Prompt:
Human: I will start by going through some of the highlights of the quarter, then Jack will go through the third quarter results and guidance for the fourth quarter.
And I'll then share some concluding thoughts before we start our Q&A session.
But before we start, Jack will now cover the Safe Harbor language.
These statements are based on management's current expectations or beliefs.
Following our announcement and special investor call in late August, we were very pleased to recently announce the successful and timely completion of the ettain group acquisition.
ettain was one of the largest privately held IT resourcing and services provider in North America and, since October 1st, is now operating as part of our Experis business.
In addition to expanding our IT services in the financial and healthcare sectors, this acquisition also improves our geographic diversification in the U.S. and increases our strength in the digital workspace and business transformation practice areas.
Turning to our financial results.
In the third quarter, revenue was $5.1 billion, up 11% year-over-year in constant currency.
Our operating profit for the quarter was $151 million.
Excluding Mexico restructuring and ettain acquisition transaction costs, operating profit was $162 million.
Operating profit was up significantly year-over-year as the pandemic had a significant financial impact in the prior year.
Reported operating margin was 2.9%, and after excluding Mexico restructuring and acquisition costs, operating profit margin was 3.2%.
Reported earnings per diluted share was $1.77 and $1.93 after excluding Mexico restructuring and acquisition costs and both were significantly above the prior year.
The global economic recovery continued in the third quarter.
As vaccine rollouts progress in many countries, and pandemic-related restrictions ease, we continue to see very strong hiring demand.
This strong demand is again evident in our Q4 ManpowerGroup Employment Outlook Survey of more than 40,000 employers in 43 countries.
All countries are reporting improved hiring intentions year-on-year and in 14 of the 43 countries, employers are reporting hiring intentions at the highest levels in more than 10 years.
That said, during the third quarter, we have also seen some levelling off in the rate of recovery in some markets.
Concerns about the Delta variant contribute to parts of the workforce not coming back into the labor market and exacerbating worker shortages in many industries and markets, making it more difficult to meet the strong demand for workers.
The impact related to supply chain challenges caused by the pandemic have also become a more visible factor impacting many manufacturers in various industries.
As we discussed on our second quarter earnings call, we view supply chain challenges and the impact of the Delta variant as transitory factors, and we remain optimistic and confident in the demand outlook once the effects of the pandemic normalize.
Companies all over the world need access to skilled human capital to meet their business objectives and fully participated in the economic global recovery.
With our operational and strategic workforce solutions and services, we help them meet the strong demand for their goods and services today and into the future.
Revenues in the third quarter came in just below our constant currency guidance range, driven by a slowdown in the rate of improvement in France, due to supply chain disruptions, notably in the automotive sector, and Delta variant disruptions.
Gross profit margin came in well above our guidance range.
As-adjusted operating profit was $162 million, representing a significant increase from the prior year period which was heavily impacted by the pandemic.
As-adjusted operating profit margin was 3.2%, which was at the top end of our guidance.
Breaking our revenue trend down into a bit more detail, after adjusting for the positive impact of currency of about 1%, our constant currency revenue increased 11%.
Due to the impact of net dispositions and slightly fewer billing days, the organic days-adjusted revenue increase was 12%.
Comparing to pre-pandemic levels, our third quarter revenues were below 2019 levels by 5% on an organic days-adjusted constant currency basis, which is slightly lower than the second quarter trend on this same basis due to the impact of new regulations in Mexico and the exiting of a low-margin arrangement in Australia.
Turning to the earnings per share bridge on Slide 4, earnings per share was $1.77, which included $0.07 related to Mexico restructuring costs and $0.09 related to acquisition transaction costs.
Excluding these costs, adjusted earnings per share was $1.93 which exceeded the mid-point of our guidance range.
Walking from our guidance mid-point, our results included: improved operational performance of $0.02; slightly lower than expected foreign currency exchange rates which had a negative impact of $0.03; a slightly better than expected effective tax rate that added $0.02; and favorable other expenses which added $0.02.
Looking at our gross profit margin in detail, our gross margin came in at 16.6%.
Underlying staffing margin contributed 20 basis point increase.
Permanent recruitment contributed an 80 basis point GP margin improvement as hiring activity was strong across our largest markets.
A lower mix of Right Management career transition business this year drove 30 basis points of GP margin reduction.
Other and accrual adjustments included a 10 basis point margin improvement from our Experis managed services business in Europe and a 10 basis point improvement from consulting and MSP services, partially offset by a 10 basis point reduction from lower direct cost adjustments in the current year as favorable direct cost adjustments in Latin America were less than the prior year favorable adjustments in France.
Next, let's review our gross profit by business line.
During the quarter, the Manpower brand comprised 63% of gross profit.
Our Experis professional business comprised 22%, and Talent Solutions comprised 15%.
During the quarter, our Manpower brand reported an organic constant currency gross profit year-over-year growth of 15%.
Compared to pre-pandemic levels, this represented a decrease of 4% from the third quarter of 2019 on an organic constant currency basis.
Gross profit in our Experis brand increased 24% on an organic constant currency basis year-over-year during the quarter.
This represented a flat trend from the third quarter of 2019 on an organic constant currency basis.
Talent Solutions includes our global market leading RPO, MSP and Right Management offerings.
Organic gross profit increased 16% in constant currency year-over-year.
This represented an increase of 14% from the third quarter of 2019 on an organic constant currency basis.
Our RPO business posted high double-digit GP growth during the quarter on significant hiring activity.
Our MSP business, which has grown through the entire pandemic, continued to experience double-digit growth in gross profit in the quarter.
As the recovery strengthens, our Right Management business continues to see significant run-off in outplacement activity, primarily in the U.S., and experienced a reduction in gross profit of 42% year-over-year.
Our SG&A expense in the quarter was $703 million and represented a 6% increase on a reported basis from the prior year.
Excluding Mexico restructuring charges and acquisition costs in the current year and restructuring charges and a loss from dispositions in the prior year, SG&A was 13% higher on a constant currency basis.
This compares to an increase in gross profit of 17% in constant currency and reflects investment in incremental recruiters and sales talent based on increased market activity, as well as ongoing technology initiatives.
The underlying increases consisted of operational costs of $78 million and currency changes of $6 million.
SG&A expenses as a percentage of revenue, after excluding restructuring and acquisition costs, represented 13.4% in the third quarter.
The Americas segment comprised 19% of consolidated revenue.
Revenue in the quarter was $1 billion, an increase of 8% in constant currency.
OUP was $41 million.
Excluding Mexico restructuring costs and ettain acquisition costs, OUP was $52 million and OUP margin was 5.2%.
The U.S. is the largest country in the Americas segment, comprising 65% of segment revenues.
Revenue in the U.S. was $645 million, representing an 11% increase compared to the prior year.
Excluding ettain acquisition costs in the current year and restructuring charges in the prior year, OUP for our U.S. business is flat year-over-year at $34 million in the quarter as decreases from Right Management's career placement run-off was offset by improvements across all other businesses.
Excluding the acquisition costs, OUP margin was 5.3%.
Within the U.S., the Manpower brand comprised 33% of gross profit during the quarter.
Revenue for the Manpower brand in the U.S. increased 9% during the quarter.
While the U.S. Manpower business continues to recover, the labor shortage experienced in the second quarter continued into the third quarter through the summer months.
The Experis brand in the U.S. comprised 33% of gross profit in the quarter.
Within Experis in the U.S., IT skills comprise approximately 80% of revenues.
Experis U.S. revenues grew 17% during the quarter and we anticipate continued strong double-digit organic growth in the fourth quarter.
We are encouraged by the current trends in our U.S. Experis business and the recent acquisition of ettain which significantly increases our presence in the convenience market for IT professional services.
Talent Solutions in the U.S. contributed 34% of gross profit and experienced revenue growth of 9% in the quarter.
This was driven by RPO which experienced record revenue levels as hiring programs continued to strengthen.
MSP business continued to perform well and experienced double-digit revenue growth in the quarter.
In the fourth quarter, on an organic basis, we expect ongoing underlying improvement and revenue growth for the U.S. in the range of 1% to 5% year-over-year.
This represents a 1% decline compared to 2019 levels using the midpoint of our guidance.
Separately, we estimate ettain revenues within a range of $175 million to $185 million in the fourth quarter.
Our Mexico operation experienced a revenue decline of 46% in constant currency in the quarter.
The decline was driven by the new labor legislation which prohibits certain types of temporary staffing not considered specialized services.
The actual reduction in demand from our clients from the regulation was more severe than originally anticipated.
The restructuring actions we have taken in the third quarter have quickly right-sized this business for the impact of new regulations.
Although this will result in significant revenue reductions over the next few quarters, we believe the mix shift toward more specialized staffing will improve the margin profile of our Mexican business over time.
We also believe there may be additional revenue opportunities over time as clients adjust their workforce strategies.
We estimate that fourth quarter revenues in Mexico will decrease by approximately 55% to 60% year-over-year.
Mexico represented 2.8% of our 2020 revenues.
Revenue in Canada increased 15% in constant currency during the quarter.
Southern Europe revenue comprised 46% of consolidated revenue in the quarter.
Revenue in Southern Europe came in at $2.4 billion, growing 12% in constant currency.
OUP equaled $111 million and OUP margin was 4.6%.
France revenue comprised 55% of the Southern Europe segment in the quarter and increased 8% in constant currency.
Compared to the same period in 2019, France revenues were down 10%.
Automotive supply chain constraints and the Delta variant slowed the rate of recovery in the third quarter for our French business.
OUP was $62 million in the quarter and OUP margin was 4.7%.
As we begin the fourth quarter, we are estimating a year-over-year constant currency increase in revenues for France in the range of 2% to 6%.
Comparing estimated fourth quarter revenues to pre-crisis levels in constant currency, this represents an 8% decline compared to 2019 levels in the fourth quarter using the midpoint of our guidance.
Revenue in Italy equaled $456 million in the quarter, reflecting an increase of 28% in days-adjusted constant currency.
Through the third quarter, revenues in Italy continued to exceed 2019 levels.
OUP equaled $31 million and OUP margin was 6.7%.
We estimate that Italy will continue to perform very well in the fourth quarter with year-over-year constant currency revenue growth in the range of 7% to 11%.
Revenue in Spain increased 1% in days-adjusted constant currency from the prior year and revenue in Switzerland increased 21% in days-adjusted constant currency.
Our Northern Europe segment comprised 23% of consolidated revenue in the quarter.
Revenue increased 19% in constant currency to $1.2 billion, driven by all major markets.
OUP represented $17 million and OUP margin was 1.4%.
Our largest market in Northern Europe segment is the U.K., which represented 37% of segment revenues in the quarter.
During the quarter, U.K. revenues grew 26% in constant currency.
We expect continued growth in the 4% to 8% constant currency range year-over-year in the fourth quarter.
In Germany, revenues increased 13% in days-adjusted constant currency in the third quarter.
We expect to see ongoing revenue improvement in Germany in the fourth quarter.
In the Nordics, revenues grew 19% in constant currency.
Revenue in the Netherlands increased 5% in constant currency.
Belgium experienced days-adjusted revenue growth of 10% in constant currency during the quarter.
The Asia Pacific Middle East segment comprises 12% of total company revenue.
In the quarter, revenue grew 4% in constant currency to $611 million.
OUP was $23 million and OUP margin was 3.7%.
Revenue in Japan grew 13% in constant currency which represents an improvement from the 10% growth rate in the second quarter.
Our Japan business continues to lead the market in revenue growth, and we expect ongoing high single-digit revenue growth in the fourth quarter.
Revenues in Australia were down 29% in constant currency, reflecting the exit of a low-margin client arrangement during the second quarter.
I'll now turn to cash flow and balance sheet.
During the first nine months of the year, free cash flow equaled $343 million compared to $685 million in the prior year reflecting significant accounts receivable declines in the prior year period.
Our third quarter free cash flow of $172 million exceeded the prior year free cash flow of $108 million, representing strong current period cash collections.
At quarter end, days sales outstanding was flat year-over-year at 58 days.
Capital expenditures represented $40 million for the nine-month period and $15 million during the third quarter.
During the third quarter we did not have any share repurchases.
Our year-to-date purchases stand at 1.5 million shares of stock for $150 million.
As of September 30th, we have 1.9 million shares remaining for repurchase under the 2019 share program and 4 million shares remaining under the share program approved in August of 2021.
Our balance sheet was strong at quarter-end with cash of $1.61 billion and total debt of $1.07 billion, resulting in a net cash position of $547 million.
On October 1st, we utilized $800 million of cash to fund the acquisition of ettain.
Our debt ratios at quarter-end reflect total gross debt to trailing 12-months Adjusted EBITDA of 1.63 and total debt to total capitalization at 30%.
Our debt and credit facilities did not change in the quarter.
Although our revolving credit facility for $600 million remained unused at September 30th, we did draw $150 million on October 1st in conjunction with the funding of the ettain acquisition.
As we previously indicated, we intend to pay this down over the next 12 months.
Next, I'll review our outlook for the fourth quarter of 2021.
Our guidance continues to assume no material additional COVID-19-related difficulties beyond those that exists today, including incremental supply chain disruptions, additional variants and the emergence of adverse trends impacting our clients in any of our largest markets.
On that basis, we are forecasting earnings per share in the fourth quarter to be in the range of $1.99 to $2.07, which includes an unfavorable foreign currency impact of $0.04 per share and a positive $0.13 impact from ettain.
This does not include the impact of acquisition transaction costs of approximately $9 million or integration costs of $4 million to $6 million which will be broken out separately from ongoing operations.
Our constant currency revenue guidance growth range is between 5% and 9% and, after adjusting for ettain, our organic constant currency growth range is estimated between 2% and 6%.
The midpoint of our constant currency guidance is 7%.
A minor decrease in billing days in the fourth quarter and the impact of net acquisitions, driven by ettain, impact the growth rate, resulting in an outlook for organic days-adjusted revenue growth of 4% at the midpoint.
This would represent a fourth quarter organic constant currency decline in the range of minus 2% to minus 4% compared to 2019 revenues, representing an improvement from our third quarter trend.
Although final purchase accounting for the ettain acquisition will be finalized in the months ahead, we currently estimate that intangible asset amortization will be approximately $24 million annually.
Since amortization will be more significant going forward, we are also disclosing operating profit before amortization, or EBITA, to help assess underlying financial performance.
We estimate that EBITA margin during the fourth quarter will be up 30 basis points at the midpoint compared to the prior year with ettain contributing 20 basis points of the improvement.
We expect our operating profit margin during the fourth quarter to be up 20 basis points at the midpoint compared to the prior year with ettain contributing 10 basis points of the improvement.
We estimate that the effective tax rate in the fourth quarter will be 32%.
As usual, our guidance does not incorporate restructuring charges or additional share repurchases and we estimate our weighted average shares to be 55.3 million.
The acceleration of digitization and investment in technology by companies during the pandemic means organizations are requiring new skills and capabilities for the future.
While hiring intentions are at some of the highest levels we have seen in years, it is unlikely employers will be able to fulfill all these intentions as a result of the labor market shortages for many skills.
Our most recent global Talent Shortage survey found that shortages are at a 15-year high for the second consecutive quarter, with 69% of employers stating they cannot find the talent they need.
In response, organizations are looking ahead, focusing on strengthening workforce and reskilling, upskilling and building the capabilities to ensure their existing and future workforce has the skills to remain competitive.
We believe this is an opportunity for us and through our diversification strategy, we are sourcing the talent they are looking for through the offerings in our Manpower, Experis and Talent Solutions brands.
We are also investing in innovation to create the talent pools with skills and capabilities at scale.
Our successful Manpower MyPath program has impacted over 129,000 lives to date and is a great example of this.
Through MyPath, we are building the talent pool of the future and providing clients access to our high potential associates.
Another recent example of innovation is our Experis Career Accelerator launched at the global Viva Tech conference in Paris earlier this year and now active in six markets.
Experis Career Accelerator is our AI-driven platform, developed in partnership with FutureFit AI.
Using machine learning and dynamic data to scan the market, it can match our Experis consultants to IT learning pathways and in-demand roles.
We are attracting, developing, upskilling our consultants by providing curated learning and technical training content from the world's leading tech clients and accredited learning partners, and preparing our people with the skills tech employers need most.
Machine learning is also helping us grow our own people's expertise so they are even better at assessing and predicting performance to provide a better job match than either humans or machines could do on their own.
That's an example of how we continue to innovate in our brands to invest in our capability to both find and create the best talent pipeline in the market for the benefit of the organizations we work with and for the benefit of the individuals for whom we provide sustainable and meaningful careers and employment.
This investment in our people's skills is also reflected in our recent internal Annual People Survey where we are pleased to see higher employee engagement levels year-over-year, despite the challenges experienced by many of them during the pandemic.
We are proud and very grateful for the strong culture of our organization and we see this as a competitive advantage with opportunities for even further improvement, positioning us very well for future growth.
I'd now like to open the call for Q&A.
 Assistant:

Chosen response:
q3 earnings per share $1.93 excluding items.
sees q4 earnings per share $1.99 to $2.07 including items.
q3 earnings per share $1.77.
q3 revenue $5.1 billion versus refinitiv ibes estimate of $5.32 billion.
manpowergroup - including full quarter impact of ettain group acquisition, anticipate diluted earnings per share in q4 will be between $1.99 & $2.07.


Prompt:
Human: Following comments from Michael and Sachin, the operator will announce your opportunity to get into the queue for the Q&A session.
Both the release and the slide deck include reconciliations of non-GAAP measures to GAAP reported amounts.
I'm starting off with the key highlights for the quarter.
We delivered strong revenue and earnings growth as we saw further improvement in our underlying operating metrics.
Quarter 4 net revenues were up 28% and earnings per share up 46% versus a year ago on a non-GAAP currency-neutral basis.
On the same basis, Quarter 4 net revenues are 19% above pre-COVID levels in 2019.
So with that, let's take a look at the macroeconomic front.
The outlook remains positive despite the recent supply chain constraints, geopolitical uncertainties and inflationary pressures.
Although there has been a recent surge in COVID cases, there are signs that these may be peaking.
By each of these areas, merit monitoring, underlying spending trends remain strong as consumers, businesses and governments have become more adaptable to a changing environment.
In the U.S., economic growth remains solid with low unemployment and healthy consumer confidence.
According to our Quarter 4 SpendingPulse report, which is always based on all payment types including cash and check, guest retail sales ex auto, ex gas were up 6.4% versus a year ago and up 10.9% versus 2019.
In Europe, GDV growth has been strong, although recently impacted by mobility restrictions.
SpendingPulse shows that overall European retail sales in Quarter 4 were up 3.3% versus a year ago and up 1.3% versus 2019.
In Asia Pacific, vaccination rates continue to improve, and we expect the economic recovery to pick up pace as both government and businesses ramp up investment.
The travel recovery in Asia Pacific has lagged that of the rest of the world and has significant growth potential.
The growth in Latin America is expected to moderate a bit following the rebound in 2021.
As it relates to COVID specifically, there are early signs that the Omicron will be relatively short-lived.
The reality is that the tools we have to deal with the pandemic are more advanced than ever.
60% of the world's population is now at least partially vaccinated, effective therapeutics are becoming available, and governments are using more targeted measures to limit the spread.
More bodies have opened and have stayed open despite the recent variant.
Although we've always said the path forward will not be linear, there are signs we are moving toward the endemic phase of the disease.
Looking at Mastercard's spending trends, switch volume growth continued to improve quarter over quarter.
Both consumer credit and debit continued to grow well.
The recovery has continued with overall Quarter 4 cross-border levels now higher than those in 2019.
While Omicron has had some recent impact on cross-border travel, we continue to believe that cross-border travel will return to 2019 levels by the end of this year.
Cross-border card-not-present spending ex travel continued to hold up well in the quarter.
So overall, the spending trends are moving in the right direction with some near-term travel-related headwinds as a result of the variant.
Now turning to our business highlights.
As outlined at our investment community meeting in November, we remain focused on our growth, diversified build strategy and our three strategic priorities, which are expanding in payments, extending our services and embracing new networks.
Here's an update on how we're progressing against each of those priorities.
First, we're expanding in payments, a growing person to merchant payments, scaling across other payment flows and leaning into innovation in new payment technologies.
In aggregate, these targeted flows represent $115 trillion in opportunity.
First off, we're driving growth in person to merchant payments through new wins across the globe.
In the U.S., I'm excited to announce that we're partnering with Chase and Instacart, a leading online grocery platform in North America on a new Instacart Mastercard co-brand program.
This partnership marks an additional co-brand win with Chase, quickly following the recent launch of the Chase Aeroplan World Elite Mastercard.
In addition, with First Interstate Bank's planned acquisition of Great Western Bank, we will flip Great Western's consumer debit, credit and commercial portfolios to MasterCard.
And I'm happy to note that the consumer credit portfolio of Merix Bank, over 3 million customers will transition to Mastercard beginning in the second quarter.
Merix Bank plans to leverage several Mastercard solutions, including our fraud prevention, consulting, open banking and loyalty services.
Over in the Netherlands, we've renewed our partnership with Rabobank, which includes the migration of 8 million Maestro cards to debit Mastercard.
We signed an exclusive deal with Westpac in Australia for the new Banking-as-a-Service platform.
This platform will allow new players to leverage Westpac's banking capabilities.
Afterpay, the first partner on the platform will connect debit Mastercards to their money by Afterpay app.
And in the U.K., the Net West debit migration is progressing to plan as in the early stages of consumer rollout.
We're also expanding in payments by capturing new payment flows, including commercial, B2B accounts payable, bill pay and cross-border remittances.
For example, in the commerce space, we've expanded our relationship with Bank of America, where we'll be the lead brand for new commercial card issuance.
We've also renewed and expanded our relationship with WEX, including the chosen as their strategic partner, and adding open-loop functionality to their millions of closed-loop fleet cards.
For accounts payable, we continue to scale Mastercard tracks, WEX, BMO, BOK Financial, [Inaudible] will connect to the platform.
We also launched the launch -- we also announced the launch of Mastercard Track Instant Pay, which uses machine learning to analyze and initiate automatic virtual card payments, streamlining processes for buyers and improving cash flow for suppliers.
And we're driving new B2B acceptance through a global partnership with Boost Payment Solutions with an initial focus on expanding the use of commercial card in seven key markets.
We're addressing new payment flows in consumer bill payments as well.
We recently announced the acquisition of Argus to help deliver bill pay solutions and other real-time payment applications in Latin America.
Argus enables digital payments for the majority of households built in Mexico and its connections with banks, fintechs and digital wall providers across the region.
And finally, we continue to capture new flows in cross-border remittances.
This quarter, we established a partnership with Travelex in Brazil, who will use Mastercard's cross-border services, send P2P transfers to the U.S. and Europe.
For domestic disbursements in the U.S., we partnered with fintech processor, TabaPay, to make Mastercard Send easily available to fintechs and merchants across multiple use cases.
We're also expanding in payments by leaning into payment innovation in areas like installments, contactless acceptance and crypto currencies.
Here are a few examples.
Our open-loop Mastercard installment program that we announced last quarter has been very well received.
The U.S. launch is on schedule for Quarter 1.
We're actively bringing new partners into the program as we announced in the Middle East, Africa earlier this week, watch this space.
Now we're making great progress in expanding contactless acceptance by turning the world's billions of active smartphones into potential acceptance devices, enabling people to buy and sell whenever, wherever they want.
We now have 100 deployments of Tap on Phone in over 50 markets with leading partners globally.
Contactless penetration increased to one and two of our in-person switch transactions globally this quarter.
This is up from approximately one and three prior to the pandemic.
And with that, the potential for accelerated acceptance growth, financial inclusion and consumer convenience is substantial.
We're also bringing capabilities, experience and reach to help enable the crypto ecosystem.
Our new collaboration with Coinbase will allow consumers to use their Mastercard to purchase NFTs, try that myself.
Our work with consensus will make it easier for software developers to increase the scale, efficiency and speed of transactions on Ethereum and finishing blockchains.
And our CPC Sandbox Test Platform, which we launched in 2020, continues to gain traction.
We're helping central banks, financial institutions and fintechs simulate the issuance and distribution of CBDC along with the integration of CBDDs with our card network, our real-time payment modules and native blockchain wallets.
Now shifting to services.
Our services support can differentiate our core products and have played a critical role in having many of them I just mentioned.
The group services revenue at 25% in 2021 on a currency-neutral basis.
We will continue to extend our service capabilities to enhance the value of payments.
We even further accelerating our growth by expanding into new areas and new use cases, particularly through our data and services and cyber intelligence propositions, again, a few examples for you.
In December, we announced an agreement to acquire Dynamic Yield from McDonald's.
Dynamic Yield uses enhanced AI to deliver customized product recommendations, offers and content to consumers.
Their customer set includes over 400 global brands ranging from financial services companies like Synchrony to retailers like Lens End.
When combined with SessionM's loyalty platform and our Test & Learn experimentation software, we will be able to offer a unified consumer engagement and loyalty hub to our customers.
McDonald's is a great example of a company who's using all three of these platforms today with plans to further scale and integrate Dynamic Yield's capabilities globally.
In addition, our Ethoca platform continues to experience strong traction in preventing unnecessary chargebacks, a real pain point.
We added new customers in every region in 2021 for Ethoca.
Recently, we launched Ethoca Consumer Clarity, which gives consumers detailed information about purchases on their mobile banking app.
and several European markets, including OTP Bank, central Cooperative Bank and Paybox Bank.
Now beyond expanding in payments and extending in services, our third strategic priority area is embracing new networks.
Specifically, we are leveraging our expertise and payments to build out new networks for the current focus on open banking and digital identity.
On the open banking front, we have closed the acquisition of Aiia in November, which brings strong API connectivity to over 2,700 banks across Europe.
And combined with Finicity's North American connection, which covered more than 95% of deposit accounts in the U.S. market, Mastercard has an unparalleled footprint in the key open banking regions, upon which we are building solutions to solve a wide range of these cases.
One example is in the mortgage verification space, where Finicity has signed deals with several new partners, including loan people.
And in the digital identity space, we're helping our customers with fast, frictionless identity verification services.
Ethoca has performed strongly over the last quarter, expanding through strategic partnerships with companies such as ZIP and Equifax, as well as growing its global footprint with leading frack providers Tonga and Air Click in Asia Pacific.
Combined, open banking and digital identity extend our value before and after the payment transaction.
These are large, attractive and growing opportunities, and we are uniquely positioned to be a leader in both.
So in summary, we delivered strong revenue and earnings growth this quarter.
The macroeconomic outlook remains positive with a few areas of the monitoring, and we're executing against our three strategic priorities: spanning and payments, extending our services and embracing new networks.
And all that with substantial progress on the product and deal front this quarter.
Now Sachin, over to you and the numbers.
So turning to Page 3, which shows our financial performance for the quarter on a currency-neutral basis, excluding special items and the impact of gains and losses on our equity investments.
Net revenue was up 28%, reflecting the continued execution of our strategy and the ongoing recovery in spending.
Acquisitions contributed 3 ppt to this growth.
Operating expenses increased 19%, including a 7 ppt increase from acquisitions.
Operating income was up 37%, which includes a 1 ppt decrease related to acquisitions.
Net income was up 44%, which includes no impact from acquisitions as the impact of acquisitions on operating income was offset by a onetime acquisition-related tax benefit.
EPS was up 46% year over year to $2.35, which includes a $0.04 contribution from share repurchases.
During the quarter, we repurchased $1.3 billion worth of stock and an additional $528 million through January 24, 2022.
So let's turn to Page 4, where you can see the operational metrics for the fourth quarter.
Worldwide gross dollar volume, or GDV, increased by 23% year over year on a local-currency basis.
We are seeing continued strength in debit and credit.
U.S. GDV increased by 23% with debit growth of 15% and credit growth of 34%.
Outside of the U.S., volume increased 23%, with debit growth of 25% and credit growth of 20%.
To put this in perspective, as a percentage of 2019 levels, GDV is at 125%, up 4 points quarter over quarter with credit at 116%, up 5 points sequentially and debit at 134%, up 3 points sequentially.
Cross-border volume was up 53% globally for the quarter, with intra-Europe cross-border volumes up 45% and other cross-border volumes up 63%, reflecting continued improvement in travel-related cross-border as several borders opened during the fourth quarter.
In the fourth quarter, cross-border volume was 109% of 2019 levels, with intra-Europe at 122% and other cross-border volume at 98% of 2019 levels.
Turning to Page 5.
Switched transactions grew 27% year over year in Q4 and were at 132% of 2019 levels.
Card-present growth continued to improve while card-not-present growth rates remain strong.
Card-present growth was aided in part by increases in contactless penetration in several regions.
In addition, card growth was 9%.
Globally, there are 3 billion Mastercard and Maestro-branded cards issued.
The increase in net revenue of 28% was primarily driven by domestic and cross-border transaction and volume growth, as well as strong growth in services, partially offset by higher rebates and incentives.
As previously mentioned, acquisitions contributed approximately 3 ppt to net revenue growth.
Looking quickly at the individual revenue line items.
Domestic assessments were up 24%, while worldwide GDV grew 23%.
Cross-border volume fees increased 61% while cross-border volumes increased 53%.
The APPD difference is primarily due to favorable mix as higher-yielding ex intra-Europe cross-border volumes grew faster than intra-Europe cross-border volumes this quarter.
Transaction processing fees were up 28%, generally in line with switched transaction growth of 27%.
Other revenues were up 30%, including a 9 ppt contribution from acquisitions.
The remaining growth was mostly delivered by our cyber and intelligence and data and services solutions.
Finally, rebates and incentives were up 38%, in line with our expectations, reflecting the strong growth in volumes and transactions and new internode deal activity.
Moving on to Page 7.
You can see that on a currency-neutral basis, total operating expenses increased 19%, including a 7 ppt impact from acquisitions.
Excluding acquisitions, operating expenses grew 12%, primarily due to increased spending on advertising and marketing, higher personnel costs to support the continued investment in our strategic initiatives and increased data processing costs.
Turning now to Page 8.
Let's discuss the specific metrics for the first three weeks of January.
First, as a point of process, we continue to provide volume and transaction metrics both on a year over year and as a percentage of 2019 basis.
However, it is important to note that as we turn the calendar and move into 2022, the index versus 2019 metric now looks back three years and, therefore, includes a compounding improvement relative to the 2021 index metric.
This compounding impact must be taken into consideration when considering the sequential trend from Q4 to January.
So at the highest level, omicron has had a minimal impact on overall switched volumes and transactions and has called some moderation on cross-border panel.
Going through the metrics in turn.
Starting with switched volumes.
Through the first three weeks of January, we are now at 149% of 2019 levels, up 13 points versus Q4.
This increase is primarily driven by the compounding effect I just referred to.
After adjusting for this compounding effect, switched volumes are tracking similarly to what we saw in Q4.
The underlying trends in switched transactions adjusted for the compounding effect are generally tracking the trends we are seeing in switched volumes.
In terms of cross-border volume growth, as I mentioned earlier, spending levels as a percentage of 2019 in Q4 are now above pre-pandemic levels.
The Omicron variant, which hit partly through December, impacted the strong cross-border travel momentum we saw in November.
That impact has carried over into January.
This has been partially offset by an increase in cross-border card-not-present ex travel.
Overall, cross-border volume through the first three weeks of January is now at 116% of 2019 levels, up 7 points versus Q4.
In this case, the compounding effect is partially offset by the impact of the Omicron virus on cross-border travel in January.
Turning to Page 9.
I want to share our thoughts on the upcoming year.
While there is some uncertainty related to Omicron and potential future variance, our overall expectations for 2022 are positive.
The macroeconomic outlook is for continued growth and domestic spending levels have summed up well despite the recent surge in cases.
The recovery in cross-border travel was progressing well prior to Omicron and we expect the recovery in cross-border travel to resume as the surge passes.
As Michael just noted, the tools available to deal with the pandemic have improved with time.
And although the path forward may not be linear, there are signs we are moving toward the endemic phase of this disease.
Many countries have relaxed their border restrictions and we continue to expect cross-border travel to recover to 2019 levels by the end of 2022.
Our recent deal wins, travel-oriented portfolios and diversified set of services position us extremely well to capitalize on these trends.
Turning to our expectations for the full year 2022.
Our base case scenario is for net revenues to grow at the high end of a high teens rate on a currency-neutral basis, excluding acquisitions.
dollar relative to the euro.
In terms of operating expenses, we continue to carefully manage our spending as we invest in our payments, services and new network priorities to drive short- and long-term growth.
For the year, we expect operating expenses to grow at the low end of a low double-digit rate on a currency-neutral basis, excluding acquisitions and special items.
Acquisitions are forecast to add about 4 to 5 ppt to this growth, while foreign exchange is expected to be a tailwind of approximately 1 ppt for the year.
Turning now to the first quarter.
Year-over-year net revenue growth is expected to be at the high end of a high teens rate, again, on a currency-neutral basis, excluding acquisitions.
This reflects some sequential improvement in cross-border travel spending trends within the quarter relative to 2019 as the impact from Omicron starts to recede as the quarter progresses.
Acquisitions are forecast to add about 2 ppt to this growth, while foreign exchange is expected to be a headwind of 2 to 3 ppt for the quarter.
From an operating expense standpoint, we expect Q1 operating expense growth to be at the high end of high-single digits rate versus a year ago on a currency-neutral basis, excluding acquisitions and special lines.
Acquisitions are forecast to add about 6 ppt to this growth, while foreign exchange is expected to be a tailwind of approximately 1 ppt for the quarter.
As a reminder, we discretely disclosed the impact of acquisitions for the year-end, which it closed and the subsequent year after which time we do not split them out.
For instance, Finicity, which closed in November of 2020 is now folded into the base.
We are pleased to have closed the acquisitions of both Aiia and Argus in November and anticipate closing the pending acquisition of Dynamic Yield in the first half of 2022.
Other items to keep in mind.
On the other income and expense line, we are at an expense run rate of approximately $115 million per quarter given the prevailing interest rates and debt levels.
This excludes gains and losses on our equity investments, which are excluded from our non-GAAP metrics.
And finally, we expect a tax rate of approximately 17% to 18% for the year based on the current geographic mix of our business.
With that as a backdrop and turning now to Slide 10, I would like to update you on our three-year performance objectives for the 2022 to 2024 period that we first introduced in November at our Investment Community Meeting.
The bottom line is that there is no change, although our jumping off point for earnings is slightly higher due to our Q4 2021 overperformance.
As a reminder, these objectives are on a currency-neutral basis, exclude special items, gains and losses on equity investments and acquisitions closed after 2021.
Using 2021 as our base over the 2022 to 2024 period, we expect to deliver a net revenue compound annual growth rate in the high teens.
This assumes an annual target market volume growth rate of 10% to 11%, cross-border travel returning to 2019 levels by the end of 2022 and doing our services revenues at a 20%-plus CAGR.
From an operating margin perspective, we will continue to operate with the philosophy of delivering a minimum annual operating margin of 50%.
Having said this, I would like to emphasize that we continue to believe that it is important for us to invest with a long-term growth while delivering positive operating leverage, and we continue to dive with this philosophy in mind.
And finally, we expect to deliver an earnings per share CAGR in the low 20s range on a currency-neutral basis, excluding the impact of special items, gains and losses on equity investments and future acquisitions.
Dermira, we're now ready for the question-and-answer session.
 Assistant:

Chosen response:
fourth quarter adjusted net income of $2.3 billion, and adjusted diluted earnings per share of $2.35.
fourth quarter net revenue of $5.2 billion, an increase of 27%, or 28% on a currency-neutral basis.
fourth quarter gross dollar volume up 23% and purchase volume up 27%.
mastercard - had strong q4 as spending trends continued to improve, with q4 cross-border spending now above pre-pandemic levels.
qtrly cross-border volume growth of 53% on a local currency basis.
qtrly switched transactions growth of 27%.
sees switched volume through january 21st up 27% - presentation.
2022 – 2024 performance objectives - reiterated - presentation.


Prompt:
Human: I'm Shivani Kak, Head of Investor Relations.
I'm going to begin by providing a general update on the business, including Moody's second quarter 2021 financial results.
And following my commentary, Mark Kaye will provide further details on our second quarter 2021 performance as well as our revised 2021 outlook.
Moody's delivered strong financial results in the second quarter of 2021.
Revenue growth of 8% and increase in adjusted diluted earnings per share of 15% highlighted the robust demand for our best-in-class integrated risk assessment offerings.
Favorable market conditions and heightened M&A activity provided the backdrop for sustained leveraged finance issuance in the second quarter, and it supported growth in our ratings business.
The ongoing expansion of our risk assessment solutions combined with strong retention rates drove MA's significant recurring revenue growth.
Top line performance as well as expense discipline contributed to adjusted operating margin expansion, and our cost efficiency initiatives continue to fund key investments and product innovation that should support ongoing growth.
As a result of our solid execution in the quarter, we've revised our full year 2021 guidance and now forecast Moody's revenue to grow in the low double-digit percent range.
Additionally, we've raised our adjusted diluted earnings per share guidance to be in the range of $11.55 to $11.85.
Now turning to second quarter results.
MIS revenue grew 4%.
That's despite the tough prior year comparable, while MA achieved its highest ever quarterly revenue, up 15% from last year.
On an organic constant currency basis, MA revenue increased 8%.
Moody's adjusted operating income rose 12% to $861 million, and the adjusted operating margin expanded 200 basis points to 55.4%.
Adjusted diluted earnings per share was $3.22, up 15%.
On the last earnings call, I highlighted that issuance volumes reached their highest level in over a decade.
This quarter, as anticipated, investment-grade activity declined as many issuers had already substantially fulfilled their funding needs in recent quarters.
Although overall issuance declined by 16%, as you can see on the chart, second quarter issuance was still well above the historical 10-year average as shown on the blue line.
While the growth in leveraged loans outpaced high-yield bonds, the demand that we saw earlier this year from both asset classes persisted, albeit a bit slower sequentially.
We also saw increased momentum in the CLO market, driven by opportunistic refinancing as spreads remain tight.
We frequently comment on our revenue relative to issuance levels, which relates to issuance mix.
And in the second quarter, transactional MIS revenue grew 3%, while MIS rated issuance declined 16%.
This chart provides an illustration of our second quarter issuance and revenue mix by asset class.
So for example, the dark green bubble on the bottom left corner represents investment-grade issuance.
And you can see that issuance was down 68% in the second quarter versus the prior year.
However, leveraged loans, which has a greater proportion of issuers on per issuance or pay-as-you-go commercial programs, represented by the dark blue bubble on the far right, saw issuance up over 200%.
And that significantly contributed to this quarter's favorable issuance mix.
Similar to last quarter, favorable market conditions led issuers to access the debt markets for a variety of reasons.
Credit spreads tightened as default rates trended lower, keeping the overall cost of debt low and allowing issuers to opportunistically refinance existing debt.
And as the economy started to recover and equity markets continued their strong run, we saw an acceleration of M&A as companies use the combination of cash balances and debt financing to acquire growth and position businesses for the post-pandemic economy.
We expect this constructive environment to persist, providing issuers further opportunities to tap the markets.
That said, we forecast activity for the remainder of 2021 to moderate from the historical highs that we saw in the first half of this year.
And Mark is going to go into further detail on our issuance guidance by asset class later in the call.
Now let's turn to MA.
MA's growing recurring revenue base and strong retention rates demonstrate the market demand for our products.
Our emphasis on renewable sales has increased the proportion of recurring revenue by four percentage points in the trailing 12-month period to 92%.
We continue to see significant opportunities in know your customer and financial crime compliance solutions as well as areas like insurance and asset management, both of which contributed to recurring revenue growth along with research and data feeds.
We briefly discussed some of these businesses in the first quarter 2021 earnings call, and I want to further spotlight these two high-growth areas.
I'll start by highlighting a few key trends in the KYC market.
First, as I've mentioned before, the pandemic has accelerated digital transformation in know your customer and customer onboarding.
Second, regulators are requiring organizations to know more about their customers and suppliers than ever before.
And finally, financial crime continues to become more sophisticated, which requires advanced detection and monitoring capabilities.
Our industry-leading product offerings and solutions leverage information on hundreds of millions of entities and ownership structures as well as detailed profiles on over 13 million politically exposed individuals.
Using artificial intelligence, we combine our world-class data sets to map and analyze adverse media, together generating insights and identifying risks at a scale, speed and precision that is difficult for others to match and creating a compelling solution that is unique to Moody's and enables our customers to make better and faster decisions to combat financial crime.
Similar to our know your customer and financial crime compliance products, our expanding offerings for insurers and asset managers are contributing to revenue growth for MA and are a core part of our integrated risk assessment strategy.
We initially entered the insurance customer segment by providing market-leading regulatory compliance software.
We then moved into actuarial models to support global life insurers enabled by our acquisition of GGY.
We further expanded our capabilities to include asset and liability management and balance sheet solutions, portfolio analytics and other tools to help address new accounting standards such as IFRS 17 and CECL.
Now the data, analytics and domain expertise from across our business enables us to provide insurers and asset managers with more comprehensive solutions to manage a wider set of risks.
As the industry continues to evolve, our holistic approach allows us to build on our existing position in the insurance space, while at the same time provide a broader range of increasingly important analytics and insights, such as climate risk scenarios.
Together, this has contributed to our ability to deliver 20% organic revenue growth over the trailing 12 months in this segment.
And we're excited about the opportunity ahead to serve new and growing risk assessment use cases for insurers and asset managers, leveraging our vast data sets and analytic capabilities.
I've also talked a number of times about the importance of innovating and integrating our data and analytics across our product suite.
For example, this quarter, we launched an industry-first ESG Score Predictor.
This offering combines Moody's ESG scoring methodology with company-specific data and predictive analytics to produce ESG scores for over 140 million small- and medium-sized enterprises.
These scores allow our customers to screen ESG risks on public and private companies to monitor portfolio and supply chain risk and are a great example of integrating our SME and ESG capabilities to address a key market need, which is ESG assessment to support sustainable supply chains.
Now staying on ESG for a moment, there's been a proliferation of climate-related financial disclosures over the past few years, and we recently partnered with the TCFD to provide insight on the quality of climate disclosures, leveraging our natural language processing and machine learning tools.
In MIS, we expanded our proprietary ESG credit impact score coverage to companies in a broader range of industries as well as to U.S. states and cities.
And we believe this is a unique offering that will allow investors to understand more clearly the impact of E, S and G on any issuer's creditworthiness and enhances our credit ratings relevance and thought leadership.
In MA, as a leading provider of know-your-customer data and analytics, our customers are increasingly needing to comply with regulations relating to modern slavery and human trafficking within their supply chain.
Working with various stakeholders, we added new AI-enabled features to help our customers screen and track previously undetected instances of human trafficking and modern slavery risk across their supplier base, providing an opportunity to further broaden our KYC customer base beyond financial institutions.
I'm frequently asked how we are differentiating ourselves in the ESG space.
So I thought I would take a minute to provide a few customer case studies that illustrate how we're combining our capabilities to meet the risk assessment needs of different customer types.
In the Americas, we worked with a leading global commercial real estate firm to embed physical climate risk analysis into their global funds and client portfolios.
The detail and rigor of our climate scores and data on individual properties allowed them to analyze thousands of properties in a more sophisticated and a more efficient way.
In Europe, a large government agency requested our expertise on their green bond financing framework.
Through our second-party opinion, we assessed that the proposed framework not only aligned with their climate and environmental agenda but also with the 2021 green bond principles.
And since 2012, we provided hundreds of second-party opinions across 30 countries with over 60 second-party opinions provided just in the first half of this year.
On to Asia, a large regional bank, also an existing MA customer, recently selected Moody's to create a robust framework to quantify the ESG and climate risk of customers' portfolios, leveraging our ESG assessments, ESG and climate insights and data and our ESG Score Predictor that I just talked about.
They also requested in-house training on how to integrate ESG and sustainability into their in-house risk management practices.
So it's a really great example of commercializing ESG and climate across our risk assessment offerings and our customer base.
And these matter because they are independent third-party validation about the strength of our offerings across the firm.
MIS was named Best Credit Rating Agency in multiple areas in the GlobalCapital Bond Awards and the Best Global Credit Rating Agency by Institutional Investor again.
MIS was also ranked the number one Securitization Rating Agency of the Year in the GlobalCapital European Awards.
As I noted, within MA, we are investing in our products to help our customers make better decisions on a wider range of risks.
Industry participants recognize the pace of our innovation, awarding MA's Credit Sentiment Score the Best AI-based Solution in the 2021 AI Breakthrough Awards.
I'm pleased that we ranked number two on Chartis' STORM Top 50, demonstrating our position at the forefront of digital transformation in our sector.
Moody's ESG Solutions also won the Climate Risk Solution of the Year in Environmental Finance's Sustainable Investment Awards.
I'm also enormously proud that Moody's was named a Top 50 Company for Diversity by DiversityInc.
And together, these recognitions underscore our commitment to customer delivery, innovation, sustainability and diversity, equity and inclusion, all of which are critical to our sustained success.
And finally, I'm thrilled that Moody's joined the Fortune 500 earlier this quarter.
This milestone is a testament to the dedication our employees have shown both to our customers and to one another.
In the second quarter, MIS revenue increased 4%, supported by a 3% rise in transaction revenue, while global MIS rated issuance declined 16%.
As a result of favorable mix, corporate finance revenue declined 4% versus a 26% decrease in issuance.
This was attributable to a surge in leveraged finance activity as U.S. and EMEA issuers opportunistically refinance existing debt and funded M&A transactions.
Investment-grade supply contracted compared to the prior year period, which had seen significant liquidity-driven financing caused by uncertainty over the unfolding pandemic.
Financial institutions revenue rose 6%, above the 1% increase in issuance.
This is due to infrequent EMEA bank issuers who sought to take advantage of the ongoing attractive rate environment.
Revenue from public, project and infrastructure finance declined 2% compared to a 45% decrease in issuance as increased non-U.S. project and infrastructure activity was offset by a reduction in U.S. infrastructure supply.
Structured finance revenue increased 73%, supported by an over 200% growth in issuance.
This is due to approximately 200 CLO deals this quarter, our highest on record, predominantly attributable to refinancing activity.
In addition, CMBS formation further bolstered overall results.
MIS' adjusted operating margin expanded 230 basis points to 66.3%.
This was enabled by strong revenue growth, coupled with operating efficiency initiatives and lower legal accruals, partially offset by higher reserves for 2021 incentive compensation.
Second quarter revenue rose 15% or 13% on an organic basis.
In RD&A, revenue increased 19% or 16% on an organic basis.
This is due to robust demand for KYC and compliance solutions as well as strong customer retention rates and double-digit trailing 12-month sales growth in research and data feeds.
For ERS, recurring revenue rose 16%, driving overall ERS growth of 5% or 3% organically.
This reflected the demand for our insurance and asset management offerings, tools supporting upcoming accounting standards implementations such as IFRS 17 as well as our SaaS-based credit assessment and origination solutions.
Additionally, ERS' recurring revenue comprised 88% of second quarter revenue, up eight percentage points from the prior year period.
MA's adjusted operating margin expanded 310 basis points to 31.8%.
This reflected the benefits of our recently completed restructuring program, which relates to the realization of incremental operating leverage in the quarter.
Turning to Moody's full year 2021 guidance.
Moody's outlook for 2021 is based on assumptions regarding many geopolitical conditions, macroeconomic and capital market factors.
These include, but are not limited to, the impact of the COVID-19 pandemic; responses by governments, regulators, businesses and individuals as well as the effects on interest rates, foreign currency exchange rates, capital markets liquidity and activity in different sectors of the debt market.
Our full year 2021 guidance is underpinned by the following macro assumptions: a rise in the 2021 U.S. and euro area GDP to a range of 6% to 7% and 4% to 5%, respectively; benchmark interest rates will remain low, with U.S. high-yield spreads remaining below approximately 500 basis points; the U.S. unemployment rate will decline to under 5% by year-end; and the global high-yield default rate will fall below 2% by year-end.
Our guidance also assumes foreign currency translation at end of quarter exchange rates.
Specifically, our forecast for the balance of 2021 reflects U.S. exchange rates for the British pound of $1.38 and $1.19 for the euro.
These assumptions are subject to uncertainties and results for the year could differ materially from our current outlook.
Following our better-than-anticipated second quarter results, we are raising our full year 2021 guidance across several metrics.
We now forecast Moody's revenue to grow in the low double-digit percent range.
We maintain our expectation for expenses to increase in the mid-single-digit percent range as we balance reinvesting the benefits from our cost efficiency programs against the opportunity for future growth-oriented investments.
Given our improved revenue outlook and expense stability, we now project Moody's adjusted operating margin to be approximately 51%.
We raised the diluted and adjusted diluted earnings per share guidance ranges to $10.95 to $11.25 and $11.55 to $11.85, respectively.
We increased our free cash flow forecast to be between $2.2 billion and $2.3 billion.
And we anticipate full year share repurchases to remain at approximately $1.5 billion subject to available cash, market conditions and other ongoing capital allocation.
On prior earnings calls, Rob has detailed our integrated risk assessment strategy, of which investments and acquisitions will play an important role.
To that end, we are focused on M&A opportunities in our addressable markets that will advance our strategy.
As always, we don't comment on any specific potential acquisitions or divestitures, and we won't comment on any deals that we are pursuing.
We have not included the impact of any future acquisitions in our current outlook, but obviously, a transaction could affect our guidance depending on the terms of any deals that we are able to reach.
Under our long-held capital allocation policy, we prioritize organic and inorganic investments into the business before returning any excess cash via share repurchases.
Within MIS, following a strong second quarter, we now project aggregate global rated issuance to grow in the low single-digit percent range, up from our previous guidance of a low single-digit percent decline.
We would like to reiterate that our guidance, similar to last quarter, does not factor in any potential impacts from the U.S. infrastructure bill proposals.
We are raising our issuance forecast for leveraged loans to be up approximately 75% and for high-yield bonds to be up approximately 25%.
These are meaningful increases compared to our prior outlook of up 55% and approximately flat, respectively, and is the result of better-than-expected second quarter issuance as well as ongoing favorable refinancing conditions and heightened M&A activity.
We expect that the increase in leveraged loan supply will continue to drive CLO creation and are therefore also improving the structured issuance outlook to be up approximately 75%.
Following a very active 2020, full year investment-grade supply is now forecast to decrease by approximately 40%.
That's slightly lower than our previous guidance, which anticipated volumes to decline 30%.
Also, after a surge in activity in the second quarter, we are increasing our guidance for new mandates to be in the range of 950 to 1,050.
While we believe favorable market conditions will persist, we forecast issuance to moderate in the second half of the year to more of a historic sawtooth pattern as we believe many issuers will fulfill the majority of their funding needs early in the year and that liquidity-driven issuance will return to pre-pandemic levels.
With our improved issuance outlook, we now estimate that MIS' revenue will increase in the high single-digit percent range.
MIS' adjusted operating margin guidance remains at approximately 61% as our improved top line outlook is partially offset by higher incentive compensation accruals and an acceleration in ESG, technology and automation investments in the second half of the year.
For MA, we are maintaining our low double-digit revenue growth guidance, supported by a high single-digit constant dollar organic growth given robust demand for our renewable products and stable customer retention rates, favorable movements in foreign exchange rates and tailwinds from a recent acquisition.
We are raising MA's adjusted operating margin guidance to be in the range of 30% to 31% as we continue to effectively manage our expense base while accelerating strategic investment back into the business.
As I mentioned previously, we are reaffirming our full year 2021 expense guidance to increase in the mid-single-digit percent range.
Although we expect higher incentive compensation accruals associated with our improved revenue outlook, many of our cost efficiency initiatives and organic investment assumptions remain in line with our prior update.
This enables us to both fund our strategic priorities and reinvest back into the business.
Finally, we want to reiterate that our spending for key organic investments will be heavily weighted toward the second half of the year.
Before turning the call back over to Rob, I'd like to highlight a few key takeaways.
First, we successfully executed our strategic and business objectives, delivering strong results again this quarter.
Second, several areas of MA, specifically KYC and compliance, research and data feeds as well as insurance and asset management provided momentum for recurring revenue growth.
Third, we continue to integrate and embed our holistic E, S and G offerings within our products and solutions, enabling our stakeholders to manage an evolving set of risks.
Fourth, our culture of continuous expense discipline enabled us to purposely reinvest back into the business.
And finally, following a robust first half performance and the ongoing global economic recovery, we are pleased to be able to upwardly revise our 2021 financial outlook.
 Assistant:

Chosen response:
moody's q2 adjusted earnings per share $3.22.
q2 adjusted earnings per share $3.22.


Prompt:
Human: Please note that this conference is being recorded and will be available for replay.
For information on how to access the replay, please visit our website at mdcholdings.com.
These and other factors that could impact the Company's actual performance are set forth in the Company's third quarter 2020 Form 10-Q, which is expected to be filed with the SEC today.
It should also be noted that SEC Regulation G requires that certain information accompany the use of non-GAAP financial measures.
M.D.C. Holdings posted another quarter of strong operating results, highlighted by year-over-year home sales revenue growth of 33%, homebuilding operating margin expansion of 370 basis points and net income growth of 96%.
Net new order growth for the quarter increased 73% as compared to last year on a sales pace of 6.1 homes per community per month.
These results underscore the excellent homebuilding fundamentals we are currently experiencing across our markets and demonstrate our ability to grow our operations while continuing to improve our profit margins.
Homes increasingly serve as offices, classrooms and places of entertainment for the family, and as a result, people have gravitated to a living environment then can be accommodated in this new reality.
While this trend has been a positive development for the overall housing market, it has been particularly beneficial to the new home market for several reasons.
First, there is a limited existing inventory for consumers to choose from.
According to the National Association of Realtors, total housing inventory at the end of September totaled 1.4 million units, which was down 19% from a year ago and represents less than a three-month supply of homes.
Second, a newly constructed home gives consumers the peace of mind that they will be living in a home that no one else has lived in, which is a real selling point for many families during these uncertain times.
Supplementing the demand we've experienced as the pandemic, is the demographic shift toward home buying that we believe will serve as the tailwind for industry moving forward.
Millennials are increasingly aging into their prime home buying years, while baby boomers and empty nesters are looking to downsize into homes that fit their new lifestyles.
MDC is well positioned to take advantage of these demographic shifts due to our strategic focus on opening communities with affordable products.
Homebuyers of all ages are looking for value when it comes to buying a home, and we have found ways to accommodate the desires through more efficient floor plans, while the combination of lower rates and pandemic-related buying has spurred demand across all product types, we believe the more affordable segments of the market will be the most resilient over time.
We have been fortunate in having a deep bench at MDC.
And to that end, I am pleased that Rebecca Givens has agreed to step into Michael's role as Senior Vice President and General Counsel.
On the operations side, David Viger has moved into the important role as Chief Operating Officer of our homebuilding operations.
Anthony Berris has been promoted to President of our Financial Service operations.
And Dawn Huth has taken on additional responsibilities as Senior Vice President of National Finance.
All of these individuals have proven themselves to be highly capable leaders during their time at MDC, and I look forward to them contributing to our continued success in the future.
Finally, I'd like to congratulate David Mandarich, who has been elected as President and Chief Executive Officer of the Company.
David has been associated with the Company since 1977, most recently as our President and Chief Operating Officer.
And he is widely regarded as one of the most skilled leaders within the homebuilding industry.
His move into the CEO role is a key step in the evolution of our Company.
And I look forward to continued collaboration with him on strategic directions of the Company.
David will be participating with me in our earning calls going forward.
We experienced strong topline growth for the quarter as home sale revenues increased by 33% year-over-year to $1 billion.
Homebuilding operating margin improved by 370 basis points from the prior year quarter, resulting in a 109% increase in pre-tax income from our homebuilding operations to $101.7 million.
In addition, our financial services pre-tax income increased $10.3 million, or 73%.
The increase was due to our mortgage business, which continued to benefit from a higher interest rate lock volume and increased capture rate and better net interest income on loans originated during the quarter.
As a result, net income increased 96% to $98.9 million, or $1.49 per diluted share for the third quarter of 2020.
Our tax rate increased from 19.5% to 21.5% for the 2020 third quarter.
The increase in rate was primarily due to changes in the estimated amount of energy tax credits to be received during the respective quarters.
For the fourth quarter, we currently estimate a 25% tax rate, excluding any discrete items.
Homes delivered increased 25% year-over-year to 2,147, driven by an increase in the number of homes we had in backlog to start the quarter, and to a lesser extent, an increase in our backlog conversion rate.
The average selling price of homes delivered during the quarter increased 6% to about $466,000.
The increase was the result of price increases implemented across the majority of our communities over the past 12 months, as well as a shift in the mix of homes closed from Nevada to Southern California.
We are anticipating home deliveries for the fourth quarter of 2020 to reach between 2,400 and 2,600 units.
Backlog conversion for the fourth quarter will be significantly lower than the fourth quarter of 2019 as a result of the considerable year-over-year increase in orders during the 2020 third quarter, many of which are unlikely to deliver this year.
We expect the average selling price for 2020 fourth quarter unit deliveries to again exceed $460,000.
Gross margin from home sales improved by 170 basis points year-over-year to 20.5%.
While we have seen an increase in certain building costs, most notably lumber, as a result of the pandemic and other factors, we have been successful to this point in recouping these increased costs through home price increases.
This has resulted in improved gross margins on both build-to-order and speculative home deliveries across each of our homebuilding segments.
Gross margin from home sales for the 2020 fourth quarter is expected to approach 21%, excluding impairments and warranty adjustments.
We continued to demonstrate solid operating leverage during the third quarter as our SG&A expense as a percentage of home sale revenues decreased 200 basis points year-over-year to 10.4%.
Our total dollar SG&A expense for the 2020 third quarter increased $10.9 million year-over-year, mostly due to variable commissions and marketing expenses that increased in line with our 33% increase in home sale revenues during the period.
Our general and administrative expense was down slightly when compared to the prior year, primarily due to a decrease in stock-based compensation that was largely offset by an increase in salaries and other compensation-related expenses.
Our overall headcount has increased by 5% year-over-year as we work to support the Company's strong growth trajectory.
For the fourth quarter of 2020, we may see our general and administrative expense increase to between $50 million and $55 million due to the 5% year-over-year increase in headcount I just mentioned, additional bonus accruals in line with strong operating results, and a potential charitable contribution to our Foundation.
As I previously mentioned, as a result of the continued expansion of our gross margin and our improved operating leverage, our homebuilding operating margin, defined as gross margin from home sales minus our SG&A rate, grew by 370 basis points year-over-year to 10.1%.
On the strength of this improvement, our last 12 months pre-tax return on equity increased 560 basis points year-over-year to 21.8%, which is our highest level in 15 years.
Let's look at our net new home order information for the quarter on Slide 9.
The dollar value of our net orders increased 89% year-over-year to $1.65 billion, and unit net orders increased by 73%, driven by a 70% increase in our monthly absorption rate to 6.1.
The average selling price of our net orders increased by 10% year-over-year, driven by price increases implemented over the past 12 months, as well as a shift in mix to California, which has our highest average price.
During the third quarter, our California markets had nearly as many net new orders as our Colorado markets.
I'd like to note that we ended the quarter with 194 active subdivisions, which is slightly higher than a year ago.
With the strong sales activity we've experienced during the third quarter, we have a number of subdivisions that are approaching closeout earlier than expected.
As a result, we anticipate roughly 185 active subdivisions at year-end.
Although this would be a decrease from the end of the third quarter, it would be unchanged from where we started the year.
On Slide 10, we provided further net new order detail by month since April.
You can see that sales activity ramped up significantly after the initial slowdown related to the COVID-19 pandemic.
We saw order activity peak during the month of August, but September remained strong and well above the prior year, even after we increased prices in most of our subdivisions.
We also saw the rate of cancellations continue to decrease as the months progressed.
We expect some seasonality to kick in during the fourth quarter.
However, October has remained very strong relative to the prior year.
Based on the activity we've seen to date, we expect our October 2020 net orders to exceed our October 2019 orders by at least 50%.
As a result of our strong sales, we ended the quarter with an estimated sales value for our homes in backlog of $3.1 billion, which was up 47% year-over-year.
The average selling price of homes in backlog increased 4% due to price increases implemented over the past 12 months, decreased incentives, and a shift in mix to California.
These factors were slightly offset by a shift in mix to lower-priced communities consistent with our ongoing strategy of offering more affordable home plans.
I will now turn to land activity on Slide 12.
The number of lots we acquired this quarter increased 63% year-over-year, reflecting our confidence in market conditions and our focus on continuing to grow our business.
While the number of lots we approved earlier this year were down due to the uncertainty created by COVID-19, we approved over 3,800 lots for purchase during the third quarter of 2020.
In the end, in spite of immense volatility, the number of lots approved over the last 12 months has increased by 34% compared to the prior year period.
As a result, our total lot supply to end the quarter was 8% higher than at the same point in 2019, supporting our growth potential for future periods.
We expect to see strong lot approval and acquisition activity continue into the fourth quarter given the robust demand that we have seen in recent months and our conviction about growth prospects for housing in future years.
In summary, clearly, we are encouraged by the resilience the housing market has shown in the third quarter given the immense challenges our country has faced in 2020, and we believe that we have executed our operating strategy well in this volatile environment.
More importantly, we see an opportunity to sustain growth well into the future, supported by solid demographics and changing customer preferences.
Our current backlog, not only puts us in position for a strong end to 2020, but also provides us with the opportunity for significant year-over-year increases in home sale revenues and pre-tax income to start 2021.
With our strong balance sheet and current land pipeline, we are well positioned to grow community count significantly in 2021 and have a preliminary target of at least 10,000 home deliveries for the coming fiscal year.
We are mindful that there are many risks to achieving this target, especially with COVID-19 still impacting our daily lives.
These risks will be closely monitored as we work to grow our Company and the safety of our employees, subcontractors and customers will remain top priority.
Following our strong third quarter, our Board of Directors has declared a 21% increase in the quarterly cash dividend from $0.33 to $0.40 per share.
This represents a 33% increase from the prior year and demonstrates our commitment to rewarding our shareholders for their continued support.
 Assistant:

Chosen response:
mdc holdings sees q4 2020 home deliveries between 2,400 - 2,600.
q3 dollar value of net new orders increased 89% to $1.65 billion from $871.7 million (adds period).
sees average selling price for 2020 q4 unit deliveries exceeding $460,000 (not $460,00).
q3 earnings per share $1.49.
quarterly cash dividend of $0.40 per share declared, up 21% from prior quarter and 33% from prior year.
qtrly home sale revenues increased 33% to $1.0 billion from $750.3 million.
qtrly average selling price of deliveries up 6% to $466,000.
mizel will continue his leadership role with mdc as newly appointed executive chairman.
qtrly dollar value of ending backlog up 47% to $3.08 billion from $2.10 billion.
david d. mandarich has been appointed as new president and chief executive officer of mdc.
staci woolsey has been appointed as chief accounting officer of mdc.
sees home deliveries for 2020 q4 between 2,400 and 2,600.


Prompt:
Human: If you have not received the release, it is available on the Investor Relations portion of Medifast's website at www.medifastinc.com.
These statements do not guarantee future performance, and therefore, undue reliance should not be placed on them.
After I've provided some updates on our business performance, Jim will review the Q4 financial results in more detail.
We closed the year on a strong note, with accelerating top line growth over the third quarter.
Revenue increased 55.3% to $264.9 million in the fourth quarter of 2020, and we continue to execute strongly across all areas of the business.
Earnings per diluted share were $2.36, a 42.2% increase over the prior year period.
However, due to significant differences in tax rates between the periods, we believe income from operations is a better gauge of how we perform from a profitability standpoint.
Jim will discuss our tax rates in more detail when he covers our financial results.
For the fourth quarter, income from operations was $38 million, an increase of 103% versus the same period last year.
Growth was driven by significant year-over-year and sequential improvements in the number of active earning OPTAVIA Coaches, which grew to 44,200 in the fourth quarter, another new record.
Additionally, productivity per active earning coach increased 13.4% to $5,932 during the quarter compared to the prior year period.
Our client community remains strong, and we finished 2020 even better than expected, with successful incentive coach programs in Q4 that position us well for 2021.
The initiatives we've implemented over the past one to two years are delivering consistent, meaningful progress as evidenced by the results we announced today.
The company's focus continues to be supporting our growing community of independent OPTAVIA Coaches as they develop and focus on the four competencies that drive our business success, namely, attracting new clients, supporting clients on the Optimal Weight 5&1 Plan and supporting new coaches and developing coach leaders.
There's an ever-growing number of individuals seeking greater health and wellness, and we remain resolutely focused on targeting those for whom diets have filled and who desire a holistic approach to optimizing their overall health and well-being.
The key insights supporting our sustained growth is that clients do better on their health and wellness journey when they have the support of a coach.
Coach-led model has been clinically proven to be more effective in this regard.
As such, we have combined the most powerful aspects of the direct selling model and direct-to-consumer offerings and created a model that puts the OPTAVIA Coach at the center of helping clients on their health transformation journey with the company providing the distribution infrastructure to supply products directly to the end consumer.
We reach our target audience through the community of OPTAVIA Coaches, who leverage social media channels to relate their success with our proprietary habits of health transformation system and products.
Our vision is to achieve long-term sustainable growth in the mid-teens by penetrating the large and growing addressable market in the United States, continuing our expansion into Asia Pacific markets and developing other large markets throughout the world.
As we continue to grow at scale in both coaches and clients, it's essential that we place sharp focus on building an operational foundation through investments related to organization, technology, digital products, manufacturing and distribution.
This will allow us to take full advantage of the long-term growth opportunity.
Consistent with the business and brand strategy that we communicated last quarter, we are moving forward with the sunset of our Medifast Direct channel and Medifast branded products and anticipate this being complete by the end of the second quarter.
By focusing on building capabilities in the areas that matter most to our OPTAVIA Coaches and client-centered model, we will further enhance and solidify our competitive advantage in the health and wellness space in support of our long-term growth and profit vision.
Last year, we initiated an important project to rationalize our SKUs, enabling us to place greater focus on the most popular and profitable products in our portfolio and to place a more consistent emphasis on our OPTAVIA brand.
We continue to enhance our supply chain capabilities to meet product demand across core items, while also empowering further operational optimization across all aspects of the manufacturing and the distribution network.
The strategic value of having a strong supply chain has never been more important, and we continue to prioritize these investments, focusing on expanding capacity as well as driving operational excellence.
We remain on track to support a $2 billion revenue business by the end of 2021, creating ample headroom for several years depending on the trajectory of future growth.
We are scaling up new and existing co-manufacturers, which mitigates the risk through diversification, while also adding capacity.
We are also working closely with our third-party logistics partners to leverage their capacity as well as adding distribution assets to our facility in the Maryland area.
Technology remains another key area of focus for Medifast.
We opened a new technology center in Utah roughly a year ago to become our pioneering digital lab for developing tools that create efficiencies for coaches and drive engagement for clients.
Our OPTAVIA Coaches continue to refine their use of technology and social media in attracting new clients and broadening their reach.
Overall, the new coach-directed training regimen and technology support systems are increasingly effective at supporting more clients than has been historically possible.
Deeper digital expertise will also allow us to further leverage the competitive advantages of the coach model.
During the first half of 2021, we will launch the beta version of the OPTAVIA Coach Connect app, a powerful productivity tool aimed at helping coaches manage clients.
We will also launch the beta version of the OPTAVIA client app, which focuses on meal planning on the OPTAVIA Weight 5&1 plan.
Our team in Utah continues to work on a range of other tools to drive digital engagement with the field, and we're excited about the opportunities in the light had in this space.
In 2020, our revenue growth rate was roughly two times our long-term growth rate, essentially pulling forward an entire year.
While we're clearly pleased with this elevated growth rate, as a management team, we're focused on delivering long-term sustainable value.
Our current business remains strong, and I've never been more confident in the direction of the company and our ability to drive consistent and sustainable growth by delivering on our mission of lifelong transformation, one healthy habit at a time.
For current stockholders and prospective investors, the Medifast story remains compelling for several reasons.
First, our addressable market is large and growing.
The U.S. weight loss market that is core to OPTAVIA's business has been growing at about 6% per annum and is worth $20 billion today.
Roughly 70% of the U.S. population is overweight or obese, and this segment is growing at 2% per annum, which highlights the importance of a proven health and wellness solution like the one we offer.
Earlier this year, we commissioned an independent survey that showed that the pandemic has only heightened consumer focus on health and wellness.
Around 63% of Americans report that they have adopted new positive health routines since March of 2020.
And of those, 96% plan to continue embracing healthy habits this year.
COVID-19 is causing people to put their personal health and wellness higher up in their priorities, and this presents a significant opportunity for our company.
Second, our holistic coach center approach is supported by proprietary tools in a vibrant community that provides a clear competitive advantage in the health and wellness space.
Again, it is clinically proven that people who want to lose weight do better when they have the support of a coach and a community, and that principle is the very heart of the OPTAVIA offer.
Third, we have a dynamic and agile organization that adapts quickly to changes in the marketplace.
Even when those changes come at an unexpected and rapid pace, such as what we saw last year as a result of COVID-19.
That makes us more nimble and better placed to take advantage of tactical opportunities as they emerge.
Finally, we have a strong financial position, efficient business and disciplined strategy for allocating capital, prioritizing organic growth opportunities while returning a significant amount of value to stockholders through dividends and share repurchases.
Before I turn the time over to Jim, let me note that our commitment to lifelong transformation is not just in our work with coaches and clients, but also through our active support of the communities in which we live and work.
In this challenging time, our commitment to these groups remains a priority.
As an example, in the fourth quarter, Medifast behavioral health specialists and registered dietitians and nutritionists partnered with select OPTAVIA Coaches to lead remote classes and activities for the second and fifth graders of the Living Classroom Foundation in Baltimore.
For children, the pandemic has brought about increased feelings of stress and anxiety, and these classes were designed to promote the habit of healthy mind and to empower children to better handle stress.
Proud of the work that the company, our employees and our pitched community are doing to create opportunities for people from all walks of life to deliver the best possible version of themselves in whatever way possible.
With that, let me now turn the time over to Jim Maloney, who will walk you through the financial results.
Revenue in the fourth quarter of 2020 increased 55.3% to $264.9 million from $170.6 million in the fourth quarter of 2019.
As Dan highlighted, we achieved another record quarter of active earning coaches ending the quarter with 44,200.
This represents 39% growth as compared to 31,800 coaches in the same period last year and a 5% increase from the end of the third quarter of 2020.
Average revenue per active earning coach for the quarter was 5,932 and compared to 5,229 for the fourth quarter of 2019 and down $6,329 in the third quarter of 2020, mainly due to timing of promotional activity from one quarter to another.
The fourth quarter 2020 was the second-highest level of revenue per active earning coach in our history, and we are very pleased with this strong result.
Programming in the quarter was largely unchanged from last year's December Dash, other than timing, indicating the strength of the underlying fundamental of our model.
OPTAVIA branded products grew to 87.2% of our total company consumable units sold in the fourth quarter, up from 79% in the prior year period.
Gross profit for the fourth quarter of 2020 increased 55.6% to $199.2 million compared to $128.1 million in the prior year period.
Gross profit as a percentage of revenue was 75.2%, a slight increase compared to 75.1% in the fourth quarter of 2019.
SG&A for the fourth quarter of 2020 increased $51.9 million to $161.3 million compared to $109.4 million for the fourth quarter of 2019.
The increase was primarily due to higher OPTAVIA commissions expense as a result of growth of OPTAVIA sales as well as increased salaries and benefits related expenses, partially offset by a decrease in sales and marketing expenses.
SG&A as a percentage of revenue decreased 320 basis points year-over-year to 60.9% versus 64.1% in the fourth quarter of 2019.
Income from operations increased $19.3 to $38 million from $18.7 million in the prior year period, primarily as a result of increased gross profit, partially offset increased SG&A expenses.
Income from operations as a percentage of revenue was 14.3% for the quarter, an increase of 340 basis points from the year-ago period.
The effective tax rate was 26% for the fourth quarter of 2020 compared to 22.4% for the September 30, 2020 year-to-date and compared to a tax benefit of 4.7% in the year-ago period.
During the fourth quarter of 2020, the effective tax rate increased 3.8%, which reduced earnings per diluted share by $0.12 due to a discrete tax reserve recorded during the period.
For the full year of 2020, earnings per diluted share was negatively impacted by $0.12 due to this discrete tax reserve.
The fourth quarter of 2019 tax benefit reflected the impact of federal tax benefits from share-based compensation, partially offset by increases in the effective state tax rate of 2%.
Net income in the fourth quarter of 2020 was $28 million or $2.36 per diluted share, based on approximately 11.9 million shares outstanding.
This compares to net income of $19.9 million or $1.66 per diluted share-based on approximately 11.9 million shares outstanding in the prior year.
Our balance sheet remains very strong with cash, cash equivalents and investment securities of $174.5 million as of December 31, 2020, compared to $92.7 million at December 31, 2019.
The company remains free of interest-bearing debt and believes it is well positioned in this challenging near-term macroeconomic environment.
Our Board of Directors declared a quarterly cash dividend in the fourth quarter of $13.4 million or $1.13 per share, which was paid on February 5, 2021.
There was -- there are approximately 2,323,000 shares of common stock remaining under our stock repurchase program.
Consistent with last quarter and due to the ongoing uncertainties related to the COVID-19 pandemic, we are not providing guidance at this time.
We would, however, like to provide you with some insight into the first month of the first quarter and that January's top line year-over-year growth trends are performing consistent with or better than the trends we experienced in the fourth quarter.
If you are attempting to develop a financial model for 2021, I will remind you that Q2 through Q4 2020 have much harder comparables than Q1 2020 from a top line basis.
As Dan discussed, in 2021, we intend to sunset our Medifast Direct channel and Medifast branded products and further invest in our supply chain and technology.
We've also budgeted for a return for in-person convention if safety measures permit.
These decisions and investments will have an impact on our operating margins during 2021 but will enable long-term growth and operating income objectives.
Again, if you are developing a financial model for 2021, these initiatives will increase costs.
In closing, 2020 has been a very robust growth in the face of a very challenging and uncertain environment.
We remain confident in our business model and are well positioned to capitalize on opportunities that lie ahead.
 Assistant:

Chosen response:
compname reports q4 revenue $264.9 million.
q4 earnings per share $2.36 .
q4 revenue $264.9 million versus refinitiv ibes estimate of $244.5 million.