MORNINGSTAR, INC. Item 7.01. Regulation FD Disclosure.
The following information is included in this Current Report on Form 8-K as a
result of
Caution Concerning Forward-Looking Statements
This current report on Form 8-K 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,
· the impact of the current COVID-19 pandemic on our business, financial
condition, and results of operations;
· 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;
· liability related to cybersecurity and the protection of confidential
information, including personal information about individuals;
· failing to differentiate our products and continuously create innovative,
proprietary research tools and financial advisor software;
· inadequacy of our operational risk management and business continuity programs
in the event of a material disruptive event;
· failing to respond to technological change, keep pace with new technology
developments, or adopt a successful technology strategy;
· compliance failures, regulatory action, or changes in laws applicable to our
investment advisory or credit ratings operations;
· volatility in the financial sector, global financial markets, and global
economy and its effect on our revenue from asset-based fees and credit ratings
business;
· trends in the asset management industry, including the increasing adoption of
investment strategies and portfolios relying on passively managed investment
vehicles and increased industry consolidation;
· liability relating to the collection or distribution of information and data we
collect and produce or errors included therein;
· an outage of our database, technology-based products and services, or network
facilities or the movement of parts of our technology and data infrastructure
to the public cloud and other outsourced providers;
· the failure of acquisitions and other investments to be efficiently integrated
and produce the results we anticipate;
· the failure to recruit, develop, and retain qualified employees;
· challenges faced by our non-
data and development work at our offshore facilities in
· the failure to protect our intellectual property rights or claims of
intellectual property infringement against us.
Investor Questions and Answers:
We encourage current shareholders, potential shareholders, and other interested
parties to send questions to us in writing and we make written responses
available on a regular basis. The following answers respond to selected
questions received through
If you would like to submit a question, please send an e-mail to investors@morningstar.com or write to us at the following address:
Morningstar, Inc. Investor Relations22 W. Washington St. Chicago, IL 60602 Competitive Landscape
1.) What are some examples of new entrants in Morningstar's markets that have tried, but failed?
In our more established data offerings, there aren't many new entrants because the fields are crowded already and it would take a significant amount of new investment to "catch up" to players, like us, who already have a head start.
That said, here are a few examples of new entrants that have tried to gain traction in some of our end markets.
Similarly,
In Workplace Solutions, we've seen numerous robo-advisors attempt to enter the market; however, these providers lack the relationships with retirement plan record-keepers that Morningstar has spent years building and securing. These relationships constitute back-end connections to plan participant data, which is highly sensitive, and our established clients are reluctant to entrust this data with as-yet unproven new market entrants.
DBRS Morningstar
2.)
2020 Annual Meeting. What percentage of DBRS Morningstar revenue is from
'Leading', 'Established' and 'Developing' categories that he presented?
Please refer to p. 74 of our 2020 Annual Meeting of Shareholders presentation, which can be found on our Investor Relations website.
DBRS Morningstar's percentage of revenue by geography has remained consistent
since we announced the acquisition in
Due to our standard-setting position as a credit ratings agency in the Canadian
market, the majority of our Canadian revenue falls under the "leading" category.
In the
PitchBook
3.)
including increased use cases per user and increasing the number of users per
firm. There has been a widening gap between license and revenue growth from
2018 through Q2 2020. Does that indicate that growth is primarily driven by
increasing numbers of users at enterprise accounts with lower prices per
additional user rather than increasing use cases per user?
Further penetration into existing accounts has represented an important area of growth for PitchBook in recent years. Oftentimes, a core user of the PitchBook Platform introduces it to a new team within the same firm, who ends up using the Platform in a different manner that is specific to that team's workflow. That is how we define a new "use case" at PitchBook. As these accounts grow in size, we often convert them into enterprise accounts that offer enough licenses to cover every potential user within the firm. This is consistent with how other software-as-a-service firms treat enterprise relationships, and also helps to explain why license growth has been outpacing revenue growth in recent years. As such, expanding use cases at existing clients can be a strong signal that we are adding value, which ultimately helps to establish an even stronger relationship with the client, a phenomenon that supports our historically high revenue retention rates.
4.)
and Kunal Kapoor indicated that it is "off the charts" at the 2020 Annual
Meeting. What is it now? Can you disclose other NPS scores across
Morningstar's products? How is NPS score viewed by Morningstar's management
team?
Across different industries, NPS scores are used to aid sales, service and, most importantly, product to understand trends in user satisfaction and sentiment. Scores below zero present a real need for product and service improvement, scores 0-30 are considered good, 30-70 great, and 70+ excellent.
At Morningstar, management tracks company-level and product-level NPS scores and measures these scores according to these aforementioned ranges to help understand customer sentiment and experience. In addition to the "absolute" scores, management pays close attention to NPS trends as one of many ways of measuring progress.
PitchBook's NPS score year to date is 59. PitchBook believes that one of its differentiating qualities is a high-level of customer service, and we believe that this number reflects that. We have historically not disclosed specific NPS scores for our other products; however, we can share that across our other highest growth products and strategic imperatives, we have NPS scores that range from "good" to "great." Our product and service teams leverage all of this insight to drive service improvements and product roadmap prioritizations. Further, NPS scores are combined with other sources of customer feedback, including CSAT (Customer Satisfaction score), win/loss data, user group feedback and usage data, to deliver a more complete picture of customer health and satisfaction.
Sustainalytics
5.) See below from Note 10 in the 2019 Form 10-K. Under the equity method of
accounting, the decline in the investment value in Sustainalytics suggests
that business is loss making. Please let us know if think this interpretation
is incorrect.
In 2019, our share of Sustainalytics' earnings actually increased the value of our equity position; however, this was largely offset by the negative impact of foreign currency translation, which resulted in the slight decline that you referenced.
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