MORNINGSTAR, INC., 10-Q filed on 4/29/2019
Quarterly Report
v3.19.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2019
Apr. 19, 2019
Document and Entity Information Abstract    
Entity Registrant Name MORNINGSTAR, INC.  
Entity Central Index Key 0001289419  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Document Type 10-Q  
Document Period End Date Mar. 31, 2019  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q1  
Amendment Flag false  
Entity Emerging Growth Company false  
Entity Small Business false  
Entity Common Stock, Shares Outstanding   42,655,713
v3.19.1
Condensed Consolidated Statements of Income - USD ($)
shares in Millions, $ in Millions
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Income Statement [Abstract]    
Revenue $ 258.9 $ 243.5
Operating expense:    
Cost of revenue 105.1 102.4
Sales and marketing 40.0 38.5
General and administrative 40.8 32.2
Depreciation and amortization 23.5 22.9
Total operating expense 209.4 196.0
Operating income 49.5 47.5
Non-operating income (expense), net:    
Interest expense, net (0.7) (0.3)
Gain on sale of investments, reclassified from other comprehensive income 0.6 0.5
Gain on sale of product line 0.0 10.5
Other expense, net (3.2) (1.4)
Non-operating income (expense), net (3.3) 9.3
Income before income taxes and equity in net loss of unconsolidated entities 46.2 56.8
Equity in net loss of unconsolidated entities (1.5) (1.5)
Income tax expense 11.5 13.4
Consolidated net income $ 33.2 $ 41.9
Net income per share:    
Basic (in dollars per share) $ 0.78 $ 0.99
Diluted (in dollars per share) 0.77 0.98
Dividends declared (in dollars per share) 0.28 0.25
Dividends paid per common share (in dollars per share) $ 0.28 $ 0.25
Weighted average shares outstanding:    
Basic (in shares) 42.6 42.5
Diluted (in shares) 43.0 42.9
v3.19.1
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Statement of Comprehensive Income [Abstract]    
Consolidated net income $ 33.2 $ 41.9
Other comprehensive income:    
Foreign currency translation adjustment 3.4 7.5
Unrealized gains (losses) on securities, net of tax:    
Unrealized holding gains arising during period 1.9 0.0
Reclassification gains included in net income (0.5) (0.4)
Other comprehensive income 4.8 7.1
Comprehensive income $ 38.0 $ 49.0
v3.19.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
Mar. 31, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 349.1 $ 369.3
Investments 29.5 26.6
Accounts receivable, less allowance of $3.4 and $4.0, respectively 173.8 172.2
Income tax receivable 0.0 1.8
Deferred commissions 16.1 14.8
Other current assets 18.0 16.9
Total current assets 586.5 601.6
Goodwill 557.3 556.7
Property, equipment, and capitalized software, less accumulated depreciation and amortization of $370.2 and $351.7, respectively 142.7 143.5
Operating lease assets 118.8 0.0
Intangible assets, net 68.8 73.9
Investments in unconsolidated entities 61.9 63.1
Deferred commissions, non-current 9.8 10.3
Other assets 5.8 4.7
Total assets 1,551.6 1,453.8
Current liabilities:    
Deferred revenue 233.0 195.8
Accrued compensation 55.7 109.5
Accounts payable and accrued liabilities 46.5 54.4
Operating lease liabilities 29.1  
Other current liabilities 8.5 3.1
Total current liabilities 372.8 362.8
Operating lease liabilities, non-current 116.7  
Accrued compensation 12.3 11.8
Deferred tax liability, net 22.1 22.2
Long-term debt 30.0 70.0
Deferred revenue, non-current 14.9 14.2
Other long-term liabilities 14.6 38.1
Total liabilities 583.4 519.1
Morningstar, Inc. shareholders’ equity:    
Common stock, no par value, 200,000,000 shares authorized, of which 42,655,713 and 42,624,118 shares were outstanding as of March 31, 2019 and December 31, 2018, respectively 0.0 0.0
Treasury stock at cost, 10,858,607 and 10,816,672 shares as of March 31, 2019 and December 31, 2018, respectively (731.4) (726.8)
Additional paid-in capital 633.7 621.7
Retained earnings 1,136.1 1,114.8
Accumulated other comprehensive loss:    
Currency translation adjustment (71.1) (74.5)
Unrealized gain (loss) on available-for-sale investments 0.9 (0.5)
Total accumulated other comprehensive loss (70.2) (75.0)
Total equity 968.2 934.7
Total liabilities and equity $ 1,551.6 $ 1,453.8
v3.19.1
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Mar. 31, 2019
Dec. 31, 2018
Statement of Financial Position [Abstract]    
Allowance for doubtful accounts receivable $ 3.4 $ 4.0
Accumulated depreciation and amortization $ 370.2 $ 351.7
Common Stock, No Par Value $ 0 $ 0
Common Stock, Shares Authorized 200,000,000 200,000,000
Common Stock, Shares, Outstanding 42,655,713 42,624,118
Treasury Stock, Shares 10,858,607 10,816,672
v3.19.1
Condensed Consolidated Statement of Equity - USD ($)
$ in Millions
Total
Common Stock
Treasury Stock
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Balance at Dec. 31, 2017 $ 804.9 $ 0.0 $ (708.2) $ 601.0 $ 958.7 $ (46.6)
Balance (in shares) at Dec. 31, 2017   42,547,707        
Increase (Decrease) in Stockholders' Equity            
Net income 41.9       41.9  
Other comprehensive income:            
Unrealized gain on available-for-sale investments, net of income tax of $0.7 0.0          
Reclassification of adjustments for gain included in net income, net of income tax (0.4)         (0.4)
Foreign currency translation adjustment 7.5         7.5
Other comprehensive income 7.1         7.1
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units (in shares)   79,050        
Issuance of common stock related to option exercises and vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units (4.1)     (4.1)    
Reclassification of awards previously liability-classified that were converted to equity 4.4     4.4    
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition            
Stock-based compensation 6.6     6.6    
Common share repurchased (in shares)   (92,529)        
Common shares repurchased (8.9)   (8.9)      
Dividends declared (10.6)       (10.6)  
Balance at Mar. 31, 2018 858.3 $ 0.0 (717.1) 607.9 1,007.0 (39.5)
Balance (in shares) at Mar. 31, 2018   42,534,228        
Balance at Dec. 31, 2018 $ 934.7 $ 0.0 (726.8) 621.7 1,114.8 (75.0)
Balance (in shares) at Dec. 31, 2018 42,624,118 42,624,118        
Increase (Decrease) in Stockholders' Equity            
Net income $ 33.2       33.2  
Other comprehensive income:            
Unrealized gain on available-for-sale investments, net of income tax of $0.7 1.9         1.9
Reclassification of adjustments for gain included in net income, net of income tax (0.5)         (0.5)
Foreign currency translation adjustment 3.4         3.4
Other comprehensive income 4.8         4.8
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units (in shares)   73,530        
Issuance of common stock related to option exercises and vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units (4.6) $ 0.0 0.0 (4.6)    
Reclassification of awards previously liability-classified that were converted to equity 6.6 $ 0.0 0.0 6.6 0.0 0.0
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition            
Stock-based compensation 10.0     10.0    
Common share repurchased (in shares)   (41,935)        
Common shares repurchased (4.6)   (4.6)      
Dividends declared (11.9)       (11.9)  
Balance at Mar. 31, 2019 $ 968.2 $ 0.0 $ (731.4) $ 633.7 $ 1,136.1 $ (70.2)
Balance (in shares) at Mar. 31, 2019 42,655,713 42,655,713        
v3.19.1
Condensed Consolidated Statement of Equity (Parenthetical) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Statement of Stockholders' Equity [Abstract]    
Taxes from unrealized gain on available-for-sale investments $ 0.7  
Reclassification of adjustments for gains included in net income, net of income tax of $ 0.2 $ 0.1
Dividends declared (in dollars per share) $ 0.28 $ 0.25
v3.19.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Operating activities    
Consolidated net income $ 33.2 $ 41.9
Adjustments to reconcile consolidated net income to net cash flows from operating activities:    
Depreciation and amortization 23.5 22.9
Deferred income taxes (0.4) 5.7
Stock-based compensation expense 10.0 6.6
Provision for bad debt 0.5 0.8
Equity in net loss of unconsolidated entities 1.5 1.5
Gain on sale of product line 0.0 (10.5)
Other, net 3.2 0.9
Changes in operating assets and liabilities:    
Accounts receivable (2.0) (9.8)
Deferred commissions 0.8 21.6
Accounts payable and accrued liabilities (3.5) 0.0
Accrued compensation (48.6) (65.3)
Income taxes, current 8.5 8.7
Deferred revenue 37.9 33.1
Other assets and liabilities (5.6) 1.8
Cash provided by operating activities 59.0 59.9
Investing activities    
Purchases of investments (8.9) (7.8)
Proceeds from maturities and sales of investments 8.9 7.7
Capital expenditures (18.7) (17.6)
Proceeds from sale of a product line 0.0 10.5
Purchases of equity investments (1.1) (0.1)
Other, net 0.3 0.0
Cash used for investing activities (19.5) (7.3)
Financing activities    
Common shares repurchased (4.9) (8.9)
Dividends paid (11.9) (10.6)
Repayment of long-term debt (40.0) (30.0)
Employee taxes paid from withholding of restricted stock units (4.6) (4.1)
Other, net 0.7 (0.5)
Cash used for financing activities (60.7) (54.1)
Effect of exchange rate changes on cash and cash equivalents 1.0 4.3
Net increase (decrease) in cash and cash equivalents (20.2) 2.8
Cash and cash equivalents—beginning of period 369.3 308.2
Cash and cash equivalents—end of period 349.1 311.0
Supplemental disclosure of cash flow information:    
Cash paid for income taxes 3.4 4.8
Cash paid for interest 1.1 0.8
Supplemental information of non-cash investing and financing activities:    
Unrealized gain (loss) on available-for-sale investments $ 2.0 $ (0.9)
v3.19.1
Basis of Presentation of Interim Financial Information
3 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation of Interim Financial Information
Basis of Presentation of Interim Financial Information
 
The accompanying unaudited condensed consolidated financial statements of Morningstar, Inc. and subsidiaries (Morningstar, we, our, the Company) have been prepared to conform to the rules and regulations of the Securities and Exchange Commission (SEC). The preparation of financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue, and expenses. Actual results could differ from those estimates. In the opinion of management, the statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly our financial position, results of operations, equity, and cash flows. These financial statements and notes are unaudited and should be read in conjunction with our Audited Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 1, 2019 (our Annual Report).

The acronyms that appear in the Notes to our Unaudited Condensed Consolidated Financial Statements refer to the following:
 
ASC: Accounting Standards Codification
ASU: Accounting Standards Update
FASB: Financial Accounting Standards Board
 
v3.19.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

Significant changes to our accounting policies as a result of adopting ASU 2016-02, Leases, are discussed below. We discuss our other significant accounting policies in Note 2 of our Audited Consolidated Financial Statements included in our Annual Report.

Recently adopted accounting pronouncements

Leases: On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. Expenses are recognized in the consolidated statement of income in a manner similar to previous accounting guidance. Topic 842 originally required the use of a modified retrospective approach upon adoption. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842) - Targeted Improvements, which allows an additional transition method to adopt the new lease standard at the adoption date instead of the beginning of the earliest period presented. We elected this transition method at the adoption date of January 1, 2019.

We also chose to elect the following practical expedients upon adoption: not to reassess whether any expired or existing contracts are or contain leases, not to reassess the lease classification for any expired or existing leases, not to reassess initial direct costs for any existing leases, and not to separately identify lease and nonlease components (i.e. maintenance costs) except for real estate leases. Additionally, we elected the short-term lease exemption, and are only applying the requirements of Topic 842 to long-term leases (leases greater than 1 year).

The adoption of Topic 842 resulted in the presentation of $118.8 million of operating lease assets and $145.8 million of operating lease liabilities on the consolidated balance sheet as of March 31, 2019. At implementation, we also reclassified $27.9 million in deferred rent liabilities related to these leases reducing the recognized operating lease assets. The new standard did not have a material impact on the statement of income. See Note 9 for additional information.

Income Statement-Reporting Comprehensive Income: On February 14, 2018, the FASB issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, to address a specific consequence of the Tax Cuts and Jobs Act of 2017 (the Tax Reform Act) by allowing a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Reform Act’s reduction of the U.S. federal corporate income tax rate. The new standard became effective for us on January 1, 2019 and is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Reform Act is recognized. We did not elect to reclassify any stranded tax effects from accumulated other comprehensive income (loss) to retained earnings. The adoption did not have an impact on our consolidated financial statements and related disclosures.

Compensation—Stock Compensation: On June 20, 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for share-based payment awards issued to employees and nonemployees. Under the new standard, the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term can be used in lieu of an expected term in the option-pricing model for nonemployee awards. The new standard became effective for us on January 1, 2019 and will be applied to all new awards granted after the date of adoption. The adoption did not have an impact on our consolidated financial statements and related disclosures.

Codification Improvements to Investments - Debt and Equity Securities: On July 17, 2018, the FASB issued ASU No. 2018-09, Codification Improvements, which modifies the disclosure requirements on debt and equity securities related to ASC 320, Investments - Debt and Equity Securities. ASU No. 2018-09 removes the requirement for these disclosures when an entity provides summarized interim financial information. The new standard became effective for us on January 1, 2019. The adoption did not have an impact on our consolidated financial statements.

Recently issued accounting pronouncements not yet adopted

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement: On August 28, 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for fair value measurements. The new standard is effective for us on January 1, 2020. We are currently evaluating the impact of adopting ASU No. 2018-13 on our consolidated financial statements and related disclosures.

Cloud Computing: On August 29, 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, which helps entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (CCA) by providing guidance for determining when an arrangement includes a software license and when an arrangement is solely a hosted CCA service. Under ASU No. 2018-15, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. The new guidance also prescribes the balance sheet, income statement, and cash flow classification of the capitalized implementation costs and related amortization expense and requires additional quantitative and qualitative disclosures. The new standard is effective for us on January 1, 2020. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued. Entities can choose to adopt the new guidance prospectively to eligible costs incurred on or after the date this guidance is first applied or retrospectively. We are evaluating the effect that ASU No. 2018-15 will have on our consolidated financial statements and related disclosures.
v3.19.1
Credit Arrangements
3 Months Ended
Mar. 31, 2019
Debt Disclosure [Abstract]  
Credit Arrangements
Credit Arrangements

In December 2018, we amended our credit agreement to extend the maturity date to December 21, 2020 with no other changes in terms. The credit agreement provides us with a borrowing capacity of up to $300.0 million and provides for issuance of up to $25.0 million of letters of credit under the revolving credit facility.

The interest rate applicable to any loan under the credit agreement is, at our option, either: (i) the applicable London interbank offered rate (LIBOR) plus an applicable margin for such loans, which ranges between 1.00% and 1.75%, based on our consolidated leverage ratio or (ii) the lender's base rate plus the applicable margin for such loans, which ranges between 2.00% and 2.75%, based on our consolidated leverage ratio.

The credit agreement also contains financial covenants under which we: (i) may not exceed a maximum consolidated leverage ratio of 3.00 to 1.00 and (ii) are required to maintain a minimum consolidated interest coverage ratio of not less than 3.00 to 1.00. We were in compliance with the financial covenants as of March 31, 2019.

Our outstanding principal balance was $30.0 million at a one-month LIBOR interest rate plus 100 basis points as of March 31, 2019, leaving borrowing availability of $270.0 million.
v3.19.1
Goodwill and Other Intangible Assets
3 Months Ended
Mar. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets

Goodwill
 
The following table shows the changes in our goodwill balances from December 31, 2018 to March 31, 2019:
 
 
 
(in millions)
Balance as of December 31, 2018
 
$
556.7

Foreign currency translation
 
0.6

Balance as of March 31, 2019
 
$
557.3



We did not record any impairment losses in the first three months of 2019 and 2018. We perform our annual impairment reviews in the fourth quarter and when triggering events are identified.

Intangible Assets

The following table summarizes our intangible assets: 

 
 
As of March 31, 2019
 
As of December 31, 2018
(in millions)
 
Gross
 
Accumulated
Amortization
 
Net
 
Weighted
Average
Useful  Life
(years)
 
Gross
 
Accumulated
Amortization
 
Net
 
Weighted
Average
Useful  Life
(years)
Intellectual property
 
$
30.9

 
$
(29.5
)
 
$
1.4

 
9
 
$
30.8

 
$
(29.2
)
 
$
1.6

 
9
Customer-related assets
 
153.5

 
(113.9
)
 
39.6

 
12
 
153.0

 
(111.7
)
 
41.3

 
12
Supplier relationships
 
0.2

 
(0.1
)
 
0.1

 
20
 
0.2

 
(0.1
)
 
0.1

 
20
Technology-based assets
 
127.1

 
(99.7
)
 
27.4

 
7
 
126.9

 
(96.3
)
 
30.6

 
7
Non-competition agreements
 
2.4

 
(2.1
)
 
0.3

 
5
 
2.4

 
(2.1
)
 
0.3

 
5
Total intangible assets
 
$
314.1

 
$
(245.3
)
 
$
68.8

 
10
 
$
313.3

 
$
(239.4
)
 
$
73.9

 
10

 
The following table summarizes our amortization expense related to intangible assets:
 
 
Three months ended March 31,
(in millions)
 
2019
 
2018
Amortization expense
 
$
4.9

 
$
5.3


 
We amortize intangible assets using the straight-line method over their expected economic useful lives.

We expect intangible amortization expense for the remainder of 2019 and subsequent years as follows:
 
 
(in millions)
Remainder of 2019 (from April 1 through December 31)
 
$
14.3

2020
 
16.2

2021
 
12.8

2022
 
5.0

2023
 
4.9

Thereafter
 
15.6


 
Our estimates of future amortization expense for intangible assets may be affected by acquisitions, divestitures, changes in the estimated average useful lives, and foreign currency translation.
v3.19.1
Income Per Share
3 Months Ended
Mar. 31, 2019
Earnings Per Share [Abstract]  
Income Per Share
Income Per Share 

The following table shows how we reconcile our net income and the number of shares used in computing basic and diluted net income per share:

 
 
Three months ended March 31,
(in millions, except share and per share amounts)
 
2019
 
2018
Basic net income per share:
 
 

 
 

Consolidated net income
 
$
33.2

 
$
41.9

 
 
 
 
 
Weighted average common shares outstanding
 
42.6

 
42.5

 
 
 
 
 
Basic net income per share
 
$
0.78

 
$
0.99

 
 
 
 
 
Diluted net income per share:
 
 
 
 
Consolidated net income
 
$
33.2

 
$
41.9

 
 
 
 
 
Weighted average common shares outstanding
 
42.6

 
42.5

Net effect of dilutive stock options, restricted stock units, performance share awards, and market stock units
 
0.4

 
0.4

Weighted average common shares outstanding for computing diluted income per share
 
43.0

 
42.9

 
 
 
 
 
Diluted net income per share
 
$
0.77

 
$
0.98



The number of weighted average restricted stock units, performance share awards, and market stock units excluded from our calculation of diluted earnings per share, as their inclusion would have been anti-dilutive, was immaterial during the periods presented.

v3.19.1
Revenue
3 Months Ended
Mar. 31, 2019
Revenue from Contract with Customer [Abstract]  
Revenue
Revenue

Disaggregation of Revenue

The following table presents our revenue disaggregated by revenue type. Sales and usage-based taxes are excluded from revenue.
 
 
Three months ended March 31,
(in millions)
 
2019
 
2018
License-based
 
$
195.5

 
$
178.6

Asset-based
 
48.8

 
50.7

Transaction-based
 
14.6

 
14.2

Consolidated revenue
 
$
258.9

 
$
243.5



License-based performance obligations are generally satisfied over time as the customer has access to the product or service during the term of the subscription license and the level of service is consistent during the contract period. License-based agreements typically have a term of 12 to 36 months. License-based revenue is sourced from Morningstar Data, Morningstar Direct, Morningstar Advisor Workstation, Morningstar Enterprise Components, Morningstar Research, PitchBook Data, and other similar products.

Asset-based performance obligations are satisfied over time as the customer receives continuous access to a service for the term. Asset-based arrangements typically have a term of 12 to 36 months. The asset-based fees represent variable consideration and the customer does not make separate purchasing decisions that result in additional performance obligations. Significant changes in the underlying fund assets, or significant disruptions in the market, are evaluated to determine if revisions of estimates of earned asset-based fees are needed for the current quarter. An estimate of variable consideration is included in the initial transaction price only to the extent it is probable that a significant reversal in the amount of the revenue recognized will not occur. Estimates of asset-based fees are based on the most recently completed quarter and, as a result, it is unlikely a significant reversal of revenue would occur. Asset-based revenue includes Morningstar Investment Management, Workplace Solutions, and Morningstar Indexes.

Transaction-based performance obligations are satisfied when the product or service is completed or delivered. Transaction-based revenue includes Morningstar Credit Ratings, Internet Advertising Sales, and Conferences. Morningstar Credit Ratings may include surveillance services, which are recognized over time, as the customer has access to the service during the surveillance period.

Contract liabilities

Our contract liabilities represent deferred revenue. We record contract liabilities when cash payments are received or due in advance of our performance, including amounts which are refundable. The contract liabilities balance for the three months ended March 31, 2019 had a net increase of $37.9 million, primarily driven by cash payments received or due in advance of satisfying our performance obligations. We recognized $103.3 million of revenue in the three-month period ended March 31, 2019 that was included in the contract liabilities balance as of December 31, 2018.

We expect to recognize revenue related to our contract liabilities for the remainder of 2019 and subsequent years as follows:
(in millions)
 
As of March 31, 2019
Remainder of 2019 (from April 1 through December 31)
 
$
357.4

2020
 
122.6

2021
 
39.1

2022
 
11.9

2023
 
5.8

Thereafter
 
46.7

 
 
$
583.5



The aggregate amount of revenue we expect to recognize for the remainder of 2019 and subsequent years is higher than our contract liability balance of $247.9 million as of March 31, 2019. The difference represents the value of performance obligations for signed contracts where we have not yet begun to satisfy the performance obligations, partially satisfied performance obligations, or have not yet billed the customer.

The table above does not include variable consideration for unsatisfied performance obligations related to certain of our asset-based and transaction-based contracts as of March 31, 2019. We are applying the optional exemption as the variable consideration relates to these unsatisfied performance obligations being fulfilled as a series. The performance obligations related to these contracts are expected to be satisfied over the next 12 to 36 months as services are provided to the client. For licensed-based contracts, the consideration received for services performed is based on future user count, which will be known at the time the services are performed. The variable consideration for this revenue can be affected by the number of user licenses. For asset-based contracts, the consideration received for services performed is based on future asset values, which will be known at the time the services are performed. The variable consideration for this revenue can be affected by changes in the underlying value of fund assets due to client redemptions, additional investments, or significant movements in the market. For transaction-based contracts such as Internet advertising, the consideration received for services performed is based on the number of impressions, which will be known once impressions are created. The variable consideration for this revenue can be affected by the timing and quantity of impressions in any given period.

The table above does not include revenue for unsatisfied performance obligations related to certain of our license-based and transaction-based contracts as of March 31, 2019. We are applying the optional exemption as the performance obligations for such contracts have an expected duration of one year or less. For certain license-based contracts, the remaining performance obligation is expected to be less than one year based on the corresponding subscription terms. For transaction-based contracts, such as new credit rating issuances and the Morningstar conference, the related performance obligations are expected to be satisfied within the next twelve months.

Contract Assets

Our contract assets represent accounts receivable, less allowance and deferred commissions. We did not record any impairment losses on receivables or deferred commissions in the first three months of 2019.

The following table summarizes our contract assets balance:

(in millions)
 
As of March 31, 2019
 
As of December 31, 2018
Accounts receivable, less allowance
 
$
173.8

 
$
172.2

Deferred commissions
 
16.1

 
14.8

Deferred commissions, non-current
 
9.8

 
10.3

Total contract assets
 
$
199.7

 
$
197.3


The following table shows the change in our deferred commissions balance from December 31, 2018 to March 31, 2019:

 
 
(in millions)
Balance as of December 31, 2018
 
$
25.1

Commissions earned and capitalized
 
5.6

Amortization of capitalized amounts
 
(4.8
)
Balance as of March 31, 2019
 
$
25.9

v3.19.1
Segment and Geographical Area Information
3 Months Ended
Mar. 31, 2019
Segment Reporting [Abstract]  
Segment and Geographical Area Information
Segment and Geographical Area Information
 
Segment Information

We report our results in a single reportable segment, which reflects how our chief operating decision maker allocates resources and evaluates our financial results. Because we have a single reportable segment, all required financial segment information can be found directly in the Consolidated Financial Statements. The accounting policies for our reportable segment are the same as those described in “Note 2. Summary of Significant Accounting Policies” included in the Audited Consolidated Financial Statements and Notes thereto included in our Annual Report. We evaluate the performance of our reporting segment based on revenue and operating income.

Geographical Area Information

The tables below summarize our revenue and long-lived assets, which includes property, equipment, and capitalized software, net and operating lease assets, by geographical area:

Revenue by geographical area
 
 
 
 
 
 
Three months ended March 31,
(in millions)
 
2019
 
2018
United States
 
$
195.1

 
$
179.5

 
 
 
 
 
United Kingdom
 
18.1

 
18.3

Continental Europe
 
20.4

 
19.9

Australia
 
9.5

 
10.5

Canada
 
7.9

 
7.7

Asia
 
6.3

 
6.1

Other
 
1.6

 
1.5

Total International
 
63.8

 
64.0

 
 
 
 
 
Consolidated revenue
 
$
258.9

 
$
243.5



Property, equipment, and capitalized software, net by geographical area
 
 
 
 
 
 
 
 
 
(in millions)
 
As of March 31, 2019
 
As of December 31, 2018
United States
 
$
125.6

 
$
126.4

 
 
 
 
 
United Kingdom
 
3.7

 
3.8

Continental Europe
 
1.3

 
1.3

Australia
 
4.8

 
5.0

Canada
 
0.3

 
0.3

Asia
 
6.7

 
6.5

Other
 
0.3

 
0.2

Total International
 
17.1

 
17.1

 
 
 
 
 
Consolidated property, equipment, and capitalized software, net
 
$
142.7

 
$
143.5


Operating lease assets by geographical area
 
 
 
 
 
 
 
 
 
(in millions)
 
As of March 31, 2019
 
As of December 31, 2018
United States
 
$
68.7

 
$

 
 
 
 
 
United Kingdom
 
7.0

 

Continental Europe
 
5.5

 

Australia
 
6.1

 

Canada
 
2.7

 

Asia
 
28.7

 

Other
 
0.1

 

Total International
 
50.1

 

 
 
 
 
 
Consolidated operating lease assets
 
$
118.8

 
$



The long-lived asset by geographical area does not include deferred commissions, non-current as the balance is not significant.
v3.19.1
Investments and Fair Value Measurements
3 Months Ended
Mar. 31, 2019
Fair Value Disclosures [Abstract]  
Investments and Fair Value Measurements
Fair Value Measurements

As of March 31, 2019 and December 31, 2018, our investment balances totaled $29.5 million and $26.6 million , respectively. We classify our investments into three categories: available-for-sale, held-to-maturity, and trading securities. Our investment portfolio consists of stocks, bonds, options, mutual funds, money market funds, or exchange-traded products that replicate the model portfolios and strategies created by Morningstar. These investment accounts may also include exchange-traded products where Morningstar is an index provider. All investments in our investment portfolio have valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access, and, therefore, are classified as Level 1 within the fair value hierarchy.
v3.19.1
Leases
3 Months Ended
Mar. 31, 2019
Leases [Abstract]  
Leases
Leases

We lease office space and certain equipment under various operating and finance leases, with the majority of our lease portfolio consisting of operating leases for office space.

We determine whether an arrangement is or includes an embedded lease at contract inception. Operating lease assets and lease liabilities are recognized at commencement date and initially measured based on the present value of lease payments over the defined lease term. Lease expense is recognized on a straight-line basis over the lease term. For finance leases, we also recognize a finance lease asset and finance lease liability at inception, with lease expense recognized as interest expense and amortization.

A contract is or contains an embedded lease if the contract meets all of the below criteria:

There is an identified asset.
We obtain substantially all of the economic benefits of the asset.
We have the right to direct the use of the asset.

For initial measurement of the present value of lease payments and for subsequent measurement of lease modifications, we are required to use the rate implicit in the lease. However, as most of our leases do not provide an implicit rate; therefore, we use our incremental borrowing rate, which is a collateralized rate. To apply the incremental borrowing rate, we used a portfolio approach and grouped leases based on similar lease terms in a manner whereby the company reasonably expects that the application does not differ materially from a lease-by-lease approach.

Our leases have remaining lease terms of approximately 1 year to 10 years, which may include the option to extend the lease when it is reasonably certain the company will exercise that option. We do not have lease agreements with residual value guarantees, sale leaseback terms, or material restrictive covenants.

Leases with an initial term of 12 months or less are not recognized on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term.

The following table summarizes our operating assets and lease liabilities:
Leases (in millions)
 
Balance Sheet Classification
 
As of March 31, 2019

Assets
 
 
 
 
Operating
 
Operating lease assets
 
$
118.8

 
 
 
 
 
Liabilities
 
 
 
 
Current
 
 
 
 
Operating
 
Operating lease liabilities
 
$
29.1

Non-current
 
 
 
 
Operating
 
Operating lease liabilities, non-current
 
116.7

Total lease liabilities
 
 
 
$
145.8



Our operating lease expense for the three months ended March 31, 2019 was $7.9 million. Charges related to our operating leases that are variable and therefore not included in the measurement of the lease liabilities were $2.6 million for the three months ended March 31, 2019. We made lease payments of $6.2 million during the three months ended March 31, 2019.

The following table shows our minimum future lease commitments due in each of the next five years and thereafter for operating leases:

Minimum Future Lease Commitments (in millions)
 
Operating Leases
Remainder of 2019 (April 1 through December 31)
 
$
25.3

2020
 
35.1

2021
 
31.2

2022
 
19.0

2023
 
15.1

Thereafter
 
39.4

Total lease payments
 
165.1

Adjustment for discount to present value
 
19.3

Total
 
$
145.8



As of March 31, 2019, we had $26.2 million of operating leases included in the table above, primarily for office space, that have not yet commenced. These leases will commence between fiscal year 2019 and fiscal year 2020 with lease terms of 3 to 10 years.

The following table summarizes the weighted-average lease terms and weighted-average discount rates for our operating leases:

 
 
As of March 31, 2019

Weighted-average remaining lease term (in years)
 
5.84

 
 
 
Weighted-average discount rate
 
3.96
%
v3.19.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation
Stock-Based Compensation
 
Stock-Based Compensation Plans
 
All of our employees and our non-employee directors are eligible for awards under the Morningstar 2011 Stock Incentive Plan, which provides for a variety of stock-based awards, including stock options, restricted stock units, performance share awards, market stock units, and restricted stock.

The following table summarizes the stock-based compensation expense included in each of our operating expense categories:
 
 
Three months ended March 31,
 
(in millions)
 
2019
 
2018
 
Cost of revenue
 
$
3.1

 
$
2.7

 
Sales and marketing
 
1.4

 
0.8

 
General and administrative
 
5.5

 
3.1

 
Total stock-based compensation expense
 
$
10.0

 
$
6.6

 


As of March 31, 2019, the total unrecognized stock-based compensation cost related to outstanding restricted stock units, performance share awards, and market stock units expected to vest was $52.0 million, which we expect to recognize over a weighted average period of 24 months.
v3.19.1
Income Taxes
3 Months Ended
Mar. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes

Effective Tax Rate

The following table shows our effective tax rate for the three months ended March 31, 2019 and March 31, 2018:
 
 
 
Three months ended March 31,
(in millions)
 
2019
 
2018
Income before income taxes and equity in net loss of unconsolidated entities
 
$
46.2

 
$
56.8

Equity in net loss of unconsolidated entities
 
(1.5
)
 
(1.5
)
Total
 
$
44.7

 
$
55.3

Income tax expense
 
$
11.5

 
$
13.4

Effective tax rate
 
25.7
%
 
24.2
%

 
Our effective tax rate in the first quarter of 2019 was 25.7%, an increase of 1.5 percentage points compared with the same period in the prior year. The increase was primarily attributable to higher tax rates in foreign jurisdictions.

Unrecognized Tax Benefits

The table below provides information concerning our gross unrecognized tax benefits as of March 31, 2019 and December 31, 2018, as well as the effect these gross unrecognized tax benefits would have on our income tax expense, if they were recognized.
(in millions)
 
As of March 31, 2019
 
As of December 31, 2018
Gross unrecognized tax benefits
 
$
13.5

 
$
13.1

Gross unrecognized tax benefits that would affect income tax expense
 
$
13.5

 
$
13.1

Decrease in income tax expense upon recognition of gross unrecognized tax benefits
 
$
13.0

 
$
12.6



Our Unaudited Condensed Consolidated Balance Sheets include the following liabilities for unrecognized tax benefits. These amounts include interest and penalties, less any associated tax benefits.

Liabilities for Unrecognized Tax Benefits (in millions)
 
As of March 31, 2019
 
As of December 31, 2018
Current liability
 
$
6.7

 
$
6.6

Non-current liability
 
7.5

 
7.1

Total liability for unrecognized tax benefits
 
$
14.2

 
$
13.7



Because we conduct business globally, we file income tax returns in U.S. federal, state, local, and foreign jurisdictions. We are currently under audit by various state and local tax authorities in the United States, as well as tax authorities in certain non-U.S. jurisdictions. It is possible that the examination phase of some of our current audits will conclude in 2019. It is not possible to estimate the effect of current audits on previously recorded unrecognized tax benefits.

Approximately 57% of our cash, cash equivalents, and investments balance as of March 31, 2019 was held by our operations outside of the United States. In February 2019, we repatriated approximately $45.8 million of our foreign earnings back to the U.S. Otherwise, we generally consider our U.S. directly-owned foreign subsidiary earnings to be permanently reinvested. We believe that our cash balances and investments in the United States, along with cash generated from our U.S. operations, will be sufficient to meet our U.S. operating and cash needs for the foreseeable future, without requiring us to repatriate earnings from these foreign subsidiaries.

Certain of our non-U.S. operations have incurred net operating losses (NOLs), which may become deductible to the extent these operations become profitable. For each of our operations, we evaluate whether it is more likely than not that the tax benefits related to NOLs will be realized. As part of this evaluation, we consider evidence such as tax planning strategies, historical operating results, forecasted taxable income, and recent financial performance. In the year that certain non-U.S. operations record a loss, we do not recognize a corresponding tax benefit, thus increasing our effective tax rate. Upon determining that it is more likely than not that the NOLs will be realized, we reduce the tax valuation allowances related to these NOLs, which results in a reduction to our income tax expense and our effective tax rate in the period.


v3.19.1
Contingencies
3 Months Ended
Mar. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Contingencies
Contingencies

Data Audits and Reviews
In our global data business, we include in our products or directly redistribute to our customers data and information licensed from third-party vendors. Our compliance with the terms of these licenses is subject to audit by the third-party vendors, and we also regularly review our compliance with the terms of the licenses. We are undergoing several such third-party vendor audits and internal reviews, and the results and findings may indicate that we may be required to make a payment for prior data usage. Due to a variety of factors, including lack of available information and data, the unique nature of each audit and internal review, as well as potential variations of the audit or internal review findings, we are not able to reasonably estimate a possible loss, or range of losses, for some matters. While we cannot predict the outcomes, we do not believe the results of any audits will have a material adverse effect on our business, operating results, or financial position.
 
We record accrued liabilities for litigation, regulatory, and other business matters when those matters represent loss contingencies that are both probable and estimable. In these cases, there may be an exposure to loss in excess of any amounts accrued. When a loss contingency is not both probable and estimable, we do not establish an accrued liability. As a litigation, regulatory, or other business matter develops, we evaluate on an ongoing basis whether such matter presents a loss contingency that is probable and estimable.

Other Matters
We are involved from time to time in legal proceedings and litigation that arise in the normal course of our business. While it is difficult to predict the outcome of any particular proceeding, we do not believe the result of any of these matters will have a material adverse effect on our business, operating results, or financial position.
v3.19.1
Share Repurchase Program
3 Months Ended
Mar. 31, 2019
Equity [Abstract]  
Share Repurchase Program
Share Repurchase Program
 
In December 2017, the board of directors approved a share repurchase program that authorizes the company to repurchase up to $500.0 million in shares of the company's outstanding common stock effective January 1, 2018. The authorization expires on December 31, 2020. We may repurchase shares from time to time at prevailing market prices on the open market or in private transactions in amounts that we deem appropriate.

As of March 31, 2019, we had repurchased a total of 244,180 shares for $25.6 million under this authorization, leaving approximately $474.4 million available for future repurchases.
v3.19.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
Recent Accounting Pronouncements Policy
Recently adopted accounting pronouncements

Leases: On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. Expenses are recognized in the consolidated statement of income in a manner similar to previous accounting guidance. Topic 842 originally required the use of a modified retrospective approach upon adoption. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842) - Targeted Improvements, which allows an additional transition method to adopt the new lease standard at the adoption date instead of the beginning of the earliest period presented. We elected this transition method at the adoption date of January 1, 2019.

We also chose to elect the following practical expedients upon adoption: not to reassess whether any expired or existing contracts are or contain leases, not to reassess the lease classification for any expired or existing leases, not to reassess initial direct costs for any existing leases, and not to separately identify lease and nonlease components (i.e. maintenance costs) except for real estate leases. Additionally, we elected the short-term lease exemption, and are only applying the requirements of Topic 842 to long-term leases (leases greater than 1 year).

The adoption of Topic 842 resulted in the presentation of $118.8 million of operating lease assets and $145.8 million of operating lease liabilities on the consolidated balance sheet as of March 31, 2019. At implementation, we also reclassified $27.9 million in deferred rent liabilities related to these leases reducing the recognized operating lease assets. The new standard did not have a material impact on the statement of income. See Note 9 for additional information.

Income Statement-Reporting Comprehensive Income: On February 14, 2018, the FASB issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, to address a specific consequence of the Tax Cuts and Jobs Act of 2017 (the Tax Reform Act) by allowing a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Reform Act’s reduction of the U.S. federal corporate income tax rate. The new standard became effective for us on January 1, 2019 and is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Reform Act is recognized. We did not elect to reclassify any stranded tax effects from accumulated other comprehensive income (loss) to retained earnings. The adoption did not have an impact on our consolidated financial statements and related disclosures.

Compensation—Stock Compensation: On June 20, 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for share-based payment awards issued to employees and nonemployees. Under the new standard, the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term can be used in lieu of an expected term in the option-pricing model for nonemployee awards. The new standard became effective for us on January 1, 2019 and will be applied to all new awards granted after the date of adoption. The adoption did not have an impact on our consolidated financial statements and related disclosures.

Codification Improvements to Investments - Debt and Equity Securities: On July 17, 2018, the FASB issued ASU No. 2018-09, Codification Improvements, which modifies the disclosure requirements on debt and equity securities related to ASC 320, Investments - Debt and Equity Securities. ASU No. 2018-09 removes the requirement for these disclosures when an entity provides summarized interim financial information. The new standard became effective for us on January 1, 2019. The adoption did not have an impact on our consolidated financial statements.

Recently issued accounting pronouncements not yet adopted

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement: On August 28, 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for fair value measurements. The new standard is effective for us on January 1, 2020. We are currently evaluating the impact of adopting ASU No. 2018-13 on our consolidated financial statements and related disclosures.

Cloud Computing: On August 29, 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, which helps entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (CCA) by providing guidance for determining when an arrangement includes a software license and when an arrangement is solely a hosted CCA service. Under ASU No. 2018-15, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. The new guidance also prescribes the balance sheet, income statement, and cash flow classification of the capitalized implementation costs and related amortization expense and requires additional quantitative and qualitative disclosures. The new standard is effective for us on January 1, 2020. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued. Entities can choose to adopt the new guidance prospectively to eligible costs incurred on or after the date this guidance is first applied or retrospectively. We are evaluating the effect that ASU No. 2018-15 will have on our consolidated financial statements and related disclosures.

Segment Reporting Policy
We report our results in a single reportable segment, which reflects how our chief operating decision maker allocates resources and evaluates our financial results. Because we have a single reportable segment, all required financial segment information can be found directly in the Consolidated Financial Statements. The accounting policies for our reportable segment are the same as those described in “Note 2. Summary of Significant Accounting Policies” included in the Audited Consolidated Financial Statements and Notes thereto included in our Annual Report. We evaluate the performance of our reporting segment based on revenue and operating income.

Investments- Debt and Equity Securities Policy
We classify our investments into three categories: available-for-sale, held-to-maturity, and trading securities. Our investment portfolio consists of stocks, bonds, options, mutual funds, money market funds, or exchange-traded products that replicate the model portfolios and strategies created by Morningstar. These investment accounts may also include exchange-traded products where Morningstar is an index provider.
v3.19.1
Goodwill and Other Intangible Assets (Tables)
3 Months Ended
Mar. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Goodwill
The following table shows the changes in our goodwill balances from December 31, 2018 to March 31, 2019:
 
 
 
(in millions)
Balance as of December 31, 2018
 
$
556.7

Foreign currency translation
 
0.6

Balance as of March 31, 2019
 
$
557.3

Schedule of Intangible Assets
The following table summarizes our intangible assets: 

 
 
As of March 31, 2019
 
As of December 31, 2018
(in millions)
 
Gross
 
Accumulated
Amortization
 
Net
 
Weighted
Average
Useful  Life
(years)
 
Gross
 
Accumulated
Amortization
 
Net
 
Weighted
Average
Useful  Life
(years)
Intellectual property
 
$
30.9

 
$
(29.5
)
 
$
1.4

 
9
 
$
30.8

 
$
(29.2
)
 
$
1.6

 
9
Customer-related assets
 
153.5

 
(113.9
)
 
39.6

 
12
 
153.0

 
(111.7
)
 
41.3

 
12
Supplier relationships
 
0.2

 
(0.1
)
 
0.1

 
20
 
0.2

 
(0.1
)
 
0.1

 
20
Technology-based assets
 
127.1

 
(99.7
)
 
27.4

 
7
 
126.9

 
(96.3
)
 
30.6

 
7
Non-competition agreements
 
2.4

 
(2.1
)
 
0.3

 
5
 
2.4

 
(2.1
)
 
0.3

 
5
Total intangible assets
 
$
314.1

 
$
(245.3
)
 
$
68.8

 
10
 
$
313.3

 
$
(239.4
)
 
$
73.9

 
10
Schedule of Intangible Asset, Amortization Expense
The following table summarizes our amortization expense related to intangible assets:
 
 
Three months ended March 31,
(in millions)
 
2019
 
2018
Amortization expense
 
$
4.9

 
$
5.3

Schedule of Expected Amortization Expense
We expect intangible amortization expense for the remainder of 2019 and subsequent years as follows:
 
 
(in millions)
Remainder of 2019 (from April 1 through December 31)
 
$
14.3

2020
 
16.2

2021
 
12.8

2022
 
5.0

2023
 
4.9

Thereafter
 
15.6


 
Our estimates of future amortization expense for intangible assets may be affected by acquisitions, divestitures, changes in the estimated average useful lives, and foreign currency translation.
v3.19.1
Income Per Share (Tables)
3 Months Ended
Mar. 31, 2019
Earnings Per Share [Abstract]  
Schedule of Earnings Per Share, Basic and Diluted
The following table shows how we reconcile our net income and the number of shares used in computing basic and diluted net income per share:

 
 
Three months ended March 31,
(in millions, except share and per share amounts)
 
2019
 
2018
Basic net income per share:
 
 

 
 

Consolidated net income
 
$
33.2

 
$
41.9

 
 
 
 
 
Weighted average common shares outstanding
 
42.6

 
42.5

 
 
 
 
 
Basic net income per share
 
$
0.78

 
$
0.99

 
 
 
 
 
Diluted net income per share:
 
 
 
 
Consolidated net income
 
$
33.2

 
$
41.9

 
 
 
 
 
Weighted average common shares outstanding
 
42.6

 
42.5

Net effect of dilutive stock options, restricted stock units, performance share awards, and market stock units
 
0.4

 
0.4

Weighted average common shares outstanding for computing diluted income per share
 
43.0

 
42.9

 
 
 
 
 
Diluted net income per share
 
$
0.77

 
$
0.98

v3.19.1
Revenue (Tables)
3 Months Ended
Mar. 31, 2019
Revenue from Contract with Customer [Abstract]  
Disaggregation of Revenue
The following table presents our revenue disaggregated by revenue type. Sales and usage-based taxes are excluded from revenue.
 
 
Three months ended March 31,
(in millions)
 
2019
 
2018
License-based
 
$
195.5

 
$
178.6

Asset-based
 
48.8

 
50.7

Transaction-based
 
14.6

 
14.2

Consolidated revenue
 
$
258.9

 
$
243.5

Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction
We expect to recognize revenue related to our contract liabilities for the remainder of 2019 and subsequent years as follows:
(in millions)
 
As of March 31, 2019
Remainder of 2019 (from April 1 through December 31)
 
$
357.4

2020
 
122.6

2021
 
39.1

2022
 
11.9

2023
 
5.8

Thereafter
 
46.7

 
 
$
583.5

Summary of Contract Assets and Change in Deferred Commissions
The following table summarizes our contract assets balance:

(in millions)
 
As of March 31, 2019
 
As of December 31, 2018
Accounts receivable, less allowance
 
$
173.8

 
$
172.2

Deferred commissions
 
16.1

 
14.8

Deferred commissions, non-current
 
9.8

 
10.3

Total contract assets
 
$
199.7

 
$
197.3


The following table shows the change in our deferred commissions balance from December 31, 2018 to March 31, 2019:

 
 
(in millions)
Balance as of December 31, 2018
 
$
25.1

Commissions earned and capitalized
 
5.6

Amortization of capitalized amounts
 
(4.8
)
Balance as of March 31, 2019
 
$
25.9

v3.19.1
Segment and Geographical Area Information (Tables)
3 Months Ended
Mar. 31, 2019
Segment Reporting [Abstract]  
Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block]
The tables below summarize our revenue and long-lived assets, which includes property, equipment, and capitalized software, net and operating lease assets, by geographical area:

Revenue by geographical area
 
 
 
 
 
 
Three months ended March 31,
(in millions)
 
2019
 
2018
United States
 
$
195.1

 
$
179.5

 
 
 
 
 
United Kingdom
 
18.1

 
18.3

Continental Europe
 
20.4

 
19.9

Australia
 
9.5

 
10.5

Canada
 
7.9

 
7.7

Asia
 
6.3

 
6.1

Other
 
1.6

 
1.5

Total International
 
63.8

 
64.0

 
 
 
 
 
Consolidated revenue
 
$
258.9

 
$
243.5



Property, equipment, and capitalized software, net by geographical area
 
 
 
 
 
 
 
 
 
(in millions)
 
As of March 31, 2019
 
As of December 31, 2018
United States
 
$
125.6

 
$
126.4

 
 
 
 
 
United Kingdom
 
3.7

 
3.8

Continental Europe
 
1.3

 
1.3

Australia
 
4.8

 
5.0

Canada
 
0.3

 
0.3

Asia
 
6.7

 
6.5

Other
 
0.3

 
0.2

Total International
 
17.1

 
17.1

 
 
 
 
 
Consolidated property, equipment, and capitalized software, net
 
$
142.7

 
$
143.5


Operating lease assets by geographical area
 
 
 
 
 
 
 
 
 
(in millions)
 
As of March 31, 2019
 
As of December 31, 2018
United States
 
$
68.7

 
$

 
 
 
 
 
United Kingdom
 
7.0

 

Continental Europe
 
5.5

 

Australia
 
6.1

 

Canada
 
2.7

 

Asia
 
28.7

 

Other
 
0.1

 

Total International
 
50.1

 

 
 
 
 
 
Consolidated operating lease assets
 
$
118.8

 
$



The long-lived asset by geographical area does not include deferred commissions, non-current as the balance is not significant.