MOODYS CORP DE

This section of this Form 10-K generally discusses the year ended December 31, 2023 and 2022 financial results and year-to-year comparisons between these years. Discussions related to the year ended December 31, 2021 financial results and year-to-year comparisons between the years ended December 31, 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

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.

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Year ended December 31, 2023 compared with year ended December 31, 2022

Executive Summary

The following table provides an executive summary of key operating results for the year ended December 31, 2023. Following this executive summary is a more detailed discussion of the Company’s operating results as well as a discussion of the operating results of the Company’s reportable segments.

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Moody’s Corporation

GLOBAL REVENUE

Growth in global revenue reflected increases 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 fulsome discussion of the Company’s segment revenue.

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Operating Expense ⇑ $74 million

SG&A Expense ⇑ $105 million

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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 11 to the consolidated financial statements.

Operating Margin and Adjusted Operating Margin(1) expansion primarily reflects revenue growth offset by an increase in operating and SG&A expenses.

Gain on extinguishment of debt

The gain in the prior year relates to the early redemption of a portion of the 2.55% 2020 Senior Notes, Due 2060.

ETR ⇓ 500BPS

The decrease in the 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.

Both diluted EPS and Adjusted Diluted EPS(1) growth is mostly attributable to higher operating income and Adjusted Operating Income(1), the components of which are more fully described above. This is coupled with a $0.76/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.

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Segment Results

Moody’s Analytics

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

MOODY'S ANALYTICS REVENUE

The 10% increase in global MA revenue reflects growth both in the U.S. (9%) and internationally (12%) across all LOBs.

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

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DECISION SOLUTIONS REVENUE

Global DS revenue for the for the years ended December 31, 2023 and 2022 was comprised as follows:

Global DS revenue grew 11% and reflects increases in both the U.S. (11%) and internationally (11%).

The most notable drivers of the growth reflect:

–continued demand for KYC solutions reflecting increased counterparty risk data usage, including new sales growth from corporates, governments, and insurers, which also drove ARR(2) growth of 17%;

–growth in subscription-based revenue for actuarial modeling and regulatory reporting tools that support customers' compliance with certain international accounting standards relating to insurance contracts, which resulted in ARR(2) growth of 11%; and

–growth across banking offerings following Moody's investments in SaaS-based solutions, which also resulted in ARR(2) growth of 9%.

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

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RESEARCH AND INSIGHTS REVENUE

Global R&I revenue increased 9% compared to 2022 and reflects growth in both the U.S. (4%) and internationally (15%).

The most notable drivers of growth reflect:

–increased demand for credit default models and economic analytics, partially due to banking stress events in the first quarter; and

–steady sales growth and strong retention from the CreditView product offering.

The aforementioned factors contributed to overall ARR(2)growth for R&I of 7%.

DATA AND INFORMATION REVENUE

Global D&I revenue increased 11% compared to 2022 and reflects growth in both the U.S. (12%) 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.

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MA: Operating and SG&A Expense ⇑ $183 million

MA: Adjusted Operating Margin 30.5% ⇑ 30BPS

The modest Adjusted Operating Margin expansion for MA is primarily due to the 10% increase in global MA revenue, offset by a 10% increase in operating and SG&A expenses.

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 11 to the consolidated financial statements.

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Moody’s Investors Service

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

The following chart presents changes in rated issuance volumes compared to 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.

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MOODY'S INVESTORS SERVICE REVENUE

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

CFG REVENUE

Global CFG revenue for the years ended December 31, 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.

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The growth in CFG revenue reflected increases in both the U.S (14%) and internationally (3%).

Transaction revenue increased $115 million compared to the prior year, with the most notable drivers reflecting:

–higher leveraged finance (speculative-grade bonds and bank loans) and investment-grade rated issuance volumes reflecting both refinancing activity and issuance to fund M&A transactions compared to suppressed issuance activity in these sectors in the prior year.

SFG REVENUE

Global SFG revenue for the years ended December 31, 2023 and 2022 was comprised as follows:

The decrease in SFG revenue of 12% reflected declines in both the U.S. (18%) and internationally (1%). Transaction revenue decreased $72 million compared to 2022.

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

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FIG REVENUE

Global FIG revenue for the years ended December 31, 2023 and 2022 was comprised as follows:

The increase in FIG revenue of 11% reflected growth in both the U.S. (13%) and internationally (9%) which resulted in a $43 million increase in transaction revenue compared to 2022.

The most notable drivers of the increase reflected:

–a favorable mix of infrequent issuers within the banking sector coupled with higher rated issuance volumes; and

–higher rated issuance volumes in the insurance sector.

PPIF REVENUE

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Global PPIF revenue for the years ended December 31, 2023 and 2022 was comprised as follows:

The 10% increase in PPIF revenue reflected growth in both the U.S. (10%) and internationally (12%), which resulted in an increase in transaction revenue of $38 million compared to 2022.

The most notable drivers of the growth were:

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

–higher U.S. and international public finance activity.

MIS: Operating and SG&A Expense ⇓ $4 million

Restructuring

The restructuring charges in both periods relate to the Company's 2022 - 2023 Geolocation Restructuring Program as more fully discussed in Note 11 to the consolidated financial statements.

MIS: Adjusted Operating Margin 54.5% ⇑ 270BPS

The MIS Adjusted Operating Margin expansion primarily reflected the aforementioned 6% increase in revenue coupled with ongoing disciplined cost management.

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