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 54 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 activities in two segments: MIS and MA.

			Provider of financial intelligence and analytical tools supporting customers’ growth, efficiency and risk management objectives						Global integrated risk assessment firm providing credit rating opinions, analytical solutions and insights that empower organizations to make better, faster decisions						Independent provider of credit rating opinions and related information for over 100 years

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.

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.

Sustainability

Moody’s manages its business with the goal of delivering value to all of its stakeholders, including but not limited to, 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 in its operations, 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); International Sustainability Standards Board (ISSB); and the World Economic Forum (WEF)’s Stakeholder Capitalism metrics. On April 20, 2023, Moody's issued its 2022 annual reports on Stakeholder Sustainability and Task Force on Climate-related Financial Disclosures (“TCFD”). Moody’s sustainability-related achievements during the first quarter of 2023 included the following:

–Named 2022 CDP Supplier Engagement Leader on Climate Action for third consecutive year;

–Recognized among America’s 100 Most JUST Companies by JUST Capital and CNBC for its commitment to serving its workforce, customers, communities, the environment, and stockholders; and

–Named to Bloomberg Gender-Equality Index for fourth consecutive year.

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 Audit Committee oversees financial, risk and other disclosures made in the Company’s annual and quarterly reports related to sustainability and has overseen the expanded voluntary disclosures the Company has made in its periodic filings. The Governance & Nominating Committee oversees sustainability matters, including significant issues of corporate social and environmental responsibility, as they pertain to the Company’s business and to long-term value creation for the Company and its stockholders, and makes recommendations to the Board regarding these issues. This has helped to develop the Company’s robust ESG strategy. Finally, the Compensation & Human Resources Committee oversees inclusion of sustainability-related performance goals for determining compensation of all senior executives. This oversight has resulted in the Company more fully integrating sustainability-related performance metrics into the strategic & operational compensation metric of all senior executives. The Board also oversees Moody’s policies for assessing and managing the Company's exposure to risk, including climate-related risks such as business continuity disruption and reputational or credibility concerns stemming from incorporation of climate-related risks into the credit methodologies and credit ratings of MIS.

Three Pillars of Moody's Sustainability Strategy
Better Business									Better Lives									Better Solutions
For Moody's operations and value chain									For Moody's people and communities									For market transformation
Strive to embed responsible, sustainable decision-making into our operations and value chain.									Aim to foster a nurturing and inclusive culture across Moody's people and communities.									Deliver trusted perspectives on financial materiality and sustainability performance that help our customers decode risk and unlock opportunity.

Current Matters Impacting Moody's Business

Current Macroeconomic Uncertainties/Market Volatility

The Company continues to monitor current macroeconomic and geopolitical uncertainties that have contributed to declines in rated issuance volumes beginning in 2022, which have continued into the first quarter of 2023. These uncertainties include, but are not limited to: i) increasing inflation; ii) rising interest rates; and iii) volatility in the global capital markets partly resulting from the ongoing Russia/Ukraine conflict (further discussed below) and the failures of certain banking institutions in the first quarter of 2023. A substantial portion of MIS’s revenue is impacted by the level of issuance activity in the fixed income capital markets, both in the U.S. and internationally. While market volatility has resulted in declines in rated issuance volumes, the Company believes that these declines are predominantly transitory in nature. However, due to various uncertainties, Moody's is unable to predict the severity and duration of current macroeconomic and geopolitical uncertainties and their potential impact on future rated issuance volumes. Refer to Item 1A. “Risk Factors” contained in the Company’s annual report on Form 10-K for the year ended December 31, 2022 for further disclosure relating to these risks.

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, the Company is no longer conducting commercial operations in Russia for both MA and MIS 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, which partially relates to uncertainties surrounding the conflict, has contributed to an adverse impact on rated issuance volumes. This impact to rated issuance volumes 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.

Reportable Segments

The Company is organized into two reportable segments as of March 31, 2023: MA and MIS, which are more fully described in the section entitled “The Company” above and in Note 17 to the condensed consolidated financial statements.

RESULTS OF OPERATIONS

The following footnotes are applicable throughout the discussion of the Company's results of operations:

(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.

(3) 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 MD&A for further information regarding these measures.

Three months ended March 31, 2023 compared with three months ended March 31, 2022

Executive Summary

The following table provides an executive summary of key operating results for the quarter ended March 31, 2023. 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:			2023			2022			% Change Favorable (Unfavorable)			Insight and Key Drivers of Change Compared to Prior Year
Moody's total revenue			$	1,470		$	1,522		(3		%)	— reflects lower MIS revenue partially offset by growth in MA
MA external revenue			$	737		$	695		6		%	— sustained demand for KYC and insurance solutions as well as ratings data feeds; partially offset by: — unfavorable changes in FX translation rates
MIS external revenue			$	733		$	827		(11		%)	— ongoing uncertainty around inflation, interest rates, recessionary concerns and stress in the banking sector broadly impacted credit markets, constraining rated issuance volumes across most LOBs
Total operating and SG&A expenses			$	814		$	788		(3		%)	— higher incentive compensation accruals; — hiring in MA coupled with annual salary increases; and — costs to support organic investments; partially offset by: — favorable changes in FX translation rates; and — benefits from cost management initiatives
Depreciation and amortization			$	88		$	78		(13		%)	— higher amortization relating to internally developed software, primarily related to the development of MA SaaS solutions
Restructuring			$	14		$	—		NM			— relates to the Company's 2022 - 2023 Geolocation Restructuring Program, more fully discussed in Note 10 to the condensed consolidated financial statements
Total non-operating (expense) income, net			$	(48)		$	(47)		(2 %)			— reflects $26 million of FX losses recorded in the first quarter of 2023, mostly offset by lower tax-related interest expense related to the resolutions of tax matters
Operating margin			37.7		%	43.1		%	(540		BPS)	— margin declines primarily due to the aforementioned decrease in MIS revenue coupled with an increase in operating and SG&A expenses in MA to support growth
Adjusted Operating Margin			44.6		%	48.2		%	(360		BPS)
ETR			1.0		%	18.2		%	(1,720		BPS)	— significantly lower ETR reflects tax benefits recognized in the first quarter of 2023, which resulted from the resolutions of uncertain tax positions in various U.S. and non-U.S. tax jurisdictions
Diluted EPS			$	2.72		$	2.68		1		%	— increase reflects a $0.75/share benefit related to the resolutions of tax matters in the first quarter of 2023, partially offset by lower operating income/Adjusted Operating Income
Adjusted Diluted EPS			$	2.99		$	2.89		3		%

Moody's Corporation

			Three Months Ended March 31,												% Change Favorable (Unfavorable)
			2023						2022
Revenue:
United States			$	770					$	823					(6		%)
Non-U.S.:
EMEA			451						457						(1		%)
Asia-Pacific			151						141						7		%
Americas			98						101						(3		%)
Total Non-U.S.			700						699						—		%
Total			1,470						1,522						(3		%)
Expenses:
Operating			428						417						(3		%)
SG&A			386						371						(4		%)
Depreciation and amortization			88						78						(13		%)
Restructuring			14						—						NM
Total			916						866						(6		%)
Operating income			$	554					$	656					(16		%)
Adjusted Operating Income (3)			$	656					$	734					(11		%)
Interest expense, net			$	(48)					$	(53)					9		%
Other non-operating income, net			—						6						(100		%)
Non-operating (expense) income, net			$	(48)					$	(47)					(2		%)
Net income attributable to Moody's			$	501					$	498					1		%
Diluted weighted average shares outstanding			184.1						186.1						1		%
Diluted EPS attributable to Moody's common shareholders			$	2.72					$	2.68					1		%
Adjusted Diluted EPS (3)			$	2.99					$	2.89					3		%
Operating margin			37.7		%				43.1		%
Adjusted Operating Margin(3)			44.6		%				48.2		%
Effective tax rate			1.0		%				18.2		%

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

									March 31,																		Change
									2023						2022												%
MA			U.S.						2,899						2,708												7		%
			Non-U.S.						4,412						4,076												8		%
			Total						7,311						6,784												8		%
MIS			U.S.						1,488						1,504												(1		%)
			Non-U.S.						3,975						3,895												2		%
			Total						5,463						5,399												1		%
MSS			U.S.						659						749												(12		%)
			Non-U.S.						986						981												1		%
			Total						1,645						1,730												(5		%)
Total MCO			U.S.						5,046						4,961												2		%
			Non-U.S.						9,373						8,952												5		%
			Total						14,419						13,913												4		%

GLOBAL REVENUE

Three months ended March 31,

2023**-----------------------------------------------------------------------------------**2022

_________________________________________********________________________________________

Global revenue ⇓ $52 million						U.S. Revenue ⇓ $53 million						Non-U.S. Revenue ⇑ $1 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.

						First Quarter Operating Expense ⇑ $11 million												First Quarter SG&A Expense ⇑ $15 million

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

			Compensation expenses increased $1 million reflecting:												Compensation expenses increased $24 million reflecting:
			— higher salaries and benefits in MA to support growth mostly offset by the benefits from cost management initiatives in MIS.												— higher incentive compensation accruals of $11 million, which aligns with actual/projected financial and operating performance; and
															— higher salaries and benefits of approximately $7 million primarily reflecting hiring and salary increases in MA to support continued growth in the business.
			Non-compensation expenses increased $10 million reflecting:												Non-compensation expenses decreased $9 million reflecting:
			— higher costs of $7 million relating to strategic investments in technology, innovation and product development.												— higher bad debt reserves of $10 million in the prior year resulting from the impact of the Russia/Ukraine conflict; and
												— lower legal fees of $5 million; partially offset by
												— higher travel and entertainment costs of $6 million.

Depreciation and amortization

The increase in depreciation and amortization expense is driven by amortization of internally developed software, which is primarily related to the development of MA SaaS solutions.

						Operating margin 37.7%, down 540 BPS									Adjusted Operating Margin 44.6%, down 360 BPS

Overall, margin declines primarily resulted from the aforementioned decrease in MIS revenue coupled with increases in operating and SG&A expenses in the MA segment.

									Interest Expense, net ⇓ $5 million									Other non-operating income ⇓ $6 million

Decrease in expense is primarily due to:									Decrease in income is primarily due to:
— a $22 million reduction of tax-related interest expense primarily related to the resolutions of tax matters; and									— FX losses of $26 million recorded in the first quarter of 2023 mostly due to an immaterial out-of-period adjustment relating to the 2022 fiscal year; partially offset by
— higher interest income of $8 million related to increased earnings on Moody's cash balances driven by higher interest rates; partially offset by									— higher gains of $10 million on certain of the Company's investments; and
— realized losses of $18 million on fixed-to-floating interest rate swaps resulting from higher interest rates (more fully discussed in Note 8 to the condensed consolidated financial statements).									— a benefit of $9 million related to the favorable resolution of various tax matters.

						ETR ⇓ 1,720 BPS

The decrease in ETR primarily reflects the resolutions of uncertain tax positions in various U.S. and non-U.S. tax jurisdictions, which resulted in a $113 million reduction to the provision for income taxes in the first quarter of 2023.

						Diluted EPS ⇑ $0.04												Adjusted Diluted EPS ⇑ $0.10

Diluted EPS and Adjusted Diluted EPS growth reflects a $0.75/share benefit related to the resolutions of tax matters in the first quarter of 2023, partially offset by lower operating income and Adjusted Operating Income, the components of which are more fully described above. 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 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)
			2023						2022
Revenue:
Decision Solutions (DS)			$	354					$	334					6		%
Research and Insights (R&I)			195						183						7		%
Data and Information (D&I)			188						178						6		%
Total external revenue			737						695						6		%
Intersegment revenue			3						2						50		%
Total MA revenue			740						697						6		%
Expenses:
Operating and SG&A (external)			481						430						(12		%)
Operating and SG&A (intersegment)			45						43						(5		%)
Total operating and SG&A			526						473						(11		%)
Adjusted Operating Income			$	214					$	224					(4		%)
Adjusted Operating Margin			28.9		%				32.1		%
Depreciation and amortization			70						60						(17		%)
Restructuring			8						—						NM

MOODY'S ANALYTICS REVENUE

Three months ended March 31,

2023**-----------------------------------------------------------------------------------**2022

_________________________________________********________________________________________

MA: Global revenue ⇑ $42 million			U.S. Revenue ⇑ $14 million			Non-U.S. Revenue ⇑ $28 million

The 6% increase in global MA revenue reflects growth both in the U.S. (5%) and internationally (7%) in all LOBs. Changes in foreign currency translation rates unfavorably impacted MA revenue by three percentage points.

**–**Constant currency revenue growth(1) was 9% reflecting increases across all LOBs.

**–**ARR(2) grew 10% reflecting strong growth across all LOBs.

DECISION SOLUTIONS REVENUE

Three months ended March 31,

2023**-----------------------------------------------------------------------------------**2022

_________________________________________********________________________________________

DS: Global revenue ⇑ $20 million			U.S. Revenue ⇑ $5 million			Non-U.S. Revenue ⇑ $15 million

Global DS revenue grew 6% compared to the first quarter of 2022 and reflects growth in both the U.S. (3%) and internationally (8%) with the most notable drivers of the increase reflecting:

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

–higher revenue from RMS primarily due to a reduction of revenue in the first quarter of 2022 pursuant to a fair value adjustment to deferred revenue previously required as part of acquisition accounting; and

–growth in subscription-based revenue for actuarial modeling tools in support of certain international accounting standards relating to insurance contracts.

Changes in foreign currency translation rates unfavorably impacted DS revenue by two percentage points.

Constant currency revenue(1) growth was 8%.

ARR(2) grew 11% primarily reflecting continued demand for KYC, banking and insurance products.

RESEARCH AND INSIGHTS REVENUE

Three months ended March 31,

2023**-----------------------------------------------------------------------------------**2022

_________________________________________________****__ ________________________________________________

R&I: Global revenue ⇑ $12 million			U.S. Revenue ⇑ $2 million			Non-U.S. Revenue ⇑ $10 million

Global R&I revenue increased 7% compared to the first quarter of 2022 and reflects growth in both the U.S. (2%) and internationally (13%), mainly driven by continued strong retention and demand for credit research, analytics and models.

Constant currency revenue growth(1) was 8%.

ARR(2) grew 9% primarily reflecting the aforementioned strong retention and demand for credit research, analytics and models.

DATA AND INFORMATION REVENUE

Three months ended March 31,

2023**-----------------------------------------------------------------------------------**2022

______________________________________________********__________________________________________________

D&I: Global revenue ⇑ $10 million			U.S. Revenue ⇑ $7 million			Non-U.S. Revenue ⇑ $3 million

Global D&I revenue increased 6% compared to the first quarter of 2022 and reflects growth in both the U.S. (12%) and internationally (3%) mainly driven by:

**–**strong retention and new sales for ratings feeds coupled with higher pricing realization; and

–continued demand for company data.

Changes in foreign currency translation rates unfavorably impacted D&I revenue by four percentage points.

Constant currency revenue growth(1) was 10%.

ARR(2) grew 9% reflecting increasing demand for company data and ratings data feed products.

						MA: First Quarter Operating and SG&A Expense ⇑ $51 million

The increase in operating and SG&A expenses compared to the first quarter of 2022 reflected growth in both compensation and non-compensation costs of $28 million and $23 million, respectively. The most notable drivers of these changes were:

Compensation costs						Non-compensation costs
The increase is primarily due to:						The increase is primarily due to:
— higher salaries and benefits of $13 million related to headcount growth and annual salary increases; and						— higher consulting/professional fees of $7 million primarily related to strategic investments in technology, innovation and product development; and
— higher incentive compensation accruals of $10 million aligned with actual/expected financial and operational performance as well as headcount growth.
			— higher travel and entertainment costs of $8 million.

Favorable changes in FX translation rates reduced compensation and non-compensation costs by $9 million and $4 million, respectively.

												MA: Adjusted Operating Margin 28.9% ⇓ 320 BPS

The Adjusted Operating Margin decrease for MA is primarily due to operating and SG&A expense growth of 12% outpacing the 6% increase in global MA revenue.

Depreciation and amortization

The increase in depreciation and amortization expense primarily reflects higher amortization of internally developed software relating to the development of SaaS-based solutions.

Restructuring Charge

The restructuring charge in 2023 relates to the Company's 2022 - 2023 Geolocation Restructuring Program as more fully discussed in Note 10 to the condensed consolidated financial statements.

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)
			2023						2022
Revenue:
Corporate finance (CFG)			$	356					$	417					(15		%)
Structured finance (SFG)			99						144						(31		%)
Financial institutions (FIG)			142						131						8		%
Public, project and infrastructure finance (PPIF)			129						123						5		%
Total ratings revenue			726						815						(11		%)
MIS Other			7						12						(42		%)
Total external revenue			733						827						(11		%)
Intersegment revenue			45						43						5		%
Total MIS revenue			778						870						(11		%)
Expenses:
Operating and SG&A (external)			333						358						7		%
Operating and SG&A (intersegment)			3						2						(50		%)
Total operating and SG&A			336						360						7		%
Adjusted Operating Income			$	442					$	510					(13		%)
Adjusted Operating Margin			56.8		%				58.6		%
Depreciation and amortization			18						18						—		%
Restructuring			6						—						NM

The following chart presents changes in rated issuance volumes compared to the first quarter of 2022. 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

Three months ended March 31,

2023**-----------------------------------------------------------------------------------**2022

_________________________________________********________________________________________

MIS: Global revenue ⇓ $94 million			U.S. Revenue ⇓ $67 million			Non-U.S. Revenue ⇓ $27 million

**–**The decrease in global MIS revenue primarily reflects a 13% decrease in rated issuance volumes, which resulted in transaction revenue declining $98 million compared to the same period in the prior year. The decline in rated issuance volumes compared to the first quarter of 2022 reflected muted credit market activity given ongoing uncertainty around inflation, interest rates, recessionary concerns and stress in the banking sector following the failure of certain banks in the first quarter of 2023.

CFG REVENUE

Three months ended March 31,

2023**-----------------------------------------------------------------------------------**2022

_________________________________________********________________________________________

CFG: Global revenue ⇓ $61 million			U.S. Revenue ⇓ $29 million			Non-U.S. Revenue ⇓ $32 million

Global CFG revenue for the three months ended March 31, 2023 and 2022 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 15% reflected declines in both U.S. (11%) and internationally (23%).

Transaction revenue decreased $63 million compared to the same period in the prior year.

The decline reflected:

• lower leveraged finance revenue across all regions as geopolitical and macroeconomic uncertainties have continued to impact issuance levels;

partially offset by:

• growth in investment grade issuance activity within the U.S., which included a number of jumbo deals within the healthcare and technology industries in the first quarter of 2023.

SFG REVENUE

Three months ended March 31,

2023**---------------------------------------------------------------------------**2022

_________________________________________********________________________________________

SFG: Global revenue ⇓ $45 million			U.S. Revenue ⇓ $36 million			Non-U.S. Revenue ⇓ $9 million

Global SFG revenue for the three months ended March 31, 2023 and 2022 was comprised as follows:

The 31% decrease in SFG revenue reflected declines in both U.S. (37%) and internationally (19%).

Transaction revenue decreased $48 million compared to the first quarter of 2022.

The most notable driver of the decline in SFG revenue was lower CMBS activity compared to a strong prior year period reflecting higher credit spreads and market volatility given ongoing geopolitical and macroeconomic uncertainties.

FIG REVENUE

Three months ended March 31,

2023**-----------------------------------------------------------------------------------**2022

_________________________________________********________________________________________

FIG: Global revenue ⇑ $11 million			U.S. Revenue ⇓ $2 million			Non-U.S. Revenue ⇑ $13 million

Global FIG revenue for the three months ended March 31, 2023 and 2022 was comprised as follows:

The increase in FIG revenue of 8% reflected revenue growth internationally (20%) partially offset by declines in the U.S. (3%).

Transaction revenue increased $9 million compared to the first quarter of 2022.

The growth primarily reflects:

• higher rated issuance volumes in the banking sector early in the first quarter of 2023, before volatility from recent bank stress events muted issuance activity; and

• a favorable product mix internationally within the banking sector.

Changes in foreign currency translation rates unfavorably impacted FIG revenue by two percentage points.

PPIF REVENUE

Three months ended March 31,

2023**-----------------------------------------------------------------------------------**2022

_________________________________________********________________________________________

PPIF: Global revenue ⇑ $6 million			U.S. Revenue ⇑ $1 million			Non-U.S. Revenue ⇑ $5 million

Global PPIF revenue for the three months ended March 31, 2023 and 2022 was comprised as follows:

Transaction revenue increased $7 million compared to the first quarter of 2022.

The increase in PPIF revenue of 5% reflected growth in the U.S. (1%) and internationally (10%).

The main drivers of the growth were:

–increases in investment-grade infrastructure finance activity both in the U.S. and internationally;

partially offset by:

–declines in U.S. project finance revenue compared to strong activity in the prior year; and

–lower U.S. public finance activity as the elevated and uncertain interest rate environment suppressed issuance.

Changes in foreign currency translation rates unfavorably impacted PPIF revenue by two percentage points.

						MIS: First Quarter Operating and SG&A Expense ⇓ $25 million

The decline is primarily due to lower non-compensation costs of $23 million with the most notable drivers reflecting:

						Non-compensation costs
						The decrease is primarily due to:
						— higher bad debt expense of $10 million in the prior year resulting from the impact of the Russia/Ukraine conflict;
						— lower legal fees of $5 million; and
						— lower rent expense of $4 million primarily resulting from savings pursuant to the 2022-2023 Geolocation Restructuring Program, further described in Note 10 to the condensed consolidated financial statements.

Favorable changes in FX translation rates reduced compensation and non-compensation costs by $6 million and $1 million, respectively.

												MIS: Adjusted Operating Margin 56.8% ⇓ 180 BPS

The MIS Adjusted Operating Margin decline primarily reflected the aforementioned 11% decrease in revenue.

Restructuring Charge

The restructuring charge in 2023 relates to the Company's 2022 - 2023 Geolocation Restructuring Program as more fully discussed in Note 10 to the condensed consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

Moody's remains committed to using its 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 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)
			2023						2022
Net cash provided by operating activities			$	608					$	470					$	138
Net cash used in investing activities			$	(63)					$	(161)					$	98
Net cash used in financing activities			$	(216)					$	(352)					$	136
Free Cash Flow (1)			$	535					$	411					$	124

(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, 2023 increased $138 million compared to the same period in 2022, primarily due to approximately $140 million in higher incentive compensation payments in the first quarter 2022 (based on full-year 2021 financial results) compared to the current year.

Net cash used in investing activities

The $98 million decrease in cash used in investing activities in the three months ended March 31, 2023 compared to the same period in 2022 primarily reflects higher cash paid of $83 million in the prior year for acquisitions, reflecting the acquisition of kompany in 2022.

Net cash used in financing activities

The $136 million decrease in cash used in financing activities in the three months ended March 31, 2023 compared to the same period in the prior year was primarily attributed to:

–higher cash paid for treasury share repurchases in 2022 of $617 million, which includes payment for shares made under an ASR agreement executed in the first quarter of 2022;

partially offset by:

*–*long-term debt issuance of $491 million in the first quarter 2022 that did not recur in 2023 (refer to the section "Material Cash Requirements" below for further discussion on the Company's financing arrangements).

Cash and cash equivalents and short-term investments

The Company’s aggregate cash and cash equivalents and short-term investments of $2.2 billion at March 31, 2023 included approximately $1.7 billion located outside of the U.S. Approximately 42% 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, 2023, Moody’s had $7.5 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, 2023 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 $4.9 billion, of which approximately $334 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 could 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, 2023, these purchase obligations totaled $244 million, of which $151 million is expected to be paid in the next twelve months.

Leases

The Company has remaining payments relating to its operating leases of $490 million at March 31, 2023, primarily related to real estate leases, of which $118 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, 2023, 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 24, 2023, the Board approved the declaration of a quarterly dividend of $0.77 per share for Moody’s common stock, payable June 9, 2023 to shareholders of record at the close of business on May 19, 2023. 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, 2023, the Company had approximately $807 million of remaining authority. There is no established expiration date for the remaining authorizations.

Restructuring

As more fully discussed in Note 10 to the condensed consolidated financial statements, the Company is currently in the process of executing the 2022 - 2023 Geolocation Restructuring Program. This program relates to the Company's post-COVID-19 geolocation strategy and includes the rationalization and exit of certain real estate leases and a reduction in staff, including the relocation of certain job functions. Future cash outlays associated with this program, which will primarily consist of personnel-related costs, are expected to be approximately $40 million to $60 million, which are expected to be paid through 2024.

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 estimated useful lives and use different methods of acquiring and depreciating productive assets. Restructuring charges/adjustments 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,
			2023						2022
Operating income			$	554					$	656
Adjustments:
Depreciation and amortization			88						78
Restructuring			14						—
Adjusted Operating Income			$	656					$	734
Operating margin			37.7		%				43.1		%
Adjusted Operating Margin			44.6		%				48.2		%

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 estimated useful lives 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/adjustments are excluded as the frequency and magnitude of these items 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.

									Three Months Ended March 31,
Amounts in millions															2023									2022
Net income attributable to Moody's common shareholders																								$	501								$	498
Pre-Tax Acquisition-Related Intangible Amortization Expenses																					$	51								$	51
Tax on Acquisition-Related Intangible Amortization Expenses																					(12)									(12)
Net Acquisition-Related Intangible Amortization Expenses																								39									39
Pre-Tax Restructuring																					$	14								$	—
Tax on Restructuring																					(4)									—
Net Restructuring																								10									—
Adjusted Net Income																								$	550								$	537

									Three Months Ended March 31,
															2023									2022
Diluted earnings per share attributable to Moody's common shareholders																								$	2.72								$	2.68
Pre-Tax Acquisition-Related Intangible Amortization Expenses																					$	0.28								$	0.27
Tax on Acquisition-Related Intangible Amortization Expenses																					(0.06)									(0.06)
Net Acquisition-Related Intangible Amortization Expenses																								0.22									0.21
Pre-Tax Restructuring																					$	0.08								$	—
Tax on Restructuring																					(0.03)									—
Net Restructuring																								0.05									—
Adjusted Diluted EPS																								$	2.99								$	2.89

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,
			2023						2022
Net cash provided by operating activities			$	608					$	470
Capital additions			(73)						(59)
Free Cash Flow			$	535					$	411
Net cash used in investing activities			$	(63)					$	(161)
Net cash used in financing activities			$	(216)					$	(352)

Constant Currency Revenue Growth (Decline):

The Company presents constant currency revenue growth (decline) as its non-GAAP measure of revenue growth (decline). Management deems this measure to be useful in providing additional perspective in assessing the Company's revenue growth (decline) excluding the impacts of changes in foreign exchange rates. The Company calculates the dollar impact of foreign exchange as the difference between the translation of its current period non-USD functional currency results using comparative prior period weighted average foreign exchange translation rates and current year reported results.

Below is a reconciliation of the Company's reported revenue and growth (decline) rates to its constant currency revenue growth (decline) measures:

												Three Months Ended March 31,
Amounts in millions																														2023						2022						Change						Growth
MA revenue																														$	737					$	695					$	42					6%
FX impact																														18						—						18
Constant currency MA revenue																														$	755					$	695					$	60					9%
Decision Solutions revenue																														$	354					$	334					$	20					6%
FX impact																														7						—						7
Constant currency Decision Solutions revenue																														$	361					$	334					$	27					8%
Research and Insights revenue																														$	195					$	183					$	12					7%
FX impact																														3						—						3
Constant currency Research and Insights revenue																														$	198					$	183					$	15					8%
Data and Information revenue																														$	188					$	178					$	10					6%
FX impact																														8						—						8
Constant currency Data and Information revenue																														$	196					$	178					$	18					10%
MCO revenue																														$	1,470					$	1,522					$	(52)					(3)%
FX impact																														28						—						28
Constant currency MCO revenue																														$	1,498					$	1,522					$	(24)					(2)%

Key Performance Metrics:

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

The Company calculates 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 transaction sales including training, one-time services and perpetual licenses. In order to compare period-over-period 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, ARR excludes contracts related to acquisitions to provide additional perspective in assessing 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, 2023						March 31, 2022						Change						Growth
MA ARR
Decision Solutions						$	1,234					$	1,108					$	126					11%
Research and Insights						770						708						62						9%
Data and Information						748						685						63						9%
Total MA ARR						$	2,752					$	2,501					$	251					10%

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.

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 Company's business and operations 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 35 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 in this document 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 impact of current economic conditions, including capital market disruptions, inflation and related monetary policy actions by governments in response to inflation, on worldwide credit markets and on economic activity, including on the volume of mergers and acquisitions, and their effects on the volume of debt and other securities issued in domestic and/or global capital markets;

• the uncertain effectiveness and possible collateral consequences of U.S. and foreign government initiatives and monetary policy to respond to the current economic climate, including instability of financial institutions, credit quality concerns, and other potential impacts of volatility in financial and credit markets;

• the global impact of the Russia - Ukraine military conflict on volatility in world financial markets, on general economic conditions and GDP in the U.S. and worldwide, on global relations and on the Company's own operations and personnel;

• other matters that could affect the volume of debt and other securities issued in domestic and/or global capital markets, including regulation, increased utilization of technologies that have the potential to intensify competition and accelerate disruption and disintermediation in the financial services industry, as well as the number of issuances of securities without ratings or securities which are rated or evaluated by non-traditional parties;

• 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;

• the impact of MIS’s withdrawal of its credit ratings on countries or entities within countries and of Moody’s no longer conducting commercial operations in countries where political instability warrants such actions;

• 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 and the impact of the global labor environment;

• failures or malfunctions of our operations and infrastructure;

• any vulnerabilities to cyber threats or other cybersecurity concerns;

• the timing and effectiveness of our restructuring programs, such as the 2022 - 2023 Geolocation Restructuring Program;

• currency and foreign exchange volatility;

• 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;

• the level of future cash flows;

• the levels of capital investments; and

• a decline in the demand for 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, 2022, 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.