MOODYS CORP /DE/ [MCO] Filings

10-Q 1 mco-20220331.htm 10-Q mco-20220331

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 March 31, 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 March 31, 2022
184.5 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 March 31, 2022 and 2021	7
	Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2022 and 2021	8
	Consolidated Balance Sheets (Unaudited) at March 31, 2022 and December 31, 2021	9
	Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2022 and 2021	10
	Consolidated Statements of Shareholders’ Equity (Unaudited) for the Three Months Ended March 31, 2022 and 2021	11-12
	Notes to Condensed Consolidated Financial Statements (Unaudited)	13-37
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
	The Company	38
	Sustainability	38


	Reportable Segments	39
	Results of Operations	40-52
	Liquidity and Capital Resources	52-57
	Recently Issued Accounting Standards	58
	Contingencies	58
	Regulation	58
	Forward-Looking Statements	59-60
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	61
Item 4.	Controls and Procedures	62
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	63
Item 1A.	Risk Factors	63
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 5.	Other Information	63
Item 6.	Exhibits	64

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 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
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. It also 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
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 that provides vast data sets on economies, companies, commercial properties and financial securities via data feeds and data applications products
DBPPs			Defined benefit pension plans
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

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TERM			DEFINITION
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			The Enterprise Risk Solutions 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
ESPP			Employee stock purchase plan
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
INR			Indian rupee
IRS			Internal Revenue Service

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
KIS			Korea Investors Service, Inc; a Korean rating agency and consolidated subsidiary of the Company
KIS Pricing			Korea Investors Service Pricing, Inc; a Korean provider of fixed income securities pricing and consolidated subsidiary of the Company
KIS Research			Korea Investors Service Research; a Korean provider of financial research and consolidated subsidiary of the Company
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

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TERM			DEFINITION
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
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
Profit Participation Plan			Defined contribution profit participation plan that covers substantially all U.S. employees of the Company

RealXData			A provider of CRE lease-level portfolio management with benchmarking and rent forecasting capabilities; acquired by the Company in September 2021
RD&A			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


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
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
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 changes 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

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TERM			DEFINITION
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
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





2013 Senior Notes due 2024			Principal amount of the $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

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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 March 31,
		2022		2021
Revenue		$	1,522	$	1,600
Expenses
Operating		417		393
Selling, general and administrative		371		293
Depreciation and amortization		78		59
Restructuring		—		2


Total expenses		866		747
Operating income		656		853
Non-operating (expense) income, net
Interest expense, net		(53)		(7)
Other non-operating income, net		6		16
Total non-operating (expense) income, net		(47)		9
Income before provision for income taxes		609		862
Provision for income taxes		111		126


Net income attributable to Moody's		$	498	$	736
Earnings per share attributable to Moody's common shareholders
Basic		$	2.69	$	3.93
Diluted		$	2.68	$	3.90
Weighted average number of shares outstanding
Basic		185.1		187.2
Diluted		186.1		188.6

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 March 31, 2022						Three Months Ended March 31, 2021

	Pre-tax amounts		Tax amounts		After-tax amounts		Pre-tax amounts		Tax amounts		After-tax amounts
Net Income					$	498					$	736
Other Comprehensive Income (Loss):
Foreign Currency Adjustments:
Foreign currency translation adjustments, net	$	(108)	$	1	(107)		$	(147)	$	6	(141)
Net gains on net investment hedges	64		(17)		47		175		(42)		133
Net investment hedges - reclassification of gains included in net income	—		—		—		(1)		—		(1)

Cash Flow Hedges:

Reclassification of losses included in net income	1		—		1		1		—		1
Pension and Other Retirement Benefits:
Amortization of actuarial losses and prior service costs included in net income	—		—		—		3		(1)		2
Net actuarial losses and prior service costs	(3)		1		(2)		—		—		—
Total other comprehensive (loss) income	$	(46)	$	(15)	$	(61)	$	31	$	(37)	$	(6)
Comprehensive income					437						730
Less: comprehensive income attributable to noncontrolling interests					—						2
Comprehensive Income Attributable to Moody's					$	437					$	728

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)


	March 31, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	1,750	$	1,811
Short-term investments	103		91
Accounts receivable, net of allowance for credit losses of $44 in 2022 and $32 in 2021	1,824		1,720
Other current assets	385		389

Total current assets	4,062		4,011
Property and equipment, net of accumulated depreciation of $1,035 in 2022 and $1,010 in 2021	381		347
Operating lease right-of-use assets	427		438
Goodwill	6,039		5,999
Intangible assets, net	2,422		2,467
Deferred tax assets, net	347		384
Other assets	1,061		1,034
Total assets	$	14,739	$	14,680
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	856	$	1,142
Current portion of operating lease liabilities	106		105

Current portion of long-term debt	501		—
Deferred revenue	1,525		1,249

Total current liabilities	2,988		2,496
Non-current portion of deferred revenue	86		86
Long-term debt	7,285		7,413
Deferred tax liabilities, net	498		488
Uncertain tax positions	368		388
Operating lease liabilities	440		455
Other liabilities	492		438
Total liabilities	12,157		11,764
Contingencies (Note 16)
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 March 31, 2022 and December 31, 2021, respectively.	3		3
Capital surplus	826		885
Retained earnings	13,132		12,762
Treasury stock, at cost; 158,363,386 and 157,262,484 shares of common stock at March 31, 2022 and December 31, 2021	(11,096)		(10,513)
Accumulated other comprehensive loss	(471)		(410)
Total Moody's shareholders' equity	2,394		2,727
Noncontrolling interests	188		189
Total shareholders' equity	2,582		2,916
Total liabilities, noncontrolling interests and shareholders' equity	$	14,739	$	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)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities
Net income	$	498	$	736
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization	78		59
Stock-based compensation	46		45
Deferred income taxes	30		44




Changes in assets and liabilities:
Accounts receivable	(117)		(71)
Other current assets	(11)		67

Other assets	(21)		(27)
Lease obligations	(2)		(3)

Accounts payable and accrued liabilities	(296)		(206)
Deferred revenue	290		146
Unrecognized tax benefits and other non-current tax liabilities	(18)		(78)
Other liabilities	(7)		(36)
Net cash provided by operating activities	470		676
Cash flows from investing activities
Capital additions	(59)		(14)
Purchases of investments	(46)		(65)
Sales and maturities of investments	27		45

Cash paid for acquisitions, net of cash acquired	(83)		(138)
Receipts from settlements of net investment hedges	—		1
Payments for settlements of net investment hedges	—		(23)
Net cash used in investing activities	(161)		(194)
Cash flows from financing activities
Issuance of notes	491		—



Proceeds from stock-based compensation plans	8		9
Repurchase of shares related to stock-based compensation	(58)		(51)
Treasury shares	(560)		(132)
Cash paid for ASR contract relating to shares retained by counterparty until final settlement	(98)		—
Dividends	(130)		(116)
Debt issuance costs and related fees	(5)		—



Net cash used in financing activities	(352)		(290)

Effect of exchange rate changes on cash and cash equivalents	(18)		(20)
(Decrease) increase in cash and cash equivalents	(61)		172
Cash and cash equivalents, beginning of period	1,811		2,597
Cash and cash equivalents, end of period	$	1,750	$	2,769

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						736							736		—		736
Dividends ($0.62 per share)						(115)							(115)		(1)		(116)
Stock-based compensation				45									45				45
Shares issued for stock-based compensation plans at average cost, net				(41)				0.6	(24)				(65)				(65)

Treasury shares repurchased								(0.5)	(132)				(132)				(132)
Currency translation adjustment, net of net investment hedge activity (net of tax of $36 million)											(11)		(11)		2		(9)

Amortization of prior service costs and actuarial losses (net of tax of $1 million)											2		2				2
Net realized gain on cash flow hedges											1		1				1
Balance at March 31, 2021	342.9	$	3	$	739	$	11,632	(155.7)	$	(9,904)	$	(440)	$	2,030	$	195	$	2,225

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						498							498		—		498
Dividends ($0.70 per share)						(128)							(128)		(1)		(129)

Stock-based compensation				46									46				46
Shares issued for stock-based compensation plans at average cost, net				(42)				0.5	(32)				(74)				(74)
Shares issued as consideration to acquire kompany(1)				35				0.1	9				44				44


Treasury shares repurchased								(1.7)	(560)				(560)				(560)
Accelerated Share Repurchase pending final settlement				(98)									(98)				(98)
Currency translation adjustment, net of net investment hedge activity (net of tax of $16 million)											(60)		(60)		—		(60)
Net actuarial gains and prior service costs (net of tax of $1 million)											(2)		(2)				(2)

Net realized and unrealized gain on cash flow hedges											1		1				1
Balance at March 31, 2022	342.9	$	3	$	826	$	13,132	(158.4)	$	(11,096)	$	(471)	$	2,394	$	188	$	2,582

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 will be applied to all business combination transactions completed subsequent to January 1, 2022.

COVID-19

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.

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, in the first quarter of 2022, the Company has suspended 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 relating to uncertainties surrounding the conflict has adversely impacted rated issuance volumes in the first quarter of 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 economies, companies, commercial properties and financial securities via data feeds and data applications products.

Table of Contents

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

NOTE 2. REVENUES

Revenue by Category

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


	Three Months Ended March 31,
		2022		2021
MIS:
Corporate Finance (CFG)
Investment-grade		$	114	$	134
High-yield		39		141
Bank loans		113		180
Other accounts (1)		151		150
Total CFG		417		605
Structured Finance (SFG)
Asset-backed securities		32		26
RMBS		35		27
CMBS		38		24
Structured credit		39		38
Other accounts		—		1
Total SFG		144		116
Financial Institutions (FIG)
Banking		89		109
Insurance		34		43
Managed investments		5		8
Other accounts		3		2
Total FIG		131		162
Public, Project and Infrastructure Finance (PPIF)
Public finance / sovereign		58		67
Project and infrastructure		65		76
Total PPIF		123		143
Total ratings revenue		815		1,026
MIS Other		12		10
Total external revenue		827		1,036
Intersegment revenue		43		40
Total MIS		870		1,076
MA:
Decision Solutions		334		225
Research and Insights		183		171
Data and Information		178		168
Total external revenue		695		564
Intersegment revenue		2		2
Total MA		697		566
Eliminations		(45)		(42)
Total MCO		$	1,522	$	1,600

(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.

Table of Contents

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

Three Months Ended March 31, 2022

Three Months Ended March 31, 2021

U.S.

Non-U.S