Morningstar, Inc. · NASDAQ:MORN
Morningstar — Q2 2023 Earnings Presentation
34 slides from Morningstar's earnings presentation, Jul 28, 2023
Slide 1: Second Quarter 2023 Supplemental Presentation
Second Quarter 2023 Supplemental Presentation July 26, 2023
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 financial performance. Forward-looking statements by their nature address matters tha
Slide 3: Q2 2023 Financial Performance
Q2 2023 Financial Performance ($mil) $53.9 $41.7 22 23 $69.7 ＋7.3% –22.6% –5.0% 22 23 $470.4 $504.7 22 23 $73.4 –$5.8 22 23 $37.0 Revenue Operating Income Adjusted Free Cash Flow** Operating Income* * 3 3 Adjusted operating income is a non-GAAP measure and excludes intangible amortization expense, o
Slide 4: Q2 2023 Revenue Walk
Q2 2023 Revenue Walk Organic revenue, a non-GAAP measure, excludes revenue from acquisitions for a period of 12 months upon completion of the acquisition, accounting changes, and the effect of foreign currency translations. **Starting with the quarter ended March 31, 2023, the Company updated its re
Slide 5: Quarterly Revenue Trend
Quarterly Revenue Trend ($mil) Bars represent reported revenue. Percentages represent YOY organic revenue growth (decline). *Starting with the quarter ended March 31, 2023, the Company updated its revenue-type classifications to account for product areas with more than one revenue type, impacting Mo
Slide 6: YTD 2023 Organic Revenue Walk
YTD 2023 Organic Revenue Walk* ($ mil) 6 6 YTD 2022 Revenue M&A and foreign currency adjustments PitchBook Morningstar Data Morningstar Direct Morningstar Sustainalytics Morningstar Indexes Morningstar Advisor Workstation Investment Management DBRS Morningstar Workplace Solutions Other products YTD
Slide 7: Q2 2023 Revenue Drivers: License-Based Revenue Trend
Q2 2023 Revenue Drivers: License-Based Revenue Trend* ($mil) +14.8% Reported + 12.2% Organic 22 23 License-Based Q2 23 Organic Revenue Drivers: PitchBook (+21.0%), Morningstar Sustainalytics’ license-based products (+26.7%), Morningstar Data (+8.3%), and Morningstar Direct (+9.3%) were the primary c
Slide 8: Q2 2023 Revenue Drivers: Asset-Based Revenue Trend
Q2 2023 Revenue Drivers: Asset-Based Revenue Trend* ($mil) Asset-Based Q2 23 Organic Revenue Drivers: Declines in Investment Management organic revenue (-10.7%) reflected the timing of client billings, which were largely based on assets as of March 31, 2023, when most markets were still down over th
Slide 9: Q2 2023 Revenue Drivers: Transaction-Based Revenue Trend
Q2 2023 Revenue Drivers: Transaction-Based Revenue Trend* ($mil) Transaction-Based Q2 23 Organic Revenue Drivers: DBRS Morningstar revenue decreased 15.9% on an organic basis, with a 17.4% organic decline in its transaction-based revenue, due primarily to an 80% decrease in US commercial-mortgage-ba
Slide 10: Quarterly Product Trends: PitchBook and Morningstar Data
Quarterly Product Trends PitchBook* ($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 YOY Org
Slide 11: Quarterly Product Trends: Morningstar Direct
Quarterly Product 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 $50.0 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Morningstar Direct Revenue YOY Organic Revenue Growth YOY License G
Slide 12: Quarterly Product Trends: Morningstar Advisor Workstation
Quarterly Product Trends Morningstar Advisor Workstation ($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 $25.0 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Advisor Workstation Revenue YOY Organic Revenue G
Slide 13: DBRS Morningstar Revenue by Asset Class
Quarterly Product Trends: DBRS Morningstar Revenue by Asset Class ($mil) DBRS Morningstar Q2 2023 Organic Revenue Drivers: Category mix in Q2 2023 was 58% Structured Finance* v. 42% Fundamental Ratings.** Recurring revenue, which is derived primarily from surveillance, research, and other transactio
Slide 14: DBRS Morningstar Revenue Trend by Geography
Quarterly Product Trends: DBRS Morningstar Revenue Trend 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 $70.0 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 EMEA Canada USA DBRS Morningstar Q2 2023 Organic Revenue Drivers: Organic revenue
Slide 15: Quarterly Product Trends: Investment Management
Quarterly Product Trends: Investment Management ($bil) Investment Management Q2 2023 AUM/A: Investment Management assets increased 5.6% over the prior year period, due to market gains. Declines in Investment Management organic revenue (-10.7%) reflected the timing of client billings, which were larg
Slide 16: Workplace Solutions
Workplace Solutions Q2 2023 AUM/A: Workplace Solutions assets under management and advisement increased 3.9% versus the prior-year period, reflecting market gains. Quarterly Product Trends: Workplace Solutions ($bil) Managed Accounts includes Retirement Manager and Advisor Managed Accounts. Fiduciar
Slide 17: Q2 2023 Operating Margins
Q2 2023 Operating Margins Operating Margin Drivers: Operating expense included $7.3 million of costs related to the Company’s significant reduction and shift of its China operations, which are excluded from adjusted operating income and are nearing their successful completion. Key drivers of expense
Slide 18: Adjusted Operating Income Walk Q2 2022 to Q2 2023
Adjusted Operating Income* Walk Q2 2022 to Q2 2023 ($ mil) Adjusted operating income, a non-GAAP measure, excludes intangible amortization expenses, all mergers and acquisitions (M&A)-related expenses (including M&A earn-outs), and items related to the significant reduction and shift of the Company'
Slide 19: YTD Adjusted Operating Income Walk
YTD Adjusted Operating Income* Walk Q2 2022 to Q2 2023 ($ mil) Adjusted operating income, a non-GAAP measure, excludes intangible amortization expenses, all mergers and acquisitions (M&A)-related expenses (including M&A earn-outs), and items related to the significant reduction and shift of the Comp
Slide 20: Quarterly Operating Margin Trends
Quarterly Operating Margin Trends Adjusted operating margin is a non-GAAP measure. Severance costs related to certain reorganizations, and excluding expenses related to the shift of the Company's China activities, negatively impacted operating margin and adjusted operating margin by 0.8 percentage p
Slide 21: Revenue vs. Adjusted Operating Expense Growth
Revenue vs. Adjusted Operating Expense Growth 21 21 Adjusted operating expense is a non-GAAP measure and is defined as operating expense excluding intangible amortization expense, all mergers and acquisition related expenses (including M&A-related arnouts), and items related to the significant reduc
Slide 22: Headcount Trends
Headcount Trends 22 22 Headcount represents permanent, full-time employees.
Slide 23: Q2 2023 Cash Flow and Capital Allocation
Q2 2023 Cash Flow and Capital Allocation ($mil) 2 $24.5 –$5.8 Operating Cash Flow Free Cash Flow* Capital Allocation** 23 23 * ($mil) Termination Agreement 59.9 Capital Expenditures 30.3 Dividends Paid 16.0 Share Repurchases 1.4 Investments in Unconsolidated Entities 29.4 0 Free cash flow, a non-GAA
Slide 24: Appendix
Appendix
Slide 25: Q2 2023 Operating and Free Cash Flow Excluding Certain Items
Q2 2023 Operating and Free Cash Flow Excluding Certain Items Free cash flow is a non-GAAP measure and is defined as cash provided by or used for operating activities less capital expenditures. * Includes the impact of the Sustainalytics earn-out payment in 2022. Q2 2023 Q2 2022 % Change Cash provide
Slide 26: YTD 2023 Operating and Free Cash Flow Excluding Certain Items
YTD 2023 Operating and Free Cash Flow Excluding Certain Items Free cash flow is a non-GAAP measure and is defined as cash provided by or used for operating activities less capital expenditures. *Includes the impact of contingent consideration related to the LCD acquisition in 2023 and the Sustainaly
Slide 27: Reconciliation from Reported to Organic Revenue Change by Revenue Type
Reconciliation from Reported to Organic Revenue Change by Revenue Type 27 27 Organic revenue is a non-GAAP measure.
Slide 28: Reconciliation from Reported to Organic Revenue Change by Revenue Type
Reconciliation from Reported to Organic Revenue Change by Revenue Type 28 28 Organic revenue is a non-GAAP measure.
Slide 29: Reconciliation from Reported to Organic Revenue Change by Product Area
Reconciliation from Reported to Organic Revenue Change by Product Area 29 29 Organic revenue is a non-GAAP measure.
Slide 30: Reconciliation from Reported to Organic Revenue Change by Product Area
Reconciliation from Reported to Organic Revenue Change by Product Area 30 30 Organic revenue is a non-GAAP measure.
Slide 31: Reconciliation from Reported to Organic Revenue Change by Product Area
Reconciliation from Reported to Organic Revenue Change by Product Area 31 31 Organic revenue is a non-GAAP measure.
Slide 32: Reconciliation from Operating Margin to Adjusted Operating Margin
Reconciliation from Operating Margin to Adjusted Operating Margin 32 32 Adjusted operating margin is a non-GAAP measure.
Slide 33: Reconciliation from Total Operating Expenses to Adjusted Operating Expenses
Reconciliation from Total Operating Expenses to Adjusted Operating Expenses 33 33 Adjusted operating expense is a non-GAAP measure.
Slide 34: Morningstar
MC RNINGSTAR