Form |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State of Incorporation) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
☑ | Accelerated filer | ☐ | ||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
Emerging growth company |
Shares Outstanding at September 30, 2022 | ||
MOODY’S CORPORATION INDEX TO FORM 10-Q | ||||||||
Page(s) | ||||||||
3-6 | ||||||||
Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2022 and 2021 | ||||||||
43-44 | ||||||||
44-45 | ||||||||
45-73 | ||||||||
73-78 | ||||||||
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 | ||||
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 |
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 |
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 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||||||||||
Expenses | |||||||||||||||||||||||
Operating | |||||||||||||||||||||||
Selling, general and administrative | |||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Restructuring | |||||||||||||||||||||||
Total expenses | |||||||||||||||||||||||
Operating income | |||||||||||||||||||||||
Non-operating (expense) income, net | |||||||||||||||||||||||
Interest expense, net | ( | ( | ( | ( | |||||||||||||||||||
Other non-operating income (expense), net | ( | ||||||||||||||||||||||
Total non-operating (expense) income, net | ( | ( | ( | ( | |||||||||||||||||||
Income before provision for income taxes | |||||||||||||||||||||||
Provision for income taxes | |||||||||||||||||||||||
Net income attributable to Moody's | $ | $ | $ | $ | |||||||||||||||||||
Earnings per share attributable to Moody's common shareholders | |||||||||||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||||||||||
Diluted | $ | $ | $ | $ | |||||||||||||||||||
Weighted average number of shares outstanding | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted |
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 | $ | $ | |||||||||||||||||||||||||||||||||
Other Comprehensive Income (Loss): | |||||||||||||||||||||||||||||||||||
Foreign Currency Adjustments: | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments, net | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||
Net gains on net investment hedges | ( | ( | |||||||||||||||||||||||||||||||||
Cash Flow Hedges: | |||||||||||||||||||||||||||||||||||
Reclassification of losses included in net income | ( | ||||||||||||||||||||||||||||||||||
Pension and Other Retirement Benefits: | |||||||||||||||||||||||||||||||||||
Amortization of actuarial losses/prior service costs and settlement charge included in net income | ( | ||||||||||||||||||||||||||||||||||
Net actuarial gains and prior service costs | ( | ||||||||||||||||||||||||||||||||||
Total other comprehensive (loss) income | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||
Comprehensive income | |||||||||||||||||||||||||||||||||||
Less: comprehensive (loss) income attributable to noncontrolling interests | ( | ( | |||||||||||||||||||||||||||||||||
Comprehensive Income Attributable to Moody's | $ | $ |
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 | $ | $ | |||||||||||||||||||||||||||||||||
Other Comprehensive Income (Loss): | |||||||||||||||||||||||||||||||||||
Foreign Currency Adjustments: | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments, net | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||
Foreign currency translation adjustments - reclassification of losses included in net income | |||||||||||||||||||||||||||||||||||
Net gains on net investment hedges | ( | ( | |||||||||||||||||||||||||||||||||
Net investment hedges - reclassification of gains included in net income | ( | ( | |||||||||||||||||||||||||||||||||
Cash Flow Hedges: | |||||||||||||||||||||||||||||||||||
Reclassification of losses included in net income | ( | ||||||||||||||||||||||||||||||||||
Pension and Other Retirement Benefits: | |||||||||||||||||||||||||||||||||||
Amortization of actuarial losses/prior service costs and settlement charge included in net income | ( | ||||||||||||||||||||||||||||||||||
Net actuarial gains and prior service costs | ( | ( | |||||||||||||||||||||||||||||||||
Total other comprehensive (loss) income | $ | ( | $ | ( | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||||
Comprehensive income | |||||||||||||||||||||||||||||||||||
Less: comprehensive (loss) income attributable to noncontrolling interests | ( | ( | |||||||||||||||||||||||||||||||||
Comprehensive Income Attributable to Moody's | $ | $ |
September 30, 2022 | December 31, 2021 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Short-term investments | |||||||||||
Accounts receivable, net of allowance for credit losses of $ | |||||||||||
Other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net of accumulated depreciation of $ | |||||||||||
Operating lease right-of-use assets | |||||||||||
Goodwill | |||||||||||
Intangible assets, net | |||||||||||
Deferred tax assets, net | |||||||||||
Other assets | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable and accrued liabilities | $ | $ | |||||||||
Current portion of operating lease liabilities | |||||||||||
Deferred revenue | |||||||||||
Total current liabilities | |||||||||||
Non-current portion of deferred revenue | |||||||||||
Long-term debt | |||||||||||
Deferred tax liabilities, net | |||||||||||
Uncertain tax positions | |||||||||||
Operating lease liabilities | |||||||||||
Other liabilities | |||||||||||
Total liabilities | |||||||||||
Contingencies (Note 17) | |||||||||||
Shareholders' equity: | |||||||||||
Preferred stock, par value $ | |||||||||||
Series common stock, par value $ | |||||||||||
Common stock, par value $ | |||||||||||
Capital surplus | |||||||||||
Retained earnings | |||||||||||
Treasury stock, at cost; | ( | ( | |||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Total Moody's shareholders' equity | |||||||||||
Noncontrolling interests | |||||||||||
Total shareholders' equity | |||||||||||
Total liabilities, noncontrolling interests and shareholders' equity | $ | $ |
Nine Months Ended September 30, | |||||||||||
2022 | 2021 | ||||||||||
Cash flows from operating activities | |||||||||||
Net income | $ | $ | |||||||||
Reconciliation of net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Stock-based compensation | |||||||||||
Deferred income taxes | ( | ||||||||||
FX translation losses reclassified to net income | |||||||||||
Changes in assets and liabilities: | |||||||||||
Accounts receivable | ( | ||||||||||
Other current assets | ( | ||||||||||
Other assets | ( | ||||||||||
Lease obligations | ( | ( | |||||||||
Accounts payable and accrued liabilities | ( | ( | |||||||||
Deferred revenue | ( | ( | |||||||||
Uncertain tax positions | ( | ( | |||||||||
Other liabilities | ( | ( | |||||||||
Net cash provided by operating activities | |||||||||||
Cash flows from investing activities | |||||||||||
Capital additions | ( | ( | |||||||||
Purchases of investments | ( | ( | |||||||||
Sales and maturities of investments | |||||||||||
Cash paid for acquisitions, net of cash acquired | ( | ( | |||||||||
Receipts from settlements of net investment hedges | |||||||||||
Payments for settlements of net investment hedges | ( | ||||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities | |||||||||||
Issuance of notes | |||||||||||
Repayment of notes | ( | ||||||||||
Proceeds from stock-based compensation plans | |||||||||||
Repurchase of shares related to stock-based compensation | ( | ( | |||||||||
Treasury shares | ( | ( |