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 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 80 for a discussion of uncertainties, risks and other factors associated with these statements.

THE COMPANY

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

			Provider of financial intelligence and analytical tools supporting customers’ growth, efficiency and risk management objectives						Global leader in risk assessment providing credit rating opinions, analytical solutions and insights that empower organizations to make better 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 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 its customers, employees, business partners, local communities and stockholders. As part of this effort, Moody’s advances its commitment to sustainability by considering ESG factors in its operations, value chain, products and services. It 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 involve adhering to globally recognized standards including the GRI, SASB and TCFD recommendations. Moody’s sustainability-related achievements during 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;

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

–Ranked #1 on Forbes' Net Zero Leaders list.

The Board oversees sustainability matters via 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 that inform a clear and holistic understanding of risk, including ESG and climate considerations.

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 volatility in rated issuance volumes, which began in 2022 and has continued into 2023. These uncertainties include, but are not limited to: i) inflation levels; ii) higher interest rates; and iii) volatility in the global capital markets partly resulting from the ongoing military conflicts further discussed below and the failures of certain banking institutions in the first half 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 suppressed rated issuance volumes in certain sectors, the Company believes that these suppressed volumes 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.

Military Conflicts

The Company continues to closely monitor the impact of the ongoing Russia-Ukraine military conflict, and more recently is monitoring the military conflict in Israel and surrounding areas on all aspects of its business. In response to the Russia-Ukraine military 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 authorities in the jurisdictions in which Moody's operates. Furthermore, the Company also has withdrawn MIS credit ratings on Russian entities.

While Moody's Russian and Israeli operations and net assets are not material, broader global market volatility, which partially relates to uncertainties surrounding these military conflicts, has contributed and may continue to contribute to volatility in 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 these military conflicts may have on its financial position and operating results due to numerous uncertainties regarding the severity and duration of military conflicts and their broader potential macroeconomic impact.

Critical Accounting Estimates

Moody’s discussion and analysis of its financial condition and results of operations are based on the Company’s consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires Moody’s to make estimates and judgments that affect reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the dates of the financial statements and revenue and expenses during the reporting periods. These estimates are based on historical experience and on other assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, Moody’s evaluates its estimates, including those related to revenue recognition, accounts receivable allowances, contingencies, goodwill and acquired intangible assets, pension and other retirement benefits, investments in non-consolidated affiliates, and income taxes. Actual results may differ from these estimates under different assumptions or conditions. Item 7, MD&A, in the Company’s annual report on Form 10-K for the year ended December 31, 2022, includes descriptions of some of the judgments that Moody’s makes in applying its accounting estimates in these areas. Since the date of the annual report on Form 10-K, there have been no material changes to the Company’s critical accounting estimates disclosures.

Reportable Segments

The Company is organized into two reportable segments as of September 30, 2023: MA and MIS, which are more fully described in the section entitled “The Company” above and in Note 17 to the 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.

Three months ended September 30, 2023 compared with three months ended September 30, 2022

Executive Summary

The following table provides an executive summary of key operating results for the quarter ended September 30, 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 September 30,
Financial measure:			2023			2022			% Change Favorable (Unfavorable)			Insight and Key Drivers of Change Compared to Prior Year
Moody's total revenue			$	1,472		$	1,275		15		%	— reflects growth in both segments
MA external revenue			$	776		$	685		13		%	— ongoing strong retention and new sales for ratings data feeds and credit research; — continued growth from SaaS-based banking offerings; and — sustained demand for KYC solutions
MIS external revenue			$	696		$	590		18		%	— reflects strong growth in rated issuance volumes across all ratings LOBs excluding SFG compared to suppressed issuance activity in the prior year
Total operating and SG&A expenses			$	815		$	778		(5		%)	— higher salaries and benefits primarily reflecting hiring and salary increases in MA to support business growth; and — higher incentive compensation accruals aligned with actual/expected financial and operating performance
Depreciation and amortization			$	95		$	83		(14		%)	— higher amortization of internally developed software, primarily related to the development of MA SaaS solutions
Restructuring			$	27		$	1		NM			— relates to the Company's 2022 - 2023 Geolocation Restructuring Program, more fully discussed in Note 10 to the consolidated financial statements
Total non-operating (expense) income, net			$	(48)		$	(32)		(50 %)			Expense growth primarily due to: — higher realized losses of $21 million on fixed-to-floating interest rate swaps resulting from higher interest rates (more fully discussed in Note 8 to the consolidated financial statements); and — decreases in FX gains of $11 million, partially offset by: — higher interest income of $14 million resulting from higher cash balances and interest yields
Operating margin			36.3		%	32.4		%	390		BPS	— operating margin and Adjusted Operating Margin(1) growth reflects strong revenue growth outpacing an increase in operating and SG&A expenses
Adjusted Operating Margin(1)			44.6		%	39.0		%	560		BPS
ETR			19.9		%	20.5		%	60		BPS	— in line with the prior year
Diluted EPS			$	2.11		$	1.65		28		%	— mainly reflects higher operating income and Adjusted Operating Income(1)
Adjusted Diluted EPS(1)			$	2.43		$	1.85		31		%

Moody's Corporation

			Three Months Ended September 30,												% Change Favorable (Unfavorable)
			2023						2022
Revenue:
United States			$	768					$	668					15		%
Non-U.S.:
EMEA			455						393						16		%
Asia-Pacific			145						129						12		%
Americas			104						85						22		%
Total Non-U.S.			704						607						16		%
Total			1,472						1,275						15		%
Expenses:
Operating			412						393						(5		%)
SG&A			403						385						(5		%)
Depreciation and amortization			95						83						(14		%)
Restructuring			27						1						NM
Total			937						862						(9		%)
Operating income			$	535					$	413					30		%
Adjusted Operating Income(1)			$	657					$	497					32		%
Interest expense, net			$	(66)					$	(58)					(14		%)
Other non-operating income, net			18						26						(31		%)
Non-operating (expense) income, net			$	(48)					$	(32)					(50		%)
Net income attributable to Moody's			$	389					$	303					28		%
Diluted weighted average shares outstanding			184.0						183.9						—		%
Diluted EPS attributable to Moody's common shareholders			$	2.11					$	1.65					28		%
Adjusted Diluted EPS(1)			$	2.43					$	1.85					31		%
Operating margin			36.3		%				32.4		%
Adjusted Operating Margin(1)			44.6		%				39.0		%
Effective tax rate			19.9		%				20.5		%

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

									September 30,																		Change
									2023						2022												%
MA			U.S.						3,060						2,830												8		%
			Non-U.S.						4,823						4,294												12		%
			Total						7,883						7,124												11		%
MIS			U.S.						1,470						1,576												(7		%)
			Non-U.S.						3,782						4,043												(6		%)
			Total						5,252						5,619												(7		%)
MSS			U.S.						718						785												(9		%)
			Non-U.S.						1,165						1,043												12		%
			Total						1,883						1,828												3		%
Total MCO			U.S.						5,248						5,191												1		%
			Non-U.S.						9,770						9,380												4		%
			Total						15,018						14,571												3		%

GLOBAL REVENUE

Three months ended September 30,

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

_________________________________________********________________________________________

Global revenue ⇑ $197 million						U.S. Revenue ⇑ $100 million						Non-U.S. Revenue ⇑ $97 million

The increase in global revenue reflected growth in both MA and MIS, both in the U.S. and internationally. Refer to the section entitled “Segment Results” of this MD&A for a more comprehensive discussion of the Company’s segment revenue.

						Third Quarter Operating Expense ⇑ $19 million												Third Quarter SG&A Expense ⇑ $18 million

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

			Compensation expenses increased $21 million reflecting:												Compensation expenses increased $22 million reflecting:
			— approximately 50% of the increase is attributable to higher incentive compensation accruals, which aligns with actual/projected financial and operating performance; and												— approximately 60% of the increase is attributable to higher salaries and benefits primarily reflecting hiring and salary increases in MA to support continued growth in the business; and
			— approximately 40% of the increase is attributable to higher salaries and benefits, primarily reflecting hiring and salary increases in MA to support continued growth in the business.												— approximately 30% of the increase is attributable to higher incentive compensation accruals, which aligns with actual/projected financial and operating performance.
															Non-compensation expenses decreased $4 million reflecting:
															— ongoing cost control initiatives

Depreciation and amortization

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

Restructuring

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

						Operating margin 36.3%, up 390 BPS									Adjusted Operating Margin**(1)** 44.6%, up 560 BPS

Both operating margin and Adjusted Operating Margin(1) expanded with strong revenue growth outpacing an increase in operating and SG&A expenses.

									Interest Expense, net ⇑ $8 million									Other non-operating income ⇓ $8 million

Increase in expense is primarily due to:									Decrease in income is primarily due to:
— higher realized losses of $21 million on fixed-to-floating interest rate swaps resulting from higher interest rates (more fully discussed in Note 8 to the consolidated financial statements); partially offset by									— decrease in FX gains of $11 million.
— higher interest income of $14 million reflecting higher cash balances and interest yields.

						ETR ⇓ 60 BPS

The ETR was generally in line with the prior year.

						Diluted EPS ⇑ $0.46												Adjusted Diluted EPS**(1)** ⇑ $0.58

Diluted EPS and Adjusted Diluted EPS(1) increased mainly due to higher operating income and Adjusted Operating Income(1), respectively, the components of which are more fully described above.

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 September 30,												% Change Favorable (Unfavorable)
			2023						2022
Revenue:
Decision Solutions (DS)			$	354					$	308					15		%
Research and Insights (R&I)			222						201						10		%
Data and Information (D&I)			200						176						14		%
Total external revenue			776						685						13		%
Intersegment revenue			3						2						50		%
Total MA revenue			779						687						13		%
Expenses:
Operating and SG&A (external)			470						436						(8		%)
Operating and SG&A (intersegment)			47						43						(9		%)
Total operating and SG&A			517						479						(8		%)
Adjusted Operating Income			$	262					$	208					26		%
Adjusted Operating Margin			33.6		%				30.3		%
Depreciation and amortization			76						62						(23		%)
Restructuring			22						1						NM

MOODY'S ANALYTICS REVENUE

Three months ended September 30,

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

_________________________________________********________________________________________

MA: Global revenue ⇑ $91 million			U.S. Revenue ⇑ $34 million			Non-U.S. Revenue ⇑ $57 million

The 13% increase in global MA revenue reflects growth both in the U.S. (11%) and internationally (15%).

**–**Constant currency revenue(1) growth was 11%, reflecting increases across all LOBs.

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

DECISION SOLUTIONS REVENUE

Three months ended September 30,

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

_________________________________________********________________________________________

DS: Global revenue ⇑ $46 million			U.S. Revenue ⇑ $24 million			Non-U.S. Revenue ⇑ $22 million

Global DS revenue for the three months ended September 30, 2023 and 2022 was comprised as follows:

Global DS revenue grew 15% compared to the third quarter of 2022 and reflects increases in both the U.S. (20%) and internationally (12%).

The most notable drivers of the growth reflect:

–growth across banking offerings following Moody's investments in SaaS-based solutions for lending, risk management and finance workflows, which resulted in ARR(2) growth of 10%;

–continued demand for KYC and compliance solutions reflecting increased customer and supplier risk data usage which also drove ARR(2) growth of 18% for these solutions; and

–growth in subscription-based revenue for actuarial modeling and regulatory reporting solutions which resulted in ARR(2) increasing by 8%.

Changes in foreign currency translation rates favorably impacted DS revenue by 2%.

Constant currency revenue(1) growth was 13%.

The aforementioned revenue growth drivers also resulted in overall ARR(2) growth of 11% for DS.

RESEARCH AND INSIGHTS REVENUE

Three months ended September 30,

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

_________________________________________________****__ ________________________________________________

R&I: Global revenue ⇑ $21 million			U.S. Revenue ⇑ $4 million			Non-U.S. Revenue ⇑ $17 million

Global R&I revenue increased 10% compared to the third quarter of 2022 and reflects growth in both the U.S. (3%) and internationally (21%). This growth was mainly driven by demand for credit research, analytics and models, which also contributed to R&I ARR(2) growth of 8%.

DATA AND INFORMATION REVENUE

Three months ended September 30,

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

______________________________________________********__________________________________________________

D&I: Global revenue ⇑ $24 million			U.S. Revenue ⇑ $6 million			Non-U.S. Revenue ⇑ $18 million

Global D&I revenue increased 14% compared to the third quarter of 2022 and reflects growth in both the U.S. (10%) and internationally (16%), 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 favorably impacted D&I revenue by 5%.

Constant currency revenue(1) growth was 9%.

The aforementioned revenue growth factors also contributed to ARR(2) growth of 10% for D&I.

						MA: Third Quarter Operating and SG&A Expense ⇑ $34 million

The increase in operating and SG&A expenses compared to the third quarter of 2022 reflects growth in both compensation and non-compensation costs of $26 million and $8 million, respectively. The most notable drivers of these changes were:

Compensation costs						Non-compensation costs
Notable drivers of expense growth:						Notable drivers of expense growth:
— the majority of the growth relates to higher salaries and benefits resulting from headcount growth and annual salary increases.						— approximately 60% of the increase reflects higher costs to support strategic investments in technology, innovation and product development; and
						— approximately 40% of the increase reflects higher travel and entertainment costs correlated with business growth.

												MA: Adjusted Operating Margin 33.6% ⇑ 330 BPS

The Adjusted Operating Margin expansion for MA is primarily due to the 13% increase in global MA revenue, partially offset by increases in operating and SG&A expenses of 8%.

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 charges in both periods relate to the Company's 2022 - 2023 Geolocation Restructuring Program as more fully discussed in Note 10 to the 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 September 30,												% Change Favorable (Unfavorable)
			2023						2022
Revenue:
Corporate finance (CFG)			$	346					$	277					25		%
Structured finance (SFG)			102						101						1		%
Financial institutions (FIG)			126						109						16		%
Public, project and infrastructure finance (PPIF)			115						92						25		%
Total ratings revenue			689						579						19		%
MIS Other			7						11						(36		%)
Total external revenue			696						590						18		%
Intersegment revenue			47						43						9		%
Total MIS revenue			743						633						17		%
Expenses:
Operating and SG&A (external)			345						342						(1		%)
Operating and SG&A (intersegment)			3						2						(50		%)
Total operating and SG&A			348						344						(1		%)
Adjusted Operating Income			$	395					$	289					37		%
Adjusted Operating Margin			53.2		%				45.7		%
Depreciation and amortization			19						21						10		%
Restructuring			5						—						NM

The following chart presents changes in rated issuance volumes compared to the third 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 September 30,

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

_________________________________________********________________________________________

MIS: Global revenue ⇑ $106 million			U.S. Revenue ⇑ $66 million			Non-U.S. Revenue ⇑ $40 million

The increase in global MIS revenue primarily reflects growth in rated issuance volumes across all ratings LOBs excluding SFG compared to suppressed issuance activity in the prior year.

CFG REVENUE

Three months ended September 30,

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

_________________________________________********________________________________________

CFG: Global revenue ⇑ $69 million			U.S. Revenue ⇑ $54 million			Non-U.S. Revenue ⇑ $15 million

Global CFG revenue for the three months ended September 30, 2023 and 2022 was comprised as follows:

• 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 increase in CFG revenue of 25% reflects increases in both U.S. (29%) and internationally (17%).

Transaction revenue increased $63 million compared to the same period in the prior year, with the most notable drivers of the growth reflecting:

–higher leveraged loan refinancing activity compared to suppressed rated issuance volumes in the prior year, including issuance to support leveraged buy-out / M&A activity; and

–higher speculative-grade rated issuance volumes compared to suppressed issuance in the prior year, which resulted from market volatility in 2022 relating to macroeconomic uncertainties, rising borrowing costs and the Russia/Ukraine military conflict.

SFG REVENUE

Three months ended September 30,

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

_________________________________________********________________________________________

SFG: Global revenue ⇑ $1 million			U.S. Revenue ⇓ $4 million			Non-U.S. Revenue ⇑ $5 million

Global SFG revenue for the three months ended September 30, 2023 and 2022 was comprised as follows:

SFG revenue was broadly in line with prior year and reflected declines in the U.S. (6%) offset by an increase internationally (16%).

Transaction revenue decreased $3 million compared to the third quarter of 2022.

SFG revenue continues to be suppressed by lower securitization activity resulting from higher credit spreads and market volatility given ongoing geopolitical and macroeconomic uncertainties.

FIG REVENUE

Three months ended September 30,

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

_________________________________________********________________________________________

FIG: Global revenue ⇑ $17 million			U.S. Revenue ⇑ $5 million			Non-U.S. Revenue ⇑ $12 million

Global FIG revenue for the three months ended September 30, 2023 and 2022 was comprised as follows:

The increase in FIG revenue of 16% reflected revenue growth in both the U.S. (11%) and internationally (19%).

Transaction revenue increased $11 million compared to the third quarter of 2022.

The growth primarily reflects:

– an increase in banking revenue on issuance growth against a weak comparative period; and

– a favorable product mix from infrequent bank issuers.

Changes in foreign currency translation favorably impacted FIG revenue by 2%.

Constant currency revenue(1) growth was 14%.

PPIF REVENUE

Three months ended September 30,

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

_________________________________________********________________________________________

PPIF: Global revenue ⇑ $23 million			U.S. Revenue ⇑ $12 million			Non-U.S. Revenue ⇑ 11 million

Global PPIF revenue for the three months ended September 30, 2023 and 2022 was comprised as follows:

Transaction revenue increased $21 million compared to the third quarter of 2022.

The increase in PPIF revenue of 25% reflected growth in both the U.S. (21%) and internationally (31%).

The main driver of the growth was an increase in project and infrastructure finance activity both in the U.S. and internationally compared to suppressed issuance in the prior year.

						MIS: Third Quarter Operating and SG&A Expense ⇑ $3 million

The modest increase is primarily due to higher compensation costs of $17 million, partially offset by a $14 million decrease in non-compensation expenses. The most notable drivers of these changes are as follows:

Compensation costs						Non-compensation costs
Notable driver of expense growth:						Notable driver of decline in expense:
— higher incentive compensation accruals, which aligns with actual and projected financial and operating performance.						— mainly relates to ongoing cost control initiatives

												MIS: Adjusted Operating Margin 53.2% ⇑ 750 BPS

The MIS Adjusted Operating Margin expansion primarily reflected the aforementioned 18% increase in revenue.

Restructuring Charge

The restructuring charges in both periods relate to the Company's 2022 - 2023 Geolocation Restructuring Program, as more fully discussed in Note 10 to the consolidated financial statements.

Nine months ended September 30, 2023 compared with nine months ended September 30, 2022

Executive Summary

–The following table provides an executive summary of key operating results for the nine months ended September 30, 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.

			Nine Months Ended September 30,
Financial measure:			2023			2022			% Change			Insight and Key Drivers of Change Compared to Prior Year
Moody's total revenue			$	4,436		$	4,178		6		%	— reflects growth in both segments
MA external revenue			$	2,260		$	2,055		10		%	— sustained demand for KYC solutions, as well as continued growth from SaaS-based banking offerings; — elevated usage and demand for credit and economic research; and — ongoing strong retention for ratings data feeds
MIS external revenue			$	2,176		$	2,123		2		%	— increased investment-grade/speculative-grade corporate debt issuance coupled with higher infrastructure finance issuance relative to suppressed activity in the prior year; and — increases in banking-related revenue mainly due to a favorable product mix from infrequent issuers; partially offset by: — declines across most asset classes in SFG reflecting a decrease in securitization activity amidst capital market volatility
Total operating and SG&A expenses			$	2,470		$	2,327		(6		%)	— higher incentive compensation accruals and performance-based equity compensation aligned with actual/expected financial and operating performance; and — higher salaries and benefits primarily reflecting hiring and salary increases in MA to support business growth
Depreciation and amortization			$	276		$	242		(14		%)	— higher amortization relating to internally developed software, primarily related to the development of MA SaaS solutions
Restructuring			$	51		$	32		(59		%)	— relates to the Company's 2022 - 2023 Geolocation Restructuring Program, more fully discussed in Note 10 to the consolidated financial statements
Total non-operating (expense) income, net			$	(154)		$	(144)		(7		%)	— higher realized losses of $69 million on fixed-to-floating interest rate swaps resulting from higher interest rates (more fully discussed in Note 8 to the consolidated financial statements); and — a $20 million net increase in foreign exchange losses recorded during the year; partially offset by: — an increase in interest income of $35 million related to higher cash balances and interest yields; — higher gains on certain of the Company's investments of $30 million; and — a $22 million benefit related to the resolutions of tax matters in the first quarter of 2023
Operating margin			36.9		%	37.7		%	(80 BPS)			— operating margin decline is primarily due to the increase in operating, SG&A, D&A and restructuring costs outpacing revenue growth — Adjusted Operating Margin(1) was flat, with revenue growth offset by an increase in operating and SG&A costs
Adjusted Operating Margin(1)			44.3		%	44.3		%	— BPS
ETR			14.6		%	21.3		%	670 BPS			— lower ETR primarily reflects tax benefits recognized in the first quarter of 2023, which resulted from the resolutions of UTPs in various U.S. and non-U.S. tax jurisdictions
Diluted EPS			$	6.88		$	6.10		13		%	— increase includes a $0.75/share benefit related to the resolutions of tax matters in the first quarter of 2023, compared to $0.12/share for similar matters in the first quarter of 2022, coupled with growth in operating income/Adjusted Operating Income(1)
Adjusted Diluted EPS(1)			$	7.71		$	6.96		11		%

Moody’s Corporation

			Nine Months Ended September 30,												% Change Favorable (Unfavorable)
			2023						2022
Revenue:
United States			$	2,320					$	2,214					5		%
Non-U.S.:
EMEA			1,376						1,271						8		%
Asia-Pacific			442						422						5		%
Americas			298						271						10		%
Total Non-U.S.			2,116						1,964						8		%
Total			4,436						4,178						6		%
Expenses:
Operating			1,266						1,203						(5		%)
SG&A			1,204						1,124						(7		%)
Depreciation and amortization			276						242						(14		%)
Restructuring			51						32						(59		%)
Total			2,797						2,601						(8		%)
Operating income			1,639						1,577						4		%
Adjusted Operating Income (1)			1,966						1,851						6		%
Interest expense, net			(185)						(166)						(11		%)
Other non-operating income, net			31						22						41		%
Non-operating (expense) income, net			(154)						(144)						(7		%)
Net income attributable to Moody’s			$	1,267					$	1,128					12		%
Diluted weighted average shares outstanding			184.1						184.9						—		%
Diluted EPS attributable to Moody’s common shareholders			$	6.88					$	6.10					13		%
Adjusted Diluted EPS (1)			$	7.71					$	6.96					11		%
Operating margin			36.9		%				37.7		%
Adjusted Operating Margin (1)			44.3		%				44.3		%
Effective tax rate			14.6		%				21.3		%

GLOBAL REVENUE

Nine months ended September 30,

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

_________________________________________********________________________________________

Global revenue ⇑ $258 million						U.S. Revenue ⇑ $106 million						Non-U.S. Revenue ⇑ $152 million

Growth in global revenue reflected growth in both MA and MIS, both in the U.S. and internationally. Refer to the section entitled “Segment Results” of this MD&A for a more comprehensive discussion of the Company’s segment revenue.

						YTD Operating Expense ⇑ $63 million												YTD SG&A Expense ⇑ $80 million

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

						Compensation expenses increased $50 million reflecting:												Compensation expenses increased $81 million reflecting:
						— approximately 70% of the increase is attributable to higher incentive compensation accruals and performance-based equity compensation, which aligns with actual/projected financial and operating performance.												— approximately 55% of the increase is attributable to higher incentive compensation accruals and performance-based equity compensation, which aligns with actual/projected financial and operating performance; and
															— approximately 30% of the increase is attributable to higher salaries primarily relating to hiring and salary increases in MA to support continued growth in the business.
						Non-compensation expenses increased $13 million reflecting:
						— approximately 90% of the increase is attributable to higher costs to support strategic investments in technology, innovation and product development.

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.

Restructuring

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

						Operating margin 36.9%, down 80 BPS									Adjusted Operating Margin**(1)** 44.3%, flat compared to prior year

Operating margin decline is primarily due to the aforementioned increase in operating, SG&A, D&A and restructuring expenses outpacing revenue growth.

Adjusted Operating Margin(1) was flat, with revenue growth offset by an increase in operating and SG&A expenses.

						Interest Expense, net ⇑ $19 million									Other non-operating income ⇑ $9 million

Increase in expense is primarily due to:						Increase in income is primarily due to:
— higher realized losses of $69 million on fixed-to-floating interest rate swaps resulting from higher interest rates (more fully discussed in Note 8 to the consolidated financial statements); partially offset by						— higher gains on certain of the Company's investments of $30 million; partially offset by
— higher interest income of $35 million reflecting higher cash balances and interest yields; and						— A $20 million net increase in foreign currency losses mainly attributable to an immaterial out-of-period adjustment relating to the 2022 fiscal year, partially offset by foreign currency translation losses reclassified to earnings resulting from the Company no longer conducting commercial operations in Russia.
— a $22 million benefit related to the resolutions of tax matters in the first quarter of 2023.

						ETR ⇓ 670 BPS

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

						Diluted EPS ⇑ $0.78									Adjusted Diluted EPS**(1)** ⇑ $0.75

Both diluted EPS and Adjusted Diluted EPS(1) growth includes a $0.75/share benefit related to the resolutions of tax matters in the first quarter of 2023, compared to $0.12/share for similar matters in the first quarter of 2022. This is coupled with growth in operating income and Adjusted Operating Income(1), respectively, 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(1).

Moody’s Analytics

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

			Nine Months Ended September 30,												% Change Favorable (Unfavorable)
			2023						2022
Revenue:
Decision Solutions (DS)			$	1,022					$	916					12		%
Research and Insights (R&I)			654						607						8		%
Data and Information (D&I)			584						532						10		%
Total external revenue			2,260						2,055						10		%
Intersegment revenue			10						5						100		%
Total MA Revenue			2,270						2,060						10		%
Expenses:
Operating and SG&A (external)			1,446						1,294						(12		%)
Operating and SG&A (intersegment)			138						129						(7		%)
Total operating and SG&A expense			1,584						1,423						(11		%)
Adjusted Operating Income			$	686					$	637					8		%
Adjusted Operating Margin			30.2		%				30.9		%
Depreciation and amortization			220						182						(21		%)
Restructuring			38						17						(124		%)

MOODY'S ANALYTICS REVENUE

Nine months ended September 30,

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

_________________________________________********________________________________________

MA: Global revenue ⇑ $205 million			U.S. Revenue ⇑ $78 million			Non-U.S. Revenue ⇑ $127 million

The 10% increase in global MA revenue reflects growth both in the U.S. (9%) and internationally (11%) across all LOBs.

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

.

DECISION SOLUTIONS REVENUE

Nine months ended September 30,

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

_________________________________________********________________________________________

DS: Global revenue ⇑ $106 million			U.S. Revenue ⇑ $50 million			Non-U.S. Revenue ⇑ $56 million

Global DS revenue for the nine months ended September 30, 2023 and 2022 was comprised as follows:

Global DS revenue grew 12% compared to the first nine months of 2022 and reflects increases in both the U.S. (13%) and internationally (10%).

The most notable drivers of the growth reflect:

–continued demand for KYC and compliance solutions reflecting increased customer and supplier risk data usage, which also drove ARR(2) growth of 18%;

–broad growth across banking offerings following Moody's investments in SaaS-based solutions, which also resulted in ARR(2) growth of 10%;

–growth in subscription-based revenue for actuarial modeling tools and products supporting the adoption of certain international accounting standards relating to insurance contracts which resulted in ARR(2) growth of 8%; and

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

The aforementioned factors also contributed to overall ARR(2) growth for DS of 11%.

RESEARCH AND INSIGHTS REVENUE

Nine months ended September 30,

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

_________________________________________********________________________________________

R&I: Global revenue ⇑ $47 million			U.S. Revenue ⇑ $9 million			Non-U.S. Revenue ⇑ $38 million

Global R&I revenue increased 8% compared to the first nine months of 2022 and reflects growth in both the U.S. (3%) and internationally (15%). This growth was mainly driven by continued strong retention and demand for credit research, analytics and models, which also drove ARR(2) growth of 8%.

DATA AND INFORMATION REVENUE

Nine months ended September 30,

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

_________________________________________********________________________________________

D&I: Global revenue ⇑ $52 million			U.S. Revenue ⇑ $19 million			Non-U.S. Revenue ⇑ $33 million

Global D&I revenue increased 10% compared to the first nine months of 2022 and reflects growth in both the U.S. (10%) and internationally (10%), mainly driven by:

–continued strong retention and new sales for ratings feeds coupled with higher price realization; and

–increased demand for company data.

The aforementioned factors also contributed to ARR(2) growth of 10% for D&I.

						MA: YTD Operating and SG&A Expense ⇑ $152 million

The increase in operating and SG&A expenses compared to the first nine months of 2022 is due to growth in both compensation and non-compensation costs of $88 million and $64 million, respectively, reflecting:

Compensation costs						Non-compensation costs
Notable drivers of expense growth:						Notable drivers of expense growth:
— approximately 65% of the growth is related to an increase in salaries reflecting higher headcount and annual salary increases; and						— approximately 55% of the increase reflects higher costs to support strategic investments in technology, innovation and product development; and
— approximately 30% of the increase reflects higher incentive and performance-based equity compensation aligned with actual/expected financial and operational performance as well as headcount growth.
			— approximately 25% of the increase reflects higher travel and entertainment expenses correlated with business growth.

															MA: Adjusted Operating Margin 30.2% ⇓ 70BPS

The slight Adjusted Operating Margin contraction for MA is primarily due to operating and SG&A expense growth of 12% outpacing the 10% 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

The restructuring charges in both periods relate to the Company's 2022 - 2023 Geolocation Restructuring Program as more fully discussed in Note 10 to the consolidated financial statements.

Moody’s Investors Service

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

			Nine Months Ended September 30,												% Change Favorable (Unfavorable)
			2023						2022
Revenue:
Corporate finance (CFG)			$	1,067					$	1,016					5		%
Structured finance (SFG)			303						368						(18		%)
Financial institutions (FIG)			413						368						12		%
Public, project and infrastructure finance (PPIF)			371						337						10		%
Total ratings revenue			2,154						2,089						3		%
MIS Other			22						34						(35		%)
Total external revenue			2,176						2,123						2		%
Intersegment royalty			138						129						7		%
Total			2,314						2,252						3		%
Expenses:
Operating and SG&A (external)			1,024						1,033						1		%
Operating and SG&A (intersegment)			10						5						(100		%)
Total operating and SG&A expense			1,034						1,038						—		%
Adjusted Operating Income			$	1,280					$	1,214					5		%
Adjusted Operating Margin			55.3		%				53.9		%
Depreciation and amortization			56						60						7		%
Restructuring			13						15						13		%

The following chart presents changes in rated issuance volumes compared to the first nine months 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

Nine months ended September 30,

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

_________________________________________********________________________________________

MIS: Global revenue ⇑ $53 million			U.S. Revenue ⇑ $28 million			Non-U.S. Revenue ⇑ $25 million

The modest increase in global MIS revenue reflects growth in CFG, FIG and PPIF revenue being mostly offset by declines in SFG activity across most asset classes.

CFG REVENUE

Nine months ended September 30,

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

_________________________________________********________________________________________

CFG: Global revenue ⇑ $51 million			U.S. Revenue ⇑ 54 million			Non-U.S. Revenue ⇓ $3 million

Global CFG revenue for the nine months ended September 30, 2023 and 2022 was comprised as follows:

• 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 growth in CFG revenue reflected increases in the U.S (8%) partially offset by declines internationally of 1%.

Transaction revenue increased $37 million compared to the same period in the prior year, with the most notable drivers reflecting:

–higher speculative and investment-grade rated issuance volumes reflecting both refinancing activity and issuance to fund certain large M&A transactions compared to suppressed issuance activity in these sectors in the prior year;

partially offset by:

–lower bank loan revenue in the U.S. and EMEA as geopolitical and macroeconomic uncertainties have continued to impact leveraged loan issuance levels and general M&A activity.

SFG REVENUE

Nine months ended September 30,

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

_________________________________________********________________________________________

SFG: Global revenue ⇓ $65 million			U.S. Revenue ⇓ $63 million			Non-U.S. Revenue ⇓ $2 million

Global SFG revenue for the nine months ended September 30, 2023 and 2022 was comprised as follows:

The decrease in SFG revenue of 18% reflected declines in both the U.S. (25%) and internationally (2%). Transaction revenue decreased $75 million compared to the first nine months of 2022.

The decline in SFG revenue reflected lower securitization activity across almost all asset classes, most notably in CMBS, resulting from higher credit spreads and market volatility given ongoing geopolitical and macroeconomic uncertainties.

FIG REVENUE

Nine months ended September 30,

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

_________________________________________********________________________________________

FIG: Global revenue ⇑ $45 million			U.S. Revenue ⇑ $23 million			Non-U.S. Revenue ⇑ $22 million

Global FIG revenue for the nine months ended September 30, 2023 and 2022 was comprised as follows:

The increase in FIG revenue of 12% reflected growth in both the U.S. (14%) and internationally (11%) which resulted in a $36 million increase in transaction revenue compared to the same period in the prior year.

The most notable drivers of the increase reflected:

–a favorable product mix from infrequent bank and insurance issuers; and

–modestly higher rated issuance volumes in the insurance sector which included certain large deals in the sector for refinancing purposes.

PPIF REVENUE

Nine months ended September 30,

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

_________________________________________********________________________________________

PPIF: Global revenue ⇑ $34 million			U.S. Revenue ⇑ $18 million			Non-U.S. Revenue ⇑ $16 million

Global PPIF revenue for the nine months ended September 30, 2023 and 2022 was comprised as follows:

Transaction revenue increased $29 million compared to the same period in the prior year.

The 10% increase in PPIF revenue reflected increases in both the U.S. (9%) and internationally (13%).

The main driver of the growth reflected increases in investment-grade infrastructure finance activity in the U.S. and internationally.

						MIS: YTD Operating and SG&A Expense ⇓ $9 million

The decrease in operating and SG&A expense reflects a $51 million decrease in non-compensation expenses, partially offset by a $42 million increase in compensation costs. The most notable drivers of these changes are as follows:

Compensation costs						Non-compensation costs
Notable driver of expense growth:						Notable drivers of decline in expense:
— higher incentive compensation accruals, which aligns with actual/projected financial and operating performance.						— approximately 70% of the decrease relates to ongoing cost control initiatives; and
			— higher bad debt expense in the prior year resulting from the impact of the Russia/Ukraine military conflict contributed approximately 30% of the decrease.

Other Expenses

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

															Adjusted Operating Margin of 55.3% ⇑ 140 BPS

The MIS Adjusted Operating Margin growth primarily reflected the aforementioned 2% increase in revenue coupled with ongoing disciplined cost management.

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:

			Nine Months Ended September 30,												$ Change Favorable (Unfavorable)
			2023						2022
Net cash provided by operating activities			$	1,674					$	1,097					$	577
Net cash used in investing activities			$	(193)					$	(172)					$	(21)
Net cash used in financing activities			$	(1,231)					$	(957)					$	(274)
Free Cash Flow (1)			$	1,476					$	893					$	583

(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 nine months ended September 30, 2023 increased by $577 million compared to the same period in 2022, with the most notable drivers reflecting:

–$181 million in higher income tax payments in the prior year;

–approximately $140 million in higher incentive compensation payments in the first nine months of 2022 (based on full-year 2021 financial and operating results) compared to payments made in the current year (based on full-year 2022 financial and operating results); and

–the remaining increase is primarily due to higher cash flows correlated with operating income growth and various changes in working capital.

Net cash used in investing activities

The $21 million increase in cash used in investing activities in the nine months ended September 30, 2023 compared to the same period in 2022 was primarily attributed to:

–higher net cash receipts of $220 million in 2022 relating to the settlement of net investment hedges;

mostly offset by:

–higher net purchases of investments in the prior year of $99 million, reflecting the purchase of Moody's equity interest in GCR in the prior year coupled with lower net purchases of investments in 2023; and

–higher cash paid of $94 million in the prior year for acquisitions, primarily reflecting the acquisition of kompany in 2022.

Net cash used in financing activities

The $274 million increase in cash used in financing activities in the nine months ended September 30, 2023 compared to the same period in the prior year was primarily attributed to:

*–*long-term debt issuance of $988 million in 2022 that did not recur in 2023 (refer to the section "Material Cash Requirements" below for further discussion on the Company's financing arrangements);

partially offset by:

–higher cash paid for treasury share repurchases in 2022 of $705 million, which includes payment for shares made under an ASR agreement executed in the first quarter of 2022.

Cash and cash equivalents and short-term investments

The Company’s aggregate cash and cash equivalents and short-term investments of $2.1 billion at September 30, 2023 included approximately $1.5 billion located outside of the U.S. Approximately 35% of the Company’s aggregate cash and cash equivalents and short-term investments is denominated in euros and GBP. 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 continues to repatriate 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 September 30, 2023, Moody’s had $6.9 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 September 30, 2023 is as follows:

For additional information on the Company's outstanding debt, refer to Note 14 to the 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 $300 million is expected to be paid in each of the next five years, and the remaining amount expected to be paid thereafter.

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 September 30, 2023, these purchase obligations totaled $697 million, of which approximately 40% is expected to be paid in the next twelve months and another approximate 40% expected to be paid over the next two subsequent years.

Leases

The Company has remaining payments relating to its operating leases of $452 million at September 30, 2023, primarily related to real estate leases, of which $115 million in payments are expected over the next twelve months. For more information on the expected cash flows relating to the Company's operating leases, refer to Note 15 to the 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 September 30, 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 October 23, 2023, the Board approved the declaration of a quarterly dividend of $0.77 per share for Moody’s common stock, payable December 15, 2023 to shareholders of record at the close of business on November 24, 2023. The continued payment of dividends at this rate, or at all, is subject to the discretion of the Board.

On February 7, 2022, the Board approved $750 million in share repurchase authority. At September 30, 2023, the Company had approximately $572 million of remaining authority. There is no established expiration date for the remaining authorization.

Restructuring

As more fully discussed in Note 10 to the 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 $50 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 September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
Operating income			$	535					$	413					$	1,639					$	1,577
Adjustments:
Depreciation and amortization			95						83						276						242
Restructuring			27						1						51						32
Adjusted Operating Income			$	657					$	497					$	1,966					$	1,851
Operating margin			36.3		%				32.4		%				36.9		%				37.7		%
Adjusted Operating Margin			44.6		%				39.0		%				44.3		%				44.3		%

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; ii) restructuring charges/adjustments; and iii) FX translation losses reclassified to earnings resulting from the Company no longer conducting commercial operations in Russia.

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 and FX translation losses resulting from the Company no longer conducting commercial operations in Russia 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 September 30,																		Nine Months Ended September 30,
Amounts in millions			2023									2022									2023									2022
Net income attributable to Moody's common shareholders						$	389								$	303								$	1,267								$	1,128
Pre-Tax Acquisition-Related Intangible Amortization Expenses			$	49								$	48								$	150								$	150
Tax on Acquisition-Related Intangible Amortization Expenses			(12)									(11)									(36)									(35)
Net Acquisition-Related Intangible Amortization Expenses						37									37									114									115
Pre-Tax Restructuring			$	27								$	1								$	51								$	32
Tax on Restructuring			(6)									(1)									(12)									(8)
Net Restructuring						21									—									39									24
FX losses resulting from the Company no longer conducting commercial operations in Russia						—									—									—									20
Adjusted Net Income						$	447								$	340								$	1,420								$	1,287

			Three Months Ended September 30,																		Nine Months Ended September 30,
			2023									2022									2023									2022
Diluted earnings per share attributable to Moody's common shareholders						$	2.11								$	1.65								$	6.88								$	6.10
Pre-Tax Acquisition-Related Intangible Amortization Expenses			$	0.27								$	0.26								$	0.81								$	0.81
Tax on Acquisition-Related Intangible Amortization Expenses			(0.06)									(0.06)									(0.19)									(0.19)
Net Acquisition-Related Intangible Amortization Expenses						0.21									0.20									0.62									0.62
Pre-Tax Restructuring			$	0.15								$	0.01								$	0.28								$	0.17
Tax on Restructuring			(0.04)									(0.01)									(0.07)									(0.04)
Net Restructuring						0.11									—									0.21									0.13
FX losses resulting from the Company no longer conducting commercial operations in Russia						—									—									—									0.11
Adjusted Diluted EPS						$	2.43								$	1.85								$	7.71								$	6.96

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:

			Nine Months Ended September 30,
			2023						2022
Net cash provided by operating activities			$	1,674					$	1,097
Capital additions			(198)						(204)
Free Cash Flow			$	1,476					$	893
Net cash used in investing activities			$	(193)					$	(172)
Net cash used in financing activities			$	(1,231)					$	(957)

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 September 30,
Amounts in millions						2023						2022						Change						Growth
MA revenue						$	776					$	685					$	91					13%
FX impact						(17)						—						(17)
Constant currency MA revenue						$	759					$	685					$	74					11%
Decision Solutions revenue						$	354					$	308					$	46					15%
FX impact						(5)						—						(5)
Constant currency Decision Solutions revenue						$	349					$	308					$	41					13%
Data and Information revenue						$	200					$	176					$	24					14%
FX impact						(9)						—						(9)
Constant currency Data and Information revenue						$	191					$	176					$	15					9%
FIG revenue						$	126					$	109					$	17					16%
FX impact						(2)						—						(2)
Constant currency FIG revenue						$	124					$	109					$	15					14%

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						September 30, 2023						September 30, 2022						Change						Growth
MA ARR
Decision Solutions (DS)
Banking						$	397					$	362					$	35					10%
Insurance						511						475						36						8%
KYC						308						260						48						18%
Total DS						$	1,216					$	1,097					$	119					11%
Research and Insights						853						787						66						8%
Data and Information						782						711						71						10%
Total MA ARR						$	2,851					$	2,595					$	256					10%

RECENTLY ISSUED ACCOUNTING STANDARDS

Refer to Note 1 to the 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 43 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 impacts of the Russia-Ukraine military conflict and the military conflict in Israel and the surrounding areas 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 or development of competing and/or emerging technologies and products;

• 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.