Morningstar, Inc. · NASDAQ:MORN
Morningstar — Q1 2023 Earnings Presentation
31 slides from Morningstar's earnings presentation, Apr 27, 2023
Slide 1: First Quarter 2023 Supplemental Presentation
First Quarter 2023 MORNINGSTAR Supplemental Presentation April 26, 2023
Slide 2: Forward-looking statements and non-GAAP measures
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: 2023 Financial Performance ($mil)
01 2023 Financial Performance ($mil) Revenue Operating Income +5.0% Adjusted Free Cash Flow** Operating Income* -37.2% ——— 8% i NMIF¥4 22 23 22 23 wsn0 w787 so ws $82.5 $51.8 $4.5 $6.1 perorsn Cn Fee csh ow coh ved ye operat wer Bckdng$tSearatentagenconaeston MC RNINGOTAR ome tothe acquston of aire
Slide 4: Q1 2023 Revenue Walk
Q1 2023 Revenue Walk +5.0% +1.8% + 2. 8% Contr of Organic Revenue Growth** License-Based 14.3% Asset-Based -6.0% 0, ~ 4.0% Transaction-Based -35.0% Reported Impact of M&A — Currency Impact Organic Revenue Revenue Growth Growth* on 9 4 ‘March 31, 2023, the Company updated its tic it Morningstar Index
Slide 5: Quarterly Revenue Trend ($mil)
Quarterly Revenue Trend ($mil) se000 $5000 $00 ‘mm Transaction Based Revenue” mm Asset Based Revenuo™ no ‘mm License-Based Rovenuet —* Consolidated Organic Revenue Trend 500% 450% 400% 350% 300% 250% 200% sno 150% 100% ston 50% sao 00% ara wa 032i a2 az an asze a4 a1 Bars revenue. yor 19 withthe qua
Slide 6: Q1 2023 Organic Revenue Walk
Q1 2023 Organic Revenue Walk* ($ mil) 228 6.1 43 37 14 13 $457.0 9.9 aaa — — a — —_— = — $479.7 -20.8 -3.6 =a ~1.0 Q1 2022 M&A and PitchBook it i i i DBRS Investment — Workplace Other 012023 YTD Revenue foreign Data Direct Sustainalytics Advisor Indexes Morningstar Management Solutions products Reve
Slide 7: Q1 2023 Revenue Drivers: License-Based
Q1 2023 Revenue Drivers: License-Based Revenue Trend* ($mil) License-Based Organic Revenue Drivers: +16.7% Reported +14.3% Organic > PitchBook (+24.8%), Morningstar Sustainalytics’ license- based products (+39.9%), Morningstar Data (+10.0%), and Morningstar Direct (+9.7%) were the primary contributo
Slide 8: Q1 2023 Revenue Drivers: Asset-Based
Q1 2023 Revenue Drivers: Asset-Based Revenue Trend* ($mil) Asset-Based Organic Revenue Drivers: 4.7% Reported —6.0% Organic > Market declines compared to the prior-year period drove the organic decline in revenue for Investment Management (-11.8%) and Workplace Solutions (-5.3%). > Organic growth in
Slide 9: Q1 2023 Revenue Drivers: Transaction-Based
Q1 2023 Revenue Drivers: Transaction-Based Revenue Trend* ($mil) Transaction-Based Organic Revenue Drivers: > DBRS Morningstar revenue decreased 30.7% on " an organic basis, with a 32.5% decline in its transaction- ~34.2% Reported based revenue, reflecting weak levels of global credit —35.0% Organi
Slide 10: Quarterly Product Trends
Quarterly Product Trends PitchBook* ($mil) Morningstar Data ($mil) sim0 i100 50.0% sio00 sono om s300 s700 xe $600 $600 400 aa 300 200 10.0% sia0 90 0.0% a ma a mo ee om a2 wt Ga on az wr we an aa ms _Pachockeverse =a YOY Lens Tens Moringa Dat Reverse = vOr Opie enon Tans vWF Opec Revenue Tend ° aie
Slide 11: Quarterly Product Trends
Quarterly Product Trends Morningstar Direct* ($mil) Morningstar Sustainalytics** ($mil) sia.0 $110.0 50.0% $110.0 $100.0 $100.0 $900 wom $900 $300 $800 70.0 70.0 g um $600 $600 $600 $600 400 —_ 400 $300 $300 s200 100% 200 10.0% $100 $100 00 0.0% 0 0.0% a2 aa oa a az an a2 un ae an2t a2 321 oat O12 V
Slide 12: Quarterly Product Trends
Quarterly Product Trends Morningstar Advisor Workstation ($mil) si70 $110.0 50.0% $100.0 $900 am $800 $700 30.0% $600 $500 400 mum a
Slide 13: Quarterly Product Trends: DBRS Morningstar by Asset Class
Quarterly Product Trends: DBRS Morningstar Revenue by Asset Class ($mil) DBRS Morningstar 01 2023 Organic Revenue Drivers: ot am 37% > Category mix in 01 2023 was 55% Structured oo a0 Finance* v. 45% Fundamental Ratings.** mm an 189%, . . . . . oo am E Recurring revenue, which is derived primarily c
Slide 14: Quarterly Product Trends: DBRS Morningstar by Geography
Quarterly Product Trends: DBRS Morningstar Revenue Trend by Geography ($mil) EMER musa acme DBRS Morningstar 01 2023 Organic Revenue Drivers: > Organic revenue declined 48.7% in the U.S. due to a sharp decrease in ratings of structured finance securities and financial institutions. > Organic revenue
Slide 15: Quarterly Product Trends: Investment Management
Quarterly Product Trends: Investment Management ($bil) smo 10 00 smo so 00% Investment Management 01 2023 AUM/A: Investment Management assets were relatively flat versus the prior-year period. Excluding the $4.8 billion of assets related to the acquisition of Praemium’s U.K. and international offeri
Slide 16: Quarterly Product Trends: Workplace Solutions
Quarterly Product Trends: Workplace Solutions ($bil) Workplace Solutions 01 2023 AUM/A: Workplace Solutions assets under management and ca ex advisement declined 7.8% versus the prior-year period, reflecting the decline in global markets compared to i “the prior-year period. ‘i * - mien sit etme Aco
Slide 17: Q1 2023 Operating Margins
Q1 2023 Operating Margins Operating Margin Adjusted Operating Margin + 18.1% +12.3% Operating Margin Drivers: Operating expense included $5.6 million of costs telated to the Company's significant reduction and shift of its China operations, which are excluded from adjusted operating income. Key driv
Slide 18: Adjusted Operating Income Walk
Adjusted Operating Income Walk* Q1 2022 to 01 2023 ($ mil) 22.7 40.2 42 -3.3 7, MM $518 35 Q1 2022 YOY Revenue Compensation —Stock-based Professional Sales Advertising & Infrastructure 1.2023 Growth and Benefits** Compensation Fees Commissions Reed Activities Marketing Costs & Other*** * Ate opeoing
Slide 19: Quarterly Operating Margin Trends
Quarterly Operating Margin Trends B.% 200% 15.0% peng Margin —Aajusted Operating Margin 100% ara a2ai 0321 0421 az an an un az ‘Adjusted operating margin is
Slide 20: Revenue vs. Adjusted Operating Expense Growth
Revenue vs. Adjusted Operating Expense Growth 35.0% 793.8% 30.0% 0.0% 20.0% —Fepored Revenue Gow Autos Opening Expense Growth usted Operating Ex 50% 100% 50% 00% aia 2a 0321 asa ain an B32 a4 aa expense isa non: defined. and items related to the related expenses {including
Slide 21: Headcount Growth
Headcount Growth 50.0% 40.0% mmHeadcount 30.0% 2 Headcount Growth ¥-0-Y ©—Sequential Headcount Growth v. Prior Quarter 20.0% 10.0% 0.0% Qi21 0221 «0321 «0421 122) «0222 03822042223 Headcount represents permanent, fulltime employees.
Slide 22: Q1 2023 Cash Flow and Capital Allocation ($mil)
Q1 2023 Cash Flow and Capital Allocation ($mil) Operating Free Cash Capital Allocation** Cash Flow Flow* ($mil) © MéA-tlated 50.0 $23.4 @ Capital Expenditures 29.5 @ Dividends Paid 15.9 “eiinnieae ipa slelgated : mune Teenie MORNINGSTAR” 2 thet wel es xh on fond ed ona in debt. The Co byanet of $21.
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Slide 24: Reconciliation from Reported to Organic Revenue Change by Revenue Type
Reconciliation from Reported to Organic Revenue Change by Revenue Type Consolidated a121 0221 0321 421 Q122 0222 0322 0422 123 Reported Change in Revenue 21.2% 26.7% 20.1% 21.5% 16.3% 13.2% 9.2% 28% 5.0% less: M&A, accounting changes, and currency 8.2% 10.0% 1.5% 0.1% -1.8% -2.6% 0.7% 0.6% 22% M&A a
Slide 25: Reconciliation from Reported to Organic Revenue Change by Revenue Type
Reconciliation from Reported to Organic Revenue Change by Revenue Type Asset-Based 121 0221 0321 0421 122 0222 0322 0422 0123 Reported Change in Revenue 13% 25.1% 23.5% 18.4% 11.6% 43% 1.6% 6.1% 41% less: M&A, accounting changes, and currency 15% 21% 1.0% 0.7% -3.3% 3.2% 3.7% 2.8% 1.3% M&A and accou
Slide 26: Reconciliation from Reported to Organic Revenue Change by Product Area
Reconciliation from Reported to Organic Revenue Change by Product Area Morningstar Data a121 a221 0321 0421 Q122 0222 03 22 0422 0123 Reported Change in Revenue 14.4% 13.1% 13.5% 11.9% 17% 6.6% 3.3% 1.6% 6.3% less: M&A, accounting changes, and currency 42% 5.5% 21% 0.1% 2.0% 5.1% 6.3% 5.3% 3.7% MEA
Slide 27: Reconciliation from Reported to Organic Revenue Change by Product Area
Reconciliation from Reported to Organic Revenue Change by Product Area Investment Management a121 0221 0321 0421 122 0222 0322 0422 0123 Reported Change in Revenue 3.6% 13.6% 6.9% 8.3% 4.8% 3.2% 10.2% 15.3% “3.9% less: M&A, accounting changes, and currency 2.5% 3.0% 0.9% 0.3% 8.3% “7.6% 3.0% 3.6% 7.
Slide 28: Reconciliation from Reported to Organic Revenue Change by Product Area
Reconciliation from Reported to Organic Revenue Change by Product Area DBRS Moringstar Canada Q121 0221 0321 0421 Q122 0222 03 22 0422 Q1 23 Reported Change in Revenue 29.4% 24% 0.0% 24% 9.4% 11.2% 0.5% -17.6% 0.1% less: M&A, accounting changes, and currency 7.0% 11.2% 5.5% 3.3% 0.1% 3.4% 4.6% 6.4%
Slide 29: Reconciliation from Operating Margin to Adjusted Operating Margin
Reconciliation from Operating Margin to Adjusted Operating Margin 121 0221 0321 0421 Q122 0222 0322 0422 Q123 Operating Margin 11.1% 11.4% 15.8% 16.2% 12.3% 11.5% 47% 15% 5.1% Add: intangible amortization and all M&A-related expenses 6.5% 11.8% 3.6% 3.6% 5.8% 41% 1.7% 6.6% 5% {including M&A-related
Slide 30: Reconciliation from Total Operating Expenses to Adjusted Operating Expenses
Reconciliation from Total Operating Expenses to Adjusted Operating Expenses 121 0221 0321 0421 Q122 0222 0322 0422 0123 Operating Expense 325.6 368.2 361.1 387.4 400.6 416.5 446.2 439.5 455.2 Less: intangible amortization and all M&A-related expenses 25.1 49.2 187 16.4 26.1 19.5 546 30.9 213 (includ
Slide 31: Morningstar
MORNINGSTAR