REVENUES

3 Months Ended

Mar. 31, 2018

NOTE 3. REVENUES

Revenue by Category

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

		Three Months Ended March 31,
		2018		2017 ⁽¹⁾
MIS:
Corporate finance (CFG)
	Investment-grade	$	81.1	$	72.1
	High-yield		57.9		64.2
	Bank loans		108.1		101.4
	Other accounts ⁽²⁾		130.6		115.1
Total CFG			377.7		352.8
Structured finance (SFG)
	Asset-backed securities		28.2		22.7
	Residential mortgage backed securities		24.3		20.4
	Commercial real estate finance		33.2		29.3
	Structured credit		43.4		27.4
	Other accounts		0.6		0.4
Total SFG			129.7		100.2
Financial institutions (FIG)
	Banking		77.0		79.1
	Insurance		28.3		25.1
	Managed investments		5.7		5.1
	Other accounts		3.3		3.0
Total FIG			114.3		112.3
Public, project and infrastructure finance (PPIF)
	Public finance / sovereign		46.9		53.0
	Project and infrastructure		46.3		45.1
Total PPIF			93.2		98.1
	Total ratings revenue		714.9		663.4
MIS Other			5.0		4.8
	Total external revenue		719.9		668.2
Intersegment royalty			29.8		26.0
	Total MIS		749.7		694.2
MA:
Research, data and analytics (RD&A)			269.2		175.4
Enterprise risk solutions (ERS)			100.1		95.9
Professional services (PS)			37.5		35.7
	Total external revenue		406.8		307.0
Intersegment revenue			5.0		3.7
	Total MA		411.8		310.7
Eliminations			(34.8)		(29.7)
Total MCO		$	1,126.7	$	975.2

(1) Prior period amounts have not been adjusted under the modified retrospective method of adoption for the New Revenue Accounting Standard.
(2) Other includes: recurring monitoring fees of a rated debt obligation and/or entities that issue such obligations as well as fees from programs such as commercial paper, medium term notes, and ICRA corporate finance revenue.

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

		Three Months Ended March 31, 2018
		United States		International		Total
MIS:
Corporate finance (CFG)		$	246.7	$	131.0	$	377.7
Structured finance (SFG)			84.6		45.1		129.7
Financial institutions (FIG)			48.5		65.8		114.3
Public, project and infrastructure finance (PPIF)			53.4		39.8		93.2
	Total ratings revenue		433.2		281.7		714.9
MIS Other			0.2		4.8		5.0
	Total		433.4		286.5		719.9
MA:
Research, data and analytics (RD&A)			112.6		156.6		269.2
Enterprise risk solutions (ERS)			38.5		61.6		100.1
Professional services (PS)			13.2		24.3		37.5
	Total		164.3		242.5		406.8
Total MCO		$	597.7	$	529.0	$	1,126.7

		Three Months Ended March 31, 2017 ⁽¹⁾
		United States		International		Total
MIS:
Corporate finance (CFG)		$	243.8	$	109.0	$	352.8
Structured finance (SFG)			65.0		35.2		100.2
Financial institutions (FIG)			50.6		61.7		112.3
Public, project and infrastructure finance (PPIF)			63.0		35.1		98.1
	Total ratings revenue		422.4		241.0		663.4
MIS Other			0.1		4.7		4.8
	Total		422.5		245.7		668.2
MA:
Research, data and analytics (RD&A)			101.4		74.0		175.4
Enterprise risk solutions (ERS)			40.2		55.7		95.9
Professional services (PS)			13.7		22.0		35.7
	Total		155.3		151.7		307.0
Total MCO		$	577.8	$	397.4	$	975.2
(1) Prior period amounts have not been adjusted under the modified retrospective method of adoption for the New Revenue Accounting Standard.

The tables below summarize the split between transaction and relationship revenue. 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 relationship revenue represents the 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 and outsourcing engagements and relationship revenue represents subscription-based revenues. In the MA segment, relationship revenue represents subscription-based revenues and software maintenance revenue. Transaction revenue in MA represents perpetual software license fees and revenue from software implementation services, risk management advisory projects, training and certification services, and outsourced research and analytical engagements.

	Three Months Ended March 31,
	2018							2017 ⁽²⁾
	Transaction			Relationship		Total		Transaction		Relationship		Total
Corporate Finance	$	274.9		$	102.8	$	377.7	$	260.6	$	92.2	$	352.8
		73%			27%		100%		74%		26%		100%
Structured Finance	$	83.1		$	46.6	$	129.7	$	57.5	$	42.7	$	100.2
		64%			36%		100%		57%		43%		100%
Financial Institutions	$	50.0		$	64.3	$	114.3	$	53.4	$	58.9	$	112.3
		44%			56%		100%		48%		52%		100%
Public, Project and Infrastructure Finance	$	54.4		$	38.8	$	93.2	$	59.2	$	38.9	$	98.1
		58%			42%		100%		60%		40%		100%
MIS Other	$	0.6		$	4.4	$	5.0	$	0.3	$	4.5	$	4.8
		12%			88%		100%		6%		94%		100%
Total MIS	$	463.0		$	256.9	$	719.9	$	431.0	$	237.2	$	668.2
		64%			36%		100%		65%		35%		100%
Moody's Analytics	$	60.8	⁽¹⁾	$	346.0	$	406.8	$	64.6	$	242.4	$	307.0
		15%			85%		100%		21%		79%		100%
Total Moody's Corporation	$	523.8		$	602.9	$	1,126.7	$	495.6	$	479.6	$	975.2
		46%			54%		100%		51%		49%		100%
(1) Revenue from software implementation services and risk management advisory projects, while classified by management as transactional revenue, is recognized over time under the New Revenue Accounting Standard (please also refer to the table below).
(2) Prior period amounts have not been adjusted under the modified retrospective method of adoption for the New Revenue Accounting Standard.

The following table presents the timing of revenue recognition:

	Three Months Ended March 31,
	2018
	MIS		MA			Total
Revenue recognized at a point in time	$	463.0	$	15.5	$	478.5
Revenue recognized over time		256.9		391.3		648.2
Total	$	719.9	$	406.8	$	1,126.7

Contract balances, Unbilled receivables and Remaining performance obligations

Unbilled receivables

At March 31, 2018, accounts receivable included approximately $344.0 million of unbilled receivables related to the MIS segment. Certain MIS arrangements contain contractual terms whereby the customers are billed in arrears for annual monitoring services, requiring revenue to be accrued as an unbilled receivable as such services are provided. Additionally, there are other instances in which the timing of when the Company has the unconditional right to consideration and recognizes revenue prior to invoicing the customer, for which an unbilled receivable is recorded.

In addition, for certain MA arrangements, the timing of when the Company has the unconditional right to consideration and recognizes revenue occurs prior to invoicing the customer. Consequently, at March 31, 2018, accounts receivable included approximately $40.1 million of unbilled receivables related to the MA segment.

Historically, the Company has not had material differences between the estimated revenue and the actual billings.

Deferred revenue

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

Significant changes in the deferred revenue balances during the three months ended March 31, 2018 are as follows:

	Three Months Ended March 31, 2018
	MIS		MA		Total
Balance at January 1, 2018 (after New Revenue Accounting Standard transition adjustment)	$	334.7	$	611.6	$	946.3
Changes in deferred revenue
Revenue recognized that was included in the deferred revenue balance at the beginning of the period		(93.4)		(173.9)		(267.3)
Increases due to amounts billable excluding amounts recognized as revenue during the period		154.9		279.8		434.7
Effect of exchange rate changes		1.3		11.5		12.8
Total Changes in deferred revenue		62.8		117.4		180.2
Balance at March 31, 2018	$	397.5	$	729.0	$	1,126.5
Deferred revenue - current	$	273.4	$	725.3	$	998.7
Deferred revenue - noncurrent	$	124.1	$	3.7	$	127.8

Deferred revenue increased during the three months ended March 31, 2018 primarily due to the significant portion of contract renewals that occur during the first quarter within both segments.

Remaining performance obligations

The following tables include the expected recognition period for the remaining performance obligations for each reportable segment as of March 31, 2018:

MIS
Total			Less than 1 year	1 - 5 years		6 - 10 Years		11 - 15 years		16-20 years		Over 20 Years
$	150.5	$	21.9	$	65.2	$	43.6	$	8.7	$	4.5	$	6.6

The balances in the MIS table above largely reflect deferred revenue related to monitoring fees for certain structured finance products, primarily CMBS, where the issuers can elect to pay the monitoring fees for the life of the security in advance. With respect to the remaining performance obligations for the MIS segment, the Company has applied a practical expedient set forth in ASC Topic 606 permitting the omission from the table above for unsatisfied performance obligations relating to contracts with an original expected length of one year or less.

MA
Total		Less than 1 Year		1 - 2 Years		Over 2 Years
$	1,418.6	$	1,089.0	$	217.6	$	112.0

The balances in the MA table above include both amounts recorded as deferred revenue on the balance sheet as of March 31, 2018 as well as amounts not yet invoiced to customers as of March 31, 2018 largely reflecting future revenue related to signed multi-year arrangements for hosted and installed subscription based products.