10-Q 1 morn-20220930.htm 10-Q morn-20220930
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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

FOR THE QUARTERLY PERIOD ENDED September 30, 2022
OR
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) 
morn-20220930_g1.jpg
Illinois 36-3297908
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
22 West Washington Street 
ChicagoIllinois60602
(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 registrant (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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x No o
Indicate by check mark whether the registrant 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 filer
Accelerated filer  
o

Non-accelerated filer   o
Smaller reporting company  Emerging growth 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 registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No x
As of October 21, 2022, there were 42,446,188 shares of the Company’s common stock, no par value, outstanding.


MORNINGSTAR, INC. AND SUBSIDIARIES
INDEX
 
   
 
   
   Unaudited Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2022 and 2021
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021
    
   Unaudited Condensed Consolidated Balance Sheets as September 30, 2022 and December 31, 2021
    
   Unaudited Condensed Consolidated Statements of Equity for the three and nine months ended September 30, 2022 and 2021
    
   Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021
    
   
   
 
   
 
   
 
   
   
   
 
   
 
   
 
   
 
   
 
3

PART 1.FINANCIAL INFORMATION
Item 1.Financial Statements
Morningstar, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Income
 Three months ended September 30,Nine months ended September 30,
(in millions, except share and per share amounts)2022202120222021
Revenue$468.2 $428.9 $1,395.6 $1,237.1 
Operating expense:
Cost of revenue195.4 183.1 584.3 508.8 
Sales and marketing89.7 72.9 262.9 201.3 
General and administrative116.9 67.0 294.3 232.5 
Depreciation and amortization44.2 38.1 121.8 112.3 
Total operating expense446.2 361.1 1,263.3 1,054.9 
Operating income22.0 67.8 132.3 182.2 
Non-operating loss, net:  
Interest expense, net(10.5)(2.3)(17.3)(7.3)
Realized gains (losses) on sale of investments, reclassified from other comprehensive income 1.2 (2.1)4.1 
Other loss, net(13.8)(3.5)(12.9)(2.7)
Non-operating loss, net(24.3)(4.6)(32.3)(5.9)
Income before income taxes and equity in net income (loss) of unconsolidated entities(2.3)63.2 100.0 176.3 
Equity in net income (loss) of unconsolidated entities(1.3)1.9 (2.7)4.6 
Income tax expense 5.4 16.1 30.1 44.1 
Consolidated net income (loss)$(9.0)$49.0 $67.2 $136.8 
Net income (loss) per share:  
Basic$(0.21)$1.14 $1.57 $3.18 
Diluted$(0.21)$1.13 $1.56 $3.16 
Dividends per common share:
Dividends declared per common share$ $ $0.72 $0.63 
Dividends paid per common share$0.36 $0.32 $1.08 $0.95 
Weighted average shares outstanding:
Basic42.5 43.1 42.7 43.0 
Diluted42.7 43.4 43.0 43.3 

See notes to unaudited condensed consolidated financial statements.
4

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

 Three months ended September 30,Nine months ended September 30,
(in millions) 2022202120222021
Consolidated net income (loss)$(9.0)$49.0 $67.2 $136.8 
Other comprehensive loss, net of tax:
Foreign currency translation adjustment(51.2)(18.6)(99.9)(14.0)
Unrealized gains (losses) on securities:
  Unrealized holding gains (losses) arising during period0.2 (0.5)(7.6)4.4 
  Reclassification of (gains) losses on investments included in net income (1.0)2.1 (3.2)
Other comprehensive loss, net(51.0)(20.1)(105.4)(12.8)
Comprehensive income (loss)$(60.0)$28.9 $(38.2)$124.0 

See notes to unaudited condensed consolidated financial statements.


5

Morningstar, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in millions, except share amounts)As of September 30, 2022
(unaudited)
As of December 31, 2021
Assets  
Current assets:  
Cash and cash equivalents$372.7 $483.8 
Investments34.4 62.3 
Accounts receivable, less allowance for credit losses of $5.4 million and $4.5 million, respectively284.5 268.9 
Income tax receivable9.5 8.9 
Deferred commissions36.9 31.2 
Prepaid expenses39.6 30.6 
Other current assets11.2 1.9 
Total current assets788.8 887.6 
Goodwill1,542.4 1,207.0 
Intangible assets, net559.1 328.2 
Property, equipment, and capitalized software, less accumulated depreciation and amortization of $590.4 million and $529.2 million, respectively187.8 171.8 
Operating lease assets185.5 149.2 
Investments in unconsolidated entities96.9 63.3 
Deferred tax asset, net11.5 12.8 
Deferred commissions32.5 31.1 
Other assets10.6 11.7 
Total assets$3,415.1 $2,862.7 
Liabilities and equity  
Current liabilities:  
Deferred revenue$424.8 $377.4 
Accrued compensation194.9 273.7 
Accounts payable and accrued liabilities67.1 76.5 
Current portion of long-term debt32.1  
Operating lease liabilities37.1 36.4 
Contingent consideration liability46.4 17.3 
Other current liabilities4.0 2.2 
Total current liabilities806.4 783.5 
Operating lease liabilities162.5 135.7 
Accrued compensation19.1 16.3 
Deferred tax liabilities, net72.5 101.7 
Long-term debt1,125.5 359.4 
Deferred revenue35.3 36.4 
Other long-term liabilities14.8 13.8 
Total liabilities2,236.1 1,446.8 
Equity:  
Morningstar, Inc. shareholders’ equity:  
Common stock, no par value, 200,000,000 shares authorized, of which 42,472,580 and 43,136,273 shares were outstanding as of September 30, 2022 and December 31, 2021, respectively  
6

Treasury stock at cost, 11,969,583 and 11,124,021 shares as of September 30, 2022 and December 31, 2021, respectively(982.2)(764.3)
Additional paid-in capital738.9 689.0 
Retained earnings1,563.0 1,526.5 
Accumulated other comprehensive loss:
    Currency translation adjustment(140.7)(40.8)
    Unrealized gain on available-for-sale investments 5.5 
Total accumulated other comprehensive loss(140.7)(35.3)
Total equity1,179.0 1,415.9 
Total liabilities and equity$3,415.1 $2,862.7 

See notes to unaudited condensed consolidated financial statements.
7

Morningstar, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Equity
For the three and nine months ended September 30, 2022 and 2021
 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 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 restricted stock units, net of shares withheld for taxes on settlements of restricted stock units34,350 — — (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 
Net income— — — 30.1 — 30.1 
Other comprehensive income (loss):
Unrealized loss on available-for-sale investments, net of tax— — — — (3.0)(3.0)
Reclassification of adjustments for loss on investments included in net income, net of tax— — — — 2.8 2.8 
Foreign currency translation adjustment, net— — — — (43.7)(43.7)
Other comprehensive income (loss), net— — — — (43.9)(43.9)
Issuance of common stock related to vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units98,894 — 1.4 (12.7)— — (11.3)
Reclassification of awards previously liability-classified that were converted to equity— — (0.1)— — (0.1)
Stock-based compensation— — 22.1 — — 22.1 
Common shares repurchased(374,358)— (92.5)— — — (92.5)
Dividends declared $0.36 per share)
— — — (15.3)— (15.3)
Balance as of June 30, 202242,492,188 $ $(966.0)$724.5 $1,572.0 $(89.7)$1,240.8 
Net income (loss)— — — (9.0)— (9.0)
Other comprehensive income (loss):
Unrealized gain on available-for-sale investments, net of tax— — — — 0.2 0.2 
Reclassification of adjustments for gain on investments included in net income, net of tax— — — —   
8

Foreign currency translation adjustment, net— — — — (51.2)(51.2)
Other comprehensive income (loss), net— — — — (51.0)(51.0)
Issuance of common stock related to vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units58,445 — 0.9 (7.6)— — (6.7)
Reclassification of awards previously liability-classified that were converted to equity— — (0.1)— — (0.1)
Stock-based compensation— — 22.1 — — 22.1 
Common shares repurchased(78,053)— (17.1)— — — (17.1)
Balance as of September 30, 202242,472,580 $ $(982.2)$738.9 $1,563.0 $(140.7)$1,179.0 

9


 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, 202042,898,158 $ $(767.3)$671.3 $1,389.4 $(22.0)$1,271.4 
Net income— — — 54.9 — 54.9 
Other comprehensive income (loss):
Unrealized gain on available-for-sale investments, net of tax— — — — 2.1 2.1 
Reclassification of adjustments for gain on investments included in net income, net of tax— — — — (1.0)(1.0)
Foreign currency translation adjustment, net— — — — (3.0)(3.0)
Other comprehensive income (loss), net— — — — (1.9)(1.9)
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units47,826 — — (6.3)— — (6.3)
Reclassification of awards previously liability-classified that were converted to equity— — 8.7 — — 8.7 
Stock-based compensation— — 8.1 — — 8.1 
Dividends declared ($0.32 per share)
— — — (13.5)— (13.5)
Balance as of March 31, 202142,945,984 $ $(767.3)$681.8 $1,430.8 $(23.9)$1,321.4 
Net income— — — 32.9 — 32.9 
Other comprehensive income (loss):`
Unrealized gain on available-for-sale investments, net of tax— — — — 2.8 2.8 
Reclassification of adjustments for gain on investments included in net income, net of tax— — — — (1.2)(1.2)
Foreign currency translation adjustment, net— — — — 7.6 7.6 
Other comprehensive income (loss), net— — — — 9.2 9.2 
Issuance of common stock related to stock-option exercises and vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units120,587 — 2.2 (14.2)— — (12.0)
Reclassification of awards previously liability-classified that were converted to equity— — 0.1 — — 0.1 
Stock-based compensation— — 11.8 — — 11.8 
Dividends declared ($0.32 per share)
— — — (13.6)— (13.6)
Balance as of June 30, 202143,066,571 $ $(765.1)$679.5 $1,450.1 $(14.7)$1,349.8 
Net income— — — 49.0 — 49.0 
Other comprehensive loss:
Unrealized loss on available-for-sale investments, net of tax— — — — (0.5)(0.5)
Reclassification of adjustments for gain on investments included in net income, net of tax— — — — (1.0)(1.0)
Foreign currency translation adjustment, net— — — — (18.6)(18.6)
Other comprehensive loss, net— — — — (20.1)(20.1)
10

Issuance of common stock related to vesting of restricted stock units, net of shares withheld for taxes on settlements of restricted stock units33,822 — 1.1 (5.1)— — (4.0)
Stock-based compensation— — 11.1 — — 11.1 
Common shares repurchased(1,200)— (0.3)— — — (0.3)
Balance as of September 30, 202143,099,193 $ $(764.3)$685.5 $1,499.1 $(34.8)$1,385.5 

See notes to unaudited condensed consolidated financial statements.

11

Morningstar, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
 Nine months ended September 30,
(in millions)20222021
Operating activities
Consolidated net income $67.2 $136.8 
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
Depreciation and amortization121.8 112.3 
Deferred income taxes(27.5)(8.5)
Stock-based compensation expense58.1 31.0 
Provision for bad debt2.1 2.0 
Equity in net (income) loss of unconsolidated entities2.7 (4.6)
Acquisition earn-out accrual0.9 22.5 
Other, net25.0 (0.8)
Changes in operating assets and liabilities:
Accounts receivable(19.8)(38.0)
Accounts payable and accrued liabilities5.4 (1.4)
Accrued compensation and deferred commissions(55.6)8.5 
Income taxes, current0.6 (8.1)
Deferred revenue39.1 62.7 
Other assets and liabilities(25.7)(0.4)
Cash provided by operating activities194.3 314.0 
Investing activities 
Purchases of investment securities(33.6)(54.5)
Proceeds from maturities and sales of investment securities41.2 40.6 
Capital expenditures(93.4)(71.6)
Acquisitions, net of cash acquired(646.8)(24.6)
Purchases of investments in unconsolidated entities(28.3)(15.8)
Other, net(0.1)0.5 
Cash used for investing activities(761.0)(125.4)
Financing activities 
Common shares repurchased(217.7)(0.1)
Dividends paid(46.2)(40.6)
Proceeds from revolving credit facility460.0 10.0 
Repayment of revolving credit facility(300.0)(10.0)
Proceeds from term facility650.0  
Repayment of term facility(10.9)(75.0)
Proceeds from stock-option exercises 0.2 
Employee taxes withheld for restricted stock units(25.0)(22.4)
Payment of acquisition-related earn-outs(16.2)(34.4)
Other, net(2.2)(3.2)
Cash provided by (used for) financing activities491.8 (175.5)
Effect of exchange rate changes on cash and cash equivalents(36.2)(8.6)
Net increase (decrease) in cash and cash equivalents(111.1)4.5 
Cash and cash equivalents—beginning of period483.8 422.5 
Cash and cash equivalents—end of period$372.7 $427.0 
Supplemental disclosure of cash flow information: 
Cash paid for income taxes$57.1 $60.5 
Cash paid for interest$17.7 $8.1 
Supplemental information of non-cash investing activities:
Unrealized gain (loss) on available-for-sale investments$(0.4)$1.3 

See notes to unaudited condensed consolidated financial statements.
12

MORNINGSTAR, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
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) 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, 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, 2021, filed with the SEC on February 25, 2022 (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

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

Reference Rate Reform: On March 12, 2020, the FASB issued ASU No. 2020-04: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848) (ASU No. 2020-04), which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contract modifications resulting from reference rate reform initiatives. The intention of the standard is to ease the potential accounting and financial reporting burden associated with transitioning away from the expiring London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative benchmark rates. The amendments in this update are applicable to contract modifications that replace a reference LIBOR rate beginning on March 12, 2020 through December 31, 2022. On May 6, 2022, we terminated our 2019 Credit Agreement and entered into the 2022 Credit Agreement in connection with the acquisition of Leveraged Commentary & Data (LCD). As we entered into the 2022 Credit Agreement for reasons unrelated to reference rate reform, ASU No. 2010-04 is not applicable. See Note 3 for additional information on our 2022 Credit Agreement and Note 4 for additional information on our acquisition of LCD.

Business Combinations: On October 28, 2021, the FASB issued ASU No. 2021-08: Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805) (ASU No. 2021-08), which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Generally, the new standard will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Under current U.S. GAAP, contract assets and contract liabilities acquired in a business combination are recorded by the acquirer at fair value. ASU No. 2021-08 creates an exception to the general recognition and measurement principles of ASC 805, Business Combinations (ASC 805). The new standard is effective for us on January 1, 2023. Early adoption is permitted, including in an interim period, for any period for which financial statements have not yet been issued. Entities should apply the new guidance on a prospective basis to all business combinations with an acquisition date on or after the effective date. We elected to early adopt ASU No. 2021-08 during the second quarter of 2022 and the adoption did not have a material effect on our consolidated financial statements, related disclosures, and results of operations.


13

Severance: 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. These activities will result in a significant headcount reduction in Shenzhen, China and growth in other Morningstar locations including Mumbai, Toronto, Madrid, and Chicago. Going forward, the Company's work in China will be focused solely on commercial activities in the domestic market.

As a result of these activities, the Company incurred $26.3 million of severance expense in the third quarter of 2022, which was recorded within "General and administrative" on our Consolidated Statements of Income. Due to statutory severance requirements in China and the application of the relevant accounting standards, the Company recorded substantially all of the severance costs in the third quarter of 2022 with the remainder to be incurred through the third quarter of 2023.


3. Credit Arrangements

Debt

The following table summarizes our debt as of September 30, 2022 and December 31, 2021:
(in millions)As of September 30, 2022As of December 31, 2021
Term Facility, net of unamortized debt issuance costs of $0.8 million and $0.1 million, respectively
$649.2 $11.0 
Revolving Credit Facility160.0  
2.32% Senior Notes due October 26, 2030, net of unamortized debt issuance costs of $1.6 million and $1.6 million, respectively
348.4 348.4 
Total debt$1,157.6 $359.4 

Credit Agreement

On July 2, 2019, the Company entered into a senior credit agreement (the 2019 Credit Agreement). The 2019 Credit Agreement provided the Company with a five-year multi-currency credit facility with an 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 2019 Credit Agreement also provided for the issuance of up to $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 (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 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 September 30, 2022, our total outstanding debt under the Amended 2022 Credit Agreement was $809.2 million, net of debt issuance costs, with borrowing availability of $490.0 million under the 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.
14


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 Amended 2022 Credit Agreement is, at the Company's option, either: (i) the applicable Secured Overnight Financing Rate (SOFR) plus an applicable margin for such loans, which ranges between 1.00% and 1.48%, based on the Company's consolidated leverage ratio or (ii) the lender's base rate plus the applicable margin for such loans, which ranges between 0.00% and 0.38%, based on the Company's consolidated leverage ratio.

The portions 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 September 30, 2022, our total outstanding debt, net of issuance costs, under the 2030 Notes was $348.4 million.

Compliance with Covenants

Each of the Amended 2022 Credit Agreement and the 2030 Notes include customary representations, warranties, and covenants, including financial covenants, that require us to maintain specified ratios of consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) to consolidated interest charges and consolidated funded indebtedness to consolidated EBITDA, which are evaluated on a quarterly basis. We were in compliance with these financial covenants as of September 30, 2022.


4. Acquisitions, Goodwill, and Other Intangible Assets

2022 Acquisitions

Leveraged Commentary & Data

On June 1, 2022, we completed our acquisition of LCD, a market leader in news, research, data, insights, and indexes for the leveraged finance market, from S&P Global (S&P) for an initial cash payment of $600.0 million plus a contingent payment of up to $50.0 million. We began consolidating the financial results of LCD in our consolidated financial statements as of June 1, 2022.

The total consideration transferred has been recorded as $645.5 million, comprised of a $600.0 million cash payment plus contingent consideration with an acquisition date fair value of $45.5 million.

The acquisition was accounted for as a business combination under the acquisition method of accounting pursuant to ASC 805, which requires that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date. During the third quarter of 2022, we did not record significant adjustments to the purchase price allocation compared with the preliminary estimates recorded in the second quarter of 2022.


15

The acquisition date fair value of certain assets and liabilities, including intangible assets acquired and related weighted average expected life calculations, are provisional and subject to revision within one year of the acquisition date. Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.

The final contingent consideration will be determined based upon the achievement of certain conditions related to the separation of LCD’s contractual relationships from S&P contracts that include other S&P products and services during the six month period following closing. To estimate the fair value of the contingent payment at the acquisition date, we calculated the weighted average of the estimated contingent payment scenarios. At subsequent balance sheet dates, the contingent payment will continue to be measured at fair value and any changes in the estimate will be recorded in earnings unless the change in fair value is the result of facts and circumstances that existed as of the acquisition date. During the third quarter of 2022, the contingent consideration was remeasured and an immaterial amount was recorded in earnings. The contingent payment is classified as "Contingent consideration liabilities" on our Consolidated Balance Sheet as of September 30, 2022.

The following table summarizes our preliminary allocation of the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:
(in millions)
Fair value of consideration$645.5 
Accounts receivable and other current assets$9.7 
Intangible assets, net275.6 
Deferred revenue(25.8)
Total fair value of net assets acquired$259.5 
Goodwill$386.0 

Accounts receivable acquired were recorded at gross contractual amounts receivable, which approximates fair value. We expect to collect substantially all of the gross contractual amounts receivable within a reasonable period of time after the acquisition date.

The preliminary allocation of the estimated fair values of the assets acquired and liabilities assumed includes $275.6 million of acquired intangible assets, as follows:
(in millions)Weighted average useful life (years)
Customer-related assets$197.3 20
Technology-based assets65.7 10
Intellectual property12.6 10
Total intangible assets$275.6 

Goodwill of $386.0 million represents the excess over the fair value of the net tangible and intangible assets acquired. Since LCD was an asset acquisition, goodwill is deductible for income tax purposes.

Praemium Portfolio Services Limited

On June 30, 2022, we completed our acquisition of Praemium Portfolio Services Limited (Praemium), a U.K.-based global provider of digital-first financial services, with $44.9 million in cash paid at closing, subject to post-closing adjustments. Praemium and its subsidiaries offer several investment platforms and customer relationship management services to their financial planning and wealth management clients across the U.K. and international markets. We began consolidating the financial results of Praemium in our consolidated financial statements as of June 30, 2022.

16

The acquisition was accounted for as a business combination under the acquisition method of accounting pursuant to ASC 805. During the third quarter of 2022, we did not record significant adjustments to the purchase price allocation compared with the preliminary estimates recorded in the second quarter of 2022.

The acquisition date fair value of certain assets and liabilities, including intangible assets acquired and related weighted average expected life calculations, are provisional and subject to revision within one year of the acquisition date. Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.

The following table summarizes our allocation of the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:
(in millions)
Fair value of consideration transferred$44.9 
Cash and cash equivalents$5.5 
Accounts receivable and other current and non-current assets3.3 
Intangible assets, net22.7 
Deferred revenue(0.3)
Deferred tax liability, net(5.6)
Other current and non-current liabilities(2.2)
Total fair value of net assets acquired$23.4 
Goodwill$21.5 

Accounts receivable acquired were recorded at gross contractual amounts receivable, which approximates fair value. We expect to collect substantially all of the gross contractual amounts receivable within a reasonable period of time after the acquisition date.

The preliminary allocation of the estimated fair values of the assets acquired and liabilities assumed includes $22.7 million of acquired intangible assets, as follows:
(in millions)Weighted average useful life (years)
Customer-related assets$3.4 10
Technology-based assets19.3 10
Total intangible assets$22.7 

Goodwill of $21.5 million represents the excess over the fair value of the net tangible and intangible assets acquired. Goodwill is not deductible for income tax purposes.

We recognized a preliminary net deferred tax li