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30-07-2025
- Business
- Yahoo
Morningstar, Inc. Reports Second-Quarter 2025 Financial Results
CHICAGO, July 30, 2025--(BUSINESS WIRE)--Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment insights, posted second-quarter revenue growth with increases in operating and adjusted operating income and margins. "PitchBook, Morningstar Direct Platform, and Morningstar Credit led the way in the second quarter, contributing to solid growth," said Kunal Kapoor, Morningstar's chief executive officer. "Our teams remain focused on delivering insights and experiences that make us essential to the investor workflow. In recent weeks, we enhanced Direct Advisory Suite with data on 1,000 private funds and improved screening tools, expanded CLO holdings and trade data in PitchBook, and published The State of Semiliquid Funds, offering insights on a growing segment of the market. Through such efforts, we are creating a common language to help investors navigate the convergence of public and private markets." The Company's quarterly shareholder letter provides more context on its quarterly results and business performance and can be found at Second-Quarter 2025 Financial Highlights Reported revenue increased 5.8% to $605.1 million compared to the prior-year period; organic revenue increased 5.9%. Reported operating income increased 15.3% to $125.1 million; adjusted operating income increased 9.5%. Diluted net income per share increased 30.6% to $2.09; adjusted diluted net income per share increased 19.4% to $2.40. Cash provided by operating activities decreased 35.2% to $99.0 million; free cash flow decreased 48.3% to $62.4 million. The Company repurchased 398,442 shares for a total of $112.0 million. Year-To-Date Financial Highlights Reported revenue increased 6.5% to $1.2 billion compared to the prior-year period; organic revenue increased 7.5%. Reported operating income increased 18.9% to $239.2 million; adjusted operating income increased 15.3%. Diluted net income per share increased 26.5% to $3.91; adjusted diluted net income per share increased 23.8% to $4.63. Cash provided by operating activities decreased 22.9% to $190.0 million; free cash flow decreased 32.8% to $121.2 million. The Company repurchased 766,641 shares for a total of $221.6 million. Second-Quarter 2025 Results Revenue increased 5.8% to $605.1 million on a reported basis and 5.9% on an organic basis versus the prior-year period. PitchBook, Morningstar Direct Platform, and Morningstar Credit were the biggest contributors to reported and organic revenue growth. Operating expense increased 3.8% to $480.8 million versus the prior-year period. Excluding the impact of intangible amortization and M&A-related expenses, operating expense increased 4.7%. The largest contributor to the growth in reported operating expense was an increase of $16.7 million in compensation costs, driven primarily by an increase in salaries and benefits related in part to the Company's 2025 annual merit increase and higher stock-based compensation. Compensation costs included $4.9 million related to a targeted reorganization in Morningstar Sustainalytics, the impact of which was reflected in adjusted operating income. Higher advertising and marketing and facilities-related expense also contributed to the growth. Second-quarter operating income increased 15.3% to $125.1 million. Adjusted operating income was $143.4 million, an increase of 9.5%. Second-quarter operating margin was 20.7%, compared with 19.0% in the prior-year period. Adjusted operating margin was 23.7% in the second quarter of 2025, versus 22.9% in the prior-year period. Net income in the second quarter of 2025 was $89.0 million, or $2.09 per diluted share, compared with net income of $69.1 million, or $1.60 per diluted share, in the second quarter of 2024, an increase of 30.6% on a per diluted share basis. Adjusted diluted net income per share increased 19.4% to $2.40 in the second quarter of 2025, compared with $2.01 in the prior-year period. The Company's effective tax rate was 22.8% in the second quarter of 2025 compared to 21.7% in the prior-year period. Segment Highlights Morningstar Direct Platform Morningstar Direct Platform contributed $209.2 million to consolidated revenue and $12.3 million to consolidated revenue growth, with revenue increasing 6.2% compared to the prior-year period, or 6.3% on an organic basis. Organic revenue growth excludes revenue associated with the divested Commodity and Energy Data business from the prior-year period and foreign currency impact. Higher revenue was primarily driven by Morningstar Data, supported by higher managed investment (fund) data revenue. Morningstar Direct also contributed to higher revenue with growth across geographies. Morningstar Direct licenses increased 0.6%. Morningstar Direct Platform adjusted operating income increased 10.3% to $96.3 million, and adjusted operating margin increased 1.7 percentage points to 46.0%. PitchBook PitchBook contributed $166.5 million to consolidated revenue and $14.8 million to consolidated revenue growth, with revenue increasing 9.8% on a reported and 9.6% on an organic basis compared to the prior-year period. Higher revenue was primarily driven by the PitchBook platform, with licensed users increasing 7.6% compared to the prior-year period. PitchBook platform growth drivers were consistent with recent quarters and reflected strength in PitchBook's core investor and advisor client segments, including commercial banks, private equity, credit investors, and investment banks. This was partially offset by continued softness in the corporate client segment, especially among smaller firms with more limited use cases when deal activity slows. PitchBook adjusted operating income increased 11.6% to $52.8 million, and adjusted operating margin increased 0.5 percentage points to 31.7%. Morningstar Credit Morningstar Credit contributed $85.0 million to consolidated revenue and $7.4 million to consolidated revenue growth, with revenue increasing 9.5% on a reported and 8.4% on an organic basis compared to the prior-year period. Organic revenue growth excludes revenue associated with Morningstar Credit Analytics (formerly DealX), which was acquired in the first quarter of 2025, and foreign currency impact. Higher asset-backed, residential mortgage-backed, and commercial mortgage-backed securities ratings revenue, together with an increase in licensed data revenue, were the primary drivers of growth. Increases in the US and Europe contributed to reported and organic revenue growth, partially offset by a modest revenue decline in Canada. Morningstar Credit adjusted operating income increased 9.3% to $30.5 million, and adjusted operating margin decreased 0.1 percentage points to 35.9%. Morningstar Wealth Morningstar Wealth contributed $64.3 million to consolidated revenue and $1.7 million to consolidated revenue growth, with revenue increasing 2.7% compared to the prior-year period, or 7.2% on an organic basis. Organic revenue growth excludes platform revenue associated with US TAMP assets sold to AssetMark from the prior-year period, interim service fees received from AssetMark in the current period, and foreign currency impact. Organic growth was primarily driven by an increase in advertising sales and Investment Management, supported by higher revenue for Morningstar Model Portfolios offered on third-party platforms. Reported assets under management and advisement (AUMA) increased 13.0% to $66.8 billion compared with the prior-year period. Growth was primarily driven by market performance, which contributed to higher asset values, and positive net flows to Morningstar Model Portfolios offered on third-party platforms outside the US and to the International Wealth Platform. Morningstar Wealth adjusted operating income was $3.0 million compared to a $2.2 million loss in the prior-year period, and adjusted operating margin was 4.7% compared with negative 3.5%. Morningstar Retirement Morningstar Retirement contributed $32.4 million to consolidated revenue and negative $0.9 million to consolidated revenue growth. Revenue decreased 2.7% on a reported and organic basis, primarily due to an isolated item in the prior-year period. AUMA increased 11.0% to $285.4 billion compared with the prior-year period, due to positive net flows and market gains, supported by strong growth in traditional and Advisor Managed Accounts and custom models. Morningstar Retirement adjusted operating income decreased 11.0% to $15.4 million, and adjusted operating margin decreased 4.5 percentage points to 47.5%, primarily driven by the decline in revenue; increased marketing expenses, including costs related to campaign tracking and data management; and higher compensation costs, which included the impact of increased technology and operations headcount to support growth as well as increased commissions. Corporate and All Other Revenue attributable to Corporate and All Other contributed $47.7 million to consolidated revenue and negative $2.1 million to consolidated revenue growth, with reported revenue decreasing 4.2% compared to the prior-year period, primarily due to softness in Morningstar Sustainalytics. The decline in Morningstar Sustainalytics revenue was primarily driven by the continued streamlining of the licensed-ratings offering as the Company transitions to a model focused on licensing the use and distribution of existing ratings and underlying data, as well as lower revenues for ESG Risk Ratings, due in part to vendor consolidation. Morningstar Indexes revenue declined modestly, reflecting lower investable product revenue driven by outflows and lower AUMA for certain higher margin products, partially offset by higher licensed data revenue. The impact of Corporate and All Other on consolidated adjusted operating income was negative $54.6 million compared with negative $46.6 million in the prior-year period. Balance Sheet and Capital Allocation As of June 30, 2025, the Company had cash, cash equivalents, and investments totaling $541.6 million and $838.8 million of debt, compared with $551.0 million and $698.6 million, respectively, as of Dec. 31, 2024. Cash provided by operating activities decreased 35.2% to $99.0 million and free cash flow decreased 48.3% to $62.4 million in the second quarter of 2025. The decline in cash provided by operating activities and free cash flow was primarily driven by an increase in income tax payments in 2025 compared to the prior-year period. The Company made income tax payments of $79.5 million during the second quarter of 2025 compared with $31.6 million in the second quarter of 2024. Second-quarter 2025 payments were primarily related to US federal and state income taxes, including 2025 estimated tax installments for the first half of 2025 and catch-up installments for 2024 tax liabilities. During the quarter, the Company increased its debt by $35.0 million, net, repurchased $112.0 million of its shares, and paid $19.3 million in dividends. Use of Non-GAAP Financial Measures Organic revenue, adjusted operating income (loss), adjusted operating margin, adjusted diluted net income per share, and free cash flow are non-GAAP financial measures. The tables at the end of this press release include a reconciliation of the non-GAAP financial measures used by the Company to comparable GAAP measures and an explanation of why the Company uses them. Investor Communication Morningstar encourages all interested parties — including securities analysts, current shareholders, potential shareholders, and others — to submit questions in writing. Investors and others may send questions about Morningstar's business to investors@ Morningstar will make written responses to selected inquiries available to all investors at the same time in Form 8-Ks furnished to the Securities and Exchange Commission (the SEC), generally every month. About Morningstar, Inc. Morningstar, Inc. is a leading provider of independent investment insights in North America, Europe, Australia, and Asia. The Company offers an extensive line of products and services for individual investors, financial advisors, asset managers and owners, retirement plan providers and sponsors, institutional investors in the debt and private capital markets, and alliances and redistributors. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with approximately $352 billion in AUMA as of June 30, 2025. The Company operates through wholly-owned subsidiaries in 32 countries. For more information, visit Follow Morningstar on X @MorningstarInc. Caution Concerning Forward-Looking Statements This press release 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 "aim," "committed," "consider," "estimate," "future," "goal," "is designed to," "maintain," "may," "might," "objective," "ongoing," "could," "expect," "intend," "plan," "possible," "potential," "seek," "anticipate," "believe," "predict," "prospects," "continue," "strategy," "strive," "will," "would," "determine," "evaluate," or the negative thereof, and similar expressions. 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, failing to maintain and protect our brand, independence, and reputation; failure to prevent and/or mitigate cybersecurity events and the failure to protect confidential information, including personal information about individuals; changing economic conditions, including prolonged volatility, recessions, or downturns affecting the financial sector and global financial markets, and the impacts of global trade policies, may negatively impact our financial results, including those of our asset-based businesses; compliance failures, regulatory action, or changes in laws applicable to our regulated businesses; failing to innovate our product and service offerings or meet or anticipate our clients' changing needs; impact of artificial intelligence technologies on our business and reputation, and the legal risks as they are incorporated into our products and tools; failure to detect errors in our products or failure of our products to perform properly due to defects, malfunctions or similar problems; failing to recruit, develop, and retain qualified employees; failing to scale our operations, increase productivity in order to implement our business plans and strategies; liability for any losses that result from errors in our automated advisory tools or errors in the use of the information and data we collect; inadequacy of our operational risk management and business continuity programs to address materially disruptive events; failure of our strategic transactions, acquisitions, divestitures and investments in companies or technologies to yield expected business or financial benefits, negatively impacting our operating results and our ability to deliver long-term value to shareholders; failing to maintain growth across our businesses due to changes in geopolitics and the regulatory landscape; 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 (and rising interest rates) on our cash flow and financial and operational flexibility; liability, costs and reputational risks relating to environmental, social, and governance considerations; our dependence on third-party service providers in our operations; inadequacy of our insurance coverage; challenges in accounting for tax complexities in the global jurisdictions we operate in could materially affect our tax obligations and tax rates; the potential and impact of vendor consolidation and clients' strategic decisions to replace our products and services with in-house products and services; our ability to build and maintain short-term and long-term shareholder value and pay dividends to our shareholders; our ability to maintain existing business and renewal rates and to gain new business; the impact of recently issued accounting pronouncements on our consolidated financial statements and related disclosure; and failing to protect our intellectual property rights or claims of intellectual property infringement against us. A more complete description of these risks and uncertainties, among others, can be found in our filings with the SEC, including our most recent Reports on Forms 10-K and 10-Q. 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, future events or otherwise, except as may be required by law. You are, however, advised to review any further disclosures we make on related subjects, and about new or additional risks, uncertainties and assumptions in our future filings with the SEC on Forms 10-K, 10-Q, and 8-K. ©2025 Morningstar, Inc. All Rights Reserved. MORN-E Morningstar, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Income Three months ended June 30, Six months ended June 30, (in millions, except per share amounts) 2025 2024 Change 2025 2024 Change Revenue $ 605.1 $ 571.9 5.8 % $ 1,187.0 $ 1,114.7 6.5 % Operating expense: Cost of revenue 230.6 222.7 3.5 % 462.0 440.8 4.8 % Sales and marketing 119.7 111.3 7.5 % 232.3 215.9 7.6 % General and administrative 82.0 80.3 2.1 % 158.5 160.6 (1.3 )% Depreciation and amortization 48.5 49.1 (1.2 )% 95.8 96.3 (0.5 )% Total operating expense 480.8 463.4 3.8 % 948.6 913.6 3.8 % Other operating income 0.8 — NMF 0.8 — NMF Operating income 125.1 108.5 15.3 % 239.2 201.1 18.9 % Operating margin 20.7 % 19.0 % 1.7 pp 20.2 % 18.0 % 2.2 pp Non-operating expense, net: Interest expense, net (7.4 ) (10.3 ) (28.2 )% (12.8 ) (21.8 ) (41.3 )% Other expense, net (1.2 ) (8.7 ) (86.2 )% (1.4 ) (2.8 ) (50.0 )% Non-operating expense, net (8.6 ) (19.0 ) (54.7 )% (14.2 ) (24.6 ) (42.3 )% Income before income taxes and equity in investments of unconsolidated entities 116.5 89.5 30.2 % 225.0 176.5 27.5 % Equity in investments of unconsolidated entities (1.2 ) (1.2 ) — % (3.8 ) (2.7 ) 40.7 % Income tax expense 26.3 19.2 37.0 % 53.7 40.5 32.6 % Consolidated net income $ 89.0 $ 69.1 28.8 % $ 167.5 $ 133.3 25.7 % Net income per share: Basic $ 2.11 $ 1.61 31.1 % $ 3.94 $ 3.11 26.7 % Diluted $ 2.09 $ 1.60 30.6 % $ 3.91 $ 3.09 26.5 % Weighted average shares outstanding: Basic 42.2 42.8 42.5 42.8 Diluted 42.5 43.1 42.8 43.1 NMF - Not meaningful, pp - percentage points Morningstar, Inc. and Subsidiaries Unaudited Condensed Consolidated Balance Sheets (in millions) As of June 30, 2025 As of December 31, 2024 Assets Current assets: Cash and cash equivalents $ 503.5 $ 502.7 Investments 38.1 48.3 Accounts receivable, net 384.0 358.1 Income tax receivable 18.0 12.4 Other current assets 98.7 92.6 Total current assets 1,042.3 1,014.1 Goodwill 1,618.2 1,562.0 Intangible assets, net 413.3 408.8 Property, equipment, and capitalized software, net 225.6 218.9 Operating lease assets 164.5 181.2 Investments in unconsolidated entities 77.2 85.3 Deferred tax assets 51.9 43.2 Other assets 37.5 35.4 Total assets $ 3,630.5 $ 3,548.9 Liabilities and equity Current liabilities: Deferred revenue $ 594.2 $ 540.8 Accrued compensation 179.5 272.2 Accounts payable and accrued liabilities 90.2 87.3 Operating lease liabilities 39.3 35.1 Income tax payable 8.0 30.5 Other current liabilities 9.8 1.4 Total current liabilities 921.0 967.3 Operating lease liabilities 155.9 170.3 Accrued compensation 21.7 21.0 Deferred tax liabilities 29.9 27.6 Long-term debt 838.8 698.6 Income tax payable 13.1 11.7 Other long-term liabilities 35.6 33.8 Total liabilities 2,016.0 1,930.3 Total equity 1,614.5 1,618.6 Total liabilities and equity $ 3,630.5 $ 3,548.9 Morningstar, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Cash Flows Three months ended June 30, Six months ended June 30, (in millions) 2025 2024 2025 2024 Operating activities Consolidated net income $ 89.0 $ 69.1 $ 167.5 $ 133.3 Adjustments to reconcile consolidated net income to net cash flows from operating activities 60.7 73.7 114.2 116.7 Changes in operating assets and liabilities, net (50.7 ) 9.9 (91.7 ) (3.7 ) Cash provided by operating activities 99.0 152.7 190.0 246.3 Investing activities Capital expenditures (36.6 ) (31.9 ) (68.8 ) (66.0 ) Acquisitions, net of cash acquired (0.6 ) — (39.1 ) — Purchases of investments in unconsolidated entities (1.3 ) (0.8 ) (2.5 ) (3.6 ) Other, net 14.6 (0.1 ) 15.8 10.1 Cash used for investing activities (23.9 ) (32.8 ) (94.6 ) (59.5 ) Financing activities Common shares repurchased (112.0 ) — (221.6 ) — Dividends paid (19.3 ) (17.3 ) (38.8 ) (34.6 ) Repayments of debt (85.0 ) (50.0 ) (125.0 ) (163.1 ) Proceeds from debt 120.0 — 265.0 90.0 Other, net (12.2 ) (14.3 ) (12.2 ) (17.4 ) Cash used for financing activities (108.5 ) (81.6 ) (132.6 ) (125.1 ) Effect of exchange rate changes on cash and cash equivalents 25.4 (0.8 ) 38.0 (8.4 ) Net increase (decrease) in cash and cash equivalents (8.0 ) 37.5 0.8 53.3 Cash and cash equivalents-beginning of period 511.5 353.7 502.7 337.9 Cash and cash equivalents-end of period $ 503.5 $ 391.2 $ 503.5 $ 391.2 Morningstar, Inc. and Subsidiaries Supplemental Data (Unaudited) Three months ended June 30, Six months ended June 30, (in millions) 2025 2024 Change Organic 2025 2024 Change Organic Morningstar Direct Platform Revenue $ 209.2 $ 196.9 6.2 % 6.3 % $ 408.4 $ 393.6 3.8 % 5.3 % Adjusted Operating Income $ 96.3 $ 87.3 10.3 % $ 183.4 $ 178.5 2.7 % Adjusted Operating Margin 46.0 % 44.3 % 1.7 pp 44.9 % 45.4 % (0.5) pp PitchBook Revenue $ 166.5 $ 151.7 9.8 % 9.6 % $ 330.2 $ 299.3 10.3 % 10.3 % Adjusted Operating Income $ 52.8 $ 47.3 11.6 % $ 105.1 $ 87.3 20.4 % Adjusted Operating Margin 31.7 % 31.2 % 0.5 pp 31.8 % 29.2 % 2.6 pp Morningstar Credit Revenue $ 85.0 $ 77.6 9.5 % 8.4 % $ 158.0 $ 137.9 14.6 % 14.8 % Adjusted Operating Income $ 30.5 $ 27.9 9.3 % $ 51.9 $ 40.2 29.1 % Adjusted Operating Margin 35.9 % 36.0 % (0.1) pp 32.8 % 29.2 % 3.6 pp Morningstar Wealth Revenue $ 64.3 $ 62.6 2.7 % 7.2 % $ 125.6 $ 121.6 3.3 % 7.5 % Adjusted Operating Income (loss) $ 3.0 $ (2.2 ) NMF $ 2.2 $ (7.8 ) NMF Adjusted Operating Margin 4.7 % (3.5 )% 8.2 pp 1.8 % (6.4 )% 8.2 pp Morningstar Retirement Revenue $ 32.4 $ 33.3 (2.7 )% (2.7 )% $ 65.3 $ 61.7 5.8 % 5.8 % Adjusted Operating Income $ 15.4 $ 17.3 (11.0 )% $ 30.0 $ 31.5 (4.8 )% Adjusted Operating Margin 47.5 % 52.0 % (4.5) pp 45.9 % 51.1 % (5.2) pp Consolidated Revenue Total Reportable Segments $ 557.4 $ 522.1 6.8 % $ 1,087.5 $ 1,014.1 7.2 % Corporate and All Other (1) 47.7 49.8 (4.2 )% 99.5 100.6 (1.1 )% Total Revenue $ 605.1 $ 571.9 5.8 % 5.9 % $ 1,187.0 $ 1,114.7 6.5 % 7.5 % Consolidated Adjusted Operating Income Total Reportable Segments $ 198.0 $ 177.6 11.5 % $ 372.6 $ 329.7 13.0 % Less: Corporate and All Other (2) (54.6 ) (46.6 ) NMF (93.8 ) (87.9 ) NMF Adjusted Operating Income $ 143.4 $ 131.0 9.5 % $ 278.8 $ 241.8 15.3 % Adjusted Operating Margin 23.7 % 22.9 % 0.8 pp 23.5 % 21.7 % 1.8 pp (1) Corporate and All Other provides a reconciliation between revenue from our Total Reportable Segments and consolidated revenue amounts. Corporate and All Other includes Morningstar Sustainalytics and Morningstar Indexes as sources of revenues. Revenue from Morningstar Sustainalytics was $27.3 million and $29.2 million for the three months ended June 30, 2025 and 2024, respectively, and $56.1 million and $60.0 million for the six months ended June 30, 2025 and 2024, respectively. Revenue from Morningstar Indexes was $20.4 million and $20.6 million for the three months ended June 30, 2025 and 2024, respectively, and $43.4 million and $40.6 million for the six months ended June 30, 2025 and 2024, respectively. (2) Corporate and All Other includes unallocated corporate expenses as well as adjusted operating income (loss) from Morningstar Sustainalytics and Morningstar Indexes. For the second quarter of 2025 and 2024, unallocated corporate expenses were $50.1 million and $46.1 million, respectively. For the first six months of 2025 and 2024, unallocated corporate expenses were $91.9 million and $87.0 million, respectively. Unallocated corporate expenses include finance, human resources, legal, and other management-related costs that are not considered when segment performance is evaluated. Morningstar, Inc. and Subsidiaries Supplemental Data (Unaudited) As of June 30, AUMA (approximate) ($bil) 2025 2024 Change Morningstar Retirement Managed Accounts $ 171.7 $ 149.9 14.5 % Fiduciary Services 63.3 62.6 1.1 % Custom Models/CIT 50.4 44.7 12.8 % Morningstar Retirement (total) $ 285.4 $ 257.2 11.0 % Investment Management Morningstar Model Portfolios (1) $ 47.6 $ 41.8 13.9 % Institutional Asset Management 5.8 7.3 (20.5 )% Asset Allocation Services 13.4 10.0 34.0 % Investment Management (total) $ 66.8 $ 59.1 13.0 % Asset value linked to Morningstar Indexes ($bil) $ 221.0 $ 207.6 6.5 % Three months ended June 30, Six months ended June 30, 2025 2024 Change 2025 2024 Change Average AUMA ($bil) $ 346.8 $ 304.9 13.7 % $ 343.9 $ 298.6 15.2 % (1) Includes AUMA in Morningstar Model Portfolios and assets on the International Wealth Platform invested in third-party model portfolios. Morningstar, Inc. and SubsidiariesReconciliations of Non-GAAP Measures with the Nearest Comparable GAAP Measures (Unaudited) To supplement Morningstar's condensed consolidated financial statements presented in accordance with US Generally Accepted Accounting Principles (GAAP), Morningstar uses the following measures considered as non-GAAP by the SEC, including: "Organic Revenue" is consolidated revenue before (1) acquisitions and divestitures, (2) adoption of new accounting standards or revisions to accounting practices (accounting changes), and (3) the effect of foreign currency translations. "Adjusted Operating Income (Loss)" is consolidated operating income (loss) excluding (1) intangible amortization expense, (2) the impact of merger, acquisition, and divestiture-related activity which, when applicable, may include certain non-recurring expenses such as pre-deal due diligence, transaction costs, contingent consideration, severance, and post-close integration costs (M&A-related expenses), and (3) certain other one-time, non-recurring items which management does not consider when evaluating ongoing performance (other non-recurring items). "Adjusted Operating Margin" is operating margin excluding (1) intangible amortization expense, (2) M&A-related expenses, and (3) other non-recurring items. "Adjusted Diluted Net Income Per Share" is consolidated diluted net income per share excluding (1) intangible amortization expense, (2) M&A-related expenses, (3) other non-recurring items, and (4) non-operating gains and losses. "Free Cash Flow" is cash provided by or used for operating activities less capital expenditures. 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 promulgated under GAAP. Morningstar presents organic revenue because the Company believes this non-GAAP measure helps investors better compare period-over-period results. Morningstar excludes revenue from acquired businesses from its organic revenue growth calculation for a period of 12 months after it completes the acquisition. For divestitures (including sale of assets), Morningstar excludes revenue in the prior-year period for which there is no comparable revenue in the current period. Morningstar presents adjusted operating income (loss), adjusted operating margin, and adjusted diluted net income per share to better reflect period-over-period comparisons, and improve overall understanding of the underlying performance of the business absent the impact of intangible amortization expense, M&A-related expenses and certain other one-time, non-recurring items. In addition, Morningstar presents free cash flow as a supplemental disclosure to help investors better understand how much cash is available after making capital expenditures. Morningstar's management team uses free cash flow to evaluate the health of its business. Three months ended June 30, Six months ended June 30, (in millions) 2025 2024 Change 2025 2024 Change Reconciliation from consolidated revenue to organic revenue: Consolidated revenue $ 605.1 $ 571.9 5.8 % $ 1,187.0 $ 1,114.7 6.5 % Acquisitions (1.0 ) — NMF (1.3 ) — NMF Divestitures (3.0 ) (9.3 ) (67.7 )% (6.7 ) (18.0 ) (62.8 )% Effect of foreign currency translations (5.1 ) — NMF (0.5 ) — NMF Organic revenue $ 596.0 $ 562.6 5.9 % $ 1,178.5 $ 1,096.7 7.5 % Reconciliation from consolidated operating income to adjusted operating income: Consolidated operating income $ 125.1 $ 108.5 15.3 % $ 239.2 $ 201.1 18.9 % Intangible amortization expense 15.3 17.5 (12.6 )% 29.7 35.2 (15.6 )% M&A-related expenses 3.8 5.0 (24.0 )% 10.7 5.5 94.5 % Other non-recurring items (0.8 ) — NMF (0.8 ) — NMF Adjusted operating income $ 143.4 $ 131.0 9.5 % $ 278.8 $ 241.8 15.3 % Reconciliation from consolidated operating margin to adjusted operating margin: Consolidated operating margin 20.7 % 19.0 % 1.7 pp 20.2 % 18.0 % 2.2 pp Intangible amortization expense 2.5 % 3.0 % (0.5) pp 2.5 % 3.2 % (0.7) pp M&A-related expenses 0.6 % 0.9 % (0.3) pp 0.9 % 0.5 % 0.4 pp Other non-recurring items (0.1 )% — % (0.1) pp (0.1 )% — % (0.1) pp Adjusted operating margin 23.7 % 22.9 % 0.8 pp 23.5 % 21.7 % 1.8 pp Reconciliation from consolidated diluted net income per share to adjusted diluted net income per share: Consolidated diluted net income per share $ 2.09 $ 1.60 30.6 % $ 3.91 $ 3.09 26.5 % Intangible amortization expense 0.26 0.30 (13.3 )% 0.51 0.61 (16.4 )% M&A-related expenses 0.07 0.09 (22.2 )% 0.19 0.09 111.1 % Other non-recurring items (0.01 ) — NMF (0.01 ) — NMF Non-operating (gains) losses (0.01 ) 0.02 NMF 0.03 (0.05 ) NMF Adjusted diluted net income per share $ 2.40 $ 2.01 19.4 % $ 4.63 $ 3.74 23.8 % Reconciliation from cash provided by operating activities to free cash flow: Cash provided by operating activities $ 99.0 $ 152.7 (35.2 )% $ 190.0 $ 246.3 (22.9 )% Capital expenditures (36.6 ) (31.9 ) 14.7 % (68.8 ) (66.0 ) 4.2 % Free cash flow $ 62.4 $ 120.8 (48.3 )% $ 121.2 $ 180.3 (32.8 )% NMF - Not meaningful, pp - percentage points View source version on Contacts Media Relations Contact:Stephanie Lerdall, +1 312-244-7805, Investor Relations Contact:Sarah Bush, +1 312-384-3754, Sign in to access your portfolio
Business Wire
30-07-2025
- Business
- Business Wire
Morningstar, Inc. Reports Second-Quarter 2025 Financial Results
CHICAGO--(BUSINESS WIRE)--Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment insights, posted second-quarter revenue growth with increases in operating and adjusted operating income and margins. "PitchBook, Morningstar Direct Platform, and Morningstar Credit led the way in the second quarter, contributing to solid growth," said Kunal Kapoor, Morningstar's chief executive officer. "Our teams remain focused on delivering insights and experiences that make us essential to the investor workflow. In recent weeks, we enhanced Direct Advisory Suite with data on 1,000 private funds and improved screening tools, expanded CLO holdings and trade data in PitchBook, and published The State of Semiliquid Funds, offering insights on a growing segment of the market. Through such efforts, we are creating a common language to help investors navigate the convergence of public and private markets." The Company's quarterly shareholder letter provides more context on its quarterly results and business performance and can be found at Second-Quarter 2025 Financial Highlights Reported revenue increased 5.8% to $605.1 million compared to the prior-year period; organic revenue increased 5.9%. Reported operating income increased 15.3% to $125.1 million; adjusted operating income increased 9.5%. Diluted net income per share increased 30.6% to $2.09; adjusted diluted net income per share increased 19.4% to $2.40. Cash provided by operating activities decreased 35.2% to $99.0 million; free cash flow decreased 48.3% to $62.4 million. The Company repurchased 398,442 shares for a total of $112.0 million. Year-To-Date Financial Highlights Reported revenue increased 6.5% to $1.2 billion compared to the prior-year period; organic revenue increased 7.5%. Reported operating income increased 18.9% to $239.2 million; adjusted operating income increased 15.3%. Diluted net income per share increased 26.5% to $3.91; adjusted diluted net income per share increased 23.8% to $4.63. Cash provided by operating activities decreased 22.9% to $190.0 million; free cash flow decreased 32.8% to $121.2 million. The Company repurchased 766,641 shares for a total of $221.6 million. Second-Quarter 2025 Results Revenue increased 5.8% to $605.1 million on a reported basis and 5.9% on an organic basis versus the prior-year period. PitchBook, Morningstar Direct Platform, and Morningstar Credit were the biggest contributors to reported and organic revenue growth. Operating expense increased 3.8% to $480.8 million versus the prior-year period. Excluding the impact of intangible amortization and M&A-related expenses, operating expense increased 4.7%. The largest contributor to the growth in reported operating expense was an increase of $16.7 million in compensation costs, driven primarily by an increase in salaries and benefits related in part to the Company's 2025 annual merit increase and higher stock-based compensation. Compensation costs included $4.9 million related to a targeted reorganization in Morningstar Sustainalytics, the impact of which was reflected in adjusted operating income. Higher advertising and marketing and facilities-related expense also contributed to the growth. Second-quarter operating income increased 15.3% to $125.1 million. Adjusted operating income was $143.4 million, an increase of 9.5%. Second-quarter operating margin was 20.7%, compared with 19.0% in the prior-year period. Adjusted operating margin was 23.7% in the second quarter of 2025, versus 22.9% in the prior-year period. Net income in the second quarter of 2025 was $89.0 million, or $2.09 per diluted share, compared with net income of $69.1 million, or $1.60 per diluted share, in the second quarter of 2024, an increase of 30.6% on a per diluted share basis. Adjusted diluted net income per share increased 19.4% to $2.40 in the second quarter of 2025, compared with $2.01 in the prior-year period. The Company's effective tax rate was 22.8% in the second quarter of 2025 compared to 21.7% in the prior-year period. Segment Highlights Morningstar Direct Platform Morningstar Direct Platform contributed $209.2 million to consolidated revenue and $12.3 million to consolidated revenue growth, with revenue increasing 6.2% compared to the prior-year period, or 6.3% on an organic basis. Organic revenue growth excludes revenue associated with the divested Commodity and Energy Data business from the prior-year period and foreign currency impact. Higher revenue was primarily driven by Morningstar Data, supported by higher managed investment (fund) data revenue. Morningstar Direct also contributed to higher revenue with growth across geographies. Morningstar Direct licenses increased 0.6%. Morningstar Direct Platform adjusted operating income increased 10.3% to $96.3 million, and adjusted operating margin increased 1.7 percentage points to 46.0%. PitchBook PitchBook contributed $166.5 million to consolidated revenue and $14.8 million to consolidated revenue growth, with revenue increasing 9.8% on a reported and 9.6% on an organic basis compared to the prior-year period. Higher revenue was primarily driven by the PitchBook platform, with licensed users increasing 7.6% compared to the prior-year period. PitchBook platform growth drivers were consistent with recent quarters and reflected strength in PitchBook's core investor and advisor client segments, including commercial banks, private equity, credit investors, and investment banks. This was partially offset by continued softness in the corporate client segment, especially among smaller firms with more limited use cases when deal activity slows. PitchBook adjusted operating income increased 11.6% to $52.8 million, and adjusted operating margin increased 0.5 percentage points to 31.7%. Morningstar Credit Morningstar Credit contributed $85.0 million to consolidated revenue and $7.4 million to consolidated revenue growth, with revenue increasing 9.5% on a reported and 8.4% on an organic basis compared to the prior-year period. Organic revenue growth excludes revenue associated with Morningstar Credit Analytics (formerly DealX), which was acquired in the first quarter of 2025, and foreign currency impact. Higher asset-backed, residential mortgage-backed, and commercial mortgage-backed securities ratings revenue, together with an increase in licensed data revenue, were the primary drivers of growth. Increases in the US and Europe contributed to reported and organic revenue growth, partially offset by a modest revenue decline in Canada. Morningstar Credit adjusted operating income increased 9.3% to $30.5 million, and adjusted operating margin decreased 0.1 percentage points to 35.9%. Morningstar Wealth Morningstar Wealth contributed $64.3 million to consolidated revenue and $1.7 million to consolidated revenue growth, with revenue increasing 2.7% compared to the prior-year period, or 7.2% on an organic basis. Organic revenue growth excludes platform revenue associated with US TAMP assets sold to AssetMark from the prior-year period, interim service fees received from AssetMark in the current period, and foreign currency impact. Organic growth was primarily driven by an increase in advertising sales and Investment Management, supported by higher revenue for Morningstar Model Portfolios offered on third-party platforms. Reported assets under management and advisement (AUMA) increased 13.0% to $66.8 billion compared with the prior-year period. Growth was primarily driven by market performance, which contributed to higher asset values, and positive net flows to Morningstar Model Portfolios offered on third-party platforms outside the US and to the International Wealth Platform. Morningstar Wealth adjusted operating income was $3.0 million compared to a $2.2 million loss in the prior-year period, and adjusted operating margin was 4.7% compared with negative 3.5%. Morningstar Retirement Morningstar Retirement contributed $32.4 million to consolidated revenue and negative $0.9 million to consolidated revenue growth. Revenue decreased 2.7% on a reported and organic basis, primarily due to an isolated item in the prior-year period. AUMA increased 11.0% to $285.4 billion compared with the prior-year period, due to positive net flows and market gains, supported by strong growth in traditional and Advisor Managed Accounts and custom models. Morningstar Retirement adjusted operating income decreased 11.0% to $15.4 million, and adjusted operating margin decreased 4.5 percentage points to 47.5%, primarily driven by the decline in revenue; increased marketing expenses, including costs related to campaign tracking and data management; and higher compensation costs, which included the impact of increased technology and operations headcount to support growth as well as increased commissions. Corporate and All Other Revenue attributable to Corporate and All Other contributed $47.7 million to consolidated revenue and negative $2.1 million to consolidated revenue growth, with reported revenue decreasing 4.2% compared to the prior-year period, primarily due to softness in Morningstar Sustainalytics. The decline in Morningstar Sustainalytics revenue was primarily driven by the continued streamlining of the licensed-ratings offering as the Company transitions to a model focused on licensing the use and distribution of existing ratings and underlying data, as well as lower revenues for ESG Risk Ratings, due in part to vendor consolidation. Morningstar Indexes revenue declined modestly, reflecting lower investable product revenue driven by outflows and lower AUMA for certain higher margin products, partially offset by higher licensed data revenue. The impact of Corporate and All Other on consolidated adjusted operating income was negative $54.6 million compared with negative $46.6 million in the prior-year period. Balance Sheet and Capital Allocation As of June 30, 2025, the Company had cash, cash equivalents, and investments totaling $541.6 million and $838.8 million of debt, compared with $551.0 million and $698.6 million, respectively, as of Dec. 31, 2024. Cash provided by operating activities decreased 35.2% to $99.0 million and free cash flow decreased 48.3% to $62.4 million in the second quarter of 2025. The decline in cash provided by operating activities and free cash flow was primarily driven by an increase in income tax payments in 2025 compared to the prior-year period. The Company made income tax payments of $79.5 million during the second quarter of 2025 compared with $31.6 million in the second quarter of 2024. Second-quarter 2025 payments were primarily related to US federal and state income taxes, including 2025 estimated tax installments for the first half of 2025 and catch-up installments for 2024 tax liabilities. During the quarter, the Company increased its debt by $35.0 million, net, repurchased $112.0 million of its shares, and paid $19.3 million in dividends. Use of Non-GAAP Financial Measures Organic revenue, adjusted operating income (loss), adjusted operating margin, adjusted diluted net income per share, and free cash flow are non-GAAP financial measures. The tables at the end of this press release include a reconciliation of the non-GAAP financial measures used by the Company to comparable GAAP measures and an explanation of why the Company uses them. Investor Communication Morningstar encourages all interested parties — including securities analysts, current shareholders, potential shareholders, and others — to submit questions in writing. Investors and others may send questions about Morningstar's business to investors@ Morningstar will make written responses to selected inquiries available to all investors at the same time in Form 8-Ks furnished to the Securities and Exchange Commission (the SEC), generally every month. About Morningstar, Inc. Morningstar, Inc. is a leading provider of independent investment insights in North America, Europe, Australia, and Asia. The Company offers an extensive line of products and services for individual investors, financial advisors, asset managers and owners, retirement plan providers and sponsors, institutional investors in the debt and private capital markets, and alliances and redistributors. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with approximately $352 billion in AUMA as of June 30, 2025. The Company operates through wholly-owned subsidiaries in 32 countries. For more information, visit Follow Morningstar on X @MorningstarInc. Caution Concerning Forward-Looking Statements This press release 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 "aim," "committed," "consider," "estimate," "future," "goal," "is designed to," "maintain," "may," "might," "objective," "ongoing," "could," "expect," "intend," "plan," "possible," "potential," "seek," "anticipate," "believe," "predict," "prospects," "continue," "strategy," "strive," "will," "would," "determine," "evaluate," or the negative thereof, and similar expressions. 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, failing to maintain and protect our brand, independence, and reputation; failure to prevent and/or mitigate cybersecurity events and the failure to protect confidential information, including personal information about individuals; changing economic conditions, including prolonged volatility, recessions, or downturns affecting the financial sector and global financial markets, and the impacts of global trade policies, may negatively impact our financial results, including those of our asset-based businesses; compliance failures, regulatory action, or changes in laws applicable to our regulated businesses; failing to innovate our product and service offerings or meet or anticipate our clients' changing needs; impact of artificial intelligence technologies on our business and reputation, and the legal risks as they are incorporated into our products and tools; failure to detect errors in our products or failure of our products to perform properly due to defects, malfunctions or similar problems; failing to recruit, develop, and retain qualified employees; failing to scale our operations, increase productivity in order to implement our business plans and strategies; liability for any losses that result from errors in our automated advisory tools or errors in the use of the information and data we collect; inadequacy of our operational risk management and business continuity programs to address materially disruptive events; failure of our strategic transactions, acquisitions, divestitures and investments in companies or technologies to yield expected business or financial benefits, negatively impacting our operating results and our ability to deliver long-term value to shareholders; failing to maintain growth across our businesses due to changes in geopolitics and the regulatory landscape; 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 (and rising interest rates) on our cash flow and financial and operational flexibility; liability, costs and reputational risks relating to environmental, social, and governance considerations; our dependence on third-party service providers in our operations; inadequacy of our insurance coverage; challenges in accounting for tax complexities in the global jurisdictions we operate in could materially affect our tax obligations and tax rates; the potential and impact of vendor consolidation and clients' strategic decisions to replace our products and services with in-house products and services; our ability to build and maintain short-term and long-term shareholder value and pay dividends to our shareholders; our ability to maintain existing business and renewal rates and to gain new business; the impact of recently issued accounting pronouncements on our consolidated financial statements and related disclosure; and failing to protect our intellectual property rights or claims of intellectual property infringement against us. A more complete description of these risks and uncertainties, among others, can be found in our filings with the SEC, including our most recent Reports on Forms 10-K and 10-Q. 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, future events or otherwise, except as may be required by law. You are, however, advised to review any further disclosures we make on related subjects, and about new or additional risks, uncertainties and assumptions in our future filings with the SEC on Forms 10-K, 10-Q, and 8-K. ©2025 Morningstar, Inc. All Rights Reserved. Morningstar, Inc. and Subsidiaries Unaudited Condensed Consolidated Balance Sheets (in millions) As of June 30, 2025 As of December 31, 2024 Assets Current assets: Cash and cash equivalents $ 503.5 $ 502.7 Investments 38.1 48.3 Accounts receivable, net 384.0 358.1 Income tax receivable 18.0 12.4 Other current assets 98.7 92.6 Total current assets 1,042.3 1,014.1 Goodwill 1,618.2 1,562.0 Intangible assets, net 413.3 408.8 Property, equipment, and capitalized software, net 225.6 218.9 Operating lease assets 164.5 181.2 Investments in unconsolidated entities 77.2 85.3 Deferred tax assets 51.9 43.2 Other assets 37.5 35.4 Total assets $ 3,630.5 $ 3,548.9 Liabilities and equity Current liabilities: Deferred revenue $ 594.2 $ 540.8 Accrued compensation 179.5 272.2 Accounts payable and accrued liabilities 90.2 87.3 Operating lease liabilities 39.3 35.1 Income tax payable 8.0 30.5 Other current liabilities 9.8 1.4 Total current liabilities 921.0 967.3 Operating lease liabilities 155.9 170.3 Accrued compensation 21.7 21.0 Deferred tax liabilities 29.9 27.6 Long-term debt 838.8 698.6 Income tax payable 13.1 11.7 Other long-term liabilities 35.6 33.8 Total liabilities 2,016.0 1,930.3 Total equity 1,614.5 1,618.6 Total liabilities and equity $ 3,630.5 $ 3,548.9 Expand Morningstar, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Cash Flows Three months ended June 30, Six months ended June 30, (in millions) 2025 2024 2025 2024 Operating activities Consolidated net income $ 89.0 $ 69.1 $ 167.5 $ 133.3 Adjustments to reconcile consolidated net income to net cash flows from operating activities 60.7 73.7 114.2 116.7 Changes in operating assets and liabilities, net (50.7 ) 9.9 (91.7 ) (3.7 ) Cash provided by operating activities 99.0 152.7 190.0 246.3 Investing activities Capital expenditures (36.6 ) (31.9 ) (68.8 ) (66.0 ) Acquisitions, net of cash acquired (0.6 ) — (39.1 ) — Purchases of investments in unconsolidated entities (1.3 ) (0.8 ) (2.5 ) (3.6 ) Other, net 14.6 (0.1 ) 15.8 10.1 Cash used for investing activities (23.9 ) (32.8 ) (94.6 ) (59.5 ) Financing activities Common shares repurchased (112.0 ) — (221.6 ) — Dividends paid (19.3 ) (17.3 ) (38.8 ) (34.6 ) Repayments of debt (85.0 ) (50.0 ) (125.0 ) (163.1 ) Proceeds from debt 120.0 — 265.0 90.0 Other, net (12.2 ) (14.3 ) (12.2 ) (17.4 ) Cash used for financing activities (108.5 ) (81.6 ) (132.6 ) (125.1 ) Effect of exchange rate changes on cash and cash equivalents 25.4 (0.8 ) 38.0 (8.4 ) Net increase (decrease) in cash and cash equivalents (8.0 ) 37.5 0.8 53.3 Cash and cash equivalents-beginning of period 511.5 353.7 502.7 337.9 Cash and cash equivalents-end of period $ 503.5 $ 391.2 $ 503.5 $ 391.2 Expand Morningstar, Inc. and Subsidiaries Supplemental Data (Unaudited) Three months ended June 30, Six months ended June 30, (in millions) 2025 2024 Change Organic 2025 2024 Change Organic Morningstar Direct Platform Revenue $ 209.2 $ 196.9 6.2 % 6.3 % $ 408.4 $ 393.6 3.8 % 5.3 % Adjusted Operating Income $ 96.3 $ 87.3 10.3 % $ 183.4 $ 178.5 2.7 % Adjusted Operating Margin 46.0 % 44.3 % 1.7 pp 44.9 % 45.4 % (0.5) pp PitchBook Revenue $ 166.5 $ 151.7 9.8 % 9.6 % $ 330.2 $ 299.3 10.3 % 10.3 % Adjusted Operating Income $ 52.8 $ 47.3 11.6 % $ 105.1 $ 87.3 20.4 % Adjusted Operating Margin 31.7 % 31.2 % 0.5 pp 31.8 % 29.2 % 2.6 pp Morningstar Credit Revenue $ 85.0 $ 77.6 9.5 % 8.4 % $ 158.0 $ 137.9 14.6 % 14.8 % Adjusted Operating Income $ 30.5 $ 27.9 9.3 % $ 51.9 $ 40.2 29.1 % Adjusted Operating Margin 35.9 % 36.0 % (0.1) pp 32.8 % 29.2 % 3.6 pp Morningstar Wealth Revenue $ 64.3 $ 62.6 2.7 % 7.2 % $ 125.6 $ 121.6 3.3 % 7.5 % Adjusted Operating Income (loss) $ 3.0 $ (2.2 ) NMF $ 2.2 $ (7.8 ) NMF Adjusted Operating Margin 4.7 % (3.5 )% 8.2 pp 1.8 % (6.4 )% 8.2 pp Morningstar Retirement Revenue $ 32.4 $ 33.3 (2.7 )% (2.7 )% $ 65.3 $ 61.7 5.8 % 5.8 % Adjusted Operating Income $ 15.4 $ 17.3 (11.0 )% $ 30.0 $ 31.5 (4.8 )% Adjusted Operating Margin 47.5 % 52.0 % (4.5) pp 45.9 % 51.1 % (5.2) pp Consolidated Revenue Total Reportable Segments $ 557.4 $ 522.1 6.8 % $ 1,087.5 $ 1,014.1 7.2 % Corporate and All Other (1) 47.7 49.8 (4.2 )% 99.5 100.6 (1.1 )% Total Revenue $ 605.1 $ 571.9 5.8 % 5.9 % $ 1,187.0 $ 1,114.7 6.5 % 7.5 % Consolidated Adjusted Operating Income Total Reportable Segments $ 198.0 $ 177.6 11.5 % $ 372.6 $ 329.7 13.0 % Less: Corporate and All Other (2) (54.6 ) (46.6 ) NMF (93.8 ) (87.9 ) NMF Adjusted Operating Income $ 143.4 $ 131.0 9.5 % $ 278.8 $ 241.8 15.3 % Adjusted Operating Margin 23.7 % 22.9 % 0.8 pp 23.5 % 21.7 % 1.8 pp (1) Corporate and All Other provides a reconciliation between revenue from our Total Reportable Segments and consolidated revenue amounts. Corporate and All Other includes Morningstar Sustainalytics and Morningstar Indexes as sources of revenues. Revenue from Morningstar Sustainalytics was $27.3 million and $29.2 million for the three months ended June 30, 2025 and 2024, respectively, and $56.1 million and $60.0 million for the six months ended June 30, 2025 and 2024, respectively. Revenue from Morningstar Indexes was $20.4 million and $20.6 million for the three months ended June 30, 2025 and 2024, respectively, and $43.4 million and $40.6 million for the six months ended June 30, 2025 and 2024, respectively. (2) Corporate and All Other includes unallocated corporate expenses as well as adjusted operating income (loss) from Morningstar Sustainalytics and Morningstar Indexes. For the second quarter of 2025 and 2024, unallocated corporate expenses were $50.1 million and $46.1 million, respectively. For the first six months of 2025 and 2024, unallocated corporate expenses were $91.9 million and $87.0 million, respectively. Unallocated corporate expenses include finance, human resources, legal, and other management-related costs that are not considered when segment performance is evaluated. Expand Morningstar, Inc. and Subsidiaries Supplemental Data (Unaudited) As of June 30, AUMA (approximate) ($bil) 2025 2024 Change Morningstar Retirement Managed Accounts $ 171.7 $ 149.9 14.5 % Fiduciary Services 63.3 62.6 1.1 % Custom Models/CIT 50.4 44.7 12.8 % Morningstar Retirement (total) $ 285.4 $ 257.2 11.0 % Investment Management Morningstar Model Portfolios (1) $ 47.6 $ 41.8 13.9 % Institutional Asset Management 5.8 7.3 (20.5 )% Asset Allocation Services 13.4 10.0 34.0 % Investment Management (total) $ 66.8 $ 59.1 13.0 % Asset value linked to Morningstar Indexes ($bil) $ 221.0 $ 207.6 6.5 % Three months ended June 30, Six months ended June 30, 2025 2024 Change 2025 2024 Change Average AUMA ($bil) $ 346.8 $ 304.9 13.7 % $ 343.9 $ 298.6 15.2 % (1) Includes AUMA in Morningstar Model Portfolios and assets on the International Wealth Platform invested in third-party model portfolios. Expand Morningstar, Inc. and Subsidiaries Reconciliations of Non-GAAP Measures with the Nearest Comparable GAAP Measures (Unaudited) To supplement Morningstar's condensed consolidated financial statements presented in accordance with US Generally Accepted Accounting Principles (GAAP), Morningstar uses the following measures considered as non-GAAP by the SEC, including: "Organic Revenue" is consolidated revenue before (1) acquisitions and divestitures, (2) adoption of new accounting standards or revisions to accounting practices (accounting changes), and (3) the effect of foreign currency translations. "Adjusted Operating Income (Loss)" is consolidated operating income (loss) excluding (1) intangible amortization expense, (2) the impact of merger, acquisition, and divestiture-related activity which, when applicable, may include certain non-recurring expenses such as pre-deal due diligence, transaction costs, contingent consideration, severance, and post-close integration costs (M&A-related expenses), and (3) certain other one-time, non-recurring items which management does not consider when evaluating ongoing performance (other non-recurring items). "Adjusted Operating Margin" is operating margin excluding (1) intangible amortization expense, (2) M&A-related expenses, and (3) other non-recurring items. "Adjusted Diluted Net Income Per Share" is consolidated diluted net income per share excluding (1) intangible amortization expense, (2) M&A-related expenses, (3) other non-recurring items, and (4) non-operating gains and losses. "Free Cash Flow" is cash provided by or used for operating activities less capital expenditures. 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 promulgated under GAAP. Morningstar presents organic revenue because the Company believes this non-GAAP measure helps investors better compare period-over-period results. Morningstar excludes revenue from acquired businesses from its organic revenue growth calculation for a period of 12 months after it completes the acquisition. For divestitures (including sale of assets), Morningstar excludes revenue in the prior-year period for which there is no comparable revenue in the current period. Morningstar presents adjusted operating income (loss), adjusted operating margin, and adjusted diluted net income per share to better reflect period-over-period comparisons, and improve overall understanding of the underlying performance of the business absent the impact of intangible amortization expense, M&A-related expenses and certain other one-time, non-recurring items. In addition, Morningstar presents free cash flow as a supplemental disclosure to help investors better understand how much cash is available after making capital expenditures. Morningstar's management team uses free cash flow to evaluate the health of its business.
Business Wire
24-06-2025
- Business
- Business Wire
Morningstar Brings Greater Transparency to Private Markets for Advisors
CHICAGO--(BUSINESS WIRE)-- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investing insights, today debuted new features in Direct Advisory Suite (the next phase of Advisor Workstation) to help financial advisors analyze and integrate private investments into client portfolios. These enhancements are now available and will be showcased at the Morningstar Investment Conference, taking place June 25-26 in Chicago. 'Morningstar's universal language of investing has helped advisors and investors bring clarity to complexity for decades,' said Kunal Kapoor, chief executive officer of Morningstar. 'As private investments become part of more investor portfolios, we're extending that language to help bring the same comparability and confidence to private markets that we've delivered for investors in public markets.' The new capabilities in Direct Advisory Suite are designed to help advisors evaluate, compare, and communicate the role of private investments within a broader portfolio context. Key features include: Expanded Investment Research: Advisors now have access to a new private capital fund universe to screen, compare, and monitor private investments, and semiliquid vehicles such as interval and tender-offer funds are now easier to find. Morningstar's updated categorization system integrates private capital vehicles alongside public market securities, so investors can analyze investments holistically. Enhanced Risk Profiling: The Morningstar Risk Model now accounts for private capital funds, and the Morningstar Portfolio Risk Score breaks down the risk percentage driven by volatility and liquidity restrictions. Portfolio Transparency Tools: Advisors can visualize the percentage of a portfolio exposed to private investments. Proposal-Ready Reporting: FINRA-reviewed investment proposal summary report now includes new risk and liquidity metrics. Alternative Investments Hub: A new topic page aggregates Morningstar's research and editorial content on alternatives, supporting advisor education and client conversations. 'As private markets become more accessible, advisors need actionable data, standardized analytics, and unified workflows to assess the full spectrum of investment opportunities,' said James Rhodes, president of Morningstar's Direct Platform. 'We're drawing on our history as an investor advocate and force for transparency to give Direct Advisory Suite users the ability to analyze private investments with the same rigor they expect for public markets—helping them deliver desired outcomes for their clients.' Converging Markets The new features come at a time of expanding investor choice and accelerating interest in private markets. Morningstar's 2025 Voice of the Investor study found 25% of retail investors already hold private equity investments, and that number rose to 35% among those with $500,000 or more in investable assets. To help investors approach decisions with clarity and careful due diligence, Morningstar is drawing on PitchBook's extensive private market data and extending its independent analysis to the fastest-growing corners of the private and semi-private market universe. Next quarter, Morningstar analysts will begin publishing qualitative, forward-looking Medalist Ratings for semiliquid funds such as interval funds, tender-offer funds, nontraded business development companies (BDCs), and nontraded real estate investment trusts (REITs). The newly published State of Semiliquid Funds emphasizes that the expansion of access to private markets is well underway; however, semiliquid funds are not making private markets more affordable. While semiliquid funds offer expanded access to private markets and potential for higher returns, they come with significant risks, including average fees that are three times higher than traditional open-end funds, widely used leverage that magnifies both losses and gains, and potential liquidity constraints. To learn more about how Morningstar's data speaks converging markets, visit For more on Direct Advisory Suite, click here. About Morningstar, Inc. Morningstar, Inc. is a leading provider of independent investment insights in North America, Europe, Australia, and Asia. The Company offers an extensive line of products and services for individual investors, financial advisors, asset managers and owners, retirement plan providers and sponsors, institutional investors in the debt and private capital markets, and alliances and redistributors. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with approximately $341 billion in AUMA as of March 31, 2025. The Company operates through wholly-owned subsidiaries in 32 countries. For more information, visit Follow Morningstar on X @MorningstarInc. About PitchBook, a Morningstar Company PitchBook, a Morningstar company, offers financial data and software that provides transparency into the capital markets to help professionals discover and execute opportunities with confidence and efficiency. PitchBook collects and analyzes detailed data across both private and public markets—including VC, PE, leveraged loans, private credit, real estate, real assets, infrastructure, funds of funds, secondaries, co-investments, CLOs, and more. The company's data and analysis are available through the PitchBook Platform, industry news, and in-depth reports. Founded in 2007, PitchBook operates globally with more than 3,000 team members. Its platform, data, and research serve over 100,000 professionals around the world. About Morningstar's Manager Research Group Morningstar's Manager Research Group consists of various wholly owned subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC. Morningstar Manager Research provides independent, fundamental analysis on managed investment strategies. Morningstar views are expressed in the form of Morningstar Medalist Ratings, which are derived through research of three key pillars—People, Process, and Parent. The Morningstar Medalist Rating is the summary expression of Morningstar's forward-looking analysis of investment strategies as offered via specific vehicles using a rating scale of Gold, Silver, Bronze, Neutral, and Negative. A global research team issues detailed research reports on strategies that span vehicle, asset class, and geography. Medalist Ratings are not statements of fact, nor are they credit or risk ratings, and should not be used as the sole basis for investment decisions. A Medalist Rating is not intended to be nor is a guarantee of future performance. This press release is for informational purposes only; references to securities should not be considered an offer or solicitation to buy or sell the securities. ©2025 Morningstar, Inc. All rights reserved.
Yahoo
26-02-2025
- Business
- Yahoo
Morningstar, Inc. Reports Fourth-Quarter, Full-Year 2024 Financial Results
CHICAGO, February 26, 2025--(BUSINESS WIRE)--Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment insights, reported double-digit revenue growth for 2024 and meaningful increases in operating and free cash flow, with fourth-quarter revenue increasing 9.7%, or 10.6% on an organic basis. "We finished 2024 strongly by executing on themes such as the convergence of public and private markets and using AI to transform client workflows," said Kunal Kapoor, Morningstar's chief executive officer. "Recent product enhancements include PitchBook's integration of aftermarket equity research and introduction of an improved research center experience, and the January launch of the Direct Advisory Suite, which expands our financial advisor offering with a modernized software solution that is designed to improve workflows and efficiency." The Company's quarterly shareholder letter provides more context on Morningstar's results and business and can be found at Fourth-Quarter 2024 Financial Highlights Reported revenue increased 9.7% to $591.0 million compared to the prior-year period; organic revenue increased 10.6%. Operating income increased 78.2% to $168.2 million; adjusted operating income increased 7.7%. Operating income included a $64.0 million gain related to the Company's sale of customer assets from the US Morningstar Wealth Turnkey Asset Management Platform to AssetMark (sale of US TAMP assets), which is excluded from adjusted operating income. Diluted net income per share increased 58.5% to $2.71 versus $1.71 in the prior-year period. Adjusted diluted net income per share increased 8.6% to $2.14. Cash provided by operating activities increased 11.3% to $153.4 million, and free cash flow increased 4.6% to $112.8 million. Share repurchases settled totaled 33,300 shares for $11.6 million. Full-Year 2024 Financial Highlights Reported revenue increased 11.6% to $2.3 billion compared to the prior year; organic revenue increased 11.8%. Operating income increased 110.2% to $484.8 million; adjusted operating income increased 51.2%. Diluted net income per share increased 160.8% to $8.58 versus $3.29 in the prior year. Adjusted diluted net income per share increased by 54.1% to $7.89. Cash provided by operating activities increased 87.0% to $591.6 million. Free cash flow increased 127.5% to $448.9 million. Cash flows were negatively impacted by certain items totaling $1.8 million in 2024 and $90.8 million in 2023. Excluding these items, operating cash flow and free cash flow would have increased by 45.7% and 56.4%, respectively. Share repurchases settled totaled 33,300 shares for $11.6 million. Fourth-Quarter 2024 Results Revenue increased 9.7% to $591.0 million on a reported basis and 10.6% on an organic basis versus the prior-year period. Organic revenue growth excludes the impact of divestitures and foreign currency effects. Morningstar Credit and PitchBook were the largest contributors to reported revenue growth. Operating expense increased 9.6% to $486.8 million in the fourth quarter versus the prior-year period. Excluding the impact of intangible amortization and M&A-related expenses, operating expense increased 10.2% in the quarter. The largest contributors to the increase in reported operating expense were compensation costs, driven by higher bonus expense; depreciation expense; and advertising and marketing costs. Compensation costs increased $31.7 million, including the impact of a $20.4 million increase in bonus expense compared to the prior-year period. Higher bonus expense was primarily driven by Morningstar Credit reflecting both strong performance versus plan targets and the comparison to relatively low bonus expense in the prior-year period. Higher stock-based compensation compared to the prior-year period also contributed to the increase, primarily due to expense associated with the treatment of equity awards granted in prior periods to former employees. During the quarter, the Company updated its definition of compensation costs to incorporate commissions, severance, and stock-based compensation, in addition to salaries, bonus, employee benefits, and payroll taxes, which were all included in the prior definition. Depreciation expense increased $5.1 million primarily due to higher capitalized software costs for product enhancements in prior periods, as well as the impact of accelerated depreciation related to the sale of US TAMP assets. Advertising and marketing costs increased $3.5 million primarily due to higher advertising spending for PitchBook. Fourth-quarter operating income was $168.2 million, an increase of 78.2% compared with the prior-year period. Adjusted operating income was $121.7 million in the fourth quarter of 2024, an increase of 7.7% compared with the prior-year period. Fourth-quarter operating margin was 28.5%, compared with 17.5% in the prior-year period. Adjusted operating margin was 20.6% in the fourth quarter of 2024, versus 21.0% in the prior-year period. During the quarter, operating income included a $64.0 million gain on the sale of US TAMP assets, which had a 10.9 percentage point impact on operating margin. Net income in the fourth quarter of 2024 was $116.9 million, or $2.71 per diluted share, compared with $73.5 million, or $1.71 per diluted share, in the fourth quarter of 2023. The gain on the sale of US TAMP assets had a $1.10 impact on diluted net income per share. Adjusted diluted net income per share increased 8.6% to $2.14 in the fourth quarter of 2024, compared with $1.97 in the prior-year period. The Company's effective tax rate increased to 22.5% in the fourth quarter of 2024 versus 16.1% in the prior-year period, primarily due to deferred taxes recorded with respect to unremitted foreign earnings. Full-Year 2024 Results For the full year, revenue increased 11.6% to $2.3 billion compared with the prior year. Organic revenue increased 11.8%. Morningstar Credit, PitchBook, and Morningstar Data and Analytics were the largest contributors to reported revenue growth. Operating income increased 110.2% to $484.8 million in 2024, compared with the prior year. Adjusted operating income was $493.8 million, an increase of 51.2%. Operating margin was 21.3%, compared with 11.3% in the prior year. The gain on the sale of US TAMP assets had a 2.8 percentage point impact on full-year operating margin. Adjusted operating margin was 21.7%, compared with 16.0% in the prior year. Full-year 2024 net income increased 162.2% to $369.9 million, or $8.58 per diluted share. Adjusted diluted net income per share increased 54.1% to $7.89, compared with $5.12 in the prior year. Gains on the sales of the US TAMP assets and the Company's Commodity and Energy Data business had a $1.10 and $1.05 impact, respectively, on diluted net income per share. The effective tax rate for the full year 2024 increased to 21.9% versus 19.0% in the prior year. The Company's effective tax rate was negatively impacted by deferred taxes recorded with respect to unremitted foreign earnings and was favorably impacted by the book gain in excess of taxable gain on the sale of its Commodity and Energy Data business. The Company's prior-year effective tax rate was lower due to the recognition of tax benefits related to a retroactive tax election. Fourth-Quarter Segment Highlights Morningstar Data and Analytics Morningstar Data and Analytics contributed $196.0 million to consolidated revenue and $3.3 million to consolidated revenue growth, with revenue increasing 1.7% compared to the prior-year period, or 3.6% on an organic basis. Organic revenue growth excludes revenue associated with the Commodity and Energy Data business from the prior-year period and foreign currency impact. Higher revenue was driven primarily by increases in Morningstar Direct and Morningstar Data revenue, partially offset by softness in research distribution and Direct Web Services, which experienced higher churn as clients transitioned to an updated product. Morningstar Direct licenses increased 1.1% with higher revenue across major geographies driving growth. Increases in managed investment (fund) data helped drive Morningstar Data growth, partially offset by continued softness in exchange market data. Morningstar Data and Analytics adjusted operating income decreased 5.4% to $85.5 million, and adjusted operating margin decreased 3.3 percentage points to 43.6% compared to the prior-year period, due in part to higher compensation, reflecting growth in headcount and merit increases; increased spending on sales and marketing; and the impact of the sale of the Company's Commodity and Energy Data business. PitchBook PitchBook contributed $162.5 million to consolidated revenue and $18.1 million to consolidated revenue growth, with revenue increasing 12.5% compared to the prior-year period, or 12.7% on an organic basis. Higher revenue was primarily driven by the PitchBook platform, with licensed users growing 16.4%, 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. PitchBook clients who were not previously Leveraged Commentary & Data (LCD) clients drove the majority of the increase in licensed users, although growth continued to reflect the impact of legacy LCD clients who have moved to the PitchBook platform and are now reflected in licensed user counts. PitchBook growth drivers were consistent with recent quarters and reflected strength in PitchBook's core investor and advisor client segments, including venture capital, private equity, and investment banks. This was partially offset by continued softness in the corporate client segment, especially with smaller firms with more limited use cases. PitchBook segment adjusted operating income increased 17.6% to $48.7 million, and adjusted operating margin increased 1.3 percentage points to 30.0% compared to the prior-year period. Morningstar Credit Morningstar Credit contributed $82.3 million to consolidated revenue and $20.8 million to consolidated revenue growth, with revenue increasing 33.8% compared to the prior-year period, or 34.5% on an organic basis. The increase was primarily driven by higher revenue from the US and Canada, with strength in commercial mortgage-backed securities, corporates, and residential mortgage-backed securities ratings-related revenue. Morningstar Credit adjusted operating income increased 12.8% to $20.2 million and adjusted operating margin decreased 4.6 percentage points to 24.5% compared to the prior-year period. The decline in adjusted operating margin was primarily due to higher compensation costs in the quarter, reflecting a significant increase in bonus expense. Bonus expense increased due to favorable performance versus plan targets, compared to relatively low bonus expense in the prior-year period. Morningstar Wealth Morningstar Wealth contributed $65.0 million to consolidated revenue and $3.8 million to consolidated revenue growth, with revenue increasing 6.2% on a reported and organic basis. Organic revenue growth excludes platform revenue from the US TAMP from the prior-year period starting Dec. 1, interim service fees received from AssetMark associated with the sale of US TAMP assets, and foreign currency impact. Growth was primarily driven by Investment Management, supported by higher revenue for Morningstar Model Portfolios (also referred to as Morningstar Managed Portfolios), partially offset by softness in advertising sales. Reported assets under management and advisement (AUMA) increased 12.3% to $62.3 billion compared to prior year, helped by strong market performance which drove higher asset values and positive net flows to Morningstar Model Portfolios on third-party platforms and to the International Wealth Platform. Morningstar Wealth adjusted operating loss was $0.8 million compared to a $5.3 million loss in the prior-year period, and adjusted operating margin was negative 1.2% compared with negative 8.7%. The adjusted operating loss in the fourth quarter of 2024 excludes the gain on the sale of US TAMP assets, as well as related expenses. Morningstar Retirement Morningstar Retirement contributed $33.6 million to consolidated revenue and $3.4 million to consolidated revenue growth, with revenue increasing 11.3% on a reported and organic basis compared to the prior-year period. AUMA increased 19.7% to $275.9 billion compared to prior year, reflecting market gains and positive net flows, supported by strong growth in traditional and Advisor Managed Accounts, fiduciary services, and custom models. Morningstar Retirement adjusted operating income increased 16.2% to $17.2 million, and adjusted operating margin increased 2.2 percentage points to 51.2% compared to the prior-year period. Corporate and All Other Revenue attributable to Corporate and All Other contributed $51.6 million to consolidated revenue and $2.9 million to consolidated revenue growth, with reported revenue increasing 6.0% compared to the prior-year period, driven by growth in Morningstar Indexes. The increase in Morningstar Indexes revenue was primarily due to higher investable product revenue as asset value linked to Morningstar Indexes increased by 19.4% to $210.9 billion compared to prior year, largely driven by strong market performance over the trailing 12 months. Morningstar Sustainalytics revenues declined compared to the prior-year period, primarily reflecting the impact of the ongoing streamlining of the licensed-ratings offering and softness in second-party opinions. The impact of Corporate and All Other on consolidated adjusted operating income was negative $49.1 million compared with negative $46.2 million in the prior-year period. Balance Sheet and Capital Allocation As of Dec. 31, 2024, the Company had cash, cash equivalents, and investments totaling $551.0 million and $698.6 million of debt, compared with cash, cash equivalents, and investments of $389.0 million and $972.4 million of debt as of Dec. 31, 2023. Cash provided by operating activities increased by 87.0% to $591.6 million for the full year 2024, compared with $316.4 million in 2023. Free cash flow increased by 127.5% to $448.9 million for the full year 2024, compared with $197.3 million in the prior year. The increases in operating cash flow and free cash flow were primarily driven by higher cash earnings. As previously disclosed, operating cash flow and free cash flow were negatively impacted in 2023 by certain items totaling $90.8 million. Excluding these items and $1.8 million in severance related to the sale of US TAMP assets in 2024, operating cash flow and free cash flow would have increased by 45.7% and 56.4%, respectively. In 2024, the Company reduced its debt by $273.8 million, net, paid $69.3 million in dividends, spent $7.3 million related to other minority investments, and repurchased $11.6 million of its shares. Use of Non-GAAP Financial Measures Organic revenue, adjusted operating income, adjusted operating margin, adjusted diluted net income per share, and free cash flow are non-GAAP financial measures. The tables at the end of this press release include a reconciliation of the non-GAAP financial measures used by the Company to comparable GAAP measures and an explanation of why the Company uses them. Investor Communication Morningstar encourages all interested parties — including securities analysts, current shareholders, potential shareholders, and others — to submit questions in writing. Investors and others may send questions about Morningstar's business to investors@ Morningstar will make written responses to selected inquiries available to all investors at the same time in Form 8-Ks furnished to the Securities and Exchange Commission (the SEC), generally every month. About Morningstar, Inc. Morningstar, Inc. is a leading provider of independent investment insights in North America, Europe, Australia, and Asia. The Company offers an extensive line of products and services for individual investors, financial advisors, asset managers and owners, retirement plan providers and sponsors, institutional investors in the debt and private capital markets, and alliances and redistributors. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with approximately $338 billion in AUMA as of Dec. 31, 2024. The Company operates through wholly-owned subsidiaries in 32 countries. For more information, visit Follow Morningstar on X @MorningstarInc. Caution Concerning Forward-Looking Statements This press release 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 "aim," "committed," "consider," "estimate," "future," "goal," "is designed to," "maintain," "may," "might," "objective," "ongoing," "could," "expect," "intend," "plan," "possible," "potential," "seek," "anticipate," "believe," "predict," "prospects," "continue," "strategy," "strive," "will," "would," "determine," "evaluate," or the negative thereof, and similar expressions. 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, failing to maintain and protect our brand, independence, and reputation; failure to prevent and/or mitigate cybersecurity events and the failure to protect confidential information, including personal information about individuals; compliance failures, regulatory action, or changes in laws applicable to our regulated businesses; failing to innovate our product and service offerings or meet or anticipate our clients' changing needs; impact of artificial intelligence technologies on our business and reputation, and the legal risks as they are incorporated into our products and tools; failing to detect errors in our products or the failure of our products to perform properly due to defects, malfunctions or similar problems; failing to recruit, develop, and retain qualified employees; prolonged volatility or downturns affecting the financial sector, global financial markets, and the global economy and the effect on our revenue from asset-based fees and our credit ratings business; failing to scale our operations, increase productivity in order to implement our business plans and strategies; liability for any losses that result from errors in our automated advisory tools or errors in the use of the information and data we collect; inadequacy of our operational risk management and business continuity programs to address materially disruptive events; failure of our strategic transactions, acquisitions, divestitures and investments in companies or technologies to yield expected business or financial benefits, negatively impacting our operating results and our ability to deliver long-term value to shareholders; failing to maintain growth across our businesses due to changes in geopolitics and the regulatory landscape; 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 flow and financial and operational flexibility; liability, costs and reputational risks relating to environmental, social and governance considerations; our dependence on third-party service providers in our operations; inadequacy of our insurance coverage; challenges in accounting for tax complexities in the global jurisdictions which we operate in and their effect on our tax obligations and tax rates; the potential and impact of vendor consolidation and clients' strategic decisions to replace our products and services with in-house products and services; our ability to build and maintain short-term and long-term shareholder value and pay dividends to our shareholders; our ability to maintain existing business and renewal rates and to gain new business; the impact of recently issued accounting pronouncements on our consolidated financial statements and related disclosure; impact on our stock price due to future sales of our common stock and fluctuations in our operating results; and failing to protect our intellectual property rights or claims of intellectual property infringement against us. A more complete description of these risks and uncertainties, among others, can be found in our filings with the SEC, including our most recent Reports on Forms 10-K and 10-Q. 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, future events or otherwise, except as may be required by law. You are, however, advised to review any further disclosures we make on related subjects, and about new or additional risks, uncertainties and assumptions in our future filings with the SEC on Forms 10-K, 10-Q and 8-K. ©2025 Morningstar, Inc. All Rights Reserved. MORN-E Morningstar, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Income Three months ended December 31, Year ended December 31, (in millions, except per share amounts) 2024 2023 Change 2024 2023 Change Revenue $ 591.0 $ 538.7 9.7 % $ 2,275.1 $ 2,038.6 11.6 % Operating expense: Cost of revenue 232.2 205.4 13.0 % 895.7 843.5 6.2 % Sales and marketing 117.2 100.4 16.7 % 441.0 423.8 4.1 % General and administrative 89.0 92.0 (3.3 )% 327.2 355.8 (8.0 )% Depreciation and amortization 48.4 46.5 4.1 % 190.4 184.9 3.0 % Total operating expense 486.8 444.3 9.6 % 1,854.3 1,808.0 2.6 % Gain on sale of customer assets 64.0 — NMF 64.0 — NMF Operating income 168.2 94.4 78.2 % 484.8 230.6 110.2 % Operating margin 28.5 % 17.5 % 11.0 pp 21.3 % 11.3 % 10.0 pp Non-operating income (expense), net: Interest expense, net (7.0 ) (11.5 ) NMF (37.7 ) (51.7 ) NMF Gain on sale of business — — — % 45.3 — NMF Expense from equity method transaction, net — — — % — (11.8 ) NMF Other income (expense), net 1.7 7.4 (77.0 )% (1.1 ) 14.4 NMF Non-operating income (expense), net (5.3 ) (4.1 ) NMF 6.5 (49.1 ) NMF Income before income taxes and equity in investments of unconsolidated entities 162.9 90.3 80.4 % 491.3 181.5 170.7 % Equity in investments of unconsolidated entities (12.1 ) (2.7 ) NMF (17.4 ) (7.4 ) NMF Income tax expense 33.9 14.1 140.4 % 104.0 33.0 215.2 % Consolidated net income $ 116.9 $ 73.5 59.0 % $ 369.9 $ 141.1 162.2 % Net income per share: Basic $ 2.72 $ 1.72 58.1 % $ 8.64 $ 3.31 161.0 % Diluted $ 2.71 $ 1.71 58.5 % $ 8.58 $ 3.29 160.8 % Weighted average shares outstanding: Basic 42.9 42.7 42.8 42.6 Diluted 43.1 43.0 43.1 42.9 _________________________________________________________________ NMF - Not meaningful, pp - percentage points Morningstar, Inc. and Subsidiaries Unaudited Condensed Consolidated Balance Sheets As of December 31, As of December 31, (in millions) 2024 2023 Assets Current assets: Cash and cash equivalents $ 502.7 $ 337.9 Investments 48.3 51.1 Accounts receivable, net 358.1 343.9 Income tax receivable 12.4 0.6 Other current assets 92.6 82.2 Total current assets 1,014.1 815.7 Goodwill 1,562.0 1,578.8 Intangible assets, net 408.8 484.4 Property, equipment, and capitalized software, net 218.9 207.7 Operating lease assets 181.2 163.9 Investments in unconsolidated entities 85.3 100.2 Deferred tax assets, net 43.2 ... 14.6 Other assets 35.4 38.1 Total assets $ 3,548.9 $ 3,403.4 Liabilities and equity Current liabilities: Deferred revenue $ 540.8 $ 517.7 Accrued compensation 272.2 214.4 Accounts payable and accrued liabilities 87.3 78.4 Operating lease liabilities 35.1 36.4 Current portion of long-term debt — 32.1 Income tax payable 30.5 — Other current liabilities 1.4 1.8 Total current liabilities 967.3 880.8 Operating lease liabilities 170.3 151.4 Accrued compensation 21.0 23.7 Deferred tax liabilities, net 27.6 35.6 Long-term debt 698.6 940.3 Income tax payable 11.7 8.3 Other long-term liabilities 33.8 35.5 Total liabilities 1,930.3 2,075.6 Total equity 1,618.6 1,327.8 Total liabilities and equity $ 3,548.9 $ 3,403.4 Morningstar, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Cash Flows Three months ended December 31, Year ended December 31, (in millions) 2024 2023 2024 2023 Operating activities Consolidated net income $ 116.9 $ 73.5 $ 369.9 $ 141.1 Adjustments to reconcile consolidated net income to net cash flows from operating activities — 27.9 128.9 147.2 Changes in operating assets and liabilities, net 36.5 36.4 92.8 28.1 Cash provided by operating activities 153.4 137.8 591.6 316.4 Investing activities Capital expenditures (40.6 ) (30.0 ) (142.7 ) (119.1 ) Acquisitions, net of cash acquired — (0.8 ) — (0.8 ) Proceeds from sale of business 0.2 — 52.4 — Proceeds from sale of customer assets 65.0 — 65.0 — Purchases of investments in unconsolidated entities (0.5 ) (2.6 ) (7.3 ) (3.7 ) Other, net — 0.6 11.3 41.7 Cash provided by (used for) investing activities 24.1 (32.8 ) (21.3 ) (81.9 ) Financing activities Common shares repurchased (11.6 ) — (11.6 ) (1.4 ) Dividends paid (17.3 ) (16.0 ) (69.3 ) (63.9 ) Repayments of debt (166.3 ) (83.1 ) (364.4 ) (397.5 ) Proceeds from debt — — 90.0 260.0 Payment for acquisition-related earn-outs — — — (45.5 ) Other, net (3.9 ) (4.3 ) (29.1 ) (30.1 ) Cash used for financing activities (199.1 ) (103.4 ) (384.4 ) (278.4 ) Effect of exchange rate changes on cash and cash equivalents (28.6 ) 11.3 (21.1 ) 5.2 Net increase (decrease) in cash and cash equivalents (50.2 ) 12.9 164.8 (38.7 ) Cash and cash equivalents-beginning of period 552.9 325.0 337.9 376.6 Cash and cash equivalents-end of period $ 502.7 $ 337.9 $ 502.7 $ 337.9 Morningstar, Inc. and Subsidiaries Supplemental Data (Unaudited) Three months ended December 31, Year ended December 31, (in millions) 2024 2023 Change Organic (1) 2024 2023 Change Organic (1) Morningstar Data and Analytics Revenue $ 196.0 $ 192.7 1.7 % 3.6 % $ 788.1 $ 747.2 5.5 % 5.8 % Adjusted Operating Income 85.5 90.4 (5.4 )% 355.4 339.8 4.6 % Adjusted Operating Margin 43.6 % 46.9 % (3.3) pp 45.1 % 45.5 % (0.4) pp PitchBook Revenue $ 162.5 $ 144.4 12.5 % 12.7 % $ 618.4 $ 551.9 12.0 % 12.1 % Adjusted Operating Income 48.7 41.4 17.6 % 186.4 148.1 25.9 % Adjusted Operating Margin 30.0 % 28.7 % 1.3 pp 30.1 % 26.8 % 3.3 pp Morningstar Credit Revenue $ 82.3 $ 61.5 33.8 % 34.5 % $ 291.1 $ 215.4 35.1 % 35.3 % Adjusted Operating Income 20.2 17.9 12.8 % 75.6 21.7 248.4 % Adjusted Operating Margin 24.5 % 29.1 % (4.6) pp 26.0 % 10.1 % 15.9 pp Morningstar Wealth Revenue $ 65.0 $ 61.2 6.2 % 6.2 % $ 248.4 $ 229.9 8.0 % 8.1 % Adjusted Operating Income (Loss) (0.8 ) (5.3 ) NMF (9.3 ) (40.4 ) NMF Adjusted Operating Margin (1.2 )% (8.7 )% 7.5 pp (3.7 )% (17.6 )% 13.9 pp Morningstar Retirement Revenue $ 33.6 $ 30.2 11.3 % 11.3 % $ 127.1 $ 110.5 15.0 % 15.0 % Adjusted Operating Income 17.2 14.8 16.2 % 65.6 54.1 21.3 % Adjusted Operating Margin 51.2 % 49.0 % 2.2 pp 51.6 % 49.0 % 2.6 pp Consolidated Revenue Total Reportable Segments $ 539.4 $ 490.0 10.1 % $ 2,073.1 $ 1,854.9 11.8 % Corporate and All Other (2) 51.6 48.7 6.0 % 202.0 183.7 10.0 % Total Revenue $ 591.0 $ 538.7 9.7 % 10.6 % $ 2,275.1 $ 2,038.6 11.6 % 11.8 % Consolidated Adjusted Operating Income Total Reportable Segments $ 170.8 $ 159.2 7.3 % $ 673.7 $ 523.3 28.7 % Less: Corporate and All Other (3) (49.1 ) (46.2 ) NMF (179.9 ) (196.8 ) NMF Adjusted Operating Income $ 121.7 $ 113.0 7.7 % $ 493.8 $ 326.5 51.2 % Adjusted Operating Margin 20.6 % 21.0 % (0.4) pp 21.7 % 16.0 % 5.7 pp ____________________________________________________________________________ (1) Organic revenue is a non-GAAP measure that excludes acquisitions, divestitures, the impacts of the adoption of new accounting standards or revisions to accounting practices, and the effect of foreign currency translations. (2) Corporate and All Other provides a reconciliation between revenue from the Company's Total Reportable Segments and consolidated revenue amounts. Corporate and All Other includes Morningstar Sustainalytics and Morningstar Indexes as sources of revenues. Revenue from Morningstar Sustainalytics was $29.4 million and $30.4 million for the three months ended Dec. 31, 2024 and 2023, respectively and $117.3 million and $118.2 million for the year ended Dec. 31, 2024 and 2023, respectively. Revenue from Morningstar Indexes was $22.2 million and $18.3 million for the three months ended Dec. 31, 2024 and 2023, respectively and $84.7 million and $65.5 million for the year ended Dec. 31, 2024 and 2023, respectively. (3) Corporate and All Other includes unallocated corporate expenses as well as adjusted operating income (loss) from Morningstar Sustainalytics and Morningstar Indexes. During the fourth quarter of 2024 and 2023, unallocated corporate expenses were $51.0 million and $42.1 million, respectively. For the years ended 2024 and 2023, unallocated corporate expenses were $181.4 million and $153.5 million, respectively. Unallocated corporate expenses include finance, human resources, legal, marketing, and other management-related costs that are not considered when segment performance is evaluated. Morningstar, Inc. and Subsidiaries Supplemental Data (Unaudited) As of December 31, AUMA (approximate) ($bil) 2024 2023 Change Morningstar Retirement Managed Accounts $ 160.4 $ 134.8 19.0 % Fiduciary Services 65.8 56.2 17.1 % Custom Models/CIT 49.7 39.4 26.1 % Morningstar Retirement (total) $ 275.9 $ 230.4 19.7 % Investment Management Morningstar Model Portfolios (1) $ 43.8 $ 38.7 13.2 % Institutional Asset Management 7.0 7.7 (9.1 )% Asset Allocation Services 11.5 9.1 26.4 % Investment Management (total) $ 62.3 $ 55.5 12.3 % Asset value linked to Morningstar Indexes ($bil) $ 210.9 $ 176.7 19.4 % Three months ended December 31, Year ended December 31, 2024 2023 Change 2024 2023 Change Average AUMA ($bil) $ 333.2 $ 274.8 21.3 % $ 312.4 $ 261.4 19.5 % ____________________________________________________________________________ (1) Includes AUMA in Morningstar Model Portfolios and assets on the International Wealth Platform invested in third-party model portfolios. Morningstar, Inc. and Subsidiaries Reconciliations of Non-GAAP Measures with the Nearest Comparable GAAP Measures (Unaudited) To supplement Morningstar's condensed consolidated financial statements presented in accordance with US Generally Accepted Accounting Principles (GAAP), Morningstar uses the following measures considered as non-GAAP by the SEC, including: 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 all mergers and acquisitions (M&A)-related expenses and gains (related to merger, acquisition, and divestiture activity including earn-outs), intangible amortization, and expenses related to the significant reduction and shift of the Company's operations in China (adjusted operating income); consolidated operating margin, excluding all M&A-related expenses and gains, intangible amortization, and expenses related to the significant reduction and shift of the Company's operations in China (adjusted operating margin); consolidated diluted net income per share, excluding all M&A-related expenses and gains, intangible amortization, items related to the significant reduction and shift of the Company's operations in China, and certain non-operating gains/losses and other (adjusted diluted net income per share); and cash 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. Morningstar presents organic revenue because the Company believes this non-GAAP measure helps investors better compare period-over-period results. Morningstar excludes revenue from acquired businesses from its organic revenue growth calculation for a period of 12 months after it completes the acquisition. For divestitures (including sale of assets), Morningstar excludes revenue in the prior-year period for which there is no comparable revenue in the current period. Morningstar presents adjusted operating income, adjusted operating margin, and adjusted net income per share 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. In addition, Morningstar presents free cash flow solely as supplemental disclosure to help investors better understand how much cash is available after making capital expenditures. Morningstar's management team uses free cash flow to evaluate the health of its business. Free cash flow should not be considered an alternative to any measure required to be reported under GAAP (such as cash provided by (used for) operating, investing, and financing activities). Three months ended December 31, Year ended December 31, (in millions) 2024 2023 Change 2024 2023 Change Reconciliation from consolidated revenue to organic revenue: Consolidated revenue $ 591.0 $ 538.7 9.7 % $ 2,275.1 $ 2,038.6 11.6 % Acquisitions — — — % — — — % Divestitures (1.3 ) (5.3 ) NMF (1.3 ) (5.3 ) NMF Effect of foreign currency translations 0.1 — NMF (1.3 ) — NMF Organic revenue $ 589.8 $ 533.4 10.6 % $ 2,272.5 $ 2,033.3 11.8 % Reconciliation from consolidated operating income to adjusted operating income: Consolidated operating income $ 168.2 $ 94.4 78.2 % $ 484.8 $ 230.6 110.2 % Intangible amortization expense (1) 14.6 17.6 (17.0 )% 64.5 70.5 (8.5 )% M&A-related expenses (2) 2.9 0.9 222.2 % 8.5 9.8 (13.3 )% M&A-related gains (3) (64.0 ) — NMF (64.0 ) — NMF Severance and personnel expenses (4) — 0.1 NMF — 5.5 NMF Transformation costs (4) — — — % — 7.0 NMF Asset impairment costs (4) — — — % — 3.1 NMF Adjusted operating income $ 121.7 $ 113.0 7.7 % $ 493.8 $ 326.5 51.2 % Reconciliation from consolidated operating margin to adjusted operating margin: Consolidated operating margin 28.5 % 17.5 % 11.0 pp 21.3 % 11.3 % 10.0 pp Intangible amortization expense (1) 2.5 % 3.3 % (0.8) pp 2.8 % 3.5 % (0.7) pp M&A-related expenses (2) 0.5 % 0.2 % 0.3 pp 0.4 % 0.4 % — pp M&A-related gains (3) (10.9 )% — % (10.9) pp (2.8 )% — % (2.8) pp Severance and personnel expenses (4) — % — % — pp — % 0.3 % (0.3) pp Transformation costs (4) — % — % — pp — % 0.3 % (0.3) pp Asset impairment costs (4) — % — % — pp — % 0.2 % (0.2) pp Adjusted operating margin 20.6 % 21.0 % (0.4) pp 21.7 % 16.0 % 5.7 pp Reconciliation from consolidated diluted net income per share to adjusted diluted net income per share: Consolidated diluted net income per share $ 2.71 $ 1.71 58.5 % $ 8.58 $ 3.29 160.8 % Intangible amortization expense (1) 0.25 0.30 (16.7 )% 1.11 1.22 (9.0 )% M&A-related expenses (2) 0.05 0.02 150.0 % 0.15 0.17 (11.8 )% M&A-related gains (3) (1.10 ) — NMF (1.10 ) — NMF Severance and personnel expenses (4) — — — % — 0.09 NMF Transformation costs (4) — — — % — 0.12 NMF Asset impairment costs (4) — — — % — 0.05 NMF Non-operating (gains) losses and other (5) 0.23 (0.06 ) NMF (0.85 ) 0.18 NMF Adjusted diluted net income per share $ 2.14 $ 1.97 8.6 % $ 7.89 $ 5.12 54.1 % Reconciliation from cash provided by operating activities to free cash flow: Cash provided by operating activities $ 153.4 $ 137.8 11.3 % $ 591.6 $ 316.4 87.0 % Capital expenditures (40.6 ) (30.0 ) 35.3 % (142.7 ) (119.1 ) 19.8 % Free cash flow $ 112.8 $ 107.8 4.6 % $ 448.9 $ 197.3 127.5 % _____________________________________________________________________ NMF - Not meaningful, pp - percentage points (1) Excludes finance lease amortization expense of $0.0 million and $0.2 million during the three months ended Dec. 31, 2024 and 2023, respectively, and $0.5 million and $1.2 million during the 12 months ended Dec. 31, 2024 and 2023, respectively. (2) Reflects non-recurring expenses related to merger, acquisition, and divestiture activity such as pre-deal due diligence, transaction costs, severance, and post-close integration costs. (3) Reflects the gain on sale of US TAMP assets. (4) 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 and market stock unit 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 hired replacement roles in other markets and shifted capabilities, it employed certain Shenzhen-based staff through the transition period, which resulted 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 were not redeployed, in addition to lease abandonment costs as the Company downsized its office space prior to the lease termination date. (5) Reflects realized and unrealized gains and losses on investments in the three and 12 months ended Dec. 31, 2024 and 2023. For the three months ended Dec. 31. 2024, includes an impairment loss on an investment in unconsolidated entities. In addition, for the 12 months ended Dec. 31, 2024, includes gain on the sale of the Company's Commodity and Energy Data business and impairment losses on an investment in unconsolidated entities. For the 12 months ended Dec. 31, 2023, includes expense from equity method transaction, net. View source version on Contacts Media Relations Contact:Stephanie Lerdall, +1 312-244-7805, Investor Relations Contact:Sarah Bush, +1 312-384-3754, Sign in to access your portfolio
