Revenue

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The following table presents our revenue disaggregated by revenue type. Sales and usage-based taxes are excluded from revenue.



	Year ended December 31
(in millions)	2019		2018		2017
License-based	$	812.7	$	751.6	$	667.7
Asset-based	211.6		200.4		182.2
Transaction-based	154.7		67.9		61.8
Consolidated revenue	$	1,179.0	$	1,019.9	$	911.7

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 12 to 36 months. License-based revenue is generated from the sale of Morningstar Data, Morningstar Direct, Morningstar Advisor Workstation, PitchBook, and other similar products.

Asset-based performance obligations are satisfied over time as the customer receives continuous access to a service for the term. Asset-based arrangements typically have a term of 12 to 36 months. The 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, or significant disruptions in the market, are evaluated to determine if revisions of estimates of earned asset-based fees are needed for the current quarter. 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 includes Morningstar 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 includes DBRS Morningstar credit ratings, Internet advertising, and conferences. DBRS Morningstar credit ratings revenue may include 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 December 31, 2019 had a net increase of $72.3 million, primarily driven by cash payments received or payable in advance of satisfying our performance obligations. We recognized $194.9 million of revenue in 2019 that was included in the contract liabilities balance as of December 31, 2018.

We expect to recognize revenue related to our contract liabilities for 2020 and subsequent years as follows:



(in millions)	As of December 31, 2019
2020	$	437.1
2021	107.1
2022	44.4
2023	14.2
2024	8.9
Thereafter	55.0
Total	$	666.7

The aggregate amount of revenue we expect to recognize for 2020 and subsequent years is higher than our contract liability balance of $282.3 million as of December 31, 2019. The difference represents the value of future obligations for signed contracts where we have not yet begun to satisfy the performance obligations or have partially satisfied performance obligations.

The table above does not include variable consideration for unsatisfied performance obligations related to certain of our licensed-based, asset-based, and transaction-based contracts as of December 31, 2019. 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 12 to 36 months as services are provided to the client. For licensed-based contracts, the consideration received for services performed is based on future user count, which is known at the time 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 will be known at the time 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, the consideration received for services performed is based on the number of impressions, which will be known once 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 December 31, 2019, the table above also does not include revenue for unsatisfied performance obligations related to certain of our license-based and transaction-based contracts with duration 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. For transaction-based contracts, such as new credit rating issuances and conferences, the related performance obligations are expected to be satisfied within the next twelve months.

Contract Assets

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

The following table summarizes our contract assets balance:



	As of December 31
(in millions)	2019		2018
Accounts receivable, less allowance for doubtful accounts	$	188.5	$	172.2
Deferred commissions	30.4		25.1
Total contract assets	$	218.9	$	197.3

The following table shows the change in our deferred commissions balance from January 1, 2019 to December 31, 2019:



	(in millions)
Balance as of January 1, 2019	$	25.1
Commissions earned and capitalized	24.9
Amortization of capitalized amounts	(19.6		)
Balance as of December 31, 2019	$	30.4