Moody's Corp. · Earnings release

MOODY'S CORPORATION REPORTS RESULTS FOR FOURTH QUARTER AND FULL YEAR 2024; SETS OUTLOOK FOR 2025

NEW YORK, NY - February 13, 2025 - Moody's Corporation (NYSE: MCO) today announced results for the fourth quarter and full year 2024, provided its outlook for full year 2025 and updated medium-term guidance2.

FOURTH QUARTER AND FULL YEAR SUMMARY FINANCIALS

Moody’s Corporation

(MCO) Revenue

Moody’s Analytics

(MA) Revenue

Moody’s Investors Service

(MIS) Revenue

MCO Diluted EPS

MCO Adjusted Diluted EPS1

Diluted EPS

Adjusted Diluted EPS1

“Moody’s delivered a strong finish in Q4, capping a year of incredible achievements with full year revenue growth of 20%. We sit at the intersection of deep currents that are transforming the way companies do business and markets function. The investments we’ve made in our platform, data and product innovation, paired with disciplined execution, put us in a position to capitalize on these durable demand drivers for both businesses.”

Rob Fauber

President and Chief Executive Officer

“We delivered exceptional results in 2024. MIS transactional revenue grew 54%, outpacing issuance growth of 42% with our world-class analysts rating over $6 trillion of debt. MA achieved 9% ARR growth on strong demand for our workflow solutions. For 2025, we are forecasting MCO revenue growth in the high-single-digit percent range and Adjusted Diluted EPS1 in the range of $14.00 to $14.50, growing low-to-mid-teens on the back of 26% growth in full year 2024. Heading into the third year of our medium-term targets, we have assessed our performance and are excited to provide an update, including a raise of our Adjusted Diluted EPS growth rate to a range of low-to-mid-teens percent.”2,3

Noémie Heuland

Chief Financial Officer

1 Refer to the tables at the end of this press release for reconciliations of adjusted measures to U.S. GAAP.

2 Guidance as of February 13, 2025. Refer to Table 12 - “2025 Outlook” for table of all items for which the Company provides guidance and page 10 for disclosure regarding the assumptions used by the Company with respect to its guidance. Medium-term targets refer to a time period within 5 years from the base year 2022. Growth refers to the average annualized growth over the period.

3 Moody’s does not provide medium-term diluted EPS on a U.S. GAAP basis because the items that the Company excludes to derive Adjusted Diluted EPS cannot be reasonably predicted or assumed, for example the amount of amortization associated with acquired intangible assets from future M&A activity. Accordingly, the Company does not forecast these items over the medium-term. The occurrence, timing and amount of any of the items excluded from net income to derive Adjusted Diluted EPS could significantly impact the Company’s medium-term U.S. GAAP results.

1

REVENUE

Moody’s Corporation (MCO)

•Revenue increased 13% from the prior-year period.

•Foreign currency translation had an immaterial impact on MCO revenue.

•Revenue increased 20% from the prior-year period.

•Foreign currency translation had an immaterial impact on MCO revenue.

2

Moody’s Analytics (MA)

•Revenue grew 8% versus the prior-year period, driven by 11% growth in Decision Solutions with notable contributions from Banking (11%), Insurance (9%) and Know Your Customer (15%).

•Recurring revenue, comprising 95% of total MA revenue, grew 10%. Recurring revenue growth was led by Decision Solutions.

•Recurring revenue for Banking increased 16%, while both Insurance and KYC recurring revenue increased 14%.

•Transaction revenue, most prominent in Banking, declined by 13%.

•Foreign currency translation had an immaterial impact on MA revenue.

•Revenue grew 8% versus the prior-year period.

•Recurring revenue grew 9% and transaction revenue declined 14%.

•ARR4 of $3.3 billion increased by $282 million or 9% from $3.0 billion as of December 31, 2023.

•Decision Solutions ARR4 grew 12%, including 9% in Banking, 12% in Insurance and 17% in KYC. Research & Insights and Data & Information grew 6% and 8%, respectively.

•Foreign currency translation had an immaterial impact on MA revenue.

4 Refer to Table 10 at the end of this press release for the definition of and further information on the Annualized Recurring Revenue (ARR) metric.

3

Moody’s Investors Service (MIS)

4

•Revenue increased 18% compared to the prior-year period, achieving the second highest fourth quarter on record and reaching the highest fourth quarter issuance in decades.

•Transactional revenue grew 29% from the prior-year period, reflecting continued activity across all lines of business.

•Revenue growth within Corporate Finance is primarily attributed to leveraged finance issuance, with a significant contribution from repricing activity in bank loans.

•Financial Institutions growth was underpinned by continued strength in infrequent issuer activity in the Banking and Insurance sectors.

•Structured Finance revenue growth was driven by the strongest quarter for rated CLOs since 2021, and heightened CMBS issuance.

•Foreign currency translation unfavorably impacted MIS revenue by 1%.

•Revenue increased 33% compared to the prior-year period.

•Market conditions remained favorable throughout the year, with tight spreads, declining interest rates and strong investor demand.

•Within Corporate Finance, leveraged finance issuance was the main driver of growth due to elevated refinancing, repricing and improving M&A activity.

•Revenue increase in Financial Institutions was driven by sustained activity from infrequent Banking and Insurance issuers.

•Structured Finance revenue growth benefitted from CLO issuance, particularly from refinancing and a recovery in the CMBS market.

•Foreign currency translation had an immaterial impact on MIS revenue.

5

OPERATING EXPENSES AND MARGIN

MCO Operating Expenses

•Operating expenses grew 11% compared to the prior-year period. The increase included 5% from investments and operational costs (which included a charge related to a previously disclosed regulatory matter) and 4% related to higher incentive and stock-based compensation. Foreign currency translation had an immaterial impact on operating expenses.

•Recorded $45 million in charges related to the Strategic and Operational Efficiency Restructuring Program. This program aims to realign the business toward high priority growth areas and to consolidate certain functions to simplify the organizational structure, with the goals of enabling efficiency and improving operating leverage.

•Operating expenses projected to increase in the low-to-mid-single-digit percent range in 2025.

•Growth in operating expenses to be driven by higher operating growth, including annual compensation increases, ongoing organic investments and M&A, partially offset by the reset of incentive compensation accruals and savings associated with cost efficiencies.

•G1Projecting $80 million to $100 million in restructuring charges in 2025, with cumulative charges estimated to be approximately $200 million to $250 million by the end of 2026. The program upon completion is expected to generate $250 million to $300 million in annualized savings.

5 Refer to Table 5 - “Financial Information by Segment (Unaudited)” for more information regarding the “Charges Related to Asset Abandonment” category.

6

Operating Margin and Adjusted Operating Margin1

•MCO’s operating margin was 33.6%. MCO’s adjusted operating margin1 was 43.8%, up 120 basis points from the prior-year period.

•MA’s adjusted operating margin rose by 240 basis points to 33.8%.This improvement demonstrates the company's successful execution of cost discipline measures, further amplified by top-line growth.

•MIS’s adjusted operating margin of 51.3% reflects strong revenue growth derived from a heightened issuance environment, partially offset by higher incentive compensation.

•Foreign currency translation had an immaterial impact on both operating and adjusted operating margins1.

•MCO’s operating margin was 40.6%. MCO’s adjusted operating margin1 was 48.1%, up 420 basis points from the prior-year period.

•MA’s adjusted operating margin of 30.7% reflects ongoing efforts to balance strategic investments with operational efficiency.

•MIS’s adjusted operating margin increased 560 basis points to 60.1% from the prior-year period, demonstrating the operational leverage of the business and a disciplined approach to expense management.

•Foreign currency translation had an immaterial impact on both operating and adjusted operating margins1.

7

EARNINGS PER SHARE (EPS)

Diluted EPS and Adjusted Diluted EPS1

•Diluted EPS and Adjusted Diluted EPS1 grew 17% and 20%, respectively, from the prior-year period which primarily reflects the robust revenue performance during the quarter.

•The Effective Tax Rate (ETR) of 24.8% was in line with the 24.4% from the prior-year period.

•The increase in both Diluted EPS and Adjusted Diluted EPS1 is associated with an increase in net income supported by strong revenue growth from both segments, particularly in MIS.

•The ETR was 23.7%, higher than the 16.9% reported in the prior-year period, primarily due to the favorable resolutions of uncertain tax positions within U.S. domestic and foreign tax jurisdictions in Q1 2023.

8

CAPITAL ALLOCATION AND LIQUIDITY

Capital Returned to Shareholders & Free Cash Flow1

•Cash flow from operations was $2,838 million and free cash flow1 was $2,521 million.

•The increase in both operating cash flow and free cash flow1 was primarily driven by higher net income due to strong revenue growth from both segments.

•On February 12, 2025, the Board of Directors declared a regular quarterly dividend of $0.94 per share of MCO Common Stock, an 11% increase from the prior quarterly dividend of $0.85 per share. The dividend will be payable on March 14, 2025, to stockholders of record at the close of business on February 25, 2025.

•During the fourth quarter of 2024, Moody’s repurchased 1.0 million shares at an average cost of $477.15 per share and issued net 0.1 million shares as part of its employee stock-based compensation programs. The net amount included shares withheld for employee payroll taxes.

•As of December 31, 2024, Moody’s had 180.3 million shares outstanding, with approximately $1.6 billion of share repurchase authority remaining. There is no established expiration date for the remaining authorizations.

•As of December 31, 2024, Moody's had $7.4 billion of outstanding debt and an undrawn $1.25 billion revolving credit facility.

9

ASSUMPTIONS AND OUTLOOK

Moody’s updated outlook for full year 2025, as of February 13, 2025, reflects assumptions about numerous factors that could affect its business and is based on currently available information reviewed by management through, and as of, today’s date. These assumptions include, but are not limited to, the effects of current economic conditions, including the effects of interest rates, inflation, foreign currency exchange rates, capital markets’ liquidity, trade tariffs and policy and activity in different sectors of the debt markets. This outlook also reflects assumptions about global GDP growth, and the impacts resulting from changes in international conditions, including as a result of the Russia-Ukraine military conflict and the military conflict in the Middle East. Actual full year 2025 results could differ materially from Moody’s current outlook.

This outlook incorporates various specific macroeconomic assumptions, including:

Forecasted Item

Current Assumption

U.S. GDP (1) growth

Euro area GDP (1) growth

Global GDP (1) growth

Global policy rates

To continue to normalize throughout 2025, including two cuts by the U.S. Fed

U.S. high yield spreads

To widen to around 430 bps by year-end, below historical average of around 500 bps

U.S. inflation rate

To average around 2.0% - 2.5%

Euro area inflation rate

U.S. unemployment rate

To average around 4.2% - 4.5% over the next 12 months

Global high yield default rate

Global MIS rated issuance

Increase in the low-single-digit percent range

GBP/USD exchange rate

$1.25 for the full year

EUR/USD exchange rate

$1.04 for the full year

Note: All current assumptions are as of February 13, 2025.

(1) GDP growth represents real GDP.

A full summary of Moody's full year 2025 guidance as of February 13, 2025, is included in Table 12 – “2025 Outlook” at the end of this press release.

TELECONFERENCE DETAILS

Date and Time

Webcast

The webcast and its replay can be accessed through Moody’s Investor Relations website, ir.moodys.com, within “Events & Presentations.”

Dial In

U.S. and Canada

Other callers

Passcode

Dial In Replay

A replay will be available immediately after the call on February 13, 2025 and until February 20, 2025.

U.S. and Canada

Other callers

Passcode

ABOUT MOODY’S CORPORATION

In a world shaped by increasingly interconnected risks, Moody’s (NYSE:MCO) data, insights, and innovative technologies help customers develop a holistic view of their world and unlock opportunities. With a rich history of experience in global markets and a diverse workforce of approximately 16,000 across more than 40 countries, Moody’s gives customers the comprehensive perspective needed to act with confidence and thrive. Learn more at moodys.com.

“SAFE HARBOR” STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements contained in this document are forward-looking statements and are based on future expectations, plans and prospects for Moody’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. 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 hereof, and Moody’s 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, Moody’s is identifying certain factors that could cause actual results to differ, perhaps materially, from those indicated by these forward-looking statements. These factors, risks and uncertainties include, but are not limited to: the impact of general economic conditions (including significant government debt and deficit levels, and 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 the Middle East 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 jurisdictions in which we operate, including the EU; 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 any restructuring programs; currency and foreign exchange volatility; the outcome of any review by 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 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 credit 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, 2023, 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.

Table 1 - Consolidated Statements of Operations (Unaudited)

Three Months Ended

Year Ended

Amounts in millions, except per share amounts

Revenue

$

$

$

$

Expenses:

Operating

Selling, general and administrative

Depreciation and amortization

Restructuring

Charges related to asset abandonment

—

—

Total expenses

Operating income

Non-operating (expense) income, net

Interest expense, net

Other non-operating income, net

Total non-operating (expense) income, net

Income before provision for income taxes

Provision for income taxes

Net income

Less: Net income attributable to noncontrolling interests

—

—

1

1

Net income attributable to Moody's

$

$

$

$

Earnings per share attributable to Moody's common shareholders

Basic

$

$

$

$

Diluted

$

$

$

$

Weighted average number of shares outstanding

Basic

Diluted

Table 2 - Condensed Consolidated Balance Sheet Data (Unaudited)

Amounts in millions

ASSETS

Current assets:

Cash and cash equivalents

$

$

Short-term investments

Accounts receivable, net of allowance for credit losses of $32 in 2024 and $35 in 2023

Other current assets

Total current assets

Property and equipment, net of accumulated depreciation of $1,453 in 2024 and $1,272 in 2023

Operating lease right-of-use assets

Goodwill

Intangible assets, net

Deferred tax assets, net

Other assets

Total assets

$

$

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

$

Current portion of operating lease liabilities

Current portion of long-term debt

—

Deferred revenue

Total current liabilities

Non-current portion of deferred revenue

Long-term debt

Deferred tax liabilities, net

Uncertain tax positions

Operating lease liabilities

Other liabilities

Total liabilities

Total Moody's shareholders' equity

Noncontrolling interests

Total shareholders' equity

Total liabilities, noncontrolling interests and shareholders' equity

$

$

Table 3 - Condensed Consolidated Statements of Cash Flows (Unaudited)

Year Ended

Amounts in millions

Cash flows from operating activities

Net income

$

$

Reconciliation of net income to net cash provided by operating activities:

Depreciation and amortization

Stock-based compensation

Deferred income taxes

Non-cash restructuring and asset impairment/abandonment-related charges

Provision for credit losses on accounts receivable

Gain on previously held/sold investments in non-consolidated affiliates

(7)

(4)

Net changes in other operating assets and liabilities

Net cash provided by operating activities

Cash flows from investing activities

Capital additions

Purchases of investments

Sales and maturities of investments

Purchases of investments in non-consolidated affiliates

(4)

(5)

Sales of/distributions from investments in non-consolidated affiliates

2

Cash paid for acquisitions, net of cash acquired

(3)

Net cash used in investing activities

Cash flows from financing activities

Issuance of notes

—

Repayment of notes

—

Proceeds from stock-based compensation plans

Repurchase of shares related to stock-based compensation

Treasury shares

Dividends

Dividends to noncontrolling interests

(7)

(9)

Debt issuance costs and related fees

(5)

—

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

$

$

Table 4 - Non-Operating (Expense) Income, Net (Unaudited)

Three Months Ended

Year Ended

Amounts in millions

Interest:

Income

$

$

$

$

Expense on borrowings

(Expense) income on UTPs and other tax related liabilities(1)

(1)

(2)

8

Net periodic pension costs - interest component

(7)

(7)

Interest expense, net

$

$

$

$

Other non-operating income, net:

FX gain (loss)

$

7

$

(1)

$

—

$

Net periodic pension income - non-service and non-interest cost components

5

9

Income/gain from investments in non-consolidated affiliates

5

7

Gain on previously held equity method investments(2)

—

—

7

—

Gain on investments

1

3

Other

(2)

—

(4)

Other non-operating income, net

$

$

$

$

Total non-operating (expense) income, net

$

$

$

$

(1) The amount for the year ended December 31, 2023 includes a $22 million reduction of tax-related interest expense primarily related to the resolutions of tax matters.

(2) The amount for the year ended December 31, 2024 reflects non-cash gains relating to the step-acquisitions of Praedicat and GCR.

Table 5 - Financial Information by Segment (Unaudited)

The table below shows revenue and Adjusted Operating Income by reportable segment. Adjusted Operating Income is a financial metric utilized by the Company’s chief operating decision maker to assess the profitability of each reportable segment.

Three Months Ended December 31,

Amounts in millions

MA

MIS

Eliminations

Consolidated

MA

MIS

Eliminations

Consolidated

Total external revenue

$

$

$

—

$

$

$

$

—

$

Intersegment revenue

3

—

3

—

Total revenue

Compensation expense

—

—

Non-compensation expense

—

—

Intersegment expense

3

—

3

—

Operating, SG&A

Adjusted Operating Income

$

$

$

—

$

$

$

$

—

$

Adjusted Operating Margin

%

%

%

%

%

%

Depreciation and amortization

—

—

Restructuring

—

—

Charges related to asset abandonment

—

—

—

—

—

—

Operating income

$

$

Operating margin

%

%

Year Ended December 31,

Amounts in millions

MA

MIS

Eliminations

Consolidated

MA

MIS

Eliminations

Consolidated

Total external revenue

$

$

$

—

$

$

$

$

—

$

Intersegment revenue

—

—

Total revenue

Compensation expense

—

—

Non-compensation expense

—

—

Intersegment expense

—

—

Operating, SG&A

Adjusted Operating Income

$

$

$

—

$

$

$

$

—

$

Adjusted Operating Margin

%

%

%

%

%

%

Depreciation and amortization

—

—

Restructuring

—

—

Charges related to asset abandonment (1)

—

—

—

—

—

—

Operating income

$

$

Operating margin

%

%

(1) During the year ended December 31, 2024, the Company recorded charges related to asset abandonment of $43 million pursuant to the Company's decision to outsource the production of certain sustainability content utilized in our product offerings. These charges consist of: i) $12 million related to severance incurred pursuant to a reduction in staff; and ii) $31 million in incremental amortization expense related to the change in estimated useful lives of certain internally developed software and amortizable intangible assets that are associated with the sustainability content offerings for which production is being outsourced.

Table 6 - Transaction and Recurring Revenue (Unaudited)

The following tables summarize the split between transaction revenue and recurring revenue. In the MA segment, recurring revenue represents subscription-based revenue and software maintenance revenue. Transaction revenue in MA represents perpetual software license fees and revenue from software implementation services, risk management advisory projects, and training and certification services. In the MIS segment, excluding MIS Other, transaction revenue represents the initial rating of a new debt issuance, as well as other one-time fees, while recurring revenue represents recurring monitoring fees of a rated debt obligation and/or entities that issue such obligations, as well as revenue from programs such as commercial paper, medium-term notes and shelf registrations. In MIS Other, transaction revenue represents revenue from professional services, while recurring revenue represents subscription-based revenue.

Three Months Ended December 31,

Amounts in millions

Transaction

Recurring

Total

Transaction

Recurring

Total

Decision Solutions

Banking

$

$

$

$

$

$

%

%

%

%

%

%

Insurance

$

7

$

$

$

$

$

4

%

%

%

9

%

%

%

KYC

$

1

$

$

$

—

$

$

1

%

%

%

—

%

%

%

Total Decision Solutions

$

$

$

$

$

$

9

%

%

%

%

%

%

Research & Insights

$

4

$

$

$

4

$

$

2

%

%

%

2

%

%

%

Data & Information

$

1

$

$

$

1

$

$

—

%

%

%

—

%

%

%

Total MA

$

$

$

$

$

$

5

%

%

%

6

%

%

%

Corporate Finance

$

$

$

$

$

$

%

%

%

%

%

%

Structured Finance

$

$

$

$

$

$

%

%

%

%

%

%

Financial Institutions

$

$

$

$

$

$

%

%

%

%

%

%

Public, Project and Infrastructure Finance

$

$

$

$

$

$

%

%

%

%

%

%

MIS Other

$

2

$

6

$

8

$

2

$

6

$

8

%

%

%

%

%

%

Total MIS

$

$

$

$

$

$

%

%

%

%

%

%

Total Moody's Corporation

$

$

$

$

$

$

%

%

%

%

%

%

Table 6 - Transaction and Recurring Revenue (Unaudited) Continued

Year Ended December 31,

Amounts in millions

Transaction

Recurring

Total

Transaction

Recurring

Total

Decision Solutions

Banking

$

$

$

$

$

$

%

%

%

%

%

%

Insurance

$

$

$

$

$

$

4

%

%

%

7

%

%

%

KYC

$

2

$

$

$

1

$

$

1

%

%

%

—

%

%

%

Total Decision Solutions

$

$

$

$

$

$

9

%

%

%

%

%

%

Research & Insights

$

$

$

$

$

$

2

%

%

%

2

%

%

%

Data & Information

$

4

$

$

$

3

$

$

—

%

%

%

—

%

%

%

Total MA

$

$

$

$

$

$

5

%

%

%

6

%

%

%

Corporate Finance

$

$

$

$

$

$

%

%

%

%

%

%

Structured Finance

$

$

$

$

$

$

%

%

%

%

%

%

Financial Institutions

$

$

$

$

$

$

%

%

%

%

%

%

Public, Project and Infrastructure Finance

$

$

$

$

$

$

%

%

%

%

%

%

MIS Other

$

8

$

$

$

6

$

$

%

%

%

%

%

%

Total MIS

$

$

$

$

$

$

%

%

%

%

%

%

Total Moody's Corporation

$

$

$

$

$

$

%

%

%

%

%

%

Table 7 - Adjusted Operating Income and Adjusted Operating Margin (Unaudited)

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; ii) restructuring charges/adjustments; and iii) charges related to asset abandonment. 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 and charges related to asset abandonment, which the Company believes are not reflective of its ongoing operating cost structure, 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.

Below is a reconciliation of these measures to their most directly comparable U.S. GAAP measures:

Three Months Ended December 31,

Year Ended December 31,

Amounts in millions

Operating income

$

$

$

$

Depreciation and amortization

Restructuring

Charges related to asset abandonment

—

—

Adjusted Operating Income

$

$

$

$

Operating margin

%

%

%

%

Adjusted Operating Margin

%

%

%

%

Table 8 - Free Cash Flow (Unaudited)

The Company defines Free Cash Flow as net cash provided by operating activities minus cash paid 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:

Year Ended December 31,

Amounts in millions

Net cash provided by operating activities

$

$

Capital additions

Free Cash Flow

$

$

Net cash used in investing activities

$

$

Net cash used in financing activities

$

$

Table 9 - Constant Currency Revenue Growth (Unaudited)

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 December 31,

Year Ended December 31,

Amounts in millions

Change

Growth

Change

Growth

MCO revenue

$

$

$

$

$

$

FX impact

4

—

4

(1)

—

(1)

Constant currency MCO revenue

$

$

$

$

$

$

MA revenue

$

$

$

8%

$

$

$

8%

FX impact

—

—

—

(6)

—

(6)

Constant currency MA revenue

$

$

$

8%

$

$

$

8%

Decision Solutions revenue

$

$

$

$

$

$

FX impact

—

—

—

(2)

—

(2)

Constant currency Decision Solutions revenue

$

$

$

$

$

$

9%

Research and Insights revenue

$

$

$

6%

$

$

$

5%

FX impact

—

—

—

(2)

—

(2)

Constant currency Research and Insights revenue

$

$

$

6%

$

$

$

5%

Data and Information revenue

$

$

$

6%

$

$

$

8%

FX impact

—

—

—

(2)

—

(2)

Constant currency Data and Information revenue

$

$

$

6%

$

$

$

8%

MA recurring revenue

$

$

$

$

$

$

9%

FX impact

(2)

—

(2)

(8)

—

(8)

Constant currency MA recurring revenue

$

$

$

9%

$

$

$

9%

MIS revenue

$

$

$