CHICAGO, Feb. 21, 2019 /PRNewswire/ -- Morningstar, Inc.
(Nasdaq: MORN), a leading provider of independent investment research, today announced fourth-quarter and full-year 2018
financial results. The Company surpassed $1 billion in revenue in 2018 and recorded strong organic
revenue growth and free cash flow.
Fourth-Quarter Financial Highlights
- Revenue increased 8.1% to $262.7 million; organic revenue growth was 8.7%.
- Operating income rose 15.7% to $49.3 million.
- Diluted net income per share rose 8.8% to $0.99, versus $0.91
in the fourth quarter of 2017.
Full-Year 2018 Financial Highlights
- Revenue increased 11.9% to $1.02 billion; organic revenue growth was 11.4%.
- Operating income rose 27.1% to $215.8 million.
- Diluted net income per share rose 33.6% to $4.25, versus $3.18
in 2017.
- Cash provided by operating activities increased 25.9% to $314.8 million; free cash flow was
$238.7 million, or 30.1% higher than 2017.
"Morningstar reached a significant milestone in 2018, surpassing $1
billion in revenue for the first time," said Kunal Kapoor, Morningstar's chief
executive officer. "This achievement resulted from putting investors first and providing exceptional experiences that support
better investor outcomes. While the late 2018 downturn in global markets impacted net flows and asset growth in Morningstar
Managed Portfolios, we experienced record flows into the ETFs built on Morningstar Indexes. We believe the diversity of our
offerings and strength of our balance sheet allowed us to mitigate the impact of market fluctuations so that we can continue to
focus on building products and delivering services that empower investor success."
Accomplishments:
- As a group, our key investment areas -- Morningstar Data, Morningstar Direct, PitchBook, Morningstar Managed Portfolios,
Workplace Solutions, and Morningstar Credit Ratings -- had organic revenue growth of 16.7% in 2018.
- In 2018, we continued to enhance our analytics, data, and research offerings. We launched Investor Pulse, our new business
intelligence tool that combines predictive analytics with fund flow data. We also expanded our
equity data sets, launched four fixed-income data feed packages, and added new environmental, social,
and governance (ESG) datapoints. The Morningstar Quantitative Rating for Funds launched globally, covering more
than 100,000 funds. We also added coverage of collective
investment trust target-date series, separately managed accounts, and global equity
research coverage in Asia Pacific and Europe.
- Morningstar Data experienced strong demand from clients preparing to meet global regulatory requirements. In Europe, we collected and delivered new regulatory data sets addressing the Markets in Financial
Instruments Directive (MiFID II), Packaged Retail and Insurance-based Investment Products Regulation (PRIIPS), and the German
Investment Tax Act. An increasing appetite for data science and analytical platforms, as well as the trend toward more digital
experiences for investors, also prompted clients to find new use-cases for our data.
- We introduced Morningstar Direct for Asset Management and Morningstar Direct for Wealth Management on the Morningstar
Cloud, our next-generation web-based software platform. These workflow-specific editions share a common platform, enabling us
to deliver enhancements as we innovate new data sets and solutions.
- PitchBook made meaningful platform improvements, with an upgraded site architecture delivering a more advanced search
experience, and functionality additions such as industry overview visualizations and enhanced public company comparables
featuring Morningstar's public equity data. PitchBook also expanded its datasets, adding coverage of over 320,000 new private middle-market companies while also substantially increasing the number of financial
statements available for more than 70,000 European private companies already covered.
- Morningstar's Investment Management group successfully launched nine Morningstar Mutual Funds in November 2018, which are offered exclusively to advisors using Morningstar Managed Portfolios. As of
Dec. 31, 2018, we have converted approximately $1 billion in
existing client assets into portfolios which utilize the funds. As advisors increasingly seek high-quality, cost-effective,
outsourced investment management solutions, we expect demand for our Morningstar mutual funds to grow in 2019 and beyond.
- Morningstar Plan Advantage, our new platform for advisors who design and manage retirement plans, signed a major broker
dealer as its first client in late 2018.
- Morningstar Credit Ratings published an updated rating methodology for CMBS conduit transactions. The new methodology
incorporates recent performance data into an enhanced model and improves transparency into our analytical approach.
Challenges:
- Market volatility negatively impacted net flows into Morningstar Managed Portfolios and impacted overall assets in
Morningstar Investment Management and Workplace Solutions, particularly in the fourth quarter. Assets under management and
advisement in Managed Portfolios increased by $1.2 billion in 2018 and were relatively flat year
over year in Workplace Solutions.
- Morningstar.com premium subscriptions did not meet our expectations for growth this year. We recently refreshed the
Morningstar.com website and plan additional improvements in 2019.
- Asset managers used 2018 to reevaluate their research consumption policies and spending in light of MiFID II, which
impacted revenue from our equity and manager research products. However, we believe that the implementation of the new
regulation had the positive outcome of increasing price transparency in sell-side research and reducing competitors in that
space.
Overview of Financial Results
Fourth-Quarter Results
Revenue for the fourth quarter was $262.7 million, an increase of 8.1% compared with the fourth
quarter of 2017, or 8.7% higher on an organic basis. On a reported basis, license-based revenue grew 10.0% year over year, driven
by strong demand for PitchBook in the U.S., Morningstar Data in Europe and Asia Pacific, and Morningstar Direct across all geographies. Despite global market volatility in the fourth
quarter, asset-based revenue increased year over year by 4.6%, driven primarily by growth in Workplace Solutions and Morningstar
Indexes. In Morningstar Investment Management, revenue also increased by 1.9% in the fourth quarter, as adoption of the new
revenue recognition standard mitigated the negative impacts of market performance and net flows. Transaction-based revenue
remained flat year over year, as growth in Morningstar Credit Ratings was offset by declines in
conference revenue due to changes in event timing.
Operating expense grew 6.5% in the fourth quarter due to increased bonus expenses, resulting from strong companywide business
performance, higher salaries, and production costs. Operating expense growth was partially offset by lower commissions, as softer
net flows in the fourth quarter drove weaker performance in Morningstar Investment Management relative to the prior year period.
Higher capitalization of software development costs and lower benefit costs also offset fourth-quarter operating expenses.
Fourth-quarter operating income was $49.3 million, an increase of 15.7% compared with the prior
year period, reflecting operating margin of 18.8% versus 17.5% in the fourth quarter of 2017. Net income in the fourth quarter
was $42.4 million, or $0.99 per diluted share, compared with
$38.9 million, or $0.91 per diluted share, in the fourth quarter of
2017.
Full-Year 2018 Results
For the full year, revenue increased 11.9% to $1.02 billion, including a $10.5 million revenue benefit from an amended license agreement in the third quarter of 2018 which had a 1.2
percentage point favorable impact. On an organic basis, full-year revenue increased 11.4%. Growth was balanced across geographies
and products, with license-based revenue higher by 12.6%, asset-based revenue increasing 10.0%, and transaction-based revenue
growing 9.8% on a reported basis.
Operating expense increased 8.4% for the year, due primarily to higher salaries and bonus expenses, in addition to production
expenses and depreciation.
Operating income was $215.8 million, an increase of 27.1%, compared with the prior year period.
Full-year operating margin was 21.2%, compared with 18.6% at the end of 2017. The amended license agreement positively impacted
full-year operating income growth by 6.2 percentage points and operating margin by less than one percentage point, as the
recognition of the related revenue was not accompanied by a commensurate increase in operating expense.
Net income was $183.0 million, or $4.25 per diluted share,
compared with $136.9 million, or $3.18 per diluted share, for the
year ended Dec. 31, 2017. Net income for 2018 included an after-tax gain of $7.8 million, or $0.18 per diluted share, from the sale of our 15(c) board
consulting services product line during the first quarter, and a $10.5 million revenue benefit, or $0.18 per diluted share, related to an amended license agreement in the third quarter. Net income for 2018 also
included an after-tax gain of $4.1 million, or $0.10 per diluted
share, on the sale of a portion of the company's equity ownership interest in Morningstar Japan K.K. Collectively, these items
had a favorable impact of $0.46 per diluted share. Net income for 2017 included a non-cash
after-tax gain of $17.9 million, or $0.42 per diluted share, in
connection with the sale of HelloWallet. Excluding the impact of these items in 2018 and 2017, net income per diluted share
increased 37.3%.
The effective tax rate for the full year 2018 was 20.7%, which benefited from the lower U.S. federal statutory tax rate
associated with the Tax Cuts and Jobs Act, versus 23.9% in 2017.
Update on Key Investment Areas
The highlights below summarize key operating metrics in our six investment areas for the full year ended Dec. 31, 2018.
- Revenue for Morningstar Data was up 11.5% to $185.2 million.
- Morningstar Direct licenses increased 8.3% to 15,033 and revenue grew 10.9% to $137.9
million.
- PitchBook licenses increased 65.2% to 22,979 and revenue grew 56.6% to $99.6 million.
- Assets under management and advisement in Managed Portfolios increased 3.0% to $41.7 billion
as of Dec. 31, 2018. Approximately 20,000 advisors globally now use Managed Portfolios.
- Assets under management and advisement for Workplace Solutions were flat at $128.2 billion as
of Dec. 31, 2018.
- Morningstar Credit Ratings completed 138 new-issue ratings, compared with 97 in 2017, representing a 49.2% increase in
asset value in 2018.
Balance Sheet and Capital Allocation
As of Dec. 31, 2018, the Company had cash, cash equivalents, and investments totaling
$395.9 million and $70.0 million of long-term debt, compared with
cash, cash equivalents, and investments of $353.3 million and $180.0
million of long-term debt as of Dec. 31, 2017.
Cash provided by operating activities was $314.8 million for the full year 2018, compared with
$250.1 million in the prior year. Free cash flow was $238.7 million
for the full year 2018, compared with $183.5 million in the prior year. In 2018, the Company
repurchased 0.2 million shares of common stock for $20.9 million and paid $42.6 million in dividends.
Comparability of Year-Over-Year Results
Certain items affected the comparability of fourth-quarter and full-year 2018 results versus the same period in 2017.
Fourth-Quarter Results
- Fourth-quarter 2018 organic revenue growth includes the full contribution of PitchBook; whereas in the fourth quarter of
2017, only one month of PitchBook's revenue was included in the organic revenue calculation.
- Fourth-quarter 2018 organic revenue growth also excludes a $1.7 million positive adjustment
to revenue resulting from the adoption of the new revenue recognition standard, as described below.
- Fourth-quarter operating expenses in 2017 included a $4.1 million impairment charge recorded
in depreciation expense.
- Foreign currency translation decreased revenue by $2.5 million, or 1.0%, and operating
expenses by $3.5 million, or 1.7%, in the fourth quarter of 2018. This resulted in a $1.0 million increase in fourth-quarter operating income.
- Net income in 2017 included a $10.6 million benefit related to the impact of the Tax Cuts and
Jobs Act recorded in the fourth quarter.
- As a result of the adoption of the new revenue recognition standard ("ASC Topic 606") effective Jan.
1, 2018, results for reporting periods beginning after Jan. 1, 2018 are presented under
ASC Topic 606, and previously reported results have not been adjusted. ASC Topic 606 changed the presentation of revenue and
costs associated with third-party content and data to a gross (versus net) basis as well as the accounting for expenses related
to sales commission plans. In the quarter ended Dec. 31, 2018, this change resulted in an
increase to revenue of $1.7 million, and a corresponding increase in the cost of revenue, with no
impact on operating income. The favorable impact of the change in accounting for sales commissions on operating income was
$1.2 million in the fourth quarter.
Full-Year 2018 Results
- Full-year 2018 organic revenue growth includes a $10.5 million benefit from an amended
license agreement in the third quarter.
- Full-year 2018 organic revenue growth excludes the $6.7 million positive adjustment to
revenue resulting from the adoption of the new revenue recognition standard. The change in accounting for sales commissions had
a favorable impact of $2.9 million on operating income for the full year.
- Foreign currency translation increased revenue by $4.0 million, or 0.4%, and operating
expenses by $2.6 million, or 0.4%, for the year ended Dec. 31,
2018. This resulted in a $1.4 million increase in full-year operating income.
- Net income for 2018 includes an after-tax gain of $7.8 million from the sale of our 15(c)
board consulting services product line in the first quarter, which increased diluted net income per share by $0.18.
- Net income for 2018 includes a $10.5 million revenue benefit related to an amended license agreement in the third quarter,
which increased diluted net income per share by $0.18.
- Net income for 2018 also includes a $4.1 million after-tax gain on the sale of a portion of the company's equity ownership
interest in Morningstar Japan K.K., which increased diluted net income per share by $0.10.
- Net income for 2017 includes a non-cash after-tax gain of $17.9 million, or $0.42 per share, in connection with the sale of
HelloWallet.
Use of Non-GAAP Financial Measures
The tables at the end of this press release include a reconciliation of the non-GAAP financial measures used by the company to
comparable GAAP measures and an explanation of why the company uses them.
Investor Communication
Morningstar encourages all interested parties—including securities analysts, current shareholders, potential shareholders, and
others—to submit questions in writing. Investors and others may send questions about Morningstar's business to investors@morningstar.com. Morningstar will make written responses to
selected inquiries available to all investors at the same time in Form 8-Ks furnished to the Securities and Exchange Commission,
generally on the first Friday of every month.
About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America,
Europe, Australia, and Asia.
The company offers an extensive line of products and services for individual investors, financial advisors, asset managers,
retirement plan providers and sponsors, and institutional investors in the private capital markets. Morningstar provides data and
research insights on a wide range of investment offerings, including managed investment products, publicly listed companies,
private capital markets, and real-time global market data. Morningstar also offers investment management services
through its investment advisory subsidiaries, with more than $193 billion in assets under
advisement and management as of Dec. 31, 2018. The company has operations in 27 countries. For more
information, visit www.morningstar.com/company. Follow Morningstar on Twitter @MorningstarInc.
Caution Concerning Forward-Looking Statements
This press release contains forward-looking statements as that term is used in the Private Securities Litigation Reform Act of
1995. These statements are based on our current expectations about future events or future financial performance. Forward-looking
statements by their nature address matters that are, to different degrees, uncertain, and often contain words such as "may,"
"could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential," "prospects," or
"continue." These statements involve known and unknown risks and uncertainties that may cause the events we discuss not to occur
or to differ significantly from what we expect. For us, these risks and uncertainties include, among others, liability for any
losses that result from an actual or claimed breach of our fiduciary duties; failing to maintain and protect our brand,
independence, and reputation; failing to differentiate our products and continuously create innovative, proprietary research
tools; failing to respond to technological change, keep pace with new technology developments, or adopt a successful
technology strategy; trends in the asset management industry, including the increasing popularity of passively managed investment
vehicles; inadequacy in our business continuity program in the event of a material emergency or adverse political or regulatory
developments; liability related to the storage of personal information related to individuals as well as portfolio and
account-level information; compliance failures, regulatory action, or changes in laws applicable to our investment advisory or
credit rating operations; an outage of our database, technology-based products and services, or network facilities or the
movement of parts of our technology infrastructure to the public cloud; downturns in the financial sector, global markets,
and global economy; the effect of market volatility on revenue from asset-based fees; the failure of acquisitions and other
investments to produce the results we anticipate; the failure to recruit, develop, and retain qualified employees; challenges
faced by our non-U.S. operations, including the concentration of data and development work at our offshore facilities in
China and India; liability relating to the acquisition or
redistribution of data or information we acquire or errors included therein; and the failure to protect our intellectual property
rights or claims of intellectual property infringement against us. A more complete description of these risks and uncertainties
can be found in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year
ended December 31, 2017. If any of these risks and uncertainties materialize, our actual future
results may vary significantly from what we expected. We do not undertake to update our forward-looking statements as a result of
new information or future events.
Contact:
Stephanie Lerdall, +1 312-244-7805, stephanie.lerdall@morningstar.com
©2019 Morningstar, Inc. All Rights Reserved.
MORN-E
Morningstar, Inc. and Subsidiaries
|
Unaudited Condensed Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31
|
|
|
|
Year ended December 31
|
|
|
(in millions, except per share amounts)
|
|
2018
|
|
2017
|
|
change
|
|
2018
|
|
2017
|
|
change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ 262.7
|
|
$ 243.1
|
|
8.1%
|
|
$ 1,019.9
|
|
$ 911.7
|
|
11.9%
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
108.9
|
|
103.4
|
|
5.3%
|
|
411.1
|
|
386.6
|
|
6.3%
|
|
Sales and marketing
|
|
34.8
|
|
34.1
|
|
2.3%
|
|
148.5
|
|
134.3
|
|
10.6%
|
|
General and administrative
|
|
44.2
|
|
36.6
|
|
21.0%
|
|
147.8
|
|
129.8
|
|
13.9%
|
|
Depreciation and amortization
|
|
25.5
|
|
26.4
|
|
(3.5%)
|
|
96.7
|
|
91.2
|
|
6.0%
|
|
Total operating expense
|
|
213.4
|
|
200.5
|
|
6.5%
|
|
804.1
|
|
741.9
|
|
8.4%
|
Operating income
|
|
49.3
|
|
42.6
|
|
15.7%
|
|
215.8
|
|
169.8
|
|
27.1%
|
Operating margin
|
|
18.8%
|
|
17.5%
|
|
1.3pp
|
|
21.2%
|
|
18.6%
|
|
2.6pp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
(0.6)
|
|
(1.0)
|
|
(45.7%)
|
|
(1.8)
|
|
(3.6)
|
|
(51.2%)
|
|
Gain (loss) on sale of business
|
|
-
|
|
(0.8)
|
|
NMF
|
|
-
|
|
16.7
|
|
NMF
|
|
Gain on sale of product line
|
|
-
|
|
-
|
|
0.0%
|
|
10.5
|
|
-
|
|
NMF
|
|
Other income (expense), net
|
|
(0.3)
|
|
1.1
|
|
NMF
|
|
8.4
|
|
(1.8)
|
|
NMF
|
|
Non-operating income (expense), net
|
|
(0.9)
|
|
(0.7)
|
|
18.9%
|
|
17.1
|
|
11.3
|
|
52.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and equity in net loss of unconsolidated
entities
|
|
48.4
|
|
41.9
|
|
15.7%
|
|
232.9
|
|
181.1
|
|
28.7%
|
Equity in net loss of unconsolidated entities
|
|
(0.5)
|
|
(0.3)
|
|
24.8%
|
|
(2.1)
|
|
(1.3)
|
|
55.4%
|
Income tax expense
|
|
5.5
|
|
2.7
|
|
113.4%
|
|
47.8
|
|
42.9
|
|
11.9%
|
Consolidated net income
|
|
$ 42.4
|
|
$ 38.9
|
|
9.1%
|
|
$ 183.0
|
|
$ 136.9
|
|
33.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ 0.99
|
|
$ 0.91
|
|
8.8%
|
|
$ 4.30
|
|
$ 3.21
|
|
34.0%
|
|
Diluted
|
|
$ 0.99
|
|
$ 0.91
|
|
8.8%
|
|
$ 4.25
|
|
$ 3.18
|
|
33.6%
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
42.7
|
|
42.5
|
|
0.5%
|
|
42.6
|
|
42.7
|
|
(0.2%)
|
|
Diluted
|
|
43.1
|
|
42.9
|
|
0.5%
|
|
43.0
|
|
43.0
|
|
0.0%
|
|
NMF — Not meaningful, pp — percentage points
|
Morningstar, Inc. and Subsidiaries
|
Unaudited Condensed Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31
|
|
Year ended December 31
|
(in millions)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Consolidated net income
|
|
$ 42.4
|
|
$ 38.9
|
|
$ 183.0
|
|
$ 136.9
|
Adjustments to reconcile consolidated net income to net cash flows from
operating activities
|
|
26.9
|
|
19.9
|
|
113.3
|
|
89.9
|
Changes in operating assets and liabilities, net
|
|
36.0
|
|
26.6
|
|
18.5
|
|
23.3
|
|
Cash provided by
operating activities
|
|
105.3
|
|
85.4
|
|
314.8
|
|
250.1
|
Investing activities
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(20.9)
|
|
(20.2)
|
|
(76.1)
|
|
(66.6)
|
Proceeds from sale of a product line
|
|
-
|
|
-
|
|
10.5
|
|
-
|
Acquisitions, net of cash acquired
|
|
(0.4)
|
|
-
|
|
(0.4)
|
|
(1.0)
|
Proceeds from sale of a business
|
|
-
|
|
-
|
|
-
|
|
23.7
|
Purchases of equity investments
|
|
(6.9)
|
|
(0.5)
|
|
(7.4)
|
|
(24.8)
|
Other, net
|
|
17.3
|
|
9.4
|
|
23.5
|
|
7.9
|
|
Cash used for investing
activities
|
|
(10.9)
|
|
(11.3)
|
|
(49.9)
|
|
(60.8)
|
Financing activities
|
|
|
|
|
|
|
|
|
Common shares repurchased
|
|
(10.1)
|
|
(1.0)
|
|
(20.9)
|
|
(42.3)
|
Dividends paid
|
|
(10.7)
|
|
(9.7)
|
|
(42.6)
|
|
(39.3)
|
Repayments of long-term debt
|
|
(20.0)
|
|
(25.0)
|
|
(110.0)
|
|
(70.0)
|
Other, net
|
|
(2.8)
|
|
(2.3)
|
|
(15.3)
|
|
(5.9)
|
|
Cash used for financing
activities
|
|
(43.6)
|
|
(38.0)
|
|
(188.8)
|
|
(157.5)
|
Effect of exchange rate changes on cash and cash equivalents
|
(4.5)
|
|
1.8
|
|
(15.0)
|
|
17.3
|
Net increase in cash and cash equivalents
|
|
46.3
|
|
37.9
|
|
61.1
|
|
49.1
|
Cash and cash equivalents—Beginning of period
|
|
323.0
|
|
270.3
|
|
308.2
|
|
259.1
|
Cash and cash equivalents—End of period
|
|
$ 369.3
|
|
$ 308.2
|
|
$ 369.3
|
|
$ 308.2
|
Morningstar, Inc. and Subsidiaries
|
Unaudited Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
December 31
|
|
December 31
|
(in millions)
|
|
2018
|
|
2017
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ 369.3
|
|
$ 308.2
|
|
Investments
|
|
26.6
|
|
45.1
|
|
Accounts receivable, net
|
|
172.2
|
|
148.2
|
|
Income tax receivable, net
|
|
1.8
|
|
-
|
|
Other current assets
|
|
31.7
|
|
28.3
|
|
Total current
assets
|
|
601.6
|
|
529.8
|
|
|
|
|
|
|
Property, equipment, and capitalized software, net
|
|
143.5
|
|
147.4
|
Investments in unconsolidated entities
|
|
63.1
|
|
62.0
|
Goodwill
|
|
556.7
|
|
564.9
|
Intangible assets, net
|
|
73.9
|
|
95.4
|
Other assets
|
|
15.0
|
|
6.2
|
|
Total assets
|
|
$ 1,453.8
|
|
$ 1,405.7
|
|
|
|
|
|
|
Liabilities and equity
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$ 54.4
|
|
$ 49.2
|
|
Accrued compensation
|
|
109.5
|
|
92.0
|
|
Deferred revenue
|
|
195.8
|
|
171.3
|
|
Other
|
|
3.1
|
|
10.7
|
|
Total current
liabilities
|
|
362.8
|
|
323.2
|
|
|
|
|
|
|
Accrued compensation
|
|
11.8
|
|
11.7
|
Deferred tax liability, net
|
|
22.2
|
|
23.6
|
Long-term debt
|
|
70.0
|
|
180.0
|
Other long-term liabilities
|
|
52.3
|
|
62.3
|
|
Total liabilities
|
|
519.1
|
|
600.8
|
|
Total equity
|
|
934.7
|
|
804.9
|
|
Total liabilities and equity
|
|
$ 1,453.8
|
|
$ 1,405.7
|
Morningstar, Inc. and Subsidiaries
|
Supplemental Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morningstar.com Premium Membership subscriptions (U.S.)
|
116,402
|
|
118,462
|
|
(1.7%)
|
|
|
|
|
|
|
|
Morningstar.com average monthly unique users (U.S.)
|
|
2,090,972
|
|
1,964,513
|
|
6.4%
|
(1)
|
|
|
|
|
|
|
Advisor Workstation clients (U.S.)
|
|
171
|
|
182
|
|
(6.0%)
|
|
|
|
|
|
|
|
Morningstar Office licenses (U.S.)
|
|
4,378
|
|
4,330
|
|
1.1%
|
|
|
|
|
|
|
|
Morningstar Direct licenses
|
|
15,033
|
|
13,884
|
|
8.3%
|
|
|
|
|
|
|
|
PitchBook Platform licenses
|
|
22,979
|
|
13,908
|
|
65.2%
|
|
|
|
|
|
|
|
Asset value linked to Morningstar Indexes
|
|
$46.8 bil
|
|
$34.4 bil
|
|
36.0%
|
|
|
|
|
|
|
|
Assets under management and advisement (approximate)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Workplace Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed Retirement Accounts
|
|
$58.2 bil
|
|
$57.6 bil
|
|
1.0%
|
|
|
|
|
|
|
|
|
|
Fiduciary Services
|
|
41.0 bil
|
|
42.5 bil
|
|
(3.5%)
|
|
|
|
|
|
|
|
|
|
Custom Models
|
|
29.0 bil
|
|
28.0 bil
|
|
3.6%
|
|
|
|
|
|
|
|
|
Workplace Solutions (total)
|
|
$128.2 bil
|
|
$128.1 bil
|
|
0.1%
|
|
|
|
|
|
|
|
|
Morningstar Investment Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morningstar Managed Portfolios
|
|
$41.7 bil
|
|
$40.5 bil
|
(2)
|
3.0%
|
|
|
|
|
|
|
|
|
|
Institutional Asset Management
|
|
16.8 bil
|
|
16.4 bil
|
(3)
|
2.4%
|
|
|
|
|
|
|
|
|
|
Asset Allocation Services
|
|
6.5 bil
|
|
9.5 bil
|
|
(31.6%)
|
|
|
|
|
|
|
|
|
Morningstar Investment Management (total)
|
|
$65.0 bil
|
|
$66.4 bil
|
(4)
|
(2.1%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our employees (approximate)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide headcount
|
|
5,416
|
|
4,920
|
|
10.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31
|
|
|
Year ended December 31
|
|
|
(in millions)
|
|
2018
|
|
2017
|
|
change
|
|
2018
|
|
2017
|
|
change
|
|
Key product and investment area revenue
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morningstar Data (6)
|
|
$ 47.6
|
|
$ 43.8
|
(7)
|
8.8%
|
|
$ 185.2
|
|
$ 166.1
|
(7)
|
11.5%
|
|
Morningstar Direct
|
|
35.5
|
|
32.5
|
|
9.4%
|
|
137.9
|
|
124.4
|
|
10.9%
|
|
Morningstar Investment Management
(8)
|
|
27.3
|
|
26.8
|
(7)
|
1.9%
|
|
111.2
|
|
101.0
|
(7)
|
10.1%
|
|
PitchBook Data
|
|
29.6
|
|
18.8
|
|
57.5%
|
|
99.6
|
|
63.6
|
|
56.6%
|
|
Morningstar Advisor Workstation
|
|
21.8
|
|
22.5
|
|
(3.1%)
|
|
90.0
|
|
87.3
|
|
3.1%
|
|
Workplace Solutions
|
|
19.3
|
|
18.3
|
|
5.7%
|
|
75.3
|
|
73.5
|
|
2.4%
|
(9)
|
Morningstar Credit Ratings
|
|
11.7
|
|
11.2
|
|
4.1%
|
|
36.3
|
|
31.4
|
|
15.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by Type (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License-based (10)
|
|
$ 192.1
|
|
$ 174.7
|
(7)
|
10.0%
|
|
$ 751.6
|
|
$ 667.7
|
(7)
|
12.6%
|
|
Asset-based (11)
|
|
50.5
|
|
48.3
|
(7)
|
4.6%
|
|
200.4
|
|
182.2
|
(7)
|
10.0%
|
|
Transaction-based (12)
|
|
20.1
|
|
20.1
|
(7)
|
0.1%
|
|
67.9
|
|
61.8
|
(7)
|
9.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management and advisement
|
|
$200.6 bil
|
|
$208.0 bil
|
|
(3.6%)
|
|
$200.1 bil
|
|
$206.2 bil
|
|
(3.0%)
|
|
Number of new-issue ratings completed
|
52
|
|
40
|
|
30.0%
|
|
138
|
|
97
|
|
42.3%
|
|
Asset value of new-issue ratings
|
|
$18.6 bil
|
|
$15.9 bil
|
|
17.0%
|
|
$58.2 bil
|
|
$39.0 bil
|
|
49.2%
|
|
|
|
(1) In prior periods, the Company estimated traffic on Morningstar.com
using a combination of internal tools and our third-party platform. The new website launched in the first quarter of 2018
now allows tracking of 100% of website traffic using a third-party platform. The Company believes the current reporting
is a more accurate representation of traffic, and this change in methodology is the primary driver of the difference in
reported traffic numbers versus 2017.
|
|
|
|
|
|
|
|
|
|
(2) Revised to include Australia assets, which were previously reflected in
Institutional Asset Management.
|
|
|
|
|
|
|
|
|
|
(3) Revised to exclude Australia and South Africa assets, which are
reflected in Morningstar Managed Portfolios.
|
|
|
|
|
|
|
|
|
|
(4) Excludes $1.4 billion of assets under advisement and management related
to Manager Selection Services that was reclassified to Morningstar Data. The associated revenue is included in
Morningstar Data.
|
|
|
|
|
|
|
|
|
|
(5) Key product and investment area revenue and revenue by type includes
the effect of foreign currency translation.
|
|
|
|
|
|
|
|
|
|
(6) The adoption of ASC Topic 606 favorably impacted revenue for the three
months and full year ended December 31, 2018 by $0.5 million and $1.5 million, respectively.
|
|
|
|
|
|
|
|
|
|
(7) Restated due to realignment of individual products within the product
groups.
|
|
|
|
|
|
|
|
|
|
(8) The adoption of ASC Topic 606 favorably impacted revenue for the three
months and full year ended December 31, 2018 by $1.2 million and $5.0 million, respectively.
|
|
|
|
|
|
|
|
|
|
(9) Excluding the negative 4.6 percentage point impact of the HelloWallet
divestiture, revenue increased by 7.0% for the full year ended December 31, 2018.
|
|
|
|
|
|
|
|
|
|
(10) License-based revenue includes Morningstar Data, Morningstar Direct,
Morningstar Advisor Workstation, Morningstar Enterprise Components, Morningstar Research, PitchBook Data, and other
similar products. License-based revenue for the full year ended 2018 included a $10.5 million revenue benefit related to
the amendment of a license agreement.
|
|
|
|
|
|
|
|
|
|
(11) Asset-based revenue includes Morningstar Investment Management,
Workplace Solutions, and Morningstar Indexes.
|
|
|
|
|
|
|
|
|
|
(12) Transaction-based revenue includes Morningstar Credit Ratings,
Internet advertising sales, and Conferences.
|
Morningstar, Inc. and Subsidiaries
|
Reconciliations of Non-GAAP Measures with the Nearest Comparable GAAP
Measures (Unaudited)
|
|
To supplement Morningstar's condensed consolidated financial statements
presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), Morningstar uses the following
measures considered as non-GAAP by the Securities and Exchange Commission: consolidated revenue excluding acquisitions,
divestitures, adoption of accounting changes, and the effect of foreign currency translations (organic revenue) and free
cash flow. These non-GAAP measures may not be comparable to similarly titled measures reported by other
companies.
|
|
Morningstar presents consolidated revenue excluding acquisitions,
divestitures, adoption of accounting changes, and the effect of foreign currency translations (organic revenue) because
the company believes this non-GAAP measure helps investors better compare period-over-period results. We exclude revenue
from acquired businesses from our organic revenue growth calculation for a period of 12 months after we complete the
acquisition. For divestitures, we exclude revenue in the prior period for which there is no comparable revenue in the
current period. For adoption of accounting changes, we exclude the effects of the adoption of the new revenue recognition
standard effective Jan. 1, 2018, as 2017 results have not been adjusted
|
|
In addition, Morningstar presents free cash flow solely as supplemental
disclosure to help investors better understand how much cash is available after making capital expenditures.
Morningstar's management team uses free cash flow to evaluate its business. Free cash flow should not be considered an
alternative to any measure required to be reported under GAAP (such as cash provided by (used for) operating, investing,
and financing activities).
|
|
|
|
|
Three months ended December 31
|
|
|
|
Year ended December 31
|
|
|
(in millions)
|
|
2018
|
|
2017
|
|
change
|
|
2018
|
|
2017
|
|
change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation from consolidated revenue to revenue excluding acquisitions,
divestitures, adoption of accounting changes, and the effect of foreign currency translations (organic
revenue):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated revenue
|
|
$ 262.7
|
|
$ 243.1
|
|
8.1%
|
|
$ 1,019.9
|
|
$ 911.7
|
|
11.9%
|
Less: divestitures
|
|
-
|
|
(0.7)
|
|
NMF
|
|
-
|
|
(6.1)
|
|
NMF
|
Less: acquisitions
|
|
-
|
|
-
|
|
0.0%
|
|
-
|
|
-
|
|
0.0%
|
Less: adoption of accounting changes
|
|
(1.7)
|
|
-
|
|
NMF
|
|
(6.7)
|
|
-
|
|
NMF
|
Effect of foreign currency translations
|
|
2.5
|
|
-
|
|
NMF
|
|
(4.0)
|
|
-
|
|
NMF
|
Revenue excluding acquisitions, divestitures,
adoption of accounting changes, and the effect of foreign currency translations
|
|
$ 263.5
|
|
$ 242.4
|
|
8.7%
|
|
$ 1,009.2
|
|
$ 905.6
|
|
11.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation from cash provided by operating activities to free cash
flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities
|
|
$ 105.3
|
|
$ 85.4
|
|
23.3%
|
|
$ 314.8
|
|
$ 250.1
|
|
25.9%
|
Capital expenditures
|
|
(20.9)
|
|
(20.2)
|
|
3.5%
|
|
(76.1)
|
|
(66.6)
|
|
14.3%
|
Free cash flow
|
|
$ 84.4
|
|
$ 65.2
|
|
29.4%
|
|
$ 238.7
|
|
$ 183.5
|
|
30.1%
|
![Morningstar logo (PRNewsFoto/Morningstar Research Inc.) (PRNewsfoto/Morningstar, Inc.) Morningstar logo (PRNewsFoto/Morningstar Research Inc.) (PRNewsfoto/Morningstar, Inc.)](https://mma.prnewswire.com/media/462798/morningstar_logo.jpg)
View original content to download multimedia:http://www.prnewswire.com/news-releases/morningstar-inc-reports-fourth-quarter-full-year-2018-financial-results-300800042.html
SOURCE Morningstar, Inc.