Morningstar, Inc. · NASDAQ:MORN
Morningstar — Q3 2022 Earnings Presentation
28 slides from Morningstar's earnings presentation, Oct 27, 2022
Slide 1: Third Quarter 2022 Supplemental Presentation
Third Quarter 2022 Supplemental Presentation Oct. 26, 2022
Slide 2: Forward-looking statements and non-GAAP disclaimer
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations about future events or future fi nancial performance. Forward-looking statements by their nature address matters tha
Slide 3: Q3 2022 Financial Performance
Q3 2022 Financial Performance ($mil) $22.0 $67.8 22 21 $76.6 ＋ 9.2% – 67.6% – 8.3% 22 21 $468.2 $428.9 22 21 $83.5 $68.4 – 26.0% 22 21 $92.4 Operating Income Free Cash Flow** Revenue Adjusted Operating Income* * 3 3 Adjusted operating income is a non-GAAP measure and excludes intangible amortization
Slide 4: Q3 2022 Revenue Walk
Q3 2022 Revenue Walk *Organic revenue excludes revenue from acquisitions for a period of 12 months upon completion of the acquisition, accounting changes, and the e ff ect of foreign currency translations. ＋ 9.2% Reported Revenue Growth Impact of M&A, Accounting Changes, and Currency ＋ 8.5% – 0.7% Co
Slide 5: Quarterly Revenue Growth Trend
Quarterly Revenue Growth Trend ($mil) Bars represent reported revenue. Percentages represent YOY organic revenue growth, which is a non-GAAP measure. 5 5
Slide 6: YTD Organic Revenue Walk
YTD Organic Revenue Walk * ($ mil) 6 6 3Q21 YTD Revenue M&A, accounting changes, and foreign exchange adjustments PitchBook Morningstar Sustainalytics Morningstar Data Morningstar Direct Morningstar Indexes Advisor Workstation Investment Management DBRS Morningstar Workplace Solutions Other products
Slide 7: Q3 2022 Revenue Drivers: License-Based Revenue Growth
Q3 2022 Revenue Drivers: License-Based Revenue Growth ($mil) +19.4% Reported +18.3% Organic 22 21 License-Based Organic Revenue Drivers: PitchBook (+38.7%), Morningstar Sustainalytics (+45.8%), Morningstar Data (+9.6%), and Morningstar Direct (+10.0%) were the primary contributors to organic revenue
Slide 8: License-Based Quarterly Trends: PitchBook and Morningstar Data
License-Based Quarterly Trends PitchBook ($mil) 47.5% 53.0% 42.9% 40.2% 36.8% 32.6% 33.6% 36.0% 61.8% 61.4% 59.7% 67.5% 53.2% 48.3% 42.5% 38.5% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% $0.0 $15.0 $30.0 $45.0 $60.0 $75.0 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 PitchBook Revenue YO
Slide 9: License-Based Quarterly Trends: Morningstar Direct
License-Based Quarterly Trends 6.5% 5.5% 6.5% 6.5% 6.5% 5.5% 6.5% 6.9% 7.3% 6.2% 5.8% 3.9% 4.0% 4.0% 3.0% 3.1% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Morningstar Direct Revenue YOY Organic Revenue Growth YOY Lic
Slide 10: License-Based Quarterly Trends: Advisor Workstation
License-Based Quarterly Trends Advisor Workstation ($mil) - 4.3% - 1.7% 3.2% - 2.4% - 1.3% - 1.7% 3.2% 3.9% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Advisor Workstation Revenue YOY Organic Revenue Gr
Slide 11: Q3 2022 Revenue Drivers: Asset-Based Revenue Growth
Q3 2022 Revenue Drivers: Asset-Based Revenue Growth ($mil) Bars represent reported revenue. Organic revenue growth is a non-GAAP measure. Asset-Based Organic Revenue Drivers: The continued downturn in global markets drove organic revenue declines for Investment Management (-13.2%) and Workplace Solu
Slide 12: Asset-Based Quarterly Trends: Investment Management
Asset-Based Quarterly Trends: Investment Management ($bil) Investment Management AUM/A: Investment Management assets declined 6.5% versus the prior year, re fl ecting the continued downturn in global markets and softer net fl ows. Excluding $3.7 billion in Praemium assets added in the second quarter,
Slide 13: Asset-Based Quarterly Trends: Workplace Solutions
Workplace Solutions Q3 2022 AUM/A: Workplace Solutions assets under management and advisement declined 8.3% versus the prior year, re fl ecting the continued downturn in global markets. Asset-Based Quarterly Trends: Workplace Solutions ($bil) *Managed Accounts includes Retirement Manager and Advisor
Slide 14: Q3 2022 Revenue Drivers: Transaction-Based Revenue Growth
Q3 2022 Revenue Drivers: Transaction-Based Revenue Growth ($mil) Bars represent reported revenue. Organic revenue growth is a non-GAAP measure. Transaction-Based Organic Revenue Drivers: DBRS Morningstar’s 17.5% decrease in organic revenue re fl ected a marked decline in global new issuance activity
Slide 15: DBRS Morningstar Revenue Growth by Geography
Quarterly Transaction-Based Trends: DBRS Morningstar Revenue Growth by Geography ($mil) 5.1% 6.7% 17.6% 15.4% 34.6% 29.4% 3.3% -- 16.6% 52.0% $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 EMEA Canada USA DBRS Morningstar Q3 2022 Organic Revenue Drivers: Org
Slide 16: DBRS Morningstar Revenue by Asset Class
Quarterly Transaction-Based Trends: DBRS Morningstar Revenue by Asset Class ($mil) DBRS Morningstar Q3 2022 Organic Revenue Drivers: Category mix in Q3 2022 was 60% Structured Finance v. 40% Fundamental Ratings. Recurring revenue represented 48.6% of total DBRS Morningstar revenue. *Fundamental Rati
Slide 17: Q3 2022 Operating Margins
Q3 2022 Operating Margins Operating Margin Drivers: Operating expense included $30.1 million of costs associated with the Company’s initiation of a signi fi cant reduction and shift of its China operations, which are excluded from adjusted operating income. Key drivers of expense growth: Severance co
Slide 18: YTD Adjusted Operating Income Walk
YTD Adjusted Operating Income* Walk ($ mil) Adjusted operating income excludes intangible amortization expenses, all mergers and acquisitions (M&A)-related expenses (including M&A earn-outs), and items related to the signi fi cant reduction and shift of the Company's operations in China. **Includes s
Slide 19: Quarterly Operating Margin Trends
Quarterly Operating Margin Trends Adjusted operating margin is a non-GAAP fi nancial measure. 19 19
Slide 20: Q3 2022 Cash Flow and Capital Allocation
Q3 2022 Cash Flow and Capital Allocation ($mil) 2 $102.1 $68.4 Operating Cash Flow Free Cash Flow* Capital Allocation Free cash fl ow is a non-GAAP measure and is de fi ned as cash provided by or used for operating activities less capital expenditures. 20 20 * ($mil) CapEx 33.7 Dividends 15.3 Share Re
Slide 21: Appendix
Appendix
Slide 22: Reconciliation from Reported to Organic by Revenue Type
Reconciliation from Reported to Organic Revenue Growth by Revenue Type 22 22 Going forward, the Company will provide a reconciliation of reported to organic revenue that details the impact from M&A and accounting changes and from currency e ff ects.
Slide 23: Reconciliation from Reported to Organic by Revenue Type
Reconciliation from Reported to Organic Revenue Growth by Revenue Type 23 23 Going forward, the Company will provide a reconciliation of reported to organic revenue that details the impact from M&A and accounting changes and from currency e ff ects.
Slide 24: Reconciliation from Reported to Organic by Product Area
Reconciliation from Reported to Organic Revenue Growth by Product Area 24 24 Going forward, the Company will provide a reconciliation of reported to organic revenue that details the impact from M&A and accounting changes and from currency e ff ects.
Slide 25: Reconciliation from Reported to Organic by Product Area
Reconciliation from Reported to Organic Revenue Growth by Product Area 25 25 Going forward, the Company will provide a reconciliation of reported to organic revenue that details the impact from M&A and accounting changes and from currency e ff ects.
Slide 26: Reconciliation from Reported to Organic by Product Area
Reconciliation from Reported to Organic Revenue Growth by Product Area 26 26 Going forward, the Company will provide a reconciliation of reported to organic revenue that details the impact from M&A and accounting changes and from currency e ff ects.
Slide 27: Reconciliation from Reported to Organic by Product Area
Reconciliation from Reported to Organic Revenue Growth by Product Area 27 27
Slide 28: MC ANINGOTAR
MC ANINGOTAR