Morningstar, Inc. · NASDAQ:MORN
Morningstar — Q2 2021 Earnings Presentation
26 slides from Morningstar's earnings presentation, Jul 29, 2021
Slide 1: Second Quarter 2021 Supplemental Presentation
Second Quarter 2021 Supplemental Presentation July 28, 2021
Slide 2: Forward-looking statements
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 that
Slide 3: Q2 2021 Financial Performance
Q2 2021 Financial Performance ($mil) $ 47.2 $61.3 21 20 $96.4 ＋26.7% –23.0% ＋21.3% 21 20 $415.4 $327.9 21 20 $79.5 $108.5 –1.9%*** 21 20 $110.6 Adjusted operating income excludes intangible amortization expense and all mergers and acquisitions (M&A)-related expenses from operating income. Free cash
Slide 4: Q2 2021 Revenue Walk
Q2 2021 Revenue Walk *Organic revenue excludes revenue from acquisitions for a period of 12 months upon completion of the acquisition, and the effect of foreign currency translations. 26.7% Reported Revenue Growth Impact of M&A and Currency 16.7% 10.0% Revenue by Type License-Based 13.3% Asset-Based
Slide 5: Quarterly Revenue Growth Trend
Quarterly Revenue Growth Trend ($mil) Bars represent reported revenue. Percentages represent YOY organic revenue growth, which is a non-GAAP measure. Revenue from DBRS Morningstar is excluded from the reporting of organic revenue growth between Q3 2019 and Q2 2020. 11.8% 10.7% 11.1% 10.5% 10.8% 10.1
Slide 6: Q2 2021 Revenue Drivers: License-Based Revenue Growth
Q2 2021 Revenue Drivers: License-Based Revenue Growth ($mil) +25.4% Reported +13.3% Organic 21 20 License-Based Revenue Drivers: PitchBook (+42.3%), Morningstar Data (+7.6%), and Morningstar Direct (+7.2%) were the primary contributors to license-based organic revenue growth in Q2 2021. Sustainalyti
Slide 7: License-Based Quarterly Trends: PitchBook and Morningstar Direct
License-Based Quarterly Trends PitchBook ($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 $75.0 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 PitchBook Revenue YO
Slide 8: License-Based Quarterly Trends: Advisor Workstation and Morningstar Data
License-Based Quarterly Trends Advisor Workstation ($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 $25.0 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Advisor Workstation Revenue YOY Organic Revenue Growth
Slide 9: Q2 2021 Revenue Drivers: Asset-Based Revenue Growth
Q2 2021 Revenue Drivers: Asset-Based Revenue Growth ($mil) Bars represent reported revenue. Organic revenue growth is a non-GAAP measure. Asset-Based Revenue Drivers: Workplace Solutions (+29.4%) and Morningstar Indexes (+59.5%) delivered robust contributions to asset-based organic revenue growth in
Slide 10: Asset-Based Quarterly Trends: Investment Management
Asset-Based Quarterly Trends: Investment Management ($bil) Investment Management Q2 2021 AUM/A: Investment Management assets increased 5.3% year over year in aggregate, primarily driven by market performance in Morningstar Managed Portfolios. The drop from Q4 2019 to Q1 2020 in Managed Portfolios—No
Slide 11: Asset-Based Quarterly Trends: Workplace Solutions
Asset-Based Quarterly Trends: Workplace Solutions ($bil) Workplace Solutions Q2 2021 AUM/A: Workplace Solutions Assets grew 27.2% year over year, driven by market performance and further penetration of our Managed Accounts offerings. Within Managed Accounts, Morningstar Retirement Manager was the pri
Slide 12: Q2 2021 Revenue Drivers: Transaction-Based Revenue Growth
Q2 2021 Revenue Drivers: Transaction-Based Revenue Growth ($mil) Bars represent reported revenue. Organic revenue growth is a non-GAAP measure. Transaction-Based Revenue Drivers: DBRS Morningstar’s organic revenue growth (+22.3%) stemmed primarily from a recovery in the structured credit markets rel
Slide 13: DBRS Morningstar Revenue Growth by Geography
Quarterly Transaction-Based Trends: DBRS Morningstar Revenue Growth by Geography ($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 $70.0 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 EMEA Canada USA DBRS Morningstar Q2 Revenue Drivers: DBRS Morningstar
Slide 14: DBRS Morningstar Revenue by Asset Class
Quarterly Transaction-Based Trends: DBRS Morningstar Revenue by Asset Class ($mil) DBRS Morningstar Q2 2021 Revenue Drivers: Category mix in Q2 2021 was 65% Structured Finance vs 35% Fundamental Ratings. Canadian corporate issuance slowed after a particularly strong 2020, but demand picked up in the
Slide 15: Q2 2021 Operating Margins
Q2 2021 Operating Margins Adjusted Operating Margin Operating Margin 21 20 ＋11.4% ＋23.2% 21 20 Adjusted operating margin is a non-GAAP financial measure. ＋18.7% ＋24.3% Operating Margin Drivers: Higher revenue across product areas with leverage in asset-based and transaction-based areas. Expense growt
Slide 16: Quarterly Operating Margin Trends
Quarterly Operating Margin Trends Adjusted operating margin is a non-GAAP financial measure. 19.1% 18.5% 15.8% 11.9% 13.7% 18.7% 12.4% 17.1% 17.1% 21.1% 21.0% 20.4% 17.1% 18.9% 24.3% 25.6% 22.3% 23.6% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Operat
Slide 17: Q2 2021 Cash Flow and Capital Allocation
Q2 2021 Cash Flow* and Capital Allocation ($mil) 2 ($mil) Debt Repayment 30.0 CapEx 18.7 Dividends 13.5 Equity Method Investments 9.3 Q2 21 Q2 21 $127.2 $108.5 Operating Cash Flow Free Cash Flow Capital Allocation *Excluding $16.6 million of M&A-related earn-out payments (primarily Sustainalytics),
Slide 18: Appendix
Appendix
Slide 19: Sustainalytics Acquisition
Sustainalytics Acquisition ($mil) These represent non-cash charges recorded in the quarter related to the Tranche II and III payments. The fair value of the contingent consideration liability across the presented time periods is impacted by the payment of Tranche II and foreign currency translations
Slide 20: Reconciliation from Reported to Organic Revenue Growth
Reconciliation from Reported to Organic Revenue Growth License-based revenue grew 9.9% in Q3 2019 when excluding a $10.5 million non-recurring revenue benefit from prior period results. DBRS Morningstar is excluded from the reporting of organic revenue growth between Q3 2019 and Q2 2020. * ** **
Slide 21: Reconciliation from Reported to Organic Revenue Growth
Reconciliation from Reported to Organic Revenue Growth
Slide 22: Reconciliation from Reported to Organic Revenue Growth
Reconciliation from Reported to Organic Revenue Growth
Slide 23: Reconciliation from Consolidated Operating Income to Adjusted Operating Income
Reconciliation from Consolidated Operating Income to Adjusted Operating Income ($mil)
Slide 24: Reconciliation from Cash Provided by Operating Activities to Free Cash Flow
Reconciliation from Cash Provided by Operating Activities to Free Cash Flow ($mil) *Excluding $16.6 million of M&A-related earn-out payments (primarily Sustainalytics), operating cash and free cash flow would have grown by 12.7% and 13.1%, respectively. *
Slide 25: Reconciliation from Operating to Adjusted Operating Margin
Reconciliation from Operating to Adjusted Operating Margin
Slide 26: Morningstar
MORNINGSTAR