resilience and dedication of our people. And I've really appreciated how our people have come together recently to support each other and to continue to deliver for our customers.
So as you all will have seen from this morning's earnings release, we reported 15% overall revenue growth with strong top line performance and improved adjusted operating margins from each of our businesses. And that contributed to a 31% increase in adjusted diluted EPS in the third quarter. MA revenue grew 13% while achieving its fourth consecutive quarter of 10% ARR growth. And MA's growth continues to be led by our KYC business. We now have over $300 million of annualized recurring revenue, or ARR. And that's growing at 18%. MA also produced an adjusted operating margin of 33.6%.
Now MIS grew 18% in the quarter as the leveraged finance issuance markets continued to improve from last year's subdued levels, I would call it. And MIS revenue is now expected to grow in the mid- to high single-digit percentage range for the full year. And that acknowledges the current uncertainties in the capital markets
Last week, we published our annual refinancing wall study. And that showed a 21% increase in the total U.S. nonfinancial corporate debt coming due over the next five years. And as I've mentioned on prior calls, these refi walls are a very important component of our long-term growth algorithm. And that remains firmly intact. And as those of you who attended our Innovation Open House last month would have heard, we're moving quickly to integrate our broad data and analytic capabilities across our product suite and to leverage the power of GenAI to develop new and cutting-edge solutions to empower both our customers and our employees. And the pace of innovation is clearly accelerating across our businesses. We're investing, we're launching new products, entering into strategic partnerships, all that will enable us to continue delivering market-leading growth. And if you look just at the third quarter, we announced some really interesting things. And I want to take you through a few of those. And I'm going to start with ratings.
We've talked about on prior calls about how deepening our participation in developing capital markets, and in particular, domestic issuance markets, is important to that long-term growth algorithm that I just mentioned. And that includes Latin America, where Moody's Local has grown its customer count by more than 20% this year. And the Asia-Pacific region also has some exciting opportunities, which is why in September, we further extended our domestic ratings business with the opening of VIS Rating in Vietnam. And that is a small but fast-growing domestic bond market. I also talked about how the relevance and importance of our voice in the markets is a really critical part of what makes MIS the agency of choice for both issuers and investors. And last month, we published really a groundbreaking cross-industry report on cyber risk and practices. And it leveraged our relationship with BitSight. And we had nearly 2,000 companies that provided data and inputs. And we were able to highlight the more than $20 trillion of rated debt that is at high risk from cyber threats. And that is, I think, a really great example of the importance of a multidimensional view of risk, in this case, understanding how cyber risks are impacting credit risks.
Now moving to MA. We're launching our first GenAI-enabled product. We call it Research Assistant. And we've already previewed it with over 150 customers. Our strategy is to commercialize the launch as we head into the year -end renewal cycle. And initially, our thinking is that Research Assistant will be sold as an add-on to our flagship product, which is CreditView. And leveraging the power of an LLM with Moody's trusted proprietary content allows customers to generate rich credit insights in just seconds and with capabilities in multiple languages. We also expanded our coverage in CreditView to now include 12,000 new unrated names. And that allows us to better serve the private credit market. And customers who purchase that module are going to have a seamless, integrated experience that includes financials, ownership structures, credit scores, sector research, interactive scorecards and peer analysis. And I think that is a great example of content integration to serve new customers and new use cases.
We're also constantly investing in our data estate that includes Orbis, which is one of the world's largest databases on companies. And we've expanded again our partnership with BitSight by integrating their cyber data and scores for about 250,000 entities into Orbis. And that enables our customers to better understand cyber risk.
We also have several exciting product launches across Decision Solutions. So in banking, we launched a new module in CreditLens that will integrate a bank's own loan -level data with Moody's content. And this portfolio module really provides a dynamic view of a bank's loan portfolio by monitoring and measuring performance and providing early warning signals. We're also integrating RMS's physical and transition risk models with our proprietary ESG and climate data into a range of banking solutions. And that is empowering our customers to make better, more informed decisions around lending, portfolio management, stress testing and regulatory reporting. And these are some of the original synergies that we envisioned with the RMS acquisition. So it's great to see this in practice.
And speaking of RMS, I was in Europe last month at a major insurance industry gathering with a bunch of CEOs and Chief Risk Officers. And I again came away very excited about what we're doing with the industry. Together with BitSight, we recently launched the Moody's RMS Cyber Industry Steering Group with two major market players, Munich Re and Gallagher. And we're also partnering with Lloyd's of London to develop a carbon emissions accounting platform for their ecosystem.
Now in addition to these recent product launches and initiatives, we're continuing to leverage GenAI across our organization. And as you heard at our Innovation Open House last month, our colleagues are taking a really active and hands-on approach in innovating and driving change. In fact, over 70% of our people have used our in-house CoPilot tool. And that includes for things like coding, preparing a report or improving an internal process. And this adoption is also reinforcing our early-mover advantage as we're now benefiting from an internal feedback loop. And that's allowing us to share learnings from our own GenAI journey with our customers. And speaking of customers, we've been engaging extensively with customers around our GenAI strategy, including the relevance of our curated and proprietary data and research and our approach to data integrity and security. And in particular, since July, we've demoed our Research Assistant, as I said, with a number of our customers. And nearly every one of these customers believes that this product will have meaningful benefits for both their productivity and their insight.
We're also revving up the work that we've been doing as part of our partnership with Microsoft and leveraging their secure Azure OpenAI Service. We're building new functionality and content sets and entitlement capabilities into Research Assistant. We're also continuing to expand the ways that we leverage Microsoft Teams to collaborate internally. And I think importantly, we're seeking to expand our joint go-to-market opportunities, broadening the appeal of this partnership to new customers and market segments. And that includes creating Teams plug-ins that will be available to Microsoft's 300 million monthly users and infusing Moody's content into their Dynamics and Power Platforms to enable CRM and workflow integrations. We're also continuing to explore migrating our content sets to Microsoft Fabric to enable entitlement and delivery of content and insights to our shared customers. So really taken together, I'd say we're very energized by the progress we've made. And we're excited about the opportunities that lie ahead.
In addition to Microsoft, we're working closely with other leading cloud and software players, leveraging our respective strengths to deliver new and innovative GenAI solutions. And partnerships can take many forms. It can include joint product development, joint go-to-market activities or direct commercial opportunities. And to help maximize this opportunity, we've developed a strategy and a framework and a team for third-party partnerships. I think a good example of this is the work we announced earlier this week with Google. And through this partnership, Moody's and Google Cloud are going to explore creating LLMs and AI applications specifically to help financial professionals perform faster and deeper analysis of financial reports and disclosures and other materials. So we're certainly excited to be at the cutting edge of GenAI innovation with some leading partners.
In recent quarters, we've been spotlighting one of the three cloud-based SaaS businesses within Decision Solutions. And so I want to cap off that series, if you will, with KYC. And unlike banking and insurance, which are obviously industry-specific, KYC is relevant to all of our customer base. And as I said before, a really important objective for many of our customers is to have a better understanding of who they are doing business with, whether it's making a loan, underwriting an insurance policy, onboarding a customer or monitoring a supplier. And over the years, we have tried to be very thoughtful about how we have added to our capabilities to build a business that, as I said earlier, is generating over $300 million in ARR and growing at 18%. And two significant acquisitions that some of you ask about from time-to-time, and that's BvD and RDC, really foundational elements of our KYC solutions. And they have both outperformed their original acquisition targets. And there are several thematic drivers behind the growth of the KYC business. Specifically, I would callout the digitization and automation of what are very manual and expensive in-house compliance processes; the growth in online transactions and payments; and also the need for greater breadth and precision amidst new and increasing regulations; and all of this combines with the need for better analytics and insights, again not just about customers but more broadly, who companies are doing business with.
So by combining our proprietary data on companies and people with analytics and through a modern cloud-based SaaS platform, we're delivering solutions for our customers in some pretty compelling ways. And these solutions use traditional AI, you've heard us talk about that on this call before, that includes machine learning, natural language processing and integrating data on over 470 million public and private companies with more than 1.7 billion ownership links, profiles on over 20 million politically exposed people and sanctions in adverse media. And recently, based on customer feedback, we've also added an ESG scores and credit scores.
So we offer access to our KYC tools and content in several different ways. And that includes via data feeds or APIs into customers' in-house systems. It also includes full end-to-end workflow with proprietary and third-party data that supports customer acquisition and onboarding, screening, monitoring and third-party risk management processes. And the front-end workflow software is what we acquired when we bought PassFort back in 2021. So that moved us from being just a data provider to being a full-service provider in this space. And that combination is increasingly being recognized across the industry, including the recent Chartis awards, as the only vendor that's identified as a market leader for both data and workflow.
We're also seeing significant growth outside of the financial sector. And we are investing to enhance the relevance of our offerings in the corporate and government space. That includes our recent launch of something called Sanctions360. That enables customers to efficiently and effectively comply with regulatory requirements regarding their customers, counterparties and suppliers by better understanding the implications of both sanctions and sanctions by extension. And our ability to build solutions that reach a broad set of customers is really a key element of our land -and -expand strategy. In fact, approximately 25% of MA's overall new customer ARR growth in the last year came from KYC. And generating these new relationships then provides additional opportunities for us to cross-sell from other parts of MA. Likewise, our existing customer base also provides some very significant runway for future growth. Currently, only about 20% or about 3,000 of MA's customers buy one of our KYC solutions. And that represents an important cross-sell opportunity for our remaining 13,000 -or -so customers.
Now turning to MIS. In the third quarter, issuance was consistent with normal seasonal patterns. I'd say that activity was relatively subdued in July and August. And we certainly saw some stronger volumes in September. Growth was driven by leveraged finance on the back of what was the strongest leverage loan volume since the first quarter of 2022. And that, coupled with elevated activity from infrequent banking issuers and an improvement in project and public finance issuance versus the prior year, all of that contributed to a favorable mix. As a result, while global issuance was up about 12%, MIS transactional revenue was up 31% versus last year. And together with 5% recurring revenue growth, MIS revenue grew 18% for the quarter. And as we head into the fourth quarter, I'd say the general market sentiment remains a bit fragile. We've updated our guidance to reflect an expectation of modestly lower issuance volumes in the fourth quarter, particularly in investment-grade and structured finance, than we had been anticipating back in July. And the heightened geopolitical turmoil, combined with macroeconomic concerns around a higher-for-longer interest rate environment, will continue to drive some volatility and uncertainty around yields and spreads. And these conditions are likely to be particularly impactful on opportunistic investment-grade issuers. And that's a reason that we're lowering the outlook for investment-grade issuance to approximately 25% growth for the full year 2023.
We also continue to see the knock-on impacts of lower asset generation on the structured finance sector. And so we're updating our outlook to decline by around 25% compared to the prior year. So these two forecast updates result in an overall revision to our expectation for issuance for the year. And we now expect issuance growth to be in the low to mid-single-digit range in 2023 and MIS to grow in the mid- to high single-digit range.
So while there are some headwinds to accelerating issuance growth in the near term, refunding walls continue to grow. And they are a key factor supporting medium-term issuance growth. And our annual study on refinancing, which we, as I mentioned, just recently published, captures nonfinancial corporate maturities in both the U.S. and EMEA. And we look at the next four years as an aggregate figure, and with approximately $4.4 trillion coming due in the next four years, that's up by about 10% versus last year's study. And you can see that, I believe, in the Appendix in our supplemental materials. I also want to spotlight the U.S. in particular. Obviously, this is the largest of all the global bond markets. And looking out over five years, and that's the length of the U.S. study, the aggregate forward maturity wall grew by about 21% compared to the study -- last year's study. And the main contributor to this is leveraged finance, which grew approximately 27%. So that's certainly going to be helpful to future mix over the coming years.
So forward maturities continue to provide support for future issuance and continue to be an important part of the MIS long-term growth algorithm. And I would also say that overall corporate debt velocity, which is total corporate issuance as a percent of total corporate debt outstanding, remains pretty far below historical averages. So that implies the potential for pent-up issuance demand in the future.
So on that note, I'm going to pause here. I'm happy to open the call for questions. Operator?
