MOODYS CORP DE

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:

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

Net cash provided by operating activities

Net cash flows from operating activities in the three months ended March 31, 2024 increased by $167 million compared to the same period in 2023, primarily due to higher cash flows correlated with operating income growth partly offset by various changes in working capital.

Net cash used in investing activities

The $33 million increase in cash used in investing activities in the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to:

–higher net purchases of investments in 2024 of $14 million; and

–higher cash paid of $12 million in the current year for certain immaterial acquisitions completed in the first quarter of 2024.

Net cash used in financing activities

The $92 million increase in cash used in financing activities in the three months ended March 31, 2024 compared to the same period in the prior year was primarily attributed to higher cash paid in 2024 for treasury share repurchases of $79 million and dividends of $14 million.

Cash and cash equivalents and short-term investments

The Company’s aggregate cash and cash equivalents and short-term investments of $2.5 billion at March 31, 2024 included approximately $1.9 billion located outside of the U.S. Approximately 45% 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 March 31, 2024, 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 March 31, 2024 is as follows:

For additional information on the Company's outstanding debt, refer to Note 13 to the consolidated financial statements.

Future interest payments and fees associated with the Company's debt and credit facility are expected to be $4.8 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 March 31, 2024, these purchase obligations totaled $722 million, of which approximately 50% is expected to be paid in the next twelve months and another approximate 40% expected to be paid over the next two subsequent years, with the remainder to be paid thereafter.

Leases

The Company has remaining payments relating to its operating leases of $415 million at March 31, 2024, primarily related to real estate leases, of which $119 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 14 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 March 31, 2024, and accordingly holds sufficient investments to fund future benefit obligations. Payments for the Company's unfunded plans are not expected to be material in either the short or long-term.

Dividends and share repurchases

On April 26, 2024, the Board approved the declaration of a quarterly dividend of $0.85 per share for Moody’s common stock, payable June 7, 2024 to shareholders of record at the close of business on May 17, 2024. 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, and on February 5, 2024, the Board approved an additional $1 billion in share repurchase authority. At March 31, 2024, the Company had approximately $1.2 billion of remaining authority. There is no established expiration date for the remaining authorizations.

Restructuring

As more fully discussed in Note 9 to the consolidated financial statements, the Company has substantially completed the 2022 - 2023 Geolocation Restructuring Program. Future cash outlays associated with this program, which will consist of personnel-related costs, are expected to be $24 million, substantially all of 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.