Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains Forward-Looking Statements. See “Forward-Looking Statements” commencing on page 59 for a discussion of uncertainties, risks and other factors associated with these statements.

THE COMPANY

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

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

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

Sustainability

Moody’s manages its business with the goal of delivering value to all of its stakeholders, including its customers, employees, business partners, local communities and stockholders. As part of this effort, Moody’s advances sustainability by considering environmental, social, and governance (“ESG”) factors throughout its operations and products and services. The Company uses its expertise and assets to make a positive difference through technology tools, research and analytical services that help other organizations and the investor community better understand the links between sustainability considerations and the global markets. Moody’s efforts to promote sustainability-related thought leadership, assessments and data to market participants include adhering to the policies of recognized sustainability organizations that develop standards or frameworks and/or evaluate and assess performance, including: the Global Reporting Initiative (GRI); Sustainability Accounting Standards Board (SASB); and the World Economic Forum (WEF)’s Stakeholder Capitalism metrics. Moody's also issues an annual report on Stakeholder Sustainability and on how the Company has implemented the Task Force on Climate-related Financial Disclosures (“TCFD”) recommendations. Moody’s sustainability-related achievements during the first quarter of 2022 included the following:

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

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

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

–Awarded Best ESG Reporting (large-cap) from IR Magazine

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

Russia/Ukraine Conflict

The Company is closely monitoring the impact of the ongoing Russia/Ukraine conflict on all aspects of its business. In response to the conflict, in the first quarter of 2022, the Company has suspended commercial operations in Russia for both MIS and MA and is complying with all applicable regulatory restrictions set forth by the jurisdictions in which Moody's operates. Furthermore, the Company also has withdrawn MIS credit ratings on Russian entities.

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

COVID-19

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

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

Reportable Segments

The Company is organized into two reportable segments at March 31, 2022: MIS and MA, which are more fully described in the section entitled “The Company” above and in Note 17 to the condensed consolidated financial statements.

Reclassification of Previously Reported Revenue by LOB

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

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

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

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

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

RESULTS OF OPERATIONS

Impact of acquisitions/divestitures on comparative results

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

–Cortera on March 19, 2021;

–RMS on September 15, 2021;

–RealXData on September 17, 2021; and

–PassFort on November 30, 2021.

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

Three months ended March 31, 2022 compared with three months ended March 31, 2021

Executive Summary

The following table provides an executive summary of key operating results for the quarter ended March 31, 2022. Following this executive summary is a more detailed discussion of the Company’s operating results as well as a discussion of the operating results of the Company’s reportable segments.

			Three Months Ended March 31,
Financial measure:			2022			2021			% Change Favorable (Unfavorable)			Insight and Key Drivers of Change Compared to Prior Year
Moody's total revenue			$	1,522		$	1,600		(5		%)	— reflects lower MIS revenue partially offset by growth in MA
MIS External Revenue			$	827		$	1,036		(20		%)	— mainly reflects declines in leveraged finance (high-yield corporate debt and bank loans) issuance resulting from market volatility relating to the Russia/Ukraine conflict, inflation concerns and rising borrowing costs
MA External Revenue			$	695		$	564		23		%	— inorganic growth from acquisitions; — continued growth in KYC products; and — ongoing recurring revenue growth from subscription-based sales to banking and insurance customers
Total operating and SG&A expenses			$	788		$	686		(15		%)	— operational and integration costs associated with recent acquisitions contributed approximately 13 percentage points of growth
Total non-operating (expense) income, net			$	(47)		$	9		NM			— primarily reflects a $40 million benefit in the prior period related to the reversal of tax-related interest accruals pursuant to the resolution of tax matters
Operating Margin			43.1		%	53.3		%	(1,020		BPS)	— margin declines primarily due to the aforementioned decrease in MIS revenue
Adjusted Operating Margin			48.2		%	57.1		%	(890		BPS)
ETR			18.2		%	14.6		%	(360		BPS)	— primarily due to the resolution of uncertain tax positions in the first quarter of 2021 that did not recur to the same extent in the first quarter of 2022
Diluted EPS			$	2.68		$	3.90		(31		%)	— mainly due to declines in MIS revenue coupled with the aforementioned increase in expenses. EPS includes $0.12/share and $0.47/share in benefits related to the aforementioned resolution of tax matters in 2022 and 2021, respectively.
Adjusted Diluted EPS			$	2.89		$	4.06		(29		%)

Moody's Corporation

			Three Months Ended March 31,												% Change Favorable (Unfavorable)
			2022						2021
Revenue:
United States			$	862					$	885					(3		%)
Non-U.S.:
EMEA			434						478						(9		%)
Asia-Pacific			135						156						(13		%)
Americas			91						81						12		%
Total Non-U.S.			660						715						(8		%)
Total			1,522						1,600						(5		%)
Expenses:
Operating			417						393						(6		%)
SG&A			371						293						(27		%)
Depreciation and amortization			78						59						(32		%)
Restructuring			—						2						100		%
Total			866						747						(16		%)
Operating income			$	656					$	853					(23		%)
Adjusted Operating Income (1)			$	734					$	914					(20		%)
Interest expense, net			$	(53)					$	(7)					NM
Other non-operating income, net			6						16						(63		%)
Non-operating (expense) income, net			$	(47)					$	9					NM
Net income attributable to Moody's			$	498					$	736					(32		%)
Diluted weighted average shares outstanding			186.1						188.6						1		%
Diluted EPS attributable to Moody's common shareholders			$	2.68					$	3.90					(31		%)
Adjusted Diluted EPS (1)			$	2.89					$	4.06					(29		%)
Operating margin			43.1		%				53.3		%
Adjusted Operating Margin(1)			48.2		%				57.1		%
Effective tax rate			18.2		%				14.6		%

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

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

									March 31,																		Change
									2022						2021												%
MIS
			U.S.						1,504						1,524												(1		%)
			Non-U.S.						3,895						3,618												8		%
			Total						5,399						5,142												5		%
MA
			U.S.						2,708						2,033												33		%
			Non-U.S.						4,076						2,971												37		%
			Total						6,784						5,004												36		%
MSS
			U.S.						749						672												11		%
			Non-U.S.						981						809												21		%
			Total						1,730						1,481												17		%
Total MCO
			U.S.						4,961						4,229												17		%
			Non-U.S.						8,952						7,398												21		%
			Total						13,913						11,627												20		%

The increase in Moody’s global staffing included approximately 1,300 employees from acquisitions completed subsequent to March 31, 2021.

GLOBAL REVENUE

2022**-----------------------------------------------------------------------------------**2021

_________________________________________********________________________________________

Global revenue ⇓ $78 million						U.S. Revenue ⇓ $23 million						Non-U.S. Revenue ⇓ $55 million

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

						Operating Expense ⇑ $24 million									SG&A Expense ⇑ $78 million

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

Compensation expenses increased $12 million reflecting:												Compensation expenses increased $40 million reflecting:
— inorganic growth from acquisitions; partially offset by												— inorganic growth from acquisitions coupled with hiring and salary increases.
— a higher proportion of compensation costs eligible for capitalization in 2022 reflecting certain product development in the MA operating segment.
Non-compensation expenses increased $12 million reflecting:												Non-compensation expenses increased $38 million reflecting:
— inorganic growth from acquisitions; and												— inorganic growth from acquisitions;
— higher costs relating to strategic initiatives to support business growth coupled with enhancements to technology infrastructure to enable automation, innovation and efficiency.												— higher estimates for bad debt reserves for the Company's Russian-domiciled customers resulting from the impact of the Russia/Ukraine conflict; and
									— higher costs relating to strategic initiatives to support business growth coupled with enhancements to technology infrastructure to enable automation, innovation and efficiency.

						Operating margin 43.1%, down 1,020 BPS									Adjusted Operating Margin 48.2%, down 890 BPS

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

									Interest Expense, net ⇑ $46 million									Other non-operating income ⇓ $10 million

Increase in expense is primarily due to:									Decrease in income is primarily due to:
— a $40 million benefit in the prior year related to the reversal of tax-related interest accruals pursuant to the resolution of uncertain tax positions.									— higher gains in the prior year on certain of the Company's investments in equity securities.

						ETR ⇑ 360 BPS

The increase in the ETR includes approximately $40 million in higher tax benefits from the resolution of uncertain tax positions in 2021 compared to 2022.

						Diluted EPS ⇓ $1.22												Adjusted Diluted EPS ⇓ $1.17

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

Segment Results

Moody’s Investors Service

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

			Three Months Ended March 31,												% Change Favorable (Unfavorable)
			2022						2021
Revenue:
Corporate finance (CFG)			$	417					$	605					(31		%)
Structured finance (SFG)			144						116						24		%
Financial institutions (FIG)			131						162						(19		%)
Public, project and infrastructure finance (PPIF)			123						143						(14		%)
Total ratings revenue			815						1,026						(21		%)
MIS Other			12						10						20		%
Total external revenue			827						1,036						(20		%)
Intersegment revenue			43						40						8		%
Total MIS revenue			$	870					$	1,076					(19		%)
Expenses:
Operating and SG&A (external)			$	358					$	346					(3		%)
Operating and SG&A (intersegment)			2						2						—		%
Total operating and SG&A			$	360					$	348					(3		%)
Adjusted Operating Income			$	510					$	728					(30		%)
Adjusted Operating Margin			58.6		%				67.7		%
Depreciation and amortization			18						18						—		%

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

MOODY'S INVESTORS SERVICE REVENUE

2022**-----------------------------------------------------------------------------------**2021

_________________________________________********________________________________________

MIS: Global revenue ⇓ $209 million			U.S. Revenue ⇓ $134 million			Non-U.S. Revenue ⇓ $75 million

–The decrease in global MIS revenue primarily resulted from a 25% decrease in rated issuance volumes, which resulted in transaction revenue declining $216 million compared to the same period in the prior year. The decline in rated issuance volumes compared to the first quarter of 2021 resulted from geopolitical concerns, rising yields and elevated market uncertainty, which adversely affected issuance in all asset classes.

CFG REVENUE

2022**-----------------------------------------------------------------------------------**2021

_________________________________________********________________________________________

CFG: Global revenue ⇓ $188 million			U.S. Revenue ⇓ $139 million			Non-U.S. Revenue ⇓ $49 million

Global CFG revenue for the three months ended March 31, 2022 and 2021 was comprised as follows:

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

The decrease in CFG revenue of 31% reflected declines in both U.S. (34%) and internationally (26%).

Transaction revenue decreased $194 million compared to the same period in the prior year.

The most notable drivers of the decrease compared to 2021 reflected declines in leveraged finance and investment-grade issuance activity compared to a strong prior year period resulting from market volatility relating to the Russia/Ukraine conflict, inflation concerns and higher borrowing costs.

SFG REVENUE

2022**---------------------------------------------------------------------------**2021

_________________________________________********________________________________________

SFG: Global revenue ⇑ $28 million			U.S. Revenue ⇑ $29 million			Non-U.S. Revenue ⇓ $1 million

Global SFG revenue for the three months ended March 31, 2022 and 2021 was comprised as follows:

The 24% increase in SFG revenue was substantially all in the U.S.

Transaction revenue increased $27 million compared to the first quarter of 2021.

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

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

–an increase in U.S. RMBS securitization activity for agency eligible loans in the private market; and

–growth in U.S. ABS issuance activity reflecting larger-sized deals in the first quarter of 2022.

Foreign currency translation unfavorably impacted SFG revenue by three percentage points.

FIG REVENUE

2022**-----------------------------------------------------------------------------------**2021

_________________________________________********________________________________________

FIG: Global revenue ⇓ $31 million			U.S. Revenue ⇓ $21 million			Non-U.S. Revenue ⇓ $10 million

Global FIG revenue for the three months ended March 31, 2022 and 2021 was comprised as follows:

The decrease in FIG revenue of 19% reflected revenue declines in both U.S. (24%) and internationally (13%).

Transaction revenue decreased $29 million compared to the first quarter of 2021.

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

–an unfavorable product mix; and

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

Foreign currency translation unfavorably impacted FIG revenue by two percentage points.

PPIF REVENUE

2022**-----------------------------------------------------------------------------------**2021

_________________________________________********________________________________________

PPIF: Global revenue ⇓ $20 million			U.S. Revenue ⇓ $3 million			Non-U.S. Revenue ⇓ $17 million

Global PPIF revenue for the three months ended March 31, 2022 and 2021 was comprised as follows:

Transaction revenue decreased $21 million compared to the first quarter of 2021.

The decrease in PPIF revenue of 14% reflected declines in the U.S. (4%) and internationally (26%).

The decrease in revenue was mainly due to declines in sovereign, project finance and infrastructure finance rated issuance volumes in EMEA resulting from market volatility and rising funding costs.

						MIS: Operating and SG&A Expense ⇑ $12 million

The growth is due to higher non-compensation costs of $18 million partially offset by lower compensation costs of $6 million, with the most notable drivers reflecting:

Compensation costs						Non-compensation costs
The decrease is primarily due to:						The increase is primarily due to:
— lower incentive compensation accruals and performance-based equity compensation, which aligns with actual/projected financial and operating performance.						— higher estimates for bad debt reserves for the Company's Russian-domiciled customers resulting from the impact of the Russia/Ukraine conflict.

												MIS: Adjusted Operating Margin 58.6% ⇓ 910 BPS

The MIS Adjusted Operating Margin decline primarily reflected the aforementioned 20% decrease in revenue.

Moody’s Analytics

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

			Three Months Ended March 31,												% Change Favorable (Unfavorable)
			2022						2021
Revenue:
Decision Solutions (DS)			$	334					$	225					48		%
Research and Insights (R&I)			183						171						7		%
Data and Information (D&I)			178						168						6		%
Total external revenue			695						564						23		%
Intersegment revenue			2						2						—		%
Total MA revenue			697						566						23		%
Expenses:
Operating and SG&A (external)			430						340						(26		%)
Operating and SG&A (intersegment)			43						40						(8		%)
Total operating and SG&A			473						380						(24		%)
Adjusted Operating Income			$	224					$	186					20		%
Adjusted Operating Margin			32.1		%				32.9		%
Depreciation and amortization			60						41						(46		%)
Restructuring			—						2						100		%

MOODY'S ANALYTICS REVENUE

2022**-----------------------------------------------------------------------------------**2021

_________________________________________********________________________________________

MA: Global revenue ⇑ $131 million			U.S. Revenue ⇑ $111 million			Non-U.S. Revenue ⇑ $20 million

The 23% increase in global MA revenue reflects growth both in the U.S. and internationally in all LOBs and includes revenue from the acquisitions of Cortera, RMS, RealXData and PassFort.

–Organic revenue growth (1) was 9%.

–ARR(2) grew 25% mainly due to acquisitions completed in the previous twelve months. Organic ARR(2) grew 9% representing increased demand for KYC and banking products within the Decision Solutions LOB coupled with growth for company data and ratings feeds products in the Data & Information LOB.

Foreign currency translation unfavorably impacted MA revenue by two percentage points.

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

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

DECISION SOLUTIONS REVENUE

2022**-----------------------------------------------------------------------------------**2021

_________________________________________********________________________________________

DS: Global revenue ⇑ $109 million			U.S. Revenue ⇑ $97 million			Non-U.S. Revenue ⇑ $12 million

Global DS revenue grew 48% compared to the first quarter of 2021 with the most notable drivers of the increase reflecting:

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

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

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

Organic revenue growth for DS was 14%.

Foreign currency translation unfavorably impacted DS revenue by two percentage points.

RESEARCH AND INSIGHTS REVENUE

2022**-----------------------------------------------------------------------------------**2021

****_______****

R&I: Global revenue ⇑ $12 million			U.S. Revenue ⇑ $9 million			Non-U.S. Revenue ⇑ $3 million

Global R&I revenue increased 7% compared to the first quarter of 2021 mainly driven by:

–growth in recurring revenue of 7%, primarily due to continued strong retention and demand for credit research, analytics and models.

DATA AND INFORMATION REVENUE

2022**-----------------------------------------------------------------------------------**2021

****_______****

D&I: Global revenue ⇑ $10 million			U.S. Revenue ⇑ $5 million			Non-U.S. Revenue ⇑ $5 million

Global D&I revenue increased 6% compared to the first quarter of 2021 mainly driven by:

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

–increased demand and new sales for company data.

Recurring revenue growth was 7%.

Foreign currency translation unfavorably impacted D&I revenue by four percentage points.

						MA: Operating and SG&A Expense ⇑ $90 million

The increase in operating and SG&A expenses compared to the first quarter of 2021 reflected growth of $55 million and $35 million in compensation and non-compensation costs, respectively. The most notable drivers of these increases were:

Compensation costs						Non-compensation costs
The increase is primarily due to:						The increase is primarily due to:
— inorganic expense growth from acquisitions, which contributed approximately 90% of the growth; partially offset by						— operating and integration-related costs associated with recent acquisitions, which contributed approximately 60% of the growth; and
— a higher proportion of compensation costs eligible for capitalization in 2022 reflecting certain product development.						— higher costs relating to strategic initiatives to support business growth coupled with enhancements to technology infrastructure to enable automation, innovation and efficiency.

												MA: Adjusted Operating Margin 32.1% ⇓ 80 BPS

The Adjusted Operating Margin contraction for MA is primarily due to operational and integration-related costs associated with recent acquisitions.

LIQUIDITY AND CAPITAL RESOURCES

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

Cash Flow

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

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

			Three Months Ended March 31,												$ Change Favorable (Unfavorable)
			2022						2021
Net cash provided by operating activities			$	470					$	676					$	(206)
Net cash used in investing activities			$	(161)					$	(194)					$	33
Net cash used in financing activities			$	(352)					$	(290)					$	(62)
Free Cash Flow (1)			$	411					$	662					$	(251)

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

Net cash provided by operating activities

Net cash flows from operating activities in the three months ended March 31, 2022 decreased $206 million compared to the same period in 2021 primarily reflecting a decrease in net income (see section entitled “Results of Operations” of this MD&A for further discussion).

Net cash used in investing activities

The $33 million decrease in cash used in investing activities in the three months ended March 31, 2022 compared to the same period in 2021 primarily reflects:

–higher cash paid of $55 million in the prior year for acquisitions (refer to Note 8 to the condensed consolidated financial statements for further discussion on the Company's material M&A activity); and

–cash paid of $23 million in the prior period relating to the settlement of net investment hedges;

partially offset by:

–an increase in cash paid for capital additions of $45 million reflecting product development and investments relating to strategic initiatives to support business growth and to enhance technology infrastructure to enable automation, innovation and efficiency.

Net cash used in financing activities

The $62 million increase in cash used in financing activities in the three months ended March 31, 2022 compared to the same period in the prior year was primarily attributed to:

–higher cash paid for treasury share repurchases in 2022 of $526 million, which includes a $98 million payment for shares made under an ASR agreement executed in the first quarter of 2022 that were retained by a financial institution counterparty until final settlement of the contract in April 2022;

partially offset by:

*–*the issuance of $500 million in long-term debt in 2022.

Cash and cash equivalents and short-term investments

The Company’s aggregate cash and cash equivalents and short-term investments of $1.9 billion at March 31, 2022 included approximately $1.6 billion located outside of the U.S. Approximately 29% of the Company’s aggregate cash and cash equivalents and short-term investments is denominated in euros and British pounds. The Company manages both its U.S. and non-U.S. cash flow to maintain sufficient liquidity in all regions to effectively meet its operating needs.

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

Material Cash Requirements

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

Financing Arrangements

Indebtedness

At March 31, 2022, Moody’s had $7.8 billion of outstanding debt and approximately $1 billion of additional capacity available under the Company’s CP program, which is backstopped by the $1.25 billion 2021 Facility.

The repayment schedule for the Company’s borrowings outstanding at March 31, 2022 is as follows:

For additional information on the Company's outstanding debt, refer to Note 14 to the condensed consolidated financial statements.

Future interest payments and fees associated with the Company's debt and credit facility are expected to be $3.9 billion, of which approximately $233 million is expected to be paid over the next twelve months.

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

Purchase Obligations

Purchase obligations generally include multi-year agreements with vendors to purchase goods or services and mainly include data center/cloud hosting fees and fees for information technology licensing and maintenance. As of March 31, 2022, these purchase obligations totaled $230 million, of which $144 million is expected to be paid in the next twelve months.

Leases

The Company has operating lease obligations of $546 million at March 31, 2022, primarily related to real estate leases, of which $106 million in payments are expected over the next twelve months. For more information on the Company's operating leases, refer to Note 15 to the condensed consolidated financial statements.

Pension and Other Retirement Plan Obligations

The Company does not anticipate making significant contributions to its funded pension plan in the next twelve months. This plan is overfunded at March 31, 2022, and accordingly holds sufficient investments to fund future benefit obligations. Payments for the Company's unfunded plans are not expected to be material in either the short or long-term.

Dividends and share repurchases

On April 26, 2022, the Board approved the declaration of a quarterly dividend of $0.70 per share for Moody’s common stock, payable June 10, 2022 to shareholders of record at the close of business on May 20, 2022. The continued payment of dividends at this rate, or at all, is subject to the discretion of the Board.

On February 9, 2021, the Board approved $1 billion in share repurchase authority, and on February 7, 2022, the Board approved an additional $750 million of share repurchase authority. At March 31, 2022, the Company had approximately $1,173 million of remaining authority. There is no established expiration date for the remaining authorizations.

Sources of Funding to Satisfy Material Cash Requirements

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

Non-GAAP Financial Measures:

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

Adjusted Operating Income and Adjusted Operating Margin**:**

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

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

									Three Months Ended March 31,
															2022						2021
Operating income															$	656					$	853
Adjustments:
Depreciation and amortization															78						59
Restructuring															—						2
Adjusted Operating Income															$	734					$	914
Operating margin															43.1		%				53.3		%
Adjusted Operating Margin															48.2		%				57.1		%

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

The Company presents Adjusted Net Income and Adjusted Diluted EPS because management deems these metrics to be useful measures to provide additional perspective on Moody's operating performance. Adjusted Net Income and Adjusted Diluted EPS exclude the impact of: i) amortization of acquired intangible assets; and ii) restructuring charges/adjustments.

The Company excludes the impact of amortization of acquired intangible assets as companies utilize intangible assets with different ages and have different methods of acquiring and amortizing intangible assets. These intangible assets were recorded as part of acquisition accounting and contribute to revenue generation. The amortization of intangible assets related to acquisitions will recur in future periods until such intangible assets have been fully amortized. Furthermore, the timing and magnitude of business combination transactions are not predictable and the purchase price allocated to amortizable intangible assets and the related amortization period are unique to each acquisition and can vary significantly from period to period and across companies. Restructuring charges are excluded as the frequency and magnitude of these charges may vary widely across periods and companies.

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

Below is a reconciliation of this measure to its most directly comparable U.S. GAAP amount:

									Three Months Ended March 31,
Amounts in millions															2022									2021
Net income attributable to Moody's common shareholders																								$	498								$	736
Pre-Tax Acquisition-Related Intangible Amortization Expenses																					$	51								$	35
Tax on Acquisition-Related Intangible Amortization Expenses																					(12)									(8)
Net Acquisition-Related Intangible Amortization Expenses																								39									27
Pre-Tax Restructuring																					$	—								$	2
Tax on Restructuring																					—									—
Net Restructuring																								—									2
Adjusted Net Income																								$	537								$	765

									Three Months Ended March 31,
															2022									2021
Diluted earnings per share attributable to Moody's common shareholders																								$	2.68								$	3.90
Pre-Tax Acquisition-Related Intangible Amortization Expenses																					$	0.27								$	0.19
Tax on Acquisition-Related Intangible Amortization Expenses																					(0.06)									(0.04)
Net Acquisition-Related Intangible Amortization Expenses																								0.21									0.15
Pre-Tax Restructuring																					$	—								$	0.01
Tax on Restructuring																					—									—
Net Restructuring																								—									0.01
Adjusted Diluted EPS																								$	2.89								$	4.06

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

Free Cash Flow*:*

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

			Three Months Ended March 31,
			2022						2021
Net cash flows provided by operating activities			$	470					$	676
Capital additions			(59)						(14)
Free Cash Flow			$	411					$	662
Net cash flows used in investing activities			$	(161)					$	(194)
Net cash flows used in financing activities			$	(352)					$	(290)

Organic Revenue:

The Company presents the organic revenue and organic revenue growth (including organic recurring revenue and organic recurring revenue growth) because management deems these metrics to be useful measures which provide additional perspective in assessing the revenue growth excluding the inorganic revenue impacts from certain acquisition activity. For further information on the acquired companies included in the calculation of inorganic revenue, refer to Note 8 to the condensed consolidated financial statements and Note 9 as contained in the Company’s annual report on Form 10-K for the year ended December 31, 2021.

Below is a reconciliation of MA's reported revenue and growth rates to its organic revenue and organic growth rates:

									Three Months Ended March 31,
Amounts in millions																											2022						2021						Change						Growth
MA revenue																											$	695					$	564					$	131					23%
Inorganic revenue from acquisitions																											(79)						—						(79)
Organic MA revenue																											$	616					$	564					$	52					9%
									Three Months Ended March 31,
Amounts in millions																											2022						2021						Change						Growth
Decision Solutions revenue																											$	334					$	225					$	109					48%
Inorganic revenue from acquisitions																											(77)						—						(77)
Organic Decision Solutions revenue																											$	257					$	225					$	32					14%
									Three Months Ended March 31,
Amounts in millions																											2022						2021						Change						Growth
Data and Information revenue																											$	178					$	168					$	10					6%
Inorganic revenue from acquisitions																											(2)						—						(2)
Organic Data and Information revenue																											$	176					$	168					$	8					5%
									Three Months Ended March 31,
Amounts in millions																											2022						2021						Change						Growth
MA recurring revenue																											$	651					$	521					$	130					25%
Inorganic recurring revenue from acquisitions																											(75)						—						(75)
Organic MA recurring revenue																											$	576					$	521					$	55					11%

Key Performance Metrics:

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

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

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

Amounts in millions						March 31, 2022						March 31, 2021						Change						Growth
MA ARR						$	2,573					$	2,063					$	510					25%
Organic MA ARR						$	2,246					$	2,063					$	183					9%

Recently Issued Accounting Standards

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

Contingencies

Legal proceedings in which the Company is involved also may impact Moody’s liquidity or operating results. No assurance can be provided as to the outcome of such proceedings. In addition, litigation inherently involves significant costs. For information regarding legal proceedings, see Item 1 - "Financial Statements", Note 16 "Contingencies” in this Form 10-Q.

Regulation

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

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

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

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

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

Forward-Looking Statements

Certain statements contained in this quarterly report on Form 10-Q are forward-looking statements and are based on future expectations, plans and prospects for the business and operations of the Company that involve a number of risks and uncertainties. Such statements involve estimates, projections, goals, forecasts, assumptions and uncertainties that could cause actual results or outcomes to differ materially from those contemplated, expressed, projected, anticipated or implied in the forward-looking statements. Those statements appear at various places throughout this quarterly report on Form 10-Q, including in the sections entitled “Contingencies” under Item 2, “MD&A”, commencing on page 38 of this quarterly report on Form 10-Q, under “Legal Proceedings” in Part II, Item 1, of this Form 10-Q, and elsewhere in the context of statements containing the words “believe”, “expect”, “anticipate”, “intend”, “plan”, “will”, “predict”, “potential”, “continue”, “strategy”, “aspire”, “target”, “forecast”, “project”, “estimate”, “should”, “could”, “may” and similar expressions or words and variations thereof relating to the Company’s views on future events, trends and contingencies or otherwise convey the prospective nature of events or outcomes generally indicative of forward-looking statements. Stockholders and investors are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements and other information are made as of the date of this quarterly report on Form 10-Q, and the Company undertakes no obligation (nor does it intend) to publicly supplement, update or revise such statements on a going-forward basis, whether as a result of subsequent developments, changed expectations or otherwise, except as required by applicable law or regulation. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company is identifying certain factors that could cause actual results to differ, perhaps materially, from those indicated by these forward-looking statements.

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

• the global impact of the crisis in Ukraine on volatility in the U.S. and world financial markets, on general economic conditions and GDP in the U.S. and worldwide, on global relations, and its potential for further worldwide credit market disruptions and economic slowdowns;

• the impact of MIS’s withdrawal of its credit ratings on Russian entities and of Moody’s suspension of commercial operations in Russia;

• the impact of COVID-19 on world financial markets, on general economic conditions and on Moody’s own operations and personnel;

• future worldwide credit market disruptions or economic slowdowns, which could affect the volume of debt and other securities issued in domestic and/or global capital markets;

• other matters that could affect the volume of debt and other securities issued in domestic and/or global capital markets, including regulation, credit quality concerns, changes in interest rates, inflation and other volatility in the financial markets and uncertainty as companies transition away from LIBOR; the level of merger and acquisition activity in the U.S. and abroad;

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

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

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

• pricing pressure from competitors and/or customers; the level of success of new product development and global expansion; the impact of regulation as an NRSRO, the potential for new U.S., state and local legislation and regulations;

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

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

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

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

• uncertainty regarding the future relationship between the U.S. and China; the possible loss of key employees;

• failures or malfunctions of our operations and infrastructure;

• any vulnerabilities to cyber threats or other cybersecurity concerns;

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

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

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

• currency and foreign exchange volatility;

• the level of future cash flows;

• the levels of capital investments; and

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

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