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)

Moody's Corp (NYSE:MCO) Q2 2021 Earnings Conference Call July 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 Kevin McVeigh - Crédit Suisse George Tong - Goldman Sachs Group Toni Kaplan - Morgan Stanley Alexander Kramm - UBS Owen Lau - Oppenheimer Jeffrey Silber - BMO Capital Markets Craig Huber - Huber Research Partners Andrew Nicholas - William Blair & Company Ashish ...

Financial Data and Key Metrics Changes - Moody's reported a revenue growth of 24% in Q1 2021, with adjusted diluted EPS increasing by 49% to $4.06 [8][9] - Adjusted operating income rose 41% to $914 million, and the adjusted operating margin expanded by 680 basis points to 57.1% [9][20] - The company updated its full-year 2021 guidance, projecting revenue to increase in the high single-digit percent range and adjusted diluted EPS to be in the range of $11 to $11.30 [8][24] Business Line Data and Key Metrics Changes - Moody's Investor Service (MIS) generated over $1 billion in revenue, up 30% year-over-year, marking the first time MIS revenue exceeded $1 billion in a single quarter [8][19] - Moody's Analytics (MA) revenue grew by 14%, with subscription-based products driving this growth [8][20] - MIS's adjusted operating margin expanded to 67.7%, while MA's adjusted operating margin increased to 32.9% [20][24] Market Data and Key Metrics Changes - Issuance volumes reached their highest level in over a decade, with leveraged loans and high-yield bond issuance increasing by 94% and 85%, respectively [10][11] - The global speculative-grade default rate is expected to decline to approximately 3% to 4% by year-end, improving the outlook for corporate defaults [11][23] - Investment-grade issuance is expected to decline by approximately 30% for the full year, while high-yield bonds and leveraged loans are projected to be flat and up 55%, respectively [25][26] Company Strategy and Development Direction - The company is focused on innovation and integrating new features into its products to meet evolving customer needs, particularly in areas like ESG and climate [13][15] - Moody's is making strategic investments in KYC, commercial real estate, and ESG, aiming to enhance its risk assessment capabilities [44][45] - The company is also integrating recent acquisitions to improve its offerings and customer solutions [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic backdrop, which supports business growth and capital investment, while acknowledging potential challenges such as a third wave of infections [11][68] - The company anticipates a modest decline in issuance in the second half of 2021, as many issuers are expected to fulfill their funding needs earlier in the year [25][49] - Management highlighted the importance of economic growth as a key driver for the business over the medium and long term [78] Other Important Information - The company is maintaining its expense growth expectations in the mid-single-digit percent range while focusing on cost efficiency initiatives [24][29] - Moody's free cash flow forecast is expected to be between $2.1 billion and $2.2 billion, with share repurchases anticipated at approximately $1.5 billion [25] Q&A Session Summary Question: Insights on the full-year guidance raise - Management noted that the full-year adjusted EPS guidance was increased to approximately $11.15, reflecting strong operating performance from MIS [34] Question: Clarification on MIS margins - Management explained that the guidance for MIS margins is approximately 61%, with expectations for lower margins in the latter part of the year due to tough comparables and issuance activity [36] Question: Opportunities in insurance and commercial real estate - Management discussed the growth in the insurance business driven by IFRS 17 compliance and the integration of data analytics in commercial real estate solutions [40][41] Question: Update on M&A opportunities - Management emphasized a focus on acquiring assets that enhance risk assessment capabilities and meet evolving customer needs [44][45] Question: Clarification on issuance outlook - Management acknowledged that Q2 2020 had a surge in issuance, making it a tough comparable, and expects a modest decline in issuance in Q2 and Q3 [49][50] Question: Discussion on refinancing pull-forward activity - Management indicated that many borrowers pulled forward their 2021 funding plans to take advantage of favorable rates, impacting the issuance outlook [75]

[Glossary of Terms and Abbreviations](index=4&type=section&id=Glossary%20of%20Terms%20and%20Abbreviations) [Glossary of Terms and Abbreviations](index=4&type=section&id=Glossary%20of%20Terms%20and%20Abbreviations) This section defines key terms, abbreviations, and acronyms used throughout the report - The glossary defines key operational and financial terms used in the report, including the two main reportable segments: **Moody's Investors Service (MIS)** and **Moody's Analytics (MA)**[8](index=8&type=chunk) - Several recent acquisitions are defined, highlighting the company's strategic focus areas, such as **Regulatory Data Corporation (RDC)** for KYC services, **Vigeo Eiris (VE)** for ESG research, and **ZM Financial Systems (ZMFS)** for risk management software[10](index=10&type=chunk)[11](index=11&type=chunk) - The glossary includes definitions for various restructuring programs, such as the **2020 Real Estate Rationalization** and the **2020 MA Strategic Reorganization**, indicating recent operational adjustments[11](index=11&type=chunk) Part I [Item 1. Business](index=10&type=section&id=Item%201.%20Business) Moody's operates as a global integrated risk assessment firm with two main segments, MIS for credit ratings and MA for data solutions [The Company](index=10&type=section&id=The%20Company) The company operates as a global risk assessment firm with two segments, MIS and MA, generating $5.4 billion in 2020 revenue 2020 Financial Highlights by Segment | Segment | 2020 Revenue Contribution | 2020 Operating Margin | 2020 Adjusted Operating Margin | | :--- | :--- | :--- | :--- | | **Moody's Corporation Total** | **$5.4 billion** | **44.5%** | **49.7%** | | Moody's Investors Service (MIS) | 61% (approx. $3.3B) | 57.1% | 59.7% | | Moody's Analytics (MA) | 39% (approx. $2.1B) | 20.3% | 29.4% | - The company's strategic evolution focuses on expanding beyond its traditional ratings agency role by building out data and analytics capabilities, particularly through acquisitions like **Bureau van Dijk (BvD)** for private company information[15](index=15&type=chunk) - Moody's is positioned to serve high-growth risk assessment use cases, such as **Know-Your-Customer (KYC)** and compliance, by integrating its data and analytics with technology and expertise[15](index=15&type=chunk) [Human Capital](index=16&type=section&id=Human%20Capital) The company employed 11,490 people in 2020, a 4% increase, with a focus on diversity, equity, and inclusion initiatives Employee Headcount by Segment (as of Dec 31) | Segment | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | MIS | 5,076 | 4,811 | 6% | | MA | 4,967 | 4,833 | 3% | | MSS | 1,447 | 1,437 | 1% | | **Total MCO** | **11,490** | **11,081** | **4%** | - The company is focused on diversity, equity, and inclusion, with objectives to increase diverse representation; as of December 31, 2020, women comprised **38% of the total workforce** and **35% of officers and managers**[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) - **Voluntary employee turnover decreased in 2020** compared to 2019, a trend attributed to the labor market effects of the COVID-19 pandemic[36](index=36&type=chunk) [Moody's Strategy](index=20&type=section&id=Moody's%20Strategy) The company's growth strategy combines organic development with targeted acquisitions to enhance its core businesses and expand into new markets Key 2020 Acquisitions and Strategic Investments | Date | Business Area | Company Acquired/Invested In | Stake | Strategic Rationale | | :--- | :--- | :--- | :--- | :--- | | Dec 2020 | Commercial Real Estate | Catylist, Inc | 100% | Enhance MA's CRE platform with property-level data for the broker market | | Dec 2020 | Risk Solutions | ZM Financial Systems | 100% | Broaden MA's suite of enterprise risk solutions for the U.S. banking sector | | Nov 2020 | ESG & KYC | MioTech | Minority | Provide technology-enabled ESG and KYC solutions for China's financial markets | | Oct 2020 | Data | Acquire Media | 100% | Strengthen MA's ability to provide real-time insights and early warning signals | | Feb 2020 | KYC | Regulatory DataCorp (RDC) | 100% | Complement the 2017 acquisition of Bureau van Dijk (BvD) to create a global leader in compliance solutions | - Future strategic priorities include sharpening customer focus, investing with intent to grow and scale, and collaborating to modernize and innovate, particularly in technology interoperability and data access[43](index=43&type=chunk) [Prospects for Growth](index=22&type=section&id=Prospects%20for%20Growth) Long-term growth is anticipated from the expansion of global fixed-income and financial information markets, including ESG and KYC - The company identifies strong secular trends providing long-term growth opportunities for MIS, including debt market issuance driven by global GDP and the disintermediation of fixed-income markets[48](index=48&type=chunk) - Growth drivers for MA include expansion into adjacent data and analytics markets such as **ESG, KYC, and CRE**, as well as the continued shift to SaaS-based solutions for credit decisioning[51](index=51&type=chunk)[53](index=53&type=chunk) - **ESG data and solutions** are expected to be an increasingly important growth driver across both the MIS and MA segments as market participants seek trusted insights for decision-making[44](index=44&type=chunk) [Regulation](index=24&type=section&id=Regulation) The company operates in a highly regulated industry with significant oversight from the SEC in the U.S. and ESMA in the EU - In the U.S., Credit Rating Agencies (CRAs) are regulated by the SEC pursuant to the **Reform Act** and the **Dodd-Frank Act**, which enhanced oversight and changed liability standards[57](index=57&type=chunk) - In the EU, the industry is supervised by the **European Securities and Markets Authority (ESMA)**, which sets rules on methodologies, conflicts of interest, and sovereign ratings[57](index=57&type=chunk) - Following Brexit, the MIS U.K. registered CRA is now regulated by the U.K. Financial Conduct Authority, with arrangements in place to endorse ratings between the U.K. and EU[57](index=57&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks across legal, regulatory, business, and technology domains, including the impact of COVID-19 - Legal and regulatory risks are prominent, stemming from complex and evolving laws in the U.S. (**Dodd-Frank Act**) and abroad (**EU regulations via ESMA**) that could increase costs and heighten litigation exposure[73](index=73&type=chunk)[78](index=78&type=chunk) - Business results are highly sensitive to the volume of debt securities issued in capital markets, which is influenced by economic conditions, interest rates, and market volatility[104](index=104&type=chunk)[105](index=105&type=chunk)[119](index=119&type=chunk) - The company is exposed to significant technology risks, including **cybersecurity threats** targeting its systems and confidential data, the need to comply with various data privacy laws like **GDPR**, and reliance on third-party infrastructure[125](index=125&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) - The global **COVID-19 pandemic** is highlighted as a material risk factor that could adversely impact operations, financial performance, and the achievement of strategic objectives[117](index=117&type=chunk)[118](index=118&type=chunk) [Item 2. Properties](index=40&type=section&id=Item%202.%20Properties) The company's operations are conducted from 124 leased offices worldwide, with its headquarters in New York City - The company's principal executive offices are at **7 World Trade Center, New York, NY**[133](index=133&type=chunk) - As of year-end 2020, Moody's conducted its business from a total of **124 leased office locations worldwide** (26 in the U.S. and 98 non-U.S.)[133](index=133&type=chunk) Part II [Item 5. Market for the Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities](index=41&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity,%20Related%20Shareholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details information about Moody's common stock, shareholder matters, and share repurchase activities Share Repurchases (Q4 2020) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Oct 1-31 | — | — | | Nov 1-30 | 395,735 | $277.73 | | Dec 1-31 | 502,196 | $278.92 | | **Total Q4** | **897,931** | **$278.40 (weighted avg.)** | - As of December 31, 2020, Moody's had approximately **$831 million remaining** under its share repurchase authority, with an additional **$1.0 billion approved** in February 2021[136](index=136&type=chunk) - The company's **5-year cumulative total shareholder return was 206%**, significantly outperforming the S&P 500 (103%) and Russell 3000 Financial Services (84%) indices[140](index=140&type=chunk)[142](index=142&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2020, revenue grew 11% to $5.37 billion and Diluted EPS rose 27% to $9.39, driven by strong performance in both MIS and MA segments [Results of Operations](index=50&type=section&id=Results%20of%20Operations) Total revenue increased 11% to $5.37 billion in 2020, driven by strong corporate debt issuance in MIS and acquisition-led growth in MA Moody's Corporation Full Year 2020 vs. 2019 Financial Summary | Financial Metric | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $5,371 M | $4,829 M | 11% | | Operating Income | $2,388 M | $1,998 M | 20% | | Adjusted Operating Income | $2,667 M | $2,291 M | 16% | | Operating Margin | 44.5% | 41.4% | +310 bps | | Adjusted Operating Margin | 49.7% | 47.4% | +230 bps | | Diluted EPS | $9.39 | $7.42 | 27% | | Adjusted Diluted EPS | $10.15 | $8.29 | 22% | - **MIS revenue grew 15% to $3.29 billion**, primarily driven by a 24% increase in Corporate Finance Group (CFG) revenue from higher debt issuance as companies bolstered liquidity amid COVID-19 uncertainty[179](index=179&type=chunk)[192](index=192&type=chunk)[198](index=198&type=chunk) - **MA revenue grew 6% to $2.08 billion** (8% on an organic basis), led by a 19% increase in Research, Data, and Analytics (RD&A) revenue from strong demand for KYC solutions and acquisitions[179](index=179&type=chunk)[212](index=212&type=chunk)[217](index=217&type=chunk) [Liquidity and Capital Resources](index=65&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position, generating $2.04 billion in free cash flow and increasing long-term debt by a net $691 million Summary of Cash Flows (in millions) | Cash Flow Activity | 2020 | 2019 | $ Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $2,146 | $1,675 | $471 | | Net cash (used in) provided by investing activities | $(1,077) | $36 | $(1,113) | | Net cash used in financing activities | $(351) | $(1,563) | $1,212 | | **Free Cash Flow** | **$2,043** | **$1,606** | **$437** | - In 2020, the company increased its long-term debt position by a **net $691 million** to enhance liquidity in response to COVID-19 uncertainties[231](index=231&type=chunk)[237](index=237&type=chunk) - As of December 31, 2020, the company had **$2.7 billion in cash, cash equivalents, and short-term investments**, of which approximately $1.5 billion was located outside the U.S[231](index=231&type=chunk) [Item 8. Financial Statements](index=73&type=section&id=Item%208.%20Financial%20Statements) This section contains the audited consolidated financial statements for the fiscal year ended December 31, 2020 [Consolidated Statements of Operations](index=77&type=section&id=Consolidated%20Statements%20of%20Operations) For 2020, total revenues were $5.371 billion, operating income was $2.388 billion, and diluted EPS was $9.39 Consolidated Statement of Operations Highlights (in millions, except EPS) | Line Item | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Revenue | $5,371 | $4,829 | $4,443 | | Operating income | $2,388 | $1,998 | $1,868 | | Net income attributable to Moody's | $1,778 | $1,422 | $1,310 | | Diluted EPS | $9.39 | $7.42 | $6.74 | [Consolidated Balance Sheets](index=79&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2020, total assets were $12.41 billion and total liabilities were $10.65 billion Consolidated Balance Sheet Highlights (in millions) | Line Item | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $2,597 | $1,832 | | Goodwill | $4,556 | $3,722 | | **Total Assets** | **$12,409** | **$10,265** | | **Liabilities & Equity** | | | | Long-term debt | $6,422 | $5,581 | | **Total Liabilities** | **$10,646** | **$9,428** | | **Total Moody's Shareholders' Equity** | **$1,569** | **$612** | [Consolidated Statements of Cash Flows](index=80&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For 2020, net cash from operations was $2.15 billion, with $897 million used for acquisitions and $923 million for share repurchases and dividends Consolidated Statement of Cash Flows Highlights (in millions) | Line Item | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $2,146 | $1,675 | $1,461 | | Net cash (used in) provided by investing activities | $(1,077) | $36 | $(406) | | Net cash used in financing activities | $(351) | $(1,563) | $(412) | | **Increase in cash and cash equivalents** | **$765** | **$147** | **$613** | Part III [Items 10-14](index=132&type=section&id=Items%2010-14) This section incorporates information by reference from the company's 2021 definitive proxy statement - Information required for Items 10 through 14 is incorporated by reference from the Registrant's definitive proxy statement for its annual meeting of stockholders scheduled for April 20, 2021[497](index=497&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=133&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the documents filed as part of the Form 10-K report, including an index of all exhibits - This section provides a comprehensive list of all exhibits filed with the Form 10-K, including corporate governance documents, debt indentures, and management compensation plans[502](index=502&type=chunk)[503](index=503&type=chunk)

Financial Data and Key Metrics Changes - Moody's achieved record financial results in 2020, with revenue growth of 11% and an increase in adjusted diluted EPS of 22% [9] - Adjusted operating income rose 16% to $2.7 billion, and adjusted operating margin expanded by 230 basis points to 49.7% [11] - For 2021, Moody's projects revenue to increase in the mid-single digit percent range, with adjusted diluted EPS forecasted to be between $10.30 and $10.70 [10][32] Business Line Data and Key Metrics Changes - Moody's Investors Service (MIS) generated $3.3 billion in revenue, up 15% from the prior year, while Moody's Analytics (MA) revenue totaled $2.1 billion, up 6% [9] - MA's recurring revenue now comprises over 90% of its total, driven by a strategic focus on subscription-based business [15] - In Q4 2020, MIS revenue increased by 2%, while MA revenue grew by 8% [24] Market Data and Key Metrics Changes - Credit market activity reached record levels in 2020, particularly for non-financial corporate issuance, which grew over 16% from its previous high in 2017 [14] - Investment grade issuance is projected to decline approximately 30% in 2021, while leveraged loan issuance is expected to grow by about 10% [33] - The global high-yield default rate is expected to decline below 5% by year-end 2021 [30] Company Strategy and Development Direction - Moody's aims to integrate and leverage data and analytic capabilities while investing in innovation to meet evolving customer needs [10] - The company is focused on expanding its presence in risk assessment markets, particularly in KYC and compliance solutions [19] - Recent acquisitions, including Cortera, are expected to enhance Moody's data offerings and support growth in various markets [22] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of resilience in scenario planning and the need for a holistic view of risk management in a complex environment [17] - The outlook for 2021 reflects assumptions regarding economic conditions, including a projected U.S. GDP increase of approximately 4% to 5% [30] - Management expressed confidence in the long-term growth opportunities driven by high demand for data analytics and insights [36] Other Important Information - Moody's plans to return approximately $2 billion to stockholders in 2021 through dividends and share repurchases [10] - The company made significant contributions to diversity and inclusion initiatives, as well as environmental sustainability efforts [12] Q&A Session All Questions and Answers Question: Margin outlook for 2021 - Management is focused on balancing margin expansion with necessary investments, projecting margins to remain around 49% to 50% for the year [38][40] Question: Issuance forecasts and flat revenue forecasts - Management expects issuance to be down modestly year-over-year, with a high single-digit percent decline, while recurring revenue growth is projected in the low to mid-single digits [44][50] Question: Thoughts on M&A strategy - Management remains open to both large and small acquisitions, focusing on opportunities that advance their strategic goals [56][58] Question: ESG revenue growth - ESG revenue is projected to grow by around 25% in 2021, with additional revenue expected from integrating ESG data into existing products [60] Question: Growth opportunities beyond KYC and compliance - Management sees strong demand for data and analytics on private companies, as well as growth in commercial real estate content and economic data [66]