Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions |
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Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
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Statement of Comprehensive Income [Abstract] | ||||
Consolidated net income | $ 30.1 | $ 32.9 | $ 76.2 | $ 87.8 |
Other comprehensive loss, net of tax: | ||||
Foreign currency translation adjustment | (43.7) | 7.6 | (48.7) | 4.6 |
Unrealized gains (losses) on securities: | ||||
Unrealized holding gains (losses) arising during period | (3.0) | 2.8 | (7.8) | 4.9 |
Reclassification of (gains) losses on investments included in net income | 2.8 | (1.2) | 2.1 | (2.2) |
Other comprehensive income (loss) | (43.9) | 9.2 | (54.4) | 7.3 |
Comprehensive income | $ (13.8) | $ 42.1 | $ 21.8 | $ 95.1 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions |
Jun. 30, 2022 |
Dec. 31, 2021 |
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Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 5.5 | $ 4.5 |
Accumulated depreciation and amortization | $ 569.3 | $ 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) | 42,492,188 | 43,136,273 |
Treasury Stock, Shares (in shares) | 11,895,748 | 11,124,021 |
Condensed Consolidated Statement of Equity (Parenthetical) - $ / shares |
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Jun. 30, 2022 |
Mar. 31, 2022 |
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
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Statement of Stockholders' Equity [Abstract] | ||||||
Dividends declared (in dollars per share) | $ 0.36 | $ 0.36 | $ 0.32 | $ 0.32 | $ 0.72 | $ 0.63 |
Basis of Presentation of Interim Financial Information |
6 Months Ended |
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Jun. 30, 2022 | |
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, 2021, filed with the SEC on February 25, 2022 (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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Jun. 30, 2022 | |
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. Reference Rate Reform: On March 12, 2020, the FASB issued ASU No. 2020-04: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848) (ASU No. 2020-04), which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contract modifications resulting from reference rate reform initiatives. The intention of the standard is to ease the potential accounting and financial reporting burden associated with transitioning away from the expiring London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative benchmark rates. The amendments in this update are applicable to contract modifications that replace a reference LIBOR rate beginning on March 12, 2020 through December 31, 2022. On May 6, 2022, we terminated our 2019 Credit Agreement and entered into a new Credit Agreement in connection with the acquisition of Leveraged Commentary & Data (LCD). The new Credit Agreement is comprised of a five-year term facility and a revolving credit facility and was used to finance the purchase price of LCD and is available for other general corporate purposes. As we entered into the new Credit Agreement for reasons unrelated to reference rate reform, ASU No. 2010-04 is not applicable. See Note 3 for additional information on our new Credit Agreement and Note 4 for additional information on our acquisition of LCD. Business Combinations: On October 28, 2021, the FASB issued ASU No. 2021-08, Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805) (ASU No. 2021-08), which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Generally, the new standard will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Under current U.S. GAAP, contract assets and contract liabilities acquired in a business combination are recorded by the acquirer at fair value. ASU No. 2021-08 creates an exception to the general recognition and measurement principles of ASC 805, Business Combinations (ASC 805). The new standard is effective for us on January 1, 2023. Early adoption is permitted, including in an interim period, for any period for which financial statements have not yet been issued. Entities should apply the new guidance on a prospective basis to all business combinations with an acquisition date on or after the effective date. We elected to early adopt ASU No. 2021-08 during the second quarter of 2022 and the adoption did not have a material effect on our consolidated financial statements, related disclosures, and results of operations.
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Credit Arrangements |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Arrangements | Credit Arrangements Debt The following table summarizes our long-term debt as of June 30, 2022 and December 31, 2021:
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 provides 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 (which was undrawn as of June 30, 2022) and a $450.0 million revolving credit facility (the 2022 Revolving Credit Facility). The optional second draw on the 2022 Term Facility is available to fund the contingent consideration of up to $50.0 million payable in connection with the LCD acquisition. 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 facility under the 2022 Revolving Credit Facility. As of June 30, 2022, our total outstanding debt under the 2022 Credit Agreement was $828.0 million with borrowing availability of $220.0 million under the 2022 Revolving Credit Facility and $50.0 million under the 2022 Term Facility. 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 LCD and to repay borrowings under the 2019 Revolving Credit Facility. The proceeds of future borrowings under the 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 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 2022 Revolving Credit Facility are included in other current and non-current assets, and the portion of deferred debt issuance costs related to the 2022 Term Facility is reported as a reduction to the carrying amount of the Term Facility. Debt issuance costs related to the 2022 Revolving Credit Facility are amortized on a straight-line basis to interest expense over the term of the 2022 Credit Agreement. Debt issuance costs related to the 2022 Term Facility are amortized to interest expense using the effective interest method over the term of the 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 June 30, 2022, our total outstanding debt, net of issuance costs, under the 2030 Notes was $348.4 million. Compliance with Covenants Each of the 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 June 30, 2022.
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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 2022 Acquisitions Leveraged Commentary & Data On June 1, 2022, we completed our acquisition of LCD, a market leader in news, research, data, insights, and indexes for the leveraged finance market, from S&P Global (S&P) for an initial cash payment of $600.0 million plus a contingent payment of up to $50.0 million. We began consolidating the financial results of LCD in our consolidated financial statements as of June 1, 2022. The total consideration transferred has been recorded as $645.5 million, comprised of a $600.0 million cash payment plus contingent consideration with an acquisition date fair value of $45.5 million. The acquisition was accounted for as a business combination under the acquisition method of accounting pursuant to ASC 805, which requires that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date. As of June 30, 2022, we completed our initial determination of the fair values of the acquired identifiable assets and liabilities based on preliminary financial data available. Based on the timing of the close of this transaction, certain valuation calculations are considered preliminary due to information that may subsequently become available, and values assigned to various assets and liabilities could change. The final contingent consideration will be determined based upon the achievement of certain conditions related to the separation of LCD’s contractual relationships from S&P contracts that include other S&P products and services during the six month period following closing. To estimate the fair value of the contingent payment at the acquisition date, we calculated the weighted average of the estimated contingent payment scenarios. At subsequent balance sheet dates, the contingent payment will continue to be measured at fair value and any changes in the estimate will be recorded in earnings unless the change in fair value is the result of facts and circumstances that existed as of the acquisition date. The contingent payment is classified as "Contingent consideration liabilities" on our Consolidated Balance Sheet as of June 30, 2022. The acquisition date fair value of certain assets and liabilities, including intangible assets acquired and related weighted average expected life calculations, are provisional and subject to revision within one year of the acquisition date. Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. The following table summarizes our preliminary allocation of the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:
Accounts receivable acquired were recorded at gross contractual amounts receivable, which approximates fair value. We expect to collect substantially all of the gross contractual amounts receivable within a reasonable period of time after the acquisition date. The preliminary allocation of the estimated fair values of the assets acquired and liabilities assumed includes $275.6 million of acquired intangible assets, as follows:
Goodwill of $385.3 million represents the excess over the fair value of the net tangible and intangible assets acquired. Since LCD was an asset acquisition, goodwill is deductible for income tax purposes. Praemium Portfolio Services Limited On June 30, 2022, we completed our acquisition of Praemium Portfolio Services Limited (Praemium), a U.K.-based global provider of digital-first financial services with, $44.9 million in cash paid at closing, subject to post-closing adjustments. Praemium and its subsidiaries offer several investment platform and customer relationship management services to their financial planning and wealth management clients across the U.K. and international markets. We began consolidating the financial results of Praemium in our consolidated financial statements as of June 30, 2022. The acquisition was accounted for as a business combination under the acquisition method of accounting pursuant to ASC 805. As of June 30, 2022, we completed our initial determination of the fair values of the acquired identifiable assets and liabilities based on preliminary financial data available. Based on the timing of the close of this transaction, certain valuation calculations are considered preliminary due to information that will subsequently become available, and values assigned to various assets and liabilities could change. The acquisition date fair value of certain assets and liabilities, including intangible assets acquired and related weighted average expected life calculations, are provisional and subject to revision within one year of the acquisition date. Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. The following table summarizes our allocation of the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:
Accounts receivable acquired were recorded at gross contractual amounts receivable, which approximates fair value. We expect to collect substantially all of the gross contractual amounts receivable within a reasonable period of time after the acquisition date. The preliminary allocation of the estimated fair values of the assets acquired and liabilities assumed includes $22.1 million of acquired intangible assets, as follows:
Goodwill of $21.9 million represents the excess over the fair value of the net tangible and intangible assets acquired. Goodwill is not deductible for income tax purposes. We recognized a preliminary net deferred tax liability of $5.4 million primarily because the amortization expense related to certain intangible assets is not deductible for income tax purposes. Goodwill The following table shows the changes in our goodwill balances from December 31, 2021 to June 30, 2022:
We did not record any goodwill impairment losses in the first six months of 2022 and 2021. 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. Based on acquisitions completed through June 30, 2022, we expect intangible amortization expense for the remainder of 2022 and subsequent years to be as follows:
Our estimates of future amortization expense for intangible assets may be affected by additional 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 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:
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 | 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, 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, 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 June 30, 2022 had a net increase of $80.6 million, primarily driven by cash payments received or payable in advance of satisfying our performance obligations. We recognized $244.6 million of revenue in the six months ended June 30, 2022 that was included in the contract liabilities balance as of December 31, 2021. We expect to recognize revenue related to our contract liabilities for the remainder of 2022 and subsequent years as follows:
The aggregate amount of revenue we expect to recognize for the remainder of 2022 and subsequent years is higher than our contract liability balance of $494.4 million as of June 30, 2022. 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 June 30, 2022. 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 June 30, 2022, 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 June 30, 2022. 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:
The long-lived assets by geographical area do not include deferred commissions, non-current as the balance is not material.
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Fair Value Measurement of Investments |
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Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements Investments As of June 30, 2022 and December 31, 2021, our investment balances totaled $36.6 million and $62.3 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 June 30, 2022, 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. During the second quarter of 2022, we converted our $10.0 million convertible note, which was previously recorded as an available-for-sale investment, into preferred shares, which are now accounted for as an investment in equity securities. The preferred stock was initially measured at fair value and any subsequent remeasurement may occur upon impairment or an observable price change via a transaction with identical or similar instruments of the same issuer. The preferred stock is classified as an "Investment in unconsolidated entities" on our Consolidated Balance Sheet as of June 30, 2022. Contingent Consideration As of June 30, 2022, financial assets and liabilities that are classified as Level 3 within the fair value hierarchy include a contingent consideration liability of $45.5 million, which is equal to the acquisition date fair value. The contingent consideration reflects potential future payments that are contingent upon the achievement of certain conditions related to the separation of LCD’s contractual relationships from S&P contracts that include other S&P products and services. This additional purchase consideration, for which the amount is contingent, is 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 will be remeasured each reporting period until the contingency is resolved with any changes in fair value recorded in current period earnings. In the second quarter of 2022, we made the third and final cash payment of $56.2 million, resolving our contingent consideration liability related to our acquisition of Sustainalytics. The payment was based on the achievement of certain revenue metrics for the year ended December 31, 2021.
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Leases |
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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 June 30, 2022 was $10.0 million, compared with $11.0 million for the three months ended June 30, 2021. 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 June 30, 2022, compared with $3.6 million for the three months ended June 30, 2021. We made lease payments of $10.7 million during the three months ended June 30, 2022, compared with $11.7 million during the three months ended June 30, 2021. Our operating lease expense for the six months ended June 30, 2022 was $20.2 million, compared with $21.9 million for the six months ended June 30, 2021. Charges related to our operating leases that are variable and, therefore, not included in the measurement of the lease liabilities, were $8.0 million for the six months ended June 30, 2022, compared with $8.0 million for the six months ended June 30, 2021. We made lease payments of $21.5 million during the six months ended June 30, 2022, compared with $24.0 million during the six months ended June 30, 2021. 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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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:
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Income Taxes |
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Income Taxes | Income Taxes Effective Tax Rate The following table shows our effective tax rate for the three months ended June 30, 2022 and June 30, 2021:
Our effective tax rate in the second quarter and first six months of 2022 was 19.7% and 24.5%, respectively, reflecting a decrease of 10.0 percentage points and an increase of 0.3 percentage points, respectively, compared with the same periods in the prior year. The decrease in the second quarter is primarily attributable to non-deductible compensation expense recorded in the second quarter of 2021 for the M&A-related earn-out, which inflated the effective tax rate in the prior year quarter. Unrecognized Tax Benefits The table below provides information concerning our gross unrecognized tax benefits as of June 30, 2022 and December 31, 2021, as well as the effect these gross unrecognized tax benefits would have on our income tax expense, if they were recognized.
Our gross unrecognized tax benefits of $14.5 million at June 30, 2022 increased by $3.1 million compared with $11.4 million at December 31, 2021. The increase, which was recorded in the first quarter of 2022, was primarily attributable to a change in facts and circumstances regarding our assessment as to the realizability of certain unrecognized tax benefits for prior tax periods. 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.
Our total liability for unrecognized tax benefits of $16.0 million at June 30, 2022 increased by $3.6 million compared with $12.4 million at December 31, 2021. This increase reflects the change in our assessment as to the realizability of certain unrecognized tax benefits for prior tax periods, as discussed above. 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 2022. It is not possible to estimate the effect of current audits on previously recorded unrecognized tax benefits. Approximately 62% of our cash, cash equivalents, and investments balance as of June 30, 2022 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 |
6 Months Ended |
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Jun. 30, 2022 | |
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. When a loss contingency is not 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. Our financial results as of June 30, 2022 include an immaterial accrual related to certain in-progress audits and reviews. Credit Ratings Matters On April 12, 2022, Morningstar Credit Ratings, LLC (MCR) reached an agreement in principle with the staff of the SEC to settle the civil action filed by the SEC in the United States District Court for the Southern District of New York on February 16, 2021. The SEC’s complaint related to MCR’s former commercial mortgage-backed securities ratings methodology during the period from 2015 to March 2017. MCR was formerly registered with the SEC as a Nationally Recognized Statistical Ratings Organization (NRSRO), but effective in December 2019, it withdrew its NRSRO registration. The SEC approved the settlement, and the District Court entered its final judgement on June 7, 2022. The settlement fully resolved this matter on a neither-admit-nor-deny basis and involved a civil monetary penalty of $1.15 million, which was paid in the second quarter of 2022. Given the nature of its credit ratings activities, DBRS, Inc. and its credit rating affiliates (collectively, DBRS) are subject to legal and tax proceedings, governmental, regulatory, and legislative investigations, subpoenas and other inquiries, and claims and litigation by governmental and private parties that are based on ratings assigned by these entities or that are otherwise incidental to their business. DBRS is subject to periodic reviews, inspections, examinations, and investigations by regulators in the U.S. and other jurisdictions, 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 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 regulatory investigations, examinations, and legal proceedings that arise in the normal course of our business. 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.
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Share Repurchase Program |
6 Months Ended |
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Jun. 30, 2022 | |
Equity [Abstract] | |
Treasury Stock | Share Repurchase Program In December 2020, the board of directors approved a new share repurchase program that authorizes the Company to repurchase up to $400.0 million in shares of the Company's outstanding common stock, effective January 1, 2021. The new authorization expires on December 31, 2023. 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. For the three months ended June 30, 2022, we repurchased a total of 374,358 shares for $92.5 million, of which $0.6 million was settled in early July 2022. For the six months ended June 30, 2022, we repurchased a total of 777,329 shares for $203.1 million, of which $0.6 million was settled in early July 2022. As of June 30, 2022, we have repurchased a total of 782,229 shares for $204.4 million, leaving $195.6 million available for future repurchases under the current share repurchase program.
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Subsequent Events |
6 Months Ended |
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Jun. 30, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsIn July 2022, we announced internally our decision to shift the company’s operations in Shenzhen, China to focus on the domestic market. The transition is expected to occur over the next 12 months. We are currently evaluating the impact on our consolidated financial statements, related disclosures, and results of operations in future periods for these unusual, non-recurring, or special items. |
Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
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Jun. 30, 2022 | |
Accounting Policies [Abstract] | |
Recent Accounting Pronouncements Policy | Reference Rate Reform: On March 12, 2020, the FASB issued ASU No. 2020-04: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848) (ASU No. 2020-04), which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contract modifications resulting from reference rate reform initiatives. The intention of the standard is to ease the potential accounting and financial reporting burden associated with transitioning away from the expiring London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative benchmark rates. The amendments in this update are applicable to contract modifications that replace a reference LIBOR rate beginning on March 12, 2020 through December 31, 2022. On May 6, 2022, we terminated our 2019 Credit Agreement and entered into a new Credit Agreement in connection with the acquisition of Leveraged Commentary & Data (LCD). The new Credit Agreement is comprised of a five-year term facility and a revolving credit facility and was used to finance the purchase price of LCD and is available for other general corporate purposes. As we entered into the new Credit Agreement for reasons unrelated to reference rate reform, ASU No. 2010-04 is not applicable. See Note 3 for additional information on our new Credit Agreement and Note 4 for additional information on our acquisition of LCD.Business Combinations: On October 28, 2021, the FASB issued ASU No. 2021-08, Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805) (ASU No. 2021-08), which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Generally, the new standard will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Under current U.S. GAAP, contract assets and contract liabilities acquired in a business combination are recorded by the acquirer at fair value. ASU No. 2021-08 creates an exception to the general recognition and measurement principles of ASC 805, Business Combinations (ASC 805). The new standard is effective for us on January 1, 2023. Early adoption is permitted, including in an interim period, for any period for which financial statements have not yet been issued. Entities should apply the new guidance on a prospective basis to all business combinations with an acquisition date on or after the effective date. We elected to early adopt ASU No. 2021-08 during the second quarter of 2022 and the adoption did not have a material effect on our consolidated financial statements, related disclosures, and results of operations. |
Fair Value Measurements (Policies) |
6 Months Ended |
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Jun. 30, 2022 | |
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) |
6 Months Ended |
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Jun. 30, 2022 | |
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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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Total Debt and Long-term Debt | The following table summarizes our long-term debt as of June 30, 2022 and December 31, 2021:
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Acquisitions, Goodwill and Other Intangible Assets (Tables) |
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Jun. 30, 2022 |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes our allocation of the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:
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The following table summarizes our preliminary allocation of the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:
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Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination | The preliminary allocation of the estimated fair values of the assets acquired and liabilities assumed includes $22.1 million of acquired intangible assets, as follows:
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The preliminary allocation of the estimated fair values of the assets acquired and liabilities assumed includes $275.6 million of acquired intangible assets, as follows:
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Schedule of Goodwill | The following table shows the changes in our goodwill balances from December 31, 2021 to June 30, 2022:
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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 | Based on acquisitions completed through June 30, 2022, we expect intangible amortization expense for the remainder of 2022 and subsequent years to be as follows:
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Income Per Share (Tables) |
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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:
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Revenue (Tables) |
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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 for the remainder of 2022 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) |
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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:
The long-lived assets by geographical area do not include deferred commissions, non-current as the balance is not material.
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Leases (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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) |
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Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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) |
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Effective Income Tax Rate Reconciliation | The following table shows our effective tax rate for the three months ended June 30, 2022 and June 30, 2021:
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Schedule of Gross Unrecognized Tax Benefits | The table below provides information concerning our gross unrecognized tax benefits as of June 30, 2022 and December 31, 2021, 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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Credit Arrangements - Schedule of Long-term Debt (Details) - USD ($) $ in Millions |
Jun. 30, 2022 |
Dec. 31, 2021 |
Oct. 26, 2020 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Long-term debt | $ 1,147.0 | $ 359.4 | |
Long-term debt | 1,176.4 | 359.4 | |
Debt Instrument, Interest Rate, Stated Percentage | 2.32% | ||
Medium-term Notes [Member] | Term Loan Facility [Member] | |||
Debt Instrument [Line Items] | |||
Long-term debt | 598.0 | 11.0 | |
Debt Issuance Costs, Gross | 1.8 | 0.1 | |
Notes Payable, Other Payables | Private Placement | |||
Debt Instrument [Line Items] | |||
Long-term debt | 348.4 | 348.4 | |
Debt Issuance Costs, Gross | $ 1.6 | $ 1.6 | |
Debt Instrument, Interest Rate, Stated Percentage | 2.32% | 2.32% | |
Revolving Credit Facility | Line of Credit [Member] | July 2019 Revolving Credit Facility [Member] | |||
Debt Instrument [Line Items] | |||
Long-term debt | $ 0.0 | ||
Revolving Credit Facility | Line of Credit [Member] | May 2022 Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Long-term debt | $ 230.0 |
Acquisitions, Goodwill and Other Intangible Assets (Schedule of Goodwill) (Details) - USD ($) $ in Millions |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2022 |
Jun. 01, 2022 |
Jun. 30, 2022 |
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Business Acquisition [Line Items] | |||
Goodwill | $ 1,578.9 | $ 1,578.9 | |
Goodwill [Roll Forward] | |||
Goodwill, Beginning Balance | 1,207.0 | ||
Foreign currency translation | (35.3) | ||
Goodwill, Ending Balance | 1,578.9 | $ 1,578.9 | |
LCD | |||
Business Acquisition [Line Items] | |||
Finite-lived Intangible Assets Acquired | $ 275.6 | ||
Goodwill, Acquired During Period | $ 385.3 | ||
Praemium | |||
Business Acquisition [Line Items] | |||
Finite-lived Intangible Assets Acquired | 22.1 | ||
Goodwill, Acquired During Period | $ 21.9 |
Acquisitions, Goodwill and Other Intangible Assets (Amortization Expense) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
Dec. 31, 2021 |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||
Amortization expense | $ 15.6 | $ 15.7 | $ 29.7 | $ 31.3 | |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | |||||
Remainder of 2022 (July 1 through December 31) | 37.0 | 37.0 | |||
2023 | 71.5 | 71.5 | |||
2024 | 65.4 | 65.4 | |||
2025 | 57.0 | 57.0 | |||
2026 | 53.2 | 53.2 | |||
Thereafter | 309.1 | 309.1 | |||
Total | $ 593.2 | $ 593.2 | $ 328.2 |
Income Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | 6 Months Ended | ||||
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Jun. 30, 2022 |
Mar. 31, 2022 |
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
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Earnings Per Share, Basic [Abstract] | ||||||
Consolidated net income | $ 30.1 | $ 46.1 | $ 32.9 | $ 54.9 | $ 76.2 | $ 87.8 |
Weighted average common shares outstanding | 42.6 | 43.0 | 42.8 | 43.0 | ||
Basic net income per share attributable to Morningstar, Inc. | $ 0.71 | $ 0.77 | $ 1.78 | $ 2.04 | ||
Earnings Per Share, Diluted [Abstract] | ||||||
Consolidated net income | $ 30.1 | $ 32.9 | $ 76.2 | $ 87.8 | ||
Weighted average common shares outstanding | 42.6 | 43.0 | 42.8 | 43.0 | ||
Net effect of dilutive stock options and restricted stock units | 0.3 | 0.3 | 0.3 | 0.3 | ||
Weighted average common shares outstanding for computing diluted income per share | 42.9 | 43.3 | 43.1 | 43.3 | ||
Diluted net income per share attributable to Morningstar, Inc. | $ 0.70 | $ 0.76 | $ 1.77 | $ 2.03 |
Revenue (Disaggregation of Revenue) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
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Disaggregation of Revenue [Line Items] | ||||
Consolidated revenue | $ 470.4 | $ 415.4 | $ 927.4 | $ 808.2 |
License-based | ||||
Disaggregation of Revenue [Line Items] | ||||
Consolidated revenue | 327.5 | 277.2 | 639.4 | 543.3 |
Asset-based | ||||
Disaggregation of Revenue [Line Items] | ||||
Consolidated revenue | 67.6 | 64.8 | 136.1 | 126.2 |
Transaction-based | ||||
Disaggregation of Revenue [Line Items] | ||||
Consolidated revenue | $ 75.3 | $ 73.4 | $ 151.9 | $ 138.7 |
Revenue (Contract Liabilities, Additional Information Narrative) (Details) $ in Millions |
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Jun. 30, 2022
USD ($)
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase in contract liabilities from cash payments received | $ 80.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract with Customer, Liability, Change in Timeframe, Performance Obligation Satisfied, Revenue Recognized | 244.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts payable and accrued liabilities | $ 494.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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, 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, 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 June 30, 2022 had a net increase of $80.6 million, primarily driven by cash payments received or payable in advance of satisfying our performance obligations. We recognized $244.6 million of revenue in the six months ended June 30, 2022 that was included in the contract liabilities balance as of December 31, 2021. We expect to recognize revenue related to our contract liabilities for the remainder of 2022 and subsequent years as follows:
The aggregate amount of revenue we expect to recognize for the remainder of 2022 and subsequent years is higher than our contract liability balance of $494.4 million as of June 30, 2022. 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 June 30, 2022. 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 June 30, 2022, 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 June 30, 2022. 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 |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Revenue from Contract with Customer [Abstract] | ||
Accounts receivable, less allowance for credit losses | $ 307.3 | $ 268.9 |
Deferred commissions, current and non-current | 68.2 | 62.3 |
Total contract assets | $ 375.5 | $ 331.2 |
Fair Value Measurements - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Jun. 30, 2022 |
Dec. 31, 2021 |
|
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Investment balances | $ 36.6 | $ 62.3 |
Equity Method Investments | 10.0 | |
Sustainalytics | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Payment for Contingent Consideration Liability, Operating Activities | 56.2 | |
Estimate of Fair Value Measurement | Fair Value, Recurring | Other Security Investments | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Asset Acquisition, Contingent Consideration, Liability | $ 45.5 |
Leases - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Lessee, Lease, Description [Line Items] | ||||
Operating lease expense | $ 10.0 | $ 11.0 | $ 20.2 | $ 21.9 |
Variable lease, cost | 4.1 | 3.6 | 8.0 | 8.0 |
Operating lease payments | $ 10.7 | $ 11.7 | $ 21.5 | $ 24.0 |
Minimum [Member] | ||||
Lessee, Lease, Description [Line Items] | ||||
Operating lease, weighted average remaining lease term | 1 year | 1 year | ||
Maximum [member] | ||||
Lessee, Lease, Description [Line Items] | ||||
Operating lease, weighted average remaining lease term | 12 years | 12 years |
Leases - Operating Lease Minimum Future Lease Commitments (Details) $ in Millions |
Jun. 30, 2022
USD ($)
|
---|---|
Leases [Abstract] | |
Remainder of 2019 | $ 20.8 |
2020 | 39.2 |
2021 | 29.1 |
2022 | 22.9 |
2023 | 19.4 |
Thereafter | 40.5 |
Total minimum lease commitments | 171.9 |
Adjustment for discount to present value | 15.9 |
Present value of lease liabilities | $ 156.0 |
Leases - Weighted Average Remaining Lease Terms and Discount Rates (Details) |
Jun. 30, 2022 |
---|---|
Weighted-average remaining lease term (in years) | |
Weighted-average remaining lease term (in years) | 5 years 9 months 18 days |
Weighted-average discount rate | |
Weighted-average discount rate | 3.20% |
Stock-Based Compensation (Allocation of Stock-Based Compensation Costs by Plan) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 22.1 | $ 11.8 | $ 36.0 | $ 19.9 |
Cost of revenue | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 6.7 | 4.9 | 9.2 | 7.3 |
Sales and marketing | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 2.6 | 1.1 | 4.0 | 2.0 |
General and administrative | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 12.8 | $ 5.8 | $ 22.8 | $ 10.6 |
Stock-Based Compensation (Narrative) (Details) - Restricted Stock Units and Performance Share Awards $ in Millions |
3 Months Ended |
---|---|
Jun. 30, 2022
USD ($)
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized stock-based compensation expense | $ 112.0 |
Expected amortization period (months) | 28 months |
Income Taxes (Income Tax Contingency) (Details) - USD ($) $ in Millions |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Gross unrecognized tax benefits | $ 14.5 | $ 11.4 |
Gross unrecognized tax benefits that would affect income tax expense | 14.5 | 11.4 |
Decrease in income tax expense upon recognition of gross unrecognized tax benefits | $ 14.3 | $ 11.2 |
Contingencies Contingencies (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2022 |
Jun. 30, 2022 |
|
Commitments and Contingencies Disclosure [Abstract] | ||
Payments for Legal Settlements | $ 1,150 | |
Document Period End Date | Jun. 30, 2022 |
Share Repurchase Program (Details) - USD ($) $ in Millions |
1 Months Ended | 3 Months Ended | 6 Months Ended |
---|---|---|---|
Jul. 29, 2022 |
Jun. 30, 2022 |
Jun. 30, 2022 |
|
Subsequent Event [Line Items] | |||
Share repurchase program, authorized amount | $ 400.0 | $ 400.0 | |
Shares repurchased (in shares) | 374,358 | 777,329 | |
Shares repurchased, value | $ 92.5 | $ 203.1 | |
Shares repurchased, cumulative (in shares) | 782,229 | 782,229 | |
Shares repurchased, cumulative, value | $ 204.4 | $ 204.4 | |
Stock repurchase program, remaining authorized repurchase amount | $ 195.6 | $ 195.6 | |
Subsequent Event | |||
Subsequent Event [Line Items] | |||
Shares repurchased, value | $ 0.6 |