Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form10-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 Or ☐ 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 ...

[Glossary of Terms and Abbreviations](index=4&type=section&id=Glossary%20of%20Terms%20and%20Abbreviations) Provides definitions for key terms and abbreviations used throughout the report [PART I. Company Overview and Business Operations](index=12&type=section&id=PART%20I.) This section provides a comprehensive overview of the company's business, operations, and strategic direction [Item 1. Business Overview](index=12&type=section&id=Item%201.%20BUSINESS) Moody's Corporation operates as a global integrated risk assessment firm through two primary segments: Moody's Investors Service (MIS), which provides credit ratings, and Moody's Analytics (MA), offering data, research, and decision solutions. The company has strategically expanded its capabilities in data and analytics, including private company information, commercial real estate (CRE) data, and ESG data, positioning itself to serve diverse risk assessment markets. Key strategic pillars include enhancing core businesses, expanding into new geographies and adjacencies, and leveraging technology and data integration [Background](index=12&type=section&id=Background) Outlines the company's foundational information and operational base - Moody's Corporation is a Delaware corporation with executive offices located at 7 World Trade Center, New York, NY[15](index=15&type=chunk) [Company Structure and Evolution](index=12&type=section&id=The%20Company) Details the company's operational segments and strategic growth over time - Moody's operates in two segments: Moody's Investors Service (MIS) and Moody's Analytics (MA), providing global integrated risk assessment[16](index=16&type=chunk) - Over the last 15 years, Moody's expanded beyond ratings, establishing Moody's Analytics, building the ERS business, and expanding ratings to China. From 2017-2021, it built substantial data and analytics capabilities, including private company information (BvD), CRE data, and ESG data, and invested in insurance data and analytics (RMS)[17](index=17&type=chunk)[18](index=18&type=chunk) - MIS publishes credit ratings and assessment services for various debt obligations globally, enabling issuers to access wider investor focus and deeper liquidity options[19](index=19&type=chunk) MIS Key Metrics (2021) | Metric | Value | | :------------------------------------ | :----------- | | Rated Organizations and Structured Deals | 35,000+ | | Rated Non-Financial Corporates | 5,300+ | | Rated Financial Institutions | 3,500+ | | Rated Public Finance Issuers | 15,500+ | | Rated Structured Finance Deals | 9,000+ | | Project Finance Issuers | 1,000+ | | Rated Infrastructure & 445 Rated Sub-Sovereigns | 145 | | Rated Sovereigns | 49 | | Rated Supranational Institutions | $73 trillion | | Total rated debt outstanding | 190 | | Rating Methodologies | | - MA provides data, information, research, insights, and decision solutions, leveraging expertise across credit, market, financial crime, supply chain, catastrophe, and climate risks. Its subscription businesses provide recurring revenue, mitigating cyclical changes in debt issuance[26](index=26&type=chunk) MA Customer Base (2021) | Customer Type | Count | | :---------------------------------- | :------- | | Total MA customers | 14,900 + | | Asset Managers | 1,800+ | | Commercial Banks | 2,300+ | | Corporations | 3,600+ | | Securities Dealers and Investment Banks | 200+ | | Insurance Companies | 900+ | | Government & Other Entities | 5,300+ | | Real Estate Entities | 800+ | | Countries where MA customers operate | 165 | | Customer users accessed Moody's research website in 2021 | 29,000+ | | Individuals accessed Moody's research website | 244,000+ | [Human Capital Management](index=14&type=section&id=Human%20Capital) Details the company's approach to talent management, diversity, and employee development - Moody's focuses on attracting, supporting, and retaining skilled talent by championing diversity, equity, and inclusion, offering competitive compensation and benefits, wellness programs, and supporting employee learning and development[31](index=31&type=chunk) - The company has numerous diversity programs and eight active Business Resource Groups (BRGs) with over **6,600 global memberships** as of December 31, 2021, including initiatives like the TIDE program to elevate women and ethnically diverse employees into leadership[32](index=32&type=chunk) Employee Population (2020 vs. 2021) | Segment | Category | 2021 Headcount | 2020 Headcount | Change % | | :------ | :------- | :------------- | :------------- | :------- | | MIS | U.S. | 1,459 | 1,518 | (4)% | | | Non-U.S. | 3,836 | 3,533 | 9% | | | Total | 5,295 | 5,051 | 5% | | MA | U.S. | 2,647 | 2,012 | 32% | | | Non-U.S. | 3,882 | 2,996 | 30% | | | Total | 6,529 | 5,008 | 30% | | MSS | U.S. | 728 | 704 | 3% | | | Non-U.S. | 908 | 724 | 25% | | | Total | 1,636 | 1,428 | 15% | | Total MCO | U.S. | 4,834 | 4,234 | 14% | | | Non-U.S. | 8,626 | 7,253 | 19% | | | Total | 13,460 | 11,487 | 17% | - The company's total employee population increased by **17%** from 2020 to 2021, with significant growth in the MA segment (**30%**). Voluntary turnover rates increased in 2021, likely due to COVID-19 impacts on the labor market[37](index=37&type=chunk) [Climate Change Initiatives](index=18&type=section&id=Climate) Highlights the company's environmental commitments and climate-related strategies - Moody's has accelerated its net-zero commitment to **2040**, a decade earlier than the Paris Agreement goal, and published a decarbonization plan with science-based targets[39](index=39&type=chunk) - The company received an **'A' score from CDP** on climate action for the second consecutive year and became a founding member of the Net Zero Financial Services Provider Alliance[29](index=29&type=chunk) - Moody's has invested in acquisitions like RMS, Four Twenty Seven, and Vigeo Eiris to expand its climate capabilities and integrate ESG and climate insights into its products[39](index=39&type=chunk) [Corporate Strategy](index=19&type=section&id=Moody%27s%20Strategy) Defines the company's strategic pillars for growth and market expansion - Moody's mission is to provide trusted insights and standards for confident decision-making, focusing on growth and scaling through investment in core businesses and strategic adjacencies[40](index=40&type=chunk) - The strategy includes sharpening customer focus, developing people and culture, and collaborating/modernizing/innovating, with growth driven by organic development and targeted acquisitions[40](index=40&type=chunk) - In 2021, Moody's made several strategic acquisitions to enhance its KYC, Cyber, Insurance, and Commercial Real Estate (CRE) capabilities, including PassFort, BitSight (minority investment), RMS, RealXData, and Cortera[41](index=41&type=chunk) [Growth Outlook and Drivers](index=21&type=section&id=Prospects%20for%20Growth) Identifies key factors influencing future business growth and market opportunities - Moody's expects favorable long-term growth in global fixed-income and financial information markets, driven by increasing financial complexity and demand for credit analysis and risk management tools[42](index=42&type=chunk) - Key growth drivers for MIS include global GDP growth, debt market issuance, sustainable finance offerings, and expansion in domestic capital markets and private credit[46](index=46&type=chunk) - MA's growth is influenced by expanding data and analytics solutions in adjacent markets such as KYC, CRE, and ESG, and improving efficiencies and compliance with financial regulation[49](index=49&type=chunk) [Competitive Landscape](index=23&type=section&id=Competition) Analyzes the company's position relative to its industry competitors - MIS competes with other credit rating agencies (CRAs), investment banks, brokerage firms, and in-house credit research capabilities[50](index=50&type=chunk) - MA competes in the broader financial information industry against diversified competitors, including providers of fixed income analytics, economic data, risk management software, and financial training firms[50](index=50&type=chunk) [Regulatory Environment](index=23&type=section&id=Regulation) Describes the legal and regulatory frameworks governing the company's operations - Moody's and its affiliates are subject to extensive regulation in the U.S. (Reform Act, Dodd-Frank Act) and foreign regulations (EU, UK, Hong Kong, China), which can increase costs, legal risks, and impact profitability[51](index=51&type=chunk) - The regulatory landscape is evolving, with potential changes in laws affecting CRAs and increased scrutiny, including new measures related to sustainable finance strategy in the EU[58](index=58&type=chunk) [Intellectual Property](index=24&type=section&id=Intellectual%20Property) Covers the company's proprietary assets and their protection - Moody's owns and controls a variety of intellectual property, including proprietary information, publications, databases, trademarks, software tools, and research models, which are material to its business[59](index=59&type=chunk) - The company holds **75 patents** and relies on copyright, trademark, trade secret, patent, and contractual safeguards for protection, licensing its IP to customers primarily through MA[61](index=61&type=chunk) [Available Information](index=25&type=section&id=Available%20Information) Indicates where public information and SEC filings can be accessed - Moody's provides investor relations information, including SEC filings (10-K, 10-Q, 8-K), free of charge on its website (ir.moodys.com) and through the SEC's website (sec.gov)[62](index=62&type=chunk) [Executive Officers](index=25&type=section&id=Executive%20Officers%20of%20the%20Registrant) Lists the key leadership personnel of the registrant - Key executive officers include Robert Fauber (President and CEO), John J. Goggins (EVP and General Counsel), Mark Kaye (EVP and CFO), Caroline Sullivan (SVP and Corporate Controller), Stephen Tulenko (President, Moody's Analytics), and Michael West (President, Moody's Investors Service)[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20RISK%20FACTORS) Moody's faces a broad range of risks, including legal and regulatory challenges in a highly regulated global industry, operational and economic risks from its international presence, and technology-related risks such as cybersecurity threats. The COVID-19 pandemic has amplified many of these risks, creating significant uncertainty for the company's business, financial condition, and operating results [Legal and Regulatory Risks](index=27&type=section&id=A.%20Legal%20and%20Regulatory%20Risks) Highlights the legal and regulatory challenges inherent in the company's global operations - Moody's operates in a highly regulated industry, subject to extensive U.S. laws (Reform Act, Dodd-Frank Act) and foreign regulations (EU, UK, Hong Kong, China), which can increase competition, restrict operations, and lead to higher compliance costs and legal risks[71](index=71&type=chunk)[73](index=73&type=chunk)[75](index=75&type=chunk) - The company is exposed to litigation and government regulatory proceedings related to rating opinions and business practices, with potential for adverse judgments, fines, and reputational harm, especially in foreign jurisdictions with less protective legal standards[75](index=75&type=chunk) - Failure to adequately protect intellectual property rights or adapt to changing tax laws (e.g., Tax Act, international initiatives) could adversely affect Moody's reputation, competitive position, and financial results[78](index=78&type=chunk)[79](index=79&type=chunk) [Business Operations Risks](index=31&type=section&id=B.%20Risks%20Relating%20to%20our%20Business) Addresses operational, economic, and human capital risks impacting the company's business model - Global operations expose Moody's to legal, economic, and regulatory risks, including exchange rate movements, restrictions on cash repatriation, trade barriers, and competition from local rating agencies[81](index=81&type=chunk) - The company's business is sensitive to general economic conditions, volatility in financial markets, and changes in debt issuance volumes, which can negatively impact transaction-based revenue[84](index=84&type=chunk) - Increased pricing pressure from competitors and customers, along with the introduction of competing products or technologies, could adversely affect Moody's market share and profitability[85](index=85&type=chunk)[87](index=87&type=chunk) - The COVID-19 pandemic has created significant uncertainty, potentially impacting credit markets, demand for financial tools, pricing, and operational productivity due to remote work[89](index=89&type=chunk)[90](index=90&type=chunk) - Moody's relies on recruiting and retaining skilled employees, and the loss of key personnel or inability to offer competitive compensation could materially harm its business[88](index=88&type=chunk) - Acquisitions and strategic investments carry risks of integration challenges, unrealized synergies, and potential impairment charges for goodwill and intangible assets if business objectives are not met[88](index=88&type=chunk) [Technology Risks](index=36&type=section&id=C.%20Technology%20Risks) Examines the cybersecurity and data management risks inherent in the company's technology-driven operations - Moody's operations are exposed to cybersecurity threats, including cyber-attacks, hacking, and employee error, which could lead to data manipulation, service disruptions, and compromise of confidential information, resulting in reputational harm, financial losses, and regulatory actions[91](index=91&type=chunk) - The company's reliance on third-party software, data, and cloud infrastructure exposes it to risks from product quality issues, service disruptions, and compliance with evolving data protection and privacy laws (e.g., GDPR, CCPA)[92](index=92&type=chunk) [Item 1B. Unresolved Staff Comments](index=38&type=section&id=Item%201B.%20UNRESOLVED%20STAFF%20COMMENTS) There are no unresolved staff comments to report for the fiscal year ended December 31, 2021 [Item 2. Properties](index=38&type=section&id=Item%202.%20PROPERTIES) Moody's corporate headquarters is located in New York, NY, occupying approximately 797,537 square feet of leased space. Globally, the company operates from 35 U.S. offices and 107 non-U.S. office locations, all of which are leased and considered suitable for current operating requirements [Item 3. Legal Proceedings](index=38&type=section&id=Item%203.%20LEGAL%20PROCEEDINGS) Information regarding legal proceedings is incorporated by reference from Note 21, 'Contingencies,' to the consolidated financial statements in Part II, Item 8 of this Form 10-K [Item 4. Mine Safety Disclosures](index=38&type=section&id=Item%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to Moody's Corporation [PART II. Financial Information and Management Discussion](index=39&type=section&id=PART%20II.) This section provides detailed financial information, management's discussion and analysis of results, and market risk disclosures [Item 5. Market for Common Equity and Shareholder Matters](index=39&type=section&id=Item%205.%20MARKET%20FOR%20THE%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20SHAREHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) This section provides details on Moody's common stock market activity, including share repurchases, outstanding shares, equity compensation plans, and shareholder returns. The company actively manages its capital structure through share repurchases and maintains various equity incentive programs for employees and directors [Equity Securities Purchases](index=39&type=section&id=Moody%27s%20Purchases%20of%20Equity%20Securities) Details the company's share repurchase activities and remaining authorization Moody's Purchases of Equity Securities (Q4 2021) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | | :------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------- | | October 1-31 | 1,400 | $— | — | | November 1-30 | 236,692 | $389.93 | 235,647 | | December 1-31 | 78,013 | $389.35 | 77,330 | | Total | 316,105 | $389.78 | 312,977 | - As of December 31, 2021, approximately **$1,081 million** of share repurchase authority remained. An additional **$750 million** was approved on February 7, 2022, with no established expiration date[95](index=95&type=chunk) [Common Stock Information](index=39&type=section&id=Common%20Stock%20Information) Provides details on Moody's common stock trading and shareholder base - Moody's common stock trades on the New York Stock Exchange under the symbol 'MCO'. As of January 31, 2022, there were **1,628 registered shareholders** of record[96](index=96&type=chunk) [Equity Compensation Plan Information](index=39&type=section&id=Equity%20Compensation%20Plan%20Information) Summarizes the company's equity-based compensation plans for employees and directors Equity Compensation Plan Summary (as of Dec 31, 2021) | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-Average Exercise Price of Options, and Rights (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding Securities Reflected in Column (a)) (c) | | :------------------------------------------------------- | :-------------------------------------------------------------------------------------------- | :--------------------------------------------------------- | :-------------------------------------------------------------------------------------------------------------------------------------------------------------- | | Equity compensation plans approved by security holders | 3,115,970 | $166.16 | 17,171,937 | | Equity compensation plans not approved by security holders | — | $— | — | | Total | 3,115,970 | $166.16 | 17,171,937 | [Performance Graph](index=40&type=section&id=Performance%20Graph) Illustrates the historical stock performance of Moody's common stock against relevant indices - Over the five-year period ended December 31, 2021, Moody's Corporation's common stock generated a total cumulative shareholder return of **335%**[99](index=99&type=chunk) - This performance significantly outpaced the S&P 500 Composite Index (**133%**) and the Russell 3000 Financial Services Index (**110%**) over the same period[99](index=99&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides a comprehensive analysis of Moody's financial condition and operating results for the year ended December 31, 2021, compared to 2020. The company achieved strong revenue and earnings growth, driven by both its MIS and MA segments, despite ongoing uncertainties from the COVID-19 pandemic. Key areas of discussion include critical accounting estimates, segment performance, market risk management, and liquidity and capital resources, along with non-GAAP financial measures used by management [Company Overview and COVID-19 Impact](index=41&type=section&id=The%20Company) Provides a brief overview of Moody's business and the impact of the COVID-19 pandemic - Moody's is a global integrated risk assessment firm operating through two segments: MIS (credit ratings) and MA (data, research, decision solutions)[102](index=102&type=chunk) - The COVID-19 pandemic has not had a material adverse impact on reported results to date and is not expected to in the near-term, though longer-term impacts remain uncertain[103](index=103&type=chunk) [Critical Accounting Estimates](index=41&type=section&id=Critical%20Accounting%20Estimates) Discusses the significant judgments and assumptions used in preparing the financial statements - Key critical accounting estimates include goodwill and other acquired intangible assets, long-lived assets, income taxes, revenue recognition, costs to obtain a contract, accounts receivable allowances, pension and other retirement benefits, and leases[104](index=104&type=chunk) - Goodwill is evaluated annually for impairment at the reporting unit level (MIS and MA segments, with four reporting units in total as of July 31, 2021). Acquisitions like RMS and PassFort in 2021 added significant goodwill[105](index=105&type=chunk)[106](index=106&type=chunk) - Determining fair value for goodwill impairment involves significant estimates and assumptions, including future cash flows, long-term growth rates, and weighted average cost of capital (WACC)[108](index=108&type=chunk)[109](index=109&type=chunk) - The company's effective tax rate and liabilities are affected by estimates for uncertain tax positions (UTPs) and changes in tax laws, requiring significant judgment[111](index=111&type=chunk) - Revenue recognition for contracts with multiple performance obligations requires judgment in allocating transaction price based on standalone selling price (SSP)[113](index=113&type=chunk)[114](index=114&type=chunk) - Pension and other retirement benefit expenses and liabilities depend on assumptions like future compensation increases, expected return on plan assets, and discount rates, with changes potentially having a significant effect[118](index=118&type=chunk) [Reportable Segments](index=46&type=section&id=Reportable%20Segments) Identifies the company's primary operating segments for financial reporting - Moody's is organized into two reportable segments: Moody's Investors Service (MIS) and Moody's Analytics (MA)[126](index=126&type=chunk) [Results of Operations (2021 vs. 2020)](index=46&type=section&id=Results%20of%20Operations) Analyzes the financial performance of the company's operations for the specified periods Key Operating Results (Year Ended Dec 31, 2021 vs. 2020) | Financial Measure | 2021 ($ millions) | 2020 ($ millions) | % Change Favorable / (Unfavorable) | | :-------------------------------- | :---------------- | :---------------- | :--------------------------------- | | Moody's total revenue | 6,218 | 5,371 | 16 | | MIS External Revenue | 3,812 | 3,292 | 16 | | MA External Revenue | 2,406 | 2,079 | 16 | | Total operating and SG&A expenses | 3,117 | 2,704 | (15) | | Total non-operating (expense) income, net | (89) | (159) | 44 | | Operating Margin | 45.7% | 44.5% | 120BPS | | Adjusted Operating Margin | 49.9% | 49.7% | 20BPS | | ETR | 19.6% | 20.3% | 70BPS | | Diluted EPS | $11.78 | $9.39 | 25 | | Adjusted Diluted EPS | $12.29 | $10.15 | 21 | - Global revenue increased by **$847 million**, with U.S. revenue up **$461 million** and non-U.S. revenue up **$386 million**, reflecting strong growth in both MIS and MA segments[132](index=132&type=chunk) - Total operating and SG&A expenses increased by **$413 million**, with approximately seven percentage points of growth from acquisitions and five percentage points from higher incentive and stock-based compensation[132](index=132&type=chunk) - Operating margin expanded due to strong revenue growth outpacing expense growth. Non-operating income improved significantly due to tax-related interest accrual reversals and a non-cash gain from the BitSight investment[135](index=135&type=chunk)[136](index=136&type=chunk) MIS Revenue by LOB (2021 vs. 2020) | LOB | 2021 ($ millions) | 2020 ($ millions) | % Change | | :---------------------------------------- | :---------------- | :---------------- | :------- | | Corporate finance (CFG) | 2,087 | 1,857 | 12% | | Financial institutions (FIG) | 602 | 530 | 14% | | Public, project and infrastructure finance (PPIF) | 521 | 496 | 5% | | Structured finance (SFG) | 560 | 362 | 55% | | Total ratings revenue | 3,770 | 3,245 | 16% | | MIS Other | 42 | 47 | (11)% | | Total external revenue | 3,812 | 3,292 | 16% | - MIS revenue growth was driven by strong leveraged finance issuance, increased CLO and CMBS activity, and higher banking revenue in FIG, partially offset by lower investment-grade issuance[129](index=129&type=chunk)[147](index=147&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) MA Revenue by LOB (2021 vs. 2020) | LOB | 2021 ($ millions) | 2020 ($ millions) | % Change | | :-------------------------------- | :---------------- | :---------------- | :------- | | Research, data and analytics (RD&A) | 1,745 | 1,514 | 15% | | Enterprise risk solutions (ERS) | 661 | 565 | 17% | | Total external revenue | 2,406 | 2,079 | 16% | - MA revenue growth was strong, driven by demand for KYC and compliance solutions, credit research, data feeds, and inorganic growth from acquisitions (RMS, ZMFS). Recurring revenue in ERS grew **30%**, while transaction revenue declined **32%** due to a strategic shift to higher-margin SaaS-based products[129](index=129&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) [Market Risk Management](index=60&type=section&id=Market%20Risk) Describes the company's exposure to market risks and its strategies for mitigation - Moody's is exposed to foreign exchange (FX) risk, with approximately **42% of revenue** and **38% of expenses** denominated in non-U.S. functional currencies (primarily GBP and EUR)[162](index=162&type=chunk) - The company uses FX forwards to mitigate fair value changes on assets and liabilities, and cross-currency swaps and euro-denominated debt as net investment hedges to manage FX exposure of foreign subsidiaries[162](index=162&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) - Interest rate risk on fixed-rate debt is managed using interest rate swaps, converting fixed rates to floating rates (LIBOR-based) to reduce funding cost volatility[167](index=167&type=chunk) [Liquidity and Capital Resources](index=61&type=section&id=Liquidity%20and%20Capital%20Resources) Analyzes the company's cash flow, debt, and capital allocation strategies - Moody's uses operating and financing cash flows to fund operations, capital expenditures, and acquisitions, returning excess capital to shareholders via dividends and share repurchases[168](index=168&type=chunk) Cash Flow Summary (2021 vs. 2020) | Cash Flow Item | 2021 ($ millions) | 2020 ($ millions) | $ Change Favorable (Unfavorable) | | :-------------------------------- | :---------------- | :---------------- | :------------------------------- | | Net cash provided by operating activities | 2,005 | 2,146 | (141) | | Net cash used in investing activities | (2,619) | (1,077) | (1,542) | | Net cash used in financing activities | (122) | (351) | 229 | | Free Cash Flow | 1,866 | 2,043 | (177) | - Net cash from operating activities decreased by **$141 million** in 2021, primarily due to higher cash paid for income taxes and increased accounts receivable balances[170](index=170&type=chunk) - Net cash used in investing activities increased by **$1,542 million**, mainly driven by a **$1,282 million** increase in cash paid for acquisitions (e.g., RMS) and a **$250 million** minority investment in BitSight[170](index=170&type=chunk)[171](index=171&type=chunk) - Net cash used in financing activities decreased by **$229 million**, reflecting a net issuance of **$1.2 billion** in long-term debt, partially offset by an increase in share repurchases[171](index=171&type=chunk) - As of December 31, 2021, Moody's had **$1.9 billion** in cash and cash equivalents and short-term investments, with approximately **$1.5 billion** located outside the U.S.[172](index=172&type=chunk) - Material cash requirements include **$7.4 billion** in outstanding debt, **$233 million** in purchase obligations, and **$560 million** in operating lease obligations as of December 31, 2021[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) - The Board approved a quarterly dividend of **$0.70 per share** in February 2022 and an additional **$750 million** in share repurchase authority[177](index=177&type=chunk) [Recently Issued Accounting Pronouncements](index=66&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) Outlines new accounting standards and their anticipated impact on the company's financial reporting - The company is monitoring ASU 2021-01 (Reference Rate Reform) for the transition from LIBOR to alternative reference rates and intends to early adopt ASU 2021-08 (Business Combinations) effective January 1, 2022[191](index=191&type=chunk) [Contingencies](index=66&type=section&id=Contingencies) Addresses potential future liabilities arising from legal, tax, and other business matters - Moody's is involved in legal and tax proceedings, governmental investigations, and claims, with liabilities recorded when probable and estimable. The outcomes are inherently unpredictable and could materially impact liquidity or operating results[192](index=192&type=chunk) [Forward-Looking Statements](index=66&type=section&id=Forward-Looking%20Statements) Provides a cautionary note regarding future-oriented statements and associated risks - The report contains forward-looking statements based on future expectations, plans, and prospects, which involve risks and uncertainties that could cause actual results to differ materially[193](index=193&type=chunk) - Key risk factors include the impact of COVID-19, credit market disruptions, regulatory changes, competition, new product development, and the integration of acquisitions like RMS[193](index=193&type=chunk)[194](index=194&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=67&type=section&id=Item%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This item refers to the 'Market Risk' section within Item 7, which provides detailed quantitative and qualitative disclosures regarding Moody's exposure to foreign exchange and interest rate risks and the strategies employed to manage them [Item 8. Financial Statements and Supplementary Data](index=68&type=section&id=Item%208.%20FINANCIAL%20STATEMENTS) This section presents Moody's consolidated financial statements, including statements of operations, comprehensive income, balance sheets, cash flows, and shareholders' equity, along with detailed notes. It also includes management's report and the independent auditor's opinion on internal control over financial reporting [Management's Report on Internal Control Over Financial Reporting](index=69&type=section&id=Management%27s%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) Presents management's assessment of the effectiveness of the company's internal controls over financial reporting - Management concluded that Moody's maintained effective internal control over financial reporting as of December 31, 2021, based on the COSO framework[196](index=196&type=chunk) - The assessment excluded the internal controls of RMS, acquired during 2021, which will be included in the 2022 assessment. RMS's total assets and revenues represented **$333 million** and **$81 million**, respectively, of the consolidated financial statements[196](index=196&type=chunk) [Report of Independent Registered Public Accounting Firm](index=70&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Provides the independent auditor's opinion on the company's financial statements and internal controls - KPMG LLP issued an unqualified opinion on Moody's consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2021[198](index=198&type=chunk) - The audit of internal control over financial reporting also excluded an evaluation of RMS's internal controls, consistent with management's assessment[198](index=198&type=chunk) - Critical audit matters included the assessment of goodwill carrying value in Moody's Analytics segments and the gross uncertain tax positions, both requiring significant judgment[202](index=202&type=chunk)[203](index=203&type=chunk) [Consolidated Financial Statements](index=72&type=section&id=Consolidated%20Financial%20Statements) Presents the company's primary financial statements for the reported periods Consolidated Statements of Operations (2019-2021) | Metric | 2021 ($ millions) | 2020 ($ millions) | 2019 ($ millions) | | :------------------------------------ | :---------------- | :---------------- | :---------------- | | Revenue | 6,218 | 5,371 | 4,829 | | Total expenses | 3,374 | 2,983 | 2,831 | | Operating income | 2,844 | 2,388 | 1,998 | | Non-operating (expense) income, net | (89) | (159) | (188) | | Income before provision for income taxes | 2,755 | 2,229 | 1,810 | | Provision for income taxes | 541 | 452 | 381 | | Net income attributable to Moody's | 2,214 | 1,778 | 1,422 | | Diluted EPS | $11.78 | $9.39 | $7.42 | Consolidated Balance Sheets (as of Dec 31, 2021 vs. 2020) | Asset/Liability/Equity | 2021 ($ millions) | 2020 ($ millions) | | :---------------------------------- | :---------------- | :---------------- | | Total current assets | 4,011 | 4,509 | | Property and equipment, net | 347 | 278 | | Operating lease right-of-use assets | 438 | 393 | | Goodwill | 5,999 | 4,556 | | Intangible assets, net | 2,467 | 1,824 | | Total assets | 14,680 | 12,409 | | Total current liabilities | 2,496 | 2,222 | | Long-term debt | 7,413 | 6,422 | | Total liabilities | 11,764 | 10,646 | | Total shareholders' equity | 2,916 | 1,763 | Consolidated Statements of Cash Flows (2019-2021) | Cash Flow Activity | 2021 ($ millions) | 2020 ($ millions) | 2019 ($ millions) | | :-------------------------------- | :---------------- | :---------------- | :---------------- | | Net cash provided by operating activities | 2,005 | 2,146 | 1,675 | | Net cash (used in) provided by investing activities | (2,619) | (1,077) | 36 | | Net cash used in financing activities | (122) | (351) | (1,563) | | (Decrease) increase in cash and cash equivalents | (786) | 765 | 147 | | Cash and cash equivalents, end of period | 1,811 | 2,597 | 1,832 | [Notes to Consolidated Financial Statements](index=79&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the consolidated financial statements [NOTE 1. Description of Business and Basis of Presentation](index=79&type=section&id=NOTE%201%20DESCRIPTION%20OF%20BUSINESS%20AND%20BASIS%20OF%20PRESENTATION) Outlines the company's business model and the foundational principles of its financial reporting - Moody's is a global integrated risk assessment firm with two reportable segments: MIS (credit ratings) and MA (data, research, decision solutions)[215](index=215&type=chunk) - The company adopted new accounting standards in 2020 and 2021, including ASU 2016-13 (Credit Losses) and ASU 2018-15 (Cloud Computing), with no material impact on current financial statements[216](index=216&type=chunk)[217](index=217&type=chunk) [NOTE 2. Summary of Significant Accounting Policies](index=80&type=section&id=NOTE%202%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Details the key accounting principles and methods applied in preparing the financial statements - Key accounting policies cover consolidation, cash and investments, property and equipment, internal-use software, goodwill and intangible assets impairment, stock-based compensation, derivative instruments, revenue recognition (MIS and MA), costs to obtain/fulfill contracts, accounts receivable allowances, leases, contingencies, and income taxes[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk) - Revenue is recognized when control of goods or services is transferred to the customer, with transaction prices allocated to distinct performance obligations based on standalone selling price (SSP)[229](index=229&type=chunk) - Costs to obtain customer contracts (e.g., sales commissions) are deferred and amortized over the expected economic life of the products or services[233](index=233&type=chunk) - The company uses its estimated secured incremental borrowing rates to determine the present value of lease payments for operating leases, as implicit interest rates are generally not provided[236](index=236&type=chunk) [NOTE 3. Revenues](index=93&type=section&id=NOTE%203%20REVENUES) Provides a detailed breakdown of revenue by segment, category, and geographic area MIS Revenue by Category (2021 vs. 2020) | MIS Category | 2021 ($ millions) | 2020 ($ millions) | | :-------------------------------- | :---------------- | :---------------- | | Corporate finance (CFG) | 2,087 | 1,857 | | Financial institutions (FIG) | 602 | 530 | | Public, project and infrastructure finance (PPIF) | 521 | 496 | | Structured finance (SFG) | 560 | 362 | | Total ratings revenue | 3,770 | 3,245 | | MIS Other | 42 | 47 | | Total external revenue | 3,812 | 3,292 | MA Revenue by Category (2021 vs. 2020) | MA Category | 2021 ($ millions) | 2020 ($ millions) | | :-------------------------------- | :---------------- | :---------------- | | Research, data and analytics (RD&A) | 1,745 | 1,514 | | Enterprise risk solutions (ERS) | 661 | 565 | | Total external revenue | 2,406 | 2,079 | Total MCO Revenue by Geographic Area (2021 vs. 2020) | Geographic Area | 2021 ($ millions) | 2020 ($ millions) | | :-------------- | :---------------- | :---------------- | | U.S. | 3,416 | 2,955 | | Non-U.S. | 2,802 | 2,416 | | Total | 6,218 | 5,371 | Revenue Recognition Timing (2021 vs. 2020) | Timing of Recognition | 2021 Total ($ millions) | 2020 Total ($ millions) | | :-------------------- | :---------------------- | :---------------------- | | At a point in time | 2,741 | 2,303 | | Over time | 3,477 | 3,068 | | Total | 6,218 | 5,371 | - Unbilled receivables increased in both MIS (**$386 million** in 2021) and MA (**$152 million** in 2021) due to contractual billing terms and organic growth/acquisitions[256](index=256&type=chunk) - Deferred revenue increased to **$1,335 million** in 2021 (from **$1,187 million** in 2020), primarily driven by acquisitions (Cortera, RMS, PassFort) and organic growth in the MA segment[257](index=257&type=chunk) - Remaining performance obligations totaled approximately **$112 million** for MIS and **$3.0 billion** for MA as of December 31, 2021, with most expected to be recognized within one to five years[260](index=260&type=chunk) [NOTE 4. Reconciliation of Weighted Average Shares Outstanding](index=98&type=section&id=NOTE%204%20RECONCILIATION%20OF%20WEIGHTED%20AVERAGE%20SHARES%20OUTSTANDING) Reconciles the basic and diluted weighted average shares outstanding for earnings per share calculations Weighted Average Shares Outstanding (2019-2021) | Shares (millions) | 2021 | 2020 | 2019 | | :---------------- | :---- | :---- | :---- | | Basic | 186.4 | 187.6 | 189.3 | | Dilutive effect | 1.5 | 1.7 | 2.3 | | Diluted | 187.9 | 189.3 | 191.6 | | Antidilutive options and restricted stock | 0.2 | 0.2 | 0.2 | [NOTE 5. Accelerated Share Repurchase Program](index=98&type=section&id=NOTE%205%20ACCELERATED%20SHARE%20REPURCHASE%20PROGRAM) Describes the details and impact of the company's accelerated share repurchase program - The company completed a **$500 million** Accelerated Share Repurchase (ASR) agreement on April 26, 2019, repurchasing **2.8 million shares** at an average price of **$180.33 per share**[264](index=264&type=chunk) [NOTE 6. Cash Equivalents and Investments](index=99&type=section&id=NOTE%206%20CASH%20EQUIVALENTS%20AND%20INVESTMENTS) Provides a breakdown of the company's cash and short-term investment holdings Cash Equivalents and Investments (as of Dec 31, 2021) | Asset Category | Cost ($ millions) | Fair Value ($ millions) | | :-------------------------------------------- | :---------------- | :---------------------- | | Certificates of deposit and money market deposit accounts | 691 | 691 | | Mutual funds | 65 | 73 | | Total | 756 | 764 | - The company's cash equivalents and short-term investments primarily consist of certificates of deposit and money market deposit accounts, with mutual funds also held[265](index=265&type=chunk) [NOTE 7. Derivative Instruments and Hedging Activities](index=99&type=section&id=NOTE%207%20DERIVATIVE%20INSTRUMENTS%20AND%20HEDGING%20ACTIVITIES) Details the company's use of derivative financial instruments to manage market risks - Moody's uses derivative financial instruments (interest rate swaps, cross-currency swaps, foreign exchange forward contracts) to manage exposure to changes in FX rates and interest rates, not for speculative purposes[266](index=266&type=chunk) - Interest rate swaps are designated as fair value hedges to convert fixed interest rates on long-term debt to floating rates, mitigating fair value risk[267](index=267&type=chunk) Interest Rate Swaps Designated as Fair Value Hedges (as of Dec 31, 2021) | Hedged Item | Nature of Swap | Notional Amount ($ millions) | | :------------------------- | :---------------------- | :--------------------------- | | 2017 Senior Notes due 2023 | Pay Floating/Receive Fixed | 250 | | 2017 Senior Notes due 2028 | Pay Floating/Receive Fixed | 500 | | 2020 Senior Notes due 2025 | Pay Floating/Receive Fixed | 300 | | 2014 Senior Notes due 2044 | Pay Floating/Receive Fixed | 300 | | 2018 Senior Notes due 2048 | Pay Floating/Receive Fixed | 300 | | Total | | 1,650 | - Cross-currency swaps and euro-denominated debt are designated as net investment hedges to mitigate FX exposure related to euro net investments in foreign subsidiaries[271](index=271&type=chunk)[272](index=272&type=chunk) - Foreign exchange forward contracts not designated as accounting hedges are used to mitigate FX risk on certain assets and liabilities, with changes in fair value recognized immediately in other non-operating income (expense), net[280](index=280&type=chunk) [NOTE 8. Property and Equipment, Net](index=104&type=section&id=NOTE%208%20PROPERTY%20AND%20EQUIPMENT%2C%20NET) Provides a detailed breakdown of the company's property and equipment assets and related depreciation Property and Equipment, Net (as of Dec 31, 2021 vs. 2020) | Category | 2021 ($ millions) | 2020 ($ millions) | | :-------------------------------------- | :---------------- | :---------------- | | Office and computer equipment | 300 | 260 | | Office furniture and fixtures | 52 | 49 | | Internal-use computer software | 771 | 666 | | Leasehold improvements and building | 234 | 231 | | Total property and equipment, at cost | 1,357 | 1,206 | | Less: accumulated depreciation and amortization | (1,010) | (928) | | Total property and equipment, net | 347 | 278 | - Depreciation and amortization expense for these assets was **$99 million** in 2021, **$96 million** in 2020, and **$97 million** in 2019[284](index=284&type=chunk) [NOTE 9. Acquisitions and Divestiture](index=104&type=section&id=NOTE%209%20ACQUISITIONS%20AND%20DIVESTITURE) Summarizes the company's acquisition and divestiture activities and their financial impact - In 2021, Moody's acquired PassFort (KYC workflow platform), RMS (climate and natural disaster risk modeling), and Cortera (North American credit data). These acquisitions enhance integrated risk assessment capabilities and expand market reach[286](index=286&type=chunk)[290](index=290&type=chunk)[296](index=296&type=chunk) - Goodwill recognized from these acquisitions is primarily assigned to the MA segment and is not deductible for tax purposes[289](index=289&type=chunk)[293](index=293&type=chunk)[298](index=298&type=chunk) - In 2020, Moody's acquired RDC (AML/KYC data), Catylist (CRE solutions), ZM Financial Systems (financial management software), and Acquire Media (real-time news/data)[300](index=300&type=chunk)[303](index=303&type=chunk) - The divestiture of MAKS in 2019 resulted in a total loss of **$23 million**, including reclassified currency translation losses[306](index=306&type=chunk) [NOTE 10. Goodwill and Other Acquired Intangible Assets](index=109&type=section&id=NOTE%2010%20GOODWILL%20AND%20OTHER%20ACQUIRED%20INTANGIBLE%20ASSETS) Provides details on the company's goodwill and other acquired intangible assets, including changes and amortization Goodwill Activity (2021) | Segment | Balance at Beginning of Year ($ millions) | Additions/Adjustments ($ millions) | Foreign Currency Translation Adjustments ($ millions) | Ending Balance ($ millions) | | :----------- | :---------------------------------------- | :--------------------------------- | :---------------------------------------------------- | :-------------------------- | | MIS | 311 | 90 | (5) | 396 | | MA | 4,245 | 1,525 | (167) | 5,603 | | Consolidated | 4,556 | 1,615 | (172) | 5,999 | Acquired Intangible Assets, Net (as of Dec 31, 2021 vs. 2020) | Intangible Asset Category | 2021 ($ millions) | 2020 ($ millions) | | :---------------------------- | :---------------- | :---------------- | | Net customer relationships | 1,720 | 1,310 | | Net software/product technology | 444 | 264 | | Net database | 133 | 115 | | Net trade names | 160 | 123 | | Net other | 10 | 12 | | Total acquired intangible assets, net | 2,467 | 1,824 | - Amortization expense for acquired intangible assets was **$158 million** in 2021, **$124 million** in 2020, and **$103 million** in 2019[310](index=310&type=chunk) - Estimated future annual amortization expense for intangible assets is projected to be **$191 million** in 2022, **$189 million** in 2023, and **$185 million** in 2024[311](index=311&type=chunk) [NOTE 11. Restructuring](index=111&type=section&id=NOTE%2011%20RESTRUCTURING) Details the company's restructuring programs and associated charges - Moody's implemented the 2020 MA Strategic Reorganization Restructuring Program (**$20 million** in charges) and the 2020 Real Estate Rationalization Restructuring Program (non-cash charges for asset impairment) in response to strategic realignments and the COVID-19 pandemic[313](index=313&type=chunk) - The 2018 Restructuring Program, which included staff reductions and real estate rationalization, was substantially completed by December 31, 2020[313](index=313&type=chunk) Total Restructuring Charges (2019-2021) | Restructuring Program | 2021 ($ millions) | 2020 ($ millions) | 2019 ($ millions) | | :------------------------------------- | :---------------- | :---------------- | :---------------- | | 2018 Restructuring Program | (2) | (4) | 60 | | 2020 Real Estate Rationalization Restructuring Program | — | 36 | — | | 2020 MA Strategic Reorganization Restructuring Program | 2 | 18 | — | | Total Restructuring | — | 50 | 60 | [NOTE 12. Fair Value](index=112&type=section&id=NOTE%2012%20FAIR%20VALUE) Provides information on the fair value measurements of financial instruments Fair Value Measurement (as of Dec 31, 2021) | Description | Fair Value Balance ($ millions) | Level 1 ($ millions) | Level 2 ($ millions) | | :---------- | :------------------------------ | :------------------- | :------------------- | | Assets: | | | | | Derivatives | 67 | — | 67 | | Mutual funds | 73 | 73 | — | | Total Assets | 140 | 73 | 67 | | Liabilities: | | | | | Derivatives | 52 | — | 52 | | Total Liabilities | 52 | — | 52 | - Fair value of derivative contracts is determined using industry standard valuation models (Level 2 inputs), while mutual funds are valued based on quoted market prices in active markets (Level 1 inputs)[317](index=317&type=chunk)[318](index=318&type=chunk) [NOTE 13. Other Balance Sheet Information](index=113&type=section&id=NOTE%2013.%20OTHER%20BALANCE%20SHEET%20INFORMATION) Presents additional details on various assets and liabilities not separately disclosed Other Current Assets (as of Dec 31, 2021 vs. 2020) | Category | 2021 ($ millions) | 2020 ($ millions) | | :-------------------------------------- | :---------------- | :---------------- | | Prepaid taxes | 112 | 94 | | Prepaid expenses | 99 | 91 | | Capitalized costs to obtain and fulfill sales contracts | 103 | 93 | | Foreign exchange forwards on certain assets and liabilities | 1 | 31 | | Other | 74 | 74 | | Total other current assets | 389 | 383 | Other Assets (as of Dec 31, 2021 vs. 2020) | Category | 2021 ($ millions) | 2020 ($ millions) | | :-------------------------------------- | :---------------- | :---------------- | | Investments in non-consolidated affiliates | 443 | 135 | | Indemnification assets related to acquisitions | 106 | 15 | | Costs to obtain sales contracts | 138 | 134 | | Derivative instruments designated as accounting hedges | 66 | 57 | | Pension and other retirement employee benefits | 77 | 21 | | Total other assets | 1,034 | 515 | Accounts Payable and Accrued Liabilities (as of Dec 31, 2021 vs. 2020) | Category | 2021 ($ millions) | 2020 ($ millions) | | :-------------------------------------- | :---------------- | :---------------- | | Salaries and benefits | 211 | 197 | | Incentive compensation | 324 | 226 | | Customer credits, advanced payments and advanced billings | 100 | 42 | | Interest accrued on debt | 85 | 82 | | Income taxes | 115 | 128 | | Total accounts payable and accrued liabilities | 1,142 | 1,039 | Other Liabilities (as of Dec 31, 2021 vs. 2020) | Category | 2021 ($ millions) | 2020 ($ millions) | | :-------------------------------------- | :---------------- | :---------------- | | Pension and other retirement employee benefits | 235 | 244 | | Interest accrued on UTPs | 59 | 113 | | MAKS indemnification provisions | 33 | 33 | | Derivative instruments designated as accounting hedges | 40 | 145 | | Total other liabilities | 438 | 590 | - Investments in non-consolidated affiliates increased significantly to **$443 million** in 2021 (from **$135 million** in 2020), primarily due to a minority interest in BitSight[322](index=322&type=chunk) [NOTE 14. Comprehensive Income and Accumulated Other Comprehensive Income](index=115&type=section&id=NOTE%2014%20COMPREHENSIVE%20INCOME%20AND%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME) Reports changes in comprehensive income and its components, including accumulated other comprehensive loss Changes in Accumulated Other Comprehensive Loss (AOCL) by Component (2021) | Component | Balance Dec 31, 2020 ($ millions) | Other Comprehensive Income/(Loss) before Reclassifications ($ millions) | Amounts Reclassified from AOCL ($ millions) | Balance Dec 31, 2021 ($ millions) | | :-------------------------------------- | :-------------------------------- | :---------------------------------------------------------------------- | :------------------------------------------ | :-------------------------------- | | Pension and Other Retirement Benefits | (118) | 55 | 14 | (49) | | Gains on / Cash Flow Hedges | (49) | — | 2 | (47) | | Foreign Currency Translation Adjustments | (45) | (290) | — | (335) | | Net Investment Hedges | (220) | 242 | (1) | 21 | | Total | (432) | 7 | 15 | (410) | - Total AOCL decreased from **$(432) million** in 2020 to **$(410) million** in 2021, primarily due to positive changes in net investment hedges and pension benefits, partially offset by foreign currency translation adjustments[325](index=325&type=chunk) [NOTE 15. Pension and Other Retirement Benefits](index=116&type=section&id=NOTE%2015%20PENSION%20AND%20OTHER%20RETIREMENT%20BENEFITS) Details the company's defined benefit pension and other post-retirement plans, including funded status and expenses - Moody's maintains funded and unfunded Defined Benefit Pension Plans (DBPPs) and other retirement plans for U.S. employees, with new hires after 2008 participating in a Profit Participation Plan instead of DBPPs[328](index=328&type=chunk) Funded Status of Retirement Plans (as of Dec 31, 2021 vs. 2020) | Plan Type | 2021 Funded Status ($ millions) | 2020 Funded Status ($ millions) | | :-------------------- | :------------------------------ | :------------------------------ | | Pension Plans | (26) | (135) | | Other Retirement Plans | (48) | (48) | - The net decrease in pension benefit obligation in 2021 resulted from increases to discount rates and changes in actuarial assumptions[329](index=329&type=chunk) Net Periodic Benefit Expenses (2019-2021) | Component | 2021 ($ millions) | 2020 ($ millions) | 2019 ($ millions) | | :------------------------ | :---------------- | :---------------- | :---------------- | | Pension Plans | 25 | 23 | 22 | | Other Retirement Plans | 6 | 4 | 4 | | Total Net Periodic Expense | 31 | 27 | 26 | - The expected rate of return on plan assets for 2022 is **5.05%**, reflecting the company's long-term capital market outlook[335](index=335&type=chunk) - The company did not contribute to its U.S. funded pension plan in 2021 but contributed **$99 million** in 2020. No material contributions are anticipated for 2022[340](index=340&type=chunk) [NOTE 16. Stock-Based Compensation Plans](index=121&type=section&id=NOTE%2016%20STOCK-BASED%20COMPENSATION%20PLANS) Describes the various stock-based compensation plans and their financial impact - Moody's maintains several stock-based compensation plans, including the 1998 Plan, 2001 Plan, Directors' Plan, and the newly registered RMS Plans, offering stock options, restricted stock, and performance shares[344](index=344&type=chunk) Stock-Based Compensation Expense and Tax Benefit (2019-2021) | Metric | 2021 ($ millions) | 2020 ($ millions) | 2019 ($ millions) | | :----------------------------- | :---------------- | :---------------- | :---------------- | | Stock-based compensation expense | 175 | 154 | 136 | | Tax benefit | 42 | 30 | 29 | - As of December 31, 2021, total unrecognized compensation expense was **$22 million** for options, **$209 million** for nonvested restricted stock, and **$63 million** for performance-based restricted stock[348](index=348&type=chunk)[350](index=350&type=chunk)[353](index=353&type=chunk) - The Employee Stock Purchase Plan (ESPP) is non-compensatory, with no expense recognized, allowing eligible employees to purchase common stock at a **5% discount**[353](index=353&type=chunk) [NOTE 17. Income Taxes](index=124&type=section&id=NOTE%2017%20INCOME%20TAXES) Provides a detailed analysis of the company's income tax provision, effective tax rate, and uncertain tax positions Components of Income Tax Provision (2019-2021) | Category | 2021 ($ millions) | 2020 ($ millions) | 2019 ($ millions) | | :-------------- | :---------------- | :---------------- | :---------------- | | Current | 759 | 496 | 419 | | Deferred | (218) | (44) | (38) | | Total provision for income taxes | 541 | 452 | 381 | Effective Tax Rate (2019-2021) | Metric | 2021 | 2020 | 2019 | | :---------------------- | :------ | :------ | :------ | | U.S. statutory tax rate | 21.0% | 21.0% | 21.0% | | Effective tax rate | 19.6% | 20.3% | 21.0% | - The 2021 effective tax rate includes **$31 million** in Excess Tax Benefits from stock compensation and **$70 million** in benefits from the resolution of certain uncertain tax positions (UTPs)[357](index=357&type=chunk) - As of December 31, 2021, the company had **$388 million** in UTPs, a decrease from **$483 million** in 2020, primarily due to resolutions of uncertain tax positions[357](index=357&type=chunk) Uncertain Tax Positions Activity (2019-2021) | Activity | 2021 ($ millions) | 2020 ($ millions) | 2019 ($ millions) | | :-------------------------------------- | :---------------- | :---------------- | :---------------- | | Balance as of January 1 | 483 | 477 | 495 | | Additions for tax positions related to the current year | 102 | 37 | 35 | | Settlements with taxing authorities | (134) | (5) | (1) | | Lapse of statute of limitations | (81) | (41) | (44) | | Balance as of December 31 | 388 | 483 | 477 | [NOTE 18. Indebtedness](index=127&type=section&id=NOTE%2018%20INDEDBTEDNESS) Provides a detailed breakdown of the company's long-term debt, credit facilities, and interest expense Total Long-Term Debt (as of Dec 31, 2021 vs. 2020) | Notes Payable (Principal Amount) | 2021 ($ millions) | 2020 ($ millions) | | :------------------------------- | :---------------- | :---------------- | | 4.875% 2013 Senior Notes, due 2024 | 500 | 500 | | 5.25% 2014 Senior Notes, due 2044 | 600 | 600 | | 1.75% 2015 Senior Notes, due 2027 | 568 | 612 | | 2.625% 2017 Senior Notes, due 2023 | 500 | 500 | | 3.25% 2017 Senior Notes, due 2028 | 500 | 500 | | 4.25% 2018 Senior Notes, due 2029 | 400 | 400 | | 4.875% 2018 Senior Notes, due 2048 | 400 | 400 | | 0.950% 2019 Senior Notes, due 2030 | 853 | 918 | | 3.75% 2020 Senior Notes, due 2025 | 700 | 700 | | 3.25% 2020 Senior Notes, due 2050 | 300 | 300 | | 2.55% 2020 Senior Notes, due 2060 | 500 | 500 | | 2.00% 2021 Senior Notes, due 2031 | 600 | — | | 2.75% 2021 Senior Notes, due 2041 | 600 | — | | 3.10% 2021 Senior Notes, due 2061 | 500 | — | | Total long-term debt | 7,521 | 6,430 | - The company entered into a new **$1.25 billion** five-year senior, unsecured revolving credit facility in December 2021, replacing the previous **$1 billion** facility. This facility backstops the **$1.0 billion** commercial paper program[362](index=362&type=chunk)[363](index=363&type=chunk)[366](index=366&type=chunk) - In 2021, Moody's issued new senior notes totaling **$1.7 billion** and fully repaid **$500 million** of the 2012 Senior Notes due 2022[367](index=367&type=chunk) - The company was in compliance with all debt covenants as of December 31, 2021[368](index=368&type=chunk) Debt Repayment Schedule (as of Dec 31, 2021) | Year Ending December 31 | Total ($ millions) | | :---------------------- | :----------------- | | 2022 | — | | 2023 | 500 | | 2024 | 500 | | 2025 | 700 | | 2026 | — | | Thereafter | 5,821 | | Total | 7,521 | Interest Expense, Net (2019-2021) | Component | 2021 ($ millions) | 2020 ($ millions) | 2019 ($ millions) | | :-------------------------------------- | :---------------- | :---------------- | :---------------- | | Expense on borrowings | (185) | (163) | (176) | | Expense on UTPs and other tax related liabilities | 21 | (34) | (28) | | Net periodic pension costs—interest component | (16) | (19) | (22) | | Income | 9 | 11 | 17 | | Total | (171) | (205) | (208) | [NOTE 19. Capital Stock](index=130&type=section&id=NOTE%2019%20CAPITAL%20STOCK) Provides information on the company's authorized and outstanding capital stock, share repurchases, and dividends - Moody's has authorized **1.02 billion shares** of stock, including **1.0 billion common shares**. The company maintains a systematic share repurchase program[374](index=374&type=chunk) - As of December 31, 2021, **$1,081 million** remained under the share repurchase authority, with an additional **$750 million** approved on February 7, 2022[375](index=375&type=chunk) Cash Dividends Declared and Paid Per Share (2019-2021) | Quarter | 2021 ($) | 2020 ($) | 2019 ($) | | :------------- | :------- | :------- | :------- | | First quarter | 0.62 | 0.56 | 0.50 | | Second quarter | 0.62 | 0.56 | 0.50 | | Third quarter | 0.62 | 0.56 | 0.50 | | Fourth quarter | 0.62 | 0.56 | 0.50 | | Total | 2.48 | 2.24 | 2.00 | - A quarterly dividend of **$0.70 per share** was approved on February 7, 2022, payable March 18, 2022[376](index=376&type=chunk) [NOTE 20. Lease Commitments](index=131&type=section&id=NOTE%2020%20LEASE%20COMMITMENTS) Details the company's operating lease obligations and related expenses - Moody's primarily has operating leases for office space, with options to renew extending from one to 20 years[378](index=378&type=chunk) Total Lease Cost (2019-2021) | Component | 2021 ($ millions) | 2020 ($ millions) | 2019 ($ millions) | | :---------------- | :---------------- | :---------------- | :---------------- | | Operating lease cost | 98 | 96 | 97 | | Sublease income | (6) | (5) | (2) | | Variable lease cost | 19 | 19 | 17 | | Total lease cost | 111 | 110 | 112 | - As of December 31, 2021, the weighted-average remaining lease term was **5.6 years**, with a weighted-average discount rate of **3.1%**[380](index=380&type=chunk) Maturity Analysis of Operating Lease Liabilities (as of Dec 31, 2021) | Year Ending December 31 | Operating Leases (Undiscounted, $ millions) | | :---------------------- | :------------------------------------------ | | 2022 | 121 | | 2023 | 118 | | 2024 | 109 | | 2025 | 93 | | 2026 | 74 | | Thereafter | 95 | | Total lease payments (undiscounted) | 610 | | Less: Interest | 50 | | Present value of lease liabilities | 560 | [NOTE 21. Contingencies](index=132&type=section&id=NOTE%2021%20CONTINGENCIES) Addresses potential liabilities arising from legal, tax, and other business-related claims and investigations - Moody's is subject to legal and tax proceedings, governmental investigations, and claims incidental to its business, including those based on ratings assigned by MIS[382](index=382&type=chunk) - Liabilities are recorded when a loss is probable and reasonably estimable, but the ultimate outcome of these matters is inherently unpredictable and could materially affect financial results[382](index=382&type=chunk) [NOTE 22. Segment Information](index=132&type=section&id=NOTE%2022%20SEGMENT%20INFORMATION) Provides financial data broken down by the company's operating segments - Moody's reports in two segments: MIS (Corporate Finance, Financial Institutions, Public/Project/Infrastructure Finance, Structured Finance, and MIS Other LOBs) and MA (Research, Data and Analytics, and Enterprise Risk Solutions LOBs)[383](index=383&type=chunk) Revenue and Adjusted Operating Income by Segment (2021 vs. 2020) | Metric | MIS 2021 ($ millions) | MA 2021 ($ millions) | Consolidated 2021 ($ millions) | MIS 2020 ($ millions) | MA 2020 ($ millions) | Consolidated 2020 ($ millions) | | :------------------------ | :-------------------- | :------------------- | :----------------------------- | :-------------------- | :------------------- | :----------------------------- | | Revenue | 3,977 | 2,413 | 6,218 | 3,440 | 2,086 | 5,371 | | Operating, SG&A | 1,503 | 1,786 | 3,117 | 1,387 | 1,472 | 2,704 | | Adjusted Operating Income | 2,474 | 627 | 3,101 | 2,053 | 614 | 2,667 | Consolidated Revenue by Geographic Area (2021 vs. 2020) | Geographic Area | 2021 ($ millions) | 2020 ($ millions) | | :-------------- | :---------------- | :---------------- | | U.S. | 3,416 | 2,955 | | Non-U.S. | 2,802 | 2,416 | | Total | 6,218 | 5,371 | [NOTE 23. Valuation and Qualifying Accounts](index=134&type=section&id=NOTE%2023%20VALUATION%20AND%20QUALIFYING%20ACCOUNTS) Provides details on allowances for credit losses and deferred tax asset valuation allowances Allowances for Credit Losses and Deferred Tax Assets Valuation Allowance (2019-2021) | Account | 2021 Balance at End of Year ($ millions) | 2020 Balance at End of Year ($ millions) | 2019 Balance at End of Year ($ millions) | | :-------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Allowances for credit losses | (32) | (34) | (20) | | Deferred tax assets—valuation allowance | (18) | (15) | (9) | [NOTE 24. Other Non-Operating Income, Net](index=134&type=section&id=NOTE%2024%20OTHER%20NON-OPERATING%20INCOME%2C%20NET) Details the components of non-operating income and expenses, including foreign exchange and investment gains Components of Other Non-Operating Income, Net (2019-2021) | Component | 2021 ($ millions) | 2020 ($ millions) | 2019 ($ millions) | | :-------------------------------------- | :---------------- | :---------------- | :---------------- | | FX (loss) gain | (1) | 2 | (

Financial Performance - Moody's Corporation (MCO) reported revenue of $6.2 billion, a 16% increase, with Moody's Investors Service (MIS) contributing $3.8 billion and Moody's Analytics (MA) $2.4 billion[6] - Adjusted diluted EPS increased by 21% to $12.29[6] - The company projects approximately $2.0 billion in share repurchases and dividends for 2022[6] - The company anticipates MCO revenue to increase by a high-single-digit percentage in 2022, with an adjusted operating margin between 49% and 50%, and an adjusted diluted EPS range of $12.40 to $12.90[6] Moody's Investors Service (MIS) - MIS rated over $6 trillion in issuance during the year[8] - Total MIS rated issuance increased by 9% year-over-year[18] - Structured Finance issuance increased by 123% year-over-year[18] - Leveraged Loans issuance increased by 104% year-over-year[18] - Investment Grade issuance decreased by 36% year-over-year[18] Moody's Analytics (MA) - MA delivered over 55 consecutive quarters of revenue growth[8] - MA organic revenue growth was 9%[23] - MA recurring revenue comprised 95% of total MA revenue[23] - MA added over 2,000 customer accounts in 2021[23]

Moody's Corporation (NYSE:MCO) Q4 2021 Results Conference Call February 10, 2022 11:30 AM ET Company Participants Shivani Kak - Head, IR Robert Fauber - President, CEO & Director Mark Kaye - SVP & CFO Conference Call Participants Manav Patnaik - Barclays Bank Alex Kramm - UBS Ashish Sabadra - RBC Capital Markets Toni Kaplan - Morgan Stanley Kevin McVeigh - Crédit Suisse Craig Huber - Huber Research Partners Jeff Silber - BMO Capital Markets Andrew Steinerman - JPMorgan Chase & Co Owen Lau - Oppenheimer Andr ...

Moody's Corp (NYSE:MCO) Q3 2021 Earnings Conference Call October 28, 2021 11:30 AM ET Company Participants Shivani Kak - Head, IR Robert Fauber - President, CEO & Director Mark Kaye - SVP & CFO Conference Call Participants Manav Patnaik - Barclays Bank Alexander Kramm - UBS Ashish Sabadra - RBC Capital Markets Toni Kaplan - Morgan Stanley Kevin McVeigh - Crédit Suisse George Tong - Goldman Sachs Group Trevor Romeo - William Blair & Company Craig Huber - Huber Research Partners Jeffrey Silber - BMO Capital M ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=13&type=section&id=Item%201.%20Financial%20Statements) This section presents Moody's unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2021, and 2020, including statements of operations, balance sheets, cash flows, and detailed notes [Consolidated Financial Statements](index=13&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show significant revenue and net income growth for the nine months ended September 30, 2021, with total assets increasing to $14.4 billion, largely due to acquisitions Consolidated Statements of Operations Highlights (in millions, except EPS) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $1,526 | $1,356 | $4,679 | $4,081 | | **Operating Income** | $676 | $642 | $2,330 | $1,944 | | **Net Income** | $474 | $467 | $1,787 | $1,463 | | **Diluted EPS** | $2.53 | $2.47 | $9.51 | $7.73 | Consolidated Balance Sheet Highlights (in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $4,255 | $4,509 | | **Goodwill** | $5,898 | $4,556 | | **Total Assets** | $14,414 | $12,409 | | **Total Liabilities** | $11,795 | $10,646 | | **Total Shareholders' Equity** | $2,619 | $1,763 | Consolidated Statements of Cash Flows Highlights (in millions) | Metric | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $1,706 | $1,488 | | **Net cash used in investing activities** | $(2,161) | $(853) | | **Net cash provided by financing activities** | $135 | $3 | [Notes to Condensed Consolidated Financial Statements](index=21&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail key accounting policies and financial data, highlighting significant revenue increases, the $1.9 billion RMS acquisition, and the company's debt structure and segment performance - The company realigned its MA reporting units for goodwill impairment testing in Q2 2021 from five units to two, following a strategic reorganization, with a quantitative assessment as of July 31, 2021, not resulting in any impairment[81](index=81&type=chunk)[82](index=82&type=chunk) - On September 15, 2021, the company acquired RMS, a global provider of climate and natural disaster risk modeling, for a total consideration of **$1.936 billion**, expanding its insurance data and analytics business[117](index=117&type=chunk)[118](index=118&type=chunk) - On October 26, 2021, the Board approved a quarterly dividend of **$0.62 per share**, and on October 13, 2021, Moody's completed a **$250 million minority investment** in BitSight[213](index=213&type=chunk) Revenue by Segment (in millions) | Segment | Q3 2021 Revenue | Q3 2020 Revenue | YTD 2021 Revenue | YTD 2020 Revenue | | :--- | :--- | :--- | :--- | :--- | | **MIS** | $925 | $825 | $2,941 | $2,557 | | **MA** | $601 | $531 | $1,738 | $1,524 | | **Total** | $1,526 | $1,356 | $4,679 | $4,081 | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=56&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 and YTD 2021 financial results, highlighting 13% Q3 and 15% YTD revenue growth driven by MIS and MA segments, increased operating expenses due to acquisitions, and strong liquidity Q3 2021 vs Q3 2020 Performance Summary | Metric | Q3 2021 | Q3 2020 | % Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $1,526M | $1,356M | 13% | | **Operating Margin** | 44.3% | 47.3% | (300 bps) | | **Adjusted Operating Margin** | 48.3% | 53.2% | (490 bps) | | **Diluted EPS** | $2.53 | $2.47 | 2% | | **Adjusted Diluted EPS** | $2.69 | $2.69 | 0% | YTD 2021 vs YTD 2020 Performance Summary | Metric | YTD 2021 | YTD 2020 | % Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $4,679M | $4,081M | 15% | | **Operating Margin** | 49.8% | 47.6% | 220 bps | | **Adjusted Operating Margin** | 53.7% | 52.3% | 140 bps | | **Diluted EPS** | $9.51 | $7.73 | 23% | | **Adjusted Diluted EPS** | $9.96 | $8.24 | 21% | - The COVID-19 pandemic has not had a material adverse impact on reported results to date and is not expected to in the near-term, but longer-term impacts remain uncertain[217](index=217&type=chunk) [Results of Operations](index=59&type=section&id=Results%20of%20Operations) Q3 2021 revenue increased 13% to $1.5 billion, driven by MIS and MA growth, while operating and SG&A expenses rose 24% due to acquisitions and compensation, impacting Q3 margins - MIS Q3 revenue grew **12% to $925 million**, driven by a **63% surge in Structured Finance (SFG)** and a **6% rise in Corporate Finance (CFG)**, primarily from strong U.S. bank loan and CLO activity[230](index=230&type=chunk)[246](index=246&type=chunk)[254](index=254&type=chunk) - MA Q3 revenue increased **13% to $601 million** (**8% organic growth**), led by a **15% rise in RD&A** from strong demand for KYC solutions and data feeds, while ERS organic revenue declined 2% due to a strategic shift[230](index=230&type=chunk)[271](index=271&type=chunk)[278](index=278&type=chunk) - Q3 operating and SG&A expenses rose **24% to $789 million**, driven by inorganic growth from acquisitions, including **$22 million in RMS transaction costs**, higher incentive compensation, and strategic technology investments[231](index=231&type=chunk) - For the nine months ended Sep 30, 2021, MIS revenue grew **15% to $2.9 billion**, and MA revenue grew **14% to $1.7 billion**, with the total operating margin expanding by **220 basis points to 49.8%**[280](index=280&type=chunk)[281](index=281&type=chunk) [Liquidity and Capital Resources](index=89&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity, with operating cash flow of $1.7 billion for the first nine months of 2021, while cash used in investing activities significantly increased to $2.2 billion due to acquisitions Cash Flow Summary (Nine Months Ended Sep 30, in millions) | Flow | 2021 | 2020 | | :--- | :--- | :--- | | **Operating Activities** | $1,706 | $1,488 | | **Investing Activities** | $(2,161) | $(853) | | **Financing Activities** | $135 | $3 | - The increase in cash used for investing activities was primarily due to **$1.3 billion more in cash paid for acquisitions** in 2021 compared to 2020[330](index=330&type=chunk) - As of September 30, 2021, approximately **$1.2 billion remained under the share repurchase authorizations**[337](index=337&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=98&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports no material changes to its market risk during the first nine months of 2021, referring to its 2020 Form 10-K for further discussion - There have been no material changes to the Company's market risk during the first nine months of 2021[367](index=367&type=chunk) [Controls and Procedures](index=98&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of September 30, 2021, noting a new ERP system implementation automated certain controls without materially affecting overall internal control - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[368](index=368&type=chunk) - In Q3 2021, the company completed the second phase of a new ERP system implementation, automating certain controls without materially changing the overall internal control environment[369](index=369&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=99&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 18, 'Contingencies,' in the financial statements for information regarding various legal and regulatory proceedings incidental to the business - Information regarding legal proceedings is provided in Note 18, 'Contingencies,' of the financial statements[372](index=372&type=chunk) [Risk Factors](index=99&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes from the significant risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020 - There have been no material changes from the risk factors disclosed in the company's 2020 Form 10-K[373](index=373&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=99&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2021, Moody's repurchased 340,807 shares at an average price of $374.70, with approximately $1.203 billion remaining under the share repurchase program as of September 30, 2021 Share Repurchases for Q3 2021 | Month | Total Shares Purchased | Average Price Paid | Shares Purchased Under Program | | :--- | :--- | :--- | :--- | | **July** | 283,386 | $374.04 | 277,547 | | **August** | 56,345 | $377.98 | 55,636 | | **September** | 1,076 | — | — | | **Total** | **340,807** | **$374.70** | **333,183** | - As of September 30, 2021, approximately **$1.203 billion of share repurchase authority remained available**[375](index=375&type=chunk) [Exhibits](index=100&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including agreements for the RMS acquisition, supplemental indentures for new debt, and CEO/CFO certifications - Exhibits filed include the Purchase Agreement for the RMS acquisition, supplemental indentures for new senior notes due 2031 and 2041, and CEO/CFO certifications[377](index=377&type=chunk)