Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2018	Oct. 19, 2018
Document and Entity Information Abstract
Entity Registrant Name	MORNINGSTAR, INC.
Entity Central Index Key	0001289419
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding		42,660,038

Condensed Consolidated Statements of Income - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Statement [Abstract]
Revenue	$ 261.3	$ 229.9	$ 757.2	$ 668.6
Operating expense:
Cost of revenue	100.0	90.9	302.2	283.2
Sales and marketing	35.8	31.1	113.7	100.2
General and administrative	35.4	33.3	103.6	93.2
Depreciation and amortization	24.7	21.8	71.2	64.8
Total operating expense	195.9	177.1	590.7	541.4
Operating income	65.4	52.8	166.5	127.2
Non-operating income (expense), net:
Interest expense, net	(0.2)	(0.9)	(1.2)	(2.6)
Gain on sale of investments, reclassified from other comprehensive income	0.3	0.3	0.9	1.1
Gain on sale of business	0.0	0.0	0.0	17.5
Gain on sale of product line	0.0	0.0	10.5	0.0
Gain on sale of equity investments	5.6	0.0	5.6	0.0
Other income (expense), net	1.6	(1.4)	2.2	(4.0)
Non-operating income (expense), net	7.3	(2.0)	18.0	12.0
Income before income taxes and equity in net income (loss) of unconsolidated entities	72.7	50.8	184.5	139.2
Equity in net income (loss) of unconsolidated entities	0.3	0.0	(1.6)	(1.0)
Income tax expense	16.1	16.9	42.3	40.2
Consolidated net income	$ 56.9	$ 33.9	$ 140.6	$ 98.0
Net income per share:
Basic (in dollars per share)	$ 1.33	$ 0.80	$ 3.30	$ 2.29
Diluted (in dollars per share)	1.32	0.79	3.27	2.28
Dividends declared per common share (in dollars per share)	0	0	0.50	0.46
Dividends paid per common share (in dollars per share)	$ 0.25	$ 0.23	$ 0.75	$ 0.69
Weighted average shares outstanding:
Basic (in shares)	42.6	42.5	42.6	42.8
Diluted (in shares)	43.1	42.8	43.0	43.1

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Statement of Comprehensive Income [Abstract]
Consolidated net income	$ 56.9	$ 33.9	$ 140.6	$ 98.0
Other comprehensive (loss) income:
Foreign currency translation adjustment	(6.1)	10.0	(20.2)	29.9
Unrealized gains (losses) on securities, net of tax:
Unrealized holding gains arising during period	0.5	0.9	0.8	3.5
Reclassification gains included in net income	(0.2)	(0.3)	(0.7)	(0.8)
Other comprehensive (loss) income	(5.8)	10.6	(20.1)	32.6
Comprehensive income	$ 51.1	$ 44.5	$ 120.5	$ 130.6

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 1A
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=114867106&loc=SL7669619-108580

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 50
-Paragraph 1A
-Subparagraph (a)(1)
-URI http://asc.fasb.org/extlink&oid=109239629&loc=SL4573702-111684

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 1B
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=114867106&loc=SL7669625-108580

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 50
-Paragraph 1A
-Subparagraph (c)(1)
-URI http://asc.fasb.org/extlink&oid=109239629&loc=SL4573702-111684

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-URI http://asc.fasb.org/extlink&oid=115929826&loc=d3e8736-108599

Reference 6: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 55
-Paragraph 4J
-URI http://asc.fasb.org/extlink&oid=84234705&loc=SL4591551-111686

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 230
-SubTopic 10
-Section 45
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=109223946&loc=d3e3000-108585

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 45
-Paragraph 19
-URI http://asc.fasb.org/extlink&oid=108774443&loc=SL4569616-111683

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=115929826&loc=d3e8933-108599

Reference 10: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 55
-Paragraph 4K
-URI http://asc.fasb.org/extlink&oid=84234705&loc=SL4591552-111686

+ Details

Condensed Consolidated Balance Sheets - USD ($) $ in Millions	Sep. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 323.0	$ 308.2
Investments	43.7	45.1
Accounts receivable, less allowance of $4.5 and $3.2, respectively	172.4	148.2
Income tax receivable	7.8	0.0
Deferred commissions	14.2	0.0
Other current assets	22.8	28.3
Total current assets	583.9	529.8
Property, equipment, and capitalized software, less accumulated depreciation and amortization of $333.1 and $284.7, respectively	144.5	147.4
Investments in unconsolidated entities	58.4	62.0
Goodwill	559.2	564.9
Intangible assets, net	79.3	95.4
Deferred commissions, non-current	9.8	0.0
Other assets	4.4	6.2
Total assets	1,439.5	1,405.7
Current liabilities:
Accounts payable and accrued liabilities	42.5	49.2
Accrued compensation	85.6	92.0
Deferred revenue	189.0	171.3
Other current liabilities	4.2	10.7
Total current liabilities	321.3	323.2
Accrued compensation	11.9	11.7
Deferred tax liability, net	30.2	23.6
Long-term debt	90.0	180.0
Deferred rent	25.3	26.9
Deferred revenue, non-current	14.6	14.2
Other long-term liabilities	18.6	21.2
Total liabilities	511.9	600.8
Morningstar, Inc. shareholders’ equity:
Common stock, no par value, 200,000,000 shares authorized, of which 42,670,728 and 42,547,707 shares were outstanding as of September 30, 2018 and December 31, 2017, respectively	0.0	0.0
Treasury stock at cost, 10,728,410 and 10,633,637 shares as of September 30, 2018 and December 31, 2017, respectively	(717.0)	(708.2)
Additional paid-in capital	616.3	601.0
Retained earnings	1,095.0	958.7
Accumulated other comprehensive loss:
Currency translation adjustment	(68.1)	(47.9)
Unrealized gain on available-for-sale investments	1.4	1.3
Total accumulated other comprehensive loss	(66.7)	(46.6)
Total equity	927.6	804.9
Total liabilities and equity	$ 1,439.5	$ 1,405.7

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Sep. 30, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Allowance for doubtful accounts receivable	$ 4.5	$ 3.2
Accumulated depreciation and amortization	$ 333.1	$ 284.7
Common Stock, No Par Value	$ 0	$ 0
Common Stock, Shares Authorized	200,000,000	200,000,000
Common Stock, Shares, Outstanding	42,670,728	42,547,707
Treasury Stock, Shares	10,728,410	10,633,637

Condensed Consolidated Statement of Equity - USD ($) $ in Millions	Total	Common Stock	Treasury Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Loss
Increase (Decrease) in Stockholders' Equity
Cumulative effect of accounting change related to the adoption of ASU No. 2014-09	$ 17.0				$ 17.0
Balance at Dec. 31, 2017	$ 804.9	$ 0.0	$ (708.2)	$ 601.0	958.7	$ (46.6)
Balance (in shares) at Dec. 31, 2017	42,547,707	42,547,707
Increase (Decrease) in Stockholders' Equity
Net income	$ 140.6				140.6
Other comprehensive income (loss):
Unrealized gain on available-for-sale investments, net of income tax of $0.1	0.8					0.8
Reclassification of adjustments for gain included in net income, net of income tax of $0.2	(0.7)					(0.7)
Foreign currency translation adjustment	(20.2)					(20.2)
Other comprehensive income (loss)	(20.1)					(20.1)
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units	(11.4)	$ 0.0	1.7	(13.1)
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units (in shares)		232,310
Reclassification of awards previously liability-classified that were converted to equity	4.5	$ 0.0	0.0	4.5	0.0	0.0
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition
Stock-based compensation	23.9			23.9
Common share repurchased	(10.5)		(10.5)
Common share repurchased (in shares)		(109,289)
Dividends declared	(21.3)				(21.3)
Balance at Sep. 30, 2018	$ 927.6	$ 0.0	$ (717.0)	$ 616.3	$ 1,095.0	$ (66.7)
Balance (in shares) at Sep. 30, 2018	42,670,728	42,670,728

Condensed Consolidated Statement of Equity (Parenthetical) $ in Millions	9 Months Ended
	Sep. 30, 2018 USD ($)
Statement of Stockholders' Equity [Abstract]
Other Comprehensive Income (Loss), Securities, Available-for-Sale, Unrealized Holding Gain (Loss) Arising During Period, Tax	$ 0.1
Other Comprehensive Income (Loss), Reclassification Adjustment for Sale of Securities Included in Net Income, Tax	$ 0.2

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Operating activities
Consolidated net income	$ 140.6	$ 98.0
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
Depreciation and amortization	71.2	64.8
Deferred income taxes	6.5	1.0
Stock-based compensation expense	23.9	16.5
Provision for bad debt	2.6	1.3
Equity in net loss of unconsolidated entities	1.6	1.0
Gain on sale of business	0.0	(17.5)
Gain on sale of product line	(10.5)	0.0
Gain on sale of equity investments	(5.6)	0.0
Other, net	(3.3)	2.9
Changes in operating assets and liabilities:
Accounts receivable	(29.1)	(0.3)
Other assets	8.8	(3.0)
Deferred commissions	24.0	0.0
Accounts payable and accrued liabilities	5.9	(4.3)
Accrued compensation	(31.6)	0.2
Income taxes, current	(13.7)	1.6
Deferred revenue	21.0	6.2
Deferred rent	(1.4)	(1.1)
Other liabilities	(1.4)	(2.6)
Cash provided by operating activities	209.5	164.7
Investing activities
Purchases of investments	(23.7)	(22.7)
Proceeds from maturities and sales of investments	22.3	20.6
Capital expenditures	(55.2)	(46.4)
Acquisitions, net of cash acquired	0.0	(1.0)
Proceeds from sale of a business	0.0	23.7
Proceeds from sale of a product line	10.5	0.0
Proceeds from sale of equity investments	7.9	0.0
Purchases of equity investments	(0.5)	(24.3)
Other, net	(0.3)	0.6
Cash used for investing activities	(39.0)	(49.5)
Financing activities
Common shares repurchased	(10.8)	(41.3)
Dividends paid	(31.9)	(29.6)
Repayment of long-term debt	(90.0)	(45.0)
Proceeds from stock-option exercises	0.1	0.2
Employee taxes paid from withholding of restricted stock units	(11.5)	(3.4)
Other, net	(1.1)	(0.4)
Cash used for financing activities	(145.2)	(119.5)
Effect of exchange rate changes on cash and cash equivalents	(10.5)	15.5
Net increase in cash and cash equivalents	14.8	11.2
Cash and cash equivalents—beginning of period	308.2	259.1
Cash and cash equivalents—end of period	323.0	270.3
Supplemental disclosure of cash flow information:
Cash paid for income taxes	55.3	37.5
Cash paid for interest	2.7	3.8
Supplemental information of non-cash investing and financing activities:
Unrealized (loss) gain on available-for-sale investments	(0.2)	3.5
Software and equipment obtained under long-term financing arrangement	$ 0.0	$ 3.1

Basis of Presentation of Interim Financial Information	9 Months Ended
Basis of Presentation of Interim Financial Information	Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Presentation of Interim Financial Information	Basis of Presentation of Interim Financial Information The accompanying unaudited condensed consolidated financial statements of Morningstar, Inc. and subsidiaries (Morningstar, we, our, the company) have been prepared to conform to the rules and regulations of the Securities and Exchange Commission (SEC). The preparation of financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue, and expenses. Actual results could differ from those estimates. In the opinion of management, the statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly our financial position, results of operations, equity, and cash flows. These financial statements and notes are unaudited and should be read in conjunction with our Audited Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 1, 2018 (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 SAB: Staff Accounting Bulletin

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Significant changes to our accounting policies as a result of adopting ASU 2014-09, Revenue from Contracts with Customers, are discussed below. We discuss our other significant accounting policies in Note 2 of our Audited Consolidated Financial Statements included in our Annual Report.

Recently adopted accounting pronouncements

Revenue Recognition: On May 28, 2014, the FASB issued ASU No. 2014-09 (Topic 606), Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The original effective date for ASU 2014-09 would have required us to adopt it beginning on January 1, 2017. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers—Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 for one year and permitted early adoption as early as the original effective date. We elected the deferral, and the new standard was effective for us on January 1, 2018. We also adopted ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-11, ASU No. 2016-12, and ASU No. 2016-20 on January 1, 2018.

We adopted Topic 606 using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2018. Upon adoption, we recognized the cumulative effect of adopting this guidance as an adjustment to our opening balance of retained earnings. Prior periods were not retrospectively adjusted.

The impact to revenue as a result of applying Topic 606 was an increase of $1.7 million and $5.0 million for the three and nine months ended September 30, 2018, respectively, and relates to a change in presentation of revenue and costs associated with third-party content and data. Such revenue and costs were presented on a net basis prior to the adoption of Topic 606 and are now presented on a gross basis.

We also changed our accounting for expenses related to our sales commission plans as a result of adopting Topic 606. Due to our method of adoption, we recorded a deferred commission asset, and related deferred tax liability, as of January 1, 2018 for sales commissions that were expensed in prior periods. This change resulted in an opening net adjustment to retained earnings of $17.0 million, with an offsetting increase to our deferred commissions and deferred income tax liabilities relating to prior periods.

The following table summarizes the cumulative effect of the changes to our unaudited condensed consolidated balance sheet as of January 1, 2018 from the adoption of Topic 606:



(in millions)	Balance at December 31, 2017		Adjustments due to Topic 606		Balance at January 1, 2018
Assets:
Deferred commissions, current and non-current	$	—	$	22.7	$	22.7

Liabilities:
Deferred income tax liability	$	—	$	5.7	$	5.7

Equity:
Retained earnings	$	—	$	17.0	$	17.0

The following table illustrates the impact that adopting Topic 606 has had on our reported results in the unaudited condensed consolidated balance sheet as of September 30, 2018 and the unaudited condensed consolidated statements of income for the three and nine months ended September 30, 2018:



	As of September 30, 2018
(in millions)	As Reported		Impact of adopting Topic 606		Balances without adoption of Topic 606
Balance Sheet:
Accounts receivable, less allowance	$	172.4	$	—	$	172.4
Deferred commissions, current and non-current	24.0		24.0		—
Deferred revenue, current and non-current	203.6		—		203.6



	Three months ended September 30,							Nine months ended September 30,
	2018							2018
(in millions)	As Reported		Impact of adopting Topic 606			Balances without adoption of Topic 606		As Reported		Impact of adopting Topic 606			Balances without adoption of Topic 606
Income Statement:
Revenue	$	261.3	$	1.7		$	259.6	$	757.2	$	5.0		$	752.2
Cost of revenue	100.0		1.7			98.3		302.2		5.0			297.2
Sales and marketing	35.8		1.5			37.3		113.7		1.7			115.4
Operating income	65.4		(1.5		)	63.9		166.5		(1.7		)	164.8

We recognize revenue by applying the following five-step model to each of our customer arrangements:

1.Identify the customer contract

2.Identify the performance obligations in the contract

3.Determine the transaction price

4.Allocate the transaction price to the performance obligations

5.Recognize revenue when (or as) performance obligations are satisfied

Revenues are recognized when (or as) performance obligations are satisfied by transferring a promised product or service to the customer. Products or services are transferred when (or as) the customer obtains control of the product or service. The transaction price for a customer arrangement is the amount we expect to be entitled to in exchange for transferring the promised product or service. The transaction price may include fixed amounts, variable amounts, or both. Amounts invoiced in excess of the revenue recognized for the services transferred during the period will result in an increase to deferred revenue. The timing of cash payments is typically thirty to sixty days after the performance obligation has been satisfied and these payments reduce our outstanding accounts receivable.

Revenue from contracts with customers is derived from license-based arrangements, asset-based arrangements, and transaction-based arrangements.

License-based revenue is generated through subscription contracts with our customers of Morningstar Data, Morningstar Direct, Morningstar Advisor Workstation, Morningstar Enterprise Components, PitchBook Data, and other similar products. Our performance obligations under these contracts are typically 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. Therefore, we recognize revenue for these performance obligations on a straight-line basis, typically over terms of 12 to 36 months.

Asset-based revenue is generated through consulting service contracts with our customers of Morningstar Investment Management, Workplace Solutions, and Morningstar Indexes. Our performance obligations under these contracts are satisfied over time as the customer receives continuous access to a service for the contract term. We recognize revenue over the contract term based on the value of assets under management and a tiered fee agreed to with the customer (typically in a range of 30-55 basis points of the customer’s average daily portfolio balance). Asset-based arrangements typically have a term of 12 to 36 months. The fees from such arrangements represent variable consideration, and the customer does not make separate purchasing decisions that result in additional performance obligations. Significant changes in the underlying fund assets, or significant disruptions in the market, are evaluated to determine if revisions on estimates of earned asset-based fees for the current quarter are needed. 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 revenue recognized will not occur. Estimates of asset-based fees are based on the most recently reported quarter, and, as a result, it is unlikely a significant reversal of revenue would occur.

Transaction-based revenue is generated through contracts with our customers for Internet advertising, Morningstar Conferences, and Morningstar Credit Ratings. Our performance obligations for Internet advertising and Morningstar Conferences are satisfied as the service is delivered, and therefore we recognize revenue when the performance obligation is satisfied (as the customer’s advertisements are displayed and at the completion of the Morningstar Conference). Our performance obligations for Morningstar Credit Ratings include the issuance of the rating, and may include surveillance services for a period of time as agreed with the customer. We allocate the transaction price to the deliverables based on their relative selling price, which is generally based on the price we charge when the same deliverable is sold separately. Our performance obligation for the issuance of the rating is satisfied when the rating is issued, which is when we recognize the related revenue. Our performance obligations for surveillance services is satisfied over time, as the customer has access to the service during the surveillance period and the level of service is consistent during the contract period. Therefore, we recognize revenue for this performance obligation on a straight-line basis.

Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its estimated standalone selling price. We generally determine standalone selling prices based on prices charged to customers when the same performance obligation is sold separately.

Our contracts with customers may include third-party involvement in providing goods or services to the customer. The inclusion of third-party content does not result in separate performance obligations because is it not delivered separately from the other license obligations. In these arrangements, the customer has contracted to receive a single, bundled solution with third-party and Morningstar content delivered via Morningstar’s subscription services. Revenue and related costs of revenue from third-party content is presented on a gross basis within the condensed consolidated interim financial statements.

Sales Commissions: We capitalize sales incentive compensation costs (sales commissions), which are considered directly attributable to obtaining a customer contract. Such costs are capitalized using a portfolio approach that aggregates these costs by legal entity within their geographical regions. Capitalized sales commissions are amortized using the straight-line method over a period that is consistent with the transfer of the products or services to the customer to which the sales commission relates. The period of transfer for each portfolio is the shorter of the weighted-average customer life, or the economic life of the underlying technology that delivers the products or services. As of September 30, 2018, the period of transfer was determined to be two to three years. Discretionary amounts which are added to sales commission payments are expensed as incurred, as they are not considered to be directly attributable to obtaining a customer contract.

Financial Instruments: On January 5, 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The accounting for other financial instruments, such as loans, investments in debt securities, and financial liabilities is largely unchanged. The new standard was effective for us on January 1, 2018. The adoption of ASU No. 2016-01 on January 1, 2018 had no impact on our consolidated financial statements and related disclosures.

Statement of Cash Flows: On August 26, 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, which reduces diversity in practice of how certain transactions are classified in the statement of cash flows. The new guidance clarifies the classification of cash activities related to debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate and bank-owned life insurance policies, distributions received from equity-method investments, and beneficial interests in securitization transactions. The guidance also describes a predominance principle in which cash flows with aspects of more than one class that cannot be separated should be classified based on the activity that is likely to be the predominant source or use of cash flow. The new standard was effective for us on January 1, 2018. The adoption of ASU No. 2016-15 on January 1, 2018 had no impact on our consolidated financial statements and related disclosures.

Business Combinations: On January 5, 2017, the FASB issued ASU No. 2017-01, Business Combinations: Clarifying the Definition of a Business, which revises the definition of a business. When substantially all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets), the assets acquired would not represent a business. To be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to create outputs. The new guidance provides a framework to evaluate when an input and substantive process are present (including for early-stage companies that have not generated outputs). To be a business without outputs, there will now need to be an organized workforce. The new guidance also narrows the definition of the term outputs to be consistent with how it is described in Topic 606, Revenue from Contracts with Customers. The new standard was effective for us on January 1, 2018. The adoption of ASU No. 2017-01 on January 1, 2018 had no impact on our consolidated financial statements and related disclosures.

Compensation—Stock Compensation: On May 10, 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation: Scope of Modification Accounting, which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The new standard was effective for us on January 1, 2018. The adoption of ASU No. 2017-09 on January 1, 2018 had no impact on our consolidated financial statements and related disclosures.

Income Taxes: On March 13, 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118, which allowed SEC registrants to record provisional amounts in earnings for the year ended December 31, 2017 due to the complexities involved in accounting for the enactment of the Tax Reform Act. We recognized the estimated income tax effects of the Tax Reform Act in our Audited Consolidated Financial Statements included in our Annual Report in accordance with SEC Staff Accounting Bulletin No. 118 (SAB 118). Refer to Note 10 for further information regarding the provisional amounts that we recorded as of December 31, 2017.

Recently issued accounting pronouncements not yet adopted

Leases: On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will require lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. The new standard is effective for us on January 1, 2019. The new standard required the use of a modified retrospective approach upon adoption. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842) -Targeted Improvements, which allows an additional transition method to adopt the new lease standard at the adoption date, as compared to the beginning of the earliest period presented, and recognize a cumulative-effect adjustment to the beginning balance of retained earnings in the period of adoption. We plan to elect this transition method at the adoption date of January 1, 2019. We continue to evaluate the effect that ASU No. 2016-02 will have on our consolidated financial statements and related disclosures. We are progressing on our project plan and achieving project milestones related to our comprehensive review of our lease portfolio, including identification of all leases where the company is either a lessor or lessee. We are implementing processes and lease accounting software to assist in our ongoing lease data collection and analysis, and updating our accounting policies and internal controls that would be impacted by the new guidance, to ensure readiness for adoption in the first quarter of 2019.

Intangibles—Goodwill and Other: On January 26, 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other, which simplifies the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclose the amount of goodwill at reporting units with zero or negative carrying amounts. The new standard is effective for us on January 1, 2020. The new standard is required to be applied prospectively. Early adoption is permitted for any impairment tests performed after January 1, 2017. We are evaluating the effect that ASU No. 2017-04 will have on our consolidated financial statements and related disclosures.

Income Statement-Reporting Comprehensive Income: On February 14, 2018, the FASB issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, to address a specific consequence of the Tax Cuts and Jobs Act (the Tax Reform Act) by allowing a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Reform Act’s reduction of the U.S. federal corporate income tax rate. The new standard is effective for us on January 1, 2019 and is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Reform Act is recognized. Early adoption is permitted. We are evaluating the effect that ASU No. 2018-02 will have on our consolidated financial statements and related disclosures.

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

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

Credit Arrangements	9 Months Ended
Credit Arrangements	Sep. 30, 2018
Debt Disclosure [Abstract]
Credit Arrangements	Credit Arrangements We are party to a credit agreement that provides us with a three-year credit facility expiring in November 2019 with a borrowing capacity of up to $300.0 million. The credit agreement also provides for issuance of up to $25.0 million of letters of credit under the revolving credit facility. The interest rate applicable to any loan under the credit agreement is, at our option, either: (i) the applicable London interbank offered rate (LIBOR) plus an applicable margin for such loans, which ranges between 1.00% and 1.75%, based on our consolidated leverage ratio or (ii) the lender's base rate plus the applicable margin for such loans, which ranges between 2.00% and 2.75%, based on our consolidated leverage ratio. The credit agreement also contains financial covenants under which we: (i) may not exceed a maximum consolidated leverage ratio of 3.00 to 1.00 and (ii) are required to maintain a minimum consolidated interest coverage ratio of not less than 3.00 to 1.00. We were in compliance with the financial covenants as of September 30, 2018. Our outstanding principal balance was $90.0 million at a one-month LIBOR interest rate plus 100 basis points as of September 30, 2018, leaving borrowing availability of $210.0 million.

Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

Goodwill

The following table shows the changes in our goodwill balances from December 31, 2017 to September 30, 2018:



	(in millions)
Balance as of December 31, 2017	$	564.9
Foreign currency translation	(5.7		)
Balance as of September 30, 2018	$	559.2

We did not record any impairment losses in the first nine months of 2018 and 2017. We perform our annual impairment reviews in the fourth quarter and when triggering events are identified.

Intangible Assets

The following table summarizes our intangible assets:



	As of September 30, 2018								As of December 31, 2017
(in millions)	Gross		Accumulated Amortization			Net		Weighted Average Useful Life (years)	Gross		Accumulated Amortization			Net		Weighted Average Useful Life (years)
Intellectual property	$	31.4	$	(29.1	)	$	2.3	9	$	31.5	$	(28.9	)	$	2.6	9
Customer-related assets	154.4		(111.4		)	43.0		12	156.6		(108.1		)	48.5		12
Supplier relationships	0.3		(0.2		)	0.1		20	0.2		(0.1		)	0.1		20
Technology-based assets	127.1		(93.5		)	33.6		7	127.9		(84.2		)	43.7		7
Non-competition agreements	2.4		(2.1		)	0.3		5	2.5		(2.0		)	0.5		5
Total intangible assets	$	315.6	$	(236.3	)	$	79.3	10	$	318.7	$	(223.3	)	$	95.4	10

The following table summarizes our amortization expense related to intangible assets:



	Three months ended September 30,				Nine months ended September 30,
(in millions)	2018		2017		2018		2017
Amortization expense	$	5.2	$	5.5	$	15.7	$	18.1

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

We expect intangible amortization expense for the remainder of 2018 and subsequent years as follows:



	(in millions)
Remainder of 2018 (from October 1 through December 31)	$	4.9
2019	19.1
2020	16.2
2021	12.9
2022	5.1
Thereafter	21.1

Our estimates of future amortization expense for intangible assets may be affected by acquisitions, divestitures, changes in the estimated average useful lives, and foreign currency translation.

Income Per Share

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Income Per Share

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



	Three months ended September 30,				Nine months ended September 30,
(in millions, except per share amounts)	2018		2017		2018		2017

Basic net income per share:
Consolidated net income	$	56.9	$	33.9	$	140.6	$	98.0

Weighted average common shares outstanding	42.6		42.5		42.6		42.8

Basic net income per share	$	1.33	$	0.80	$	3.30	$	2.29

Diluted net income per share:
Consolidated net income	$	56.9	$	33.9	$	140.6	$	98.0

Weighted average common shares outstanding	42.6		42.5		42.6		42.8
Net effect of dilutive stock options, restricted stock units, performance share awards, and market stock units	0.5		0.3		0.4		0.3
Weighted average common shares outstanding for computing diluted income per share	43.1		42.8		43.0		43.1

Diluted net income per share	$	1.32	$	0.79	$	3.27	$	2.28

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

Revenue

9 Months Ended

Sep. 30, 2018

Revenue from Contract with Customer [Abstract]

Revenue

Disaggregation of Revenue

The following table presents our revenue disaggregated by revenue type. Sales and usage-based taxes are excluded from revenue.



	Three months ended September 30,				Nine months ended September 30,
(in millions)	2018		2017		2018		2017
License-based	$	196.7	$	169.5	$	559.5	$	492.9
Asset-based	50.5		46.2		149.9		134.0
Transaction-based	14.1		14.2		47.8		41.7
Consolidated revenue	$	261.3	$	229.9	$	757.2	$	668.6

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

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

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

Contract liabilities

Our contract liabilities represent deferred revenue. We record contract liabilities when cash payments are received or due in advance of our performance, including amounts which are refundable. The contract liabilities balance for the nine months ended September 30, 2018 had a net increase of $18.1 million, primarily driven by cash payments received or due in advance of satisfying our performance obligations. We recognized $153.6 million of revenue in the nine-month period ended September 30, 2018 that was included in the contract liabilities balance as of December 31, 2017.

We expect to recognize revenue related to our contract liabilities for the remainder of 2018 and subsequent years as follows:



(in millions)	As of September 30, 2018
Remainder of 2018 (from October 1 through December 31)	$	137.6
2019	246.7
2020	69.9
2021	17.4
2022	8.9
Thereafter	37.5
	$	518.0

The aggregate amount of revenue we expect to recognize for the remainder of 2018 and subsequent years is higher than our contract liability balance of $203.6 million as of September 30, 2018. The difference represents the value of performance obligations for signed contracts where we have not yet begun to satisfy the performance obligations, partially satisfied performance obligations, or have not yet billed the customer.

The table above does not include variable consideration for unsatisfied performance obligations related to certain of our asset-based and transaction-based contracts as of September 30, 2018. We are applying the optional exemption as the variable consideration relates to these unsatisfied performance obligations being fulfilled as a series. The performance obligations related to these contracts are expected to be satisfied over the next 12 to 36 months as services are provided to the client. For asset-based contracts, the consideration received for services performed is based on future asset values, which will be known at the time the services are performed. The variable consideration for this revenue can be affected by changes in the underlying value of fund assets due to client redemptions, additional investments, or significant movements in the market. For transaction-based contracts such as Internet advertising, the consideration received for services performed is based on the number of impressions, which will be known once impressions are created. The variable consideration for this revenue can be affected by the timing and quantity of impressions in any given period.

The table above does not include revenue for unsatisfied performance obligations related to certain of our license-based and transaction-based contracts as of September 30, 2018. We are applying the optional exemption as the performance obligations for such contracts have an expected duration of one year or less. For certain license-based contracts, the remaining performance obligation is expected to be less than one year based on the corresponding subscription terms. For transaction-based contracts such as new credit rating issuances and the Morningstar conference, the related performance obligations are expected to be satisfied within the next twelve months.

Contract Assets

Our contract assets represent accounts receivable, less allowance and deferred commissions. We did not record any impairment losses on receivables or deferred commissions in the first nine months of 2018.

The following table summarizes our contract assets balance:



(in millions)	As of September 30, 2018		As of December 31, 2017
Accounts receivable, less allowance	$	172.4	$	148.2
Deferred commissions	14.2		—
Deferred commissions, non-current	9.8		—
Total contract assets	$	196.4	$	148.2

The following table shows the change in our deferred commissions balance from January 1, 2018 to September 30, 2018:



	(in millions)
Balance as of January 1, 2018	$	22.7
Commissions earned and capitalized	13.8
Amortization of capitalized amounts	(12.5		)
Balance as of September 30, 2018	$	24.0

Segment and Geographical Area Information

9 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

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 one reportable segment, all required financial segment information can be found directly in the Unaudited Condensed Consolidated Financial Statements.

The accounting policies for our single reportable segment are the same as those described in “Note 2. Summary of Significant Accounting Policies” included in the Audited Consolidated Financial Statements and Notes thereto included in our Annual Report. We evaluate the performance of our reporting segment based on revenue and operating income.

Geographical Area Information

The tables below summarize our revenue and long-lived assets by geographical area:



Revenue by geographical area
	Three months ended September 30,				Nine months ended September 30,
(in millions)	2018		2017		2018		2017
United States	$	198.7	$	171.8	$	566.0	$	503.4

United Kingdom	17.9		17.0		54.6		47.5
Continental Europe	20.1		18.2		60.3		51.0
Australia	9.9		8.8		31.2		25.5
Canada	7.4		7.5		22.6		22.0
Asia	5.9		5.3		18.1		15.7
Other	1.4		1.3		4.4		3.5
Total International	62.6		58.1		191.2		165.2

Consolidated revenue	$	261.3	$	229.9	$	757.2	$	668.6



Long-lived assets by geographical area

(in millions)	As of September 30, 2018		As of December 31, 2017
United States	$	128.4	$	131.9

United Kingdom	4.3		6.0
Continental Europe	1.3		1.7
Australia	5.1		2.3
Canada	0.3		0.2
Asia	5.1		5.2
Other	—		0.1
Total International	16.1		15.5

Consolidated property, equipment, and capitalized software, net	$	144.5	$	147.4

Investments and Fair Value Measurements

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Investments and Fair Value Measurements

We classify our investments into three categories: available-for-sale, held-to-maturity, and trading securities. Our investment portfolio consists of stocks, bonds, options, mutual funds, money market funds, or exchange-traded products that replicate the model portfolios and strategies created by Morningstar. These investment accounts may also include exchange-traded products where Morningstar is an index provider. We classify our investment portfolio as shown below:



(in millions)	As of September 30, 2018		As of December 31, 2017
Available-for-sale	$	23.1	$	21.5
Held-to-maturity	18.8		21.9
Trading securities	1.8		1.7
Total	$	43.7	$	45.1

The following table shows the cost, unrealized gains (losses), and fair value of investments classified as available-for-sale and held-to-maturity:



	As of September 30, 2018									As of December 31, 2017
(in millions)	Cost		Unrealized Gain		Unrealized Loss			Fair Value		Cost		Unrealized Gain		Unrealized Loss			Fair Value
Available-for-sale:
Equity securities and exchange-traded funds	$	18.5	$	2.5	$	(0.8	)	$	20.2	$	17.1	$	2.4	$	(0.6	)	$	18.9
Mutual funds	2.8		0.2		(0.1		)	2.9		2.4		0.2		—			2.6
Total	$	21.3	$	2.7	$	(0.9	)	$	23.1	$	19.5	$	2.6	$	(0.6	)	$	21.5

Held-to-maturity:
Certificates of deposit	$	18.8	$	—	$	—		$	18.8	$	19.9	$	—	$	—		$	19.9
Convertible note	—		—		—			—		2.0		—		—			2.0
Total	$	18.8	$	—	$	—		$	18.8	$	21.9	$	—	$	—		$	21.9

As of September 30, 2018 and December 31, 2017, investments with unrealized losses for greater than a 12-month period were not material to the Unaudited Condensed Consolidated Balance Sheets and were not deemed to have other than temporary declines in value.

The table below shows the cost and fair value of investments classified as available-for-sale and held-to-maturity based on their contractual maturities as of September 30, 2018 and December 31, 2017.



	As of September 30, 2018				As of December 31, 2017
(in millions)	Cost		Fair Value		Cost		Fair Value
Available-for-sale:
Equity securities, exchange-traded funds, and mutual funds	$	21.3	$	23.1	$	19.5	$	21.5
Total	$	21.3	$	23.1	$	19.5	$	21.5

Held-to-maturity:
Due in one year or less	$	18.6	$	18.6	$	19.7	$	19.7
Due in one to three years	0.2		0.2		2.2		2.2
Total	$	18.8	$	18.8	$	21.9	$	21.9

The following table shows the realized gains and losses arising from sales of our investments classified as available-for-sale recorded in our Unaudited Condensed Consolidated Statements of Income:



	Three months ended September 30,						Nine months ended September 30,
(in millions)	2018			2017			2018			2017
Realized gains	$	0.5		$	0.4		$	1.4		$	1.3
Realized losses	(0.2		)	(0.1		)	(0.5		)	(0.2		)
Realized gains, net	$	0.3		$	0.3		$	0.9		$	1.1

We determine realized gains and losses using the specific identification method.

The following table shows the net unrealized gains on trading securities as recorded in our Unaudited Condensed Consolidated Statements of Income:



	Three months ended September 30,				Nine months ended September 30,
(in millions)	2018		2017		2018		2017
Unrealized gains, net	$	—	$	—	$	—	$	0.1

The table below shows the fair value of our assets subject to fair value measurements on a recurring basis using a fair value hierarchy:


Level 1:	Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access.


Level 2:	Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.


Level 3:	Valuations based on inputs that are unobservable and significant to the overall fair value measurement.



	Fair Value		Fair Value Measurements as of September 30, 2018
	as of		Using Fair Value Hierarchy
(in millions)	September 30, 2018		Level 1		Level 2		Level 3
Available-for-sale investments:
Equity securities and exchange-traded funds	$	20.2	$	20.2	$	—	$	—
Mutual funds	2.9		2.9		—		—
Trading securities	1.8		1.8		—		—
Cash equivalents	0.5		0.5		—		—
Total	$	25.4	$	25.4	$	—	$	—



	Fair Value		Fair Value Measurements as of December 31, 2017
	as of		Using Fair Value Hierarchy
(in millions)	December 31, 2017		Level 1		Level 2		Level 3
Available-for-sale investments:
Equity securities and exchange-traded funds	$	18.9	$	18.9	$	—	$	—
Mutual funds	2.6		2.6		—		—
Trading securities	1.7		1.7		—		—
Cash equivalents	0.5		0.5		—		—
Total	$	23.7	$	23.7	$	—	$	—

Based on our analysis of the nature and risks of our investments in equity securities and mutual funds, we determined that presenting each of these investment categories in the aggregate is appropriate.

We measure the fair value of money market funds, mutual funds, equity securities, and exchange-traded funds based on quoted prices in active markets for identical assets or liabilities. We did not hold any securities categorized as Level 2 or Level 3 as of September 30, 2018 and December 31, 2017.

Stock-Based Compensation

9 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation Plans

All of our employees and our non-employee directors are eligible for awards under the Morningstar 2011 Stock Incentive Plan, which provides for a variety of stock-based awards, including stock options, restricted stock units, performance share awards, market stock units, and restricted stock.

The following table summarizes the stock-based compensation expense included in each of our operating expense categories:



	Three months ended September 30,				Nine months ended September 30,
(in millions)	2018		2017		2018		2017
Cost of revenue	$	3.1	$	2.2	$	9.0	$	6.6
Sales and marketing	0.8		0.7		2.5		2.1
General and administrative	3.4		2.6		12.4		7.8
Total stock-based compensation expense	$	7.3	$	5.5	$	23.9	$	16.5

As of September 30, 2018, the total unrecognized stock-based compensation cost related to outstanding restricted stock units, performance share awards, and market stock units expected to vest was $44.2 million, which we expect to recognize over a weighted average period of 32 months.

Income Taxes

9 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Effective Tax Rate

The following table shows our effective tax rate for the three and nine months ended September 30, 2018 and September 30, 2017:



	Three months ended September 30,						Nine months ended September 30,
(in millions)	2018			2017			2018			2017
Income before income taxes and equity in net income (loss) of unconsolidated entities	$	72.7		$	50.8		$	184.5		$	139.2
Equity in net income (loss) of unconsolidated entities	0.3			—			(1.6		)	(1.0		)
Total	$	73.0		$	50.8		$	182.9		$	138.2
Income tax expense	$	16.1		$	16.9		$	42.3		$	40.2
Effective tax rate	22.1		%	33.3		%	23.1		%	29.1		%

Our effective tax rate in the third quarter and first nine months of 2018 was 22.1% and 23.1%, respectively, which resulted in respective decreases of 11.2 and 6.0 percentage points compared with the same periods in the prior year. Our effective tax rate in the third quarter and the first nine months of 2018 reflects the U.S. federal statutory income tax rate change from 35% to 21% and other provisions of the Tax Reform Act enacted in December 2017. The impacts of other provisions of the Tax Reform Act on our effective tax rate in the third quarter and first nine months of 2018 are discussed below. Our effective tax rate for the first nine months of 2017, compared to the first nine months of 2018, also reflects a book gain of $17.5 million on the sale of HelloWallet in the second quarter of 2017 that was not a gain for tax purposes.

On December 22, 2017, the President of the United States signed into law the Tax Reform Act. The legislation significantly changed U.S. tax law by, among other things, lowering corporate income tax rates, changing to a territorial tax system and imposing a transitional tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective from January 1, 2018.

In our consolidated financial statements for the year ended December 31, 2017, we recognized a $10.6 million discrete net tax benefit. SAB 118 allowed for the recording of provisional amounts, which were primarily comprised of the following:


•	A $14.7 million deferred tax benefit from revaluing our net U.S. deferred tax liabilities at December 31, 2017 to reflect the new U.S. corporate tax rate.


•	A tax expense of $7.5 million for the transitional tax liability on deemed repatriated earnings of foreign subsidiaries payable over 8 years. This tax expense was offset by a tax benefit of a $6.4 million reduction of a deferred tax liability previously recorded for our foreign equity method investments.


•	A tax expense of $3.0 million related to changes in our indefinite reinvestment assertion. We recorded deferred taxes in the amount of $3.0 million for foreign withholding taxes that would be due upon remittance of dividends from certain of our foreign affiliates.

During the nine-month period ended September 30, 2018, we made no changes to the provisional amounts recognized in 2017. We will continue to analyze the effects of the Tax Reform Act and will record additional impacts of the enactment as we complete our accounting within the measurement period, which extends up to one year from the enactment date.

The ultimate impact from the enactment of the Tax Reform Act may differ from the provisional amounts that we recorded in 2017, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions that we have made, additional legislative or administrative actions taken to clarify the intent of the statutory language that may differ from our current interpretation, any changes in accounting standards for income taxes or related interpretations in response to the Tax Reform Act or any updates or changes to estimates used to calculate the impacts.

In addition to the reduction of the U.S. corporate income tax rate to a flat 21% rate discussed above, we are

subject to the following provisions of the Tax Reform Act effective from January 1, 2018, which:


•	impose a new minimum tax on certain non-U.S. earnings, irrespective of the territorial system of taxation, and generally allow for the repatriation of future earnings of foreign subsidiaries without incurring additional U.S. taxes by transitioning to a territorial system of taxation (Global Intangible Low-Taxed Income or “GILTI Tax”);


•	eliminate tax incentives for domestic production activities in the United States (the “Section 199 Deduction”) and create an incentive for U.S. companies to sell, lease or license goods and services abroad by allowing for a new deduction for Foreign-Derived Intangible Income (the “FDII Deduction”);


•	subject certain payments made by a U.S. company to related foreign companies to certain minimum taxes (Base Erosion Anti-Abuse Tax or “BEAT”);

•

disallow net business interest deductions in excess of 30% of adjusted U.S. taxable income without regard to interest expense, interest income, taxes, net operating losses, depreciation and amortization (generally, EBITDA) for years beginning before January 1, 2022, and taxable income without regard to interest and taxes (EBIT) thereafter with indefinite carryforwards of excess interest expense (the “163(j) Interest Limitation”);


•	reduce deductions with respect to certain employee fringe benefits and reduce deductions for compensation paid to specified executive officers.

With respect to the above provisions, our effective tax rate in the three and nine months ended September 30, 2018 is favorably impacted by the federal statutory income tax rate change from 35% of 21% and also the tax benefits of the FDII Deduction. The impact of these favorable provisions is offset by the loss of tax benefits from the repeal of the Section 199 Deduction, the incremental tax expense attributable to GILTI Tax estimates and, to a lesser extent, the incremental tax expense for disallowed deductions for employee fringe benefits and executive compensation. Our effective tax rate in the three and nine months ended September 30, 2018 was not impacted by BEAT or the 163(j) Interest Limitation.

We also continue to evaluate the impact of the GILTI Tax provisions, which are complex and subject to continuing interpretation and administrative actions of the U.S. tax authorities. We are required to make an accounting policy election of either (1) treating taxes due on future U.S. inclusions in taxable income related to the GILTI Tax as a current period expense when incurred (the “period cost method”) or (2) factoring such amounts into the measurement of our deferred taxes (the “deferred method”). Our accounting policy election with respect to the new GILTI Tax rules will depend, in part, on analyzing our global income to determine whether we can reasonably estimate the tax impact. While we have included an estimate of GILTI Tax in our estimated effective tax rate for the three and nine months ended September 30, 2018, we have not completed our analysis and are not yet able to determine which method to elect. Adjustments related to the amount of GILTI Tax recorded in our consolidated financial statements may be required based on the outcome of this election.

Unrecognized Tax Benefits

The table below provides information concerning our gross unrecognized tax benefits as of September 30, 2018 and December 31, 2017, as well as the effect these gross unrecognized tax benefits would have on our income tax expense, if they were recognized.



(in millions)	As of September 30, 2018		As of December 31, 2017
Gross unrecognized tax benefits	$	12.6	$	18.7
Gross unrecognized tax benefits that would affect income tax expense	$	12.3	$	15.0
Decrease in income tax expense upon recognition of gross unrecognized tax benefits	$	11.8	$	14.4

The amount of our gross unrecognized tax benefits decreased in 2018 primarily as a result of the following:

•

In the first quarter of 2018, we settled certain of our U.S. federal and state tax audits including our federal audit for the tax periods covering 2008 to 2012. The impact of the audit settlements decreased our gross unrecognized tax benefits by $2.4 million but the impact on our tax expense was nominal since the liabilities that we reserved for these audits were approximate to the final settlement amounts.


•	In the second and third quarters of 2018, there were lapses of statutes of limitation for unsuccessful state refund claims which decreased our gross unrecognized tax benefits by $3.4 million. We did not previously record a financial statement benefit for the state refund claims and, therefore, this decrease had no impact on our income tax expense in the second and third quarters.


•	In the third quarter of 2018, there were other lapses of statutes of limitation that decreased our gross unrecognized tax benefits by $1.0 million and our income tax expense by $1.0 million.

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



Liabilities for Unrecognized Tax Benefits (in millions)	As of September 30, 2018		As of December 31, 2017
Current liability	$	7.2	$	8.7
Non-current liability	5.7		7.0
Total liability for unrecognized tax benefits	$	12.9	$	15.7

Because we conduct business globally, we file income tax returns in U.S. federal, state, local, and foreign jurisdictions. We are currently under audit by various state and local tax authorities in the United States, as well as tax authorities in certain non-U.S. jurisdictions. It is possible that the examination phase of some of our current audits will conclude in 2018. It is not possible to estimate the effect of current audits on previously recorded unrecognized tax benefits.

Approximately 75% of our cash, cash equivalents, and investments balance as of September 30, 2018 was held by our operations outside of the United States. 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. In December 2017, we recorded a provisional deferred tax liability of $3.0 million for foreign withholding taxes that would be due upon remittance of dividends from certain of our foreign affiliates. We continue to assess our indefinite reinvestment assertion as a result of the Tax Reform Act. Accordingly, we consider that most of our remaining foreign outside basis differences to be indefinitely reinvested and we have not recorded deferred taxes on those outside basis differences. As part of our continuing evaluation, we will need to gather additional information to compute outside basis differences for our foreign affiliates in order to assess whether any new deferred taxes should be recorded. We will also need to account for any prospective interpretive guidance issued on the Tax Reform Act as part of our evaluation.

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

Contingencies	9 Months Ended
Contingencies	Sep. 30, 2018
Commitments and Contingencies Disclosure [Abstract]
Contingencies	Contingencies Michael D. Green In August 2017, Michael D. Green, individually and purportedly on behalf of all others similarly situated, filed a complaint in the United States District Court for the Northern District of Illinois. The complaint named as defendants Morningstar, Inc., Prudential Investment Management Services LLC, and Prudential Retirement Insurance and Annuity Co., and contained one count alleging violation of the Racketeer Influenced and Corrupt Organizations Act (RICO). Plaintiff, a participant in a pension plan, alleged that the defendants engaged in concerted racketeering actions to steer plan participants into high-cost investments that pay unwarranted fees to the defendants. The complaint sought unspecified compensatory damages for plaintiff and the members of the putative class, treble damages, injunctive relief, costs, and attorneys’ fees. We filed a motion to dismiss the complaint for failure to state a claim, which the court granted without prejudice on March 16, 2018. On April 13, 2018, plaintiff filed an amended complaint, substituting Morningstar Investment Management LLC for Morningstar, Inc. as a defendant, and which again contains one count alleging violation of RICO and seeks unspecified compensatory damages for plaintiff and the members of the putative class, treble damages, injunctive relief, costs, and attorneys' fees. We moved to dismiss the amended complaint on May 11, 2018. Morningstar's motion is fully briefed and is awaiting the court's ruling. Although we are vigorously contesting the claim asserted, we cannot predict the outcome of the proceeding. Other Matters We are involved from time to time in legal proceedings and litigation that arise in the normal course of our business. While it is difficult to predict the outcome of any particular proceeding, we do not believe the result of any of these matters will have a material adverse effect on our business, operating results, or financial position.

Share Repurchase Program	9 Months Ended
Share Repurchase Program	Sep. 30, 2018
Equity [Abstract]
Share Repurchase Program	Share Repurchase Program In December 2017, 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, 2018. The authorization expires on December 31, 2020. We may repurchase shares from time to time at prevailing market prices on the open market or in private transactions in amounts that we deem appropriate. As of September 30, 2018, we had repurchased a total of 109,289 shares for $10.5 million under this authorization, leaving approximately $489.5 million available for future repurchases.

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Recent Accounting Pronouncements Policy

Recently adopted accounting pronouncements

Revenue Recognition: On May 28, 2014, the FASB issued ASU No. 2014-09 (Topic 606), Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The original effective date for ASU 2014-09 would have required us to adopt it beginning on January 1, 2017. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers—Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 for one year and permitted early adoption as early as the original effective date. We elected the deferral, and the new standard was effective for us on January 1, 2018. We also adopted ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-11, ASU No. 2016-12, and ASU No. 2016-20 on January 1, 2018.

We adopted Topic 606 using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2018. Upon adoption, we recognized the cumulative effect of adopting this guidance as an adjustment to our opening balance of retained earnings. Prior periods were not retrospectively adjusted.

The impact to revenue as a result of applying Topic 606 was an increase of $1.7 million and $5.0 million for the three and nine months ended September 30, 2018, respectively, and relates to a change in presentation of revenue and costs associated with third-party content and data. Such revenue and costs were presented on a net basis prior to the adoption of Topic 606 and are now presented on a gross basis.

We also changed our accounting for expenses related to our sales commission plans as a result of adopting Topic 606. Due to our method of adoption, we recorded a deferred commission asset, and related deferred tax liability, as of January 1, 2018 for sales commissions that were expensed in prior periods. This change resulted in an opening net adjustment to retained earnings of $17.0 million, with an offsetting increase to our deferred commissions and deferred income tax liabilities relating to prior periods.

The following table summarizes the cumulative effect of the changes to our unaudited condensed consolidated balance sheet as of January 1, 2018 from the adoption of Topic 606:



(in millions)	Balance at December 31, 2017		Adjustments due to Topic 606		Balance at January 1, 2018
Assets:
Deferred commissions, current and non-current	$	—	$	22.7	$	22.7

Liabilities:
Deferred income tax liability	$	—	$	5.7	$	5.7

Equity:
Retained earnings	$	—	$	17.0	$	17.0

The following table illustrates the impact that adopting Topic 606 has had on our reported results in the unaudited condensed consolidated balance sheet as of September 30, 2018 and the unaudited condensed consolidated statements of income for the three and nine months ended September 30, 2018:



	As of September 30, 2018
(in millions)	As Reported		Impact of adopting Topic 606		Balances without adoption of Topic 606
Balance Sheet:
Accounts receivable, less allowance	$	172.4	$	—	$	172.4
Deferred commissions, current and non-current	24.0		24.0		—
Deferred revenue, current and non-current	203.6		—		203.6



	Three months ended September 30,							Nine months ended September 30,
	2018							2018
(in millions)	As Reported		Impact of adopting Topic 606			Balances without adoption of Topic 606		As Reported		Impact of adopting Topic 606			Balances without adoption of Topic 606
Income Statement:
Revenue	$	261.3	$	1.7		$	259.6	$	757.2	$	5.0		$	752.2
Cost of revenue	100.0		1.7			98.3		302.2		5.0			297.2
Sales and marketing	35.8		1.5			37.3		113.7		1.7			115.4
Operating income	65.4		(1.5		)	63.9		166.5		(1.7		)	164.8