Item 1. Financial Statements

192K characters. Original on sec.gov · Markdown

Item 1. Financial Statements

MOODY’S CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Amounts in millions, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue	$	1,472	$	1,275	$	4,436	$	4,178
Expenses
Operating	412		393		1,266		1,203
Selling, general, and administrative	403		385		1,204		1,124
Depreciation and amortization	95		83		276		242
Restructuring	27		1		51		32


Total expenses	937		862		2,797		2,601
Operating income	535		413		1,639		1,577
Non-operating (expense) income, net
Interest expense, net	(66)		(58)		(185)		(166)
Other non-operating income, net	18		26		31		22
Total non-operating (expense) income, net	(48)		(32)		(154)		(144)
Income before provision for income taxes	487		381		1,485		1,433
Provision for income taxes	97		78		217		305
Net income	390		303		1,268		1,128
Less: Net income attributable to noncontrolling interests	1		—		1		—
Net income attributable to Moody's	$	389	$	303	$	1,267	$	1,128
Earnings per share attributable to Moody's common shareholders
Basic	$	2.12	$	1.65	$	6.91	$	6.13
Diluted	$	2.11	$	1.65	$	6.88	$	6.10
Weighted average number of shares outstanding
Basic	183.3		183.2		183.4		184.1
Diluted	184.0		183.9		184.1		184.9

The accompanying notes are an integral part of the consolidated financial statements.

MOODY’S CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Amounts in millions)



	Three Months Ended September 30, 2023						Three Months Ended September 30, 2022
	Pre-tax amounts		Tax amounts		After-tax amounts		Pre-tax amounts		Tax amounts		After-tax amounts
Net Income					$	390					$	303
Other Comprehensive Income (Loss):
Foreign Currency Adjustments:
Foreign currency translation adjustments, net	$	(174)	$	(2)	(176)		$	(358)	$	6	(352)

Net gains on net investment hedges	124		(31)		93		256		(63)		193

Cash Flow Hedges:

Reclassification of losses included in net income	1		—		1		1		(1)		—
Pension and Other Retirement Benefits:
Amortization of actuarial gains/prior service credits and settlement credit included in net income	(1)		—		(1)		1		—		1
Net actuarial gains and prior service costs	2		(1)		1		—		—		—
Total other comprehensive loss	$	(48)	$	(34)	$	(82)	$	(100)	$	(58)	$	(158)
Comprehensive income					308						145
Less: comprehensive income (loss) attributable to noncontrolling interests					—						(9)
Comprehensive Income Attributable to Moody's					$	308					$	154


	Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022

	Pre-tax amounts		Tax amounts		After-tax amounts		Pre-tax amounts		Tax amounts		After-tax amounts
Net Income					$	1,268					$	1,128
Other Comprehensive Income (Loss):
Foreign Currency Adjustments:
Foreign currency translation adjustments, net	$	(14)	$	(4)	(18)		$	(806)	$	10	(796)
Foreign currency translation adjustments - reclassification of losses included in net income	—		—		—		20		—		20
Net gains on net investment hedges	11		(3)		8		561		(140)		421

Cash Flow Hedges:

Reclassification of losses included in net income	2		(1)		1		2		(1)		1
Pension and Other Retirement Benefits:
Amortization of actuarial gains/prior service credits and settlement credit included in net income	(3)		1		(2)		2		—		2
Net actuarial gains and prior service costs	2		(1)		1		3		(1)		2
Total other comprehensive loss	$	(2)	$	(8)	$	(10)	$	(218)	$	(132)	$	(350)
Comprehensive income					1,258						778
Less: comprehensive loss attributable to noncontrolling interests					(1)						(12)
Comprehensive Income Attributable to Moody's					$	1,259					$	790

The accompanying notes are an integral part of the consolidated financial statements.

MOODY’S CORPORATION

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Amounts in millions, except share and per share data)


	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	2,006	$	1,769
Short-term investments	73		90
Accounts receivable, net of allowance for credit losses of $34 in 2023 and $40 in 2022	1,513		1,652
Other current assets	445		583

Total current assets	4,037		4,094
Property and equipment, net of accumulated depreciation of $1,234 in 2023 and $1,123 in 2022	573		502
Operating lease right-of-use assets	298		346
Goodwill	5,831		5,839
Intangible assets, net	2,058		2,210
Deferred tax assets, net	264		266
Other assets	1,130		1,092
Total assets	$	14,191	$	14,349
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	938	$	1,011
Current portion of operating lease liabilities	105		106


Deferred revenue	1,226		1,258

Total current liabilities	2,269		2,375
Non-current portion of deferred revenue	65		75
Long-term debt	6,851		7,389
Deferred tax liabilities, net	483		457
Uncertain tax positions	208		322
Operating lease liabilities	316		368
Other liabilities	647		674
Total liabilities	10,839		11,660
Contingencies (Note 16)
Shareholders' equity:
Preferred stock, par value $0.01 per share; 10,000,000 shares authorized; no shares issued and outstanding	—		—
Series common stock, par value $0.01 per share; 10,000,000 shares authorized; no shares issued and outstanding	—		—
Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 342,902,272 shares issued at September 30, 2023 and December 31, 2022, respectively	3		3
Capital surplus	1,175		1,054
Retained earnings	14,460		13,618
Treasury stock, at cost; 159,895,591 and 159,702,362 shares of common stock at September 30, 2023 and December 31, 2022, respectively	(11,795)		(11,513)
Accumulated other comprehensive loss	(652)		(643)
Total Moody's shareholders' equity	3,191		2,519
Noncontrolling interests	161		170
Total shareholders' equity	3,352		2,689
Total liabilities, noncontrolling interests, and shareholders' equity	$	14,191	$	14,349

The accompanying notes are an integral part of the consolidated financial statements.

MOODY’S CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in millions)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities
Net income	$	1,268	$	1,128
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization	276		242
Stock-based compensation	143		130
Deferred income taxes	(10)		58
ROU Asset impairment & other non-cash restructuring/impairment charges	12		—
FX translation losses reclassified to net income	—		20


Changes in assets and liabilities:
Accounts receivable	127		123
Other current assets	151		(140)

Other assets	(31)		10
Lease obligations	(16)		(14)

Accounts payable and accrued liabilities	(61)		(358)
Deferred revenue	(35)		(20)
Uncertain tax positions	(114)		(41)
Other liabilities	(36)		(41)
Net cash provided by operating activities	1,674		1,097
Cash flows from investing activities
Capital additions	(198)		(204)
Purchases of investments	(108)		(244)
Sales and maturities of investments	116		153
Receipts from settlements of net investment hedges	—		220
Cash paid for acquisitions, net of cash acquired	(3)		(97)

Net cash used in investing activities	(193)		(172)
Cash flows from financing activities
Repayment of notes	(500)		(500)
Issuance of notes	—		988


Proceeds from stock-based compensation plans	40		21
Treasury shares	(278)		(983)

Repurchase of shares related to stock-based compensation	(67)		(85)
Dividends	(424)		(387)
Dividends to noncontrolling interest	(2)		(1)

Debt issuance costs and related fees	—		(10)

Net cash used in financing activities	(1,231)		(957)

Effect of exchange rate changes on cash and cash equivalents	(13)		(123)
Increase (decrease) in cash and cash equivalents	237		(155)
Cash and cash equivalents, beginning of period	1,769		1,811
Cash and cash equivalents, end of period	$	2,006	$	1,656

The accompanying notes are an integral part of the consolidated financial statements.

MOODY’S CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(Amounts in millions, except per share data)


Shareholders of Moody's Corporation
	Common Stock			Capital Surplus			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss		Total Moody's Shareholders' Equity		Non- Controlling Interests		Total Shareholders' Equity
	Shares	Amount				Shares			Amount
Balance at June 30, 2022	342.9	$	3	$	965		$	13,328		(159.4)	$	(11,403)	$	(599)	$	2,294	$	185	$	2,479
Net income							303								303		—		303
Dividends ($0.70 per share)							(130)								(130)		(1)		(131)
Stock-based compensation				46											46				46
Shares issued for stock-based compensation plans at average cost, net				2						0.1	1				3				3


Treasury shares repurchased				—						(0.4)	(112)				(112)				(112)

Currency translation adjustment, net of net investment hedge activity (net of tax of $57 million)													(150)		(150)		(9)		(159)

Amortization of prior service costs and actuarial losses													1		1				1

Balance at September 30, 2022	342.9	$	3	$	1,013		$	13,501		(159.7)	$	(11,514)	$	(748)	$	2,255	$	175	$	2,430

The accompanying notes are an integral part of the consolidated financial statements.

MOODY'S CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(Amounts in millions, except per share data)


Shareholders of Moody's Corporation
	Common Stock			Capital Surplus			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss		Total Moody's Shareholders' Equity		Non- Controlling Interests		Total Shareholders' Equity
	Shares	Amount				Shares			Amount
Balance at December 31, 2021	342.9	$	3	$	885		$	12,762		(157.3)	$	(10,513)	$	(410)	$	2,727	$	189	$	2,916
Net income							1,128								1,128		—		1,128
Dividends ($2.10 per share)							(389)								(389)		(2)		(391)
Stock-based compensation				130											130				130
Shares issued for stock-based compensation plans at average cost, net				(34)						0.6	(30)				(64)				(64)


Shares issued as consideration to acquire kompany(1)				35						0.1	9				44				44
Treasury shares repurchased				(3)						(3.1)	(980)				(983)				(983)

Currency translation adjustment, net of net investment hedge activity (net of tax of $130 million)													(343)		(343)		(12)		(355)
Net actuarial gains and prior service costs (net of tax of $1 million)													2		2				2
Amortization of prior service costs and actuarial losses													2		2				2
Net realized and unrealized gain on cash flow hedges													1		1				1
Balance at September 30, 2022	342.9	$	3	$	1,013		$	13,501		(159.7)	$	(11,514)	$	(748)	$	2,255	$	175	$	2,430

The accompanying notes are an integral part of the consolidated financial statements.

(1) Represents a non-cash investing activity relating to the issuance of common stock to fund a portion of the purchase price for kompany.

MOODY'S CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(Amounts in millions, except per share data)


Shareholders of Moody's Corporation
	Common Stock			Capital Surplus			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss		Total Moody's Shareholders' Equity		Non- Controlling Interests		Total Shareholders' Equity
	Shares	Amount				Shares			Amount
Balance at June 30, 2023	342.9	$	3	$	1,124		$	14,213		(159.4)	$	(11,626)	$	(570)	$	3,144	$	168	$	3,312
Net income							389								389		1		390
Dividends ($0.77 per share)							(142)								(142)		(8)		(150)
Stock-based compensation				46											46				46
Shares issued for stock-based compensation plans at average cost, net				5						—	2				7				7


Treasury shares repurchased										(0.5)	(171)				(171)				(171)
Currency translation adjustment, net of net investment hedge activity (net of tax of $33 million)													(83)		(83)		—		(83)
Net actuarial gains and prior service costs (net of tax of $1 million)													1		1				1
Amortization of prior service credits/ actuarial gains and settlement credit													(1)		(1)				(1)
Net realized and unrealized gain on cash flow hedges													1		1				1
Balance at September 30, 2023	342.9	$	3	$	1,175		$	14,460		(159.9)	$	(11,795)	$	(652)	$	3,191	$	161	$	3,352

The accompanying notes are an integral part of the consolidated financial statements.

MOODY'S CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(Amounts in millions, except per share data)


Shareholders of Moody's Corporation
	Common Stock			Capital Surplus			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss		Total Moody's Shareholders' Equity		Non- Controlling Interests		Total Shareholders' Equity
	Shares	Amount				Shares			Amount
Balance at December 31, 2022	342.9	$	3	$	1,054		$	13,618		(159.7)	$	(11,513)	$	(643)	$	2,519	$	170	$	2,689
Net income							1,267								1,267		1		1,268
Dividends ($2.31 per share)							(425)								(425)		(9)		(434)

Stock-based compensation				143											143				143
Shares issued for stock-based compensation plans at average cost, net				(22)						0.7	(2)				(24)				(24)



Treasury shares repurchased				—						(0.9)	(280)				(280)				(280)

Currency translation adjustment, net of net investment hedge activity (net of tax of $7 million)													(9)		(9)		(1)		(10)
Net actuarial gains and prior service costs (net of tax of $1 million)													1		1				1
Amortization of prior service credits/ actuarial gains and settlement credit (net of tax of $1 million)													(2)		(2)				(2)
Net realized and unrealized gain on cash flow hedges (net of tax of $1 million)													1		1				1
Balance at September 30, 2023	342.9	$	3	$	1,175		$	14,460		(159.9)	$	(11,795)	$	(652)	$	3,191	$	161	$	3,352

The accompanying notes are an integral part of the consolidated financial statements.

MOODY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(tabular dollar and share amounts in millions, except per share data)

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

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

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 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.

These interim financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the Company’s consolidated financial statements and related notes in the Company’s 2022 annual report on Form 10-K filed with the SEC on February 15, 2023. The results of interim periods are not necessarily indicative of results for the full year or any subsequent period. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the periods presented have been included. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.

Certain reclassifications have been made to prior period amounts to conform to the current presentation.

Adoption of New Accounting Standards in 2023

In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform - Scope,” which clarified the scope and application of the original guidance, ASU No. 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU No. 2020-04"), issued in March 2020 (codified into ASC Topic 848 "Reference Rate Reform"). ASU No. 2020-04 provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. In December 2022, the FASB issued ASU 2022-06, "Reference Rate Reform—Deferral of the Sunset Date of Topic 848," which deferred the sunset date of Topic 848 to December 31, 2024. These ASU's were effective upon issuance and the amendments may be applied prospectively through December 31, 2024 as the transition from LIBOR is completed.

During the first quarter of 2023, the Company modified the contractual terms of certain of its interest rate swaps designated as fair value hedges and cross-currency swaps designated as net investment hedges. These modifications replaced the previous LIBOR/EURIBOR-based reference rates included in the swap agreements to SOFR/ESTR-based rates. Pursuant to the modification of the contractual terms of these instruments, the Company utilized the optional expedients set forth in ASC Topic 848 relating to derivative instruments used in hedging relationships. The aggregate notional amounts of these swaps is disclosed in Note 8.

Reclassification of Previously Reported Revenue by LOB

In the second quarter of 2023, the Company expanded its disaggregation of revenue disclosures for MA's Decision Solutions LOB to enhance insight and transparency into this business. In conjunction with this new presentation, the Company reclassified certain immaterial revenue relating to structured finance solutions from the Decision Solutions LOB to the Research & Insights LOB.

Prior year revenue by LOB disclosures have been reclassified to conform to this new presentation, which is disclosed in Note 2.

NOTE 2. REVENUES

Revenue by Category

The following table presents the Company’s revenues disaggregated by LOB:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
MA:
Decision Solutions (DS)
Banking	$	136	$	115	$	390	$	355
Insurance	138		129		404		370
KYC	80		64		228		191
Total DS	354		308		1,022		916
Research and Insights (R&I)	222		201		654		607
Data and Information (D&I)	200		176		584		532
Total external revenue	776		685		2,260		2,055
Intersegment revenue	3		2		10		5
Total MA	779		687		2,270		2,060
MIS:
Corporate Finance (CFG)
Investment-grade	63		67		272		249
High-yield	38		21		116		91
Bank loans	82		47		209		232
Other accounts (1)	163		142		470		444
Total CFG	346		277		1,067		1,016
Structured Finance (SFG)
Asset-backed securities	30		26		89		89
RMBS	22		22		72		85
CMBS	17		19		45		84
Structured credit	32		34		95		109
Other accounts	1		—		2		1
Total SFG	102		101		303		368
Financial Institutions (FIG)
Banking	92		76		289		258
Insurance	24		24		92		82
Managed investments	7		6		23		19
Other accounts	3		3		9		9
Total FIG	126		109		413		368
Public, Project and Infrastructure Finance (PPIF)
Public finance / sovereign	49		44		155		157
Project and infrastructure	66		48		216		180
Total PPIF	115		92		371		337
Total ratings revenue	689		579		2,154		2,089
MIS Other	7		11		22		34
Total external revenue	696		590		2,176		2,123
Intersegment revenue	47		43		138		129
Total MIS	743		633		2,314		2,252
Eliminations	(50)		(45)		(148)		(134)
Total MCO	$	1,472	$	1,275	$	4,436	$	4,178

(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 following table presents the Company’s revenues disaggregated by LOB and geographic area:


	Three Months Ended September 30, 2023						Three Months Ended September 30, 2022
	U.S.		Non-U.S		Total		U.S.		Non-U.S		Total
MA:
Decision Solutions	$	147	$	207	$	354	$	123	$	185	$	308
Research and Insights	124		98		222		120		81		201
Data and Information	69		131		200		63		113		176
Total MA	340		436		776		306		379		685
MIS:
Corporate Finance	242		104		346		188		89		277
Structured Finance	65		37		102		69		32		101
Financial Institutions	52		74		126		47		62		109
Public, Project and Infrastructure Finance	69		46		115		57		35		92
Total ratings revenue	428		261		689		361		218		579
MIS Other	—		7		7		1		10		11
Total MIS	428		268		696		362		228		590
Total MCO	$	768	$	704	$	1,472	$	668	$	607	$	1,275


	Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022
	U.S.		Non-U.S		Total		U.S.		Non-U.S		Total
MA:
Decision Solutions	$	426	$	596	$	1,022	$	376	$	540	$	916
Research and Insights	361		293		654		352		255		607
Data and Information	204		380		584		185		347		532
Total MA	991		1,269		2,260		913		1,142		2,055
MIS:
Corporate Finance	727		340		1,067		673		343		1,016
Structured Finance	186		117		303		249		119		368
Financial Institutions	188		225		413		165		203		368
Public, Project and Infrastructure Finance	228		143		371		210		127		337
Total ratings revenue	1,329		825		2,154		1,297		792		2,089
MIS Other	—		22		22		4		30		34
Total MIS	1,329		847		2,176		1,301		822		2,123
Total MCO	$	2,320	$	2,116	$	4,436	$	2,214	$	1,964	$	4,178

The following table presents the Company’s reportable segment revenues disaggregated by segment and geographic region:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
MA:
U.S.	$	340	$	306	$	991	$	913
Non-U.S.:
EMEA	300		254		867		774
Asia-Pacific	78		72		229		211
Americas	58		53		173		157
Total Non-U.S.	436		379		1,269		1,142
Total MA	776		685		2,260		2,055
MIS:
U.S.	428		362		1,329		1,301
Non-U.S.:
EMEA	155		139		509		497
Asia-Pacific	67		57		213		211
Americas	46		32		125		114
Total Non-U.S.	268		228		847		822
Total MIS	696		590		2,176		2,123
Total MCO	$	1,472	$	1,275	$	4,436	$	4,178

The following tables summarize the split between Transaction Revenue and Recurring Revenue.


	Three Months Ended September 30,
	2023										2022
	Transaction				Recurring			Total			Transaction			Recurring			Total
Decision Solutions	$	43			$	311		$	354		$	34		$	274		$	308
	12		%		88		%	100		%	11		%	89		%	100		%
Research and Insights	$	4			$	218		$	222		$	4		$	197		$	201
	2		%		98		%	100		%	2		%	98		%	100		%
Data and Information	$	1			$	199		$	200		$	—		$	176		$	176
	1		%		99		%	100		%	—		%	100		%	100		%
Total MA	$	48		(1)	$	728		$	776		$	38		$	647		$	685
	6		%		94		%	100		%	6		%	94		%	100		%
Corporate Finance	$	216			$	130		$	346		$	153		$	124		$	277
	62		%		38		%	100		%	55		%	45		%	100		%
Structured Finance	$	48			$	54		$	102		$	51		$	50		$	101
	47		%		53		%	100		%	50		%	50		%	100		%
Financial Institutions	$	52			$	74		$	126		$	41		$	68		$	109
	41		%		59		%	100		%	38		%	62		%	100		%
Public, Project and Infrastructure Finance	$	71			$	44		$	115		$	50		$	42		$	92
	62		%		38		%	100		%	54		%	46		%	100		%
MIS Other	$	1			$	6		$	7		$	1		$	10		$	11
	14		%		86		%	100		%	9		%	91		%	100		%
Total MIS	$	388			$	308		$	696		$	296		$	294		$	590
	56		%		44		%	100		%	50		%	50		%	100		%
Total Moody's Corporation	$	436			$	1,036		$	1,472		$	334		$	941		$	1,275
	30		%		70		%	100		%	26		%	74		%	100		%



	Nine Months Ended September 30,
	2023										2022
	Transaction				Recurring			Total			Transaction			Recurring			Total
Decision Solutions	$	126			$	896		$	1,022		$	112		$	804		$	916
	12		%		88		%	100		%	12		%	88		%	100		%
Research and Insights	$	12			$	642		$	654		$	12		$	595		$	607
	2		%		98		%	100		%	2		%	98		%	100		%
Data and Information	$	2			$	582		$	584		$	—		$	532		$	532
	—		%		100		%	100		%	—		%	100		%	100		%
Total MA	$	140		(1)	$	2,120		$	2,260		$	124		$	1,931		$	2,055
	6		%		94		%	100		%	6		%	94		%	100		%
Corporate Finance	$	682			$	385		$	1,067		$	645		$	371		$	1,016
	64		%		36		%	100		%	63		%	37		%	100		%
Structured Finance	$	142			$	161		$	303		$	217		$	151		$	368
	47		%		53		%	100		%	59		%	41		%	100		%
Financial Institutions	$	195			$	218		$	413		$	159		$	209		$	368
	47		%		53		%	100		%	43		%	57		%	100		%
Public, Project and Infrastructure Finance	$	240			$	131		$	371		$	211		$	126		$	337
	65		%		35		%	100		%	63		%	37		%	100		%
MIS Other	$	4			$	18		$	22		$	3		$	31		$	34
	18		%		82		%	100		%	9		%	91		%	100		%
Total MIS	$	1,263			$	913		$	2,176		$	1,235		$	888		$	2,123
	58		%		42		%	100		%	58		%	42		%	100		%
Total Moody's Corporation	$	1,403			$	3,033		$	4,436		$	1,359		$	2,819		$	4,178
	32		%		68		%	100		%	33		%	67		%	100		%

(1) Revenue from software implementation services and risk management advisory projects, while classified by management as transactional revenue, is recognized over time under U.S. GAAP (please also refer to the following table).

The following table presents the timing of revenue recognition:


	Three Months Ended September 30, 2023						Nine Months Ended September 30, 2023
	MA		MIS		Total		MA		MIS		Total
Revenue recognized at a point in time	$	24	$	388	$	412	$	73	$	1,263	$	1,336
Revenue recognized over time	752		308		1,060		2,187		913		3,100
Total	$	776	$	696	$	1,472	$	2,260	$	2,176	$	4,436



	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	MA		MIS		Total		MA		MIS		Total
Revenue recognized at a point in time	$	20	$	296	$	316	$	77	$	1,235	$	1,312
Revenue recognized over time	665		294		959		1,978		888		2,866
Total	$	685	$	590	$	1,275	$	2,055	$	2,123	$	4,178

Unbilled receivables, deferred revenue and remaining performance obligations

Unbilled receivables

For certain MA arrangements, the timing of when the Company has the unconditional right to consideration and recognizes revenue occurs prior to invoicing the customer. In addition, certain MIS arrangements contain contractual terms whereby the customers are billed in arrears for annual monitoring services, requiring revenue to be accrued as an unbilled receivable as such services are provided.

The following table presents the Company's unbilled receivables, which are included within accounts receivable, net, at September 30, 2023 and December 31, 2022:


	As of September 30, 2023				As of December 31, 2022
	MA		MIS		MA		MIS
Unbilled Receivables	$	119	$	429	$	148	$	385

Deferred revenue

The Company recognizes deferred revenue when a contract requires a customer to pay consideration to the Company in advance of when revenue related to that contract is recognized. This deferred revenue is relieved when the Company satisfies the related performance obligation and revenue is recognized.

Significant changes in the deferred revenue balances during the three and nine months ended September 30, 2023 and 2022 are as follows:



	Three Months Ended September 30, 2023						Three Months Ended September 30, 2022
	MA		MIS		Total		MA		MIS		Total
Balance at June 30,	$	1,116	$	336	$	1,452	$	1,019	$	347	$	1,366
Changes in deferred revenue
Revenue recognized that was included in the deferred revenue balance at the beginning of the period	(513)		(113)		(626)		(480)		(110)		(590)
Increases due to amounts billable excluding amounts recognized as revenue during the period	410		82		492		389		82		471

Effect of exchange rate changes	(25)		(2)		(27)		(9)		(5)		(14)
Total changes in deferred revenue	(128)		(33)		(161)		(100)		(33)		(133)
Balance at September 30,	$	988	$	303	$	1,291	$	919	$	314	$	1,233



	Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022
	MA		MIS		Total		MA		MIS		Total
Balance at December 31,	$	1,055	$	278	$	1,333	$	1,039	$	296	$	1,335
Changes in deferred revenue
Revenue recognized that was included in the deferred revenue balance at the beginning of the period	(969)		(192)		(1,161)		(883)		(186)		(1,069)
Increases due to amounts billable excluding amounts recognized as revenue during the period	908		218		1,126		819		218		1,037
Increases due to acquisitions during the period	—		—		—		1		—		1
Effect of exchange rate changes	(6)		(1)		(7)		(57)		(14)		(71)
Total changes in deferred revenue	(67)		25		(42)		(120)		18		(102)
Balance at September 30,	$	988	$	303	$	1,291	$	919	$	314	$	1,233
Deferred revenue - current	$	986	$	240	$	1,226	$	917	$	238	$	1,155
Deferred revenue - non-current	$	2	$	63	$	65	$	2	$	76	$	78

For the MA segment, the decrease in deferred revenue for the three months ended September 30, 2023 was primarily due to the recognition of annual subscription and maintenance billings from December 2022 and January 2023. For the nine months ended September 30, 2023, the decrease in the deferred revenue balance is attributable to recognition of revenues related to the aforementioned December 2022 billings and unfavorable changes in FX translation rates being mostly offset by the impact of the high concentration of billings in the first quarter of 2023.

For the MIS segment, the changes in the deferred revenue balance during the three and nine months ended September 30, 2023 were primarily related to the significant portion of contract renewals that occurred during the first quarter of 2023 and are generally recognized over a one year period.

Remaining performance obligations

Remaining performance obligations in the MA segment include both amounts recorded as deferred revenue on the balance sheet as of September 30, 2023 as well as amounts not yet invoiced to customers as of September 30, 2023, largely reflecting future revenue related to signed multi-year arrangements for hosted and installed subscription-based products. As of September 30, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $3.1 billion. The Company expects to recognize into revenue approximately 65% of this balance within one year, approximately 25% of this balance between one to two years and the remaining amount thereafter.

Remaining performance obligations in the MIS segment largely reflect deferred revenue related to monitoring fees for certain structured finance products, primarily CMBS, where the issuers can elect to pay the monitoring fees for the life of the security in advance. As of September 30, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $91 million. The Company expects to recognize into revenue approximately 25% of this balance within one year, approximately 50% of this balance between one to five years and the remaining amount thereafter. With respect to the remaining performance obligations for the MIS segment, the Company has applied a practical expedient set forth in ASC Topic 606 permitting the omission from the amounts stated above relating to unsatisfied performance obligations for contracts with an original expected length of one year or less.

NOTE 3. STOCK-BASED COMPENSATION

Presented below is a summary of the stock-based compensation cost and associated tax benefit included in the accompanying consolidated statements of operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Stock-based compensation cost	$	46	$	46	$	143	$	130
Tax benefit	$	10	$	10	$	32	$	30

In April 2023, stockholders approved an amendment to the 2001 Plan increasing the number of shares of Common Stock authorized for issuance by 4.0 million. This results in the 2001 Plan now permitting for the grant of up to 54.6 million shares, of which not more than 10.7 million shares are available for grants of awards other than stock options. During the first nine months of 2023, the Company granted 0.1 million employee stock options, which had a weighted average grant date fair value of $95.66 per share. The Company also granted 0.6 million shares of restricted stock in the first nine months of 2023, which had a weighted average grant date fair value of $296.05 per share. Both the employee stock options and restricted stock generally vest ratably over four years. Additionally, the Company granted 0.1 million shares of performance-based awards whereby the number of shares that ultimately vest are based on the achievement of certain non-market-based performance metrics of the Company over three years. The weighted average grant date fair value of these awards was $287.70 per share.

The following weighted average assumptions were used in determining the fair value using the Black-Scholes option-pricing model for options granted in 2023:


Expected dividend yield	1.04	%
Expected stock volatility	29	%
Risk-free interest rate	4.18	%
Expected holding period	5.8 years

Unrecognized stock-based compensation expense at September 30, 2023 was $12 million and $261 million for unvested stock options and restricted stock, respectively, which is expected to be recognized over a weighted average period of 1.9 years and 2.5 years, respectively. Additionally, there was $29 million of unrecognized stock-based compensation expense relating to the aforementioned non-market-based performance-based awards, which is expected to be recognized over a weighted average period of 2.1 years.

The following table summarizes information relating to stock option exercises and restricted stock vesting:


	Nine Months Ended September 30,
	2023		2022
Exercise of stock options:
Proceeds from stock option exercises	$	26	$	6
Aggregate intrinsic value	$	48	$	7
Tax benefit realized upon exercise	$	11	$	2
Number of shares exercised (1)	0.2		—
Vesting of restricted stock:
Fair value of shares vested	$	154	$	174
Tax benefit realized upon vesting	$	36	$	41
Number of shares vested	0.5		0.5
Vesting of performance-based restricted stock:
Fair value of shares vested	$	24	$	50
Tax benefit realized upon vesting	$	3	$	7
Number of shares vested	0.1		0.2

(1) The number of options exercised in 2022 was approximately 41 thousand.

NOTE 4. INCOME TAXES

Moody’s ETR was 19.9% and 20.5% for the three months ended September 30, 2023 and 2022, respectively; the difference was primarily driven by return-to-accrual adjustments recorded during the current period. Furthermore, Moody’s ETR for the nine months ended September 30, 2023 and 2022 was 14.6% and 21.3%, respectively. The 6.7% decrease in the ETR for the nine months ended September 30, 2023 compared to the same period in the prior year was primarily due to tax benefits recognized in the first quarter of 2023, which reflect the resolutions of UTPs in various U.S. and non-U.S. tax jurisdictions. The Company’s year-to-date provision for income taxes differs from the tax computed by applying its estimated annual effective tax rate to the pre-tax earnings primarily due to the following items recognized in 2023: i) benefits of $116 million related to the resolutions of UTPs; and ii) excess tax benefits from stock-based compensation of $13 million.

The Company classifies interest related to UTPs in interest expense, net in its consolidated statements of operations. Penalties, if incurred, would be recognized in other non-operating income (expense), net. The Company had an increase in its UTPs of $5 million ($4 million, net of federal tax) during the third quarter of 2023 and a decrease in its UTPs of $114 million ($115 million, net of federal tax) during the nine months of 2023.

Moody’s is subject to U.S. federal income tax as well as income tax in various state, local and foreign jurisdictions. The Company’s U.S. federal income tax returns for 2019 through 2020 are currently under examination and 2021 through 2022 remain open to examination. The Company’s New York City tax returns for 2015 through 2019 are currently under examination. The Company’s U.K. tax returns for 2017 through 2021 remain open to examination.

For ongoing audits, it is possible the balance of UTPs could decrease in the next twelve months as a result of the settlement of such audits, which might involve the payment of additional taxes, the adjustment of certain deferred taxes and/or the recognition of tax benefits. It is also possible that new issues will be raised by tax authorities which could necessitate increases to the balance of UTPs. As the Company is unable to predict the timing or outcome of these audits, it is unable to estimate the amount of changes to the balance of UTPs at this time. However, the Company believes that it has adequately provided for its financial exposure relating to all open tax years, by tax jurisdiction, in accordance with the applicable provisions of ASC Topic 740 regarding UTPs.

The following table shows the amount the Company paid for income taxes:


	Nine Months Ended September 30,
	2023		2022
Income taxes paid	$	213	$	394

In August 2022, the U.S. Congress passed the Inflation Reduction Act, which included a corporate minimum tax on book earnings of 15%, an excise tax on corporate share repurchases of 1%, and certain climate change and energy tax credit incentives. The adoption of a corporate minimum tax of 15% is not expected to impact Moody’s ETR. The excise tax of 1% on corporate share buybacks will not have an impact on the Company’s ETR for 2023.

NOTE 5. RECONCILIATION OF WEIGHTED AVERAGE SHARES OUTSTANDING

Below is a reconciliation of basic to diluted shares outstanding:


	Three Months Ended September 30,		Nine Months Ended September 30,

	2023	2022	2023	2022
Basic	183.3	183.2	183.4	184.1
Dilutive effect of shares issuable under stock-based compensation plans	0.7	0.7	0.7	0.8
Diluted	184.0	183.9	184.1	184.9
Anti-dilutive options to purchase common shares and restricted stock as well as contingently issuable restricted stock which are excluded from the table above	0.4	0.5	0.5	0.4

The calculation of basic shares outstanding is based on the weighted average number of shares of common stock outstanding during the reporting period. The calculation of diluted EPS requires certain assumptions regarding the use of both cash proceeds and assumed proceeds that would be received upon the exercise of stock options and vesting of restricted stock outstanding as of September 30, 2023 and 2022.

NOTE 6. ACCELERATED SHARE REPURCHASE PROGRAM

On March 1, 2022, the Company entered into an ASR agreement with a financial institution counterparty to repurchase $500 million of its outstanding common stock. The Company paid $500 million to the counterparty and received an initial delivery of 1.2 million shares of its common stock. Final settlement of the ASR agreement was completed in April 2022 and the Company received delivery of an additional 0.3 million shares of the Company’s common stock.

In total, the Company repurchased 1.5 million shares of the Company’s common stock during the term of the ASR Agreement, based on the volume-weighted average price (net of discount) of $324.20 per share over the duration of the program. The initial share repurchase and final share settlement were recorded as a reduction to shareholders’ equity.

NOTE 7. CASH EQUIVALENTS AND INVESTMENTS

The table below provides additional information on the Company’s cash equivalents and investments:


	As of September 30, 2023
							Balance sheet location
	Cost		Gains/(Losses)		Fair Value		Cash and cash equivalents		Short-term investments		Other assets
Certificates of deposit and money market deposit accounts/funds (1)	$	1,039	$	—	$	1,039	$	961	$	73	$	5
Mutual funds	$	88	$	5	$	93	$	—	$	—	$	93


	As of December 31, 2022
							Balance sheet location
	Cost		Gains/(Losses)		Fair Value		Cash and cash equivalents		Short-term investments		Other assets

Certificates of deposit and money market deposit accounts (1)	$	914	$	—	$	914	$	808	$	90	$	16
Mutual funds	$	71	$	—	$	71	$	—	$	—	$	71

(1) Consists of time deposits, money market deposit accounts and money market funds. The remaining contractual maturities for the certificates of deposits classified as short-term investments are one month to 12 months at both September 30, 2023 and December 31, 2022. The remaining contractual maturities for the certificates of deposits classified in other assets are 13 months to 15 months at September 30, 2023 and 13 months to 24 months at December 31, 2022. Time deposits with a maturity of less than 90 days at time of purchase are classified as cash and cash equivalents.

In addition, the Company invested in Corporate-Owned Life Insurance (COLI). As of September 30, 2023 and December 31, 2022, the contract value of the COLI was $46 million and $40 million, respectively.

NOTE 8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to global market risks, including risks from changes in FX rates and changes in interest rates. Accordingly, the Company uses derivatives in certain instances to manage financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for speculative purposes.

Derivatives and non-derivative instruments designated as accounting hedges:

Fair Value Hedges

Interest Rate Swaps

The Company has entered into interest rate swaps to convert the fixed interest rate on certain of its long-term debt to a floating interest rate based on the SOFR. The purpose of these hedges is to mitigate the risk associated with changes in the fair value of the long-term debt, thus the Company has designated these swaps as fair value hedges. The fair value of the swaps is adjusted quarterly with a corresponding adjustment to the carrying value of the debt. The changes in the fair value of the swaps and the underlying hedged item generally offset and the net cash settlements on the swaps are recorded each period within interest expense, net in the Company’s consolidated statements of operations.

The following table summarizes the Company’s interest rate swaps designated as fair value hedges:


		As of September 30, 2023			As of December 31, 2022
Hedged Item	Nature of Swap	Notional Amount		Floating Interest Rate (1)	Notional Amount		Floating Interest Rate
2017 Senior Notes due 2028	Pay Floating/Receive Fixed	$	500	SOFR	$	500	3-month LIBOR
2020 Senior Notes due 2025	Pay Floating/Receive Fixed	300		SOFR	300		6-month LIBOR
2014 Senior Notes due 2044	Pay Floating/Receive Fixed	300		SOFR	300		3-month LIBOR
2018 Senior Notes due 2048	Pay Floating/Receive Fixed	300		SOFR	300		3-month LIBOR
2018 Senior Notes due 2029	Pay Floating/Receive Fixed	400		SOFR	400		SOFR
2022 Senior Notes due 2052	Pay Floating/Receive Fixed	500		SOFR	500		SOFR
2022 Senior Notes due 2032	Pay Floating/Receive Fixed	250		SOFR	250		SOFR
Total		$	2,550		$	2,550

(1) Contractual terms of instruments using the 3-month or 6-month LIBOR at December 31, 2022 were modified to the SOFR reference rate in the first quarter of 2023.

Refer to Note 14 for information on the cumulative amount of fair value hedging adjustments included in the carrying amount of the above hedged items.

The following table summarizes the impact to the statements of operations of the Company’s interest rate swaps designated as fair value hedges:


Total amounts of financial statement line item presented in the statements of operations in which the effects of fair value hedges are recorded				Amount of income/(loss) recognized in the consolidated statements of operations
	Three Months Ended September 30,					Nine Months Ended September 30,
	2023		2022			2023			2022
Interest expense, net				$	(66)		$	(58)		$	(185)	$	(166)

Descriptions		Location on Consolidated Statements of Operations
Net interest settlements and accruals on interest rate swaps		Interest expense, net		$	(25)		$	(4)		$	(64)	$	5
Fair value changes on interest rate swaps		Interest expense, net		$	(35)		$	(95)		$	(35)	$	(227)
Fair value changes on hedged debt		Interest expense, net		$	35		$	95		$	35	$	227

Net investment hedges

Debt designated as net investment hedges

The Company has designated €500 million of the 2015 Senior Notes Due 2027 and €750 million of the 2019 Senior Notes due 2030 as net investment hedges to mitigate FX exposure related to a portion of the Company’s euro net investment in certain foreign subsidiaries against changes in euro/USD exchange rates. These hedges are designated as accounting hedges under the applicable sections of ASC Topic 815 and will end upon the repayment of the notes in 2027 and 2030, respectively, unless terminated early at the discretion of the Company.

Cross currency swaps designated as net investment hedges

The Company enters into cross-currency swaps to mitigate FX exposure related to a portion of the Company’s euro net investment in certain foreign subsidiaries against changes in euro/USD exchange rates. The following table provides information on the cross-currency swaps designated as net investment hedges under ASC Topic 815:


September 30, 2023
	Pay			Receive
Nature of Swap	Notional Amount		Weighted Average Interest Rate	Notional Amount		Weighted Average Interest Rate
Pay Fixed/Receive Fixed	€	765	3.67%	$	800	5.25%
Pay Floating/Receive Floating	2,138		Based on ESTR	2,250		Based on SOFR
Total	€	2,903		$	3,050


December 31, 2022
	Pay			Receive
Nature of Swap	Notional Amount		Weighted Average Interest Rate	Notional Amount		Weighted Average Interest Rate
Pay Fixed/Receive Fixed	€	765	3.67%	$	800	5.25%
Pay Floating/Receive Floating	450		Based on 3-month EURIBOR	500		Based on 3-month USD LIBOR
Pay Floating/Receive Floating	1,688		Based on ESTR	1,750		Based on SOFR
Total	€	2,903		$	3,050

As of September 30, 2023 these hedges will expire and the notional amounts will be settled as follows unless terminated early at the discretion of the Company:


Years Ending December 31,

2026	€	450
2027	€	531
2028	€	588
2029	€	373
2031	€	481
2032	€	480
Total	€	2,903

The following tables provide information on the gains/(losses) on the Company’s net investment and cash flow hedges:


Derivative and Non-Derivative Instruments in Net Investment Hedging Relationships		Amount of Gain/(Loss) Recognized in AOCL on Derivative, net of Tax					Amount of Loss Reclassified from AOCL into Income, net of Tax					Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
	Three Months Ended September 30,					Three Months Ended September 30,					Three Months Ended September 30,
		2023		2022			2023		2022			2023		2022

Cross currency swaps		$	63	$	131		$	—	$	—		$	13	$	17
Long-term debt		30		62			—		—			—		—
Total net investment hedges		$	93	$	193		$	—	$	—		$	13	$	17
Derivatives in Cash Flow Hedging Relationships

Interest rate contracts		$	—	$	—		$	(1)	$	—		$	—	$	—
Total cash flow hedges		$	—	$	—		$	(1)	$	—		$	—	$	—
Total		$	93	$	193		$	(1)	$	—		$	13	$	17


Derivative and Non-Derivative Instruments in Net Investment Hedging Relationships		Amount of Gain/(Loss) Recognized in AOCL on Derivative, net of Tax					Amount of Loss Reclassified from AOCL into Income, net of Tax					Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
	Nine Months Ended September 30,					Nine Months Ended September 30,					Nine Months Ended September 30,
		2023		2022			2023		2022			2023		2022

Cross currency swaps		$	—	$	273		$	—	$	—		$	43	$	38
Long-term debt		8		148			—		—			—		—
Total net investment hedges		$	8	$	421		$	—	$	—		$	43	$	38
Derivatives in Cash Flow Hedging Relationships
Cross currency swaps		$	—	$	—		$	1	$	—		$	—	$	—
Interest rate contracts		—		—			(2)		(1)			—		—
Total cash flow hedges		$	—	$	—		$	(1)	$	(1)		$	—	$	—
Total		$	8	$	421		$	(1)	$	(1)		$	43	$	38

The cumulative amount of net investment hedge and cash flow hedge gains (losses) remaining in AOCL is as follows:


	Cumulative Gains/(Losses), net of tax
	September 30, 2023		December 31, 2022
Net investment hedges
Cross currency swaps	$	118	$	118
FX forwards	29		29
Long-term debt	46		38
Total net investment hedges	$	193	$	185
Cash flow hedges
Interest rate contracts	$	(45)	$	(47)
Cross currency swaps	1		2
Total cash flow hedges	(44)		(45)
Total net gain in AOCL	$	149	$	140

Derivatives not designated as accounting hedges:

Foreign exchange forwards

The Company also enters into foreign exchange forward contracts to mitigate the change in fair value on certain assets and liabilities denominated in currencies other than a subsidiary’s functional currency. These forward contracts are not designated as accounting hedges under the applicable sections of ASC Topic 815. Accordingly, changes in the fair value of these contracts are recognized immediately in other non-operating income, net, in the Company’s consolidated statements of operations along with the FX gain or loss recognized on the assets and liabilities denominated in a currency other than the subsidiary’s functional currency. These contracts have expiration dates at various times through August 2024.

The following table summarizes the notional amounts of the Company’s outstanding foreign exchange forwards:


	September 30, 2023				December 31, 2022
Notional amount of currency pair:	Sell		Buy		Sell		Buy
Contracts to sell USD for GBP	$	486	£	378	$	170	£	146
Contracts to sell USD for Japanese yen	$	15	¥	2,000	$	24	¥	3,500
Contracts to sell USD for Canadian dollars	$	146	C$	195	$	87	C$	120
Contracts to sell USD for Singapore dollars	$	61	S$	82	$	50	S$	70
Contracts to sell USD for euros	$	98	€	90	$	116	€	115

Contracts to sell USD for Indian rupee	$	23	₹	1,900	$	19	₹	1,600

Contracts to sell euros for USD	€	—	$	—	€	85	$	89
Contracts to sell AUD for USD	A$	5	$	8	A$	—	$	—


NOTE: € = euro, £ = British pound, S$ = Singapore dollar, $ = U.S. dollar, ¥ = Japanese yen, C$ = Canadian dollar, ₹= Indian Rupee, A$ = Australian dollar

Total Return Swaps

Beginning in the second quarter of 2023, the Company entered into total return swaps to mitigate market-driven changes in the value of certain liabilities associated with the Company's deferred compensation plans. The fair value of these swaps at September 30, 2023 and related gains in the three and nine months ended September 30, 2023 were not material. The notional amount of the total return swaps as of September 30, 2023 was $52 million.

The following table summarizes the impact to the consolidated statements of operations relating to the net losses on the Company’s derivatives which are not designated as hedging instruments:


Derivatives not designated as accounting hedges	Location on Consolidated Statements of Operations		Three Months Ended September 30,				Nine Months Ended September 30,
		2023	2022		2023		2022
FX forwards	Other non-operating income, net		$	(25)	$	(46)	$	(10)	$	(103)

The table below shows the classification between assets and liabilities on the Company’s consolidated balance sheets for the fair value of the derivative instrument as well as the carrying value of its non-derivative debt instruments designated and qualifying as net investment hedges:


	Derivative and Non-Derivative Instruments
	Balance Sheet Location	September 30, 2023		December 31, 2022
Assets:
Derivatives designated as accounting hedges:

Cross-currency swaps designated as net investment hedges	Other assets	$	27	$	27



Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilities	Other current assets	—		19

Total assets		$	27	$	46
Liabilities:
Derivatives designated as accounting hedges:


Cross-currency swaps designated as net investment hedges	Other liabilities	$	78	$	78
Interest rate swaps designated as fair value hedges	Other liabilities	273		239
Total derivatives designated as accounting hedges		351		317
Non-derivatives designated as accounting hedges:
Long-term debt designated as net investment hedge	Long-term debt	1,323		1,334
Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilities	Accounts payable and accrued liabilities	32		2
Total liabilities		$	1,706	$	1,653

NOTE 9. GOODWILL AND OTHER ACQUIRED INTANGIBLE ASSETS

The following table summarizes the activity in goodwill for the periods indicated:


	Nine Months Ended September 30, 2023
	MA						MIS						Consolidated
	Gross goodwill		Accumulated impairment charge		Net goodwill		Gross goodwill		Accumulated impairment charge		Net goodwill		Gross goodwill		Accumulated impairment charge		Net goodwill
Balance at beginning of year	$	5,474	$	(12)	$	5,462	$	377	$	—	$	377	$	5,851	$	(12)	$	5,839
Additions/ adjustments (1)	90		—		90		(87)		—		(87)		3		—		3
Foreign currency translation adjustments	(9)		—		(9)		(2)		—		(2)		(11)		—		(11)

Ending balance	$	5,555	$	(12)	$	5,543	$	288	$	—	$	288	$	5,843	$	(12)	$	5,831


	Year Ended December 31, 2022
	MA						MIS						Consolidated
	Gross goodwill		Accumulated impairment charge		Net goodwill		Gross goodwill		Accumulated impairment charge		Net goodwill		Gross goodwill		Accumulated impairment charge		Net goodwill
Balance at beginning of year	$	5,615	$	(12)	$	5,603	$	396	$	—	$	396	$	6,011	$	(12)	$	5,999
Additions/ adjustments (2)	88		—		88		4		—		4		92		—		92
Foreign currency translation adjustments	(229)		—		(229)		(23)		—		(23)		(252)		—		(252)

Ending balance	$	5,474	$	(12)	$	5,462	$	377	$	—	$	377	$	5,851	$	(12)	$	5,839

(1) The 2023 additions/adjustments primarily relate to a reallocation of goodwill pursuant to a realignment of certain components of the Company's ESG business in the first quarter of 2023.

(2) The 2022 additions/adjustments for the MA segment in the table above primarily relate to the acquisition of kompany in the first quarter of 2022.

Acquired intangible assets and related amortization consisted of:


	September 30, 2023		December 31, 2022
Customer relationships	$	2,021	$	2,024
Accumulated amortization	(520)		(453)
Net customer relationships	1,501		1,571
Software/product technology	659		661
Accumulated amortization	(338)		(283)
Net software/product technology	321		378
Database	178		178
Accumulated amortization	(78)		(64)
Net database	100		114
Trade names	196		197
Accumulated amortization	(68)		(58)
Net trade names	128		139
Other (1)	52		52
Accumulated amortization	(44)		(44)
Net other	8		8
Total acquired intangible assets, net	$	2,058	$	2,210

(1) Other intangible assets primarily consist of trade secrets, covenants not to compete, and acquired ratings methodologies and models.

Amortization expense relating to acquired intangible assets is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Amortization expense	$	49	$	48	$	150	$	150

NOTE 10. RESTRUCTURING

On June 30, 2022, the chief executive officer of Moody’s approved the 2022 - 2023 Geolocation Restructuring Program. The Company estimates that the program will result in annualized savings of $145 million to $165 million per year. This program relates to the Company's post-COVID-19 geolocation strategy and includes the rationalization and exit of certain leased office spaces and a reduction in staff, including the relocation of certain job functions. The exit from certain leased office spaces began in the fourth quarter of 2022 and is expected to result in $55 million to $65 million of total pre-tax charges from vacating the affected office spaces, a large portion of which Moody's intends to sublease. The program is also expected to include a total of $130 million to $140 million of pre-tax personnel-related restructuring charges, an amount that includes severance costs, expense related to the modification of equity awards, and related costs primarily determined under the Company’s existing severance plans. The savings generated from the 2022 - 2023 Geolocation Restructuring Program are expected to strengthen the Company's operating margin, with a portion being deployed to support strategic investments, including the Company's workplace of the future program and employee retention initiatives. The 2022 - 2023 Geolocation Restructuring Program is expected to be substantially complete by the end of 2023. Cash outlays associated with this program, which primarily relate to personnel-related costs, are expected to be $130 million to $140 million, which are expected to be paid through 2024.

Total expense included in the accompanying consolidated statements of operations relating to the aforementioned restructuring program is below:


	Three months ended September 30,
	2023						2022
	Employee Termination Costs		Real Estate Related Costs (1)		Total		Employee Termination Costs (1)		Real Estate Related Costs		Total



2022 - 2023 Geolocation Restructuring Program	$	17	$	10	$	27	$	1	$	—	$	1
Total Restructuring	$	17	$	10	$	27	$	1	$	—	$	1


	Nine months ended September 30,
	2023						2022
	Employee Termination Costs		Real Estate Related Costs (1)		Total		Employee Termination Costs		Real Estate Related Costs		Total


2020 MA Strategic Reorganization Restructuring Program	$	—	$	—	$	—	$	(1)	$	—	$	(1)
2022 - 2023 Geolocation Restructuring Program	39		12		51		33		—		33
Total Restructuring	$	39	$	12	$	51	$	32	$	—	$	32

(1)Primarily includes ROU Asset impairment charges for the three and nine months ended September 30, 2023. The fair value of the impaired asset was determined by utilizing the present value of the estimated future cash flows attributable to the asset. The fair value of the asset subsequent to the impairment was $4 million.

Changes to the restructuring liability for the aforementioned restructuring programs during the first nine months of 2023 were as follows:



Balance as of December 31, 2022	$	65









2022 - 2023 Geolocation Restructuring Program:
Cost incurred and adjustments	39
Cash payments and adjustments	(70)
Balance as of September 30, 2023	$	34


Cumulative expense incurred through September 30, 2023	Employee Termination Costs		Real Estate Related Costs		Other Costs		Total



2022 - 2023 Geolocation Restructuring Program	$	124	$	39	$	1	$	164

NOTE 11. FAIR VALUE

The table below presents information about items that are carried at fair value at September 30, 2023 and December 31, 2022:


	Fair Value Measurement as of September 30, 2023
Description	Balance		Level 1		Level 2
Assets:
Derivatives (1)	$	27	$	—	$	27
Money market funds/mutual funds	107		107		—
Total	$	134	$	107	$	27
Liabilities:
Derivatives (1)	$	383	$	—	$	383
Total	$	383	$	—	$	383


	Fair Value Measurement as of December 31, 2022
Description	Balance		Level 1		Level 2
Assets:
Derivatives (1)	$	46	$	—	$	46

Mutual funds	71		71		—
Total	$	117	$	71	$	46
Liabilities:
Derivatives (1)	$	319	$	—	$	319
Total	$	319	$	—	$	319

(1) Represents fair value of certain derivative contracts as more fully described in Note 8 to the consolidated financial statements.

The following are descriptions of the methodologies utilized by the Company to estimate the fair value of its derivative contracts, mutual funds and money market mutual funds:

Derivatives:

In determining the fair value of the derivative contracts in the table above, the Company utilizes industry standard valuation models. Where applicable, these models project future cash flows and discount the future amounts to a present value using spot rates, forward points, currency volatilities, interest rates as well as the risk of non-performance of the Company and the counterparties with whom it has derivative contracts. The Company established strict counterparty credit guidelines and only enters into transactions with financial institutions that adhere to these guidelines. Accordingly, the risk of counterparty default is deemed to be minimal.

Money market funds and mutual funds:

The mutual funds in the table above are deemed to be equity securities with readily determinable fair values with changes in the fair value recognized through net income under ASC Topic 321. The fair value of these instruments is determined using Level 1 inputs as defined in the ASC Topic 820.

NOTE 12. OTHER BALANCE SHEET AND STATEMENTS OF OPERATIONS INFORMATION

The following tables contain additional detail related to certain balance sheet captions:


	September 30, 2023		December 31, 2022
Other current assets:
Prepaid taxes	$	125	$	235
Prepaid expenses	137		119
Capitalized costs to obtain and fulfill sales contracts	107		106
Foreign exchange forwards on certain assets and liabilities	—		19

Interest receivable on interest rate and cross currency swaps	50		74
Other	26		30
Total other current assets	$	445	$	583

Other assets:
Investments in non-consolidated affiliates	$	521	$	517
Deposits for real-estate leases	14		15
Indemnification assets related to acquisitions	109		110
Mutual funds and fixed deposits	98		87
Company owned life insurance (at contract value)	46		40
Costs to obtain sales contracts	178		171
Derivative instruments designated as accounting hedges	27		27
Pension and other retirement employee benefits	40		40
Other	97		85
Total other assets	$	1,130	$	1,092

Accounts payable and accrued liabilities:
Salaries and benefits	$	108	$	104
Incentive compensation	244		276
Customer credits, advanced payments and advanced billings	89		102

Dividends	20		6
Professional service fees	58		49
Accrued interest	47		93
Accounts payable	41		52
Income taxes	96		86
Pension and other retirement employee benefits	7		7
Accrued royalties	22		23
Foreign exchange forwards on certain assets and liabilities	32		2
Restructuring liability	34		65


Interest payable on interest rate and cross currency swaps	50		51
Other	90		95
Total accounts payable and accrued liabilities	$	938	$	1,011






































	September 30, 2023		December 31, 2022
Other liabilities:
Pension and other retirement employee benefits	$	180	$	189

Interest accrued on UTPs	34		47
MAKS indemnification provisions	19		23
Income tax liability - non-current portion	15		48
Derivative instruments designated as accounting hedges	351		317

Other	48		50
Total other liabilities	$	647	$	674

Investments in non-consolidated affiliates:

The following table provides additional detail regarding Moody's investments in non-consolidated affiliates, as included in other assets in the consolidated balance sheets:


	September 30, 2023		December 31, 2022
Equity method investments (1)	$	189	$	187
Investments measured using the measurement alternative (2)	325		325
Other	7		5
Total investments in non-consolidated affiliates	$	521	$	517
(1) Equity securities in which the Company has significant influence over the investee but does not have a controlling financial interest in accordance with ASC Topic 323.
(2) Equity securities without readily determinable fair value for which the Company has elected to apply the measurement alternative in accordance with ASC Topic 321.

Moody's holds various investments accounted for under the equity method, the most significant of which is the Company's minority investment in CCXI. Moody's also holds various investments measured using the measurement alternative, the most significant of which is the Company's minority interest in BitSight.

Earnings from non-consolidated affiliates, which are included within other non-operating income, net, are disclosed within the table below.

Other non-operating income, net:

The following table summarizes the components of other non-operating income, net:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
FX gain (loss) (1)	$	2	$	13	$	(29)	$	(9)
Net periodic pension costs - other components	8		6		26		18
Income from investments in non-consolidated affiliates	9		10		12		14
Gain (loss) on investments	—		(3)		11		(19)
Other (2)	(1)		—		11		18
Total	$	18	$	26	$	31	$	22

(1) The amount for the nine months ended September 30, 2023 includes a $23 million loss recorded pursuant to an immaterial out-of-period adjustment relating to the 2022 fiscal year. The amount for the nine months ended September 30, 2022 includes FX translation losses of $20 million reclassified to earnings resulting from the Company no longer conducting commercial operations in Russia.

(2) The amount for the nine months ended September 30, 2023 reflects a benefit of $9 million related to the favorable resolutions of various tax matters. The amount for the nine months ended September 30, 2022 reflects an $11 million benefit from a statute of limitations lapse relating to reserves established pursuant to the divestiture of MAKS.

NOTE 13. COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table provides details about the reclassifications out of AOCL:


	Three Months Ended September 30,				Location in the consolidated statements of operations
Losses on cash flow hedges	2023		2022




Interest rate contract	(1)		(1)		Other non-operating income, net
Income tax effect of item above	—		1		Provision for income taxes
Total net losses on cash flow hedges	(1)		—




Pension and other retirement benefits
Amortization of actuarial gains/prior service credits and settlement credit included in net income	1		(1)		Other non-operating income, net



Total pension and other retirement benefits	1		(1)
Total net losses included in Net Income attributable to reclassifications out of AOCL	$	—	$	(1)



	Nine Months Ended September 30,				Location in the consolidated statements of operations
Losses on currency translation adjustments	2023		2022
Foreign currency translation adjustments - reclassification of losses included in net income	$	—	$	(20)	Other non-operating income, net
Total losses on currency translation adjustments	—		(20)
Losses on cash flow hedges

Interest rate contract	(2)		(2)		Other non-operating income, net
Income tax effect of item above	1		1		Provision for income taxes
Total net losses on cash flow hedges	(1)		(1)




Pension and other retirement benefits
Amortization of actuarial gains/prior service credits and settlement credit included in net income	3		(2)		Other non-operating income, net

Income tax effect of item above	(1)		—		Provision for income taxes
Total pension and other retirement benefits	2		(2)
Total net gains (losses) included in Net Income attributable to reclassifications out of AOCL	$	1	$	(23)

The following tables show changes in AOCL by component (net of tax):



	Three Months Ended September 30,
	2023										2022
Gains/(Losses)	Pension and Other Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation Adjustments		Net Investment Hedges		Total		Pension and Other Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation Adjustments		Net Investment Hedges		Total
Balance at June 30,	$	(48)	$	(45)	$	(577)	$	100	$	(570)	$	(46)	$	(46)	$	(756)	$	249	$	(599)
Other comprehensive income/(loss) before reclassifications	1		—		(176)		93		(82)		—		—		(343)		193		(150)
Amounts reclassified from AOCL	(1)		1		—		—		—		1		—		—		—		1
Other comprehensive income/(loss)	—		1		(176)		93		(82)		1		—		(343)		193		(149)
Balance at September 30,	$	(48)	$	(44)	$	(753)	$	193	$	(652)	$	(45)	$	(46)	$	(1,099)	$	442	$	(748)


	Nine Months Ended September 30,
	2023										2022
Gains/(Losses)	Pension and Other Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation Adjustments		Net Investment Hedges		Total		Pension and Other Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation Adjustments		Net Investment Hedges		Total
Balance at December 31,	$	(47)	$	(45)	$	(736)	$	185	$	(643)	$	(49)	$	(47)	$	(335)	$	21	$	(410)
Other comprehensive income/(loss) before reclassifications	1		—		(17)		8		(8)		2		—		(784)		421		(361)
Amounts reclassified from AOCL	(2)		1		—		—		(1)		2		1		20		—		23

Other comprehensive income/(loss)	(1)		1		(17)		8		(9)		4		1		(764)		421		(338)
Balance at September 30,	$	(48)	$	(44)	$	(753)	$	193	$	(652)	$	(45)	$	(46)	$	(1,099)	$	442	$	(748)

NOTE 14. INDEBTEDNESS

The Company’s debt is recorded at its carrying amount, which represents the issuance amount plus or minus any issuance premium or discount, except for certain debt as depicted in the table below, which is recorded at the carrying amount adjusted for the fair value of an interest rate swap used to hedge the fair value of the note.

The following table summarizes total indebtedness:


September 30, 2023
Notes Payable:	Principal Amount		Fair Value of Interest Rate Swaps (1)		Unamortized (Discount) Premium		Unamortized Debt Issuance Costs		Carrying Value
5.25% 2014 Senior Notes, due 2044	$	600	$	(46)	$	3	$	(4)	$	553
1.75% 2015 Senior Notes, due 2027	529		—		—		(1)		528

3.25% 2017 Senior Notes, due 2028	500		(37)		(2)		(2)		459
4.25% 2018 Senior Notes, due 2029	400		(49)		(2)		(2)		347
4.875% 2018 Senior Notes, due 2048	400		(48)		(6)		(3)		343
0.950% 2019 Senior Notes, due 2030	794		—		(2)		(4)		788
3.75% 2020 Senior Notes, due 2025	700		(22)		—		(2)		676
3.25% 2020 Senior Notes, due 2050	300		—		(4)		(3)		293
2.55% 2020 Senior Notes, due 2060	300		—		(2)		(3)		295
2.00% 2021 Senior Notes, due 2031	600		—		(6)		(4)		590
2.75% 2021 Senior Notes, due 2041	600		—		(13)		(5)		582
3.10% 2021 Senior Notes, due 2061	500		—		(7)		(5)		488
3.75% 2022 Senior Notes, due 2052	500		(56)		(8)		(5)		431
4.25% 2022 Senior Notes, due 2032	500		(16)		(2)		(4)		478
Total long-term debt	$	7,223	$	(274)	$	(51)	$	(47)	$	6,851


December 31, 2022
Notes Payable:	Principal Amount		Fair Value of Interest Rate Swaps (1)		Unamortized (Discount) Premium		Unamortized Debt Issuance Costs		Carrying Value
4.875% 2013 Senior Notes, due 2024	$	500	$	—	$	(1)	$	(1)	$	498
5.25% 2014 Senior Notes, due 2044	600		(42)		3		(4)		557
1.75% 2015 Senior Notes, due 2027	534		—		—		(2)		532

3.25% 2017 Senior Notes, due 2028	500		(37)		(3)		(2)		458
4.25% 2018 Senior Notes, due 2029	400		(42)		(2)		(2)		354
4.875% 2018 Senior Notes, due 2048	400		(44)		(6)		(4)		346
0.950% 2019 Senior Notes, due 2030	800		—		(2)		(4)		794
3.75% 2020 Senior Notes, due 2025	700		(27)		(1)		(3)		669
3.25% 2020 Senior Notes, due 2050	300		—		(4)		(3)		293
2.55% 2020 Senior Notes, due 2060	300		—		(2)		(3)		295
2.00% 2021 Senior Notes, due 2031	600		—		(7)		(4)		589
2.75% 2021 Senior Notes, due 2041	600		—		(13)		(5)		582
3.10% 2021 Senior Notes, due 2061	500		—		(7)		(5)		488
3.75% 2022 Senior Notes, due 2052	500		(35)		(8)		(5)		452
4.25% 2022 Senior Notes, due 2032	500		(12)		(2)		(4)		482
Total long-term debt	$	7,734	$	(239)	$	(55)	$	(51)	$	7,389

(1) The fair value of interest rate swaps in the tables above represents the cumulative amount of fair value hedging adjustments included in the carrying amount of the hedged debt.

Notes Payable

In the first nine months of 2023, the Company fully repaid $500 million of the 2013 Senior Notes due 2024.

At September 30, 2023, the Company was in compliance with all covenants contained within all of the debt agreements. All the debt agreements contain cross default provisions which state that default under one of the aforementioned debt instruments could in turn permit lenders under other debt instruments to declare borrowings outstanding under those instruments to be immediately due and payable. As of September 30, 2023, there were no such cross defaults.

The repayment schedule for the Company’s borrowings is as follows:


Year Ending December 31,	Year Ending Total
2023 (After September 30,)	$	—
2024	—
2025	700
2026	—
2027	529
Thereafter	5,994
Total	$	7,223

Interest expense, net

The following table summarizes the components of interest as presented in the consolidated statements of operations and the cash paid for interest:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Income	$	19	$	5	$	44	$	9
Expense on borrowings(1)	(75)		(54)		(220)		(152)
Income (expense) on UTPs and other tax related liabilities(2)	(4)		(5)		10		(11)
Net periodic pension costs - interest component	(6)		(4)		(19)		(12)
Interest expense, net	$	(66)	$	(58)	$	(185)	$	(166)
Interest paid(3)	$	87	$	77	$	230	$	167

(1) Expense on borrowings includes interest on long-term debt, as well as realized gains/losses related to interest rate swaps and cross currency swaps, which are more fully discussed in Note 8.

(2) The amount for the nine months ended September 30, 2023 reflects a $22 million reduction of tax-related interest expense primarily related to the resolutions of outstanding tax matters.

(3) Interest paid includes net settlements on interest rate swaps, which are more fully discussed in Note 8.

The fair value and carrying value of the Company’s debt as of September 30, 2023 and December 31, 2022 are as follows:


	September 30, 2023				December 31, 2022
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
















Total debt	$	6,851	$	5,844	$	7,389	$	6,564

The fair value of the Company’s debt is estimated based on quoted prices in active markets as of the reporting date, which are considered Level 1 inputs within the fair value hierarchy.

NOTE 15. LEASES

The Company has operating leases, substantially all of which relate to the lease of office space. The Company’s leases which are classified as finance leases are not material to the consolidated financial statements. Certain of the Company’s leases include options to renew, with renewal terms that can extend the lease term from one year to 20 years at the Company’s discretion.

The following table presents the components of the Company’s lease cost:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating lease cost	$	23	$	25	$	70	$	77
Sublease income	(1)		(2)		(5)		(6)
Variable lease cost	6		5		16		15
Total lease cost	$	28	$	28	$	81	$	86

During the three and nine months ended September 30, 2023, the Company recorded charges of $10 million and $12 million, respectively, related to the exit of certain real estate leases. The charges were primarily related to ROU asset impairment and were recorded within restructuring expense in the consolidated statements of operations. Refer to Note 10 for further details.

The following tables present other information related to the Company’s operating leases:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Cash paid for amounts included in the measurement of operating lease liabilities	$	30	$	29	$	90	$	89
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1	$	1	$	25	$	31


	September 30, 2023		September 30, 2022
Weighted-average remaining lease term	4.6 years		5.1 years
Weighted-average discount rate applied to operating leases	3.2	%	3.1	%

The following table presents a maturity analysis of the future minimum lease payments included within the Company’s operating lease liabilities at September 30, 2023:


Year Ending December 31,	Operating Leases
2023 (After September 30,)	$	29
2024	115
2025	103
2026	84
2027	68
After 2027	53
Total lease payments (undiscounted)	452
Less: Interest	31
Present value of lease liabilities:	$	421
Lease liabilities - current	$	105
Lease liabilities - noncurrent	$	316

NOTE 16. CONTINGENCIES

Given the nature of the Company's activities, Moody’s is subject to legal and tax proceedings, governmental, regulatory and legislative investigations, subpoenas and other inquiries, and claims and litigation by governmental and private parties that are based on ratings assigned by MIS or that are otherwise incidental to the Company’s business. Moody’s and, in particular, MIS also are subject to periodic reviews, inspections, examinations and investigations by regulators in the U.S. and other jurisdictions, any of which may result in claims, legal proceedings, assessments, fines, penalties or restrictions on business activities. MIS is responding to SEC requests for documents and information in connection with an investigation of MIS’s compliance with record preservation requirements relating to certain business communications sent over electronic messaging channels that have not been approved by MIS. The SEC is conducting similar investigations of the record preservation practices of other NRSROs and other registrants subject to record preservation requirements. Moody’s also is subject to ongoing tax audits as addressed in Note 4 to the consolidated financial statements.

Management periodically assesses the Company’s liabilities and contingencies in connection with these matters based upon the latest information available. For claims, litigation and proceedings and governmental investigations and inquiries not related to income taxes, the Company records liabilities in the consolidated financial statements when it is both probable that a liability has

been incurred and the amount of loss can be reasonably estimated and periodically adjusts these as appropriate. When the reasonable estimate of the loss is within a range of amounts, the minimum amount of the range is accrued unless some higher amount within the range is a better estimate than another amount within the range. In instances when a loss is reasonably possible but uncertainties exist related to the probable outcome and/or the amount or range of loss, management does not record a liability but discloses the contingency if material. As additional information becomes available, the Company adjusts its assessments and estimates of such matters accordingly. Moody’s also discloses material pending legal proceedings pursuant to SEC rules and other pending matters as it may determine to be appropriate.

In view of the inherent difficulty of assessing the potential outcome of legal proceedings, governmental, regulatory and legislative investigations and inquiries, claims and litigation and similar matters and contingencies, particularly when the claimants seek large or indeterminate damages or assert novel legal theories or the matters involve a large number of parties, the Company often cannot predict what the eventual outcome of the pending matters will be or the timing of any resolution of such matters. The Company also may be unable to predict the impact (if any) that any such matters may have on how its business is conducted, on its competitive position or on its financial position, results of operations or cash flows. As the process to resolve any pending matters progresses, management will continue to review the latest information available and assess its ability to predict the outcome of such matters and the effects, if any, on its operations and financial condition and to accrue for and disclose such matters as and when required. However, because such matters are inherently unpredictable and unfavorable developments or resolutions can occur, the ultimate outcome of such matters, including the amount of any loss, may differ from those estimates.

NOTE 17. SEGMENT INFORMATION

The Company is organized into two operating segments: MA and MIS and accordingly, the Company reports in two reportable segments: MA and MIS.

The MA segment develops a wide range of products and services that support the risk management activities of institutional participants in global financial markets. The MA segment consists of three LOBs - Decision Solutions, Research and Insights, and Data and Information.

The MIS segment consists of five LOBs. The CFG, FIG, PPIF and SFG LOBs generate revenue principally from fees for the assignment and ongoing monitoring of credit ratings on debt obligations and the entities that issue such obligations in markets worldwide. The MIS Other LOB primarily consists of financial instruments pricing services in the Asia-Pacific region, ICRA non-ratings revenue and revenue from providing professional services.

Revenue for MA and expenses for MIS include an intersegment fee charged to MIS from MA for certain MA products and services utilized in MIS’s ratings process. Additionally, revenue for MIS and expenses for MA include intersegment fees charged to MA for the rights to use and distribute content, data and products developed by MIS. These intersegment fees are generally based on the market value of the products and services being transferred between the segments.

Overhead expenses include costs such as rent and occupancy, information technology and support staff such as finance, human resources and legal. Such costs and corporate expenses that exclusively benefit one segment are fully charged to that segment.

For overhead costs and corporate expenses that benefit both segments, costs are allocated to each segment based on the segment’s share of full-year 2018 actual revenue which comprises a “Baseline Pool” established in 2019, which will remain fixed over time. In subsequent periods, incremental overhead costs (or reductions thereof) will be allocated to each segment based on the prevailing shares of total revenue represented by each segment.

“Eliminations” in the following table represent intersegment revenue/expense. Moody’s does not report the Company’s assets by reportable segment, as this metric is not used by the chief operating decision maker to allocate resources to the segments. Consequently, it is not practical to show assets by reportable segment.

Financial Information by Segment

The table below shows revenue and Adjusted Operating Income by reportable segment. Adjusted Operating Income is a financial metric utilized by the Company’s chief operating decision maker to assess the profitability of each reportable segment. Refer to Note 2 for further details on the components of the Company’s revenue.


	Three Months Ended September 30,
	2023								2022
	MA		MIS		Eliminations		Consolidated		MA		MIS		Eliminations		Consolidated
Total external revenue	$	776	$	696	$	—	$	1,472	$	685	$	590	$	—	$	1,275
Intersegment revenue	3		47		(50)		—		2		43		(45)		—
Revenue	779		743		(50)		1,472		687		633		(45)		1,275
Operating, SG&A	517		348		(50)		815		479		344		(45)		778
Adjusted Operating Income	$	262	$	395	$	—	$	657	$	208	$	289	$	—	$	497
Add:
Depreciation and amortization	76		19		—		95		62		21		—		83

Restructuring	22		5		—		27		1		—		—		1


Operating Income							$	535							$	413



	Nine Months Ended September 30,
	2023								2022
	MA		MIS		Eliminations		Consolidated		MA		MIS		Eliminations		Consolidated
Total external revenue	$	2,260	$	2,176	$	—	$	4,436	$	2,055	$	2,123	$	—	$	4,178
Intersegment revenue	10		138		(148)		—		5		129		(134)		—
Revenue	2,270		2,314		(148)		4,436		2,060		2,252		(134)		4,178
Operating, SG&A	1,584		1,034		(148)		2,470		1,423		1,038		(134)		2,327
Adjusted Operating Income	$	686	$	1,280	$	—	$	1,966	$	637	$	1,214	$	—	$	1,851
Add:
Depreciation and amortization	220		56		—		276		182		60		—		242
Restructuring	38		13		—		51		17		15		—		32



Operating Income							$	1,639							$	1,577

The table below shows cumulative restructuring expense incurred through September 30, 2023 by reportable segment.


	MA		MIS		Total



2022 - 2023 Geolocation Restructuring Program	$	87	$	77	$	164

The costs expected to be incurred related to the 2022 - 2023 Geolocation Restructuring Program are $100 million - $110 million for the MA segment and $85 million - $95 million for the MIS segment.

The restructuring program is more fully discussed in Note 10.

Consolidated Revenue Information by Geographic Area


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
United States	$	768	$	668	$	2,320	$	2,214
Non-U.S.:
EMEA	455		393		1,376		1,271
Asia-Pacific	145		129		442		422
Americas	104		85		298		271
Total Non-U.S.	704		607		2,116		1,964
Total	$	1,472	$	1,275	$	4,436	$	4,178

NOTE 18. SUBSEQUENT EVENT

On October 23, 2023, the Board approved the declaration of a quarterly dividend of $0.77 per share of Moody’s common stock, payable on December 15, 2023 to shareholders of record at the close of business on November 24, 2023.

Previous: Cover and table of contents · Next: Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations