Moody's - 10-Q quarterly report FY2022 Q3

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form			10-Q

(Mark one)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-14037

____________________

Moody’s Corporation

(Exact name of registrant as specified in its charter)


Delaware									13-3998945
(State of Incorporation)									(I.R.S. Employer Identification No.)

7 World Trade Center at 250 Greenwich Street, New York, New York 10007

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code:

(212) 553-0300

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

MCO

New York Stock Exchange

1.75% Senior Notes Due 2027

MCO 27

New York Stock Exchange

0.950% Senior Notes Due 2030

MCO 30

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months, or for such shorter period that the registrant was required to submit such files. Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


Shares Outstanding at September 30, 2022
183.2 million

Table of Contents


	MOODY’S CORPORATION INDEX TO FORM 10-Q
		Page(s)
	Glossary of Terms and Abbreviations	3-6
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Operations (Unaudited) for the Three Months Ended and Nine Months Ended September 30, 2022 and 2021	7
	Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended and Nine Months Ended September 30, 2022 and 2021	8
	Consolidated Balance Sheets (Unaudited) at September 30, 2022 and December 31, 2021	9
	Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2022 and 2021	10
	Consolidated Statements of Shareholders’ Equity (Unaudited) for the Three Months Ended and Nine Months Ended September 30, 2022 and 2021	11-14
	Notes to Condensed Consolidated Financial Statements (Unaudited)	15-42
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
	The Company	43
	Sustainability	43
	Current Matters Impacting Moody's Business	43-44
	Critical Accounting Estimates	44-45
	Reportable Segments	45
	Results of Operations	45-73
	Liquidity and Capital Resources	73-78
	Recently Issued Accounting Standards	78
	Contingencies	78
	Regulation	78-79
	Forward-Looking Statements	79-80
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	80-81
Item 4.	Controls and Procedures	81
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	82
Item 1A.	Risk Factors	82
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	82
Item 5.	Other Information	82
Item 6.	Exhibits	83

SIGNATURES

Table of Contents

GLOSSARY OF TERMS AND ABBREVIATIONS

The following terms, abbreviations and acronyms are used to identify frequently used terms in this report:


TERM			DEFINITION


Acquisition-Related Intangible Amortization Expense			Amortization of definite-lived intangible assets acquired by the Company from all business combination transactions

Adjusted Diluted EPS			Diluted EPS excluding the impact of certain items as detailed in the section entitled “Non-GAAP Financial Measures”
Adjusted Net Income			Net Income excluding the impact of certain items as detailed in the section entitled “Non-GAAP Financial Measures”
Adjusted Operating Income			Operating income excluding the impact of certain items as detailed in the section entitled “Non-GAAP Financial Measures”
Adjusted Operating Margin			Adjusted Operating Income divided by revenue
Americas			Represents countries within North and South America, excluding the U.S.

AOCI(L)			Accumulated other comprehensive income/loss; a separate component of shareholders’ equity
Annualized Recurring Revenue (ARR)			A supplemental performance metric to provide additional insight on the estimated value of MA's recurring revenue contracts at a given point in time, excluding the impact of FX and contracts related to acquisitions
ASC			The FASB Accounting Standards Codification; the sole source of authoritative GAAP as of July 1, 2009 except for rules and interpretive releases of the SEC, which are also sources of authoritative GAAP for SEC registrants
Asia-Pacific			Represents Australia and countries in Asia including but not limited to: China, India, Indonesia, Japan, Korea, Malaysia, Singapore, Sri Lanka and Thailand
ASR			Accelerated Share Repurchase
ASU			The FASB Accounting Standards Update to the ASC. Provides background information for accounting guidance and the bases for conclusions on the changes in the ASC. ASUs are not considered authoritative until codified into the ASC
BitSight			A provider that helps global market participants understand cyber risk through ratings, analytics, and performance management tools
Board			The board of directors of the Company
BPS			Basis points



CCXI			China Cheng Xin International Credit Rating Co. Ltd.; China’s first and largest domestic credit rating agency approved by the People’s Bank of China; the Company acquired a 49% interest in 2006; currently Moody’s owns 30% of CCXI
CDP			An international nonprofit organization that helps companies, cities, states and regions manage their environmental impact through a global disclosure system
CFG			Corporate finance group; an LOB of MIS

CMBS			Commercial mortgage-backed securities; an asset class within SFG
COLI			Corporate-Owned Life Insurance
Commission			European Commission
Common Stock			The Company’s common stock
Company			Moody’s Corporation and its subsidiaries; MCO; Moody’s

Cortera			A provider of North American credit data and workflow solutions; the Company acquired Cortera in March 2021
COVID-19			An outbreak of a novel strain of coronavirus resulting in an international public health crisis and a global pandemic
CP			Commercial Paper
CP Program			A program entered into on August 3, 2016 allowing the Company to privately place CP up to a maximum of $1 billion for which the maturity may not exceed 397 days from the date of issue, and which is backstopped by the 2021 Facility
CRAs			Credit rating agencies

Data and Information (D&I)			LOB within MA which provides vast data sets on companies and securities via data feeds and data applications products

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TERM			DEFINITION
Decision Solutions (DS)			LOB within MA that provides software and workflow tools for specific use cases (banking, insurance, KYC/KYS, CRE and structured finance solutions). This LOB utilizes components from the Data & Information and Research & Insights LOBs to provide integrated risk solutions
Dodd-Frank Act			Dodd-Frank Wall Street Reform and Consumer Protection Act
EMEA			Represents countries within Europe, the Middle East and Africa
EPS			Earnings per share
ERS			Enterprise Risk Solutions; former LOB within MA, which offered risk management software solutions as well as related risk management advisory engagements services. As of January 1, 2022, the MA LOBs have been realigned from RD&A and ERS to Decision Solutions, Research and Insights, and Data and Information
ESG			Environmental, Social, and Governance
ESMA			European Securities and Markets Authority

ESTR			Euro Short-Term Rate
ETR			Effective tax rate
EU			European Union

EURIBOR			The Euro Interbank Offered Rate
Excess Tax Benefits			The difference between the tax benefit realized at exercise of an option or delivery of a restricted share and the tax benefit recorded at the time the option or restricted share is expensed under GAAP
Exchange Act			The Securities Exchange Act of 1934, as amended
External Revenue			Revenue excluding any intersegment amounts
FASB			Financial Accounting Standards Board
FIG			Financial institutions group; an LOB of MIS

Free Cash Flow			Net cash provided by operating activities less cash paid for capital additions

FX			Foreign exchange
GAAP			U.S. Generally Accepted Accounting Principles
GBP			British pounds
GDP			Gross domestic product
GRI			Global Reporting Initiative, an international independent standards organization that helps organizations understand and disclose their impact on climate change, human rights and corruption
ICRA			ICRA Limited; a provider of credit ratings and research in India






kompany			360kompany AG (kompany); a Vienna, Austria-based platform for business verification and Know Your Customer (KYC) technology solutions, acquired by the Company in February 2022
Korea			Republic of South Korea
KYC			Know-your-customer
LIBOR			London Interbank Offered Rate
LOB			Line of business
MA			Moody’s Analytics - a reportable segment of MCO which provides a wide range of products and services that support financial analysis and risk management activities of institutional participants in global financial markets; consists of three LOBs - Decision Solutions; Research and Insights; and Data and Information

MAKS			Moody’s Analytics Knowledge Services; formerly known as Copal Amba; provided offshore research and analytic services to the global financial and corporate sectors; business was divested in the fourth quarter of 2019 and was formerly part of the PS LOB and a reporting unit within the MA reportable segment

MCO			Moody’s Corporation and its subsidiaries; the Company; Moody’s
MD&A			Management’s Discussion and Analysis of Financial Condition and Results of Operations
MIS			Moody’s Investors Service - a reportable segment of MCO; consists of five LOBs - SFG; CFG; FIG; PPIF; and MIS Other
MIS Other			Consists of financial instruments pricing services in the Asia-Pacific region, ICRA non-ratings revenue and revenue from providing ESG research, data and assessments. These businesses are components of MIS; MIS Other is an LOB of MIS

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TERM			DEFINITION
Moody’s			Moody’s Corporation and its subsidiaries; MCO; the Company
MSS			Moody's Shared Services; primarily consists of information technology and support staff such as finance, human resources and legal that support both MIS and MA


Net Income			Net income attributable to Moody’s Corporation, which excludes net income from consolidated noncontrolling interests belonging to the minority interest holder


NM			Percentage change is not meaningful
Non-GAAP			A financial measure not in accordance with GAAP; these measures, when read in conjunction with the Company’s reported results, can provide useful supplemental information for investors analyzing period-to-period comparisons of the Company’s performance, facilitate comparisons to competitors’ operating results and to provide greater transparency to investors of supplemental information used by management in its financial and operational decision making
NRSRO			Nationally Recognized Statistical Rating Organization, which is a credit rating agency registered with the SEC
OCI			Other comprehensive income (loss); includes gains and losses on cash flow and net investment hedges, certain gains and losses relating to pension and other retirement benefit obligations and foreign currency translation adjustments


Operating segment			Term defined in the ASC relating to segment reporting; the ASC defines an operating segment as a component of a business entity that has each of the three following characteristics: i) the component engages in business activities from which it may recognize revenue and incur expenses; ii) the operating results of the component are regularly reviewed by the entity’s chief operating decision maker; and iii) discrete financial information about the component is available

PassFort			A U.K. SaaS-based workflow platform for identity verification, customer onboarding, and risk analysis; acquired by the Company in November 2021
PPIF			Public, project and infrastructure finance; an LOB of MIS


Q3			Third Quarter
RD&A			Research, Data and Analytics; former LOB within MA that offered subscription-based research, data and analytical products, including: credit ratings produced by MIS; credit research; quantitative credit scores and other analytical tools; economic research and forecasts; business intelligence and company information products; commercial real estate data and analytical tools; and learning solutions. As of January 1, 2022, the MA LOBs have been realigned from RD&A and ERS to Decision Solutions, Research and Insights, and Data and Information
RealXData			A provider of CRE lease-level portfolio management with benchmarking and rent forecasting capabilities; acquired by the Company in September 2021


Recurring Revenue			For MIS, represents recurring monitoring fees of a rated debt obligation and/or entities that issue such obligations, as well as revenue from programs such as commercial paper, medium-term notes and shelf registrations. For MIS Other, represents subscription-based revenue. For MA, represents subscription-based revenue and software maintenance revenue
Reform Act			Credit Rating Agency Reform Act of 2006



Reporting unit			The level at which Moody’s evaluates its goodwill for impairment under U.S. GAAP; defined as an operating segment or one level below an operating segment
Research and Insights (R&I)			LOB within MA that provides models, scores, expert insights and commentary. This LOB includes credit research; credit models and analytics; and economics data and models
Revenue Accounting Standard			Updates to the ASC pursuant to ASU No. 2014-09, “Revenue from Contracts with Customers (ASC Topic 606).” This accounting guidance significantly changed the accounting framework under U.S. GAAP relating to revenue recognition and to the accounting for the deferral of incremental costs of obtaining or fulfilling a contract with a customer

RMBS			Residential mortgage-backed securities; an asset class within SFG

RMS			A global provider of climate and natural disaster risk modeling and analytics; acquired by the Company in September 2021
SaaS			Software-as-a-Service
SASB			Sustainability Accounting Standards Board
SBTi			Science Based Targets initiative; a partnership between CDP, the United Nations Global Compact, World Resources Institute and the World Wide Fund for Nature created to encourage the private sector to take the lead on urgent climate action

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TERM			DEFINITION
SEC			U.S. Securities and Exchange Commission
Securities Act			Securities Act of 1933, as amended
SFG			Structured finance group; an LOB of MIS
SG&A			Selling, general and administrative expenses
SOFR			Secured Overnight Financing Rate
Tax Act			The “Tax Cuts and Jobs Act” enacted into U.S. law on December 22, 2017 which significantly amends the tax code in the U.S.
TCFD			Task Force on Climate-Related Financial Disclosures
Total Debt			All indebtedness of the Company as reflected on the consolidated balance sheets
Transaction Revenue			For MIS, represents the initial rating of a new debt issuance as well as other one-time fees. For MIS Other, represents revenue from professional services as well as data services, research and analytical engagements. For MA, represents perpetual software license fees and revenue from software implementation services, risk management advisory projects, and training and certification services
U.K.			United Kingdom
U.S.			United States
USD			U.S. dollar
UTPs			Uncertain tax positions

WEF			World Economic Forum






YTD			Year-to-date
2020 MA Strategic Reorganization Restructuring Program			Restructuring program approved by the chief executive officer of Moody’s on December 22, 2020, relating to a strategic reorganization in the MA reportable segment
2022 - 2023 Geolocation Restructuring Program			Restructuring program approved by the chief executive officer of Moody’s on June 30, 2022 and expanded on October 24, 2022, relating to the Company's post-COVID-19 geolocation strategy
2013 Senior Notes due 2024			Principal amount of $500 million, 4.875% senior unsecured notes due in February 2024
2014 Senior Notes due 2044			Principal amount of $600 million, 5.25% senior unsecured notes due in July 2044
2015 Senior Notes due 2027			Principal amount of €500 million, 1.75% senior unsecured notes due in March 2027
2017 Senior Notes due 2023			Principal amount of $500 million, 2.625% senior unsecured notes due January 15, 2023
2017 Senior Notes due 2028			Principal amount of $500 million, 3.250% senior unsecured notes due January 15, 2028
2018 Senior Notes due 2029			Principal amount of $400 million, 4.25% senior unsecured notes due February 1, 2029
2018 Senior Notes due 2048			Principal amount of $400 million, 4.875% senior unsecured notes due December 17, 2048
2019 Senior Notes due 2030			Principal amount of €750 million, 0.950% senior unsecured notes due February 25, 2030
2020 Senior Notes due 2025			Principal amount of $700 million, 3.75% senior unsecured notes due March 24, 2025
2020 Senior Notes due 2050			Principal amount of $300 million, 3.25% senior unsecured notes due May 20, 2050
2020 Senior Notes due 2060			Principal amount of $500 million, 2.55% senior unsecured notes due August 18, 2060
2021 Facility			Five-year unsecured revolving credit facility, with capacity to borrow up to $1.25 billion; backstops CP issued under the CP Program
2021 Senior Notes due 2031			Principal amount of $600 million, 2.00% senior unsecured notes due August 19, 2031
2021 Senior Notes due 2041			Principal amount of $600 million, 2.75% senior unsecured notes due August 19, 2041
2021 Senior Notes due 2061			Principal amount of $500 million, 3.10% senior unsecured notes due November 15, 2061
2022 Senior Notes due 2052			Principal amount of $500 million, 3.75% senior unsecured notes due February 25, 2052
2022 Senior Notes due 2032			Principal amount of $500 million, 4.25% senior unsecured notes due January 15, 2032

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MOODY’S CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Amounts in millions, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue	$	1,275	$	1,526	$	4,178	$	4,679
Expenses
Operating	393		394		1,203		1,152
Selling, general and administrative	385		395		1,124		1,015
Depreciation and amortization	83		61		242		180
Restructuring	1		—		32		2


Total expenses	862		850		2,601		2,349
Operating income	413		676		1,577		2,330
Non-operating (expense) income, net
Interest expense, net	(58)		(53)		(166)		(109)
Other non-operating income (expense), net	26		(4)		22		18
Total non-operating (expense) income, net	(32)		(57)		(144)		(91)
Income before provision for income taxes	381		619		1,433		2,239
Provision for income taxes	78		145		305		452


Net income attributable to Moody's	$	303	$	474	$	1,128	$	1,787
Earnings per share attributable to Moody's common shareholders
Basic	$	1.65	$	2.55	$	6.13	$	9.58
Diluted	$	1.65	$	2.53	$	6.10	$	9.51
Weighted average number of shares outstanding
Basic	183.2		186.0		184.1		186.6
Diluted	183.9		187.3		184.9		188.0

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MOODY’S CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Amounts in millions)


	Three Months Ended September 30, 2022						Three Months Ended September 30, 2021

	Pre-tax amounts		Tax amounts		After-tax amounts		Pre-tax amounts		Tax amounts		After-tax amounts
Net Income					$	303					$	474
Other Comprehensive Income (Loss):
Foreign Currency Adjustments:
Foreign currency translation adjustments, net	$	(358)	$	6	(352)		$	(124)	$	5	(119)

Net gains on net investment hedges	256		(63)		193		99		(26)		73

Cash Flow Hedges:

Reclassification of losses included in net income	1		(1)		—		1		—		1
Pension and Other Retirement Benefits:
Amortization of actuarial losses/prior service costs and settlement charge included in net income	1		—		1		3		(1)		2
Net actuarial gains and prior service costs	—		—		—		4		(1)		3
Total other comprehensive (loss) income	$	(100)	$	(58)	$	(158)	$	(17)	$	(23)	$	(40)
Comprehensive income					145						434
Less: comprehensive (loss) income attributable to noncontrolling interests					(9)						(3)
Comprehensive Income Attributable to Moody's					$	154					$	437


	Nine Months Ended September 30, 2022						Nine Months Ended September 30, 2021

	Pre-tax amounts		Tax amounts		After-tax amounts		Pre-tax amounts		Tax amounts		After-tax amounts
Net Income					$	1,128					$	1,787
Other Comprehensive Income (Loss):
Foreign Currency Adjustments:
Foreign currency translation adjustments, net	$	(806)	$	10	(796)		$	(234)	$	9	(225)
Foreign currency translation adjustments - reclassification of losses included in net income	20		—		20		—		—		—
Net gains on net investment hedges	561		(140)		421		233		(56)		177
Net investment hedges - reclassification of gains included in net income	—		—		—		(2)		1		(1)
Cash Flow Hedges:

Reclassification of losses included in net income	2		(1)		1		2		—		2
Pension and Other Retirement Benefits:
Amortization of actuarial losses/prior service costs and settlement charge included in net income	2		—		2		16		(4)		12
Net actuarial gains and prior service costs	3		(1)		2		4		(1)		3
Total other comprehensive (loss) income	$	(218)	$	(132)	$	(350)	$	19	$	(51)	$	(32)
Comprehensive income					778						1,755
Less: comprehensive (loss) income attributable to noncontrolling interests					(12)						(2)
Comprehensive Income Attributable to Moody's					$	790					$	1,757

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MOODY’S CORPORATION

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Amounts in millions, except share and per share data)


	September 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	1,656	$	1,811
Short-term investments	89		91
Accounts receivable, net of allowance for credit losses of $42 in 2022 and $32 in 2021	1,518		1,720
Other current assets	463		389

Total current assets	3,726		4,011
Property and equipment, net of accumulated depreciation of $1,078 in 2022 and $1,010 in 2021	472		347
Operating lease right-of-use assets	387		438
Goodwill	5,617		5,999
Intangible assets, net	2,182		2,467
Deferred tax assets, net	336		384
Other assets	1,219		1,034
Total assets	$	13,939	$	14,680
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	807	$	1,142
Current portion of operating lease liabilities	104		105


Deferred revenue	1,155		1,249

Total current liabilities	2,066		2,496
Non-current portion of deferred revenue	78		86
Long-term debt	7,476		7,413
Deferred tax liabilities, net	604		488
Uncertain tax positions	308		388
Operating lease liabilities	389		455
Other liabilities	588		438
Total liabilities	11,509		11,764
Contingencies (Note 17)
Shareholders' equity:
Preferred stock, par value $0.01 per share; 10,000,000 shares authorized; no shares issued and outstanding	—		—
Series common stock, par value $0.01 per share; 10,000,000 shares authorized; no shares issued and outstanding	—		—
Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 342,902,272 shares issued at September 30, 2022 and December 31, 2021, respectively.	3		3
Capital surplus	1,013		885
Retained earnings	13,501		12,762
Treasury stock, at cost; 159,739,888 and 157,262,484 shares of common stock at September 30, 2022 and December 31, 2021	(11,514)		(10,513)
Accumulated other comprehensive loss	(748)		(410)
Total Moody's shareholders' equity	2,255		2,727
Noncontrolling interests	175		189
Total shareholders' equity	2,430		2,916
Total liabilities, noncontrolling interests and shareholders' equity	$	13,939	$	14,680

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MOODY’S CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in millions)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities
Net income	$	1,128	$	1,787
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization	242		180
Stock-based compensation	130		127
Deferred income taxes	58		(79)



FX translation losses reclassified to net income	20		—
Changes in assets and liabilities:
Accounts receivable	123		(137)
Other current assets	(140)		64

Other assets	10		(7)
Lease obligations	(14)		(10)

Accounts payable and accrued liabilities	(358)		(10)
Deferred revenue	(20)		(75)
Uncertain tax positions	(41)		(79)
Other liabilities	(41)		(55)
Net cash provided by operating activities	1,097		1,706
Cash flows from investing activities
Capital additions	(204)		(77)
Purchases of investments	(244)		(137)
Sales and maturities of investments	153		102
Cash paid for acquisitions, net of cash acquired	(97)		(2,026)
Receipts from settlements of net investment hedges	220		26
Payments for settlements of net investment hedges	—		(49)
Net cash used in investing activities	(172)		(2,161)
Cash flows from financing activities
Issuance of notes	988		1,178
Repayment of notes	(500)		—


Proceeds from stock-based compensation plans	21		30
Repurchase of shares related to stock-based compensation	(85)		(82)
Treasury shares	(983)		(628)

Dividends	(387)		(347)
Debt issuance costs and related fees	(10)		(13)
Dividends to noncontrolling interest	(1)		(3)


Net cash (used in) provided by financing activities	(957)		135

Effect of exchange rate changes on cash and cash equivalents	(123)		(38)
Decrease in cash and cash equivalents	(155)		(358)
Cash and cash equivalents, beginning of period	1,811		2,597
Cash and cash equivalents, end of period	$	1,656	$	2,239

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MOODY’S CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(Amounts in millions, except per share data)


Shareholders of Moody's Corporation
	Common Stock			Capital Surplus		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss		Total Moody's Shareholders' Equity		Non- Controlling Interests		Total Shareholders' Equity
	Shares	Amount						Shares	Amount
Balance at June 30, 2021	342.9	$	3	$	784	$	12,094	(156.7)	$	(10,270)	$	(425)	$	2,186	$	194	$	2,380
Net income						474							474		—		474
Dividends ($0.62 per share)						(117)							(117)		(2)		(119)
Stock-based compensation				41									41				41
Shares issued for stock-based compensation plans at average cost, net				7				—	1				8				8

Treasury shares repurchased								(0.3)	(125)				(125)				(125)
Currency translation adjustment, net of net investment hedge activity (net of tax of $21 million)											(43)		(43)		(3)		(46)
Net actuarial gains and prior service costs (net of tax of $1 million)											3		3				3
Amortization of prior service costs/actuarial losses and settlement charge (net of tax of $1 million)											2		2				2
Net realized gain on cash flow hedges											1		1				1
Balance at September 30, 2021	342.9	$	3	$	832	$	12,451	(157.0)	$	(10,394)	$	(462)	$	2,430	$	189	$	2,619

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MOODY'S CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(Amounts in millions, except per share data)


Shareholders of Moody's Corporation
	Common Stock			Capital Surplus		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss		Total Moody's Shareholders' Equity		Non- Controlling Interests		Total Shareholders' Equity
	Shares	Amount						Shares	Amount
Balance at December 31, 2020	342.9	$	3	$	735	$	11,011	(155.8)	$	(9,748)	$	(432)	$	1,569	$	194	$	1,763
Net income						1,787							1,787		—		1,787
Dividends ($1.86 per share)						(347)							(347)		(3)		(350)
Stock-based compensation				127									127				127
Shares issued for stock-based compensation plans at average cost, net				(30)				0.7	(18)				(48)				(48)


Treasury shares repurchased								(1.9)	(628)				(628)				(628)

Currency translation adjustment, net of net investment hedge activity (net of tax of $46 million)											(47)		(47)		(2)		(49)
Net actuarial losses and prior service costs (net of tax of $1 million)											3		3				3
Amortization of prior service costs/actuarial losses and settlement charge (net of tax of $4 million)											12		12				12
Net realized and unrealized gain on cash flow hedges											2		2				2
Balance at September 30, 2021	342.9	$	3	$	832	$	12,451	(157.0)	$	(10,394)	$	(462)	$	2,430	$	189	$	2,619

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MOODY'S CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(Amounts in millions, except per share data)


Shareholders of Moody's Corporation
	Common Stock			Capital Surplus		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss		Total Moody's Shareholders' Equity		Non- Controlling Interests		Total Shareholders' Equity
	Shares	Amount						Shares	Amount
Balance at June 30, 2022	342.9	$	3	$	965	$	13,328	(159.4)	$	(11,403)	$	(599)	$	2,294	$	185	$	2,479
Net income						303							303		—		303
Dividends ($0.70 per share)						(130)							(130)		(1)		(131)
Stock-based compensation				46									46				46
Shares issued for stock-based compensation plans at average cost, net				2				0.1	1				3				3


Treasury shares repurchased								(0.4)	(112)				(112)				(112)
Currency translation adjustment, net of net investment hedge activity (net of tax of $57 million)											(150)		(150)		(9)		(159)

Amortization of prior service costs and actuarial losses											1		1				1

Balance at September 30, 2022	342.9	$	3	$	1,013	$	13,501	(159.7)	$	(11,514)	$	(748)	$	2,255	$	175	$	2,430

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MOODY'S CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(Amounts in millions, except per share data)


Shareholders of Moody's Corporation
	Common Stock			Capital Surplus		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss		Total Moody's Shareholders' Equity		Non- Controlling Interests		Total Shareholders' Equity
	Shares	Amount						Shares	Amount
Balance at December 31, 2021	342.9	$	3	$	885	$	12,762	(157.3)	$	(10,513)	$	(410)	$	2,727	$	189	$	2,916
Net income						1,128							1,128		—		1,128
Dividends ($2.10 per share)						(389)							(389)		(2)		(391)

Stock-based compensation				130									130				130
Shares issued for stock-based compensation plans at average cost, net				(34)				0.6	(30)				(64)				(64)
Shares issued as consideration to acquire kompany(1)				35				0.1	9				44				44


Treasury shares repurchased				(3)				(3.1)	(980)				(983)				(983)

Currency translation adjustment, net of net investment hedge activity (net of tax of $130 million)											(343)		(343)		(12)		(355)
Net actuarial gains and prior service costs (net of tax of $1 million)											2		2				2
Amortization of prior service costs and actuarial losses											2		2				2
Net realized and unrealized gain on cash flow hedges											1		1				1
Balance at September 30, 2022	342.9	$	3	$	1,013	$	13,501	(159.7)	$	(11,514)	$	(748)	$	2,255	$	175	$	2,430

The accompanying notes are an integral part of the condensed consolidated financial statements.

(1) Represents a non-cash investing activity relating to the issuance of common stock to fund a portion of the purchase price for kompany.

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MOODY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(tabular dollar and share amounts in millions, except per share data)

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Moody’s is a global integrated risk assessment firm that empowers organizations and investors to make better decisions. Moody’s reports in two reportable segments: MIS and MA.

MIS publishes credit ratings and provides assessment services on a wide range of debt obligations, programs and facilities, and the entities that issue such obligations in markets worldwide, including various corporate, financial institution and governmental obligations, and structured finance securities.

MA is a global provider of: i) data and information; ii) research and insights; and iii) decision solutions, which help companies make better and faster decisions. MA leverages its industry expertise across multiple risks such as credit, market, financial crime, supply chain, catastrophe and climate to deliver integrated risk assessment solutions that enable business leaders to identify, measure and manage the implications of interrelated risks and opportunities.

These interim financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the Company’s consolidated financial statements and related notes in the Company’s 2021 annual report on Form 10-K filed with the SEC on February 22, 2022. The results of interim periods are not necessarily indicative of results for the full year or any subsequent period. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the periods presented have been included. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

Certain reclassifications have been made to prior period amounts to conform to the current presentation.

Adoption of New Accounting Standards

On January 1, 2022, the Company adopted ASU 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers" ("ASU No. 2021-08"). This ASU requires companies to apply the definition of a performance obligation under ASC Topic 606 to recognize and measure contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers that are acquired in a business combination. The adoption of this ASU will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606. Accordingly, upon adoption, the Company will no longer be required to adjust acquired deferred revenue to fair value in business combination transactions. The amendments in ASU No. 2021-08 are applied prospectively and have been applied to business combination transactions completed subsequent to January 1, 2022.

COVID-19

Russia/Ukraine Conflict

The Company is closely monitoring the impact of the ongoing Russia/Ukraine conflict on all aspects of its business. In response to the conflict, the Company is no longer conducting commercial operations in Russia for both MIS and MA and is complying with all applicable regulatory restrictions set forth by the jurisdictions in which Moody's operates. Furthermore, the Company also has withdrawn MIS credit ratings on Russian entities.

While Moody's Russian operations and net assets are not material, broader global market volatility, which partially relates to uncertainties surrounding the conflict, has contributed to an adverse impact on rated issuance volumes in 2022. The Company is unable to predict either the near-term or longer-term impact that the conflict may have on its financial position and operating results due to numerous uncertainties regarding the severity and duration of the conflict and its broader potential macroeconomic impact.

Reclassification of Previously Reported Revenue by LOB

In the first quarter of 2022, the Company realigned its revenue by LOB reporting structure for the MA operating segment to enhance insight and transparency into this business. As of January 1, 2022, the MA LOBs have been realigned from RD&A and ERS to:

–Decision Solutions (DS) - provides software and workflow tools for specific use cases (banking, insurance, KYC/KYS, CRE and structured finance solutions). This LOB utilizes components from the Data & Information and Research & Insights LOBs to provide integrated risk solutions;

–Research & Insights (R&I) - provides models, scores, expert insights and commentary. This LOB includes: credit research; credit models and analytics; and economics data and models; and

–Data & Information (D&I) - provides vast data sets on companies and securities via data feeds and data applications products.

Prior year revenue by LOB disclosures have been reclassified to conform to the new LOB reporting structure, which is presented in Note 2.

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NOTE 2. REVENUES

Revenue by Category

The following table presents the Company’s revenues disaggregated by LOB:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
MIS:
Corporate Finance (CFG)
Investment-grade	$	67	$	105	$	249	$	341
High-yield	21		82		91		347
Bank loans	47		145		232		482
Other accounts (1)	142		156		444		473
Total CFG	277		488		1,016		1,643
Structured Finance (SFG)
Asset-backed securities	26		29		89		88
RMBS	22		31		85		89
CMBS	19		26		84		73
Structured credit	34		57		109		148
Other accounts	—		—		1		1
Total SFG	101		143		368		399
Financial Institutions (FIG)
Banking	76		105		258		315
Insurance	24		38		82		114
Managed investments	6		8		19		29
Other accounts	3		2		9		7
Total FIG	109		153		368		465
Public, Project and Infrastructure Finance (PPIF)
Public finance / sovereign	44		61		157		191
Project and infrastructure	48		69		180		212
Total PPIF	92		130		337		403
Total ratings revenue	579		914		2,089		2,910
MIS Other	11		11		34		31
Total external revenue	590		925		2,123		2,941
Intersegment revenue	43		42		129		124
Total MIS	633		967		2,252		3,065
MA:
Decision Solutions	325		250		971		697
Research and Insights	184		177		552		523
Data and Information	176		174		532		518
Total external revenue	685		601		2,055		1,738
Intersegment revenue	2		2		5		6
Total MA	687		603		2,060		1,744
Eliminations	(45)		(44)		(134)		(130)
Total MCO	$	1,275	$	1,526	$	4,178	$	4,679

(1) Other includes: recurring monitoring fees of a rated debt obligation and/or entities that issue such obligations as well as fees from programs such as commercial paper, medium term notes, and ICRA corporate finance revenue.

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The following table presents the Company’s revenues disaggregated by LOB and geographic area:


	Three Months Ended September 30, 2022						Three Months Ended September 30, 2021
	U.S.		Non-U.S		Total		U.S.		Non-U.S		Total
MIS:
Corporate Finance	$	188	$	89	$	277	$	334	$	154	$	488
Structured Finance	69		32		101		98		45		143
Financial Institutions	47		62		109		71		82		153
Public, Project and Infrastructure Finance	57		35		92		76		54		130
Total ratings revenue	361		218		579		579		335		914
MIS Other	1		10		11		1		10		11
Total MIS	362		228		590		580		345		925
MA:
Decision Solutions	143		182		325		107		143		250
Research and Insights	100		84		184		96		81		177
Data and Information	63		113		176		58		116		174
Total MA	306		379		685		261		340		601
Total MCO	$	668	$	607	$	1,275	$	841	$	685	$	1,526


	Nine Months Ended September 30, 2022						Nine Months Ended September 30, 2021
	U.S.		Non-U.S		Total		U.S.		Non-U.S		Total
MIS:
Corporate Finance	$	673	$	343	$	1,016	$	1,093	$	550	$	1,643
Structured Finance	249		119		368		254		145		399
Financial Institutions	165		203		368		226		239		465
Public, Project and Infrastructure Finance	210		127		337		233		170		403
Total ratings revenue	1,297		792		2,089		1,806		1,104		2,910
MIS Other	4		30		34		3		28		31
Total MIS	1,301		822		2,123		1,809		1,132		2,941
MA:
Decision Solutions	425		546		971		294		403		697
Research and Insights	303		249		552		284		239		523
Data and Information	185		347		532		170		348		518
Total MA	913		1,142		2,055		748		990		1,738
Total MCO	$	2,214	$	1,964	$	4,178	$	2,557	$	2,122	$	4,679

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The following table presents the Company’s reportable segment revenues disaggregated by segment and geographic region:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
MIS:
U.S.	$	362	$	580	$	1,301	$	1,809
Non-U.S.:
EMEA	139		211		497		707
Asia-Pacific	57		90		211		287
Americas	32		44		114		138
Total Non-U.S.	228		345		822		1,132
Total MIS	590		925		2,123		2,941
MA:
U.S.	306		261		913		748
Non-U.S.:
EMEA	254		232		774		695
Asia-Pacific	72		59		211		173
Americas	53		49		157		122
Total Non-U.S.	379		340		1,142		990
Total MA	685		601		2,055		1,738
Total MCO	$	1,275	$	1,526	$	4,178	$	4,679

The following tables summarize the split between transaction and recurring revenue. In the MIS segment, excluding MIS Other, transaction revenue represents the initial rating of a new debt issuance as well as other one-time fees while recurring revenue represents the recurring monitoring fees of a rated debt obligation and/or entities that issue such obligations, as well as revenue from programs such as commercial paper, medium-term notes and shelf registrations. In MIS Other, transaction revenue represents revenue from professional services and recurring revenue represents subscription-based revenues. In the MA segment, recurring revenue represents subscription-based revenues and software maintenance revenue. Transaction revenue in MA represents perpetual software license fees and revenue from software implementation services, risk management advisory projects, and training and certification services.

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	Three Months Ended September 30,
	2022										2021
	Transaction				Recurring			Total			Transaction			Recurring			Total
Corporate Finance	$	153			$	124		$	277		$	366		$	122		$	488
	55		%		45		%	100		%	75		%	25		%	100		%
Structured Finance	$	51			$	50		$	101		$	93		$	50		$	143
	50		%		50		%	100		%	65		%	35		%	100		%
Financial Institutions	$	41			$	68		$	109		$	83		$	70		$	153
	38		%		62		%	100		%	54		%	46		%	100		%
Public, Project and Infrastructure Finance	$	50			$	42		$	92		$	88		$	42		$	130
	54		%		46		%	100		%	68		%	32		%	100		%
MIS Other	$	1			$	10		$	11		$	1		$	10		$	11
	9		%		91		%	100		%	9		%	91		%	100		%
Total MIS	$	296			$	294		$	590		$	631		$	294		$	925
	50		%		50		%	100		%	68		%	32		%	100		%
Decision Solutions	$	37			$	288		$	325		$	34		$	216		$	250
	11		%		89		%	100		%	14		%	86		%	100		%
Research and Insights	$	1			$	183		$	184		$	2		$	175		$	177
	1		%		99		%	100		%	1		%	99		%	100		%
Data and Information	$	—			$	176		$	176		$	1		$	173		$	174
	—		%		100		%	100		%	1		%	99		%	100		%
Total MA	$	38		(1)	$	647		$	685		$	37		$	564		$	601
	6		%		94		%	100		%	6		%	94		%	100		%
Total Moody's Corporation	$	334			$	941		$	1,275		$	668		$	858		$	1,526
	26		%		74		%	100		%	44		%	56		%	100		%


	Nine Months Ended September 30,
	2022										2021
	Transaction				Recurring			Total			Transaction			Recurring			Total
Corporate Finance	$	645			$	371		$	1,016		$	1,280		$	363		$	1,643
	63		%		37		%	100		%	78		%	22		%	100		%
Structured Finance	$	217			$	151		$	368		$	251		$	148		$	399
	59		%		41		%	100		%	63		%	37		%	100		%
Financial Institutions	$	159			$	209		$	368		$	252		$	213		$	465
	43		%		57		%	100		%	54		%	46		%	100		%
Public, Project and Infrastructure Finance	$	211			$	126		$	337		$	276		$	127		$	403
	63		%		37		%	100		%	68		%	32		%	100		%
MIS Other	$	3			$	31		$	34		$	3		$	28		$	31
	9		%		91		%	100		%	10		%	90		%	100		%
Total MIS	$	1,235			$	888		$	2,123		$	2,062		$	879		$	2,941
	58		%		42		%	100		%	70		%	30		%	100		%
Decision Solutions	$	120			$	851		$	971		$	111		$	586		$	697
	12		%		88		%	100		%	16		%	84		%	100		%
Research and Insights	$	4			$	548		$	552		$	6		$	517		$	523
	1		%		99		%	100		%	1		%	99		%	100		%
Data and Information	$	—			$	532		$	532		$	3		$	515		$	518
	—		%		100		%	100		%	1		%	99		%	100		%
Total MA	$	124		(1)	$	1,931		$	2,055		$	120		$	1,618		$	1,738
	6		%		94		%	100		%	7		%	93		%	100		%
Total Moody's Corporation	$	1,359			$	2,819		$	4,178		$	2,182		$	2,497		$	4,679
	33		%		67		%	100		%	47		%	53		%	100		%

(1) Revenue from software implementation services and risk management advisory projects, while classified by management as transactional revenue, is recognized over time under the Revenue Accounting Standard (please also refer to the following table).

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The following table presents the timing of revenue recognition:


	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	MIS		MA		Total		MIS		MA		Total
Revenue recognized at a point in time	$	296	$	20	$	316	$	1,235	$	77	$	1,312
Revenue recognized over time	294		665		959		888		1,978		2,866
Total	$	590	$	685	$	1,275	$	2,123	$	2,055	$	4,178



	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	MIS		MA		Total		MIS		MA		Total
Revenue recognized at a point in time	$	631	$	29	$	660	$	2,062	$	78	$	2,140
Revenue recognized over time	294		572		866		879		1,660		2,539
Total	$	925	$	601	$	1,526	$	2,941	$	1,738	$	4,679

Unbilled receivables, deferred revenue and remaining performance obligations

Unbilled receivables

Certain MIS arrangements contain contractual terms whereby the customers are billed in arrears for annual monitoring services, requiring revenue to be accrued as an unbilled receivable as such services are provided. In addition, for certain MA arrangements, the timing of when the Company has the unconditional right to consideration and recognizes revenue occurs prior to invoicing the customer.

The following table presents the Company's unbilled receivables, which are included within accounts receivable, net, at September 30, 2022 and December 31, 2021:


	As of September 30, 2022				As of December 31, 2021
	MIS		MA		MIS		MA
Unbilled Receivables	$	381	$	147	$	386	$	152

Deferred revenue

The Company recognizes deferred revenue when a contract requires a customer to pay consideration to the Company in advance of when revenue related to that contract is recognized. This deferred revenue is relieved when the Company satisfies the related performance obligation and revenue is recognized.

Significant changes in the deferred revenue balances during the three and nine months ended September 30, 2022 and 2021 are as follows:


	Three Months Ended September 30, 2022						Three Months Ended September 30, 2021
	MIS		MA		Total		MIS		MA		Total
Balance at June 30,	$	347	$	1,019	$	1,366	$	368	$	867	$	1,235
Changes in deferred revenue
Revenue recognized that was included in the deferred revenue balance at the beginning of the period	(110)		(480)		(590)		(118)		(484)		(602)
Increases due to amounts billable excluding amounts recognized as revenue during the period	82		389		471		85		393		478
Increases due to acquisitions during the period	—		—		—		—		89		89
Effect of exchange rate changes	(5)		(9)		(14)		(2)		(12)		(14)
Total changes in deferred revenue	(33)		(100)		(133)		(35)		(14)		(49)
Balance at September 30,	$	314	$	919	$	1,233	$	333	$	853	$	1,186

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	Nine Months Ended September 30, 2022						Nine Months Ended September 30, 2021
	MIS		MA		Total		MIS		MA		Total
Balance at December 31,	$	296	$	1,039	$	1,335	$	313	$	874	$	1,187
Changes in deferred revenue
Revenue recognized that was included in the deferred revenue balance at the beginning of the period	(186)		(883)		(1,069)		(200)		(814)		(1,014)
Increases due to amounts billable excluding amounts recognized as revenue during the period	218		819		1,037		224		713		937
Increases due to acquisitions during the period	—		1		1		—		93		93
Effect of exchange rate changes	(14)		(57)		(71)		(4)		(13)		(17)
Total changes in deferred revenue	18		(120)		(102)		20		(21)		(1)
Balance at September 30,	$	314	$	919	$	1,233	$	333	$	853	$	1,186
Deferred revenue - current	$	238	$	917	$	1,155	$	247	$	852	$	1,099
Deferred revenue - non-current	$	76	$	2	$	78	$	86	$	1	$	87

For the MIS segment, the changes in the deferred revenue balance during the three and nine months ended September 30, 2022 were primarily related to the significant portion of contract renewals that occurred during the first quarter of 2022 and are generally recognized over a one year period.

For the MA segment, the decrease in deferred revenue for the three months ended September 30, 2022 was primarily due to the recognition of annual subscription and maintenance billings from December 2021 and January 2022. For the nine months ended September 30, 2022, the decrease in the deferred revenue balance is attributable to recognition of revenues related to the aforementioned December 2021 billings and unfavorable changes in FX translation rates being mostly offset by the impact of the high concentration of billings in the first quarter of 2022.

Remaining performance obligations

Remaining performance obligations in the MIS segment largely reflect deferred revenue related to monitoring fees for certain structured finance products, primarily CMBS, where the issuers can elect to pay the monitoring fees for the life of the security in advance. As of September 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $103 million. The Company expects to recognize into revenue approximately 20% of this balance within one year, approximately 50% of this balance between one to five years and the remaining amount thereafter. With respect to the remaining performance obligations for the MIS segment, the Company has applied a practical expedient set forth in ASC Topic 606 permitting the omission from the amounts stated above relating to unsatisfied performance obligations for contracts with an original expected length of one year or less.

Remaining performance obligations in the MA segment include both amounts recorded as deferred revenue on the balance sheet as of September 30, 2022 as well as amounts not yet invoiced to customers as of September 30, 2022, largely reflecting future revenue related to signed multi-year arrangements for hosted and installed subscription-based products. As of September 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $3.1 billion. The Company expects to recognize into revenue approximately 60% of this balance within one year, approximately 30% of this balance between one to two years and the remaining amount thereafter.

NOTE 3. STOCK-BASED COMPENSATION

Presented below is a summary of the stock-based compensation cost and associated tax benefit included in the accompanying consolidated statements of operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Stock-based compensation cost	$	46	$	41	$	130	$	127
Tax benefit	$	10	$	8	$	30	$	29

During the first nine months of 2022, the Company granted 0.1 million employee stock options, which had a weighted average grant date fair value of $84.00 per share. The Company also granted 0.6 million shares of restricted stock in the first nine months of 2022, which had a weighted average grant date fair value of $321.70 per share. Both the employee stock options and restricted stock generally vest ratably over four years. Additionally, the Company granted 0.1 million shares of performance-based awards whereby the number of shares that ultimately vest are based on the achievement of certain non-market-based performance metrics of the Company over three years. The weighted average grant date fair value of these awards was $310.62 per share.

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The following weighted average assumptions were used in determining the fair value using the Black-Scholes option-pricing model for options granted in 2022:


Expected dividend yield	0.86	%
Expected stock volatility	27	%
Risk-free interest rate	1.91	%
Expected holding period	5.6 years

Unrecognized stock-based compensation expense at September 30, 2022 was $18 million and $260 million for stock options and unvested restricted stock, respectively, which is expected to be recognized over a weighted average period of 2.1 years and 2.6 years, respectively. Additionally, there was $34 million of unrecognized stock-based compensation expense relating to the aforementioned non-market-based performance-based awards, which is expected to be recognized over a weighted average period of 1.6 years.

The following table summarizes information relating to stock option exercises and restricted stock vesting:


	Nine Months Ended September 30,
	2022		2021
Exercise of stock options:
Proceeds from stock option exercises	$	6	$	20
Aggregate intrinsic value	$	7	$	44
Tax benefit realized upon exercise	$	2	$	10
Number of shares exercised (1)	—		0.2
Vesting of restricted stock:
Fair value of shares vested	$	174	$	193
Tax benefit realized upon vesting	$	41	$	43
Number of shares vested	0.5		0.7
Vesting of performance-based restricted stock:
Fair value of shares vested	$	50	$	28
Tax benefit realized upon vesting	$	7	$	4
Number of shares vested	0.2		0.1

(1) The number of options exercised in 2022 was approximately 41 thousand.

NOTE 4. INCOME TAXES

Moody’s effective tax rate (ETR) was 20.5% and 23.4% for the three months ended September 30, 2022 and 2021, respectively, and 21.3% and 20.2% for the nine months ended September 30, 2022 and 2021, respectively. The 2.9% decrease in the ETR for the three months ended September 30, 2022 compared to the same period in the prior year was primarily due to lower pre-tax income, which increases the percentage impact of net beneficial discrete items, as well as a favorable mix of earnings in the jurisdictions in which Moody’s operates. The 1.1% increase in the ETR for the nine months ended September 30, 2022 compared to the same period in the prior year was primarily due to tax benefits realized upon resolution of UTPs during 2021 that did not recur to the same extent in 2022 and a non-deductible loss associated with the Company no longer conducting commercial operations in Russia. The Company’s year-to-date 2022 income tax expense differs from the tax computed by applying its estimated annual effective tax rate to the pre-tax earnings primarily due to the following items recognized in 2022: i) Excess Tax Benefits from stock-based compensation of $19 million; and ii) net reductions in UTPs of $20 million related to the resolution of UTPs.

The Company classifies interest related to UTPs in interest expense, net in its consolidated statements of operations. Penalties, if incurred, would be recognized in other non-operating (expense) income, net. The Company had a decrease in its UTPs of $28 million (net of federal tax) during the third quarter of 2022 and a decrease in its UTPs of $80 million ($75 million net of federal tax) during the nine months of 2022, which primarily related to the aforementioned resolution of UTPs.

Moody’s Corporation and subsidiaries are subject to U.S. federal income tax as well as income tax in various state, local and foreign jurisdictions. The Company’s U.S. federal income tax returns for 2017 through 2020 are currently under examination and 2021 remains open to examination. The Company’s New York State tax returns for 2017 through 2018 and New York City tax returns for 2015 through 2018 are currently under examination. The Company’s U.K. tax returns for 2012 through 2020 remain open to examination.

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For ongoing audits, it is possible the balance of UTPs could decrease in the next twelve months as a result of the settlement of such audits, which might involve the payment of additional taxes, the adjustment of certain deferred taxes and/or the recognition of tax benefits. It is also possible that new issues will be raised by tax authorities which could necessitate increases to the balance of UTPs. As the Company is unable to predict the timing or outcome of these audits, it is unable to estimate the amount of changes to the balance of UTPs at this time. However, the Company believes that it has adequately provided for its financial exposure relating to all open tax years, by tax jurisdiction, in accordance with the applicable provisions of Topic 740 of the ASC regarding UTPs.

The following table shows the amount the Company paid for income taxes:


	Nine Months Ended September 30,
	2022		2021
Income taxes paid	$	394	$	501

In August 2022, the U.S. Congress passed the Inflation Reduction Act, which included a corporate minimum tax on book earnings of 15%, an excise tax on corporate share repurchases of 1%, and certain climate change and energy tax credit incentives. The adoption of a corporate minimum tax of 15% is not expected to impact Moody’s ETR. The excise tax of 1% on corporate share buybacks will not have an impact on the Company’s ETR for the years 2022 or 2023.

NOTE 5. RECONCILIATION OF WEIGHTED AVERAGE SHARES OUTSTANDING

Below is a reconciliation of basic to diluted shares outstanding:


	Three Months Ended September 30,		Nine Months Ended September 30,

	2022	2021	2022	2021
Basic	183.2	186.0	184.1	186.6
Dilutive effect of shares issuable under stock-based compensation plans	0.7	1.3	0.8	1.4
Diluted	183.9	187.3	184.9	188.0
Anti-dilutive options to purchase common shares and restricted stock as well as contingently issuable restricted stock which are excluded from the table above	0.5	0.1	0.4	0.2

The calculation of diluted EPS requires certain assumptions regarding the use of both cash proceeds and assumed proceeds that would be received upon the exercise of stock options and vesting of restricted stock outstanding as of September 30, 2022 and 2021.

NOTE 6. ACCELERATED SHARE REPURCHASE PROGRAM

On March 1, 2022, the Company entered into an ASR agreement with a financial institution counterparty to repurchase $500 million of its outstanding common stock. The Company paid $500 million to the counterparty and received an initial delivery of 1.2 million shares of its common stock. Final settlement of the ASR agreement was completed in April 2022 and the Company received delivery of an additional 0.3 million shares of the Company’s common stock.

In total, the Company repurchased 1.5 million shares of the Company’s common stock during the term of the ASR Agreement, based on the volume-weighted average price (net of discount) of $324.20 per share over the duration of the program. The initial share repurchase and final share settlement were recorded as a reduction to shareholders’ equity.

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NOTE 7. CASH EQUIVALENTS AND INVESTMENTS

The table below provides additional information on the Company’s cash equivalents and investments:


	As of September 30, 2022
							Balance sheet location
	Cost		Gains/(Losses)		Fair Value		Cash and cash equivalents		Short-term investments		Other assets
Certificates of deposit and money market deposit accounts (1)	$	739	$	—	$	739	$	640	$	89	$	10
Mutual funds	$	72	$	(2)	$	70	$	—	$	—	$	70


	As of December 31, 2021
							Balance sheet location
	Cost		Gains/(Losses)		Fair Value		Cash and cash equivalents		Short-term investments		Other assets

Certificates of deposit and money market deposit accounts (1)	$	691	$	—	$	691	$	584	$	91	$	16
Mutual funds	$	65	$	8	$	73	$	—	$	—	$	73

(1) Consists of time deposits and money market deposit accounts. The remaining contractual maturities for the certificates of deposits classified as short-term investments are one month to 12 months at both September 30, 2022 and December 31, 2021. The remaining contractual maturities for the certificates of deposits classified in other assets are 13 months to 27 months at September 30, 2022 and 13 months to 29 months at December 31, 2021. Time deposits with a maturity of less than 90 days at time of purchase are classified as cash and cash equivalents.

In addition, the Company invests in Corporate-Owned Life Insurance (COLI). As of September 30, 2022 and December 31, 2021, the contract value of the COLI was $38 million and $37 million, respectively.

NOTE 8. ACQUISITIONS

The material business combination described below is accounted for using the acquisition method of accounting whereby assets acquired and liabilities assumed were recognized at fair value or other values set forth in U.S. GAAP on the date of the transaction. Any excess of the purchase price over the fair value of the assets acquired and liabilities assumed was recorded to goodwill. Goodwill typically results through expected synergies from combining operations of an acquiree and an acquirer, anticipated new customer acquisition and products, as well as from intangible assets that do not qualify for separate recognition.

RMS

On September 15, 2021, the Company acquired 100% of RMS, a global provider of climate and natural disaster risk modeling and analytics. The cash payment was funded with new debt financing and a combination of U.S. and offshore cash on hand. The acquisition will expand Moody’s insurance data and analytics business and accelerate the development of the Company’s global integrated risk capabilities to address the next generation of risk assessment.

The table below details the total consideration relating to the acquisition:


Cash paid at closing	$	1,922




Replacement equity compensation awards	5
Total consideration	$	1,927

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Shown below is the purchase price allocation, which summarizes the fair value of the assets and liabilities assumed, at the date of acquisition:


Cash (1)			$	55
Accounts receivable			38
Other current assets (1)			12
Property and equipment, net			13
Operating lease right-of-use assets			64
Intangible assets:
Customer relationships (23 year useful life)	$	518
Product technology (7 year useful life)	212
Trade name (9 year useful life)	49
Total intangible assets (18 year weighted average useful life)			779
Goodwill (1)			1,357
Deferred tax assets, net			50
Other assets			99
Liabilities:
Accounts payable and accrued liabilities (1)	$	(96)
Deferred revenue	(89)
Operating lease liabilities	(68)
Deferred tax liabilities, net	(214)
Uncertain tax positions (1)	(71)
Other liabilities	(2)
Total liabilities			(540)
Net assets acquired			$	1,927

(1) During the third quarter of 2022, the Company adjusted the purchase price allocation pursuant to the receipt of additional information from the sellers relating to RMS's pre-acquisition income taxes. These adjustments included a decrease to UTPs of $25 million along with other immaterial adjustments. These adjustments resulted in a corresponding decrease in goodwill of $19 million.

Goodwill

The goodwill recognized as a result of this acquisition includes, among other things, the value of combining the complementary product portfolios of Moody's and RMS, which is expected to extend the Company's reach into new market segments. The goodwill also includes the combined company's ability to accelerate technology innovations into new product adjacencies (leveraging RMS's team of data scientists, modelers and software engineers) as well as combining RMS's products with Moody’s core data and analytics offerings to provide holistic integrated risk solutions.

Goodwill, of which $1,267 million and $90 million has been assigned to the MA and MIS segments, respectively, is not deductible for tax purposes. The amount of goodwill allocated to the MIS segment relates to the integration of certain of RMS's models/processes into the Company's ESG solutions offerings.

Other assets in the table above includes an indemnification asset of $95 million related to UTPs assumed in the transaction, for which the Company expects to be indemnified by the sellers in the event of an unfavorable outcome.

Transaction costs

Transaction costs incurred in the year ended December 31, 2021 directly related to the RMS acquisition were $22 million and were recorded in SG&A expenses in the statement of operations.

Supplementary Unaudited Pro Forma Information

Supplemental information on an unaudited pro forma basis is presented below for the three and nine months ended September 30, 2021 as if the acquisition of RMS occurred on January 1, 2020. The pro forma financial information is presented for comparative purposes only and is based on certain estimates and assumptions, which the Company believes to be reasonable but not necessarily indicative of future results of operations or the results that would have been reported if the acquisition had been completed at January 1, 2020. The unaudited pro forma information includes amortization of acquired intangible assets, based on the purchase price allocation and an estimate of useful lives reflected above, and incremental financing costs resulting from the acquisition, net of income tax, which was estimated using the weighted average statutory tax rates in effect in the jurisdiction for which the pro forma adjustment relates.

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	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Pro forma Revenue	$	1,597	$	4,910
Pro forma Net Income attributable to Moody's	$	506	$	1,807

The unaudited pro forma results do not include any anticipated cost savings or other effects of the planned integration of RMS. Accordingly, the pro forma results above are not necessarily indicative of the results that would have been reported if the acquisition had occurred on the dates indicated, nor are the pro forma results indicative of results which may occur in the future. The RMS results included in the above have been converted to U.S. GAAP from IFRS as issued by the IASB and have been translated to USD at rates in effect for the periods presented.

NOTE 9. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to global market risks, including risks from changes in FX rates and changes in interest rates. Accordingly, the Company uses derivatives in certain instances to manage the aforementioned financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for speculative purposes.

Derivatives and non-derivative instruments designated as accounting hedges:

Fair Value Hedges

Interest Rate Swaps

The Company has entered into interest rate swaps to convert the fixed interest rate on certain of its long-term debt to a floating interest rate based on the 3-month LIBOR, 6-month LIBOR, and SOFR. The purpose of these hedges is to mitigate the risk associated with changes in the fair value of the long-term debt, thus the Company has designated these swaps as fair value hedges. The fair value of the swaps is adjusted quarterly with a corresponding adjustment to the carrying value of the debt. The changes in the fair value of the swaps and the underlying hedged item generally offset and the net cash settlements on the swaps are recorded each period within interest expense, net in the Company’s consolidated statements of operations.

The following table summarizes the Company’s interest rate swaps designated as fair value hedges:


		Notional Amount
Hedged Item	Nature of Swap	As of September 30, 2022		As of December 31, 2021		Floating Interest Rate
2017 Senior Notes due 2023	Pay Floating/Receive Fixed	$	—	$	250	3-month USD LIBOR
2017 Senior Notes due 2028	Pay Floating/Receive Fixed	$	500	$	500	3-month USD LIBOR
2020 Senior Notes due 2025	Pay Floating/Receive Fixed	$	300	$	300	6-month USD LIBOR
2014 Senior Notes due 2044	Pay Floating/Receive Fixed	$	300	$	300	3-month USD LIBOR
2018 Senior Notes due 2048	Pay Floating/Receive Fixed	$	300	$	300	3-month USD LIBOR
2018 Senior Notes due 2029 (1)	Pay Floating/Receive Fixed	$	400	$	—	SOFR
2022 Senior Notes due 2052 (2)	Pay Floating/Receive Fixed	$	500	$	—	SOFR
2022 Senior Notes due 2032 (3)	Pay Floating/Receive Fixed	$	250	$	—	SOFR
Total		$	2,550	$	1,650

(1) Executed in the first quarter of 2022.

(2) Executed in the second quarter of 2022.

(3) Executed in the third quarter of 2022.

Refer to Note 15 for information on the cumulative amount of fair value hedging adjustments included in the carrying amount of the above hedged items.

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The following table summarizes the impact to the statements of operations of the Company’s interest rate swaps designated as fair value hedges:


Total amounts of financial statement line item presented in the statements of operations in which the effects of fair value hedges are recorded		Amount of income/(loss) recognized in the consolidated statements of operations
		Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021
Interest expense, net		$	(58)	$	(53)	$	(166)	$	(109)

Descriptions	Location on Consolidated Statements of Operations
Net interest settlements and accruals on interest rate swaps	Interest expense, net	$	(4)	$	6	$	5	$	17
Fair value changes on interest rate swaps	Interest expense, net	$	(95)	$	(16)	$	(227)	$	(40)
Fair value changes on hedged debt	Interest expense, net	$	95	$	16	$	227	$	40

Net investment hedges

Debt designated as net investment hedges

The Company has designated €500 million of the 2015 Senior Notes Due 2027 and €750 million of the 2019 Senior Notes due 2030 as net investment hedges to mitigate FX exposure related to a portion of the Company’s euro net investment in certain foreign subsidiaries against changes in euro/USD exchange rates. These hedges are designated as accounting hedges under the applicable sections of ASC Topic 815 and will end upon the repayment of the notes in 2027 and 2030, respectively, unless terminated early at the discretion of the Company.

Cross currency swaps designated as net investment hedges

The Company enters into cross-currency swaps to mitigate FX exposure related to a portion of the Company’s euro net investment in certain foreign subsidiaries against changes in euro/USD exchange rates. The following table provides information on the cross-currency swaps designated as net investment hedges under ASC Topic 815:


September 30, 2022
	Pay			Receive
Nature of Swap	Notional Amount		Weighted Average Interest Rate	Notional Amount		Weighted Average Interest Rate
Pay Fixed/Receive Fixed	€	765	3.67%	$	800	5.25%
Pay Floating/Receive Floating	450		Based on 3-month EURIBOR	500		Based on 3-month USD LIBOR
Pay Floating/Receive Floating	1,688		Based on ESTR	1,750		Based on SOFR
Total	€	2,903		$	3,050


December 31, 2021
	Pay			Receive
Nature of Swap	Notional Amount		Weighted Average Interest Rate	Notional Amount		Weighted Average Interest Rate
Pay Fixed/Receive Fixed	€	909	2.16%	$	1,050	4.45%
Pay Floating/Receive Floating	1,179		Based on 3-month EURIBOR	1,350		Based on 3-month USD LIBOR
Total	€	2,088		$	2,400

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As of September 30, 2022 these hedges will expire and the notional amounts will be settled as follows unless terminated early at the discretion of the Company:


Years Ending December 31,

2026	€	450
2027	€	531
2028	€	588
2029	€	373
2031	€	481
2032	€	480
Total	€	2,903

The following tables provide information on the gains/(losses) on the Company’s net investment and cash flow hedges:


Derivative and Non-Derivative Instruments in Net Investment Hedging Relationships	Amount of Gain/(Loss) Recognized in AOCL on Derivative, net of Tax				Amount of Gain/(Loss) Reclassified from AOCL into Income, net of Tax				Gain/(Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
	Three Months Ended September 30,				Three Months Ended September 30,				Three Months Ended September 30,
	2022		2021		2022		2021		2022		2021
FX forward contracts	$	—	$	2	$	—	$	—	$	—	$	—
Cross currency swaps	131		44		—		—		17		8
Long-term debt	62		26		—		—		—		—
Total net investment hedges	$	193	$	72	$	—	$	—	$	17	$	8
Derivatives in Cash Flow Hedging Relationships

Interest rate contracts	$	—	$	1	$	—	$	(1)	$	—	$	—
Total cash flow hedges	$	—	$	1	$	—	$	(1)	$	—	$	—
Total	$	193	$	73	$	—	$	(1)	$	17	$	8


Derivative and Non-Derivative Instruments in Net Investment Hedging Relationships	Amount of Gain/(Loss) Recognized in AOCL on Derivative, net of Tax				Amount of Gain/(Loss) Reclassified from AOCL into Income, net of Tax				Gain/(Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
	Nine Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021		2022		2021
FX forward contracts	$	—	$	18	$	—	$	1	$	—	$	—
Cross currency swaps	273		98		—		—		38		27
Long-term debt	148		61		—		—		—		—
Total net investment hedges	$	421	$	177	$	—	$	1	$	38	$	27
Derivatives in Cash Flow Hedging Relationships

Interest rate contracts	$	—	$	—	$	(1)	$	(2)	$	—	$	—

Total cash flow hedges	$	—	$	—	$	(1)	$	(2)	$	—	$	—
Total	$	421	$	177	$	(1)	$	(1)	$	38	$	27

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The cumulative amount of net investment hedge and cash flow hedge gains (losses) remaining in AOCL is as follows:


	Cumulative Gains/(Losses), net of tax
	September 30, 2022		December 31, 2021
Net investment hedges
Cross currency swaps	$	292	$	19
FX forwards	29		29
Long-term debt	121		(27)
Total net investment hedges	$	442	$	21
Cash flow hedges
Interest rate contracts	$	(48)	$	(49)
Cross currency swaps	2		2
Total cash flow hedges	(46)		(47)
Total net gain (loss) in AOCL	$	396	$	(26)

Derivatives not designated as accounting hedges:

Foreign exchange forwards

The Company also enters into foreign exchange forward contracts to mitigate the change in fair value on certain assets and liabilities denominated in currencies other than a subsidiary’s functional currency. These forward contracts are not designated as accounting hedges under the applicable sections of Topic 815 of the ASC. Accordingly, changes in the fair value of these contracts are recognized immediately in other non-operating income, net in the Company’s consolidated statements of operations along with the FX gain or loss recognized on the assets and liabilities denominated in a currency other than the subsidiary’s functional currency. These contracts have expiration dates at various times through January 2023.

The following table summarizes the notional amounts of the Company’s outstanding foreign exchange forwards:


	September 30, 2022				December 31, 2021
Notional amount of currency pair:	Sell		Buy		Sell		Buy
Contracts to sell USD for GBP	$	138	£	115	$	126	£	92
Contracts to sell USD for Japanese yen	$	18	¥	2,500	$	22	¥	2,500
Contracts to sell USD for Canadian dollars	$	141	C$	183	$	120	C$	150
Contracts to sell USD for Singapore dollars	$	58	S$	80	$	67	S$	90
Contracts to sell USD for euros	$	332	€	325	$	364	€	315
Contracts to sell USD for Russian ruble	$	—	₽	—	$	16	₽	1,200
Contracts to sell USD for Indian rupee	$	20	₹	1,600	$	7	₹	500
Contracts to sell GBP for USD	£	—	$	—	£	172	$	231
Contracts to sell euros for USD	€	135	$	134	€	—	$	—

NOTE: € = euro, £ = British pound, $ = U.S. dollar, ¥ = Japanese yen, C$ = Canadian dollar, S$= Singapore dollars, ₽= Russian ruble, ₹= Indian rupee

The following table summarizes the impact to the consolidated statements of operations relating to the net losses on the Company’s derivatives which are not designated as hedging instruments:


Derivatives not designated as accounting hedges	Location on Consolidated Statements of Operations	Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021
FX forwards	Other non-operating income, net	$	(46)	$	(18)	$	(103)	$	(25)
Foreign exchange forwards relating to RMS acquisition(1)	Other non-operating (expense) income, net	$	—	$	(13)	$	—	$	(13)

(1) The Company entered into forward contracts to sell $1,675 million for £1,200 to hedge a portion of the GBP denominated RMS purchase price. The contract was terminated on September 14, 2021 and resulted in a $13 million loss.

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The table below shows the classification between assets and liabilities on the Company’s consolidated balance sheets for the fair value of the derivative instrument as well as the carrying value of its non-derivative debt instruments designated and qualifying as net investment hedges:


	Derivative and Non-Derivative Instruments
	Balance Sheet Location	September 30, 2022		December 31, 2021
Assets:
Derivatives designated as accounting hedges:

Cross-currency swaps designated as net investment hedges	Other assets	$	181	$	53

Interest rate swaps designated as fair value hedges	Other assets	—		13
Total derivatives designated as accounting hedges		181		66
Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilities	Other current assets	—		1
Total assets		$	181	$	67
Liabilities:
Derivatives designated as accounting hedges:


Cross-currency swaps designated as net investment hedges	Other liabilities	$	—	$	17
Interest rate swaps designated as fair value hedges	Other liabilities	237		23
Total derivatives designated as accounting hedges		237		40
Non-derivatives designated as accounting hedges:
Long-term debt designated as net investment hedge	Long-term debt	1,225		1,421
Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilities	Accounts payable and accrued liabilities	28		12
Total liabilities		$	1,490	$	1,473

NOTE 10. GOODWILL AND OTHER ACQUIRED INTANGIBLE ASSETS

The following table summarizes the activity in goodwill for the periods indicated:


	Nine Months Ended September 30, 2022
	MIS						MA						Consolidated
	Gross goodwill		Accumulated impairment charge		Net goodwill		Gross goodwill		Accumulated impairment charge		Net goodwill		Gross goodwill		Accumulated impairment charge		Net goodwill
Balance at beginning of year	$	396	$	—	$	396	$	5,615	$	(12)	$	5,603	$	6,011	$	(12)	$	5,999
Additions/ adjustments (1)	3		—		3		87		—		87		90		—		90
Foreign currency translation adjustments	(21)		—		(21)		(451)		—		(451)		(472)		—		(472)

Ending balance	$	378	$	—	$	378	$	5,251	$	(12)	$	5,239	$	5,629	$	(12)	$	5,617

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	Year Ended December 31, 2021
	MIS						MA						Consolidated
	Gross goodwill		Accumulated impairment charge		Net goodwill		Gross goodwill		Accumulated impairment charge		Net goodwill		Gross goodwill		Accumulated impairment charge		Net goodwill
Balance at beginning of year	$	311	$	—	$	311	$	4,257	$	(12)	$	4,245	$	4,568	$	(12)	$	4,556
Additions/ adjustments (2)	90		—		90		1,525		—		1,525		1,615		—		1,615
Foreign currency translation adjustments	(5)		—		(5)		(167)		—		(167)		(172)		—		(172)

Ending balance	$	396	$	—	$	396	$	5,615	$	(12)	$	5,603	$	6,011	$	(12)	$	5,999

(1) The 2022 additions/adjustments for the MA segment in the table above primarily relate to the acquisition of kompany in the first quarter of 2022, partially offset by RMS measurement period adjustments in the third quarter of 2022, which are more fully discussed in Note 8.

(2) The 2021 additions/adjustments for the MA segment in the table above relate to the acquisitions of Cortera, RMS, RealXData, Bogard, and PassFort. The 2021 additions/adjustments for the MIS segment relate to certain revenue synergies from the RMS acquisition that are expected to benefit the ESG solutions group within the MIS Other LOB.

Acquired intangible assets and related amortization consisted of:


	September 30, 2022		December 31, 2021
Customer relationships	$	1,947	$	2,101
Accumulated amortization	(412)		(381)
Net customer relationships	1,535		1,720
Software/product technology	633		663
Accumulated amortization	(251)		(219)
Net software/product technology	382		444
Database	176		179
Accumulated amortization	(58)		(46)
Net database	118		133
Trade names	192		207
Accumulated amortization	(53)		(47)
Net trade names	139		160
Other (1)	52		54
Accumulated amortization	(44)		(44)
Net other	8		10
Total acquired intangible assets, net	$	2,182	$	2,467

(1) Other intangible assets primarily consist of trade secrets, covenants not to compete, and acquired ratings methodologies and models.

Amortization expense relating to acquired intangible assets is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Amortization expense	$	48	$	37	$	150	$	108

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NOTE 11. RESTRUCTURING

On June 30, 2022, the chief executive officer of Moody’s approved a restructuring program (the “2022 - 2023 Geolocation Restructuring Program”) for which the scope was expanded in October 2022, prior to the filing of this quarterly report on Form 10-Q. The Company estimates that the program will result in annualized savings of $100 million to $135 million per year. This program relates to the Company's post-COVID-19 geolocation strategy and includes the rationalization and exit of certain real estate leases and a reduction in staff, including the relocation of certain job functions from their current locations. The exit from certain leased office spaces is expected to begin late in 2022 or early 2023 and is expected to result in $50 million to $70 million of pre-tax charges to either terminate or sublease the affected real estate leases. The program also includes $75 million to $100 million of pre-tax personnel-related restructuring charges, an amount that includes severance and related costs primarily determined under the Company’s existing severance plans. The savings generated from the 2022 - 2023 Geolocation Restructuring Program are expected to strengthen the Company's operating margin, with a portion being deployed to support strategic investments, including the Company's Workplace of the Future program and employee retention initiatives. The 2022 - 2023 Geolocation Restructuring Program is expected to be substantially complete by the end of 2023. Cash outlays associated with this program are expected to be $75 million to $100 million, which are expected to be paid through 2024.

On December 22, 2020, the chief executive officer of Moody’s approved a restructuring program (the “2020 MA Strategic Reorganization Restructuring Program”) that the Company estimates will result in annualized savings of $20 million per year. This program relates to a strategic reorganization in the MA reportable segment consisting of severance and related costs primarily determined under the Company’s existing severance plans. The 2020 MA Strategic Reorganization Restructuring Program resulted in a total of $19 million in pre-tax charges and was substantially completed in the first half of 2021. Cash outlays associated with this program are expected to be $20 million, which will be paid through 2022.

Total expense included in the accompanying consolidated statements of operations relating to the aforementioned restructuring program is below:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021


2020 MA Strategic Reorganization Restructuring Program	$	—	$	—	$	(1)	$	2
2022 - 2023 Geolocation Restructuring Program	1		—		33		—
Total Restructuring	$	1	$	—	$	32	$	2

Changes to the restructuring liability for the aforementioned restructuring programs during the first nine months of 2022 were as follows:


	Employee Termination Costs
Balance as of December 31, 2021	$	4






2020 MA Strategic Reorganization Restructuring Program:
Cost incurred and adjustments	(1)
Cash payments and adjustments	(2)
2022 - 2023 Geolocation Restructuring Program:
Cost incurred and adjustments	33
Cash payments and adjustments	(6)
Balance as of September 30, 2022	$	28

Cumulative expense incurred to date


2020 MA Strategic Reorganization Restructuring Program	$	19
2022 - 2023 Geolocation Restructuring Program	$	33

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NOTE 12. FAIR VALUE

The table below presents information about items that are carried at fair value at September 30, 2022 and December 31, 2021:


	Fair Value Measurement as of September 30, 2022
Description	Balance		Level 1		Level 2
Assets:
Derivatives (1)	$	181	$	—	$	181
Mutual funds	70		70		—
Total	$	251	$	70	$	181
Liabilities:
Derivatives (1)	$	265	$	—	$	265
Total	$	265	$	—	$	265


	Fair Value Measurement as of December 31, 2021
Description	Balance		Level 1		Level 2
Assets:
Derivatives (1)	$	67	$	—	$	67

Mutual funds	73		73		—
Total	$	140	$	73	$	67
Liabilities:
Derivatives (1)	$	52	$	—	$	52
Total	$	52	$	—	$	52

(1) Represents FX forward contracts, interest rate swaps and cross-currency swaps as more fully described in Note 9 to the condensed consolidated financial statements.

The following are descriptions of the methodologies utilized by the Company to estimate the fair value of its derivative contracts, mutual funds and money market mutual funds:

Derivatives:

In determining the fair value of the derivative contracts in the table above, the Company utilizes industry standard valuation models. Where applicable, these models project future cash flows and discount the future amounts to a present value using spot rates, forward points, currency volatilities, interest rates as well as the risk of non-performance of the Company and the counterparties with whom it has derivative contracts. The Company established strict counterparty credit guidelines and only enters into transactions with financial institutions that adhere to these guidelines. Accordingly, the risk of counterparty default is deemed to be minimal.

Mutual funds:

The mutual funds in the table above are deemed to be equity securities with readily determinable fair values with changes in the fair value recognized through net income under ASC Topic 321. The fair value of these instruments is determined using Level 1 inputs as defined in the ASC Topic 820.

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NOTE 13. OTHER BALANCE SHEET AND STATEMENTS OF OPERATIONS INFORMATION

The following tables contain additional detail related to certain balance sheet captions:


	September 30, 2022		December 31, 2021
Other current assets:
Prepaid taxes	$	203	$	112
Prepaid expenses	105		99
Capitalized costs to obtain and fulfill sales contracts	90		103


Other	65		75
Total other current assets	$	463	$	389

Other assets:
Investments in non-consolidated affiliates	$	504	$	443
Deposits for real-estate leases	14		14
Indemnification assets related to acquisitions	109		106
Mutual funds and fixed deposits	80		89
Company owned life insurance (at contract value)	38		37
Costs to obtain sales contracts	143		138
Derivative instruments designated as accounting hedges	181		66
Pension and other retirement employee benefits	73		77
Other	77		64
Total other assets	$	1,219	$	1,034

Accounts payable and accrued liabilities:
Salaries and benefits	$	154	$	211
Incentive compensation	155		324
Customer credits, advanced payments and advanced billings	83		100

Dividends	9		6
Professional service fees	63		75
Interest accrued on debt	51		85
Accounts payable	34		47
Income taxes	79		115
Pension and other retirement employee benefits	7		7
Accrued royalties	18		36
Foreign exchange forwards on certain assets and liabilities	28		12
Restructuring liability	24		4


Other	102		120
Total accounts payable and accrued liabilities	$	807	$	1,142






































Other liabilities:
Pension and other retirement employee benefits	$	212	$	235

Interest accrued on UTPs	44		59
MAKS indemnification provisions	22		33
Income tax liability - non-current portion	23		23
Derivative instruments designated as accounting hedges	237		40
Restructuring liability - non-current portion	4		—
Other	46		48
Total other liabilities	$	588	$	438

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Allowance for credit losses:

During the nine months ended September 30, 2022, the Company increased its allowance for credit losses by $10 million. This increase was primarily due to reserves recorded for the Company's Russian-domiciled customers pursuant to the impacts of the Russia/Ukraine conflict, which is more fully described in Note 1.

Investments in non-consolidated affiliates:

The following table provides additional detail regarding Moody's investments in non-consolidated affiliates, as included in other assets in the consolidated balance sheets:


	September 30, 2022		December 31, 2021
Equity method investments (1)	$	178	$	121
Investments measured using the measurement alternative (2)	321		318
Other	5		4
Total investments in non-consolidated affiliates	$	504	$	443
(1) Equity securities in which the Company has significant influence over the investee but does not have a controlling financial interest in accordance with ASC Topic 323.
(2) Equity securities without readily determinable fair value for which the Company has elected to apply the measurement alternative in accordance with ASC Topic 321.

Moody's holds various investments accounted for under the equity method, the most significant of which is the Company's minority investment in CCXI. Moody's also holds various investments measured using the measurement alternative, the most significant of which is the Company's minority interest in BitSight.

Earnings from non-consolidated affiliates, which are included within other non-operating income, net, are disclosed within the table below.

Other non-operating income (expense), net:

The following table summarizes the components of other non-operating income (expense), net:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
FX gain/(loss) (1)	$	13	$	(2)	$	(9)	$	(2)
Purchase price hedge loss (2)	—		(13)		—		(13)
Net periodic pension costs - other components	6		4		18		5
Income from investments in non-consolidated affiliates	10		6		14		15
Other	(3)		1		(1)		13
Total	$	26	$	(4)	$	22	$	18
(1) FX loss for the nine months ended September 30, 2022 includes FX translation losses of $20 million reclassified to earnings resulting from the Company no longer conducting commercial operations in Russia.
(2) The amounts for the three and nine months ended September 30, 2021 represent a loss in the prior year on a forward contract used to hedge a portion of the GBP denominated RMS purchase price.

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NOTE 14. COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table provides details about the reclassifications out of AOCL:


	Three Months Ended September 30,				Location in the consolidated statements of operations
Losses on cash flow hedges	2022		2021



Interest rate contract	$	(1)	$	(1)	Other non-operating income, net
Income tax effect of item above	1		—		Provision for income taxes
Total net gains (losses) on cash flow hedges	—		(1)




Pension and other retirement benefits
Amortization of actuarial losses and prior service costs included in net income	(1)		(2)		Other non-operating income, net
Settlement charge	—		(1)		Other non-operating income, net
Total before income taxes	(1)		(3)
Income tax effect of items above	—		1		Provision for income taxes
Total pension and other retirement benefits	(1)		(2)
Total net losses included in Net Income attributable to reclassifications out of AOCL	$	(1)	$	(3)


	Nine Months Ended September 30,				Location in the consolidated statements of operations
Losses on currency translation adjustments	2022		2021
Foreign currency translation adjustments - reclassification of losses included in net income	$	(20)	$	—	Other non-operating income, net
Total losses on currency translation adjustments	(20)		—
Losses on cash flow hedges

Interest rate contract	(2)		(2)		Other non-operating income, net
Income tax effect of item above	1		—		Provision for income taxes
Total net losses on cash flow hedges	(1)		(2)
Gains (losses) on net investment hedges
FX forwards	—		2		Other non-operating income, net
Income tax effect of item above	—		(1)		Provision for income taxes
Total net gains on net investment hedges	—		1
Pension and other retirement benefits
Amortization of actuarial losses and prior service costs included in net income	(2)		(8)		Other non-operating income, net
Settlement charge	—		(8)		Other non-operating income, net
Total before income taxes	(2)		(16)
Income tax effect of item above	—		4		Provision for income taxes
Total pension and other retirement benefits	(2)		(12)
Total net losses included in Net Income attributable to reclassifications out of AOCL	$	(23)	$	(13)

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The following tables show changes in AOCL by component (net of tax):


	Three Months Ended September 30,
	2022										2021
Gains/(Losses)	Pension and Other Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation Adjustments		Net Investment Hedges		Total		Pension and Other Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation Adjustments		Net Investment Hedges		Total
Balance at June 30,	$	(46)	$	(46)	$	(756)	$	249	$	(599)	$	(108)	$	(48)	$	(152)	$	(117)	$	(425)
Other comprehensive income/(loss) before reclassifications	—		—		(343)		193		(150)		3		—		(116)		73		(40)
Amounts reclassified from AOCL	1		—		—		—		1		2		1		—		—		3
Other comprehensive income/(loss)	1		—		(343)		193		(149)		5		1		(116)		73		(37)
Balance at September 30,	$	(45)	$	(46)	$	(1,099)	$	442	$	(748)	$	(103)	$	(47)	$	(268)	$	(44)	$	(462)


	Nine Months Ended September 30,
	2022										2021
Gains/(Losses)	Pension and Other Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation Adjustments		Net Investment Hedges		Total		Pension and Other Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation Adjustments		Net Investment Hedges		Total
Balance at December 31,	$	(49)	$	(47)	$	(335)	$	21	$	(410)	$	(118)	$	(49)	$	(45)	$	(220)	$	(432)
Other comprehensive income/(loss) before reclassifications	2		—		(784)		421		(361)		3		—		(223)		177		(43)
Amounts reclassified from AOCL	2		1		20		—		23		12		2		—		(1)		13

Other comprehensive income/(loss)	4		1		(764)		421		(338)		15		2		(223)		176		(30)
Balance at September 30,	$	(45)	$	(46)	$	(1,099)	$	442	$	(748)	$	(103)	$	(47)	$	(268)	$	(44)	$	(462)

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NOTE 15. INDEBTEDNESS

The Company’s debt is recorded at its carrying amount, which represents the issuance amount plus or minus any issuance premium or discount, except for certain debt as depicted in the table below, which is recorded at the carrying amount adjusted for the fair value of an interest rate swap used to hedge the fair value of the note.

The following table summarizes total indebtedness:


September 30, 2022
Notes Payable:	Principal Amount		Fair Value of Interest Rate Swaps (1)		Unamortized (Discount) Premium		Unamortized Debt Issuance Costs		Carrying Value
4.875% 2013 Senior Notes, due 2024	$	500	$	—	$	(1)	$	(1)	$	498
5.25% 2014 Senior Notes, due 2044	600		(42)		3		(5)		556
1.75% 2015 Senior Notes, due 2027	490		—		—		(2)		488

3.25% 2017 Senior Notes, due 2028	500		(38)		(3)		(2)		457
4.25% 2018 Senior Notes, due 2029	400		(41)		(2)		(2)		355
4.875% 2018 Senior Notes, due 2048	400		(44)		(6)		(4)		346
0.950% 2019 Senior Notes, due 2030	735		—		(2)		(4)		729
3.75% 2020 Senior Notes, due 2025	700		(28)		(1)		(3)		668
3.25% 2020 Senior Notes, due 2050	300		—		(4)		(3)		293
2.55% 2020 Senior Notes, due 2060	500		—		(4)		(5)		491
2.00% 2021 Senior Notes, due 2031	600		—		(7)		(4)		589
2.75% 2021 Senior Notes, due 2041	600		—		(13)		(5)		582
3.10% 2021 Senior Notes, due 2061	500		—		(7)		(5)		488
3.75% 2022 Senior Notes, due 2052	500		(32)		(9)		(5)		454
4.25% 2022 Senior Notes, due 2032	500		(12)		(2)		(4)		482
Total long-term debt	$	7,825	$	(237)	$	(58)	$	(54)	$	7,476


December 31, 2021
Notes Payable:	Principal Amount		Fair Value of Interest Rate Swaps (1)		Unamortized (Discount) Premium		Unamortized Debt Issuance Costs		Carrying Value
4.875% 2013 Senior Notes, due 2024	$	500	$	—	$	(1)	$	(1)	$	498
5.25% 2014 Senior Notes, due 2044	600		(7)		3		(5)		591
1.75% 2015 Senior Notes, due 2027	568		—		—		(2)		566
2.625% 2017 Senior Notes, due 2023	500		5		—		(1)		504
3.25% 2017 Senior Notes, due 2028	500		8		(3)		(2)		503
4.25% 2018 Senior Notes, due 2029	400		—		(2)		(2)		396
4.875% 2018 Senior Notes, due 2048	400		(7)		(6)		(4)		383
0.950% 2019 Senior Notes, due 2030	853		—		(2)		(5)		846
3.75% 2020 Senior Notes, due 2025	700		(9)		(1)		(4)		686
3.25% 2020 Senior Notes, due 2050	300		—		(4)		(3)		293
2.55% 2020 Senior Notes, due 2060	500		—		(4)		(5)		491
2.00% 2021 Senior Notes, due 2031	600		—		(8)		(5)		587
2.75% 2021 Senior Notes, due 2041	600		—		(13)		(6)		581
3.10% 2021 Senior Notes, due 2061	500		—		(7)		(5)		488
Total long-term debt	$	7,521	$	(10)	$	(48)	$	(50)	$	7,413

(1) The fair value of interest rate swaps in the table above represents the cumulative amount of fair value hedging adjustments included in the carrying amount of the hedged debt.

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Notes Payable

In the first nine months of 2022, the Company issued the 2022 Senior Notes due 2052 and the 2022 Senior Notes due 2032. The key terms of this debt issuance are set forth in the table above.

Additionally, in the first nine months of 2022, the Company fully repaid $500 million of the 2017 Senior Notes due 2023.

At September 30, 2022, the Company was in compliance with all covenants contained within all of the debt agreements. All the debt agreements contain cross default provisions which state that default under one of the aforementioned debt instruments could in turn permit lenders under other debt instruments to declare borrowings outstanding under those instruments to be immediately due and payable. As of September 30, 2022, there were no such cross defaults.

The repayment schedule for the Company’s borrowings is as follows:


Year Ending December 31,	Year Ending Total
2022 (After September 30,)	$	—
2023	—
2024	500
2025	700
2026	—
Thereafter	6,625
Total	$	7,825

Interest expense, net

The following table summarizes the components of interest as presented in the consolidated statements of operations and the cash paid for interest:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Income	$	5	$	3	$	9	$	7
Expense on borrowings	(54)		(47)		(152)		(129)
Income (expense) on UTPs and other tax related liabilities(2)	(5)		(5)		(11)		25
Net periodic pension costs - interest component	(4)		(4)		(12)		(12)
Interest expense, net	$	(58)	$	(53)	$	(166)	$	(109)
Interest paid(1)	$	77	$	53	$	167	$	139

(1) Interest paid includes net settlements on interest rate swaps more fully discussed in Note 9.

(2) Income (expense) on UTPs and other tax related liabilities for the nine months ended September 30, 2021 includes a $40 million benefit relating to the reversal of tax-related interest accruals pursuant to the resolution of tax matters.

The fair value and carrying value of the Company’s debt as of September 30, 2022 and December 31, 2021 are as follows:


	September 30, 2022				December 31, 2021
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
















Long-term debt	$	7,476	$	6,426	$	7,413	$	7,982

The fair value of the Company’s long-term debt is estimated based on quoted market prices for similar instruments. Accordingly, the inputs used to estimate the fair value of the Company’s long-term debt are classified as Level 2 inputs within the fair value hierarchy.

NOTE 16. LEASE COMMITMENTS

The Company has operating leases, substantially all of which relate to the lease of office space. The Company’s leases which are classified as finance leases are not material to the consolidated financial statements. Certain of the Company’s leases include options to renew, with renewal terms that can extend the lease term from one year to 20 years at the Company’s discretion.

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The following table presents the components of the Company’s lease cost:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Operating lease cost	$	25	$	24	$	77	$	71
Sublease income	(2)		(2)		(6)		(4)
Variable lease cost	5		5		15		15
Total lease cost	$	28	$	27	$	86	$	82

The following tables present other information related to the Company’s operating leases:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Cash paid for amounts included in the measurement of operating lease liabilities	$	29	$	27	$	89	$	83
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1	$	117	$	31	$	123


	September 30, 2022		September 30, 2021
Weighted-average remaining lease term	5.1 years		5.9 years
Weighted-average discount rate applied to operating leases	3.1	%	3.1	%

The following table presents a maturity analysis of the future minimum lease payments included within the Company’s operating lease liabilities at September 30, 2022:


Year Ending December 31,	Operating Leases
2022 (After September 30,)	$	29
2023	117
2024	111
2025	96
2026	78
After 2026	102
Total lease payments (undiscounted)	533
Less: Interest	40
Present value of lease liabilities:	$	493
Lease liabilities - current	$	104
Lease liabilities - noncurrent	$	389

NOTE 17. CONTINGENCIES

Given the nature of the Company's activities, Moody’s and its subsidiaries are subject to legal and tax proceedings, governmental, regulatory and legislative investigations, subpoenas and other inquiries, and claims and litigation by governmental and private parties that are based on ratings assigned by MIS or that are otherwise incidental to the Company’s business. Moody’s and MIS also are subject to periodic reviews, inspections, examinations and investigations by regulators in the U.S. and other jurisdictions, any of which may result in claims, legal proceedings, assessments, fines, penalties or restrictions on business activities. Moody’s also is subject to ongoing tax audits as addressed in Note 4 to the condensed consolidated financial statements.

Management periodically assesses the Company’s liabilities and contingencies in connection with these matters based upon the latest information available. For claims, litigation and proceedings and governmental investigations and inquiries not related to income taxes, the Company records liabilities in the consolidated financial statements when it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated and periodically adjusts these as appropriate. When the reasonable estimate of the loss is within a range of amounts, the minimum amount of the range is accrued unless some higher amount within the range is a better estimate than another amount within the range. In instances when a loss is reasonably possible but uncertainties exist related to the probable outcome and/or the amount or range of loss, management does not record a liability but discloses the contingency if material. As additional information becomes available, the Company adjusts its assessments and estimates of such matters accordingly. Moody’s also discloses material pending legal proceedings pursuant to SEC rules and other pending matters as it may determine to be appropriate.

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In view of the inherent difficulty of assessing the potential outcome of legal proceedings, governmental, regulatory and legislative investigations and inquiries, claims and litigation and similar matters and contingencies, particularly when the claimants seek large or indeterminate damages or assert novel legal theories or the matters involve a large number of parties, the Company often cannot predict what the eventual outcome of the pending matters will be or the timing of any resolution of such matters. The Company also may be unable to predict the impact (if any) that any such matters may have on how its business is conducted, on its competitive position or on its financial position, results of operations or cash flows. As the process to resolve any pending matters progresses, management will continue to review the latest information available and assess its ability to predict the outcome of such matters and the effects, if any, on its operations and financial condition and to accrue for and disclose such matters as and when required. However, because such matters are inherently unpredictable and unfavorable developments or resolutions can occur, the ultimate outcome of such matters, including the amount of any loss, may differ from those estimates.

NOTE 18. SEGMENT INFORMATION

The Company is organized into two operating segments: MIS and MA and accordingly, the Company reports in two reportable segments: MIS and MA.

The MIS segment consists of five LOBs. The CFG, FIG, PPIF and SFG LOBs generate revenue principally from fees for the assignment and ongoing monitoring of credit ratings on debt obligations and the entities that issue such obligations in markets worldwide. The MIS Other LOB primarily consists of financial instruments pricing services in the Asia-Pacific region, ICRA non-ratings revenue and revenue from providing ESG research, data and assessments.

The MA segment develops a wide range of products and services that support the risk management activities of institutional participants in global financial markets. The MA segment consists of three LOBs - Decision Solutions, Research and Insights, and Data and Information.

Revenue for MIS and expenses for MA include intersegment fees charged to MA for the rights to use and distribute content, data and products developed by MIS. Additionally, revenue for MA and expenses for MIS include an intersegment fee charged to MIS from MA for certain MA products and services utilized in MIS’s ratings process. These intersegment fees are generally based on the market value of the products and services being transferred between the segments.

Overhead expenses include costs such as rent and occupancy, information technology and support staff such as finance, human resources and legal. Such costs and corporate expenses that exclusively benefit one segment are fully charged to that segment.

For overhead costs and corporate expenses that benefit both segments, costs are allocated to each segment based on the segment’s share of full-year 2018 actual revenue which comprises a “Baseline Pool” established in 2019, which will remain fixed over time. In subsequent periods, incremental overhead costs (or reductions thereof) will be allocated to each segment based on the prevailing shares of total revenue represented by each segment.

“Eliminations” in the following table represent intersegment revenue/expense. Moody’s does not report the Company’s assets by reportable segment, as this metric is not used by the chief operating decision maker to allocate resources to the segments. Consequently, it is not practical to show assets by reportable segment.

Financial Information by Segment

The table below shows revenue and Adjusted Operating Income by reportable segment. Adjusted Operating Income is a financial metric utilized by the Company’s chief operating decision maker to assess the profitability of each reportable segment. Refer to Note 2 for further details on the components of the Company’s revenue.


	Three Months Ended September 30,
	2022								2021
	MIS		MA		Eliminations		Consolidated		MIS		MA		Eliminations		Consolidated
Total external revenue	$	590	$	685	$	—	$	1,275	$	925	$	601	$	—	$	1,526
Intersegment revenue	43		2		(45)		—		42		2		(44)		—
Revenue	633		687		(45)		1,275		967		603		(44)		1,526
Operating, SG&A	344		479		(45)		778		387		446		(44)		789
Adjusted Operating Income	$	289	$	208	$	—	$	497	$	580	$	157	$	—	$	737
Add:
Depreciation and amortization	21		62		—		83		17		44		—		61

Restructuring	—		1		—		1		—		—		—		—


Operating Income							$	413							$	676

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	Nine Months Ended September 30,
	2022								2021
	MIS		MA		Eliminations		Consolidated		MIS		MA		Eliminations		Consolidated
Total external revenue	$	2,123	$	2,055	$	—	$	4,178	$	2,941	$	1,738	$	—	$	4,679
Intersegment revenue	129		5		(134)		—		124		6		(130)		—
Revenue	2,252		2,060		(134)		4,178		3,065		1,744		(130)		4,679
Operating, SG&A	1,038		1,423		(134)		2,327		1,079		1,218		(130)		2,167
Adjusted Operating Income	$	1,214	$	637	$	—	$	1,851	$	1,986	$	526	$	—	$	2,512
Add:
Depreciation and amortization	60		182		—		242		53		127		—		180
Restructuring	15		17		—		32		—		2		—		2



Operating Income							$	1,577							$	2,330

The cumulative restructuring charge for the MA reportable segment related to the 2020 MA Strategic Reorganization Restructuring Program is $19 million. The cumulative restructuring charge for the MIS and MA reportable segments related to the 2022 - 2023 Geolocation Restructuring Program is $15 million and $18 million, respectively. The restructuring programs are more fully discussed in Note 11.

Consolidated Revenue Information by Geographic Area


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
United States	$	668	$	841	$	2,214	$	2,557
Non-U.S.:
EMEA	393		443		1,271		1,402
Asia-Pacific	129		149		422		460
Americas	85		93		271		260
Total Non-U.S.	607		685		1,964		2,122
Total	$	1,275	$	1,526	$	4,178	$	4,679

NOTE 19. SUBSEQUENT EVENT

On October 24, 2022, the Board approved the declaration of a quarterly dividend of $0.70 per share of Moody’s common stock, payable on December 14, 2022 to shareholders of record at the close of business on November 23, 2022.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis of financial condition and results of operations should be read in conjunction with the Moody’s Corporation condensed consolidated financial statements and notes thereto included elsewhere in this quarterly report on Form 10–Q.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains Forward-Looking Statements. See “Forward-Looking Statements” commencing on page 79 for a discussion of uncertainties, risks and other factors associated with these statements.

THE COMPANY

Moody’s is a global integrated risk assessment firm that empowers organizations and investors to make better decisions. Moody’s reports in two segments: MIS and MA.

Sustainability

Moody’s manages its business with the goal of delivering value to all of its stakeholders, including but not limited to, its customers, employees, business partners, local communities and stockholders. As part of this effort, Moody’s advances sustainability by considering environmental, social, and governance (“ESG”) factors throughout its operations, products and services. The Company uses its expertise and assets to make a positive difference through technology tools, research and analytical services that help other organizations and the investor community better understand the links between sustainability considerations and the global markets. Moody’s efforts to promote sustainability-related thought leadership, assessments and data to market participants include adhering to the policies of recognized sustainability organizations that develop standards or frameworks and/or evaluate and assess performance, including: the Global Reporting Initiative (GRI); Sustainability Accounting Standards Board (SASB); and the World Economic Forum (WEF)’s Stakeholder Capitalism metrics. Moody's also issues an annual report on Stakeholder Sustainability and on how the Company has implemented the Task Force on Climate-related Financial Disclosures (“TCFD”) recommendations. Moody’s sustainability-related achievements during the first three quarters of 2022 included the following:

–Validated Moody’s long-term net-zero targets with SBTi;

–Rolled out an all-employee training on Sustainability and ESG;

–Named 2021 CDP Supplier Engagement Leader on Climate Action for second consecutive year;

–Awarded Best ESG Reporting (large-cap) from IR Magazine U.S. 2022 and ‘Sustainability reporting of the year – Americas’ from Environmental Finance Company Awards 2022;

–Published Moody’s 2021 Stakeholder Sustainability report and 2021 TCFD report;

–Issued an inaugural global tax policy; and

–Updated Moody’s decarbonization plan

The Board oversees sustainability matters, with assistance from the Audit, Governance & Nominating and Compensation & Human Resources Committees, as part of its oversight of management and the Company’s overall strategy. The Board also oversees Moody’s policies for assessing and managing our exposure to risk, including climate-related risks such as business continuity disruption.

Current Matters Impacting Moody's Business

Current Macroeconomic Uncertainties/Market Volatility

The Company is monitoring current macroeconomic and geopolitical uncertainties that have contributed to declines in rated issuance volumes in 2022. A substantial portion of MIS’s revenue is impacted by the level of issuance activity in the fixed income capital markets, both in the U.S. and internationally. While market volatility in 2022 has resulted in declines in rated issuance volumes, the Company believes that these declines are predominantly transitory in nature. However, due to various uncertainties, Moody's is unable to predict the severity and duration of current macroeconomic and geopolitical uncertainties and their potential impact on future ratings issuance volumes. Refer to Item 1A. “Risk Factors” contained in the Company’s annual report on Form 10-K for the year ended December 31, 2021 for further disclosure relating to these risks.

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Russia/Ukraine Conflict

While Moody's Russian operations and net assets are not material, broader global market volatility, which partially relates to uncertainties surrounding the conflict, has contributed to an adverse impact on rated issuance volumes in 2022. This impact to rated issuance volumes is more fully discussed in the "Results of Operations" section of this MD&A. The Company is unable to predict either the near-term or longer-term impact that the conflict may have on its financial position and operating results due to numerous uncertainties regarding the severity and duration of the conflict and its broader potential macroeconomic impact.

COVID-19

The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business. The Company continues to monitor regional developments relating to the COVID-19 pandemic to inform decisions regarding its offices and its business travel policies. As of the date of the filing of this quarterly report on Form 10-Q, the Company has reopened all of its offices for employees to access.

The COVID-19 pandemic has not had a material adverse impact on the Company's reported results to date and is currently not expected to have a material adverse impact on its near-term outlook. However, Moody's is unable to predict the longer-term impact that the pandemic may have on its business, future results of operations, financial position or cash flows due to numerous uncertainties. Refer to Item 1A. “Risk Factors” contained in the Company’s annual report on Form 10-K for the year ended December 31, 2021 for further disclosure relating to the risks of the COVID-19 pandemic on the Company's business.

Critical Accounting Estimates

Moody’s discussion and analysis of its financial condition and results of operations are based on the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires Moody’s to make estimates and judgments that affect reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the dates of the financial statements and revenue and expenses during the reporting periods. These estimates are based on historical experience and on other assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, Moody’s evaluates its estimates, including those related to revenue recognition, accounts receivable allowances, contingencies, restructuring, goodwill and acquired intangible assets, pension and other retirement benefits, stock-based compensation, and income taxes. Actual results may differ from these estimates under different assumptions or conditions. Item 7, MD&A, in the Company’s annual report on Form 10-K for the year ended December 31, 2021, includes descriptions of some of the judgments that Moody’s makes in applying its accounting estimates in these areas. Since the date of the annual report on Form 10-K, there have been no material changes to the Company’s critical accounting estimates disclosures other than the update below relating to the results of the Company's annual impairment assessment as of July 31, 2022.

Goodwill and Other Acquired Intangible Assets

On July 31st of each year, Moody’s evaluates its goodwill for impairment at the reporting unit level, defined as an operating segment (i.e., MIS and MA), or one level below an operating segment (i.e., a component of an operating segment). At July 31, 2022, the Company has four reporting units: two within the Company's ratings business (one for the ICRA business and one that encompasses all of Moody's other ratings operations) and two reporting units within MA consisting of businesses that offer: i) data and data-driven analytical solutions; and ii) risk management software, workflow and CRE solutions.

The Company evaluates the recoverability of goodwill using a two-step impairment test approach at the reporting unit level. In the first step, the Company assesses various qualitative factors to determine whether the fair value of a reporting unit may be less than its carrying amount. If a determination is made based on the qualitative factors that an impairment does not exist, the Company is not required to perform further testing. If the aforementioned qualitative assessment results in the Company concluding that it is more likely than not that the fair value of a reporting unit may be less than its carrying amount, the fair value of the reporting unit will be quantitatively determined and compared to its carrying value including goodwill. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired and the Company is not required to perform further testing. If the fair value of the reporting unit is less than the carrying value, the Company will record a goodwill impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value. The Company evaluates its reporting units on an annual basis, or more frequently if there are changes in the reporting structure of the Company due to acquisitions, realignments or if there are indicators of potential impairment. For the reporting units where the Company is consistently able to conclude that no impairment exists using only a qualitative approach, the Company’s accounting policy is to perform the second step of the aforementioned goodwill impairment assessment at least once every three years.

The Company last performed quantitative assessments on all reporting units at July 31, 2021, pursuant to a change in reporting unit structure in the MA reportable segment, which is more fully discussed in Item 7, MD&A, in the Company's annual report on Form 10-K for the year ended December 31, 2021. The quantitative assessments performed at July 31, 2021 resulted in fair values that significantly exceeded carrying values for all reporting units.

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Determining the fair value of a reporting unit involves the use of significant estimates and assumptions, which are more fully described within Item 7, MD&A, in the Company’s annual report on Form 10-K for the year ended December 31, 2021. In addition, the Company also makes certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of its reporting units.

Annual goodwill impairment assessment performed at July 31, 2022

At July 31, 2022, the Company performed a qualitative assessment for each of the reporting units. The qualitative analyses resulted in the Company determining that it was not more likely than not that the fair value of any reporting unit was less than its carrying amount.

Reportable Segments

The Company is organized into two reportable segments as of September 30, 2022: MIS and MA, which are more fully described in the section entitled “The Company” above and in Note 18 to the condensed consolidated financial statements.

Reclassification of Previously Reported Revenue by LOB

–Research & Insights (R&I) - provides models, scores, expert insights and commentary. This LOB includes: credit research; credit models and analytics; and economics data and models; and

–Data & Information (D&I) - provides vast data sets on companies and securities via data feeds and data applications products.

Prior year revenue by LOB amounts have been reclassified to conform to the new LOB reporting structure, which is presented below in the section entitled "Results of Operations."

RESULTS OF OPERATIONS

Impact of acquisitions on comparative results

Moody’s completed the following acquisitions, which impact the Company's year-over-year comparative results:

–Cortera on March 19, 2021;

–RMS on September 15, 2021;

–RealXData on September 17, 2021;

–PassFort on November 30, 2021; and

–kompany on February 28, 2022.

Refer to the section entitled "Non-GAAP Financial Measures" of this MD&A for the definitions of how the Company determines certain organic growth measures used in this MD&A that exclude the impact of acquisition activity.

The following footnotes are applicable throughout the discussion of the Company's results of operations:

(1) Refer to the section entitled "Non-GAAP Financial Measures" of this MD&A for the definition and methodology that the Company utilizes to calculate this metric.

(2) Refer to the section entitled "Key Performance Metrics" of this MD&A for the definition and methodology that the Company utilizes to calculate this metric.

(3) Adjusted Operating Income, Adjusted Operating Margin and Adjusted Diluted EPS are non-GAAP financial measures. Refer to the section entitled "Non-GAAP Financial Measures" of this MD&A for further information regarding these measures.

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Three months ended September 30, 2022 compared with three months ended September 30, 2021

Executive Summary

The following table provides an executive summary of key operating results for the quarter ended September 30, 2022. Following this executive summary is a more detailed discussion of the Company’s operating results as well as a discussion of the operating results of the Company’s reportable segments.


	Three Months Ended September 30,
Financial measure:	2022			2021			% Change Favorable (Unfavorable)		Insight and Key Drivers of Change Compared to Prior Year
Moody's total revenue	$	1,275		$	1,526		(16	%)	— reflects lower MIS revenue partially offset by growth in MA
MIS external revenue	$	590		$	925		(36	%)	— credit market activity remained muted across all sectors given ongoing market volatility, central bank actions, high levels of balance sheet cash, as well as heightened inflationary and recessionary concerns
MA external revenue	$	685		$	601		14	%	— inorganic growth from acquisitions; and — sustained demand for Know Your Customer solutions, credit research and insights, and data feeds; partially offset by: — unfavorable changes in FX translation rates
Total operating and SG&A expenses	$	778		$	789		1	%	— operational and integration costs associated with recent acquisitions; and — increases in hiring and salary growth; offset by: — lower incentive compensation accruals and performance-based equity compensation; and — favorable changes in FX translation rates
Depreciation and amortization	$	83		$	61		(36	%)	— higher amortization of intangible assets reflecting recent M&A activity (most notably RMS); and — higher amortization relating to internally developed software

Total non-operating (expense) income, net	$	(32)		$	(57)		44 %		— increase in FX gains primarily due to the strengthening of the U.S. dollar to the euro; and — a $13 million loss in the prior year on a forward contract used to hedge a portion of the GBP-denominated RMS purchase price
Operating margin	32.4		%	44.3		%	(1,190	BPS)	— margin declines primarily due to the aforementioned decrease in MIS revenue
Adjusted Operating Margin	39.0		%	48.3		%	(930	BPS)
ETR	20.5		%	23.4		%	(290	BPS)	— primarily reflects lower pre-tax income and a favorable mix of earnings in the jurisdictions in which Moody’s operates
Diluted EPS	$	1.65		$	2.53		(35	%)	— mainly due to declines in MIS revenue
Adjusted Diluted EPS	$	1.85		$	2.69		(31	%)

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Moody's Corporation


	Three Months Ended September 30,						% Change Favorable (Unfavorable)
	2022			2021
Revenue:
United States	$	668		$	841		(21	%)
Non-U.S.:
EMEA	393			443			(11	%)
Asia-Pacific	129			149			(13	%)
Americas	85			93			(9	%)
Total Non-U.S.	607			685			(11	%)
Total	1,275			1,526			(16	%)
Expenses:
Operating	393			394			—	%
SG&A	385			395			3	%
Depreciation and amortization	83			61			(36	%)
Restructuring	1			—			NM



Total	862			850			(1	%)
Operating income	$	413		$	676		(39	%)
Adjusted Operating Income (3)	$	497		$	737		(33	%)
Interest expense, net	$	(58)		$	(53)		(9	%)
Other non-operating income, net	26			(4)			NM
Non-operating (expense) income, net	$	(32)		$	(57)		44	%

Net income attributable to Moody's	$	303		$	474		(36	%)
Diluted weighted average shares outstanding	183.9			187.3			2	%
Diluted EPS attributable to Moody's common shareholders	$	1.65		$	2.53		(35	%)
Adjusted Diluted EPS (3)	$	1.85		$	2.69		(31	%)
Operating margin	32.4		%	44.3		%
Adjusted Operating Margin(3)	39.0		%	48.3		%
Effective tax rate	20.5		%	23.4		%

The table below shows Moody’s global staffing by geographic area:


		September 30,		Change
		2022	2021	%

MIS	U.S.	1,547	1,442	7	%
	Non-U.S.	3,969	3,725	7	%
	Total	5,516	5,167	7	%

MA	U.S.	2,859	2,602	10	%
	Non-U.S.	4,368	3,770	16	%
	Total	7,227	6,372	13	%

MSS	U.S.	785	697	13	%
	Non-U.S.	1,043	888	17	%
	Total	1,828	1,585	15	%

Total MCO	U.S.	5,191	4,741	9	%
	Non-U.S.	9,380	8,383	12	%
	Total	14,571	13,124	11	%

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GLOBAL REVENUE

Three months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________

Global revenue ⇓ $251 million

U.S. Revenue ⇓ $173 million

Non-U.S. Revenue ⇓ $78 million

The decrease in global revenue reflected declines in MIS, mainly in the U.S. and EMEA, partially offset by growth in MA in all regions. Refer to the section entitled “Segment Results” of this MD&A for a more fulsome discussion of the Company’s segment revenue.

–Foreign currency translation unfavorably impacted global revenue by 4% percent.

–Organic constant currency revenue(1) decreased 17%.

Q3 Operating Expense ⇓ $1 million

Q3 SG&A Expense ⇓ $10 million

---------- ---------

Compensation expenses decreased $22 million reflecting:

Compensation expenses increased $13 million reflecting:

— lower incentive compensation accruals and performance-based equity compensation of $32 million, which aligns with actual/projected financial and operating performance; and

— higher salaries and benefits of $26 million primarily due to hiring and salary increases; and

— lower salaries and benefits of $15 million reflecting a higher percentage of costs capitalized in MA for product development;

partially offset by:

— inorganic growth from acquisitions of $13 million;

partially offset by:

— lower incentive compensation accruals and performance-based equity compensation of $20 million, which aligns with actual/projected financial and operating performance.

— inorganic growth from acquisitions of $29 million.

Non-compensation expenses increased $21 million reflecting:

Non-compensation expenses decreased $23 million reflecting:

— inorganic growth from acquisitions of $10 million; and

— operating and transaction-related costs in 2021 associated with acquisitions, most notably $22 million in RMS acquisition-related costs that did not recur in 2022; and

— higher costs of $7 million primarily relating to strategic initiatives to support business growth coupled with enhancements to technology infrastructure to enable automation, innovation and efficiency.

— charitable contributions via the Moody's Foundation in 2021 that did not recur in 2022;

partially offset by:

— inorganic growth from acquisitions of $9 million.

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Depreciation and amortization

The increase in depreciation and amortization expense is driven by amortization of intangible assets recently acquired (primarily RMS) and amortization of internally developed software recently capitalized.

Operating margin 32.4%, down 1,190 BPS

Adjusted Operating Margin 39.0%, down 930 BPS

Overall, margin declines primarily resulted from the aforementioned decrease in MIS revenue.

Interest Expense, net ⇑ $5 million

Other non-operating income ⇑ $30 million

Increase in expense is primarily due to:

Increase in income is primarily due to:

— higher interest on borrowings resulting from the issuance of new long-term debt in 2022 (refer to the "Material Cash Requirements" section of this MD&A for further information on the Company's indebtedness)

— higher FX gains of $15 million primarily due to the strengthening of the U.S. dollar relative to the euro; and

— a $13 million loss in 2021 on a forward contract used to hedge a portion of the GBP-denominated RMS purchase price.


						ETR ⇓ 290 BPS

The decrease in ETR primarily reflects lower pre-tax income, which increases the percentage impact of net beneficial discrete items, and a favorable mix of earnings in the jurisdictions in which Moody’s operates.

Diluted EPS ⇓ $0.88

Adjusted Diluted EPS ⇓ $0.84

Diluted EPS and Adjusted Diluted EPS declined mainly due to lower operating income and Adjusted Operating Income, respectively, the components of which are more fully described above. Refer to the section entitled “Non-GAAP Financial Measures” of this MD&A for items excluded in the derivation of Adjusted Diluted EPS.

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Segment Results

Moody’s Investors Service

The table below provides a summary of revenue and operating results, followed by further insight and commentary:


	Three Months Ended September 30,						% Change Favorable (Unfavorable)
	2022			2021
Revenue:
Corporate finance (CFG)	$	277		$	488		(43	%)
Structured finance (SFG)	101			143			(29	%)
Financial institutions (FIG)	109			153			(29	%)
Public, project and infrastructure finance (PPIF)	92			130			(29	%)
Total ratings revenue	579			914			(37	%)
MIS Other	11			11			—	%
Total external revenue	590			925			(36	%)
Intersegment revenue	43			42			2	%
Total MIS revenue	633			967			(35	%)
Expenses:
Operating and SG&A (external)	342			385			11	%
Operating and SG&A (intersegment)	2			2			—	%
Total operating and SG&A	344			387			11	%








Adjusted Operating Income	$	289		$	580		(50	%)


Adjusted Operating Margin	45.7		%	60.0		%

Depreciation and amortization	21			17			(24	%)

The following chart presents changes in rated issuance volumes compared to the third quarter of 2021. To the extent that changes in rated issuance volumes had a material impact to MIS's revenue compared to the prior year, those impacts are discussed below.

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MOODY'S INVESTORS SERVICE REVENUE

Three months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________


MIS: Global revenue ⇓ $335 million			U.S. Revenue ⇓ $218 million			Non-U.S. Revenue ⇓ $117 million

–The decrease in global MIS revenue primarily reflects a 41% decrease in rated issuance volumes, which resulted in transaction revenue declining $335 million compared to the same period in the prior year. The decline in rated issuance volumes compared to the third quarter of 2021 reflected muted credit market activity across all sectors given ongoing market volatility, central bank actions, high levels of balance sheet cash, as well as heightened inflationary and recessionary concerns.

–Foreign currency translation unfavorably impacted MIS revenue by three percentage points.

CFG REVENUE

Three months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________


CFG: Global revenue ⇓ $211 million			U.S. Revenue ⇓ $146 million			Non-U.S. Revenue ⇓ $65 million

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Global CFG revenue for the three months ended September 30, 2022 and 2021 was comprised as follows:

The decrease in CFG revenue of 43% reflected declines in both U.S. (44%) and internationally (42%).

Transaction revenue decreased $213 million compared to the same period in the prior year.

The decrease compared to a strong period of issuance in the third quarter of 2021 reflected declines in leveraged finance and investment-grade issuance activity in all regions resulting from muted credit market activity across all sectors given ongoing market volatility, central bank actions, high levels of balance sheet cash, as well as heightened inflationary and recessionary concerns.

Changes in foreign currency translation rates unfavorably impacted CFG revenue by two percentage points.

SFG REVENUE

Three months ended September 30,

2022---------------------------------------------------------------------------2021

_______________________________________________________________________________________________________


SFG: Global revenue ⇓ $42 million			U.S. Revenue ⇓ $29 million			Non-U.S. Revenue ⇓ $13 million

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Global SFG revenue for the three months ended September 30, 2022 and 2021 was comprised as follows:

The 29% decrease in SFG revenue was substantially all in the U.S. and EMEA.

Transaction revenue decreased $42 million compared to the third quarter of 2021.

The most notable drivers of the decline in SFG revenue included lower CLO and RMBS activity reflecting higher credit spreads given ongoing market volatility, central bank actions, and heightened inflationary and recessionary concerns.

Changes in foreign currency translation rates unfavorably impacted SFG revenue by three percentage points.

FIG REVENUE

Three months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________


FIG: Global revenue ⇓ $44 million			U.S. Revenue ⇓ $24 million			Non-U.S. Revenue ⇓ $20 million

Global FIG revenue for the three months ended September 30, 2022 and 2021 was comprised as follows:

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The decrease in FIG revenue of 29% reflected revenue declines in both U.S. (34%) and internationally (24%).

Transaction revenue decreased $42 million compared to the third quarter of 2021.

The most notable drivers of the decline reflected lower revenue from U.S. banking and insurance issuers, mainly due to:

–an unfavorable product mix; and

–lower rated issuance volumes resulting from market volatility and macroeconomic/geopolitical uncertainties.

Changes in foreign currency translation rates unfavorably impacted FIG revenue by four percentage points.

PPIF REVENUE

Three months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________


PPIF: Global revenue ⇓ $38 million			U.S. Revenue ⇓ $19 million			Non-U.S. Revenue ⇓ $19 million

Global PPIF revenue for the three months ended September 30, 2022 and 2021 was comprised as follows:

Transaction revenue decreased $38 million compared to the third quarter of 2021.

The decrease in PPIF revenue of 29% reflected declines in the U.S. (25%) and internationally (35%).

The main drivers of the decrease were:

–declines in U.S. public finance and project finance revenue resulting from market volatility, which increased funding costs, coupled with issuers in these sectors being currently well capitalized; and

–declines in international sovereign and project/infrastructure finance activity compared to a strong prior year period.

Changes in foreign currency translation rates unfavorably impacted PPIF revenue by three percentage points.

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						MIS: Q3 Operating and SG&A Expense ⇓ $43 million

The decline is due to lower compensation costs of $46 million, partially offset by higher non-compensation costs of $3 million, with the most notable drivers reflecting:


Compensation costs						Non-compensation costs
The decrease is primarily due to:						The modest increase is primarily due to:
— lower incentive compensation accruals and performance-based equity compensation, which aligns with actual/projected financial and operating performance; and						— higher costs relating to strategic initiatives to support business growth coupled with enhancements to technology infrastructure to enable automation, innovation and efficiency; and
— favorable changes in FX translation rates.						— higher travel costs compared to minimal travel in the prior year in light of COVID-19; mostly offset by:
						— charitable contributions via the Moody's Foundation in 2021 that did not recur in 2022; and
						— favorable changes in FX translation rates.

MIS: Adjusted Operating Margin 45.7% ⇓ 1,430 BPS

The MIS Adjusted Operating Margin decline primarily reflected the aforementioned 36% decrease in revenue.

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Moody’s Analytics

The table below provides a summary of revenue and operating results, followed by further insight and commentary:


	Three Months Ended September 30,						% Change Favorable (Unfavorable)
	2022			2021
Revenue:
Decision Solutions (DS)	$	325		$	250		30	%
Research and Insights (R&I)	184			177			4	%
Data and Information (D&I)	176			174			1	%
Total external revenue	685			601			14	%
Intersegment revenue	2			2			—	%
Total MA revenue	687			603			14	%
Expenses:
Operating and SG&A (external)	436			404			(8	%)
Operating and SG&A (intersegment)	43			42			(2	%)
Total operating and SG&A	479			446			(7	%)











Adjusted Operating Income	$	208		$	157		32	%


Adjusted Operating Margin	30.3		%	26.0		%

Depreciation and amortization	62			44			(41	%)
Restructuring	1			—			NM

MOODY'S ANALYTICS REVENUE


Three months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________


MA: Global revenue ⇑ $84 million			U.S. Revenue ⇑ $45 million			Non-U.S. Revenue ⇑ $39 million

The 14% increase in global MA revenue reflects growth both in the U.S. (17%) and internationally (11%) in all LOBs and includes revenue from the acquisitions of RMS, RealXData, PassFort and kompany. Changes in foreign currency translation rates unfavorably impacted MA revenue by seven percentage points.

–Organic constant currency revenue growth(1) was 9% reflecting increases across all LOBs.

–ARR(2) grew 9% representing increased demand for KYC and banking products within the Decision Solutions LOB coupled with growth for company data and ratings feeds products in the Data & Information LOB.

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DECISION SOLUTIONS REVENUE

Three months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________


DS: Global revenue ⇑ $75 million			U.S. Revenue ⇑ $36 million			Non-U.S. Revenue ⇑ $39 million

Global DS revenue grew 30% compared to the third quarter of 2021 and reflects growth in both the U.S. (34%) and internationally (27%) with the most notable drivers of the increase reflecting:

–inorganic revenue growth from the acquisitions of RMS, PassFort, RealXData, and kompany; and

–continued demand for KYC and compliance solutions reflecting increased customer and supplier risk data usage.

Changes in foreign currency translation rates unfavorably impacted DS revenue by five percentage points.

Constant currency organic revenue(1) growth was 7%.

ARR(2) grew 10%.

RESEARCH AND INSIGHTS REVENUE


Three months ended September 30,

2022-----------------------------------------------------------------------------------2021

___________________________________________________ ________________________________________________


R&I: Global revenue ⇑ $7 million			U.S. Revenue ⇑ $4 million			Non-U.S. Revenue ⇑ $3 million

Global R&I revenue increased 4% compared to the third quarter of 2021 and reflects growth in both the U.S. (4%) and internationally (4%) mainly driven by continued strong retention and demand for credit research, analytics and models.

Changes in foreign currency translation rates unfavorably impacted R&I revenue by six percentage points.

Constant currency revenue growth(1) was 10%.

ARR(2) grew 8%.

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DATA AND INFORMATION REVENUE


Three months ended September 30,

2022-----------------------------------------------------------------------------------2021

________________________________________________________________________________________________________


D&I: Global revenue ⇑ $2 million			U.S. Revenue ⇑ $5 million			Non-U.S. Revenue ⇓ $3 million

Global D&I revenue increased 1% compared to the third quarter of 2021 and reflects growth in the U.S. (9%) partially offset by decreases internationally (3%) mainly driven by:

–strong retention and new sales for ratings feeds coupled with pricing increases; and

–continued demand for company data.

Changes in foreign currency translation rates unfavorably impacted D&I revenue by eleven percentage points.

Organic constant currency revenue growth(1) was 12%.

ARR(2) grew 9%.


						MA: Q3 Operating and SG&A Expense ⇑ $32 million

The increase in operating and SG&A expenses compared to the third quarter of 2021 reflected growth in compensation costs of $39 million partially offset by a decrease in non-compensation of $7 million. The most notable drivers of these changes were:


Compensation costs						Non-compensation costs
The increase is primarily due to:						The decrease is primarily due to:
— inorganic expense growth from acquisitions; and						— transaction-related costs in 2021 associated with acquisitions, most notably $22 million in RMS acquisition-related costs that did not recur in 2022;
— higher salaries and benefits related to headcount growth; partially offset by:
— favorable changes in FX translation rates.						— charitable contributions via the Moody's Foundation in 2021 that did not recur in 2022; and
						— favorable changes in FX translation rates; partially offset by:
						— operating and integration-related costs associated with recent acquisitions.

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MA: Adjusted Operating Margin 30.3% ⇑ 430 BPS

The Adjusted Operating Margin increase for MA is primarily due to the 14% increase in global MA revenue.


Depreciation and amortization

The increase in depreciation and amortization expense is driven by higher amortization of intangible assets reflecting recent M&A activity (most notably RMS) and amortization of internally developed software.

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Nine months ended September 30, 2022 compared with nine months ended September 30, 2021

Executive Summary

–The following table provides an executive summary of key operating results for the nine months ended September 30, 2022. Following this executive summary is a more detailed discussion of the Company’s operating results as well as a discussion of the operating results of the Company’s reportable segments.


	Nine Months Ended September 30,
Financial measure:	2022			2021			% Change		Insight and Key Drivers of Change Compared to Prior Year
Moody's total revenue	$	4,178		$	4,679		(11	%)	— reflects lower MIS revenue partially offset by growth in MA
MIS external revenue	$	2,123		$	2,941		(28	%)	— credit market activity remained muted across all sectors given ongoing market volatility, central bank actions, high levels of balance sheet cash, as well as heightened inflationary and recessionary concerns
MA external revenue	$	2,055		$	1,738		18	%	— inorganic growth from acquisitions; and — strong organic growth across all LOBs, most notably for KYC and compliance solutions coupled with continued strong retention and demand for credit research, analytics and models
Total operating and SG&A expenses	$	2,327		$	2,167		(7	%)	— operational and integration costs associated with recent acquisitions; and — increases in hiring and salary growth; partially offset by: — lower incentive compensation accruals and performance-based equity compensation; and — favorable changes in FX translation rates
Depreciation and amortization	$	242		$	180		(34	%)	— higher amortization of intangible assets reflecting recent M&A activity (most notably RMS); and — amortization of internally developed software
Restructuring	$	32		$	2		NM		— the 2022 charge is pursuant to the Company's 2022 - 2023 Geolocation Restructuring Program, more fully discussed in Note 11 to the condensed consolidated financial statements
Total non-operating (expense) income, net	$	(144)		$	(91)		(58	%)	— reflects a $40 million benefit in the prior period related to the reversal of tax-related interest accruals pursuant to the resolution of tax matters; and — the 2022 amount includes FX translation losses of $20 million reclassified to earnings resulting from the Company no longer conducting commercial operations in Russia
Operating margin	37.7		%	49.8		%	(1210 BPS)		— margin declines primarily due to the aforementioned decrease in MIS revenue
Adjusted Operating Margin	44.3		%	53.7		%	(940 BPS)
ETR	21.3		%	20.2		%	(110BPS)		— primarily reflects the non-deductible nature of the aforementioned FX translation losses resulting from the Company no longer conducting commercial operations in Russia; and — the resolution of UTPs in the first nine months of 2021 that did not recur to the same extent in the first nine months of 2022; partially offset by: — a favorable mix of earnings in the jurisdictions in which Moody's operates
Diluted EPS	$	6.10		$	9.51		(36	%)	— primarily due to declines in MIS revenue coupled with the aforementioned increase in expenses
Adjusted Diluted EPS	$	6.96		$	9.96		(30	%)

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Moody’s Corporation


	Nine Months Ended September 30,						% Change Favorable (Unfavorable)
	2022			2021
Revenue:
United States	$	2,214		$	2,557		(13	%)
Non-U.S.:
EMEA	1,271			1,402			(9	%)
Asia-Pacific	422			460			(8	%)
Americas	271			260			4	%
Total Non-U.S.	1,964			2,122			(7	%)
Total	4,178			4,679			(11	%)
Expenses:
Operating	1,203			1,152			(4	%)
SG&A	1,124			1,015			(11	%)
Depreciation and amortization	242			180			(34	%)
Restructuring	32			2			NM


Total	2,601			2,349			(11	%)
Operating income	1,577			2,330			(32	%)
Adjusted Operating Income (1)	1,851			2,512			(26	%)
Interest expense, net	(166)			(109)			(52	%)
Other non-operating income, net	22			18			22	%
Non-operating (expense) income, net	(144)			(91)			(58	%)

Net income attributable to Moody’s	$	1,128		$	1,787		(37	%)
Diluted weighted average shares outstanding	184.9			188.0			2	%
Diluted EPS attributable to Moody’s common shareholders	$	6.10		$	9.51		(36	%)
Adjusted Diluted EPS (1)	$	6.96		$	9.96		(30	%)
Operating margin	37.7		%	49.8		%
Adjusted Operating Margin (1)	44.3		%	53.7		%
Effective tax rate	21.3		%	20.2		%

GLOBAL REVENUE


Nine months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________

Global revenue ⇓ $501 million

U.S. Revenue ⇓ $343 million

Non-U.S. Revenue ⇓ $158 million

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The decrease in global revenue reflected declines in MIS in all regions, partially offset by growth in MA in all regions. Refer to the section entitled “Segment Results” of this MD&A for a more fulsome discussion of the Company’s segment revenue.

Changes in foreign currency translation rates unfavorably impacted global revenue by three percent.

Organic constant currency revenue(1) for MCO decreased 13%.

(1) Refer to the section entitled "Non-GAAP Financial Measures" of this MD&A for the definition and methodology that the Company utilizes to calculate this metric.

YTD Operating Expense ⇑ $51 million

YTD SG&A Expense ⇑ $109 million

-------------------------------------

Compensation expenses decreased $9 million and reflected:

Compensation expenses increased $74 million reflecting:

— lower incentive compensation accruals and performance-based equity compensation of $67 million, which aligns with actual/projected financial and operating performance; and

— inorganic growth from acquisitions of $43 million; and

— higher salaries and benefits of approximately $86 million primarily due to hiring and salary increases;

partially offset by:

— approximately $35 million in higher compensation costs eligible for capitalization in 2022 reflecting certain product development in the MA operating segment;

partially offset by:

— lower incentive compensation accruals and performance-based equity compensation of $46 million, which aligns with actual/projected financial and operating performance.

— inorganic growth from acquisitions of $101 million.

Non-compensation expenses increased $60 million reflecting:

Non-compensation expenses increased $35 million reflecting:

— inorganic growth from acquisitions of $31 million; and

— inorganic growth from acquisitions of $30 million; and

— higher costs of $20 million relating to strategic initiatives to support business growth coupled with enhancements to technology infrastructure to enable automation, innovation and efficiency.

— higher bad debt reserves of $13 million resulting from the impact of the Russia/Ukraine conflict;

partially offset by:

— charitable contributions via the Moody's Foundation in 2021 that did not recur in 2022.


Depreciation and amortization


Restructuring

The restructuring charge in the first nine months of 2022 relates to the Company's 2022 - 2023 Geolocation Restructuring Program as more fully discussed in Note 11 to the condensed consolidated financial statements.

Operating margin 37.7%, down 1,210 BPS

Adjusted Operating Margin 44.3%, down 940 BPS

Overall, margin declines resulted from the aforementioned decrease in MIS revenue coupled with operating expense growth (mainly from inorganic expense growth from acquisitions).

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Interest Expense, net ⇑ $57 million

Other non-operating income ⇑ $4 million


Increase in expense is primarily due to:						Increase in income is primarily due to:
— a $40 million benefit in the prior year related to the reversal of tax-related interest accruals pursuant to the resolution of UTPs; and						— an increase in FX gains primarily due to the strengthening of the U.S. dollar relative to the euro;
— higher interest on borrowings resulting from the issuance of new long-term debt in 2022 (refer to the "Material Cash Requirements" section of this MD&A for further information on the Company's indebtedness).						— a $13 million loss in 2021 on a forward contract used to hedge a portion of the GBP-denominated RMS purchase price;
						— an $11 million benefit in 2022 relating to statute of limitations lapses on certain indemnification obligations relating to the MAKS divestiture; and
						— an $8 million loss in 2021 on the settlement of pension obligations resulting from lump sum distributions from the Company's defined benefit pension plans; partially offset by
						— FX translation losses of $20 million reclassified to earnings resulting from the Company no longer conducting commercial operations in Russia (refer to the section above entitled "Russia/Ukraine Conflict" for further information).


						ETR ⇑ 110 BPS

The drivers for the increase in the ETR include:

–approximately $40 million in higher tax benefits from the resolution of UTPs in the first nine months of 2021 compared to the first nine months of 2022; and

–the non-deductible nature of the aforementioned FX translation losses resulting from the Company no longer conducting commercial operations in Russia;

partially offset by:

–a favorable mix of earnings in the jurisdictions in which Moody's operates.

Diluted EPS ⇓ $3.41

Adjusted Diluted EPS ⇓ $3.00

Diluted EPS and Adjusted Diluted EPS declined mainly due to lower operating income and Adjusted Operating Income, respectively. Refer to the section entitled “Non-GAAP Financial Measures” of this MD&A for items excluded in the derivation of Adjusted Diluted EPS.

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Moody’s Investors Service

The table below provides a summary of revenue and operating results, followed by further insight and commentary:


	Nine Months Ended September 30,						% Change Favorable (Unfavorable)
	2022			2021
Revenue:
Corporate finance (CFG)	$	1,016		$	1,643		(38	%)
Structured finance (SFG)	368			399			(8	%)
Financial institutions (FIG)	368			465			(21	%)
Public, project and infrastructure finance (PPIF)	337			403			(16	%)
Total ratings revenue	2,089			2,910			(28	%)
MIS Other	34			31			10	%
Total external revenue	2,123			2,941			(28	%)
Intersegment royalty	129			124			4	%
Total	2,252			3,065			(27	%)
Expenses:
Operating and SG&A (external)	1,033			1,073			4	%
Operating and SG&A (intersegment)	5			6			17	%
Total operating and SG&A expense	1,038			1,079			4	%

Adjusted Operating Income	$	1,214		$	1,986		(39	%)

Adjusted Operating Margin	53.9		%	64.8		%

Depreciation and amortization	60			53			(13	%)
Restructuring	15			—			NM

The following chart presents changes in rated issuance volumes compared to the first nine months of 2021. To the extent that changes in rated issuance volumes had a material impact to MIS's revenue compared to the prior year, those impacts are discussed below.

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MOODY'S INVESTORS SERVICE REVENUE


Nine months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________


MIS: Global revenue ⇓ $818 million			U.S. Revenue ⇓ $508 million			Non-U.S. Revenue ⇓ $310 million

–The decrease in global MIS revenue primarily relates to a 30% decrease in rated issuance volumes, which resulted in transaction revenue declining $827 million compared to the same period in the prior year. The decline in rated issuance volumes compared to the first nine months of 2021 reflected muted credit market activity across all sectors given ongoing market volatility, central bank actions, high levels of balance sheet cash, as well as heightened inflationary and recessionary concerns.

–Changes in foreign currency translation rates unfavorably impacted MIS revenue by two percentage points.

CFG REVENUE


Nine months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________


CFG: Global revenue ⇓ $627 million			U.S. Revenue ⇓ $420 million			Non-U.S. Revenue ⇓ $207 million

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Global CFG revenue for the nine months ended September 30, 2022 and 2021 was comprised as follows:

The decrease in CFG revenue of 38% reflected declines both in the U.S. and internationally of 38% each, which resulted in a $635 million decrease in transaction revenue.

The most notable drivers of the decrease compared to the first nine months of 2021 reflected declines in leveraged finance and investment-grade issuance activity compared to a strong prior year period resulting from muted credit market activity given ongoing market volatility, central bank actions, high levels of balance sheet cash, as well as heightened inflationary and recessionary concerns.

SFG REVENUE


Nine months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________


SFG: Global revenue ⇓ $31 million			U.S. Revenue ⇓ $5 million			Non-U.S. Revenue ⇓ $26 million

Global SFG revenue for the nine months ended September 30, 2022 and 2021 was comprised as follows:

The decrease in SFG revenue of 8% reflected declines in both the U.S. (2%) and internationally (18%). Transaction revenue decreased $34 million compared to the first nine months of 2021.

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The most notable drivers of the decline in SFG revenue were:

–a decrease in CLO refinancing activity in the U.S. and EMEA resulting from the widening of credit spreads for this asset class;

partially offset by:

–strong growth in U.S. CMBS securitization activity before a widening of credit spreads late in the first quarter of 2022.

Changes in foreign currency translation rates unfavorably impacted SFG revenue by three percentage points.

FIG REVENUE


Nine months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________


FIG: Global revenue ⇓ $97 million			U.S. Revenue ⇓ $61 million			Non-U.S. Revenue ⇓ $36 million

Global FIG revenue for the nine months ended September 30, 2022 and 2021 was comprised as follows:

The decrease in FIG revenue of 21% reflected declines in both the U.S. (27%) and internationally (15%) which resulted in a $93 million decrease in transaction revenue compared to the same period in the prior year.

The most notable drivers of the decline reflected lower revenue from banking and insurance issuers, mainly due to:

–an unfavorable product mix; and

–a decline in opportunistic issuance, as banks, insurers and asset management issuers were well capitalized following financing activity in the prior year period ahead of anticipated interest rate increases.

Changes in foreign currency translation rates unfavorably impacted FIG revenue by three percentage points.

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PPIF REVENUE


Nine months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________


PPIF: Global revenue ⇓ $66 million			U.S. Revenue ⇓ $23 million			Non-U.S. Revenue ⇓ $43 million

Global PPIF revenue for the nine months ended September 30, 2022 and 2021 was comprised as follows:

Transaction revenue decreased $65 million compared to the same period in the prior year.

The 16% decrease in PPIF revenue reflected declines in both the U.S. (10%) and internationally (25%). The decrease in revenue was mainly due to:

–declines in U.S. public finance revenue resulting from market volatility, which increased funding costs, coupled with issuers in this sector being currently well capitalized; and

–declines in sovereign, project finance and infrastructure finance rated issuance volumes in EMEA resulting from market volatility and rising funding costs.

Changes in foreign currency translation rates unfavorably impacted PPIF revenue by two percentage points.


						MIS: YTD Operating and SG&A Expense ⇓ $40 million

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The decrease in operating and SG&A expense reflects an $85 million decrease in compensation costs partially offset by a $45 million increase in non-compensation expenses. The most notable drivers of these changes are as follows:


Compensation costs						Non-compensation costs
The decrease is primarily due to:						The increase is primarily due to:
— lower incentive compensation accruals and performance-based equity compensation, which aligns with actual/projected financial and operating performance; and						— higher bad debt reserves resulting from the impact of the Russia/Ukraine conflict, which represented approximately 35% of the increase;
— favorable changes in FX translation rates.						— higher costs relating to strategic initiatives to support business growth coupled with enhancements to technology infrastructure to enable automation, innovation and efficiency, which represented approximately 25% of the increase; and
						— higher travel costs resulting from minimal travel in the prior year in light of COVID-19, which represented approximately 15% of the increase; partially offset by:
						— charitable contributions via the Moody's Foundation in 2021 that did not recur in 2022.


Other Expenses

Adjusted Operating Margin of 53.9% ⇓ 1,090 BPS

The MIS Adjusted Operating Margin decline primarily reflected the aforementioned 28% decrease in revenue.

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Moody’s Analytics

The table below provides a summary of revenue and operating results, followed by further insight and commentary:


	Nine Months Ended September 30,						% Change Favorable (Unfavorable)
	2022			2021
Revenue:
Decision Solutions (DS)	$	971		$	697		39	%
Research and Insights (R&I)	552			523			6	%
Data and Information (D&I)	532			518			3	%
Total external revenue	2,055			1,738			18	%
Intersegment revenue	5			6			(17	%)
Total MA Revenue	2,060			1,744			18	%
Expenses:
Operating and SG&A (external)	1,294			1,094			(18	%)
Operating and SG&A (intersegment)	129			124			(4	%)


Total operating and SG&A expense	1,423			1,218			(17	%)


Adjusted Operating Income	$	637		$	526		21	%

Adjusted Operating Margin	30.9		%	30.2		%

Depreciation and amortization	182			127			(43	%)
Restructuring	17			2			NM

MOODY'S ANALYTICS REVENUE


Nine months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________


MA: Global revenue ⇑ $317 million			U.S. Revenue ⇑ $165 million			Non-U.S. Revenue ⇑ $152 million

The 18% increase in global MA revenue reflects growth both in the U.S. (22%) and internationally (15%) in all LOBs and includes revenue from the acquisitions of Cortera, RMS, RealXData, PassFort and kompany. Change in foreign currency translation rates unfavorably impacted MA revenue by five percentage points.

–Organic constant currency revenue(1) growth was 10%.

–ARR(2) grew 9% reflecting increased demand for KYC and banking products within the Decision Solutions LOB coupled with growth for company data and ratings feeds products in the Data & Information LOB.

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DECISION SOLUTIONS REVENUE


Nine months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________


DS: Global revenue ⇑ $274 million			U.S. Revenue ⇑ $131 million			Non-U.S. Revenue ⇑ $143 million

Global DS revenue grew 39% compared to the first nine months of 2021 with the most notable drivers of the increase reflecting:

–inorganic revenue growth from the acquisitions of RMS, PassFort, RealXData and kompany;

–continued demand for KYC and compliance solutions reflecting increased customer and supplier risk data usage;

–growth in recurring revenue for banking solutions reflecting strong renewals of multi-year commitments; and

–growth in subscription-based revenue for pension and actuarial modeling tools in support of certain international accounting standards relating to insurance contracts.

Changes in foreign currency translation rates unfavorably impacted DS revenue by four percentage points.

Organic constant currency revenue(1) grew 10%.

ARR(2) grew 10%.

RESEARCH AND INSIGHTS REVENUE


Nine months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________


R&I: Global revenue ⇑ $29 million			U.S. Revenue ⇑ $19 million			Non-U.S. Revenue ⇑ $10 million

Global R&I revenue increased 6% compared to the first nine months of 2021 mainly driven by growth in recurring revenue of 6%, primarily due to continued strong retention and demand for credit research, analytics and models.

Changes in foreign currency translation rates unfavorably impacted R&I revenue by two percentage points.

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Constant currency revenue(1) growth for R&I was 8%.

ARR(2) grew 8%.

DATA AND INFORMATION REVENUE


Nine months ended September 30,

2022-----------------------------------------------------------------------------------2021

_______________________________________________________________________________________________________


D&I: Global revenue ⇑ $14 million			U.S. Revenue ⇑ $15 million			Non-U.S. Revenue ⇓ $1 million

Global D&I revenue increased 3% compared to the first nine months of 2021 and includes inorganic revenue growth from the acquisition of Cortera. The main drivers of the increase were:

–continued strong retention and new sales for ratings feeds coupled with pricing increases; and

–increased demand for company data.

Changes in foreign currency translation unfavorably impacted D&I revenue by eight percentage points.

Organic constant currency revenue(1) growth for D&I was 10%.

ARR(2) grew 9%.


						MA: YTD Operating and SG&A Expense ⇑ $200 million

The increase in operating and SG&A expenses compared to the first nine months of 2021 is primarily due to growth in both compensation and non-compensation costs of $153 million and $47 million, respectively, reflecting:


Compensation costs						Non-compensation costs
— inorganic expense growth from acquisitions, which represented approximately 95% of the growth; partially offset by:						— operating and integration-related costs associated with recent acquisitions; partially offset by:
— favorable changes in FX translation rates.						— favorable changes in FX translation rates.

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MA: Adjusted Operating Margin 30.9% ⇑ 70BPS

The Adjusted Operating Margin increase for MA is primarily due to the 18% increase in global MA revenue partially offset by operational and integration-related costs associated with recent acquisitions.


Depreciation and amortization


Restructuring

LIQUIDITY AND CAPITAL RESOURCES

Moody's remains committed to using its cash flow to create value for shareholders by both investing in the Company's employees and growing the business through targeted organic initiatives and inorganic acquisitions aligned with strategic priorities. Additional excess capital is returned to the Company’s shareholders via a combination of dividends and share repurchases.

Cash Flow

The Company is currently financing its operations, capital expenditures, acquisitions and share repurchases from operating and financing cash flows.

The following is a summary of the changes in the Company’s cash flows followed by a brief discussion of these changes:


	Nine Months Ended September 30,				$ Change Favorable (Unfavorable)
	2022		2021		$ Change Favorable (Unfavorable)
Net cash provided by operating activities	$	1,097	$	1,706	$	(609)
Net cash used in investing activities	$	(172)	$	(2,161)	$	1,989
Net cash (used in) provided by financing activities	$	(957)	$	135	$	(1,092)
Free Cash Flow (1)	$	893	$	1,629	$	(736)

(1) Free Cash Flow is a non-GAAP measure and is defined by the Company as net cash provided by operating activities minus cash paid for capital expenditures. Refer to “Non-GAAP Financial Measures” of this MD&A for further information on this financial measure.

Net cash provided by operating activities

Net cash flows from operating activities in the nine months ended September 30, 2022 decreased $609 million compared to the same period in 2021 primarily reflecting a decrease in net income (see section entitled “Results of Operations” of this MD&A for further discussion).

Net cash used in investing activities

The $1,989 million decrease in cash used in investing activities in the nine months ended September 30, 2022 compared to the same period in 2021 primarily reflects:

–higher cash paid of $1,929 million in the prior year for acquisitions, primarily reflecting the acquisition of RMS in 2021; and

–higher net cash receipts of $243 million in 2022 relating to the settlement of net investment hedges;

partially offset by:

–an increase in cash paid for capital additions of $127 million reflecting product development and investments relating to strategic initiatives to support business growth and to enhance technology infrastructure to enable automation, innovation and efficiency; and

–$56 million in higher net purchases of investments in 2022 compared to the same period in the prior year (refer to Note 7 and Note 13 to the condensed consolidated financial statements for further information on the Company's investments).

Net cash (used in) provided by financing activities

The $1,092 million increase in cash used in financing activities in the nine months ended September 30, 2022 compared to the same period in the prior year was primarily attributed to:

–higher net issuance (issuance, less repayment) of $690 million in long term debt in 2021;

–higher cash paid for treasury share repurchases in 2022 of $355 million, which includes payment for shares made under an ASR agreement executed in the first quarter of 2022; and

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–higher dividend payments of $40 million in 2022.

Cash and cash equivalents and short-term investments

The Company’s aggregate cash and cash equivalents and short-term investments of $1.7 billion at September 30, 2022 included approximately $1.6 billion located outside of the U.S. Approximately 29% of the Company’s aggregate cash and cash equivalents and short-term investments is denominated in euros and British pounds. The Company manages both its U.S. and non-U.S. cash flow to maintain sufficient liquidity in all regions to effectively meet its operating needs.

As a result of the Tax Act, all previously net undistributed foreign earnings have now been subject to U.S. tax. The Company continues to evaluate which entities it will indefinitely reinvest earnings outside the U.S. The Company has provided deferred taxes for those entities whose earnings are not considered indefinitely reinvested. Accordingly, the Company has commenced repatriating a portion of its non-U.S. cash in these subsidiaries and will continue to repatriate certain of its offshore cash in a manner that addresses compliance with local statutory requirements, sufficient offshore working capital and any other factors that may be relevant in certain jurisdictions. Notwithstanding the Tax Act, which generally eliminated federal income tax on future cash repatriation to the U.S., cash repatriation may be subject to state and local taxes or withholding or similar taxes.

Material Cash Requirements

The Company's material cash requirements consist of the following contractual and other obligations:

Financing Arrangements

Indebtedness

At September 30, 2022, Moody’s had $7.5 billion of outstanding debt and approximately $1 billion of additional capacity available under the Company’s CP Program, which is backstopped by the $1.25 billion 2021 Facility.

The repayment schedule for the Company’s borrowings outstanding at September 30, 2022 is as follows:

For additional information on the Company's outstanding debt, refer to Note 15 to the condensed consolidated financial statements.

Future interest payments and fees associated with the Company's debt and credit facility are expected to be $4.3 billion, of which approximately $271 million is expected to be paid over the next twelve months.

Management may consider pursuing additional long-term financing when it is appropriate in light of cash requirements for operations, share repurchases and other strategic opportunities, which would result in higher financing costs.

Purchase Obligations

Purchase obligations generally include multi-year agreements with vendors to purchase goods or services and mainly include data center/cloud hosting fees and fees for information technology licensing and maintenance. As of September 30, 2022, these purchase obligations totaled $236 million, of which $158 million is expected to be paid in the next twelve months.

Leases

The Company has operating lease obligations of $493 million at September 30, 2022, primarily related to real estate leases, of which $104 million in payments are expected over the next twelve months. For more information on the Company's operating leases, refer to Note 16 to the condensed consolidated financial statements.

Pension and Other Retirement Plan Obligations

The Company does not anticipate making significant contributions to its funded pension plan in the next twelve months. This plan is overfunded at September 30, 2022, and accordingly holds sufficient investments to fund future benefit obligations. Payments for the Company's unfunded plans are not expected to be material in either the short or long-term.

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Dividends and share repurchases

On October 24, 2022, the Board approved the declaration of a quarterly dividend of $0.70 per share for Moody’s common stock, payable December 14, 2022 to shareholders of record at the close of business on November 23, 2022. The continued payment of dividends at this rate, or at all, is subject to the discretion of the Board.

On February 9, 2021, the Board approved $1 billion in share repurchase authority, and on February 7, 2022, the Board approved an additional $750 million of share repurchase authority. At September 30, 2022, the Company had approximately $848 million of remaining authority. There is no established expiration date for the remaining authorizations.

Restructuring

As more fully discussed in Note 11 to the condensed consolidated financial statements, the Company is currently in the process of executing the 2022 - 2023 Geolocation Restructuring Program. This program relates to the Company's post-COVID-19 geolocation strategy and includes the rationalization and exit of certain real estate leases and a reduction in staff, including the relocation of certain job functions from their current locations. Cash outlays associated with this program are expected to be $75 million to $100 million, which are expected to be paid through 2024.

Sources of Funding to Satisfy Material Cash Requirements

The Company believes that it has the financial resources needed to meet its cash requirements and expects to have positive operating cash flow over the next twelve months. Cash requirements for periods beyond the next twelve months will depend, among other things, on the Company’s profitability and its ability to manage working capital requirements. The Company may also borrow from various sources as described above.

NON-GAAP FINANCIAL MEASURES

In addition to its reported results, Moody’s has included in this MD&A certain adjusted results that the SEC defines as “non-GAAP financial measures.” Management believes that such adjusted financial measures, when read in conjunction with the Company’s reported results, can provide useful supplemental information for investors analyzing period-to-period comparisons of the Company’s performance, facilitate comparisons to competitors’ operating results and can provide greater transparency to investors of supplemental information used by management in its financial and operational decision-making. These adjusted measures, as defined by the Company, are not necessarily comparable to similarly defined measures of other companies. Furthermore, these adjusted measures should not be viewed in isolation or used as a substitute for other GAAP measures in assessing the operating performance or cash flows of the Company. Below are brief descriptions of the Company’s adjusted financial measures accompanied by a reconciliation of the adjusted measure to its most directly comparable GAAP measure:

Adjusted Operating Income and Adjusted Operating Margin:

The Company presents Adjusted Operating Income and Adjusted Operating Margin because management deems these metrics to be useful measures to provide additional perspective on Moody's operating performance. Adjusted Operating Income excludes the impact of: i) depreciation and amortization; and ii) restructuring charges/adjustments. Depreciation and amortization are excluded because companies utilize productive assets of different ages and use different methods of acquiring and depreciating productive assets. Restructuring charges are excluded as the frequency and magnitude of these charges may vary widely across periods and companies.

Management believes that the exclusion of the aforementioned items, as detailed in the reconciliation below, allows for an additional perspective on the Company’s operating results from period to period and across companies. The Company defines Adjusted Operating Margin as Adjusted Operating Income divided by revenue.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Operating income	$	413		$	676		$	1,577		$	2,330
Adjustments:
Depreciation and amortization	83			61			242			180
Restructuring	1			—			32			2
Adjusted Operating Income	$	497		$	737		$	1,851		$	2,512
Operating margin	32.4		%	44.3		%	37.7		%	49.8		%
Adjusted Operating Margin	39.0		%	48.3		%	44.3		%	53.7		%

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Adjusted Net Income and Adjusted Diluted EPS attributable to Moody's common shareholders:

The Company presents Adjusted Net Income and Adjusted Diluted EPS because management deems these metrics to be useful measures to provide additional perspective on Moody’s operating performance. Adjusted Net Income and Adjusted Diluted EPS exclude the impact of: i) amortization of acquired intangible assets; ii) restructuring charges; and iii) FX translation losses reclassified to earnings resulting from the Company no longer conducting commercial operations in Russia.

The Company excludes the impact of amortization of acquired intangible assets as companies utilize intangible assets with different estimated useful lives and have different methods of acquiring and amortizing intangible assets. These intangible assets were recorded as part of acquisition accounting and contribute to revenue generation. The amortization of intangible assets related to acquisitions will recur in future periods until such intangible assets have been fully amortized. Furthermore, the timing and magnitude of business combination transactions are not predictable and the purchase price allocated to amortizable intangible assets and the related amortization period are unique to each acquisition and can vary significantly from period to period and across companies. Restructuring charges and FX translation losses resulting from the Company no longer conducting commercial operations in Russia are excluded as the frequency and magnitude of these items may vary widely across periods and companies.

The Company excludes the aforementioned items to provide additional perspective when comparing net income and diluted EPS from period to period and across companies as the frequency and magnitude of similar transactions may vary widely across periods.

Below is a reconciliation of these measures to their most directly comparable U.S. GAAP amounts:


	Three Months Ended September 30,								Nine Months Ended September 30,
Amounts in millions	2022				2021				2022				2021
Net income attributable to Moody's common shareholders			$	303			$	474			$	1,128			$	1,787



Pre-Tax Acquisition-Related Intangible Amortization Expenses	$	48			$	37			$	150			$	108
Tax on Acquisition-Related Intangible Amortization Expenses	(11)				(8)				(35)				(24)
Net Acquisition-Related Intangible Amortization Expenses			37				29				115				84

Pre-Tax Restructuring	$	1			$	—			$	32			$	2
Tax on Restructuring	(1)				—				(8)				—
Net Restructuring			—				—				24				2
FX losses resulting from the Company no longer conducting commercial operations in Russia			—				—				20				—
Adjusted Net Income			$	340			$	503			$	1,287			$	1,873


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
Diluted earnings per share attributable to Moody's common shareholders			$	1.65			$	2.53			$	6.10			$	9.51



Pre-Tax Acquisition-Related Intangible Amortization Expenses	$	0.26			$	0.20			$	0.81			$	0.57
Tax on Acquisition-Related Intangible Amortization Expenses	(0.06)				(0.04)				(0.19)				(0.13)
Net Acquisition-Related Intangible Amortization Expenses			0.20				0.16				0.62				0.44

Pre-Tax Restructuring	$	0.01			$	—			$	0.17			$	0.01
Tax on Restructuring	(0.01)				—				(0.04)				—
Net Restructuring			—				—				0.13				0.01
FX losses resulting from the Company no longer conducting commercial operations in Russia			—				—				0.11				—
Adjusted Diluted EPS			$	1.85			$	2.69			$	6.96			$	9.96

Note: the tax impacts in the table above were calculated using tax rates in effect in the jurisdiction for which the item relates.

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Free Cash Flow:

The Company defines Free Cash Flow as net cash provided by operating activities minus payments for capital additions. Management believes that Free Cash Flow is a useful metric in assessing the Company’s cash flows to service debt, pay dividends and to fund acquisitions and share repurchases. Management deems capital expenditures essential to the Company’s product and service innovations and maintenance of Moody’s operational capabilities. Accordingly, capital expenditures are deemed to be a recurring use of Moody’s cash flow. Below is a reconciliation of the Company’s net cash flows from operating activities to Free Cash Flow:


	Nine Months Ended September 30,
	2022		2021
Net cash flows provided by operating activities	$	1,097	$	1,706
Capital additions	(204)		(77)
Free Cash Flow	$	893	$	1,629
Net cash flows used in investing activities	$	(172)	$	(2,161)
Net cash flows (used in) provided by financing activities	$	(957)	$	135

Organic Constant Currency Revenue Growth (Decline)/Constant Currency Revenue Growth (Decline):

Beginning in the second quarter of 2022, the Company began presenting organic constant currency revenue growth (decline) and constant currency revenue growth (decline) as its non-GAAP measure of revenue growth (decline). Previously, the Company presented organic revenue growth (decline), which excluded only the impact of certain acquisition activity. Management deems this revised measure to be useful in providing additional perspective in assessing the Company's revenue growth (decline) excluding both the inorganic revenue impacts from certain acquisition activity and the impacts of changes in foreign exchange rates. The Company calculates the dollar impact of foreign exchange as the difference between the translation of its current period non-USD functional currency results using prior comparative period weighted average foreign exchange translation rates and current year as reported results.

Below is a reconciliation of the Company's reported revenue and growth rates to its organic constant currency revenue growth (decline) and constant currency revenue growth (decline) measures:


	Three Months Ended September 30,							Nine Months Ended September 30,
Amounts in millions	2022		2021		Change		Growth	2022		2021		Change		Growth
MA revenue	$	685	$	601	$	84	14%	$	2,055	$	1,738	$	317	18%
FX impact	41		—		41			81		—		81
Inorganic revenue from acquisitions	(70)		—		(70)			(232)		—		(232)
Organic constant currency MA revenue	$	656	$	601	$	55	9%	$	1,904	$	1,738	$	166	10%



Decision Solutions revenue	$	325	$	250	$	75	30%	$	971	$	697	$	274	39%
FX impact	12		—		12			28		—		28
Inorganic revenue from acquisitions	(70)		—		(70)			(230)		—		(230)
Organic constant currency Decision Solutions revenue	$	267	$	250	$	17	7%	$	769	$	697	$	72	10%

Research and Insights revenue	$	184	$	177	$	7	4%	$	552	$	523	$	29	6%
FX impact	10		—		10			15		—		15
Constant currency Research and Insights revenue	$	194	$	177	$	17	10%	$	567	$	523	$	44	8%



Data and Information revenue	$	176	$	174	$	2	1%	$	532	$	518	$	14	3%
FX impact	19		—		19			38		—		38
Inorganic revenue from acquisitions	—		—		—			(2)		—		(2)
Organic constant currency Data and Information revenue	$	195	$	174	$	21	12%	$	568	$	518	$	50	10%

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	Three Months Ended September 30,							Nine Months Ended September 30,
Amounts in millions	2022		2021		Change		Growth	2022		2021		Change		Growth
MCO revenue	$	1,275	$	1,526	$	(251)	(16)%	$	4,178	$	4,679	$	(501)	(11)%
FX impact	67		—		67			142		—		142
Inorganic revenue from acquisitions	(70)		—		(70)			(232)		—		(232)
Organic constant currency MCO revenue	$	1,272	$	1,526	$	(254)	(17)%	$	4,088	$	4,679	$	(591)	(13)%

Key Performance Metrics:

The Company presents Annualized Recurring Revenue (“ARR”) on a constant currency organic basis for its MA business as a supplemental performance metric to provide additional insight on the estimated value of MA's recurring revenue contracts at a given point in time. The Company uses ARR to manage and monitor performance of its MA operating segment and believes that this metric is a key indicator of the trajectory of MA's recurring revenue base.

The Company calculates ARR by taking the total recurring contract value for each active renewable contract as of the reporting date, divided by the number of days in the contract and multiplied by 365 days to create an annualized value. The Company defines renewable contracts as subscriptions, term licenses, maintenance and renewable services. ARR excludes transaction sales including training, one-time services and perpetual licenses. In order to compare period-over-period ARR excluding the effects of foreign currency translation, the Company bases the calculation on currency rates utilized in its current year operating budget and holds these FX rates constant for the duration of all current and prior periods being reported. Additionally, ARR excludes contracts related to acquisitions to provide additional perspective in assessing growth excluding the impacts from certain acquisition activity.

The Company’s definition of ARR may differ from definitions utilized by other companies reporting similarly named measures, and this metric should be viewed in addition to, and not as a substitute for, financial measures presented in accordance with U.S. GAAP.


Amounts in millions	September 30, 2022		September 30, 2021		Change		Growth






ARR
Decision Solutions	$	1,177	$	1,071	$	106	10%
Research and Insights	740		688		52		8%
Data and Information	745		683		62		9%
Total MA ARR	$	2,662	$	2,442	$	220	9%

RECENTLY ISSUED ACCOUNTING STANDARDS

Refer to Note 1 to the condensed consolidated financial statements located in Part I of this Form 10-Q for a discussion on the impact to the Company relating to recently issued accounting pronouncements.

CONTINGENCIES

Legal proceedings in which the Company is involved also may impact Moody’s liquidity or operating results. No assurance can be provided as to the outcome of such proceedings. In addition, litigation inherently involves significant costs. For information regarding legal proceedings, see Item 1 - "Financial Statements", Note 17 "Contingencies” in this Form 10-Q.

REGULATION

MIS, certain of the Company's credit rating affiliates and many of the issuers and/or securities that MIS and the affiliates rate, are subject to extensive regulation in the U.S., EU and in other countries (including by state and local authorities). In addition, some of the services offered by MA and its affiliates are subject to regulation in a number of countries. MA also derives a significant amount of its sales from banks and other financial services providers who are subject to regulatory oversight and who are required to pass through certain regulatory requirements to key suppliers such as MA. Existing and proposed laws and regulations can impact the Company’s operations, products and the markets in which the Company operates. Additional laws and regulations have been proposed or are being considered. Each of the existing, adopted, proposed and potential laws and regulations can increase the costs and legal risk associated with the Company’s operations, including the issuance of credit ratings, and may negatively impact the Company’s profitability and ability to compete, or result in changes in the demand for the Company’s products and services, in the manner in which the Company’s products and services are utilized and in the manner in which the Company operates.

The regulatory landscape continues to evolve. In the U.S., CRAs are subject to extensive regulation primarily pursuant to the Reform Act and the Dodd-Frank Act. The Reform Act added Section 15E to the Exchange Act and provided the SEC with the authority to establish a registration and oversight program for CRAs registered as NRSROs. The Dodd-Frank Act added additional provisions to Section 15E. Future government transitions, can bring potential changes in the laws affecting CRAs and/or the enforcement of any new or existing legislation, regulation or directives by government authorities.

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In the EU, the CRA industry is registered and supervised through a pan-EU regulatory framework. ESMA has direct supervisory responsibility for registered CRAs throughout the EU. MIS’s EU CRA subsidiaries are registered and are subject to formal regulation and periodic inspection. From time to time, ESMA publishes interpretive guidance, or thematic reports regarding various aspects of the CRA regulation and, annually, sets out its work program for the forthcoming year. The Commission is moving forward with their sustainable finance strategy released in July 2021. This includes further assessments in respect of both CRAs and sustainability ratings and research, which might lead to legislative action.

On December 31, 2020, the MIS U.K. registered CRA ceased to be registered with and regulated by ESMA and became subject to regulation by the U.K. Financial Conduct Authority (FCA). Regulatory arrangements also came into effect in both the U.K. and the EU to allow credit ratings to be available for regulatory use in both the EU and the U.K. MIS has put arrangements in place to endorse its U.K. credit ratings into the EU and its EU credit ratings into the U.K. The U.K. Government is considering bringing ESG data and ratings firms within the scope of FCA authorization and regulation. The FCA has said that it sees a clear rationale for regulating them.

In light of the regulations that have gone into effect in both the EU and the U.S. (as well as many other countries), periodically and as a matter of course pursuant to their enabling legislation, regulatory authorities have, and will continue to, publish reports that describe their oversight activities. In addition, other legislation, regulation and/or interpretation of existing regulation relating to the Company’s operations, including credit rating, ancillary and research services has been or is being considered by local, national and multinational bodies and this type of activity is likely to continue in the future. Finally, in certain countries, governments may provide financial or other support to locally-based CRAs. If enacted, any such legislation, regulation or support could change the competitive landscape in which the Company operates. The legal status of CRAs has been addressed by courts in various jurisdictions and is likely to be considered and addressed in legal proceedings from time to time in the future. Management of the Company cannot predict whether these or any other proposals will be enacted, the outcome of any pending or possible future legal proceedings, or regulatory or legislative actions, or the ultimate impact of any such matters on the competitive position, financial position or results of operations of the Company.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this quarterly report on Form 10-Q are forward-looking statements and are based on future expectations, plans and prospects for the Company's business and operations that involve a number of risks and uncertainties. Such statements involve estimates, projections, goals, forecasts, assumptions and uncertainties that could cause actual results or outcomes to differ materially from those contemplated, expressed, projected, anticipated or implied in the forward-looking statements. Those statements appear at various places throughout this quarterly report on Form 10-Q, including in the sections entitled “Contingencies” under Item 2, “MD&A”, commencing on page 43 of this quarterly report on Form 10-Q, under “Legal Proceedings” in Part II, Item 1, of this Form 10-Q, and elsewhere in the context of statements containing the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “will,” “predict,” “potential,” “continue,” “strategy,” “aspire,” “target,” “forecast,” “project,” “estimate,” “should,” “could,” “may,” and similar expressions or words and variations thereof relating to the Company’s views on future events, trends and contingencies or otherwise convey the prospective nature of events or outcomes generally indicative of forward-looking statements. Stockholders and investors are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements and other information are made as of the date of this quarterly report on Form 10-Q, and the Company undertakes no obligation (nor does it intend) to publicly supplement, update or revise such statements on a going-forward basis, whether as a result of subsequent developments, changed expectations or otherwise, except as required by applicable law or regulation. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company is identifying certain factors that could cause actual results to differ, perhaps materially, from those indicated by these forward-looking statements.

Those factors, risks and uncertainties include, but are not limited to:

•the impact of general economic conditions, including inflation and related monetary policy actions by governments in response to inflation, on worldwide credit markets and economic activity and its effect on the volume of debt and other securities issued in domestic and/or global capital markets;

•the global impacts of each of the crisis in Ukraine and COVID-19 on volatility in the U.S. and world financial markets, on general economic conditions and GDP in the U.S. and worldwide, on global relations and on the Company's own operations and personnel;

•other matters that could affect the volume of debt and other securities issued in domestic and/or global capital markets, including regulation, credit quality concerns, changes in interest rates, inflation and other volatility in the financial markets;

•the level of merger and acquisition activity in the U.S. and abroad;

•the uncertain effectiveness and possible collateral consequences of U.S. and foreign government actions affecting credit markets, international trade and economic policy, including those related to tariffs, tax agreements and trade barriers;

•the impact of MIS’s withdrawal of its credit ratings on Russian entities and of Moody’s no longer conducting commercial operations in Russia;

•concerns in the marketplace affecting our credibility or otherwise affecting market perceptions of the integrity or utility of independent credit agency ratings;

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•the introduction of competing products or technologies by other companies;

•pricing pressure from competitors and/or customers;

•the level of success of new product development and global expansion;

•the impact of regulation as an NRSRO, the potential for new U.S., state and local legislation and regulations;

•the potential for increased competition and regulation in the EU and other foreign jurisdictions;

•exposure to litigation related to our rating opinions, as well as any other litigation, government and regulatory proceedings, investigations and inquiries to which Moody’s may be subject from time to time;

•provisions in U.S. legislation modifying the pleading standards and EU regulations modifying the liability standards, applicable to credit rating agencies in a manner adverse to credit rating agencies;

•provisions of EU regulations imposing additional procedural and substantive requirements on the pricing of services and the expansion of supervisory remit to include non-EU ratings used for regulatory purposes;

•uncertainty regarding the future relationship between the U.S. and China;

•the possible loss of key employees;

•failures or malfunctions of our operations and infrastructure;

•any vulnerabilities to cyber threats or other cybersecurity concerns;

•the timing and effectiveness of our restructuring programs, such as the 2022 - 2023 Geolocation Restructuring Program;

•currency and foreign exchange volatility;

•the outcome of any review by controlling tax authorities of Moody’s global tax planning initiatives;

•exposure to potential criminal sanctions or civil remedies if Moody’s fails to comply with foreign and U.S. laws and regulations that are applicable in the jurisdictions in which Moody’s operates, including data protection and privacy laws, sanctions laws, anti-corruption laws, and local laws prohibiting corrupt payments to government officials;

•the impact of mergers, acquisitions, such as our acquisition of RMS, or other business combinations and the ability of Moody’s to successfully integrate acquired businesses;

•the level of future cash flows;

•the levels of capital investments; and

•a decline in the demand for credit risk management tools by financial institutions.

These factors, risks and uncertainties as well as other risks and uncertainties that could cause Moody’s actual results to differ materially from those contemplated, expressed, projected, anticipated or implied in the forward-looking statements are described in greater detail under “Risk Factors” in Part I, Item 1A of Moody’s annual report on Form 10-K for the year ended December 31, 2021, and in other filings made by the Company from time to time with the SEC or in materials incorporated herein or therein. Stockholders and investors are cautioned that the occurrence of any of these factors, risks and uncertainties may cause the Company’s actual results to differ materially from those contemplated, expressed, projected, anticipated or implied in the forward-looking statements, which could have a material and adverse effect on the Company’s business, results of operations and financial condition. New factors may emerge from time to time, and it is not possible for the Company to predict new factors, nor can the Company assess the potential effect of any new factors on it. Forward-looking and other statements in this document may also address our corporate responsibility progress, plans, and goals (including sustainability and environmental matters), and the inclusion of such statements is not an indication that these contents are necessarily material to investors or required to be disclosed in the Company’s filings with the Securities and Exchange Commission. In addition, historical, current, and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the nine months ended September 30, 2022, the Company entered into new hedging transactions, which are disclosed in Note 9 to the condensed consolidated financial statements. The sensitivity analyses disclosed in our Form 10-K for the year ended December 31, 2021 have been updated below to reflect the Company's derivative instrument portfolio as of September 30, 2022.

Foreign exchange risk:

The effects of revaluing assets and liabilities that are denominated in currencies other than a subsidiary’s functional currency are charged to other non-operating income (expense), net in the Company’s consolidated statements of operations. Accordingly, the Company enters into foreign exchange forwards to partially mitigate the change in fair value on certain assets and liabilities denominated in currencies other than a subsidiary’s functional currency. The following table shows the impact to the fair value of the forward contracts if currencies being purchased were to weaken by 10%:

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Foreign Currency Forwards (1)

Impact on fair value of contract

Sell

Buy

U.S. dollar

Euro

$19 million unfavorable impact

U.S. dollar

British pound

$13 million unfavorable impact

U.S. dollar

Canadian dollar

$12 million unfavorable impact

U.S. dollar

Singapore dollar

$5 million unfavorable impact

U.S. dollar

Indian rupee

$2 million unfavorable impact

U.S. dollar

Japanese yen

$1 million unfavorable impact

$52 million unfavorable impact

(1)Refer to Note 9 to the consolidated financial statements in this Form 10-Q for further detail on the forward contracts.

The change in fair value of the foreign exchange forward contracts would be offset by FX revaluation gains or losses on underlying assets and liabilities denominated in currencies other than a subsidiary’s functional currency.

Derivatives and non-derivatives designated as net investment hedges:

The Company designates derivative instruments and foreign currency-denominated debt as hedges of foreign currency risk of net investments in certain foreign subsidiaries (net investment hedges) under ASC Topic 815, Derivatives and Hedging.

Cross-currency swaps

The Company has cross-currency swaps designated as hedges of euro denominated net investments in subsidiaries. Refer to Note 9 of this Form 10-Q for further details regarding these derivative instruments as of September 30, 2022.

If the euro were to strengthen 10% relative to the U.S. dollar, there would be an approximate $284 million unfavorable impact to the fair value of the cross-currency swaps recognized in OCI, which would be offset by favorable currency translation gains on the Company’s euro net investment in foreign subsidiaries.

Interest rate and credit risk:

Interest rate swaps designated as a fair value hedge:

The Company’s interest rate risk management objectives are to reduce the funding cost and volatility to the Company and to alter the interest rate exposure to a desired risk profile. Moody’s uses interest rate swaps as deemed necessary to assist in accomplishing these objectives. The Company is exposed to interest rate risk on its various outstanding fixed-rate debt for which the fair value of the outstanding fixed rate debt fluctuates based on changes in interest rates. The Company has entered into interest rate swaps to convert the fixed interest rate on certain of its long-term debt to a floating interest rate based on the 3-month and 6-month LIBOR as well as SOFR. These swaps are adjusted to fair market value based on prevailing interest rates at the end of each reporting period and fluctuations are recorded as a reduction or addition to the carrying value of the borrowing, while net interest payments are recorded as interest expense/income in the Company’s consolidated statement of operations. A hypothetical change of 100 BPS in the LIBOR/SOFR-based swap rate would result in an approximate $114 million change to the fair value of the swaps, which would be offset by the change in fair value of the hedged item.

Additional information on these interest rate swaps is disclosed in Note 9 to the condensed consolidated financial statements of this Form 10-Q.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures: The Company carried out an evaluation, as required by Rule 13a-15(b) under the Exchange Act, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the communication to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has determined that there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, these internal controls over financial reporting during the three-month period ended September 30, 2022.

During the fiscal year ended December 31, 2021, the Company acquired RMS and during the nine months ended September 30, 2022, Moody's integrated the acquired entity into the Company’s financial reporting processes and procedures and internal controls over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding legal proceedings, see Item 1 – “Financial Statements – Notes to Condensed Consolidated Financial Statements (Unaudited),” Note 17 “Contingencies” in this Form 10-Q.

Item 1A. Risk Factors

There have been no material changes from the significant risk factors and uncertainties previously disclosed under the heading "Risk Factors" in the Company's annual report on Form 10-K for the year ended December 31, 2021, that if they were to occur, could materially adversely affect the Company’s business, financial condition, operating results and/or cash flow. For a discussion of the Company’s risk factors, refer to Item 1A. “Risk Factors” contained in the Company’s annual report on Form 10-K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

MOODY'S PURCHASES OF EQUITY SECURITIES

For the three months ended September 30, 2022


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares That May Yet be Purchased Under the Program(2)
July 1- 31	395,958	$	281.82	391,930	$	850	million
August 1- 31	5,469	$	301.87	5,411	$	848	million
September 1- 30	1,083	$	—	—	$	848	million
Total	402,510	$	282.09	397,341

(1) Includes surrender to the Company of 4,028; 58; and 1,083 shares of common stock in July, August, and September, respectively, to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees.

(2) As of the last day of each of the months. On February 9, 2021, the Board authorized $1 billion in share repurchase authority and on February 7, 2022, the Board of Directors approved an additional $750 million of share repurchase authority. At September 30, 2022 there was approximately $848 million of combined share repurchase authority remaining. There is no established expiration date for the remaining authorization.

During the third quarter of 2022, Moody’s issued a net 36 thousand shares under employee stock-based compensation plans.

Item 5. Other Information

For information regarding the expansion of the 2022 - 2023 Geolocation Restructuring Program, see Note 11 "Restructuring” in Part 1, Item 1 of this quarterly report on Form 10-Q.

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Item 6. Exhibits


Exhibit No						Description
3						ARTICLES OF INCORPORATION AND BY-LAWS

.1						Restated Certificate of Incorporation of the Registrant, effective April 22, 2020 (incorporated by reference to Exhibit 3.3 to the Report on Form 8-K of the Registrant, file number 1-14037, filed April 27, 2020)

.2						Amended and Restated By-laws of Moody’s Corporation, effective December 14, 2020 (incorporated by reference to Exhibit 3.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed December 18, 2020)

4						INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES

.1						Seventeenth Supplemental Indenture, dated as of August 8, 2022, between the Company and Computershare Trust Company, N.A. as successor to Wells Fargo Bank, National Association, as Trustee, including the form of 4.250% Senior Note due 2032 (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed August 8, 2022).

31						CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

.1*						Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

.2*						Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32						CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

.1*						Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. The Company has furnished this certification and does not intend for it to be considered filed under the Securities Exchange Act of 1934 or incorporated by reference into future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934.

.2*						Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. The Company has furnished this certification and does not intend for it to be considered filed under the Securities Exchange Act of 1934 or incorporated by reference into future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934.

101.INS*						Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH*						Inline XBRL Taxonomy Extension Schema Document
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*						Inline XBRL Definitions Linkbase Document
101.LAB*						Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

* Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		MOODY’S CORPORATION


	By:	/ S / MARK KAYE
		Mark Kaye
		Executive Vice President and Chief Financial Officer
		(principal financial officer)

	By:	/ S / CAROLINE SULLIVAN
		Caroline Sullivan
		Chief Accounting Officer and Corporate Controller
		(principal accounting officer)

Date: October 26, 2022

Moody's - 10-Q quarterly report FY2022 Q3

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