Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-Q
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2017March 31, 2023
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from         to
Commission File Number: 000-51280

MORNINGSTAR, INC.
(Exact Name of Registrant as Specified in its Charter) 
mlogored2a01a13.jpg
Illinois36-3297908
(State or Other Jurisdiction of(I.R.S. Employer
Incorporation or Organization)Identification Number)
22 West Washington Street
Chicago IllinoisIllinois60602
(Address of Principal Executive Offices)(Zip Code)
  (312) 696-6000
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common stock, no par valueMORNNASDAQ
Indicate by check mark whether the Registrantregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesxNoo
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YesxNoo
Indicate by check mark whether the Registrantregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerx
☒
Accelerated filer  
o

Non-accelerated filer   o
o
Smaller reporting company  o
☐
Emerging growth company  o
(Do not check if a smaller reporting company)☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the Registrantregistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso☐Nox
As of October 20, 2017, there were 42,529,709April 21, 2023, there were 42,550,975 shares of the Company’s common stock, no par value, outstanding.




Table of Contents

MORNINGSTAR, INC. AND SUBSIDIARIES
INDEX
 
34
34
Unaudited Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2017March 31, 2023 and 20162022
4
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2017March 31, 2023 and 20162022
5
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2017March 31, 2023 and December 31, 20162022
6
Unaudited Condensed Consolidated StatementStatements of Equity for the ninethree months ended September 30, 2017March 31, 2023 and 2022
78
Unaudited Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 30, 2017March 31, 2023 and 20162022
810
911
2024
3339
3440
3541
3541
3541
3541
3642
3743


3

Table of Contents

PART 1.FINANCIAL INFORMATION
PART 1.FINANCIAL INFORMATION
Item 1.Financial Statements

Item 1.Financial Statements
Table of Contents

Morningstar, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Income
 Three months ended March 31,
(in millions, except share and per share amounts)20232022
Revenue$479.7 $457.0 
Operating expense:
Cost of revenue218.8 191.3 
Sales and marketing107.6 81.4 
General and administrative84.0 90.3 
Depreciation and amortization44.8 37.6 
Total operating expense455.2 400.6 
Operating income24.5 56.4 
Non-operating income (loss), net:  
Interest expense, net(13.3)(2.4)
Realized gain on sale of investments, reclassified from other comprehensive income0.2 1.0 
Expense from equity method transaction, net(11.8)— 
Other income, net2.5 8.0 
Non-operating income (loss), net(22.4)6.6 
Income (loss) before income taxes and equity in investments of unconsolidated entities2.1 63.0 
Equity in investments of unconsolidated entities(1.3)0.4 
Income tax expense8.4 17.3 
Consolidated net income (loss)$(7.6)$46.1 
Net income (loss) per share:  
Basic$(0.18)$1.07 
Diluted$(0.18)$1.06 
Dividends per common share:
Dividends declared per common share$0.38 $0.36 
Dividends paid per common share$0.38 $0.36 
Weighted average shares outstanding:
Basic42.5 43.0 
Diluted42.8 43.3 
  Three months ended September 30 Nine months ended September 30
(in millions except per share amounts) 2017
 2016
 2017
 2016
         
Revenue $229.9
 $196.1
 $668.6
 $586.4
         
Operating expense:        
Cost of revenue 90.9
 84.9
 283.2
 256.3
Sales and marketing 31.1
 23.1
 100.2
 71.1
General and administrative 33.3
 25.8
 93.2
 76.1
Depreciation and amortization 21.8
 18.1
 64.8
 52.0
Total operating expense 177.1
 151.9
 541.4
 455.5
         
Operating income 52.8
 44.2
 127.2
 130.9
         
Non-operating income (expense):  
  
    
Interest income (expense), net (0.9) —
 (2.6) 0.3
Gain on sale of investments, reclassified from other comprehensive income 0.3
 0.3
 1.1
 0.5
Gain on sale of business —
 —
 17.5
 —
Other income (expense), net (1.4) 1.8
 (4.0) 4.8
Non-operating income (expense), net (2.0) 2.1
 12.0
 5.6
         
Income before income taxes and equity in net income (loss) of unconsolidated entities 50.8
 46.3
 139.2
 136.5
         
Equity in net income (loss) of unconsolidated entities —
 0.4
 (1.0) 0.7
         
Income tax expense 16.9
 16.5
 40.2
 46.5
         
Consolidated net income $33.9
 $30.2
 $98.0
 $90.7
         
Net income per share:  
  
    
Basic $0.80
 $0.70
 $2.29
 $2.11
Diluted $0.79
 $0.70
 $2.28
 $2.09
         
Dividends per common share:        
Dividends declared per common share $—
 $0.22
 $0.46
 $0.66
Dividends paid per common share $0.23
 $0.22
 $0.69
 $0.66
         
Weighted average shares outstanding:        
Basic 42.5
 43.1
 42.8
 43.0
Diluted 42.8
 43.3
 43.1
 43.3


See notes to unaudited condensed consolidated financial statements.


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Table of Contents

Morningstar, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)


 Three months ended March 31,
(in millions) 20232022
Consolidated net income (loss)$(7.6)$46.1 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment7.1 (5.0)
Unrealized gains (losses) on securities:
  Unrealized holding gains (losses) arising during period0.1 (4.8)
Reclassification of gains on investments included in net income(0.2)(0.7)
Other comprehensive income (loss), net7.0 (10.5)
Comprehensive income (loss)$(0.6)$35.6 
  Three months ended September 30 Nine months ended September 30
(in millions)  2017
 2016
 2017
 2016
         
Consolidated net income $33.9
 $30.2
 $98.0
 $90.7
         
Other comprehensive income (loss):        
Foreign currency translation adjustment 10.0
 (1.7) 29.9
 (9.8)
Unrealized gains (losses) on securities, net of tax:        
  Unrealized holding gains arising during period 0.9
 0.6
 3.5
 1.1
  Reclassification gains (losses) included in net
  income
 (0.3) 0.2
 (0.8) —
Other comprehensive income (loss) 10.6
 (0.9) 32.6
 (8.7)
         
Comprehensive income $44.5
 $29.3
 $130.6
 $82.0


See notes to unaudited condensed consolidated financial statements.





5

Table of Contents

Morningstar, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(in millions, except share amounts)As of March 31, 2023
(unaudited)		As of December 31, 2022
Assets  
Current assets:  
Cash and cash equivalents$352.2 $376.6 
Investments33.2 38.0 
Accounts receivable, less allowance for credit losses of $6.2 million and $6.6 million, respectively297.9 307.9 
Deferred commissions42.1 40.7 
Prepaid expenses48.3 36.7 
Other current assets7.6 10.9 
Total current assets781.3 810.8 
Goodwill1,577.2 1,571.7 
Intangible assets, net532.6 548.6 
Property, equipment, and capitalized software, less accumulated depreciation and amortization of $638.2 million and $610.7 million, respectively201.5 199.4 
Operating lease assets184.6 191.6 
Investments in unconsolidated entities117.7 96.0 
Deferred tax asset, net11.2 10.8 
Deferred commissions34.3 35.4 
Other assets10.3 10.5 
Total assets$3,450.7 $3,474.8 
Liabilities and equity  
Current liabilities:  
Deferred revenue$502.3 $455.6 
Accrued compensation133.6 220.1 
Accounts payable and accrued liabilities69.6 76.2 
Current portion of long-term debt32.1 32.1 
Operating lease liabilities36.1 37.3 
Contingent consideration liability— 50.0 
Other current liabilities70.7 11.2 
Total current liabilities844.4 882.5 
Operating lease liabilities170.3 176.7 
Accrued compensation20.8 20.7 
Deferred tax liabilities, net65.7 62.9 
Long-term debt1,099.4 1,077.5 
Deferred revenue31.4 33.5 
Other long-term liabilities14.0 13.9 
Total liabilities2,246.0 2,267.7 
Equity:  
Morningstar, Inc. shareholders’ equity:  
Common stock, no par value, 200,000,000 shares authorized, of which 42,550,943 and 42,480,051 shares were outstanding as of March 31, 2023 and December 31, 2022, respectively— — 
Treasury stock at cost, 11,991,484 and 11,991,517 shares as of March 31, 2023 and December 31, 2022, respectively(986.7)(986.7)
6
  As of September 30 As of December 31
(in millions except share amounts) 2017
 2016
Assets  
  
Current assets:  
  
Cash and cash equivalents $270.3
 $259.1
Investments 53.7
 44.9
Accounts receivable, less allowance of $2.6 and $2.1, respectively 148.2
 145.8
Other current assets 25.7
 22.2
Total current assets 497.9
 472.0
Property, equipment, and capitalized software, less accumulated depreciation and amortization of $263.4 and $214.8, respectively 151.2
 152.1
Investments in unconsolidated entities 61.5
 40.3
Goodwill 565.4
 556.8
Intangible assets, net 100.9
 120.9
Other assets 6.8
 8.8
Total assets $1,383.7
 $1,350.9
     
Liabilities and equity  
  
Current liabilities:  
  
Accounts payable and accrued liabilities $32.6
 $44.6
Accrued compensation 72.4
 71.7
Deferred revenue 174.1
 165.4
Other current liabilities 15.5
 13.2
Total current liabilities 294.6
 294.9
Accrued compensation 11.0
 10.3
Deferred tax liability, net 39.9
 38.2
Long-term debt 205.0
 250.0
Deferred rent 23.9
 24.8
Other long-term liabilities 30.1
 35.9
Total liabilities 604.5
 654.1
     
Equity:  
  
Morningstar, Inc. shareholders’ equity:  
  
Common stock, no par value, 200,000,000 shares authorized, of which 42,529,709 and 42,932,994 shares were outstanding as of September 30, 2017 and December 31, 2016, respectively —
 —
Treasury stock at cost, 10,627,537 and 10,106,249 shares as of September 30, 2017 and December 31, 2016, respectively (707.5) (667.9)
Additional paid-in capital 595.4
 584.0
Retained earnings 940.2
 861.9
Accumulated other comprehensive loss:    
    Currency translation adjustment (51.4) (81.3)
    Unrealized gain (loss) on available-for-sale investments 2.5
 (0.2)
Total accumulated other comprehensive loss (48.9) (81.5)
Total Morningstar, Inc. shareholders’ equity 779.2
 696.5
Noncontrolling interest —
 0.3
Total equity 779.2
 696.8
Total liabilities and equity $1,383.7
 $1,350.9


See notes to unaudited condensed consolidated financial statements.

Table of Contents

Additional paid-in capital772.0 757.8 
Retained earnings1,511.4 1,535.0 
Accumulated other comprehensive loss:
    Currency translation adjustment(91.9)(99.0)
    Unrealized gain on available-for-sale investments(0.1)— 
Total accumulated other comprehensive loss(92.0)(99.0)
Total equity1,204.7 1,207.1 
Total liabilities and equity$3,450.7 $3,474.8 
Morningstar, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statement of Equity
For the nine months ended September 30, 2017
  Morningstar, Inc. Shareholders’ Equity    
          
Accumulated
Other
Comprehensive
Loss

    
  Common Stock  
 
Additional
Paid-in
Capital

    
Non-
Controlling
Interest

  
(in millions, except share amounts) 
Shares
Outstanding

 
Par
Value

 
Treasury
Stock

  
Retained
Earnings

   
Total
Equity

                 
Balance as of December 31, 2016 42,932,994
 $—
 $(667.9) $584.0
 $861.9
 $(81.5) $0.3
 $696.8
                 
Net income   —
 —
 —
 98.0
 —
 —
 98.0
Other comprehensive income (loss):                
Unrealized gain on available-for-sale investments, net of income tax of $1.1   —
 —
 —
 —
 3.5
 —
 3.5
Reclassification of adjustments for gain included in net income, net of income tax of $0.3   —
 —
 —
 —
 (0.8) —
 (0.8)
Foreign currency translation adjustment, net   —
 —
 —
 —
 29.9
 —
 29.9
Other comprehensive income, net   —
 —
 —
 —
 32.6
 —
 32.6
Issuance of common stock related to option exercises and vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units 130,086
 —
 1.0
 (4.2) —
 —
 —
 (3.2)
Stock-based compensation   —
 —
 16.5
 —
 —
 —
 16.5
Common shares repurchased (533,371) —
 (40.6) —
 —
 —
 —
 (40.6)
Dividends declared   —
 —
 —
 (19.7) —
 —
 (19.7)
Purchase of additional interest in majority-owned investment   —
 —
 (0.9) —
 —
 (0.3) (1.2)
Balance as of September 30, 2017 42,529,709
 $—
 $(707.5) $595.4
 $940.2
 $(48.9) $—
 $779.2

See notes to unaudited condensed consolidated financial statements.

7



Table of Contents

Morningstar, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Equity
For the three months ended March 31, 2023 and 2022
 Morningstar, Inc. Shareholders’ Equity 
Accumulated
Other
Comprehensive
Loss
 Common Stock Additional
Paid-in
Capital		 
(in millions, except share and per share amounts)Shares
Outstanding		Par
Value		Treasury
Stock		Retained
Earnings		Total
Equity
Balance as of December 31, 202242,480,051 $— $(986.7)$757.8 $1,535.0 $(99.0)$1,207.1 
Net loss— — — (7.6)— (7.6)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale investments, net of tax— — — — 0.1 0.1 
Reclassification of adjustments for gain on investments included in net income, net of tax— — — — (0.2)(0.2)
Foreign currency translation adjustment, net— — — — 7.1 7.1 
Other comprehensive income (loss), net— — — — 7.0 7.0 
Issuance of common stock related to vesting of stock awards, net of shares withheld for taxes on settlements of stock awards70,892 — — (9.4)— — (9.4)
Reclassification of awards previously liability-classified that were converted to equity— — 11.4 — — 11.4 
Stock-based compensation— — 12.2 — — 12.2 
Dividends declared ($0.38 per share)— — — (16.0)— (16.0)
Balance as of March 31, 202342,550,943 $— $(986.7)$772.0 $1,511.4 $(92.0)$1,204.7 

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Table of Contents

 Morningstar, Inc. Shareholders’ Equity 
Accumulated
Other
Comprehensive
Loss
 Common Stock Additional
Paid-in
Capital		 
(in millions, except share and per share amounts)Shares
Outstanding		Par
Value		Treasury
Stock		Retained
Earnings		Total
Equity
Balance as of December 31, 202143,136,273 $— $(764.3)$689.0 $1,526.5 $(35.3)$1,415.9 
Net income— — — 46.1 — 46.1 
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale investments, net of tax— — — — (4.8)(4.8)
Reclassification of adjustments for gain on investments included in net income, net of tax— — — — (0.7)(0.7)
Foreign currency translation adjustment, net— — — — (5.0)(5.0)
Other comprehensive income (loss), net— — — — (10.5)(10.5)
Issuance of common stock related to vesting of stock awards, net of shares withheld for taxes on settlements of stock awards34,350 — — (7.1)— — (7.1)
Reclassification of awards previously liability-classified that were converted to equity— — 19.4 — — 19.4 
Stock-based compensation— — 13.9 — — 13.9 
Common shares repurchased(402,971)— (110.6)— — — (110.6)
Dividends declared ($0.36 per share)— — — (15.4)— (15.4)
Balance as of March 31, 202242,767,652 $— $(874.9)$715.2 $1,557.2 $(45.8)$1,351.7 

See notes to unaudited condensed consolidated financial statements.

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Table of Contents
Morningstar, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
 Three months ended March 31,
(in millions)20232022
Operating activities
Consolidated net income (loss)$(7.6)$46.1 
Adjustments to reconcile consolidated net income (loss) to net cash flows from operating activities:
Depreciation and amortization44.8 37.6 
Deferred income taxes2.0 (6.7)
Stock-based compensation expense12.2 13.9 
Provision for bad debt1.0 — 
Equity in investments of unconsolidated entities1.3 (0.4)
Gain on equity method transaction(49.6)— 
Acquisition earn-out accrual— 7.1 
Other, net(2.7)(9.0)
Changes in operating assets and liabilities:
Accounts receivable9.8 (8.6)
Accounts payable and accrued liabilities(5.8)(2.7)
Accrued compensation and deferred commissions(75.2)(108.7)
Income taxes, current(2.6)17.1 
Deferred revenue43.4 53.8 
Other assets and liabilities52.4 (16.0)
Cash provided by operating activities23.4 23.5 
Investing activities 
Purchases of investment securities(2.8)(15.9)
Proceeds from maturities and sales of investment securities5.5 18.2 
Capital expenditures(29.5)(28.0)
Acquisitions, net of cash acquired— (6.8)
Proceeds from sale of equity method investments, net26.2 — 
Purchases of investments in unconsolidated entities(0.1)(1.0)
Other, net— (0.2)
Cash used for investing activities(0.7)(33.7)
Financing activities 
Common shares repurchased— (110.6)
Dividends paid(15.9)(15.5)
Proceeds from revolving credit facility95.0 175.0 
Repayment of revolving credit facility(65.0)(30.0)
Repayment of term facility(8.1)— 
Employee taxes withheld for stock awards(9.3)(7.1)
Payment of acquisition-related earn-outs(45.5)— 
Cash provided by (used for) financing activities(48.8)11.8 
Effect of exchange rate changes on cash and cash equivalents1.7 (1.9)
Net decrease in cash and cash equivalents(24.4)(0.3)
Cash and cash equivalents—beginning of period376.6 483.8 
Cash and cash equivalents—end of period$352.2 $483.5 
Supplemental disclosure of cash flow information: 
Cash paid for income taxes$9.1 $7.0 
Cash paid for interest$11.9 $2.6 
  Nine months ended September 30
(in millions) 2017
 2016
     
Operating activities    
Consolidated net income $98.0
 $90.7
Adjustments to reconcile consolidated net income to net cash flows from operating activities:    
Depreciation and amortization 64.8
 52.0
Deferred income taxes 1.0
 (2.9)
Stock-based compensation expense 16.5
 10.6
Provision for bad debt 1.3
 0.7
Equity in net income (loss) of unconsolidated entities 1.0
 (0.7)
Gain on sale of business (17.5)
—
Other, net 2.9
 (5.2)
Changes in operating assets and liabilities, net of effects of acquisitions: 

 

Accounts receivable (0.3) 13.1
Other assets (3.0) (1.4)
Accounts payable and accrued liabilities (4.3) (3.9)
Accrued compensation 0.2
 (20.8)
Income taxes—current 1.6
 6.3
Deferred revenue 6.2
 4.1
Deferred rent (1.1) (2.7)
Other liabilities (2.6) 3.3
Cash provided by operating activities 164.7
 143.2
     
Investing activities    
Purchases of investments (22.7) (24.4)
Proceeds from maturities and sales of investments 20.6
 21.6
Capital expenditures (46.4) (47.5)
Acquisitions, net of cash acquired (1.0) (15.8)
Proceeds from sale of a business 23.7
 —
Purchases of equity- and cost-method investments (24.3) (16.4)
Other, net 0.6
 —
Cash used for investing activities (49.5) (82.5)
     
Financing activities    
Common shares repurchased (41.3) (38.8)
Dividends paid (29.6) (28.5)
Proceeds from short-term debt —
 40.0
Repayment of short-term debt —
 (15.0)
Repayment of long-term debt (45.0) —
Proceeds from stock-option exercises 0.2
 0.4
Employee taxes paid from withholding of restricted stock units (3.4) (4.4)
Other, net (0.4) —
Cash used for financing activities (119.5) (46.3)
     
Effect of exchange rate changes on cash and cash equivalents 15.5
 (2.1)
Net increase in cash and cash equivalents 11.2
 12.3
Cash and cash equivalents—beginning of period 259.1
 207.1
Cash and cash equivalents—end of period $270.3
 $219.4
     
Supplemental disclosure of cash flow information:    
Cash paid for income taxes $37.5
 $43.3
Cash paid for interest $3.8
 $0.8
Supplemental information of non-cash investing and financing activities:    
Unrealized gain on available-for-sale investments $3.5
 $1.5
Software and equipment obtained under long-term financing arrangement $3.1
 $9.0

See notes to unaudited condensed consolidated financial statements.

10

Table of Contents

MORNINGSTAR, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1.1. Basis of Presentation of Interim Financial Information
 
The accompanying unaudited condensed consolidated financial statements of Morningstar, Inc. and subsidiaries (Morningstar, we, our, the company)Company) have been prepared to conform to the rules and regulations of the Securities and Exchange Commission (SEC). The preparation of financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue,revenues, and expenses. Actual results could differ from those estimates. In the opinion of management, the statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly our financial position, results of operations, equity, and cash flows. These financial statements and notes are unaudited and should be read in conjunction with our Audited Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016,2022, filed with the SEC on February 28, 201724, 2023 (our Annual Report).


The acronyms that appear in the Notes to our Unaudited Condensed Consolidated Financial Statements refer to the following:

ASC: Accounting Standards Codification
ASU: Accounting Standards Update
FASB: Financial Accounting Standards Board

2. Summary of Significant Accounting Policies


We discuss ourOur significant accounting policies are included in Note 2 of the Notes to our Audited Consolidated Financial Statements included in our Annual Report.


On May 28, 2014,Severance: We account for post-employment benefits in accordance with FASB ASC 712, Compensation - Non-retirement Post-employment Benefits (FASB ASC 712). Under FASB ASC 712, we recognize compensation expense associated with these benefits as a liability when probable and estimable.

In July 2022, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entityCompany began to recognizesignificantly reduce its operations in Shenzhen, China and to shift the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The original effective date for ASU 2014-09 would have required us to adopt it beginning on January 1, 2017. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers—Deferral of the Effective Date, which defers the effective date of ASU 2014-09 for one year and permits early adoption as early as the original effective date of ASU 2014-09. We elected the deferral, and the new standard is effective for us on January 1, 2018.

The company has obtained an understanding of ASU No. 2014-09 and is in the process of analyzing the impact of the new standard on its financial results. We have completed a high-level assessment of the attributes within the company’s contracts for its major products and services, and we have started assessing potential impacts to our internal processes, control environment, and disclosures. While the company does not currently anticipate that the adoption of ASU No. 2014-09 will result in a material change to the timing of when revenue is recognized and believes that it will retain similar accounting treatment used to recognize revenue under current standards. We have identified that there will be certain changes in accounting treatmentwork related to deliveryits global business functions, including global product and software development, managed investment data collection and analysis, and equity data collection and analysis, to other Morningstar locations.

As a result of third-party content (principal vs. agent) and costs to obtain contracts (e.g., sales commissions). We are finalizing our assessment and quantifyingthese activities, the impacts related to these matters but do not expect them to be material. We are continuing to assess the impactCompany incurred $25.9 million of the new standard on our financial results and other possible impacts. The standard allows for both retrospective and modified retrospective methods of adoption. We plan to adopt using the modified retrospective transition method applied to those contractsseverance expense in 2022, which were not completed as of January 1, 2018. Upon adoption, we will recognize the cumulative effect of adopting this guidance as an adjustment to our opening balance of retained earnings. Prior periods will not be retrospectively adjusted. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We will continue to provide enhanced disclosures as we continue our assessment.




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On March 17, 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which provides guidance on assessing whether an entity is a principal or an agent in a revenue transaction and whether an entity reports revenue on a gross or net basis. On April 14, 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing, which provides guidance on identifying performance obligations and accounting for licenses of intellectual property. On May 6, 2016, the FASB issued ASU No. 2016-11, Revenue Recognition and Derivatives and Hedging: Rescission of SEC guidance because of ASU No. 2014-09 and ASU No. 2014-16 pursuant to staff announcements at the March 3, 2016 EITF Meeting, which rescinds the following SEC Staff Observer comments from ASC 605, Revenue Recognition, upon an entity's early adoption of ASC 606, Revenue from Contracts with Customers: Revenue and expense recognition for freight services in process, accounting for shipping and handling fees and costs, and accounting for consideration given by a vendor to a customer (including a reseller of the vendor's products). On May 9, 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients, which makes narrow-scope amendments to ASU No. 2014-09 and provides practical expedients to simplify the transition to the new standard and clarify certain aspects of the standard. On December 21, 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which makes narrow-scope amendments to ASU No. 2014-09.

The effective date and transition requirements for ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-11, ASU No. 2016-12, and ASU No. 2016-20 are the same as the effective date and transition requirements of ASU No. 2014-09. We are evaluating the effect that ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-11, ASU No. 2016-12, and ASU No. 2016-20 will have on our consolidated financial statements and related disclosures.

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases, which will require lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. The new standard is effective for us on January 1, 2019. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are evaluating the effect that ASU No. 2016-02 will have on our consolidated financial statements and related disclosures.

On August 26, 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, which reduces diversity in practice of how certain transactions are classified in the statement of cash flows. The new guidance clarifies the classification of cash activities related to debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate and bank-owned life insurance policies, distributions received from equity-method investments, and beneficial interests in securitization transactions. The guidance also describes a predominance principle in which cash flows with aspects of more than one class that cannot be separated should be classified based on the activity that is likely to be the predominant source or use of cash flow.

The new standard is effective for us on January 1, 2018. Early adoption is permitted, including adoption in an interim period, but requires all elements of the amendments to be adopted at once rather than individually. The new standard must be adopted using a retrospective transition method. We are evaluating the effect that ASU No. 2016-15 will have on our consolidated financial statements and related disclosures.

On January 5, 2017, the FASB issued ASU No. 2017-01, Business Combinations: Clarifying the Definition of a Business, which revises the definition of a business. Whenrepresented substantially all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets), the assets acquired would not represent a business. To be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to create outputs. The new guidance provides a framework to evaluate when an input and substantive process are present (including for early-stage companies that have not generated outputs). To be a business without outputs, there will now needseverance costs expected to be an organized workforce. The new guidance also narrowsincurred with the definition of the term outputsremainder to be consistent with how it is described in Topic 606, Revenue from Contracts with Customers. The new standard is effective for us on January 1, 2018. Early adoption is permitted.recognized through the third quarter of 2023. We are evaluatingrecorded an immaterial amount of additional severance expense during the effect that ASU No. 2017-01 will havefirst quarter of 2023. These amounts were recorded within "General and administrative" on our consolidated financial statements and related disclosures.


TableConsolidated Statements of Contents

On January 26, 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other,Income. We have $16.2 million of accrued severance remaining as of March 31, 2023, which simplifies the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same one-step impairment testwe expect will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclosepaid through the amountthird quarter of goodwill at reporting units with zero or negative carrying amounts.2023. The new standardliability is effective for us on January 1, 2020. The new standard should be applied prospectively. Early adoption is permitted for any impairment tests performed after January 1, 2017. We are evaluating the effect that ASU No. 2017-04 will haverecorded within "Accrued compensation - current" on our consolidated financial statements and related disclosures.Consolidated Balance Sheet.


On May 10, 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation: Scope of Modification Accounting,which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The new standard is effective for us on January 1, 2018. The new standard should be applied prospectively. Early adoption is permitted. We are evaluating the effect that ASU No. 2017-09 will have on our consolidated financial statements and related disclosures.

3. Credit Arrangements


In November 2016, we amendedDebt

The following table summarizes our debt as of March 31, 2023 and December 31, 2022:
(in millions)As of March 31, 2023As of December 31, 2022
Term Facility, net of unamortized debt issuance costs of $0.7 million and $0.7 million, respectively$633.0 $641.1 
Revolving Credit Facility150.0 120.0 
2.32% Senior Notes due October 26, 2030, net of unamortized debt issuance costs of $1.5 million and $1.5 million, respectively348.5 348.5 
Total debt$1,131.5 $1,109.6 

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Credit Agreement

On July 2, 2019, the Company entered into a senior credit agreement to provide us(the 2019 Credit Agreement). The 2019 Credit Agreement provided the Company with a three-yearfive-year multi-currency credit facility with aan initial borrowing capacity of up to $750.0 million, including a $300.0 million revolving credit facility (the 2019 Revolving Credit Facility) and a term loan facility of $450.0 million. The credit agreement2019 Credit Agreement also providesprovided for the issuance of up to $25.0$50.0 million of letters of credit and a $100.0 million sub-limit for a swingline facility under the 2019 Revolving Credit Facility. On May 6, 2022, the Company terminated the 2019 Credit Agreement.

On May 6, 2022, the Company entered into a new senior credit agreement (the 2022 Credit Agreement). The 2022 Credit Agreement provided the Company with a five-year multi-currency credit facility with an initial borrowing capacity of up to $1.1 billion, including a $650.0 million term loan (the 2022 Term Facility) with an initial draw of $600.0 million and an option for a second draw of up to $50.0 million and a $450.0 million revolving credit facility.facility (the 2022 Revolving Credit Facility). The 2022 Credit Agreement also provides for the issuance of up to $50.0 million of letters of credit and a $100.0 million sub-limit for a swingline.


The proceeds of the first draw under the 2022 Term Facility and initial borrowings under the 2022 Revolving Credit Facility were used to finance the acquisition of Leveraged Commentary & Data (LCD) and to repay a portion of the borrowings under the 2019 Revolving Credit Facility. The optional second draw on the 2022 Term Facility was available to fund the contingent consideration payment of up to $50.0 million payable in connection with the LCD acquisition.

The 2022 Credit Agreement was amended (the Amended 2022 Credit Agreement) on September 13, 2022 (the First Amendment to the 2022 Credit Agreement) and on September 30, 2022 (the Second Amendment to the 2022 Credit Agreement). The First Amendment to the 2022 Credit Agreement terminated the unfunded term commitment related to the optional second draw of up to $50.0 million in the 2022 Term Facility and increased the 2022 Revolving Credit Facility to $600.0 million. The Second Amendment to the 2022 Credit Agreement increased the 2022 Term Facility to a fully funded $650.0 million facility (the Amended 2022 Term Facility) and increased the 2022 Revolving Credit Facility to $650.0 million (the Amended 2022 Revolving Credit Facility) for total borrowing capacity of $1.3 billion. As of March 31, 2023, our total outstanding debt under the Amended 2022 Credit Agreement was $783.0 million, net of debt issuance costs, with borrowing availability of $500.0 million under the Amended 2022 Revolving Credit Facility. Except for incremental borrowing capacity, there were no material changes to the existing terms and conditions of the 2022 Credit Agreement.

The proceeds of the additional draw under the Amended 2022 Term Facility were used to repay borrowings under the 2022 Revolving Credit Facility. The proceeds of future borrowings under the Amended 2022 Revolving Credit Facility may be used for working capital, capital expenditures, or any other general corporate purpose.

The interest rate applicable to any loan under the credit agreementAmended 2022 Credit Agreement is, at ourthe Company's option, either: (i) the applicable London interbank offered rate (LIBOR)Secured Overnight Financing Rate (SOFR) plus an applicable margin for such loans, which ranges between 1.00% and 1.75%1.48%, based on ourthe Company's consolidated leverage ratio or (ii) the lender's base rate plus the applicable margin for such loans, which ranges between 2.00%0.00% and 2.75%0.38%, based on ourthe Company's consolidated leverage ratio.


The credit agreement also containsportions of deferred debt issuance costs related to the Amended 2022 Revolving Credit Facility are included in other current and non-current assets, and the portion of deferred debt issuance costs related to the Amended 2022 Term Facility is reported as a reduction to the carrying amount of the Amended 2022 Term Facility. Debt issuance costs related to the Amended 2022 Revolving Credit Facility are amortized on a straight-line basis to interest expense over the term of the Amended 2022 Credit Agreement. Debt issuance costs related to the Amended 2022 Term Facility are amortized to interest expense using the effective interest method over the term of the Amended 2022 Credit Agreement.

Private Placement Debt Offering

On October 26, 2020, we completed the issuance and sale of $350.0 million aggregate principal amount of 2.32% senior notes due October 26, 2030 (the 2030 Notes), in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended. Proceeds were primarily used to pay off a portion of the Company's outstanding debt under the 2019 Credit Agreement. Interest on the 2030 Notes is payable semi-annually on each October 30 and April 30 during the term of the 2030 Notes and at maturity. As of March 31, 2023, our total outstanding debt, net of issuance costs, under the 2030 Notes was $348.5 million.
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Compliance with Covenants

Each of the Amended 2022 Credit Agreement and the 2030 Notes include customary representations, warranties, and covenants, including financial covenants, under which we: (i) may not exceed a maximum consolidated leverage ratio of 3.00 to 1.00 and (ii) are requiredthat require us to maintain a minimumspecified ratios of consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) to consolidated interest coverage ratio of not less than 3.00charges and consolidated funded indebtedness to 1.00.consolidated EBITDA, which are evaluated on a quarterly basis. We were in compliance with thethese financial covenants as of September 30, 2017.March 31, 2023.


We had an outstanding principal balance of $205.0 million at a one-month LIBOR interest rate plus 100 basis points as of September 30, 2017, leaving borrowing availability of $95.0 million.

4. Acquisitions, Goodwill, and Other Intangible Assets


20172023 Acquisitions


We did not completemake any significant acquisitions induring the first nine months of 2017.

2016 Acquisitions

In the third quarter of 2017, we did not make any significant changes to the preliminary purchase price allocation related to our acquisition of PitchBook Data, Inc. compared with the preliminary estimates at December 31, 2016. The values assigned to various assets and liabilities in the preliminary purchase price allocation are subject to change as a result of information that may become available in the future.2023.

As of September 30, 2017, the primary areas of the preliminary purchase price allocation that are not yet finalized include the fair values of acquired intangible assets and related deferred tax liabilities, assumed deferred revenue, and assumed tax assets and liabilities.

Additional information concerning this acquisition can be found in the Audited Consolidated Financial Statements and Notes thereto included in our Annual Report.


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Goodwill

The following table shows the changes in our goodwill balancesbalance from December 31, 20162022 to September 30, 2017:March 31, 2023:

  (in millions)
Balance as of December 31, 2016 $556.8
Divestiture of HelloWallet (See Note 5) (2.4)
Foreign currency translation and adjustments to purchase price allocation 11.0
Balance as of September 30, 2017 $565.4

(in millions)
Balance as of December 31, 2022$1,571.7 
Foreign currency translation5.5 
Balance as of March 31, 2023$1,577.2 
We did not record any goodwill impairment losses in the first ninethree months of 2017 and 2016.2023 or 2022. We perform our annual impairment reviews in the fourth quarter.quarter or when impairment indicators and triggering events are identified.


Intangible Assets


The following table summarizes our intangible assets: 

 As of September 30, 2017 As of December 31, 2016 As of March 31, 2023As of December 31, 2022
(in millions) Gross
 
Accumulated
Amortization

 Net
 
Weighted
Average
Useful  Life
(years)
 Gross
 
Accumulated
Amortization

 Net
 
Weighted
Average
Useful  Life
(years)
(in millions)GrossAccumulated
Amortization		NetWeighted
Average
Useful  Life
(years)		GrossAccumulated
Amortization		NetWeighted
Average
Useful  Life
(years)
Intellectual property $31.5
 $(28.7) $2.8
 9 $30.9
 $(27.4) $3.5
 9
Customer-related assets 156.5
 (106.2) 50.3
 12 152.0
 (97.7) 54.3
 12Customer-related assets$596.4 $(231.7)$364.7 14$595.1 $(221.3)$373.8 14
Supplier relationships 0.2
 (0.1) 0.1
 20 0.2
 (0.1) 0.1
 20
Technology-based assets 127.8
 (80.7) 47.1
 7 133.2
 (72.1) 61.1
 7Technology-based assets313.9 (179.9)134.0 8312.8 (173.8)139.0 8
Non-competition agreements 2.5
 (1.9) 0.6
 5 5.0
 (3.1) 1.9
 5
Intellectual property & otherIntellectual property & other92.2 (58.3)33.9 892.1 (56.3)35.8 8
Total intangible assets $318.5
 $(217.6) $100.9
 10 $321.3
 $(200.4) $120.9
 10Total intangible assets$1,002.5 $(469.9)$532.6 12$1,000.0 $(451.4)$548.6 12
 
The following table summarizes our amortization expense related to intangible assets:
  Three months ended September 30 Nine months ended September 30
(in millions) 2017
 2016
 2017
 2016
Amortization expense $5.5
 $4.5
 $18.1
 $14.3

 Three months ended March 31,
(in millions)20232022
Amortization expense$17.5 $14.1 
 
We amortize intangible assets using the straight-line method over their expected economic useful lives.


We
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As of March 31, 2023, we expect intangible amortization expense for the remainder of 20172023 and subsequent years to be as follows:
  (in millions)
Remainder of 2017 (from October 1 through December 31) $5.6
2018 20.7
2019 19.2
2020 16.3
2021 13.0
Thereafter 26.1
 (in millions)
Remainder of 2023 (April 1 through December 31)$53.0 
202464.6 
202556.4 
202652.6 
202745.5 
Thereafter260.5 
Total$532.6 
 
Our estimates of future amortization expense for intangible assets may be affected by future acquisitions, divestitures,divestitures, changes in the estimated average useful life,lives, impairments, and foreign currency translation.



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5. Divestiture

In June 2014, we acquired the remaining 81.3% interest in HelloWallet Holdings, Inc. (HelloWallet), increasing our ownership to 100%. This valued HelloWallet at $54.0 million, an amount that included $39.2 million of goodwill and $9.5 million of intangible assets.

On June 30, 2017, we sold HelloWallet to KeyBank National Association, a bank-based financial services company. We recorded a noncash gain on the sale of $17.5 million. This gain mainly represents the sale proceeds of $23.7 million less $2.4 million of goodwill and the write-off of the remaining net book value on the acquired intangible assets. As some aspects of HelloWallet had been integrated into Morningstar's single reporting unit, the goodwill attributable to this transaction was calculated using a relative fair value allocation method.

The sale of HelloWallet did not meet the criteria to be classified as a discontinued operation because the divestiture did not represent a strategic shift that has, or will have, a major effect on our operations and financial results.

The following table summarizes the amounts included in the gain on sale of business for the nine months ended September 30, 2017:
  Nine months ended September 30
(in millions) 2017
Proceeds received $23.7
Intangibles and internally developed software (4.6)
Goodwill (2.4)
Other assets and liabilities 0.8
Total gain on sale of business $17.5

6. Income (Loss) Per Share


The following table shows how we reconcile our net income (loss) and the number of shares used in computing basic and diluted net income (loss) per share:

 Three months ended March 31,
(in millions, except share and per share amounts)20232022
Basic net income (loss) per share:  
Consolidated net income (loss)$(7.6)$46.1 
Weighted average common shares outstanding42.5 43.0 
Basic net income (loss) per share$(0.18)$1.07 
Diluted net income (loss) per share:
Consolidated net income (loss)$(7.6)$46.1 
Weighted average common shares outstanding42.5 43.0 
Net effect of dilutive stock options and restricted stock units0.3 0.3 
Weighted average common shares outstanding for computing diluted income per share42.8 43.3 
Diluted net income (loss) per share$(0.18)$1.06 

  Three months ended September 30 Nine months ended September 30
(in millions, except per share amounts) 2017
 2016
 2017
 2016
         
Basic net income per share:  
  
    
Consolidated net income $33.9
 $30.2
 $98.0
 $90.7
         
Weighted average common shares outstanding 42.5
 43.1
 42.8
 43.0
         
Basic net income per share $0.80
 $0.70
 $2.29
 $2.11
         
Diluted net income per share:        
Consolidated net income $33.9
 $30.2
 $98.0
 $90.7
         
Weighted average common shares outstanding 42.5
 43.1
 42.8
 43.0
Net effect of dilutive stock options, restricted stock units, and performance share awards 0.3
 0.2
 0.3
 0.3
Weighted average common shares outstanding for computing diluted income per share 42.8
 43.3
 43.1
 43.3
         
Diluted net income per share $0.79
 $0.70
 $2.28
 $2.09

TheDuring the periods presented, the number of weighted averageanti-dilutive restricted stock units, performance share awards, andor market stock units excluded from our calculation of diluted earnings per share because their inclusion would have been anti-dilutive was immaterial during the periods presented.immaterial.



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6. Revenue

Disaggregation of Revenue

7.The following table presents our revenue disaggregated by revenue type. Sales and usage-based taxes are excluded from revenue.
Three months ended March 31,
(in millions)20232022
License-based$364.0 $311.9 
Asset-based65.3 68.5 
Transaction-based50.4 76.6 
Consolidated revenue$479.7 $457.0 

License-based performance obligations are generally satisfied over time as the customer has access to the product or service during the term of the subscription license and the level of service is consistent during the contract period. License-based agreements typically have a term of 1 to 3 years and are accounted for as subscription services available to customers and not as a license under the accounting guidance. License-based revenue is generated from the sale of PitchBook, Morningstar Data, Morningstar Direct, Morningstar Sustainalytics' license-based products, Morningstar Indexes data and services products, DBRS Morningstar's data products, Morningstar Advisor Workstation, and other similar product licenses.

Asset-based performance obligations are satisfied over time as the customer receives continuous access to a service for the term of the agreement. Asset-based arrangements typically have a term of 1 to 3 years. Asset-based fees represent variable consideration, and the customer does not make separate purchasing decisions that result in additional performance obligations. Significant changes in the underlying fund assets and significant disruptions in the market are evaluated to determine whether estimates of earned asset-based fees need to be revised for the current quarter. The timing of client asset reporting and the structure of certain contracts can result in a one-quarter lag between market movements and the impact on earned revenue. An estimate of variable consideration is included in the initial transaction price only to the extent it is probable that a significant reversal in the amount of the revenue recognized will not occur. Estimates of asset-based fees are based on the most recently completed quarter and, as a result, it is unlikely a significant reversal of revenue would occur. Asset-based revenue is generated by Investment Management, Workplace Solutions, and Morningstar Indexes.

Transaction-based performance obligations are satisfied when the product or service is completed or delivered. Transaction-based revenue is generated by DBRS Morningstar, Morningstar Sustainalytics' Second Party Opinions, Internet advertising, and Morningstar-sponsored conferences. DBRS Morningstar revenue includes revenue from surveillance services, which is recognized over time, as the customer has access to the service during the surveillance period.

Contract liabilities

Our contract liabilities represent deferred revenue. We record contract liabilities when cash payments are received or due in advance of our performance, including amounts which may be refundable. The contract liabilities balance as of March 31, 2023 had a net increase of $44.6 million, primarily driven by cash payments received or payable in advance of satisfying our performance obligations. We recognized $209.9 million of revenue in the three months ended March 31, 2023 that was included in the contract liabilities balance as of December 31, 2022.


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We expect to recognize revenue related to our contract liabilities, including future billings, for the remainder of 2023 and subsequent years as follows:
(in millions)As of March 31, 2023
Remainder of 2023 (from April 1 through December 31)$739.9 
2024268.6 
202594.6 
202617.1 
20276.8 
Thereafter27.2 
Total$1,154.2 

The aggregate amount of revenue we expect to recognize for the remainder of 2023 and subsequent years is higher than our contract liability balance of $533.7 million as of March 31, 2023. The difference represents the value of future obligations for signed contracts that have yet to be billed.

The table above does not include variable consideration for unsatisfied performance obligations related to certain of our license-based, asset-based, and transaction-based contracts as of March 31, 2023. We are applying the optional exemption available under ASC Topic 606, as the variable consideration relates to these unsatisfied performance obligations being fulfilled as a series. The performance obligations related to these contracts are expected to be satisfied over the next 1 to 3 years as services are provided to the client. For license-based contracts, the consideration received for services performed is based on the number of future users, which is not known until the services are performed. The variable consideration for this revenue can be affected by the number of user licenses, which cannot be reasonably estimated. For asset-based contracts, the consideration received for services performed is based on future asset values, which are not known until the services are performed. The variable consideration for this revenue can be affected by changes in the underlying value of fund assets due to client redemptions, additional investments, or movements in the market. For transaction-based contracts for Internet advertising, the consideration received for services performed is based on the number of impressions, which is not known until the impressions are created. The variable consideration for this revenue can be affected by the timing and quantity of impressions in any given period and cannot be reasonably estimated.

As of March 31, 2023, the table above also does not include revenue for unsatisfied performance obligations related to certain of our license-based and transaction-based contracts with durations of one year or less since we are applying the optional exemption under ASC Topic 606. For certain license-based contracts, the remaining performance obligation is expected to be less than one year based on the corresponding subscription terms or the existence of cancellation terms that may be exercised causing the contract term to be less than one year from March 31, 2023. For transaction-based contracts, such as new credit rating issuances and Morningstar-sponsored conferences, the related performance obligations are expected to be satisfied within the next 12 months.

Contract Assets

Our contract assets represent accounts receivable, less allowance for credit losses, and deferred commissions.

The following table summarizes our contract assets balance:
(in millions)As of March 31, 2023As of December 31, 2022
Accounts receivable, less allowance for credit losses$297.9 $307.9 
Deferred commissions76.4 76.1 
Total contract assets$374.3 $384.0 



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7. Segment and Geographical Area Information
 
Segment Information


We report our results in a single reportable segment, which reflects how our chief operating decision maker allocates resources and evaluates our financial results.

Because we have onea single reportable segment, all required financial segment information can be found directly in the Unaudited Condensed Consolidated Financial Statements.

consolidated financial statements. The accounting policies for our single reportable segment are the same as those described in “Note 2. SummaryNote 2 of Significant Accounting Policies” included in the Audited Consolidated Financial Statements and Notes thereto included in our Annual Report. We evaluate the performance of our reporting segment based on revenue and operating income.


Geographical Area Information


The tables below summarize our revenue and long-lived assets, which includes property, equipment, and capitalized software, net and operating lease assets, by geographical area:


Revenue by geographical area
Three months ended March 31,
(in millions)20232022
United States$347.3 $328.2 
Asia12.1 10.8 
Australia14.4 14.0 
Canada27.3 27.1 
Continental Europe43.1 41.3 
United Kingdom33.1 33.1 
Other2.4 2.5 
Total International132.4 128.8 
Consolidated revenue$479.7 $457.0 

Property, equipment, and capitalized software, net by geographical area
(in millions)As of March 31, 2023As of December 31, 2022
United States$169.2 $165.6 
Asia11.2 12.8 
Australia2.1 2.3 
Canada4.8 4.5 
Continental Europe8.1 8.5 
United Kingdom5.9 5.4 
Other0.2 0.3 
Total International32.3 33.8 
Consolidated property, equipment, and capitalized software, net$201.5 $199.4 
17

External revenue by geographical area        
Operating lease assets by geographical areaOperating lease assets by geographical area
 Three months ended September 30 Nine months ended September 30
(in millions) 2017
 2016
 2017
 2016
(in millions)As of March 31, 2023As of December 31, 2022
United States $171.8
 $143.5
 $503.4
 $430.6
United States$115.7 $120.0 
        
United Kingdom 17.0
 15.2
 47.5
 45.8
Continental Europe 18.2
 16.0
 51.0
 47.3
AsiaAsia23.3 22.6 
Australia 8.8
 8.3
 25.5
 24.1
Australia3.7 3.9 
Canada 7.5
 7.1
 22.0
 20.6
Canada5.1 5.5 
Asia 5.3
 5.0
 15.7
 15.1
Continental EuropeContinental Europe17.1 18.5 
United KingdomUnited Kingdom19.2 20.6 
Other 1.3
 1.0
 3.5
 2.9
Other0.5 0.5 
Total International 58.1
 52.6
 165.2
 155.8
Total International68.9 71.6 
        
Consolidated revenue $229.9
 $196.1
 $668.6
 $586.4
Consolidated operating lease assetsConsolidated operating lease assets$184.6 $191.6 


Long-lived assets by geographical area    
  As of September 30 As of December 31
(in millions) 2017
 2016
United States $136.7
 $139.1
     
United Kingdom 6.1
 6.6
Continental Europe 1.8
 1.9
Australia 1.1
 0.6
Canada 0.2
 0.4
Asia 5.2
 3.4
Other 0.1
 0.1
Total International 14.5
 13.0
     
Consolidated property, equipment, and capitalized software, net $151.2
 $152.1


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8. Investments and8. Fair Value Measurements


Investments

As of March 31, 2023 and December 31, 2022, our investment balances totaled $33.2 million and $38.0 million, respectively. We classify our investments into threetwo categories: equity investments and debt securities. We further classify our debt securities into available-for-sale, held-to-maturity, and trading securities. Our investment portfolio consists of stocks, bonds, options, mutual funds, money market funds, or exchange-traded products that replicate the model portfolios and strategies created by Morningstar. These investment accounts may also include exchange-traded products where Morningstar is an index provider. We classifyAs of March 31, 2023, all investments in our investment portfolio as shown below:
  As of September 30 As of December 31
(in millions) 2017
 2016
Available-for-sale $32.4
 $27.7
Held-to-maturity 19.7
 15.7
Trading securities 1.6
 1.5
Total $53.7
 $44.9

The following table shows the cost, unrealized gains (losses), and fair value of investments classified as available-for-sale and held-to-maturity:
  As of September 30, 2017 As of December 31, 2016
(in millions) Cost
 
Unrealized
Gain

 
Unrealized
Loss

 
Fair
Value

 Cost
 
Unrealized
Gain

 
Unrealized
Loss

 
Fair
Value

Available-for-sale:  
  
  
  
  
  
  
  
Equity securities and exchange-traded funds $26.7
 $3.8
 $(0.5) $30.0
 $25.6
 $1.3
 $(1.5) $25.4
Mutual funds 2.1
 0.3
 —
 2.4
 2.2
 0.1
 —
 2.3
Total $28.8
 $4.1
 $(0.5) $32.4
 $27.8
 $1.4
 $(1.5) $27.7
                 
Held-to-maturity:  
  
  
  
  
  
  
  
Certificates of deposit $19.7
 $—
 $—
 $19.7
 $13.8
 $—
 $—
 $13.8
Convertible note —
 —
��—
 —
 1.9
 —
 —
 1.9
Total $19.7
 $—
 $—
 $19.7
 $15.7
 $—
 $—
 $15.7
As of September 30, 2017 and December 31, 2016, investments with unrealized losses for greater than a 12-month period were not material to the Unaudited Condensed Consolidated Balance Sheets and were not deemed to have other than temporary declines in value.

The table below shows the cost and fair value of investments classified as available-for-sale and held-to-maturity based on their contractual maturities as of September 30, 2017 and December 31, 2016.

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  As of September 30, 2017 As of December 31, 2016
(in millions) Cost
 Fair Value
 Cost
 Fair Value
Available-for-sale:  
  
  
  
Equity securities, exchange-traded funds, and mutual funds $28.8
 $32.4
 $27.8
 $27.7
    Total $28.8
 $32.4
 $27.8
 $27.7
         
Held-to-maturity:  
  
  
  
Due in one year or less $19.5
 $19.5
 $13.8
 $13.8
Due in one to three years 0.2
 0.2
 1.9
 1.9
Total $19.7
 $19.7
 $15.7
 $15.7
The following table shows the realized gains and losses arising from sales of our investments classified as available-for-sale recorded in our Unaudited Condensed Consolidated Statements of Income: 

  Three months ended September 30 Nine months ended September 30
(in millions) 2017
 2016
 2017
 2016
Realized gains $0.4
 $0.5
 $1.3
 $1.6
Realized losses (0.1) (0.2) (0.2) (1.1)
Realized gains, net $0.3
 $0.3
 $1.1
 $0.5
We determine realized gains and losses using the specific identification method.

The following table shows the net unrealized gains on trading securities as recorded in our Unaudited Condensed Consolidated Statements of Income:
  Three months ended September 30 Nine months ended September 30
(in millions) 2017
 2016
 2017
 2016
Unrealized gains, net $—
 $—
 $0.1
 $0.1

The table below shows the fair value of our assets subject to fair value measurements that are measured at fair value on a recurring basis using a fair value hierarchy:

Level 1:Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access.
Level 2:Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3:Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

  Fair Value Fair Value Measurements as of September 30, 2017
  as of Using Fair Value Hierarchy
(in millions) September 30, 2017 Level 1
 Level 2
 Level 3
Available-for-sale investments:  
  
  
  
Equity securities and exchange-traded funds $30.0
 $30.0
 $—
 $—
Mutual funds 2.4
 2.4
 —
 —
Trading securities 1.6
 1.6
 —
 —
Cash equivalents 0.3
 0.3
 —
 —
Total $34.3
 $34.3
 $—
 $—

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  Fair Value Fair Value Measurements as of December 31, 2016
  as of Using Fair Value Hierarchy
(in millions) December 31, 2016 Level 1
 Level 2
 Level 3
Available-for-sale investments:  
  
  
  
Equity securities and exchange-traded funds $25.4
 $25.4
 $—
 $—
Mutual funds 2.3
 2.3
 —
 —
Trading securities 1.5
 1.5
 —
 —
Cash equivalents 0.2
 0.2
 —
 —
Total $29.4
 $29.4
 $—
 $—

Based on our analysis of the nature and risks of our investments in equity securities and mutual funds, we have determined that presenting each of these investment categories in the aggregate is appropriate.

We measure the fair value of money market funds, mutual funds, equity securities, and exchange-traded fundsvaluations based on quoted prices in active markets for identical assets or liabilities. We did not hold any securities categorizedliabilities that we have the ability to access, and, therefore, are classified as Level 2 or1 within the fair value hierarchy.

Contingent Consideration

As of December 31, 2022, financial liabilities that were classified as Level 3 within the fair value hierarchy included a contingent consideration liability of $50.0 million, which represented the acquisition date fair value of $45.5 million plus changes due to remeasurement of this liability in subsequent reporting periods.

The contingent consideration reflected potential future payments that were contingent upon the achievement of certain conditions related to the separation of LCD's contractual relationships from S&P Global (S&P) contracts that included other S&P products and services. This additional purchase consideration, for which the amount was contingent, was recognized at fair value at the date of acquisition, which was calculated as the weighted average of the estimated contingent payment scenarios. The contingent consideration was remeasured each reporting period until the contingency was resolved with any changes in fair value recorded in current period earnings.

In the first quarter of 2023, we made a cash payment of $50.0 million, resolving our contingent consideration liability related to our acquisition of LCD.

9. Investments in Unconsolidated Entities

As of March 31, 2023 and December 31, 2022, our investment in unconsolidated entities balance totaled $117.7 million and $96.0 million, respectively. We have investments in both equity method investments and equity investments with and without a readily determinable fair value.

On January 27, 2023, we entered into a Termination Agreement (the Termination Agreement) with Morningstar Japan K.K. (now known as SBI Global Asset Management Co., Ltd. (Wealth Advisors)), and a Tender Offer Agreement (the Tender Offer Agreement) with SBI Global Asset Management Co., Ltd. (now known as SBI Asset Management Group Co., Ltd. (SBI)).

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Pursuant to the Termination Agreement, Wealth Advisors agreed to cease use of the Morningstar brand and Morningstar and Wealth Advisors agreed to terminate the License Agreement originally entered into in 1998. As consideration for the transaction, Morningstar agreed to pay Wealth Advisors 8 billion Japanese yen ($61.4 million) upon the termination of the license agreement and the achievement of certain conditions related primarily to the termination of the use of the Morningstar brand by Wealth Advisors’ customers. The termination agreement liability is recorded within "Other current liabilities" on our Consolidated Balance Sheet as of September 30, 2017March 31, 2023. The termination agreement expense is recorded within "Expense from equity method transaction, net" in our Consolidated Statements of Income for the three months ended March 31, 2023. See Note 15 for additional information on the Termination Agreement payments made in April 2023.

As part of this transaction, pursuant to the Tender Offer Agreement, Morningstar agreed to tender up to 10 million shares in Wealth Advisors to SBI. The tender offer closed on February 28, 2023, and DecemberSBI purchased 8,040,600 shares of Wealth Advisors from Morningstar, resulting in net proceeds of $26.2 million and a pre-tax gain of $18.4 million. The pre-tax gain is recorded within "Expense from equity method transaction, net" in our Consolidated Statements of Income for the three months ended March 31, 2016.2023.


Subsequent to the tender offer, the Company's ownership percentage in Wealth Advisors decreased to 13.2% from 22.1%, and as a result, we no longer account for our investment in Wealth Advisors as an equity method investment. Each reporting period, we will measure our remaining investment in Wealth Advisors, an equity security with a readily determinable value, at fair value and recognize unrealized holding gains or losses in earnings. During the first quarter of 2023, we recognized an unrealized holding gain of $31.2 million, which is recorded within "Expense from equity method transaction, net" in our Consolidated Statements of Income for the three months ended March 31, 2023.
9.
10. Leases

We lease office space and certain equipment under various operating and finance leases, with most of our lease portfolio consisting of operating leases for office space.

We determine whether an arrangement is, or includes, an embedded lease at contract inception. Operating lease assets and lease liabilities are recognized at the commencement date and initially measured using the present value of lease payments over the defined lease term. Lease expense is recognized on a straight-line basis over the lease term. For finance leases, we also recognize a finance lease asset and finance lease liability at inception, with lease expense recognized as interest expense and amortization.

A contract is or contains an embedded lease if the contract meets all of the below criteria:

•there is an identified asset;
•we obtain substantially all the economic benefits of the asset; and
•we have the right to direct the use of the asset.

For initial measurement of the present value of lease payments and for subsequent measurement of lease modifications, we are required to use the rate implicit in the lease, if available. However, as most of our leases do not provide an implicit rate, we use our incremental borrowing rate, which is a collateralized rate. To apply the incremental borrowing rate, we used a portfolio approach and grouped leases based on similar lease terms in a manner whereby we reasonably expect that the application does not differ materially from a lease-by-lease approach.

Our leases have remaining lease terms of approximately 1 year to 12 years, which may include the option to extend the lease when it is reasonably certain we will exercise that option. We do not have lease agreements with residual value guarantees, sale leaseback terms, or material restrictive covenants.

Leases with an initial term of 12 months or less are not recognized on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term.


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Our operating lease expense for the three months ended March 31, 2023 was $11.7 million, compared with $10.2 million for the three months ended March 31, 2022. Charges related to our operating leases that are variable and, therefore, not included in the measurement of the lease liabilities, were $4.1 million for the three months ended March 31, 2023, compared with $3.9 million for the three months ended March 31, 2022. We made lease payments of $11.3 million during the three months ended March 31, 2023, compared with $10.8 million during the three months ended March 31, 2022.

The following table shows our minimum future lease commitments due in each of the next five years and thereafter for operating leases:

Minimum Future Lease Commitments (in millions)Operating Leases
Remainder of 2023 (April 1 through December 31)$32.7 
202443.1 
202533.7 
202637.5 
202729.2 
Thereafter53.3 
Total minimum lease commitments229.5 
Adjustment for discount to present value23.1 
Present value of lease liabilities$206.4 

The following table summarizes the weighted-average remaining lease terms and weighted-average discount rates for our operating leases:
As of March 31, 2023
Weighted-average remaining lease term (in years)6.0
Weighted-average discount rate3.3 %

11. Stock-Based Compensation
 
Stock-Based Compensation Plans
 
All of our employees and our non-employee directors are eligible for awards under the Morningstar Amended and Restated 2011 Stock Incentive Plan, which provides for a variety of stock-based awards, including stock options, restricted stock units, performance share awards, market stock units, and restricted stock.


The following table summarizes the stock-based compensation expense included in each of our operating expense categories:
Three months ended March 31,
(in millions)20232022
Cost of revenue$5.0 $2.5 
Sales and marketing1.6 1.4 
General and administrative5.6 10.0 
Total stock-based compensation expense$12.2 $13.9 
  Three months ended September 30 Nine months ended September 30
(in millions) 2017
 2016
 2017
 2016
Cost of revenue $2.2
 $1.5
 $6.6
 $5.5
Sales and marketing 0.7
 0.3
 2.1
 1.3
General and administrative 2.6
 1.0
 7.8
 3.8
Total stock-based compensation expense $5.5
 $2.8
 $16.5
 $10.6


As of September 30, 2017,March 31, 2023, the total unrecognized stock-based compensation cost related to outstanding restricted stock units, performance share awards, and market stock units expected to vest was $37.5$86.9 million, which we expect to recognize over a weighted average period of 3325 months.




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10.12. Income Taxes


Effective Tax Rate


The following table shows our effective tax rate for the three and nine months ended September 30, 2017March 31, 2023 and September 30, 2016:March 31, 2022:

 Three months ended March 31,
(in millions)20232022
Income (loss) before income taxes and equity in investments of unconsolidated entities$2.1 $63.0 
Equity in investments of unconsolidated entities(1.3)0.4 
Total$0.8 $63.4 
Income tax expense$8.4 $17.3 
Effective tax rateNMF27.3 %
 ___________________________________________________________________________________________
NMF - not meaningful
  Three months ended September 30 Nine months ended September 30
(in millions) 2017
 2016
 2017
 2016
Income before income taxes and equity in net income (loss) of unconsolidated entities $50.8
 $46.3
 $139.2
 $136.5
Equity in net income (loss) of unconsolidated entities —
 0.4
 (1.0) 0.7
Total $50.8
 $46.7
 $138.2
 $137.2
Income tax expense $16.9
 $16.5
 $40.2
 $46.5
Effective tax rate 33.3% 35.3% 29.1% 33.9%

For the three months ended March 31, 2023, income tax expense was $8.4 million, a decline of $8.9 million compared with the prior-year period. Our effective tax rate was not meaningful due to the low level of pretax income in the third quarter and forcurrent period. For the first nine months of 2017 was 33.3% and 29.1%, a respective decrease of 2.0 and 4.8 percentage points compared with the same periods a year ago. During the third quarter of 2017, our effective2023, income tax rate, comparedexpense includes a valuation allowance against an excess capital loss generated from an equity method transaction and a change in deferred taxes with respect to the third quarter of 2016, decreased primarily due to a reduction in our liabilitystock-based compensation. See Note 9 for unrecognized tax benefits. The decrease in our effective tax rate for the first nine months of 2017, compared to the first nine months of 2016, primarily reflects the fact that we recorded a book gain of $17.5 millionadditional information on the sale of HelloWallet in the second quarter of 2017 that is not a gain for tax purposes. Further, we can no longer realize certain net deferred tax assets that were attributable to our investment in HelloWallet. The net effect of both of the HelloWallet tax impacts represents a decrease to our effective tax rate for the first nine months of 2017.equity method transaction.


Unrecognized Tax Benefits


The table below provides information concerning our gross unrecognized tax benefits as of September 30, 2017March 31, 2023 and December 31, 2016,2022, as well as the effect these gross unrecognized tax benefits would have on our income tax expense, if they were recognized.

 As of September 30 As of December 31
(in millions) 2017
 2016
(in millions)As of March 31, 2023As of December 31, 2022
Gross unrecognized tax benefits $18.1
 $18.4
Gross unrecognized tax benefits$26.5 $26.5 
Gross unrecognized tax benefits that would affect income tax expense $14.5
 $14.4
Gross unrecognized tax benefits that would affect income tax expense$26.5 $26.5 
Decrease in income tax expense upon recognition of gross unrecognized tax benefits $13.3
 $13.3
Decrease in income tax expense upon recognition of gross unrecognized tax benefits$26.2 $26.1 


Our Unaudited Condensed Consolidated Balance Sheets include the following liabilities for unrecognized tax benefits. These amounts include interest and penalties, less any associated tax benefits.


Liabilities for Unrecognized Tax Benefits (in millions)As of March 31, 2023As of December 31, 2022
Current liability$18.4 $18.3 
Non-current liability6.1 6.0 
Total liability for unrecognized tax benefits$24.5 $24.3 
  As of September 30 As of December 31
Liabilities for Unrecognized Tax Benefits (in millions) 2017
 2016
Current liability $8.8
 $8.9
Non-current liability 5.7
 5.4
Total liability for unrecognized tax benefits $14.5
 $14.3


Because we conduct business globally, we file income tax returns in U.S. federal, state, local, and foreign jurisdictions. We are currently under audit by federal, and various state, and local tax authorities in the United States,U.S. as well as tax authorities in certain non-U.S. jurisdictions. It is possiblelikely that the examination phase of some of these federal, state, local, and non-U.S. audits will conclude in 2017.2023. It is not possible to estimate the effect of current audits on previously recorded unrecognized tax benefits.


Table of Contents


We have not provided federal and state income taxes on accumulated undistributed earnings of certain foreign subsidiaries because these earnings have been permanently reinvested. Approximately 73% ofApproximately 68% of our cash, cash equivalents, and investments balance as of September 30, 2017March 31, 2023 was held by our operations outside of the United States. We generally consider our U.S. directly-owned foreign subsidiary earnings to be permanently reinvested. We believe that our cash balances and investments in the United States, along with cash generated from our U.S. operations, will be sufficient to meet our U.S. operating and cash needs for the foreseeable future, without requiring us to repatriate earnings from these foreign subsidiaries. It is not practical to determine the amount
21

Table of the unrecognized deferred tax liability related to the undistributed earnings.Contents

Certain of our non-U.S. operations have incurred net operating losses (NOLs), which may become deductible to the extent these operations become profitable. For each of our operations, we evaluate whether it is more likely than not that the tax benefits related to NOLs will be realized. As part of this evaluation, we consider evidence such as tax planning strategies, historical operating results, forecasted taxable income, and recent financial performance. In the year that certain non-U.S. operations record a loss, we do not recognize a corresponding tax benefit, thus increasingwhich increases our effective tax rate. Upon determining that it is more likely than not that the NOLs will be realized, we reduce the tax valuation allowances related to these NOLs, which results in a reduction to our income tax expense and our effective tax rate in thethat period.


11.13. Contingencies


Michael D. GreenWe record accrued liabilities for litigation, regulatory, and other business matters when those matters represent loss contingencies that are both probable and estimable. In these cases, there may be an exposure to loss in excess of any amounts accrued. Unless a loss contingency is both probable and estimable, we do not establish an accrued liability. As litigation, regulatory, or other business matters develop, we evaluate on an ongoing basis whether such matters present a loss contingency that is probable and estimable.

Data Audits and Reviews

In August 2017, Michael D. Green, individuallyour global data business, we include in our products, or directly redistribute to our customers, data and purportedly on behalfinformation licensed from third-party vendors. Our compliance with the terms of all others similarly situated, filed a complaint inthese licenses is reviewed internally and is also subject to audit by the United States District Court for the Northern District of Illinois. The complaint names as defendants Morningstar, Inc., Prudential Investment Management Services LLC,third-party vendors. At any given time, we may be undergoing several such internal reviews and Prudential Retirement Insurance and Annuity Co., and contains one count alleging violation of the Racketeering Influenced and Corrupt Practices Act (RICO). Plaintiff, a participant in a pension plan, alleges that the defendants engaged in concerted racketeering actions to steer plan participants into high-cost investments that pay unwarranted fees to the defendants. The complaint seeks unspecified compensatory damages for plaintiffthird-party vendor audits, and the membersresults and findings may indicate that we may be required to make a payment for prior data usage. Due to a lack of the putative class, treble damages, injunctive relief, costs,available information and attorneys’ fees. Morningstar has fileddata, as well as potential variations of any audit or internal review findings, we generally are not able to reasonably estimate a motionpossible loss, or range of losses, for these matters. In situations where more information or specific areas subject to dismiss the complaint, which is fully briefed and under advisement by the court. Although Morningstar is vigorously contesting the claim asserted,audit are available, we may be able to estimate a potential range of losses. While we cannot predict the outcome of the proceeding.these processes, we do not anticipate they will have a material adverse effect on our business, operating results, or financial position.


OtherRatings and Regulatory Matters
We
Our ratings and related research activities, including credit ratings, ESG ratings, managed investment and equity ratings, are involvedor may in the future become subject to regulation or increased scrutiny from timeexecutive, legislative, regulatory and private parties. Accordingly, those activities may be subject to timegovernmental, regulatory, and legislative investigations, regulatory examinations in the ordinary course of business, subpoenas and other forms of legal process, and ultimately claims and litigation brought by governmental and private parties that are based on ratings assigned or research issued in connection with these activities or that are otherwise incidental to these activities. Our regulated businesses are generally subject to periodic reviews, inspections, examinations, and investigations by regulators in the jurisdictions in which they operate, any of which may result in claims, legal proceedings, and litigation that arise in the normal course of our business.assessments, fines, penalties, disgorgement, or restrictions on business activities. While it is difficult to predict the outcome of any particular investigation or proceeding, we do not believe the result of any of these matters will have a material adverse effect on our business, operating results, or financial position.


Other Matters
12.
We are involved from time to time in commercial disputes and legal proceedings that arise in the normal course of our business. While it is difficult to predict the outcome of any particular dispute or proceeding, we do not believe the result of any of these matters will have a material adverse effect on our business, operating results, or financial position.

14. Share Repurchase Program
 
We have an ongoing authorization, originally approved by ourOn December 6, 2022, the board of directors in September 2010 and subsequently amended,approved a new share repurchase program that authorizes the Company to repurchase up to $1.0 billion$500.0 million in shares of ourthe Company's outstanding common stock.stock, effective January 1, 2023. The new authorization replaced the then-existing share repurchase program and expires on December 31, 2017. We2025. Under this authorization, we may repurchase shares from time to time at prevailing market prices on the open market or in private transactions in amounts that we deem appropriate.


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As of September 30, 2017,March 31, 2023, we hadhave not repurchased a total of 10,561,496any shares for $713.5 million under this authorization,the new share repurchase program, leaving approximately $286.5$500.0 million available for future repurchases.repurchases under the program.


13.15. Subsequent EventEvents


In October 2017, our boardMorningstar Japan K.K. (now known as SBI Global Asset Management Co., Ltd. (Wealth Advisors))

On April 6, 2023, we made the first cash payment of directors approved a regular quarterly dividend6 billion Japanese yen ($45.1 million) and on April 19, 2023, we made the second and final cash payment of 23.0 cents per share payable2 billion Japanese yen ($14.8 million), pursuant to the Termination Agreement. See Note 9 for additional information on October 31, 2017 to shareholders of record as of October 18, 2017. We will pay a quarterly dividend of approximately $9.8 million on October 31, 2017.the Termination Agreement.



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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
The discussion included in this section, as well as other under sections of this Quarterly Report on Form 10-Q (this Quarterly Report), 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,” 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;
allegations about possible conflicts•liability related to cybersecurity and the protection of interest;
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,confidential information, including the increasing popularity of passively managed investment vehicles;
liability associated with the storage of personal information related to individuals as well as portfolio and account-level information;about individuals;
liability relating to the acquisition or redistribution of data or information we acquire or errors included therein;
•compliance failures, regulatory action, or changes in laws applicable to our credit ratings operations, investment advisory, ESG and index businesses;
•failing to innovate our product and service offerings or anticipate our clients’ changing needs;
•prolonged volatility or downturns affecting the financial sector, global financial markets, and the global economy and its effect on our revenue from asset-based fees and credit rating operations;ratings business;
•failing to recruit, develop, and retain qualified employees;
•liability for any losses that result from errors in our automated advisory tools;
•inadequacy of our operational risk management and business continuity programs in the failureevent of a material disruptive event;
•failing to efficiently integrate and leverage acquisitions and other investments to produce the results we anticipate;
downturns•failing to scale our operations and increase productivity and its effect on our ability to implement our business plan;
•failing to maintain growth across our businesses in today's fragmented geopolitical, regulatory and cultural world;
•liability relating to the information and data we collect, store, use, create, and distribute or the reports that we publish or are produced by our software products;
•the potential adverse effect of our indebtedness on our cash flows and financial flexibility;
•challenges in accounting for complexities in taxes in the financial sector, global financial markets,jurisdictions in which we operate; and global economy;
the effect•failing to protect our intellectual property rights or claims of market volatility on revenue from asset-based fees;intellectual property infringement against us.
an outage of our database, technology-based products and services, or network facilities; and
challenges faced by our non-U.S. operations, including the concentration of data and development work at our offshore facilities in China and India.

A more complete description of these risks and uncertainties can be found in our other filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2016 (our2022 (our Annual Report). If any of these risks and uncertainties materialize, our actual future results and other future events may vary significantly from what we expect. We do not undertake to update our forward-looking statements as a result of new information or future events.


All dollar and percentage comparisons, which are often accompanied by words such as “increase,” “decrease,” “grew,” “declined,” “was up,” “was down,” “was flat,” or “was similar” refer to a comparison with the same period in the previous year unless otherwise stated.






24

Table of Contents

Understanding our Company
 
Our Business


Our mission is to create great productsempower investor success and everything we do at Morningstar is in the service of the investor. The investing ecosystem is complex, and navigating it with confidence requires a trusted, independent voice. We deliver our perspective to institutions, advisors, and individuals with a single-minded purpose: to empower every investor with the conviction that helpthey can make better-informed decisions and realize success on their own terms.

Our strategy is to deliver insights and experiences that are essential to the investor workflow. Proprietary data sets, meaningful analytics, independent research, and effective investment strategies are at the core of the powerful digital solutions that investors reach their financial goals.across our client segments rely on. We offer an extensive linehave a keen focus on innovation across data, research, product, and delivery so that we can effectively cater to the evolving needs and expectations of investors globally.

We leverage our proprietary data and research to sell products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors in the private capital markets. Weacross our portfolio that generate revenue throughin three main business models:primary ways:


SubscriptionsLicense-based: The majority of our research, data, and license agreements, which typically generate recurring revenue;proprietary platforms are accessed via subscription services that grant access on either a per user or enterprise-basis for a specified period of time. License-based revenue includes PitchBook, Morningstar Data, Morningstar Direct, Morningstar Sustainalytics' license-based products, Morningstar Indexes data and services products, DBRS Morningstar's data products, Morningstar Advisor Workstation, and other similar products.
Asset-based
Asset-based: We charge basis points and other fees for our investmentassets under management business;or advisement. Our Investment Management, the majority of Workplace Solutions revenue, and Morningstar Indexes products are categorized as asset-based revenue.
Transaction-based revenue for
Transaction-based: DBRS Morningstar, Morningstar Sustainalytics' second-party opinions product, Internet advertising, and Morningstar-sponsored conferences comprise the majority of the products that involveare transactional, or one-time, non-recurring revenue.

Industry Overview
Equity markets continued their positive trend in the third quarter of 2017. The Morningstar U.S. Market Index, a broad market benchmark, was up 4.0% for the third quarter of 2017 and 12.5% year-to-date, while the Global Ex-U.S. Index finished the quarter up 6.2% and 21.5% year-to-date.

U.S. mutual fund assets stood at $17.8 trillion in August 2017, based on data from the Investment Company Institute (ICI),nature, compared with $16.4 trillion in August 2016. Based on Morningstar's estimated asset flow data, investors added about $43.2 billion to long-term open-endthe recurring revenue streams represented by our license and exchange-traded funds during the third quarter of 2017, compared with an outflow of $9.5 billion in the third quarter of 2016. Continuing a long-term trend, investors continued to heavily favor lower-cost, passively managed vehicles for new inflows.asset-based products.


Assets in exchange-traded funds totaled $3.1 trillion in August 2017, up from $2.4 trillion in August 2016, based on data from the ICI.


Despite continued gains in the equity markets, we believe the business environment for the financial services industry remains challenging in some respects. Low interest rates and the industrywide shift to passive investment management have continued to put pressure on spending for many asset management firms.

25

Financial advisors have been adapting to the increasing demand for solutions that are in the best interest of investors, including new fiduciary standards, an increasing emphasis on keeping fees low, and improved client communication. Despite ongoing uncertainty about the scope of potential regulatory changes, we believe recent shifts, such as a greater emphasis on serving investors’ interests and lowering fees, are fundamental changes that will continue. Many industry participants have been moving toward a more client-centric business model and working to deliver solutions that put investors’ interests first. We believe Morningstar is well-positioned to help financial advisors meet these needs, and we have a broad range of solutions to help them determine, demonstrate, and document that their advice is in the best interest of the investor.






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Supplemental Operating Metrics (Unaudited)

The tables below summarize our key product metrics and other supplemental data.
Three months ended March 31,
 (in millions)20232022Change
Organic Change (1)
Revenue by Type (2)
License-based (3)
$364.0 $311.9 16.7 %14.3 %
Asset-based (4)
65.3 68.5 (4.7)%(6.0)%
Transaction-based (5)
50.4 76.6 (34.2)%(35.0)%
Key product area revenue
PitchBook$114.8 $92.0 24.8 %24.8 %
Morningstar Data67.3 63.3 6.3 %10.0 %
Morningstar Direct48.8 45.6 7.0 %9.7 %
DBRS Morningstar (6)
46.8 69.2 (32.4)%(30.7)%
Investment Management29.6 30.8 (3.9)%(11.8)%
Morningstar Sustainalytics27.3 24.7 10.5 %15.9 %
Workplace Solutions25.2 26.6 (5.3)%(5.3)%
Morningstar Advisor Workstation24.5 23.2 5.6 %6.2 %
As of March 31,
20232022Change
Assets under management and advisement (approximate) ($bil)
Workplace Solutions
Managed Accounts$111.7 $115.5 (3.3)%
Fiduciary Services50.6 56.7 (10.8)%
Custom Models/CIT34.9 41.7 (16.3)%
Workplace Solutions (total)$197.2 $213.9 (7.8)%
Investment Management
Morningstar Managed Portfolios$34.0 $31.9 6.6 %
Institutional Asset Management9.7 11.4 (14.9)%
Asset Allocation Services7.6 7.8 (2.6)%
Investment Management (total)$51.3 $51.1 0.4 %
Asset value linked to Morningstar Indexes ($bil)$167.8 $151.3 10.9 %
Our employees (approximate)
Worldwide headcount12,411 10,038 23.6 %
Three months ended March 31,
20232022Change
Average assets under management and advisement ($bil)$247.0 $265.1 (6.8)%

   As of September 30      
  2017
 2016
 Change
      
Our business            
Morningstar.com Premium Membership subscriptions (U.S.) 118,209
 118,375
 (0.1)%      
Morningstar.com average monthly unique users (U.S.) 1,923,483
 1,867,057
 3.0 %      
Advisor Workstation clients (U.S.) 182
 178
 2.2 %      
Morningstar Office licenses (U.S.) 4,303
 4,606
 (6.6)%      
Morningstar Direct licenses 13,476
 12,243
 10.1 %      
PitchBook Platform licenses 12,410
 9,006
(1)37.8 %      
Assets under advisement and management (approximate) ($bil) (2)
            
 Workplace Solutions (Retirement)            
 
    Managed Accounts (3)
 $56.1
 $47.5
 18.1 %      
 Plan Sponsor Advice 39.1
 33.5
 16.7 %      
 Custom Models 26.5
 22.4
 18.3 %      
 Workplace Solutions (total) $121.7
 $103.4
 17.7 %      
 Morningstar Investment Management            
 Morningstar Managed Portfolios $37.4
 $29.4
(4)27.2 %      
 Institutional Asset Management 54.1
 59.9
 (9.7)%      
 Asset Allocation Services 8.8
 7.6
 15.8 %      
 Manager Selection Services 1.4
 1.3
 7.7 %      
 Morningstar Investment Management (total) $101.7
 $98.2
 3.6 %      
              
Our employees (approximate)            
Worldwide headcount 4,820
(5)4,170
(6)15.6 %      
              
   Three months ended September 30 Nine months ended September 30
(in millions) 2017
 2016
 Change
 2017
 2016
 Change
Key product revenue (7)
            
Morningstar Data $40.8
 $38.0
 7.5 % $119.7
 $112.8
 6.1%
Morningstar Direct 32.2
 27.9
 15.5 % 92.0
 82.2
 11.9%
Morningstar Investment Management 26.3
 24.7
 6.6 % 78.0
 73.7
 5.8%
Morningstar Advisor Workstation 22.2
 20.7
 6.9 % 64.8
 62.0
 4.6%
Workplace Solutions 18.4
 17.6
 4.5 % 55.3
 50.5
 9.4%
              

Table(1) Organic revenue excludes acquisitions, divestitures, the adoption of Contents

              
Revenue by Type (7)
            
License-based (8)
 $168.3
 $142.2
 18.4 % $489.3
 $423.7
 15.5%
Asset-based (9)
 47.4
 43.1
 10.0 % 137.9
 125.3
 10.1%
Transaction-based (10)
 14.2
 10.8
 31.1 % 41.4
 37.4
 10.5%
              
Other Metrics            
Average assets under management and advisement ($bil) $217.9
 $196.5
 10.9 % $210.8
 $188.4
 11.9%
Number of new-issue ratings completed (11)
 30
 9
 233.3 % 57
 35
 62.9%
Asset value of new-issue ratings ($bil) (11)
 $8.6
 $5.1
 68.6 % $23.1
 $15.4
 50.0%

(1) Included for informational purposes only; Morningstar did not acquire full ownership of PitchBook until December 2016.

(2) The asset totals shown above (including assets we either manage directlynew accounting standards or on which we provide consulting or subadvisory work) only include assets for which we receive basis-point fees. Some of our client contracts include services for which we receive a flat fee, but we do not include those assets in the total reported above.
Excluding changes relatedrevisions to new contractsaccounting practices, and cancellations, changes in the value of assets under advisement can come from two primary sources: gains or losses related to overall trends in market performance, and net inflows or outflows caused when investors add to or redeem shares from these portfolios.

Excluding for Morningstar Managed Portfolios, it's difficult for our Investment Management business to quantify these cash inflows and outflows. The information we receive from most of our clients does not separately identify the effect of cash inflows and outflows on asset balances for each period. We also cannot specify the effect of market appreciation or depreciation because the majority of our clients have discretionary authority to implement their own portfolio allocations.

(3) Many factors can cause changes in assets under management and advisement for our managed retirement accounts, including employer and employee contributions, plan administrative fees, market movements, and participant loans and hardship withdrawals. The information we receive from the plan providers does not separately identify these transactions or the changes in balances caused by market movement.

(4) Revised to include the assets from South Africa.

(5) Includes approximately 385 PitchBook employees, who are not reflected in the September 30, 2016 headcount total.

(6) Revised to exclude temporary employees and part-time employees who work less than 30 hours a week.

(7) Key product revenue and revenue by type includes the effect of foreign currency translations.In addition, the calculation of organic revenue growth by revenue type compares first quarter 2023 revenue to first quarter 2022 revenue on the basis of the updated classifications.

(2) 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. Revenue from Morningstar Sustainalytics' second-party opinions product was reclassified from license-based to transaction-based. Revenue from Morningstar Indexes data and services products was reclassified from asset-based to license-based. Revenue from DBRS Morningstar's data products was reclassified from transaction-based to license-based.
(8)(3) License-based revenue includes PitchBook, Morningstar Data, Morningstar Direct, Morningstar Sustainalytics' license-based products, Morningstar Indexes data and services products, DBRS Morningstar's data products, Morningstar Advisor Workstation, Morningstar Enterprise Components, Morningstar Research, PitchBook Data, and other similar products.

26

(9)Table of Contents
(4) Asset-based revenue includes Morningstar Investment Management, the majority of Workplace Solutions revenue, and Morningstar Indexes.

(10)(5) Transaction-based revenue includes DBRS Morningstar, Credit Ratings,Morningstar Sustainalytics' second-party opinions product, Internet advertising, sales, and Conferences.Morningstar-sponsored conferences.

(6) For the three months ended March 31, 2023, DBRS Morningstar recurring revenue derived primarily from surveillance, research, and other transaction-related services was 55.4%. For the three months ended March 31, 2022, recurring revenue was 36.0%.
(11) Includes commercial mortgage-backed securities, residential mortgage-backed securities, other asset-backed securities, and corporate and financial institutions.




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Three and Nine Months Ended September 30, 2017March 31, 2023 vs. Three and Nine Months Ended September 30, 2016March 31, 2022
 
Consolidated Results
 Three months ended September 30 Nine months ended September 30  Three months ended March 31, 
Key Metrics (in millions) 2017
 2016
 Change
 2017
 2016
 Change
 Key Metrics (in millions)20232022Change 
Revenue $229.9
 $196.1
 17.3 % $668.6
 $586.4
 14.0 % 
Consolidated revenueConsolidated revenue$479.7 $457.0 5.0 %
Operating income $52.8
 $44.2
 19.7 % $127.2
 $130.9
 (2.8)% Operating income24.5 56.4 (56.6)%
Operating margin 23.0% 22.5% 0.5
pp19.0% 22.3% (3.3)ppOperating margin5.1 %12.3 %(7.2)pp
             
Cash provided by operating activities $62.5
 $60.4
 3.5 % $164.7
 $143.2
 15.0 % Cash provided by operating activities$23.4 $23.5 (0.4)%
Capital expenditures (13.1) (18.1) (27.6)% (46.4) (47.5) (2.3)% Capital expenditures(29.5)(28.0)5.4 %
Free cash flow $49.4
 $42.3
 16.8 % $118.3
 $95.7
 23.6 % Free cash flow$(6.1)$(4.5)35.6 %
Cash used for investing activitiesCash used for investing activities$(0.7)$(33.7)(97.9)%
Cash provided by (used for) financing activitiesCash provided by (used for) financing activities$(48.8)$11.8 NMF

NMF - not meaningful, pp — percentage points

NMF - not meaningful

To supplement our consolidated financial statements presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP)(U.S. GAAP), we use the following non-GAAP measures:


•consolidated revenue, excluding acquisitions, divestitures, adoption of new accounting standards or revisions to accounting practices (accounting changes), and the effect of foreign currency translations (organic revenue);
•consolidated operating income, excluding PitchBookintangible amortization expense, all merger and acquisition (M&A)-related expenses (including M&A-related earn-outs), and expenses related to the significant reduction and shift of the Company's operations in China (adjusted operating income);
•consolidated operating margin, excluding PitchBookintangible amortization expense, all M&A-related expenses (including M&A-related earn-outs), and expenses related to the significant reduction and shift of the Company's operations in China (adjusted operating margin); and
free •cash flow.provided by or used for operating activities less capital expenditures (free cash flow).


These non-GAAP measures may not be comparable to similarly titled measures reported by other companies and should not be considered an alternative to any measure of performance as promulgated under GAAP.


We define free cash flow as cash provided by or usedpresent organic revenue because we believe it helps investors better compare period-over-period results.

We present adjusted operating income and adjusted operating margin to show the effect of significant acquisition activity, better compare period-over-period results, and improve overall understanding of the underlying performance of the business absent the impact of acquisitions for operating activities less capital expenditures. the three months ended March 31, 2023.

We present free cash flow solely as supplemental disclosure to help investors better understand how much cash is available after making capital expenditures. Our management team uses free cash flow as a metric to evaluate the health of our business. Free cash flow is not equivalent to any measure required to be reported under GAAP.



27

Table of Contents

Consolidated Revenue
 Three months ended March 31,
(in millions)20232022Change
Consolidated revenue$479.7 $457.0 5.0 %

  Three months ended September 30 Nine months ended September 30
(in millions) 2017
 2016
 Change
 2017
 2016
 Change
Consolidated revenue $229.9
 $196.1
 17.3% $668.6
 $586.4
 14.0%

In the thirdfirst quarter of 2017,2023, consolidated revenue increased 17.3%5.0% to $229.9 million. Our acquisition of PitchBook Data, Inc. (PitchBook) in December 2016 contributed $16.6 million of revenue during the third quarter of 2017.$479.7 million. Foreign currency movements had a positive effectnegative impact in the quarter, increasingdecreasing revenue by approximately $1.4$8.3 million.


DuringLicense-based revenue grew $52.1 million, or 16.7%, during the thirdfirst quarter, we experienced continued of 2023. On an organic basis, license-based revenue increased 14.3%. Organic revenue growth was driven by demand for PitchBook, Morningstar Sustainalytics' license-based products, such as Morningstar DirectData, and Morningstar Data. Revenue from Morningstar Direct rose $4.3Direct.

Asset-based revenue decreased $3.2 million, reflecting growthor 4.7%, in licenses for both newthe first quarter of 2023. Organic revenue declined 6.0%. The decrease in reported revenue and existing clients. Morningstar Dataorganic revenue also increased $2.9 million, mainly reflecting new contracts and renewals for managed products data and our market data business.

Table of Contents

Products and services that mainly generate revenue from asset-based fees increased $4.3 million during the third quarter, mainlywas driven by strong growthdeclines in Workplace Solutions and Morningstar Managed Portfolios.

Revenue from Morningstar Credit Ratings also increased $3.1 million duringInvestment Management revenue, as most global asset class values were lower compared to the third quarter of 2017, primarily due to new-issueprior-year period. These decreases were partially offset by growth in asset-backed securities.Morningstar Indexes.


For the first nine months of 2017, consolidatedThe asset-based revenue was up 14.0% to $668.6 million, compared with $586.4 millionwe earn in the same period of 2016. PitchBook contributed $44.8 million of revenue during the first nine months of 2017. Morningstar Direct, Morningstar Managed Portfolios, Morningstar Data, Morningstar Credit Ratings,both Investment Management and Workplace Solutions is generally based on average asset levels during each quarter, which are often reported on a one-quarter lag. As a result of the timing of this client asset reporting and the structure of our contracts, this often results in a one-quarter lag between market movements and the impact on revenue. An estimate of variable consideration related to unknown or lagged AUMA values is included in the transaction price to the extent its probable that a significant reversal in the amount of the revenue recognized will not occur. Average assets under management (AUM) and advisement (AUMA) (calculated using available average quarterly or monthly data) were also primary contributorsapproximately $247.0 billion for the first quarter of 2023, compared with $265.1 billion for the first quarter of 2022, a decline of 6.8%.

Transaction-based revenue decreased $26.2 million, or 34.2%, in the first quarter of 2023, as global credit ratings activity remained weak and Morningstar.com ad revenue decreased. On an organic basis, transaction-based revenue declined 35.0%.

The product areas below are listed by largest revenue contribution for the first quarter of 2023.

PitchBook revenue increased 24.8% on a reported and organic basis, driven by strength in its core investor and advisor segments, supported by strong go-to-market lead generation activities, which offset some softening in the company (corporate) segment due to growthchallenging market conditions. Licenses grew 24.8%, reflecting both new client users and expansion with existing clients, as well as variability driven by user maintenance activities and updates to user lists when enterprise clients renew. Product enhancements during the first nine monthsquarter included the launch of 2017.the VC Exit Predictor, a new tool and scoring methodology that draws on machine learning and PitchBook's extensive database to assess a startup's prospect of a successful exit. Reported and organic results exclude contributions from the Leveraged Commentary & Data (LCD) acquisition.


Morningstar Data revenue rose by 6.3%, or 10.0% on an organic basis, driven by growth across geographies, especially in North America. At the product level, fund data was the primary driver of performance followed by growth in Morningstar Essentials and equity data.

Morningstar Direct grew first-quarter revenue by 7.0%, or 9.7% organically, driven by increases across geographies with higher growth rates in both Europe and Asia. Revenue also includes the impact of price increases that reflect increased value for clients from asset-based fees made up approximately 16%various product enhancements. Direct licenses increased 4.8%.


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Table of consolidatedContents
DBRS Morningstar revenue declined 32.4% in the thirdfirst quarter, or 30.7% on an organic basis, as global credit issuance activity remained weak due to uncertainty from the macroeconomic environment and volatility in the credit markets. These declines were most pronounced in the Company's ratings of commercial- and residential-mortgage-backed securities in the U.S. and Europe and financial institutions in the U.S. Organic revenue declined sharply in the U.S. and fell in Europe, but grew modestly in Canada. Credit-related data products demonstrated solid growth. Recurring annual fees tied to surveillance, research, and other transaction-related services represented 55.4% of DBRS Morningstar revenue.

Investment Management revenue was 3.9% lower in the first nine monthsquarter of 2017,2023 and 11.8% lower on an organic basis. Reported AUMA were relatively flat compared with approximately 17%the prior-year period. Excluding $4.8 billion of assets related to the acquisition of Praemium's U.K. and international offerings (Praemium) in the second quarter of 2022, AUMA would have fallen 9.0% compared with the prior-year period, reflecting the decline in global markets over the period and softer flows.

Morningstar Sustainalytics revenue grew 10.5%, or 15.9% on an organic basis. Revenue increased 33.8%, or 39.9% on an organic basis, for Morningstar Sustainalytics' license-based products and declined 73.0%, or 71.8% on an organic basis, for its transaction-based products, which are solely comprised of its second-party opinions product. License-based product revenue growth was driven by regulatory and compliance solutions in EMEA, the same periodsexpansion of use cases with existing clients, and robust demand for ESG ratings services. Partially offsetting this growth was the sharp decline in 2016.second-party opinions as global credit ratings activity remained weak.

Workplace Solutions revenue declined 5.3% on a reported and organic basis in the first quarter of 2023. AUMA declined 7.8% to $197.2 billion compared with the prior-year period, reflecting the decline in global markets over the period.

Morningstar Advisor Workstation revenue grew 5.6%, or 6.2% on an organic basis. The launch of the Investment Planning Experience, which is designed to help advisors deliver more personalized advice, supported new business and upsell opportunities with enterprise and individual advisor clients. In addition, enhancements to Scenario Builder to better align with the current regulatory environment and updates to the Morningstar Portfolio Risk Score supported retention and upsell opportunities with enterprise clients.

Morningstar Indexes revenue increased 25.3%, or 10.9% on an organic basis. The increase in revenue was driven by growth in investable product revenue, supported by net inflows and positive market impact with strong contributions from certain strategic beta products, including dividend-focused strategies. Increases in licensed data revenue also contributed to revenue growth. Organic revenue growth excludes LCD index-related revenue.

Organic revenue


To allow for more meaningful comparisons of our results in different periods, we provide information about organicOrganic revenue which reflects our underlying business(revenue excluding acquisitions, divestitures, the adoption of new accounting standards or revisions to accounting practices (accounting changes), and the effect of foreign currency translations. Intranslations) is considered a non-GAAP financial measure.

We exclude revenue from acquired businesses from our organic revenue growth calculation for a period of 12 months after we complete the thirdacquisition. For divestitures, we exclude revenue in the prior period for which there is no comparable revenue in the current period.

Organic revenue increased 2.8% during the first quarter. PitchBook, Morningstar Data, Morningstar Direct, and Morningstar Sustainalytics were the main drivers of the increase in organic revenue during the first quarter of 2017, organic revenue increased 8.7% after excluding a favorable effect2023.


29

Table of $1.4 million from foreign currency translations and $16.6 million of incremental revenue from acquisitions, primarily from PitchBook. Our third quarter of 2016 results included revenue of $1.1 million from HelloWallet, which we divested in the second quarter of 2017, and that did not recur in the third quarter of 2017.Contents

For the first nine months of 2017, organic revenue increased 7.0% after excluding an unfavorable effect of $3.0 million from foreign currency translations and $45.1 million of incremental revenue from acquisitions, almost entirely from PitchBook. Revenue in the first nine months of 2016 included $1.1 million of revenue from HelloWallet, which we divested in the second quarter of 2017, and that did not recur in the first nine months 2017.

The table below reconciles reported consolidated revenue with organic revenue (revenue excluding acquisitions, divestitures, and the effect of foreign currency translations):revenue:

 Three months ended March 31,
(in millions)20232022Change
Consolidated revenue$479.7 $457.0 5.0 %
Less: acquisitions(18.2)— NMF
Less: accounting changes— — NMF
Effect of foreign currency translations8.3 — NMF
Organic revenue$469.8 $457.0 2.8 %

NMF - not meaningful
  Three months ended September 30 Nine months ended September 30
(in millions) 2017
 2016
 Change
 2017
 2016
 Change
Consolidated revenue $229.9
 $196.1
 17.3% $668.6
 $586.4
 14.0%
Less: acquisitions (16.6) —
 NMF
 (45.1) —
 NMF
Less: divestitures —
 (1.1) NMF
 —
 (1.1) NMF
Favorable (unfavorable) effect of foreign currency translations (1.4) —
 NMF
 3.0
 —
 NMF
Organic revenue $211.9
 $195.0
 8.7% $626.5
 $585.3
 7.0%



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Revenue by regiongeographical area

 Three months ended September 30 Nine months ended September 30 Three months ended March 31,
(in millions) 2017
 2016
 Change
 2017
 2016
 Change
(in millions)20232022Change
United States $171.8
 $143.5
 19.7% $503.4
 $430.6
 16.9%United States$347.3 $328.2 5.8 %
            
United Kingdom 17.0
 15.2
 11.8% 47.5
 45.8
 3.7%
Continental Europe 18.2
 16.0
 13.8% 51.0
 47.3
 7.8%
AsiaAsia12.1 10.8 12.0 %
Australia 8.8
 8.3
 6.0% 25.5
 24.1
 5.8%Australia14.4 14.0 2.9 %
Canada 7.5
 7.1
 5.6% 22.0
 20.6
 6.8%Canada27.3 27.1 0.7 %
Asia 5.3
 5.0
 6.0% 15.7
 15.1
 4.0%
Continental EuropeContinental Europe43.1 41.3 4.4 %
United KingdomUnited Kingdom33.1 33.1 — %
Other 1.3
 1.0
 30.0% 3.5
 2.9
 20.7%Other2.4 2.5 (4.0)%
Total International 58.1
 52.6
 10.5% 165.2
 155.8
 6.0%Total International132.4 128.8 2.8 %
            
Consolidated revenue $229.9
 $196.1
 17.3% $668.6
 $586.4
 14.0%Consolidated revenue$479.7 $457.0 5.0 %


International revenue made up about 25%comprised approximately 28% of our consolidated revenue infor the first nine monthsquarter of 20172023 and 2016. About 60% of this amount is from2022. Approximately 58% was generated by Continental Europe and the United Kingdom, with most of the remainder from Australia, Canada, and Asia.Kingdom.


Revenue from international operations increased $5.5 million, or 10.5%, 2.8% in the thirdfirst quarter mainly reflecting growth in Morningstar Data and Morningstar Direct. Forof 2023. Acquisitions had a favorable impact of $2.9 million, while foreign currency translations had an unfavorable impact of $8.3 million on international revenue during the first nine monthsquarter of 2017, revenue from international operations was up $9.4 million, or 6.0%.2023.




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Consolidated Operating Expense

 Three months ended September 30 Nine months ended September 30  Three months ended March 31,
(in millions) 2017
 2016
 Change
 2017
 2016
 Change
 (in millions)20232022Change
Cost of revenue $90.9
 $84.9
 7.1% $283.2
 $256.3
 10.5% Cost of revenue$218.8 $191.3 14.4 %
% of consolidated revenue 39.5% 43.3% (3.8)pp42.4% 43.7% (1.3)pp % of consolidated revenue45.6 %41.9 %3.7pp
Sales and marketing 31.1
 23.1
 35.0% 100.2
 71.1
 41.1% Sales and marketing107.6 81.4 32.2 %
% of consolidated revenue 13.6% 11.8% 1.8
pp15.0% 12.1% 2.9
pp % of consolidated revenue22.4 %17.8 %4.6pp
General and administrative 33.3
 25.8
 29.0% 93.2
 76.1
 22.5% General and administrative84.0 90.3 (7.0)%
% of consolidated revenue 14.5% 13.2% 1.3
pp13.9% 13.0% 0.9
pp % of consolidated revenue17.5 %19.8 %(2.3)pp
Depreciation and amortization 21.8
 18.1
 19.7% 64.8
 52.0
 24.5% Depreciation and amortization44.8 37.6 19.1 %
% of consolidated revenue 9.5% 9.2% 0.3
pp9.7% 8.9% 0.8
pp % of consolidated revenue9.3 %8.2 %1.1pp
Total operating expense $177.1
 $151.9
 16.6% $541.4
 $455.5
 18.9% Total operating expense$455.2 $400.6 13.6 %
% of consolidated revenue 77.0% 77.5% (0.5)pp81.0% 77.7% 3.3
pp % of consolidated revenue94.9 %87.7 %7.2pp
 
Consolidated operating expense increased $25.2$54.6 million, or 16.6%13.6%, in the first quarter of 2023.

In July 2022, the Company began to significantly reduce its operations in Shenzhen, China and to shift the work related to its global business functions, including global product and software development, managed investment data collection and analysis, and equity data collection and analysis, to other Morningstar locations. Costs incurred in the first quarter of 2023 related to this transition totaled $5.6 million due primarily to transformation costs, which consist of professional fees and the temporary duplication of headcount as the Company hires replacement roles in other markets and continues to employ certain Shenzhen-based staff through the transition.

The Company expects that these activities will be substantially complete by the end of the third quarter of 2017.2023 and will result in lower ongoing run-rate costs from the overall net reduction in the related headcount and certain overhead. Excluding the impact of the initiation of the significant reduction and shift of the Company's operations in China, operating expenses increased 12.2% during the first quarter of 2023.

Compensation expense (which primarily consists of salaries, bonuses, and other company-sponsored benefits), sales commission expense, depreciation expense, and travel-related expenses were the key contributors to operating expense growth during the first quarter. Foreign currency translations had an unfavorable effecta favorable impact of $0.9$9.8 million onduring the first quarter of 2023.

Compensation expense increased $35.5 million in the first quarter of 2023. These higher costs reflect growth in headcount across key product areas over the past year, and the temporary duplication of headcount associated with the reduction and shift of the Company's China activities. Headcount increased 23.6% from the prior-year period to 12,411, largely driven by hiring in 2022. The growth in headcount was greatest for the Morningstar Sustainalytics and PitchBook product areas to support strategic growth initiatives. Headcount increased by 1.5% sequentially from December 31, 2022, the lowest percentage increase since the second quarter of 2020.

Sales commission expense increased $4.2 million during the first quarter of 2023, due in large part to strong sales performance and higher amortization of capitalized commissions related to prior year sales performance, primarily for PitchBook.

Depreciation increased $4.2 million as a result of higher capitalized software costs related to product enhancements in prior periods.

Travel-related expenses increased $3.3 million in the first quarter of 2023, primarily due to increased activity to support clients and sales generation.

An increase of $2.3 million in capitalized software development related to accelerated product development efforts for our key product areas also reduced operating expense during the thirdfirst quarter of 2017.2023.


PitchBook contributed $18.5 millionWe had 12,411 employees worldwide as of operating expense, primarily for salaries, amortization expense, professional fees, and commission expense, duringMarch 31, 2023, compared with 10,038 as of March 31, 2022, which reflects further investments across the third quarter of 2017.

The remaining increase was primarily a result of higher compensation expense (including salaries, bonus, and other company-sponsored benefits), depreciation expense, and production expense, which includes third-party data and infrastructure hosting, offset by an increase in capitalized software development and lower marketing expense.

Consolidated operating expense increased $85.9 million, or 18.9%, in the first nine months of 2017. Foreign currency had a favorable effect of $3.9 million on operating expense during first nine months of 2017.

key areas noted above to support our growth objectives.

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PitchBook contributed $53.9 million of operating expense, related to the same factors noted above, during the first nine months of 2017.

The remaining increase was primarily a result of higher compensation expense (including salaries, bonus, and other company-sponsored benefits), depreciation expense, and professional fees, offset by an increase in capitalized software development.


Cost of revenue
 
Cost of revenue is our largest category of operating expense, representing about one-half of our total operating expense. Our business relies heavily on human capital, and cost of revenue includes the compensation expense for employees who producedevelop our products and deliver our services. We include compensation expense for approximately 80% of our employees in this category.
Cost of revenue increased $6.0$27.5 million in the thirdfirst quarter of 2017.2023. Higher professional feescompensation expense of $3.9$23.2 million was the largest contributor to the increase. Higher salary and production expense also contributedincrease, primarily due to the growth in this category.

Partially offsetting these increasesfactors listed above. This increase was partially offset by higher capitalized software expense of $2.3 million, which resulted from an increase in internally developed capitalized software. We have accelerateddevelopment activity in key product areas.

Continuous focus on the development of our major software platforms resultingfor our key product areas, in addition to bringing new products and capabilities to market, resulted in an increase in capitalized software development over the prior year period, which in turn reduced operating expense. During the third quarter of 2017, weWe capitalized $11.0$23.1 million associated with software development activities, mainly related to Morningstar Data, Workplace Solutions, PitchBook,accelerated product development efforts for our key product areas and additional enhancements to reporting, financial planning, and otherenhanced capabilities in our products. In comparison, we capitalized $6.8 million in the third quarter of 2016.

For the first nine months of 2017, cost of revenue increased $26.9 million. Higher salary expense of $16.4 million was the largest contributor to the increaseproducts, internal infrastructure, and was mainly driven by additional headcount. Higher professional fees, bonus expense, and production expense also contributed to the growth in this category.

An increase in internally developed capitalized software partially offset these increases. We capitalized $34.6 million associated with software development activities related to the same products mentioned above in the first ninethree months of 20172023, compared to $19.2with $20.7 million in the first ninethree months of 2016.2022.

PitchBook contributed $3.8 million and $10.1 million of operating expense in this cost category, primarily for professional fees and salary expense, in the third quarter of 2017 and first nine months of 2017, respectively.

As a percentage of revenue, cost of revenue decreased 3.8 percentage points in the third quarter of 2017 and 1.3 percentage points in the first nine months of 2017.


Sales and marketing
 
Sales and marketing expense increased $8.0$26.2 million in the thirdfirst quarter of 2017, reflecting a $6.1 million increase in2023. Higher compensation expense (including salaries, bonus,of $17.3 million was the largest contributor. Sales commission expense grew by $4.1 million due in large part to strong sales performance and other company-sponsored benefits) and a $3.1 million increase inhigher amortization of capitalized commissions related to prior year sales commission expense.performance, primarily for PitchBook. Advertising and marketing spend decreased $1.8costs increased $2.1 million during the third quarter of 2017.

For the first ninethree months of 2017, sales2023 due to higher pay-per-click advertising, marketing campaign expense, and marketing expense increased about $29.1 million, reflecting a $17.9 million increase in compensation expense (including salaries, bonus, and other company-sponsored benefits) and a $8.1 million increase in sales commissionconference expense.

PitchBook contributed $8.6 million and $24.2 million of operating expense in this cost category, primarily for salary and sales commission expense, in the third quarter of 2017 and first nine months of 2017, respectively.

As a percentage of revenue, sales and marketing expense increased 1.8 percentage points in the third quarter of 2017 and 2.9 percentage points in the first nine months of 2017.


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General and administrative
 
General and administrative expense increased $7.5decreased $6.3 million during the third quarter.first quarter of 2023. Compensation expense (including salaries, bonus, and other company-sponsored benefits) increased $1.9decreased $4.9 million and stock-basedcompared with the prior year period, which included a $7.1 million increase to an earn-out accrual related to our acquisition of Sustainalytics. Stock-based compensation expense increased $1.7decreased $4.5 million duringprimarily due to lower scheduled incentives for the third quarter of 2017. Rent expense and software subscriptions also increased duringcurrent year under the third quarter of 2017.

For the first nine months of 2017, general and administrative expense increased $17.1 million. Compensation expense (including salaries, bonus, and other company-sponsored benefits) increased $4.3 million and stock-based compensation expense increased $4.0 million. Rent expense and software subscriptions also increased during the first nine months of 2017.

PitchBook contributed $3.4 million and $11.4 million of operating expense in this cost category, primarily for management bonus planplan. These decreases were partially offset by higher rent expense and salary expense in the third quarter of 2017 and first nine months of 2017, respectively.$1.7 million.

As a percentage of revenue, general and administrative expense increased 1.3 percentage points in the third quarter of 2017 and 0.9 percentage points in the first nine months of 2017.


Depreciation and amortization
 
Depreciation expense increased $2.7$4.2 million in the thirdfirst quarter of 2023, driven mainly driven by depreciation expense related tofrom higher levels of capitalized software development and leasehold improvements incurred over the past several years.

Intangible amortization expense increased $1.0 million.

For$3.4 million during the first nine months of 2017, depreciation expense increased $9.0 million, largely driven by capitalized software development, computer software and equipment, and leasehold improvements incurred over the past several years. Intangible amortization expense increased $3.8 million.

We expect that amortization of intangible assets will be an ongoing cost for the remaining lives of the assets. We estimate that aggregate amortization expense for intangible assets will be approximately $5.6 million for the remainder of 2017. These estimates may be affected by additional acquisitions, dispositions, changes in the estimated average useful lives, and foreign currency translation.

PitchBook contributed $2.8 million and $8.2 million of operating expense in this cost category, primarily for amortization expense, in the third quarter of 20172023, primarily from additional amortization related to intangibles from the acquisition of LCD and first nine months of 2017, respectively.Praemium.
As a percentage of revenue, depreciation and amortization expense increased 0.3 percentage points in the third quarter of 2017 and 0.8 percentage points in the first nine months of 2017.


Consolidated Operating Income and Operating Margin

 Three months ended September 30 Nine months ended September 30  Three months ended March 31,
(in millions) 2017
 2016
 Change
 2017
 2016
 Change
 (in millions)20232022Change
Operating income $52.8
 $44.2
 19.7% $127.2
 $130.9
 (2.8)% Operating income$24.5 $56.4 (56.6)%
% of revenue 23.0% 22.5% 0.5
pp19.0% 22.3% (3.3)pp% of revenue5.1 %12.3 %(7.2)pp
 
Consolidated operating income increased $8.6decreased $31.9 million in the thirdfirst quarter of 2017, as2023, reflecting an increase in operating expenses of $54.6 million, which was partially offset by an increase in revenue increased $33.8 million and operating expense increased $25.2of $22.7 million. Operating margin was 23.0%5.1%, up 0.5 percentage points compared with the third quartera decrease of 2016.

Consolidated operating income decreased $3.7 million in the first nine months of 2017 as revenue increased $82.2 million and operating expense increased $85.9 million. Operating margin was 19.0%, down 3.37.2 percentage points compared with the first nine monthsquarter of 2016.2022. In addition to reflecting operating expense growth, margins were negatively impacted by sharp declines in revenue in the asset- and transaction-based product areas.



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We reported adjusted operating income which excludes PitchBook, of $54.7$51.8 million in the thirdfirst quarter of 20172023, which excludes intangible amortization expense, M&A-related expenses (including M&A-related earn-outs), and $136.3 million forexpenses related to the first nine monthssignificant reduction and shift of 2017.the Company's operations in China. Adjusted operating income is a non-GAAP financial measure; the table below shows a reconciliation to the most directly comparable GAAP financial measure.


Three months ended March 31,
(in millions)20232022Change
Operating income$24.5 $56.4 (56.6)%
Add: Intangible amortization expense17.5 14.1 24.1 %
Add: M&A-related expenses4.2 4.9 (14.3)%
Add: M&A-related earn-outs— 7.1 NMF
Add: Severance and personnel expenses (1)
1.1 — NMF
Add: Transformation costs (1)
4.2 — NMF
Add: Asset impairment costs (1)
0.3 — NMF
Adjusted operating income$51.8 $82.5 (37.2)%
  Three months ended September 30 Nine months ended September 30
($000) 2017
 2016
 Change
 2017
 2016
 Change
Operating income $52.8
 $44.2
 19.7% $127.2
 $130.9
 (2.8)%
Add back: management bonus plan expense 1.7
 —
 —
 5.2
 —
 —
Add back: intangible amortization 2.6
 —
 —
 7.9
 —
 —
Add back: other operating income, net for PitchBook (2.4) —
 —
 (4.0) —
 —
Adjusted operating income $54.7
 $44.2
 24.1% $136.3
 $130.9
 4.2 %


We presentIn addition, we reported adjusted operating income (operating income excluding PitchBook) to show the effect operating margin of this acquisition, better reflect period-over-period comparisons, and improve overall understanding of our current and future financial performance.

We reported an adjusted operating margin, which excludes PitchBook, of 25.7% in the third quarter of 2017 and 21.9%10.8% in the first nine monthsquarter of 2017.2023, which excludes intangible amortization expense, M&A-related expenses (including M&A-related earn-outs), and expenses related to the significant reduction and shift of the Company's operations in China. Adjusted operating margin is a non-GAAP financial measure; the table below shows a reconciliation to the most directly comparable GAAP financial measure.

Three months ended March 31,
20232022Change
Operating margin5.1 %12.3 %(7.2) pp
Add: Intangible amortization expense3.6 %3.1 %0.5 pp
Add: M&A-related expenses0.9 %1.1 %(0.2) pp
Add: M&A-related earn-outs— %1.6 %(1.6) pp
Add: Severance and personnel expenses (1)
0.2 %— %0.2 pp
Add: Transformation costs (1)
0.9 %— %0.9 pp
Add: Asset impairment costs (1)
0.1 %— %0.1 pp
Adjusted operating margin10.8 %18.1 %(7.3) pp

(1) Reflects costs associated with the significant reduction of the Company's operations in Shenzhen, China and the shift of work related to its global business functions to other Morningstar locations.

Severance and personnel expenses include severance charges, incentive payments related to early signing of severance agreements, transition bonuses, and stock-based compensation related to the accelerated vesting of restricted stock unit (RSU) and market share unit (MSU) awards. In addition, the reversal of accrued sabbatical liabilities is included in this category.

Transformation costs include professional fees and the temporary duplication of headcount. As the Company hires replacement roles in other markets and shifts capabilities, it expects to continue to employ certain Shenzhen-based staff through the transition period, which will result in elevated compensation costs on a temporary basis.

Asset impairment costs include the write-off or accelerated depreciation of fixed assets in the Shenzhen, China office that are not redeployed, in addition to lease abandonment costs as the Company plans to downsize office space prior to the lease termination date.


33
  Three months ended September 30 Nine months ended September 30 
($000) 2017
 2016
 Change
 2017
 2016
 Change
 
Operating margin 23.0% 22.5% 0.5
pp19.0% 22.3% (3.3)pp
Add back: management bonus plan expense 0.6% —% 0.6
pp0.7% —% 0.7
pp
Add back: intangible amortization 1.1% —% 1.1
pp1.1% —% 1.1
pp
Add back: other operating income, net for PitchBook 1.0% —% 1.0
pp1.1% —% 1.1
pp
Adjusted operating margin 25.7% 22.5% 3.2
pp21.9% 22.3% (0.4)pp


We present adjusted operating margin (operating margin excluding PitchBook) to show the effectTable of this acquisition, better reflect period-over-period comparisons, and improve overall understanding of our current and future financial performance.Contents
Non-Operating Income (Expense)(Loss), Net, Equity in Net Income (Loss)Investments of Unconsolidated Entities, and Effective Tax Rate and Income Tax Expense
Non-operating income (expense)(loss), net
 Three months ended March 31,
(in millions)20232022
Interest income$1.2 $0.2 
Interest expense(14.5)(2.6)
Realized gain on sale of investments, reclassified from other comprehensive income0.2 1.0 
Expense from equity method transaction, net(11.8)— 
Other income, net2.5 8.0 
Non-operating income (loss), net$(22.4)$6.6 

  Three months ended September 30 Nine months ended September 30
(in millions) 2017
 2016
 2017
 2016
Interest income $0.4
 $0.4
 $1.3
 $1.2
Interest expense (1.3) (0.4) (3.9) (0.9)
Gain on sale of investments, net 0.3
 0.3
 1.1
 0.5
Gain on sale of business —
 —
 17.5
 —
Other income (expense), net (1.4) 1.8
 (4.0) 4.8
Non-operating income (expense), net $(2.0) $2.1
 $12.0
 $5.6
Interest income reflects interest from our investment portfolio. Interest expense mainly relates to the outstanding principal balance onunder our credit facility. Gain on saleAmended 2022 Credit Agreement and the $350.0 million aggregate principal amount of business relates2.32% senior notes due October 26, 2030 (2030 Notes).

Expense from equity method transaction, net for the three months ended March 31, 2023 primarily reflects the Termination Agreement with Morningstar Japan K.K. (now known as SBI Global Asset Management Co., Ltd. (Wealth Advisors)) and the Tender Offer Agreement with SBI Global Asset Management Co., Ltd. (now known as SBI Asset Management Group Co., Ltd. (SBI)). We recorded $61.4 million of expense related to the Termination Agreement, a pre-tax holding gain of $18.4 million related to the Tender Offer Agreement, and an unrealized holding gain of $31.2 million related to our saleremaining investment in Wealth Advisors. See Note 9 of HelloWallet in June 2017.the Notes to our Unaudited Condensed Consolidated Financial Statements for additional information on the Termination Agreement and Tender Offer Agreement.



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Other income, (expense), net primarily includes foreign currency exchange gains and losses resulting from U.S. dollar denominated short-term investments held in non-U.S. jurisdictions.unrealized gains on investments.


Equity in net income (loss)investments of unconsolidated entities
 Three months ended March 31,
(in millions)20232022
Equity in investments of unconsolidated entities$(1.3)$0.4 
  Three months ended September 30 Nine months ended September 30
(in millions) 2017
 2016
 2017
 2016
Equity in net income (loss) of unconsolidated entities $—
 $0.4
 $(1.0) $0.7

Equity in net income (loss)investments of unconsolidated entities primarily reflects income and losses from Morningstar Japan K.K. (MJKK) offset by losses incertain of our other equity method investments.unconsolidated entities.


Effective tax rate and income tax expense
 Three months ended September 30 Nine months ended September 30 Three months ended March 31,
(in millions) 2017
 2016
 2017
 2016
(in millions)20232022
Income before income taxes and equity in net income (loss) of unconsolidated entities $50.8
 $46.3
 $139.2
 $136.5
Equity in net income (loss) of unconsolidated entities —
 0.4
 (1.0) 0.7
Income before income taxes and equity in investments of unconsolidated entitiesIncome before income taxes and equity in investments of unconsolidated entities$2.1 $63.0 
Equity in investments of unconsolidated entitiesEquity in investments of unconsolidated entities(1.3)0.4 
Total $50.8
 $46.7
 $138.2
 $137.2
Total$0.8 $63.4 
Income tax expense $16.9
 $16.5
 $40.2
 $46.5
Income tax expense$8.4 $17.3 
Effective tax rate 33.3% 35.3% 29.1% 33.9%Effective tax rateNMF27.3 %
 
For the three months ended March 31, 2023, income tax expense was $8.4 million, a decline of $8.9 million compared with the prior year period. Our effective tax rate was not meaningful due to the low level of pretax income in the third quarter and forcurrent period. For the first nine months of 2017 was 33.3% and 29.1%, a respective decrease of 2.0 and 4.8 percentage points compared with the same periods a year ago. During the third quarter of 2017,2023, income tax expense includes a valuation allowance against an excess capital loss generated from an equity method transaction and a change in deferred taxes with respect to stock-based compensation. See Note 9 of the Notes to our effective tax rate, compared to the third quarter of 2016, decreased primarily due to a reduction in our liabilityUnaudited Condensed Consolidated Financial Statements for unrecognized tax benefits. The decrease in our effective tax rate for the first nine months of 2017, compared to the first nine months of 2016, primarily reflects the fact that we recorded a book gain of $17.5 millionadditional information on the saleequity method transaction.
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Table of HelloWallet in the second quarter of 2017 that is not a gain for tax purposes. Further, we can no longer realize certain net deferred tax assets that were attributable to our investment in HelloWallet. The net effect of both of the HelloWallet tax impacts represents a decrease to our effective tax rate for the first nine months of 2017.Contents


Liquidity and Capital Resources
 
As of September 30, 2017,March 31, 2023, we had cash, cash equivalents, and investments of $324.0$385.4 million, an increasea decrease of $20.0$29.2 million, compared with $304.0$414.6 million as of December 31, 2016. The increase reflects cash provided by operating activities and proceeds of $23.7 million related to the sale of HelloWallet, partially offset by $46.4 million of capital expenditures, $45.0 million of repayments of long-term debt, and $41.3 million used to repurchase common stock through our share repurchase program, of which $0.7 million was repurchased in the fourth quarter of 2016 but settled and paid early in the first half of 2017. Dividends paid of $29.6 million and purchases of equity-method investments of $24.3 million also offset the cash inflows.2022.


Cash provided by operating activities is our main source of cash. In the first ninethree months of 2017,2023, cash provided by operating activities was $164.7$23.4 million reflecting $168.0compared to $23.5 million in the prior-year period. Free cash flow was negative $6.1 million compared to negative $4.5 million in the prior year period. Operating cash flow and free cash flow were impacted by lower cash earnings and higher interest expense, which offset positive gains in working capital partially resulting from the lower bonus payment in the first quarter of net income, adjusted for non-cash items, and offset by $3.3 million in negative changes from our net operating assets and liabilities, which included2023 relative to the prior-year period. We made annual bonus payments of $38.4 million.$98.3 million during the first quarter of 2023 compared with $139.9 million in the first quarter of 2022.



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In November 2016, we amended ourOn May 6, 2022, the Company entered into a new senior credit agreement to provide us(the 2022 Credit Agreement). The 2022 Credit Agreement provided the Company with a three-yearfive-year multi-currency credit facility with aan initial borrowing capacity of up to $300.0 million. We had$1.1 billion, including a $650.0 million term loan (the 2022 Term Facility) with an outstanding principal balanceinitial draw of $205.0$600.0 million asand an option for a second draw of up to $50.0 million and a $450.0 million revolving credit facility (the 2022 Revolving Credit Facility). The 2022 Credit Agreement also provides for the issuance of up to $50.0 million of letters of credit and a $100.0 million sub-limit for a swingline.

The proceeds of the first draw under the 2022 Term Facility and initial borrowings under the 2022 Revolving Credit Facility were used to finance the acquisition of LCD and to repay a portion of the borrowings under the 2019 Revolving Credit Facility. The optional second draw on the 2022 Term Facility was available to fund the contingent consideration payment of up to $50.0 million payable in connection with the LCD acquisition.

The 2022 Credit Agreement was amended (the Amended 2022 Credit Agreement) on September 13, 2022 (the First Amendment to the 2022 Credit Agreement) and on September 30, 2017, leaving2022 (the Second Amendment to the 2022 Credit Agreement). The First Amendment to the 2022 Credit Agreement terminated the unfunded term commitment related to the optional second draw of up to $50.0 million in the 2022 Term Facility and increased the 2022 Revolving Credit Facility to $600.0 million. The Second Amendment to the 2022 Credit Agreement increased the 2022 Term Facility to a fully funded $650.0 million facility (the Amended 2022 Term Facility) and increased the 2022 Revolving Credit Facility to $650.0 million (the Amended 2022 Revolving Credit Facility) for total borrowing capacity of $1.3 billion. As of March 31, 2023, our total outstanding debt under the Amended 2022 Credit Agreement was $783.0 million, net of debt issuance costs, with borrowing availability of $95.0 million. $500.0 million under the Amended 2022 Revolving Credit Facility. Except for incremental borrowing capacity, there were no material changes to the existing terms and conditions of the 2022 Credit Agreement.

The credit agreement also containsproceeds of the additional draw under the Amended 2022 Term Facility were used to repay borrowings under the 2022 Revolving Credit Facility. The proceeds of future borrowings under the 2022 Revolving Credit Facility may be used for working capital, capital expenditures, or any other general corporate purpose. See Note 3 of the Notes to our Unaudited Condensed Consolidated Financial Statements for additional information on our Amended 2022 Credit Agreement.

On October 26, 2020, we completed the issuance and sale of the 2030 Notes, in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended. Proceeds were primarily used to pay off a portion of the Company's outstanding debt under the 2019 Credit Agreement. Interest on the 2030 Notes is payable semi-annually on each October 30 and April 30 during the term of the 2030 Notes and at maturity. As of March 31, 2023, our total outstanding debt, net of issuance costs, under the 2030 Notes was $348.5 million. See Note 3 of the Notes to our Unaudited Condensed Consolidated Financial Statements for additional information on our 2030 Notes.


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Each of the Amended 2022 Credit Agreement and the 2030 Notes include customary representations, warranties, and covenants, including financial covenants, under which we: (i) may not exceed a maximum consolidated leverage ratio of 3.00 to 1.00 and (ii) are requiredthat require us to maintain a minimumspecified ratios of consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) to consolidated interest coverage ratio of not less than 3.00charges and consolidated funded indebtedness to 1.00.consolidated EBITDA, which are evaluated on a quarterly basis. We were in compliance with thethese financial covenants as of March 31, 2023, with consolidated funded indebtedness to consolidated EBITDA calculated at September 30, 2017.approximately 2.5x.


We believe our available cash balances and investments, along with cash generated from operations and our line of credit facility, will be sufficient to meet our operating and cash needs for at least the next 12 months. We investare focused on maintaining a strong balance sheet and liquidity position. We hold our cash reserves in cash equivalents and investments and maintain a conservative investment policy. We invest a portionmost of our investment balance (approximately $34.0 million, or 63% of our total investments balance as of September 30, 2017) in stocks, bonds, options, mutual funds, money market funds, or exchange-traded products that replicate the model portfolios and strategies created by Morningstar. These investment accounts may also include exchange-traded products where Morningstar is an index provider.


Approximately 73%68% of our cash, cash equivalents, and investments balance as of September 30, 2017March 31, 2023 was held by our operations outside the United States, up from about 71%64% as of December 31, 2016.2022. We do not expectgenerally consider our U.S. directly-owned foreign subsidiary earnings to repatriate earnings from our international subsidiaries in the foreseeable future. We have not recognized deferred tax liabilities for the portion of the outside basis differences (including unremitted earnings) relating to international subsidiaries because the investment in these subsidiaries is considered permanent in duration. It is not practical to quantify the deferred tax liability associated with these outside basis differences.be permanently reinvested.
 
We intend to use our cash, cash equivalents, and investments for general corporate purposes, including working capital and funding future growth.


In October 2017,March 2023, our board of directors approved a regular quarterly dividend of 23.0 cents$0.375 per share, or $16.0 million, payable on October 31, 2017April 28, 2023 to shareholders of record as of October 18, 2017. We will pay a quarterly dividend of approximately $9.8 million on October 31, 2017.April 7, 2023.


In December 2015, our2022, the board of directors approved a $300.0 million increase to ournew share repurchase program bringingthat authorizes the total amount authorized underCompany to repurchase up to $500.0 million in shares of the program to $1.0 billion. We may repurchase shares from time to time at prevailing market pricesCompany's outstanding common stock, effective January 1, 2023. This authorization expires on the open market or in private transactions in amounts that we deem appropriate. InDecember 31, 2025. During the first nine monthsquarter of 2017,2023, we repurchased a total of 533,371did not repurchase any shares, for $40.6 million. As of September 30, 2017, we have repurchased a total of 10.6 million shares for $713.5 million and had approximately $286.5leaving $500.0 million available for future repurchases under the new share repurchase program.

On January 27, 2023, we entered into a Termination Agreement (the Termination Agreement) with Morningstar Japan K.K. (now known as SBI Global Asset Management Co., Ltd. (Wealth Advisors)), and a Tender Offer Agreement (the Tender Offer Agreement) with SBI Global Asset Management Co., Ltd. (now known as SBI Asset Management Group Co., Ltd. (SBI)).

Pursuant to the Termination Agreement, Wealth Advisors agreed to cease use of September 30, 2017.the Morningstar brand and Morningstar and Wealth Advisors agreed to terminate the License Agreement originally entered into in 1998. As consideration for the transaction, Morningstar agreed to pay Wealth Advisors 8 billion Japanese yen ($61.4 million) upon the termination of the license agreement and the achievement of certain conditions related primarily to the termination of the use of the Morningstar brand by Wealth Advisors’ customers. On April 6, 2023, we made the first cash payment of 6 billion Japanese Yen ($45.1 million) and on April 19, 2023, we made the second and final cash payment of 2 billion Japanese Yen ($14.8 million), pursuant to the Termination Agreement.


As part of such transaction, pursuant to the Tender Offer Agreement, Morningstar agreed to tender up to 10 million shares in Wealth Advisors to SBI. The tender offer closed on February 28, 2023, and SBI purchased 8,040,600 shares of Wealth Advisors from Morningstar, resulting in net proceeds of $26.2 million and a pre-tax gain of $18.4 million. See Note 9 of the Notes to our Unaudited Condensed Consolidated Financial Statements for additional information on the Termination Agreement and Tender Offer Agreement.

On February 6, 2023, we made a cash payment of $50.0 million, resolving our contingent consideration liability related to our acquisition of LCD.

We expect to continue making capital expenditures in 20172023, primarily for computer hardware and software provided by third parties, internally developed software, and leasehold improvements for new and existing office locations. We continue to adopt more public cloud and software-as-a-service applications for new initiatives and are in the process of migrating relevant parts of our data centers to the public cloud over the next several years. During this migration, we expect to run certain applications and infrastructure in parallel. These actions will have some transitional effects on our level of capital expenditures and operating expenses.




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Consolidated Free Cash Flow

As described in more detail above, weWe define free cash flow as cash provided by or used for operating activities less capital expenditures.

 Three months ended September 30 Nine months ended September 30 Three months ended March 31,
(in millions) 2017
 2016
 Change
 2017
 2016
 Change
(in millions)20232022Change
Cash provided by operating activities $62.5
 $60.4
 3.5 % $164.7
 $143.2
 15.0 %Cash provided by operating activities$23.4 $23.5 (0.4)%
Capital expenditures (13.1) (18.1) (27.6)% (46.4) (47.5) (2.3)%Capital expenditures(29.5)(28.0)5.4 %
Free cash flow $49.4
 $42.3
 16.8 % $118.3
 $95.7
 23.6 %Free cash flow$(6.1)$(4.5)35.6 %
 
We generatedhad negative free cash flow of $49.4$6.1 million in the thirdfirst quarter of 2017, an increase of $7.1 million2023 compared with negative $4.5 million in the thirdfirst quarter of 2016. The change reflects a $2.1 million increase in cash2022. Cash provided by operating activities as well as a $5.0 million decreasewas relatively flat in capital expenditures.

In the first nine monthsquarter of 2017, we generated2023 compared with the prior-year period, while capital expenditures increased slightly. During the first quarter, the Company made its final $50.0 million payment related to the acquisition of LCD, of which $4.5 million is reflected in operating cash flows and $45.5 million is reflected in financing cash flows. Excluding the impact of the LCD payment, free cash flow of $118.3 million, an increase of $22.6 million compared withwould have been negative $1.6 million.

Lower cash earnings and higher interest expense had a negative impact on operating and free cash flow, of $95.7 millionwhich was mostly offset by gains in working capital partially resulting from the lower bonus payment in the same periodfirst quarter of 2016.2023 relative to the prior-year period. The increase reflects a $21.5 million increasenet impact from an equity method transaction on operating cash flow in cash provided by operating activities as well as a $1.1 million decrease in capital expenditures.the quarter was positive $11.8 million.


Application of Critical Accounting Policies and Estimates
 
We discuss our critical accounting policies and estimates in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report. We also discuss our significant accounting policies in Note 2 of the Notes to our Audited Consolidated Financial Statements included in our Annual Report and in Note 2 of the Notes to our Unaudited Condensed Consolidated Financial Statements contained in Part 1, Item 1 of this Quarterly Report.




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Rule 10b5-1 Sales Plans

Our directors and executive officers may exercise stock options or purchase or sell shares of our common stock in the market from time to time. We encourage them to make these transactions through plans that comply with Exchange Act Rule 10b5-1(c). Morningstar will not receive any proceeds, other than proceeds from the exercise of stock options, related to these transactions. The following table, which we are providing on a voluntary basis, shows the Rule 10b5-1 sales plans entered into by our directors and executive officers that were in effect as of October 15, 2017:April 14, 2023:
Name and PositionDate of
Plan		Plan Termination DateNumber of
Shares
to be
Sold under
the Plan		Timing of Sales under the PlanNumber of Shares Sold under the Plan through April 14, 2023Projected
Beneficial
Ownership		(1)
Gail Landis
Director
3/23/20233/21/2025975 Shares to be sold under the plan if the stock reaches specified prices— 3,621 
Joe Mansueto
Executive Chairman
8/31/20225/3/2023400,000 Shares to be sold under the plan if the stock reaches specified prices400,000 16,579,284 
Joe Mansueto
Executive Chairman
2/28/20234/30/2024700,000 Shares to be sold under the plan if the stock reaches specified prices— 15,879,284 
Name and Position 
Date of
Plan
 Plan Termination Date 
Number of
Shares
to be
Sold under
the Plan

 Timing of Sales under the Plan Number of Shares Sold under the Plan through October 15, 2017
 
Projected
Beneficial
Ownership (1)

Steven Kaplan Director 4/25/2017 12/21/2017 7,500
 Shares to be sold under the plan on specified dates —
 43,003
Gail Landis Director 11/15/2016 2/28/2018 1,500
 Shares to be sold under the plan if the stock reaches specified prices 1,000
 4,703
Jack Noonan Director 7/28/2017 1/25/2018 20,000
 Shares to be sold under the plan if the stock reaches a specified price —
 28,717


During the third quarter of 2017, the previously disclosed Rule 10b5-1 sales plans for Bevin Desmond and Tricia Rothschild completed in accordance with their respective terms.
______________________

(1) This column reflects an estimate of the number of shares each identified director and executive officer will beneficially own following the sale of all shares under the Rule 10b5-1 sales plan. This information reflects the beneficial ownership of our common stock on September 30, 2017,March 31, 2023 and includes shares of our common stock subject to options that were then exercisable or that will have become exercisable by November 29, 2017May 31, 2023 and restricted stock units that will vest by November 29, 2017.May 31, 2023. The estimates do not reflect any changes to beneficial ownership that may have occurred since September 30, 2017.March 31, 2023. Each director and executive officer identified in the table may amend or terminate his or her Rule 10b5-1 sales plan and may adopt additional Rule 10b5-1 plans in the future.


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Item 3.Quantitative and Qualitative Disclosures about Market Risk
Item 3.Quantitative and Qualitative Disclosures about Market Risk
 
Our investment portfolio is actively managed and may suffer losses from fluctuating interest rates, market prices, or adverse security selection. These accounts may consist of stocks, bonds, options, mutual funds, money market funds, or exchange-traded products that replicate the model portfolios and strategies created by Morningstar. These investment accounts may also include exchange-traded products where Morningstar is an index provider. As of September 30, 2017,March 31, 2023, our cash, cash equivalents, and investments balance was $324.0$385.4 million. Based on our estimates, a 100 basis-point change in interest rates would not have a material effect on the fair value of our investment portfolio.


We are subject to risk from fluctuations in the interest rates related to a portion of our long-term debt. The interest rates are based upon the applicable LIBORSecured Overnight Financing Rate (SOFR) rate plus an applicable margin for such loans or the lender's base rate plus an applicable margin for such loans. On an annualized basis, based on LIBOR rates around September 30, 2017, we estimate a 100 basis-point change in the LIBORSOFR rate would have a $2.1$7.8 million impact on our interest expense.expense based on our outstanding principal balance and SOFR rates around March 31, 2023.


We are subject to risk from fluctuations in foreign currencies from our operations outside of the UnitedUnited States. To date, we have not engaged in currency hedging, and weWe do not currently have any positions in derivative instruments to hedge our currency risk.


The table below shows our exposure to foreign currency denominated revenue and operating income for the ninethree months ended September 30, 2017:March 31, 2023:

Three months ended March 31, 2023
(in millions, except foreign currency rates)Australian DollarBritish PoundCanadian DollarEuroOther Foreign Currencies
Currency rate in U.S. dollars as of March 31, 20230.66991.23690.73911.0879n/a
Percentage of revenue2.9 %6.9 %5.7 %6.5 %5.6 %
Percentage of operating income (loss)14.9 %(58.1)%(19.9)%20.5 %(99.6)%
Estimated effect of a 10% adverse currency fluctuation on revenue$(1.4)$(3.4)$(2.7)$(3.2)$(2.7)
Estimated effect of a 10% adverse currency fluctuation on operating income (loss)$(0.4)$1.4 $0.5 $(0.5)$2.4 
  Nine months ended September 30, 2017
(in millions, except foreign currency rates) Euro British Pound Australian Dollar Other Foreign Currencies
Currency rate in U.S. dollars as of September 30, 2017 1.1816
 1.3403
 0.7834
 —
         
Percentage of revenue 4.9% 7.1% 3.7% 8.9 %
Percentage of operating income (loss) 10.2% 0.3% 4.1% (8.0)%
         
Estimated effect of a 10% adverse currency fluctuation on revenue $(1.5) $(2.6) $(2.0) $(4.5)
Estimated effect of a 10% adverse currency fluctuation on operating income (loss) $(0.6) $—
 $(0.4) $1.2


The table below shows our net investment exposure to foreign currencies as of September 30, 2017:March 31, 2023:

 As of September 30, 2017As of March 31, 2023
(in millions) Euro British Pound Australian Dollar Other Foreign Currencies(in millions)Australian DollarBritish PoundCanadian DollarEuroOther Foreign Currencies
Assets, net of unconsolidated entities $88.1
 $148.8
 $80.3
 $169.9
Assets, net of unconsolidated entities$68.1 $348.7 $394.0 $241.8 $212.4 
Liabilities 36.3
 41.4
 53.5
 63.0
Liabilities28.1 74.8 173.3 166.7 (11.9)
Net currency position $51.8
 $107.4
 $26.8
 $106.9
Net currency position$40.0 $273.9 $220.7 $75.1 $224.3 
        
Estimated effect of a 10% adverse currency fluctuation on equity $(5.2) $(10.7) $(2.7) $(10.7)Estimated effect of a 10% adverse currency fluctuation on equity$(4.0)$(27.4)$(22.1)$(7.5)$(22.4)
 

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Item 4.Controls and Procedures
Item 4.Controls and Procedures
 
(a)Evaluation and Disclosure Controls and Procedures
(a)Evaluation and Disclosure Controls and Procedures
 
Disclosure controls and procedures are designed to reasonably assure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to reasonably assure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
 
We carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act of 1934, as of September 30, 2017.March 31, 2023. Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported as and when required and is accumulated and communicated to management, including the chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
(b)Changes in Internal Control Over Financial Reporting

On December 1, 2016, the Company completed the acquisition of PitchBook Data, Inc. (PitchBook). As a result, our management excluded PitchBook from its assessment of internal control over financial reporting. Management is(b)Changes in the process of documenting and testing PitchBook’s internal controls over financial reporting and will incorporate PitchBook into its annual assessment of internal control over financial reporting for its fiscal year ending December 31, 2017. PitchBook is a wholly owned subsidiary whose total assets and total revenues represent 20% and 7%, respectively, of the related unaudited condensed consolidated financial statement amounts as of and for the nine months ended September 30, 2017.Internal Control Over Financial Reporting


Other than the change noted above, thereThere were no changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2017March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.






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PART 2.OTHER INFORMATION
PART 2.OTHER INFORMATION
 
Item 1.Legal Proceedings
Item 1.Legal Proceedings
 
We incorporate by reference the information regarding legal proceedings set forth in Note 11, Contingencies,13 of the Notes to our Unaudited Condensed Consolidated Financial Statements contained in Part 1, Item 1 of this Quarterly Report on Form 10-Q.Report.
 
Item 1A.Risk Factors
Item 1A.Risk Factors
 
There have been no material changes to the risk factors disclosed in Item 1A. Risk Factors in our Annual Report.


Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
 
Issuer Purchases of Equity Securities
 
Subject to applicable law, we may repurchase shares at prevailing market prices directly on the open market or in privately negotiated transactions in amounts that we deem appropriate.


We have an ongoing authorization, originally approved by ourOn December 6, 2022, the board of directors in September 2010, and subsequently amended,approved a new share repurchase program that authorizes the Company to repurchase up to $1.0 billion $500.0 million in shares of ourthe Company's outstanding common stock.stock, effective January 1, 2023. The new authorization expires on December 31, 2017.2025.


Under this new authorization, we may repurchase shares from time to time at prevailing market prices on the open market or in private transactions in amounts that we deem appropriate.

The following table presents information related to repurchases of common stock we made during the three months ended September 30, 2017:March 31, 2023: 
Period:Total number
of shares
purchased		Average
price paid
per share		Total number
of shares
purchased as
part of publicly
announced
programs		Approximate
dollar value of
shares that
may yet be
purchased
under the
programs
January 1, 2023 - January 31, 2023— $— — $500,000,000 
February 1, 2023 - February 28, 2023— — — $500,000,000 
March 1, 2023 - March 31, 2023— — — $500,000,000 
Total— $— — 
41
Period: 
Total number
of shares
purchased

 
Average
price paid
per share

 
Total number
of shares
purchased as
part of publicly
announced
programs

 
Approximate
dollar value of
shares that
may yet be
purchased
under the
programs

July 1, 2017 - July 31, 2017 126,458
 $78.46
 126,458
 $286,469,896
August 1, 2017 - August 31, 2017 —
 —
 —
 $286,469,896
September 1, 2017 - September 30, 2017 —
 —
 —
 $286,469,896
Total 126,458
 $78.46
 126,458
 





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Item 6.Exhibits
Item 6.Exhibit NoExhibitsDescription of Exhibit
Exhibit NoDescription of Exhibit
10.1*†
Form of Morningstar Amended and Restated 2011 Stock Incentive Plan Bonus Restricted Stock Unit Award Agreement, for awards made on and after March 1, 2023
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer Pursuantpursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101
The following financial information from Morningstar, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017,March 31, 2023, filed with the SEC on October 27, 2017 on April 28, 2023 formatted in Inline XBRL: (i) Cover Page, (ii) Unaudited Condensed Consolidated Statements of Income, (ii)(iii) Unaudited Condensed Consolidated Statements of Comprehensive Income (iii)(iv) Unaudited Condensed Consolidated Balance Sheets, (iv)(v) Unaudited Condensed Consolidated Statement of Equity, (v)(vi) Unaudited Condensed Consolidated Statements of Cash Flows and (vi)(vii) the Notes to Unaudited Condensed Consolidated Financial Statements
104Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document)



* Management contract with a director or executive officer or a compensatory plan or arrangement in which directors or executive officers are eligible to participate.

† Filed or furnished herewith

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SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
MORNINGSTAR, INC.
Date: October 27, 2017April 28, 2023By:
/s/ Jason Dubinsky

Jason Dubinsky
Chief Financial Officer


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