Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions |
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Mar. 31, 2023 |
Mar. 31, 2022 |
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Statement of Comprehensive Income [Abstract] | ||
Consolidated net income (loss) | $ (7.6) | $ 46.1 |
Other comprehensive income (loss), net of tax: | ||
Foreign currency translation adjustment, net | 7.1 | (5.0) |
Unrealized gains (losses) on securities: | ||
Unrealized holding gains (losses) arising during period | 0.1 | (4.8) |
Reclassification of gains on investments included in net income | (0.2) | (0.7) |
Other comprehensive income (loss), net | 7.0 | (10.5) |
Comprehensive income (loss) | $ (0.6) | $ 35.6 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
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Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 6.2 | $ 6.6 |
Accumulated depreciation and amortization | $ 590.4 | $ 529.2 |
Common Stock, No Par Value (in dollars per share) | $ 0 | $ 0 |
Common Stock, Shares Authorized (in shares) | 200,000,000 | 200,000,000 |
Common Stock, Shares, Outstanding (in shares) | 42,550,943 | 42,480,051 |
Treasury Stock, Common, Shares | 11,991,484 | 11,991,517 |
Condensed Consolidated Statement of Equity (Parenthetical) - $ / shares |
3 Months Ended | |
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Mar. 31, 2023 |
Mar. 31, 2022 |
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Statement of Stockholders' Equity [Abstract] | ||
Dividends declared (in dollars per share) | $ 0.38 | $ 0.36 |
Basis of Presentation of Interim Financial Information |
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Mar. 31, 2023 | |
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, revenues, 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, 2022, filed with the SEC on February 24, 2023 (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
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Summary of Significant Accounting Policies |
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Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Our significant accounting policies are included in Note 2 of the Notes to our Audited Consolidated Financial Statements included in our Annual Report. Severance: We account for post-employment benefits in accordance with FASB ASC 712, Compensation - Non-retirement Post-employment Benefits (FASB ASC 712). Under FASB ASC 712, we recognize compensation expense associated with these benefits as a liability when probable and estimable. In July 2022, the Company began to significantly reduce its operations in Shenzhen, China and to shift the work related to its global business functions, including global product and software development, managed investment data collection and analysis, and equity data collection and analysis, to other Morningstar locations. As a result of these activities, the Company incurred $25.9 million of severance expense in 2022, which represented substantially all of the severance costs expected to be incurred with the remainder to be recognized through the third quarter of 2023. We recorded an immaterial amount of additional severance expense during the first quarter of 2023. These amounts were recorded within "General and administrative" on our Consolidated Statements of Income. We have $16.2 million of accrued severance remaining as of March 31, 2023, which we expect will be paid through the third quarter of 2023. The liability is recorded within "Accrued compensation - current" on our Consolidated Balance Sheet.
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Credit Arrangements |
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Credit Arrangements | Credit Arrangements Debt The following table summarizes our debt as of March 31, 2023 and December 31, 2022:
Credit Agreement On July 2, 2019, the Company entered into a senior credit agreement (the 2019 Credit Agreement). The 2019 Credit Agreement provided the Company with a five-year multi-currency credit facility with an initial borrowing capacity of up to $750.0 million, including a $300.0 million revolving credit facility (the 2019 Revolving Credit Facility) and a term loan facility of $450.0 million. The 2019 Credit Agreement also provided for the issuance of up to $50.0 million of letters of credit and a $100.0 million sub-limit for a swingline facility under the 2019 Revolving Credit Facility. On May 6, 2022, the Company terminated the 2019 Credit Agreement. On May 6, 2022, the Company entered into a new senior credit agreement (the 2022 Credit Agreement). The 2022 Credit Agreement provided the Company with a five-year multi-currency credit facility with an initial borrowing capacity of up to $1.1 billion, including a $650.0 million term loan (the 2022 Term Facility) with an initial draw of $600.0 million and an option for a second draw of up to $50.0 million and a $450.0 million revolving credit facility (the 2022 Revolving Credit Facility). The 2022 Credit Agreement also provides for the issuance of up to $50.0 million of letters of credit and a $100.0 million sub-limit for a swingline. The proceeds of the first draw under the 2022 Term Facility and initial borrowings under the 2022 Revolving Credit Facility were used to finance the acquisition of Leveraged Commentary & Data (LCD) and to repay a portion of the borrowings under the 2019 Revolving Credit Facility. The optional second draw on the 2022 Term Facility was available to fund the contingent consideration payment of up to $50.0 million payable in connection with the LCD acquisition. The 2022 Credit Agreement was amended (the Amended 2022 Credit Agreement) on September 13, 2022 (the First Amendment to the 2022 Credit Agreement) and on September 30, 2022 (the Second Amendment to the 2022 Credit Agreement). The First Amendment to the 2022 Credit Agreement terminated the unfunded term commitment related to the optional second draw of up to $50.0 million in the 2022 Term Facility and increased the 2022 Revolving Credit Facility to $600.0 million. The Second Amendment to the 2022 Credit Agreement increased the 2022 Term Facility to a fully funded $650.0 million facility (the Amended 2022 Term Facility) and increased the 2022 Revolving Credit Facility to $650.0 million (the Amended 2022 Revolving Credit Facility) for total borrowing capacity of $1.3 billion. As of March 31, 2023, our total outstanding debt under the Amended 2022 Credit Agreement was $783.0 million, net of debt issuance costs, with borrowing availability of $500.0 million under the Amended 2022 Revolving Credit Facility. Except for incremental borrowing capacity, there were no material changes to the existing terms and conditions of the 2022 Credit Agreement. The proceeds of the additional draw under the Amended 2022 Term Facility were used to repay borrowings under the 2022 Revolving Credit Facility. The proceeds of future borrowings under the Amended 2022 Revolving Credit Facility may be used for working capital, capital expenditures, or any other general corporate purpose. The interest rate applicable to any loan under the Amended 2022 Credit Agreement is, at the Company's option, either: (i) the applicable Secured Overnight Financing Rate (SOFR) plus an applicable margin for such loans, which ranges between 1.00% and 1.48%, based on the Company's consolidated leverage ratio or (ii) the lender's base rate plus the applicable margin for such loans, which ranges between 0.00% and 0.38%, based on the Company's consolidated leverage ratio. The portions of deferred debt issuance costs related to the Amended 2022 Revolving Credit Facility are included in other current and non-current assets, and the portion of deferred debt issuance costs related to the Amended 2022 Term Facility is reported as a reduction to the carrying amount of the Amended 2022 Term Facility. Debt issuance costs related to the Amended 2022 Revolving Credit Facility are amortized on a straight-line basis to interest expense over the term of the Amended 2022 Credit Agreement. Debt issuance costs related to the Amended 2022 Term Facility are amortized to interest expense using the effective interest method over the term of the Amended 2022 Credit Agreement. Private Placement Debt Offering On October 26, 2020, we completed the issuance and sale of $350.0 million aggregate principal amount of 2.32% senior notes due October 26, 2030 (the 2030 Notes), in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended. Proceeds were primarily used to pay off a portion of the Company's outstanding debt under the 2019 Credit Agreement. Interest on the 2030 Notes is payable semi-annually on each October 30 and April 30 during the term of the 2030 Notes and at maturity. As of March 31, 2023, our total outstanding debt, net of issuance costs, under the 2030 Notes was $348.5 million. Compliance with Covenants Each of the Amended 2022 Credit Agreement and the 2030 Notes include customary representations, warranties, and covenants, including financial covenants, that require us to maintain specified ratios of consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) to consolidated interest charges and consolidated funded indebtedness to consolidated EBITDA, which are evaluated on a quarterly basis. We were in compliance with these financial covenants as of March 31, 2023.
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Acquisitions, Goodwill and Other Intangible Assets |
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Acquisitions, Goodwill and Other Intangible Assets | Acquisitions, Goodwill, and Other Intangible Assets 2023 Acquisitions We did not make any acquisitions during the first quarter of 2023. Goodwill The following table shows the changes in our goodwill balance from December 31, 2022 to March 31, 2023:
We did not record any goodwill impairment losses in the first three months of 2023 or 2022. We perform our annual impairment reviews in the fourth quarter or when impairment indicators and triggering events are identified. Intangible Assets The following table summarizes our intangible assets:
The following table summarizes our amortization expense related to intangible assets:
We amortize intangible assets using the straight-line method over their expected economic useful lives. As of March 31, 2023, we expect intangible amortization expense for the remainder of 2023 and subsequent years to be as follows:
Our estimates of future amortization expense for intangible assets may be affected by future acquisitions, divestitures, changes in the estimated useful lives, impairments, and foreign currency translation.
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Income Per Share |
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Income Per Share | Income (Loss) Per Share The following table shows how we reconcile our net income (loss) and the number of shares used in computing basic and diluted net income (loss) per share:
During the periods presented, the number of anti-dilutive restricted stock units, performance share awards, or market stock units excluded from our calculation of diluted earnings per share was immaterial.
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Revenue |
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Revenue | Revenue Disaggregation of Revenue The following table presents our revenue disaggregated by revenue type. Sales and usage-based taxes are excluded from revenue.
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 1 to 3 years and are accounted for as subscription services available to customers and not as a license under the accounting guidance. License-based revenue is generated from the sale of PitchBook, Morningstar Data, Morningstar Direct, Morningstar Sustainalytics' license-based products, Morningstar Indexes data and services products, DBRS Morningstar's data products, Morningstar Advisor Workstation, and other similar product licenses. Asset-based performance obligations are satisfied over time as the customer receives continuous access to a service for the term of the agreement. Asset-based arrangements typically have a term of 1 to 3 years. 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 and significant disruptions in the market are evaluated to determine whether estimates of earned asset-based fees need to be revised for the current quarter. The timing of client asset reporting and the structure of certain contracts can result in a one-quarter lag between market movements and the impact on earned revenue. 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 is generated by 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 is generated by DBRS Morningstar, Morningstar Sustainalytics' Second Party Opinions, Internet advertising, and Morningstar-sponsored conferences. DBRS Morningstar revenue includes revenue from surveillance services, which is 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 may be refundable. The contract liabilities balance as of March 31, 2023 had a net increase of $44.6 million, primarily driven by cash payments received or payable in advance of satisfying our performance obligations. We recognized $209.9 million of revenue in the three months ended March 31, 2023 that was included in the contract liabilities balance as of December 31, 2022. We expect to recognize revenue related to our contract liabilities, including future billings, for the remainder of 2023 and subsequent years as follows:
The aggregate amount of revenue we expect to recognize for the remainder of 2023 and subsequent years is higher than our contract liability balance of $533.7 million as of March 31, 2023. The difference represents the value of future obligations for signed contracts that have yet to be billed. The table above does not include variable consideration for unsatisfied performance obligations related to certain of our license-based, asset-based, and transaction-based contracts as of March 31, 2023. We are applying the optional exemption available under ASC Topic 606, 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 1 to 3 years as services are provided to the client. For license-based contracts, the consideration received for services performed is based on the number of future users, which is not known until the services are performed. The variable consideration for this revenue can be affected by the number of user licenses, which cannot be reasonably estimated. For asset-based contracts, the consideration received for services performed is based on future asset values, which are not known until 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 movements in the market. For transaction-based contracts for Internet advertising, the consideration received for services performed is based on the number of impressions, which is not known until the impressions are created. The variable consideration for this revenue can be affected by the timing and quantity of impressions in any given period and cannot be reasonably estimated. As of March 31, 2023, the table above also does not include revenue for unsatisfied performance obligations related to certain of our license-based and transaction-based contracts with durations of one year or less since we are applying the optional exemption under ASC Topic 606. For certain license-based contracts, the remaining performance obligation is expected to be less than one year based on the corresponding subscription terms or the existence of cancellation terms that may be exercised causing the contract term to be less than one year from March 31, 2023. For transaction-based contracts, such as new credit rating issuances and Morningstar-sponsored conferences, the related performance obligations are expected to be satisfied within the next 12 months. Contract Assets Our contract assets represent accounts receivable, less allowance for credit losses, and deferred commissions. The following table summarizes our contract assets balance:
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Segment and Geographical Area Information |
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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 of the Audited Consolidated Financial Statements 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:
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Fair Value Measurement of Investments |
3 Months Ended |
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Mar. 31, 2023 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements Investments As of March 31, 2023 and December 31, 2022, our investment balances totaled $33.2 million and $38.0 million, respectively. We classify our investments into two categories: equity investments and debt securities. We further classify our debt securities into 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. As of March 31, 2023, 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. Contingent Consideration As of December 31, 2022, financial liabilities that were classified as Level 3 within the fair value hierarchy included a contingent consideration liability of $50.0 million, which represented the acquisition date fair value of $45.5 million plus changes due to remeasurement of this liability in subsequent reporting periods. The contingent consideration reflected potential future payments that were contingent upon the achievement of certain conditions related to the separation of LCD's contractual relationships from S&P Global (S&P) contracts that included other S&P products and services. This additional purchase consideration, for which the amount was contingent, was recognized at fair value at the date of acquisition, which was calculated as the weighted average of the estimated contingent payment scenarios. The contingent consideration was remeasured each reporting period until the contingency was resolved with any changes in fair value recorded in current period earnings. In the first quarter of 2023, we made a cash payment of $50.0 million, resolving our contingent consideration liability related to our acquisition of LCD.
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Investments in Unconsolidated Entities |
3 Months Ended |
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Mar. 31, 2023 | |
Investments in Unconsolidated Entities [Abstract] | |
Equity Method Investments and Joint Ventures Disclosure | Investments in Unconsolidated Entities As of March 31, 2023 and December 31, 2022, our investment in unconsolidated entities balance totaled $117.7 million and $96.0 million, respectively. We have investments in both equity method investments and equity investments with and without a readily determinable fair value. On January 27, 2023, we entered into a Termination Agreement (the Termination Agreement) with Morningstar Japan K.K. (now known as SBI Global Asset Management Co., Ltd. (Wealth Advisors)), and a Tender Offer Agreement (the Tender Offer Agreement) with SBI Global Asset Management Co., Ltd. (now known as SBI Asset Management Group Co., Ltd. (SBI)). Pursuant to the Termination Agreement, Wealth Advisors agreed to cease use of the Morningstar brand and Morningstar and Wealth Advisors agreed to terminate the License Agreement originally entered into in 1998. As consideration for the transaction, Morningstar agreed to pay Wealth Advisors 8 billion Japanese yen ($61.4 million) upon the termination of the license agreement and the achievement of certain conditions related primarily to the termination of the use of the Morningstar brand by Wealth Advisors’ customers. The termination agreement liability is recorded within "Other current liabilities" on our Consolidated Balance Sheet as of March 31, 2023. The termination agreement expense is recorded within "Expense from equity method transaction, net" in our Consolidated Statements of Income for the three months ended March 31, 2023. See Note 15 for additional information on the Termination Agreement payments made in April 2023. As part of this transaction, pursuant to the Tender Offer Agreement, Morningstar agreed to tender up to 10 million shares in Wealth Advisors to SBI. The tender offer closed on February 28, 2023, and SBI purchased 8,040,600 shares of Wealth Advisors from Morningstar, resulting in net proceeds of $26.2 million and a pre-tax gain of $18.4 million. The pre-tax gain is recorded within "Expense from equity method transaction, net" in our Consolidated Statements of Income for the three months ended March 31, 2023. Subsequent to the tender offer, the Company's ownership percentage in Wealth Advisors decreased to 13.2% from 22.1%, and as a result, we no longer account for our investment in Wealth Advisors as an equity method investment. Each reporting period, we will measure our remaining investment in Wealth Advisors, an equity security with a readily determinable value, at fair value and recognize unrealized holding gains or losses in earnings. During the first quarter of 2023, we recognized an unrealized holding gain of $31.2 million, which is recorded within "Expense from equity method transaction, net" in our Consolidated Statements of Income for the three months ended March 31, 2023.
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Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases We lease office space and certain equipment under various operating and finance leases, with most 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 the commencement date and initially measured using 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 the economic benefits of the asset; and •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, if available. However, as most of our leases do not provide an implicit rate, 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 we reasonably expect that the application does not differ materially from a lease-by-lease approach. Our leases have remaining lease terms of approximately 1 year to 12 years, which may include the option to extend the lease when it is reasonably certain we 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. Our operating lease expense for the three months ended March 31, 2023 was $11.7 million, compared with $10.2 million for the three months ended March 31, 2022. Charges related to our operating leases that are variable and, therefore, not included in the measurement of the lease liabilities, were $4.1 million for the three months ended March 31, 2023, compared with $3.9 million for the three months ended March 31, 2022. We made lease payments of $11.3 million during the three months ended March 31, 2023, compared with $10.8 million during the three months ended March 31, 2022. The following table shows our minimum future lease commitments due in each of the next five years and thereafter for operating leases:
The following table summarizes the weighted-average remaining lease terms and weighted-average discount rates for our operating leases:
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Stock-Based Compensation |
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation Stock-Based Compensation Plans All our employees and our non-employee directors are eligible for awards under the Morningstar Amended and Restated 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:
As of March 31, 2023, the total unrecognized stock-based compensation cost related to outstanding restricted stock units, performance share awards, and market stock units expected to vest was $86.9 million, which we expect to recognize over a weighted average period of 25 months.
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Income Taxes |
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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, 2023 and March 31, 2022:
___________________________________________________________________________________________ NMF - not meaningful For the three months ended March 31, 2023, income tax expense was $8.4 million, a decline of $8.9 million compared with the prior-year period. Our effective tax rate was not meaningful due to the low level of pretax income in the current period. For the first quarter of 2023, income tax expense includes a valuation allowance against an excess capital loss generated from an equity method transaction and a change in deferred taxes with respect to stock-based compensation. See Note 9 for additional information on the equity method transaction. Unrecognized Tax Benefits The table below provides information concerning our gross unrecognized tax benefits as of March 31, 2023 and December 31, 2022, as well as the effect these gross unrecognized tax benefits would have on our income tax expense, if they were recognized.
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.
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 federal, state, and local tax authorities in the U.S. as well as tax authorities in certain non-U.S. jurisdictions. It is likely that the examination phase of some of these federal, state, local, and non-U.S. audits will conclude in 2023. It is not possible to estimate the effect of current audits on previously recorded unrecognized tax benefits. Approximately 68% of our cash, cash equivalents, and investments balance as of March 31, 2023 was held by our operations outside of the United States. 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, which increases 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 that period.
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Contingencies |
3 Months Ended |
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Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies 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. Unless a loss contingency is both probable and estimable, we do not establish an accrued liability. As litigation, regulatory, or other business matters develop, we evaluate on an ongoing basis whether such matters present a loss contingency that is probable and estimable. 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 reviewed internally and is also subject to audit by the third-party vendors. At any given time, we may be undergoing several such internal reviews and third-party vendor audits, and the results and findings may indicate that we may be required to make a payment for prior data usage. Due to a lack of available information and data, as well as potential variations of any audit or internal review findings, we generally are not able to reasonably estimate a possible loss, or range of losses, for these matters. In situations where more information or specific areas subject to audit are available, we may be able to estimate a potential range of losses. While we cannot predict the outcome of these processes, we do not anticipate they will have a material adverse effect on our business, operating results, or financial position. Ratings and Regulatory Matters Our ratings and related research activities, including credit ratings, ESG ratings, managed investment and equity ratings, are or may in the future become subject to regulation or increased scrutiny from executive, legislative, regulatory and private parties. Accordingly, those activities may be subject to governmental, regulatory, and legislative investigations, regulatory examinations in the ordinary course of business, subpoenas and other forms of legal process, and ultimately claims and litigation brought by governmental and private parties that are based on ratings assigned or research issued in connection with these activities or that are otherwise incidental to these activities. Our regulated businesses are generally subject to periodic reviews, inspections, examinations, and investigations by regulators in the jurisdictions in which they operate, any of which may result in claims, legal proceedings, assessments, fines, penalties, disgorgement, or restrictions on business activities. While it is difficult to predict the outcome of any particular investigation or 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. Other Matters We are involved from time to time in commercial disputes and legal proceedings that arise in the normal course of our business. While it is difficult to predict the outcome of any particular dispute or 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.
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Share Repurchase Program |
3 Months Ended |
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Mar. 31, 2023 | |
Equity [Abstract] | |
Treasury Stock | Share Repurchase Program On December 6, 2022, the board of directors approved a new 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, 2023. The new authorization replaced the then-existing share repurchase program and expires on December 31, 2025. Under this authorization, 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, 2023, we have not repurchased any shares under the new share repurchase program, leaving $500.0 million available for future repurchases under the program.
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Subsequent Events |
Mar. 30, 2023 |
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Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events Morningstar Japan K.K. (now known as SBI Global Asset Management Co., Ltd. (Wealth Advisors)) On April 6, 2023, we made the first cash payment of 6 billion Japanese yen ($45.1 million) and on April 19, 2023, we made the second and final cash payment of 2 billion Japanese yen ($14.8 million), pursuant to the Termination Agreement. See Note 9 for additional information on the Termination Agreement.
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Summary of Significant Accounting Policies (Policies) $ in Millions |
3 Months Ended |
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Mar. 31, 2023
USD ($)
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Accounting Policies [Abstract] | |
Recent Accounting Pronouncements Policy | Severance: We account for post-employment benefits in accordance with FASB ASC 712, Compensation - Non-retirement Post-employment Benefits (FASB ASC 712). Under FASB ASC 712, we recognize compensation expense associated with these benefits as a liability when probable and estimable. In July 2022, the Company began to significantly reduce its operations in Shenzhen, China and to shift the work related to its global business functions, including global product and software development, managed investment data collection and analysis, and equity data collection and analysis, to other Morningstar locations. As a result of these activities, the Company incurred $25.9 million of severance expense in 2022, which represented substantially all of the severance costs expected to be incurred with the remainder to be recognized through the third quarter of 2023. We recorded an immaterial amount of additional severance expense during the first quarter of 2023. These amounts were recorded within "General and administrative" on our Consolidated Statements of Income. We have $16.2 million of accrued severance remaining as of March 31, 2023, which we expect will be paid through the third quarter of 2023. The liability is recorded within "Accrued compensation - current" on our Consolidated Balance Sheet.
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Employee related liabilities, Current - Accrued Severance | $ 16.2 |
Fair Value Measurements (Policies) |
3 Months Ended |
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Mar. 31, 2023 | |
Fair Value Disclosures [Abstract] | |
Investments- Debt and Equity Securities Policy | We classify our investments into two categories: equity investments and debt securities. We further classify our debt securities into available-for-sale, held-to-maturity, and trading securities. |
Leases, Codification Topic 842 (Policies) |
3 Months Ended |
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Mar. 31, 2023 | |
Leases [Abstract] | |
Lessee, Leases | We lease office space and certain equipment under various operating and finance leases, with most 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 the commencement date and initially measured using 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 the economic benefits of the asset; and •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, if available. However, as most of our leases do not provide an implicit rate, 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 we reasonably expect that the application does not differ materially from a lease-by-lease approach.
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Credit Arrangements (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Total Debt and Long-term Debt | The following table summarizes our debt as of March 31, 2023 and December 31, 2022:
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Acquisitions, Goodwill and Other Intangible Assets (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | The following table shows the changes in our goodwill balance from December 31, 2022 to March 31, 2023:
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Schedule of Intangible Assets | The following table summarizes our intangible assets:
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Schedule of Intangible Asset, Amortization Expense | The following table summarizes our amortization expense related to intangible assets:
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Schedule of Expected Amortization Expense | March 31, 2023, we expect intangible amortization expense for the remainder of 2023 and subsequent years to be as follows:
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Income Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table shows how we reconcile our net income (loss) and the number of shares used in computing basic and diluted net income (loss) per share:
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Revenue (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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.
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Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | We expect to recognize revenue related to our contract liabilities, including future billings, for the remainder of 2023 and subsequent years as follows:
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Summary of Contract Assets and Change in Deferred Commissions | The following table summarizes our contract assets balance:
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Segment and Geographical Area Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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:
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Leases (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and Liabilities, Lessee | The following table summarizes the weighted-average remaining lease terms and weighted-average discount rates for our operating leases:
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Lessee, Operating Lease, Liability, Maturity | The following table shows our minimum future lease commitments due in each of the next five years and thereafter for operating leases:
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Stock-Based Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Compensation Cost By Expense Category | The following table summarizes the stock-based compensation expense included in each of our operating expense categories:
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Income Taxes (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Effective Income Tax Rate Reconciliation | The following table shows our effective tax rate for the three months ended March 31, 2023 and March 31, 2022:
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Schedule of Gross Unrecognized Tax Benefits | The table below provides information concerning our gross unrecognized tax benefits as of March 31, 2023 and December 31, 2022, as well as the effect these gross unrecognized tax benefits would have on our income tax expense, if they were recognized.
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Schedule of Liabilities for Unrecognized Tax Benefits | 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.
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Acquisitions, Goodwill and Other Intangible Assets - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Jun. 01, 2022 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
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Business Acquisition [Line Items] | ||||
Payment for Contingent Consideration Liability, Operating Activities | $ 50.0 | $ 50.0 | ||
Contingent consideration liability | 0.0 | $ 50.0 | ||
Goodwill, impairment loss | $ 0.0 | $ 0.0 | ||
LCD | ||||
Business Acquisition [Line Items] | ||||
Contingent consideration liability | $ 45.5 |
Acquisitions, Goodwill and Other Intangible Assets (Schedule of Goodwill) (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
| |
Business Acquisition [Line Items] | |
Goodwill | $ 1,577.2 |
Goodwill [Roll Forward] | |
Goodwill, Beginning Balance | 1,571.7 |
Foreign currency translation | 5.5 |
Goodwill, Ending Balance | $ 1,577.2 |
Acquisitions, Goodwill and Other Intangible Assets (Schedule of Intangible Assets) (Details) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
Mar. 31, 2022 |
---|---|---|---|
Finite-Lived Intangible Assets [Line Items] | |||
Gross | $ 1,002.5 | $ 1,000.0 | |
Accumulated Amortization | (469.9) | (451.4) | |
Total | $ 532.6 | 548.6 | |
Weighted-Average Useful Life (years) | 12 years | 12 years | |
Customer-related assets | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross | $ 596.4 | 595.1 | |
Accumulated Amortization | (231.7) | (221.3) | |
Total | $ 364.7 | 373.8 | |
Weighted-Average Useful Life (years) | 14 years | 14 years | |
Intellectual property & other | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross | $ 92.2 | 92.1 | |
Accumulated Amortization | (58.3) | (56.3) | |
Total | $ 33.9 | 35.8 | |
Weighted-Average Useful Life (years) | 8 years | 8 years | |
Technology-Based Intangible Assets | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross | $ 313.9 | 312.8 | |
Accumulated Amortization | (179.9) | (173.8) | |
Total | $ 134.0 | $ 139.0 | |
Weighted-Average Useful Life (years) | 8 years | 8 years |
Acquisitions, Goodwill and Other Intangible Assets (Amortization Expense) (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Amortization expense | $ 17.5 | $ 14.1 | |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | |||
Remainder of 2023 (April 1 through December 31) | 53.0 | ||
2024 | 64.6 | ||
2025 | 56.4 | ||
2026 | 52.6 | ||
2027 | 45.5 | ||
Thereafter | 260.5 | ||
Total | $ 532.6 | $ 548.6 |
Income Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Earnings Per Share, Basic [Abstract] | ||
Consolidated net income (loss) | $ (7.6) | $ 46.1 |
Weighted average common shares outstanding | 42.5 | 43.0 |
Basic net income per share attributable to Morningstar, Inc. | $ (0.18) | $ 1.07 |
Earnings Per Share, Diluted [Abstract] | ||
Consolidated net income (loss) | $ (7.6) | $ 46.1 |
Weighted average common shares outstanding | 42.5 | 43.0 |
Net effect of dilutive stock options and restricted stock units | 0.3 | 0.3 |
Weighted average common shares outstanding for computing diluted income per share | 42.8 | 43.3 |
Diluted net income per share attributable to Morningstar, Inc. | $ (0.18) | $ 1.06 |
Revenue (Disaggregation of Revenue) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Disaggregation of Revenue [Line Items] | ||
Consolidated revenue | $ 479.7 | $ 457.0 |
License-based | ||
Disaggregation of Revenue [Line Items] | ||
Consolidated revenue | 364.0 | 311.9 |
Asset-based | ||
Disaggregation of Revenue [Line Items] | ||
Consolidated revenue | 65.3 | 68.5 |
Transaction-based | ||
Disaggregation of Revenue [Line Items] | ||
Consolidated revenue | $ 50.4 | $ 76.6 |
Revenue (Contract Liabilities, Additional Information Narrative) (Details) $ in Millions |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023
USD ($)
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase in contract liabilities from cash payments received | $ 44.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract with Customer, Liability, Change in Timeframe, Performance Obligation Satisfied, Revenue Recognized | 209.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts payable and accrued liabilities | $ 533.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Revenue Disaggregation of Revenue The following table presents our revenue disaggregated by revenue type. Sales and usage-based taxes are excluded from revenue.
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 1 to 3 years and are accounted for as subscription services available to customers and not as a license under the accounting guidance. License-based revenue is generated from the sale of PitchBook, Morningstar Data, Morningstar Direct, Morningstar Sustainalytics' license-based products, Morningstar Indexes data and services products, DBRS Morningstar's data products, Morningstar Advisor Workstation, and other similar product licenses. Asset-based performance obligations are satisfied over time as the customer receives continuous access to a service for the term of the agreement. Asset-based arrangements typically have a term of 1 to 3 years. 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 and significant disruptions in the market are evaluated to determine whether estimates of earned asset-based fees need to be revised for the current quarter. The timing of client asset reporting and the structure of certain contracts can result in a one-quarter lag between market movements and the impact on earned revenue. 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 is generated by 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 is generated by DBRS Morningstar, Morningstar Sustainalytics' Second Party Opinions, Internet advertising, and Morningstar-sponsored conferences. DBRS Morningstar revenue includes revenue from surveillance services, which is 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 may be refundable. The contract liabilities balance as of March 31, 2023 had a net increase of $44.6 million, primarily driven by cash payments received or payable in advance of satisfying our performance obligations. We recognized $209.9 million of revenue in the three months ended March 31, 2023 that was included in the contract liabilities balance as of December 31, 2022. We expect to recognize revenue related to our contract liabilities, including future billings, for the remainder of 2023 and subsequent years as follows:
The aggregate amount of revenue we expect to recognize for the remainder of 2023 and subsequent years is higher than our contract liability balance of $533.7 million as of March 31, 2023. The difference represents the value of future obligations for signed contracts that have yet to be billed. The table above does not include variable consideration for unsatisfied performance obligations related to certain of our license-based, asset-based, and transaction-based contracts as of March 31, 2023. We are applying the optional exemption available under ASC Topic 606, 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 1 to 3 years as services are provided to the client. For license-based contracts, the consideration received for services performed is based on the number of future users, which is not known until the services are performed. The variable consideration for this revenue can be affected by the number of user licenses, which cannot be reasonably estimated. For asset-based contracts, the consideration received for services performed is based on future asset values, which are not known until 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 movements in the market. For transaction-based contracts for Internet advertising, the consideration received for services performed is based on the number of impressions, which is not known until the impressions are created. The variable consideration for this revenue can be affected by the timing and quantity of impressions in any given period and cannot be reasonably estimated. As of March 31, 2023, the table above also does not include revenue for unsatisfied performance obligations related to certain of our license-based and transaction-based contracts with durations of one year or less since we are applying the optional exemption under ASC Topic 606. For certain license-based contracts, the remaining performance obligation is expected to be less than one year based on the corresponding subscription terms or the existence of cancellation terms that may be exercised causing the contract term to be less than one year from March 31, 2023. For transaction-based contracts, such as new credit rating issuances and Morningstar-sponsored conferences, the related performance obligations are expected to be satisfied within the next 12 months. Contract Assets Our contract assets represent accounts receivable, less allowance for credit losses, and deferred commissions. The following table summarizes our contract assets balance:
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Revenue (Summary of Contract Assets) (Details) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
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Revenue from Contract with Customer [Abstract] | ||
Accounts receivable, less allowance for credit losses | $ 297.9 | $ 307.9 |
Deferred commissions, current and non-current | 76.4 | 76.1 |
Total contract assets | $ 374.3 | $ 384.0 |
Fair Value Measurements - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | ||
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Jun. 01, 2022 |
Mar. 31, 2023 |
Dec. 31, 2022 |
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Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Investment balances | $ 33.2 | $ 38.0 | |
Payment for Contingent Consideration Liability, Operating Activities | $ 50.0 | $ 50.0 |
Investments in Unconsolidated Entities (Details) $ in Millions, ¥ in Billions |
1 Months Ended | 2 Months Ended | 3 Months Ended | ||||||
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Feb. 28, 2023
USD ($)
shares
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Jan. 27, 2023
USD ($)
shares
|
Jan. 27, 2023
JPY (¥)
shares
|
Jun. 01, 2022
USD ($)
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Mar. 31, 2023
USD ($)
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Feb. 27, 2023 |
Mar. 31, 2023
USD ($)
|
Mar. 31, 2022
USD ($)
|
Dec. 31, 2022
USD ($)
|
|
Investments in Unconsolidated Entities [Line Items] | |||||||||
Investments in unconsolidated entities | $ 117.7 | $ 117.7 | $ 96.0 | ||||||
Payment for Contingent Consideration Liability, Operating Activities | $ 50.0 | 50.0 | |||||||
Sale of Stock, Percentage of Ownership after Transaction | 13.20% | ||||||||
Sale of Stock, Percentage of Ownership before Transaction | 22.10% | ||||||||
Realized gain on sale of investments, reclassified from other comprehensive income | $ 0.2 | $ 1.0 | |||||||
Equity Method Investments and Joint Ventures Disclosure | Investments in Unconsolidated Entities As of March 31, 2023 and December 31, 2022, our investment in unconsolidated entities balance totaled $117.7 million and $96.0 million, respectively. We have investments in both equity method investments and equity investments with and without a readily determinable fair value. On January 27, 2023, we entered into a Termination Agreement (the Termination Agreement) with Morningstar Japan K.K. (now known as SBI Global Asset Management Co., Ltd. (Wealth Advisors)), and a Tender Offer Agreement (the Tender Offer Agreement) with SBI Global Asset Management Co., Ltd. (now known as SBI Asset Management Group Co., Ltd. (SBI)). Pursuant to the Termination Agreement, Wealth Advisors agreed to cease use of the Morningstar brand and Morningstar and Wealth Advisors agreed to terminate the License Agreement originally entered into in 1998. As consideration for the transaction, Morningstar agreed to pay Wealth Advisors 8 billion Japanese yen ($61.4 million) upon the termination of the license agreement and the achievement of certain conditions related primarily to the termination of the use of the Morningstar brand by Wealth Advisors’ customers. The termination agreement liability is recorded within "Other current liabilities" on our Consolidated Balance Sheet as of March 31, 2023. The termination agreement expense is recorded within "Expense from equity method transaction, net" in our Consolidated Statements of Income for the three months ended March 31, 2023. See Note 15 for additional information on the Termination Agreement payments made in April 2023. As part of this transaction, pursuant to the Tender Offer Agreement, Morningstar agreed to tender up to 10 million shares in Wealth Advisors to SBI. The tender offer closed on February 28, 2023, and SBI purchased 8,040,600 shares of Wealth Advisors from Morningstar, resulting in net proceeds of $26.2 million and a pre-tax gain of $18.4 million. The pre-tax gain is recorded within "Expense from equity method transaction, net" in our Consolidated Statements of Income for the three months ended March 31, 2023. Subsequent to the tender offer, the Company's ownership percentage in Wealth Advisors decreased to 13.2% from 22.1%, and as a result, we no longer account for our investment in Wealth Advisors as an equity method investment. Each reporting period, we will measure our remaining investment in Wealth Advisors, an equity security with a readily determinable value, at fair value and recognize unrealized holding gains or losses in earnings. During the first quarter of 2023, we recognized an unrealized holding gain of $31.2 million, which is recorded within "Expense from equity method transaction, net" in our Consolidated Statements of Income for the three months ended March 31, 2023.
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Wealth Advisors [Member] | |||||||||
Investments in Unconsolidated Entities [Line Items] | |||||||||
Business Exit Costs | $ 61.4 | ¥ 8.0 | |||||||
SBI | |||||||||
Investments in Unconsolidated Entities [Line Items] | |||||||||
Sale of Stock, Number of Shares Issued in Transaction | shares | 8,040,600 | 10,000,000 | 10,000,000 | ||||||
Sale of Stock, Consideration Received Per Transaction | $ 26.2 | ||||||||
Gain on equity method transaction | $ 31.2 | ||||||||
Realized gain on sale of investments, reclassified from other comprehensive income | $ 18.4 |
Leases - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
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Lessee, Lease, Description [Line Items] | ||
Operating lease expense | $ 11.7 | $ 10.2 |
Variable lease, cost | 4.1 | 3.9 |
Operating lease payments | $ 11.3 | $ 10.8 |
Minimum [Member] | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease, weighted average remaining lease term | 1 year | |
Maximum [member] | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease, weighted average remaining lease term | 12 years |
Leases - Operating Lease Minimum Future Lease Commitments (Details) $ in Millions |
Mar. 31, 2023
USD ($)
|
---|---|
Leases [Abstract] | |
Remainder of 2019 | $ 32.7 |
2020 | 43.1 |
2021 | 33.7 |
2022 | 37.5 |
2023 | 29.2 |
Thereafter | 53.3 |
Total minimum lease commitments | 229.5 |
Adjustment for discount to present value | 23.1 |
Present value of lease liabilities | $ 206.4 |
Leases - Weighted Average Remaining Lease Terms and Discount Rates (Details) |
Mar. 31, 2023 |
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Weighted-average remaining lease term (in years) | |
Weighted-average remaining lease term (in years) | 6 years |
Weighted-average discount rate | |
Weighted-average discount rate | 3.30% |
Stock-Based Compensation (Allocation of Stock-Based Compensation Costs by Plan) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation expense | $ 12.2 | $ 13.9 |
Cost of revenue | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation expense | 5.0 | 2.5 |
Sales and marketing | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation expense | 1.6 | 1.4 |
General and administrative | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation expense | $ 5.6 | $ 10.0 |
Stock-Based Compensation (Narrative) (Details) - Restricted Stock Units and Performance Share Awards $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized stock-based compensation expense | $ 86.9 |
Expected amortization period (months) | 25 months |
Income Taxes (Income Tax Contingency) (Details) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Gross unrecognized tax benefits | $ 26.5 | $ 26.5 |
Gross unrecognized tax benefits that would affect income tax expense | 26.5 | 26.5 |
Decrease in income tax expense upon recognition of gross unrecognized tax benefits | $ 26.2 | $ 26.1 |
Contingencies Contingencies (Details) |
3 Months Ended |
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Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Document Period End Date | Mar. 31, 2023 |
Share Repurchase Program (Details) $ in Millions |
Mar. 31, 2023
USD ($)
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---|---|
Subsequent Event [Line Items] | |
Share repurchase program, authorized amount | $ 500.0 |
Stock repurchase program, remaining authorized repurchase amount | $ 500.0 |
Subsequent Events (Details) $ in Millions, ¥ in Billions |
3 Months Ended | |||||
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Apr. 19, 2023
USD ($)
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Apr. 19, 2023
JPY (¥)
|
Apr. 06, 2023
USD ($)
|
Apr. 06, 2023
JPY (¥)
|
Jun. 01, 2022
USD ($)
|
Mar. 31, 2023
USD ($)
|
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Subsequent Event [Line Items] | ||||||
Payment for Contingent Consideration Liability, Operating Activities | $ 50.0 | $ 50.0 | ||||
Subsequent Event | Wealth Advisors [Member] | ||||||
Subsequent Event [Line Items] | ||||||
Payment for Contingent Consideration Liability, Operating Activities | $ 14.8 | ¥ 2 | $ 45.1 | ¥ 6 |
Restructuring and Related Activities (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
| |
Restructuring and Related Activities [Abstract] | |
Severance Costs | $ 25.9 |
Label | Element | Value |
---|---|---|
Retained Earnings [Member] | ||
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest | us-gaap_ProfitLoss | $ (7,600,000) |