Morningstar(MORN) - 2024 Q4 - Annual Report

Financial Performance - The company recorded revenues of $2,275.1 million for the year ended December 31, 2024, with multiple product revenue streams [476]. - Consolidated revenue for 2024 was $2,275.1 million, representing a 11.6% increase from $2,038.6 million in 2023 [489]. - Operating income increased significantly to $484.8 million in 2024, up from $230.6 million in 2023, marking a 109.8% growth [489]. - Consolidated net income for 2024 reached $369.9 million, compared to $141.1 million in 2023, reflecting a 172.5% increase [491]. - Basic net income per share rose to $8.64 in 2024, up from $3.31 in 2023, indicating a 160.4% increase [489]. - Total reportable segment revenue for 2024 reached $2,073.1 million, an increase of 11.8% from $1,854.9 million in 2023 [577]. - Adjusted operating income for 2024 was $673.7 million, up 28.7% from $523.3 million in 2023 [577]. - Revenue from the United States was $1,638.8 million in 2024, up 11.4% from $1,470.6 million in 2023 [586]. - Total international revenue increased to $636.3 million in 2024, up from $568.0 million in 2023, marking a 12.0% growth [586]. Debt and Financing - As of December 31, 2024, the company's long-term debt was $698.6 million, with floating rate borrowings under the current credit facility, exposing it to interest rate risk [292]. - The current credit facility matures in September 2027, and the company may face challenges in renegotiating or obtaining new financing [294]. - A 100 basis-point change in the Secured Overnight Financing Rate (SOFR) is estimated to impact the company's interest expense by $3.5 million annually based on the outstanding principal balance [467]. - As of December 31, 2024, total debt was $698.6 million, down from $972.4 million in 2023, with a significant reduction in the Term Facility from $608.9 million to $349.8 million [546]. Cash and Investments - The company's cash, cash equivalents, and investments balance was $551.0 million as of December 31, 2024, with a 100 basis-point change in interest rates estimated to have no material effect on the fair value of the investment portfolio [466]. - Cash and cash equivalents increased to $502.7 million in 2024, up from $337.9 million in 2023, representing a 48.7% increase [493]. - The company reported a net increase in cash and cash equivalents of $164.8 million in 2024, contrasting with a decrease of $38.7 million in 2023 [497]. - The investment portfolio's total value decreased to $48.3 million in 2024 from $51.1 million in 2023, a decline of 5.5% [588]. Shareholder Equity and Dividends - Joe Mansueto, the Executive Chairman, owned approximately 35.8% of the outstanding common stock as of December 31, 2024, which may influence shareholder decisions [296]. - The company declared dividends per common share of $1.67 in 2024, up from $1.53 in 2023, a 9.1% increase [489]. - The company may not guarantee future dividends or share repurchases, which will depend on various factors including financial condition and results of operations [299]. - The existence of the share repurchase program could potentially increase the stock price and reduce market liquidity [300]. Revenue Recognition and Segments - Revenue recognition follows a five-step model under FASB ASC Topic 606, with performance obligations satisfied over time for subscription services [525]. - License-based revenue, the largest source of customer revenue, is typically recognized over terms of 1 to 3 years [527]. - Asset-based revenue is recognized daily based on the value of assets under management, with contracts typically lasting 1 to 3 years [530]. - The company expects to recognize $1,068.0 million in revenue related to contract liabilities in 2025 [556]. Expenses and Compensation - Compensation expenses for 2024 totaled $216.1 million, compared to $173.8 million in 2023, reflecting a 24.3% increase [574]. - Stock-based compensation expense was $54.7 million in 2024, slightly up from $52.8 million in 2023 but down from $83.2 million in 2022 [497]. - The total fair value of restricted stock units (RSUs) that vested in 2024 was $50.1 million, while market stock units (MSUs) that vested totaled $5.6 million [638][642]. Foreign Currency Exposure - The company has not engaged in currency hedging, exposing it to foreign currency fluctuations, with foreign denominated revenue percentages including 2.7% from Australian dollars and 7.4% from British pounds [468]. - The estimated effect of a 10% adverse currency fluctuation on revenue could result in a loss of $16.4 million from British pounds [468]. Acquisitions and Sales - The company completed the acquisition of LCD for a total consideration of $645.5 million, which includes an initial cash payment of $600.0 million and contingent consideration of up to $50.0 million [596][597]. - The acquisition of Praemium was finalized for $44.9 million in cash, with the financial results consolidated from June 30, 2022 [602]. - The company recorded a gain of $45.3 million from the sale of its Commodity and Energy Data business for $52.4 million on September 30, 2024 [610]. - A gain of $64.0 million was recorded from the sale of customer assets to AssetMark, Inc. for approximately $65.0 million, with potential contingent consideration based on customer net flows [611]. Taxation - The effective tax rate for 2024 was 21.9%, an increase of 2.9 percentage points from 19.0% in 2023 [651]. - The company anticipates a one-time repatriation of $142.0 million in earnings from foreign subsidiaries back to the US in 2025 [654]. - The income tax expense for 2024 was $104.0 million, compared to $33.0 million in 2023 and $56.5 million in 2022 [656].