Morningstar Inc
For the period ended Sep 30, 2024. Filed Oct 25, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 25, 2024
MORN$244.15-1.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-26.
0001289419-24-000059
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-25.
0001289419-24-000111
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 186 previous paragraphs and 186 current paragraphs.
91 unchanged; 67 reworded; 27 added; 25 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 19 previous and 19 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (27)
Current report
Asset-based revenue increased $12.3 million, or 17.2%, during the third quarter of 2024. On an organic basis, asset-based revenue increased 16.9%. Reported and organic revenue growth was primarily driven by increases in Morningstar Wealth, Morningstar Retirement, and Morningstar Indexes.
Current report
Increases in compensation expense and technology infrastructure costs were mostly offset by decreases in severance expense and amortization expense during the third quarter of 2024 and the impact of SEC settlement-related expenses for DBRS, Inc. in the third quarter of 2023.
Current report
On September 29, 2023, DBRS, Inc. entered into two settlements with the SEC requiring DBRS, Inc. to pay an aggregate of $8.0 million in civil monetary penalties. The DBRS, Inc. SEC settlements resulted in a $6.0 million expense for the third quarter of 2023, bringing the total expense to $8.0 million for the first nine months of 2023.
Current report
Severance expense decreased $3.9 million during the third quarter of 2024 compared to the prior year period. We recorded $5.0 million of severance expense during the third quarter of 2023 related to targeted reorganizations and headcount reductions in certain parts of the business, including Morningstar Sustainalytics, Morningstar Wealth, and Morningstar Credit.
Current report
Intangible amortization expense decreased $3.0 million during the third quarter of 2024 compared to the prior year periodas certain intangible assets from some of our earlier acquisitions became fully amortized.
Current report
Compensation expense, technology infrastructure costs, and depreciation expense increased $23.7 million, $9.4 million, and $7.1 million, respectively, in the first nine months of 2024 compared to the prior year period due to the factors noted above.
Current report
Intangible amortization expense decreased $3.0 million during both the third quarter of 2024 andthe first nine months of 2024 as certain intangible assets from some of our earlier acquisitions became fully amortized.
Current report
Total revenue increased $9.8 million, or 5.2%, for the three months ended September 30, 2024. Revenue grew 4.7% on an organic basis, primarily driven by growth in Morningstar Direct and Morningstar Data. This growth was partially offset by softness in research distribution, reflecting the loss of a large client who brought coverage in-house, and in Morningstar Advisor Workstation, due to revenue declines related to an evolving product strategy.
Current report
Morningstar Data contributed $5.4 million to revenue growth, with revenue increasing 7.6% or 7.0%on an organic basis. Increases in managed investment (fund) data and Morningstar Essentials helped drive Morningstar Data growth, partially offset by softness in exchange market data.
Current report
Adjusted operating income increased $3.0 million, or 3.4%, and adjusted operating margin decreased 0.8 percentage points for the three months ended September 30, 2024, due in part to higher stock-based compensation.
Current report
Adjusted operating income increased $20.5 million, or 8.2%, and adjusted operating margin increased 0.6 percentage points for thenine months ended September 30, 2024.
Current report
Depreciation expense was $9.8 million and $7.9 million for thethree months ended September 30, 2024 and 2023, respectively, and $27.5 million and $23.1 million for thenine months ended September 30, 2024 and 2023, respectively.
Current report
Total revenue increased $17.0 million, or 12.2% on a reported and organic basis, for the three months ended September 30, 2024.
Current report
Adjusted operating income increased $11.3 million, or 28.9%, and adjusted operating margin increased 4.2 percentage points for the three months ended September 30, 2024.
Current report
Depreciation expense was $7.6 million and $6.8 million for the three months ended September 30, 2024 and 2023, respectively, and $23.3 million and $19.5 million for thenine months ended September 30, 2024 and 2023, respectively.
Current report
Adjusted operating loss decreased$7.5 million and adjusted operating margin increased 13.0 percentage pointsfor the three months ended September 30, 2024. Prior-year period operating expense included $1.4 million in severance related to targeted reorganizations.
Current report
Depreciation expense was $4.3 million and $4.0 million for the three months ended September 30, 2024 and 2023, respectively, and $14.0 million and $11.7 million for thenine months ended September 30, 2024 and 2023, respectively.
Current report
Adjusted operating income increased $12.4 million and adjusted operating margin increased 16.1 perc entage points for the three months ended September 30, 2024. Prior-year period operating expense included $6.0 million in expense related to the DBRS, Inc. SEC settlements and $1.1 million in severance related to targeted reorganizations.
Current report
Adjusted operating income increased $51.6 million and adjusted operating margin increased 24.0 percentage points for the nine months ended September 30, 2024.
Current report
Depreciation expense was$2.2 million and$2.0 million for the three months ended September 30, 2024 and 2023, respectively, and $5.8 million and$7.2 million for the nine months ended September 30, 2024 and 2023, respectively.
Current report
Adjusted operating income increased $2.2 million, or 15.0%, and adjusted operating margin was unchanged for the three months ended September 30, 2024.
Current report
Adjusted operating income increased $9.1 million, or 23.2%, and adjusted operating margin increased 2.9 percentage points for the nine months ended September 30, 2024.
Current report
Depreciation expense was $2.2 million and $2.9 million for the three months ended September 30, 2024 and 2023, respectively, and $7.6 million and $8.1 million for thenine months ended September 30, 2024 and 2023, respectively.
Current report
Non-Operating Income (Expense), Net
Current report
Effective September 30, 2024, we sold our Commodity and Energy Data business within the Morningstar Data and Analytics segment for a purchase price of $52.4 million and recorded a $45.3 million gain on sale of business in the Consolidated Statements of Income for the three and nine months ended September 30, 2024.
Current report
Our effective tax rate in thethird quarter and first nine months of 2024 was 19.8% and 21.7%, respectively, reflecting decreases of 10.1 and 0.1 percentage points, respectively, compared with the same periods in the prior year. The decreases are primarily attributable the book gain in excess of taxable gain on the sale of our Commodity and Energy Data business in the third quarter of 2024.
Current report
During the third quarter of 2023, the company paid $16.1 million of severance and other costs related to the significant reduction and shift of the Company's operations in China. Excluding the impact of these severance payments and related costs, free cash flow would have been $117.5 million.
Removed paragraphs (25)
Previous report
Asset-based revenue increased $29.1 million, or 21.9%, in thefirst six months of 2024. Organic revenue increased 22.1%, due to increases in Morningstar Wealth, Morningstar Indexes, and Morningstar Retirement.
Previous report
Professional fees declined $4.0 million during the second quarter of 2024 due to lower expenses for third-party resources supporting M&A integration-related activity. The company’s strategic focus on building internal capabilities and optimizing resource allocation also resulted in a reduction of professional fees.
Previous report
Declines in professional fees, facilities-related expenses, and commission expense were the biggest contributors to the decrease in consolidated operating expense during the first six months of 2024.
Previous report
Professional fees and facilities-related expenses decreased $8.5 million and $6.9 million, respectively, in the first six months of 2024, due to the factors noted above. Commission expense also decreased $2.0 million during the first six months of 2024, primarily due to sales performance against targets in certain areas relative to the prior year.
Previous report
These declines were partially offset by higher compensation expense of $7.5 million in the first six months of 2024. These higher costs primarily reflect an increase in bonus expense and company-sponsored benefits.
Previous report
Higher depreciation expense and SaaS-based software subscriptions of $4.6 million and $4.2 million, respectively, also helped offset decreases in other expenses during the first six months of 2024, due to the factors noted above.
Previous report
Sales and marketing expense decreased$1.2 million in thefirst six months of 2024. Compensation expense decreased $2.9 million primarily due to lower bonus expense. Sales commission expense also declined by $1.0 million, primarily due to sales performance against targets in certain areas relative to the prior year. These declines were offset by increases in advertising and marketing costs and professional fees during the first six months of 2024 due to the factors noted above.
Previous report
Intangible amortization expense was relatively flat during the second quarter of 2024 andthe first six months of 2024.
Previous report
Morningstar Data contributed $3.1 million to Morningstar Data and Analytics revenue growth, with revenue increasing 4.5% or 4.7%on an organic basis. Managed investment (mutual fund) data, especially in Europe, continued to be a key driver of higher revenue, partially offset by lower contributions to growth from Morningstar Essentials and equity and exchange market data.
Previous report
Morningstar Data and Analytics adjusted operating income increased $7.2 million, or 9.0%, and adjusted operating margin increased 1.2 percentage points for the three months ended June 30, 2024.
Previous report
Morningstar Data and Analytics total revenue increased $27.8 million, or 7.6%, for the six months ended June 30, 2024. Revenue grew 7.5% on an organic basis, primarily driven by growth in Morningstar Data and Morningstar Direct.
Previous report
Morningstar Data and Analytics adjusted operating income increased $17.5 million, or 10.9%, and adjusted operating margin increased 1.4 percentage points for the six months ended June 30, 2024.
Previous report
Morningstar Data and Analytics depreciation expense was $9.5 million and $7.8 million for thethree months ended June 30, 2024 and 2023, respectively, and $17.7 million and $15.2 millionfor the six months ended June 30, 2024 and 2023, respectively.
Previous report
PitchBook total revenue increased $14.9 million, or 10.9% on a reported and organic basis, for the three months ended June 30, 2024.
Previous report
PitchBook depreciation expense was $8.3 million and $6.4 million for the three months ended June 30, 2024 and 2023, respectively, and $15.7 million and $12.7 millionfor the six months ended June 30, 2024 and 2023, respectively.
Previous report
Morningstar Wealth adjusted operating loss decreased$10.1 million, or 82.1%, and adjusted operating margin increased 18.5 percentage pointsfor the three months ended June 30, 2024. In conjunction with the recent announcement of the expected sale of assets from the Morningstar Wealth Turnkey Asset Management Platform to AssetMark, the company recorded $3.3 million in severance expense in the quarter. These costs are excluded from Morningstar Wealth adjusted operating income and consolidated adjusted operating income.
Previous report
Morningstar Wealth depreciation expense was $5.0 million and $3.9 million for the three months ended June 30, 2024 and 2023, respectively, and $9.7 million and $7.7 millionfor the six months ended June 30, 2024 and 2023, respectively.
Previous report
Morningstar Credit adjusted operating income increased $22.9 million and adjusted operating margin increased 26.8 perc entage points for the three months ended June 30, 2024.
Previous report
Morningstar Credit adjusted operating income increased $39.2 million and adjusted operating margin increased 28.2 percentage points for the six months ended June 30, 2024.
Previous report
Morningstar Credit depreciation expense was$1.7 million and$3.0 million for the three months ended June 30, 2024 and 2023, respectively, and $3.6 million and$5.2 million for the six months ended June 30, 2024 and 2023, respectively.
Previous report
Morningstar Retirement adjusted operating income increased $3.9 million, or 29.1%, and adjusted operating margin increased 3.1 percentage points for the three months ended June 30, 2024.
Previous report
Morningstar Retirement adjusted operating income increased $6.9 million, or 28.0%, and adjusted operating margin increased 4.3 percentage points for the six months ended June 30, 2024.
Previous report
Morningstar Retirement depreciation expense was $2.6 million and $2.7 million for the three months ended June 30, 2024 and 2023, respectively, and $5.4 million and $5.2 millionfor the six months ended June 30, 2024 and 2023, respectively.
Previous report
Non-Operating Expense, Net
Previous report
Our effective tax rate in thesecond quarter and first six months of 2024 was 21.7% and 23.3%, respectively. Our effective tax rate in prior periods was not meaningful due to the low level of pretax income in the prior-year periods.
Reworded paragraphs (67)
Previous wording
Our mission is to empower investor success. The investing ecosystem is complex, and navigating it with confidence requires a trusted, independent voice. We deliver our perspective to institutions, advisors, and individuals with a single-minded purpose: to empower every investor with the conviction that they can make better-informed decisions and realize success on their own terms.
Current wording
Our mission is to empower investor success. The investing ecosystem is complex, and navigating it with confidence requires a trusted, independent voice. We deliver our perspective to institutions, advisors, and individuals with a single-minded purpose: to empower investors with the conviction that they can make better-informed decisions and realize success on their own terms.
Previous wording
The company has seven operating segments which are presented as the following five reportable segments: Morningstar Data and Analytics, PitchBook, Morningstar Wealth, Morningstar Credit, and Morningstar Retirement. The operating segments of Morningstar Sustainalytics and Morningstar Indexes do not individually meet the quantitative segment reporting thresholds and have been combined and presented as part of Corporate and All Other, which is not a reportable segment. Prior period segment information is presented on a comparable basis to the basis on which current period segment information is presented and reviewed by the chief operating decision maker (CODM). For additional information about our segment reporting, refer to Note 7 of the Notes to our Unaudited Financial Statements.
Current wording
The company has seven operating segments which are presented as the following five reportable segments: Morningstar Data and Analytics, PitchBook, Morningstar Wealth, Morningstar Credit, and Morningstar Retirement. The operating segments of Morningstar Sustainalytics and Morningstar Indexes do not individually meet the quantitative segment reporting thresholds and have been combined and presented as part of Corporate and All Other, which is not a reportable segment. Prior period segment information is presented on a comparable basis to the basis on which current period segment information is presented and reviewed by the chief operating decision maker (CODM). For additional information about our segment reporting, refer to Note 8 of the Notes to our Unaudited Consolidated Financial Statements.
Previous wording
Three and Six Months Ended June 30, 2024 vs. Three and Six Months Ended June 30, 2023
Current wording
Three and Nine Ended September 30, 2024 vs. Three and Nine Months Ended September 30, 2023
Previous wording
We exclude revenue from acquired businesses from our organic revenue growth calculation for a period of 12 months after we complete the acquisition. For divestitures, we exclude revenue in the prior period for which there is no comparable revenue in the current period.
Current wording
We present organic revenue because we believe it helps investors better compare our period-to-period results, and our management team uses this measure to evaluate the performance of our business. We exclude revenue from acquired businesses from our organic revenue growth calculation for a period of 12 months after we complete the acquisition. For divestitures, we exclude revenue in the prior year period for which there is no comparable revenue in the current period.
Previous wording
We present free cash flow solely as supplemental disclosure to help investors better understand how much cash isavailable after capital expenditures. Our management team uses free cash flowas a metric to evaluate the health of our business.
Current wording
We present free cash flow solely as supplemental disclosure to help investors better understand how much cash isavailable after capital expenditures. Our management team uses free cash flowas a metric to evaluate the health of our 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).
Previous wording
(1) Starting with the quarter ended March 31, 2024, revenue from PitchBook media sales product was reclassified from license-based to transaction-based. Prior periods have not been restated to reflect the updated classifications.
Current wording
(1) Starting with the quarter ended March 31, 2024, revenue from PitchBook's media sales product was reclassified from license-based to transaction-based. Prior periods have not been restated to reflect the updated classifications.
Previous wording
In the second quarter of 2024, consolidated revenue increased 13.3% to $571.9 million. Foreign currency translations had a negative impact in the quarter, decreasing revenue by $1.4 million.
Current wording
In the third quarter of 2024, consolidated revenue increased 10.5% to $569.4 million. Foreign currency translations had apositive impact in the quarter, increasing revenue by$1.6 million.
Previous wording
License-based revenue grew $25.7 million, or 6.8%, during the second quarter of 2024. On an organic basis, license-based revenue increased 7.5%. Reported and organic revenue growth was primarily driven by strong demand for PitchBook and Morningstar Data and Analytics products.
Current wording
License-based revenue grew $24.3 million, or 6.3%, during the third quarter of 2024. On an organic basis, license-based revenue increased 6.4%. Reported and organic revenue growth was primarily driven by strong demand for PitchBook and Morningstar Data and Analytics products.
Previous wording
Transaction-based revenue increased $24.1 million, or 39.3%, in the second quarter of 2024. On an organic basis, transaction-based revenue increased 37.2%, primarily driven by Morningstar Credit revenue.
Current wording
Transaction-based revenue increased $17.3 million, or 29.1%, in the third quarter of 2024. On an organic basis, transaction-based revenue increased 25.9%, primarily driven by Morningstar Credit revenue.
Previous wording
In thefirst six months of 2024, consolidated revenue increased 13.2% to$1,114.7 million. Foreign currency translations had a negative impact in the first six months of 2024, decreasing revenue by $0.2 million.
Current wording
In the first nine months of 2024, consolidated revenue increased 12.3% to $1,684.1 million. Foreign currency translations had a positive impact in the first nine months of 2024, increasing revenue by$1.4 million.
Previous wording
License-based revenue grew $61.9 million, or 8.4%, during thefirst six months of 2024. On an organic basis, license-based revenue increased 8.7%. Reported and organic revenue growth was primarily driven by strong demand for PitchBook and Morningstar Data and Analytics products.
Current wording
License-based revenue grew$86.2 million, or 7.7%, during the first nine months of 2024. On an organic basis, license-based revenue increased 7.9%. Reported and organic revenue growth was primarily driven by strong demand for PitchBook and Morningstar Data and Analytics products.
Previous wording
Asset-based revenue increased $17.4 million, or 25.9% on a reported and organic basis, in the second quarter of 2024. Reported and organic revenue growth was primarily driven by increases in Morningstar Wealth, Morningstar Retirement, and Morningstar Indexes.
Current wording
Asset-based revenue increased $41.4 million, or 20.3%, on a reported and organic basis in thefirst nine months of 2024. Reported and organic revenue growth was primarily driven by increases in Morningstar Wealth, Morningstar Retirement, and Morningstar Indexes.
Previous wording
Transaction-based revenue increased $39.3 million, or 35.2%, in thefirst six months of 2024. On an organic basis, transaction-based revenue increased 32.7% primarily driven by Morningstar Credit revenue.
Current wording
Transaction-based revenue increased $56.6 million, or 33.0%, in thefirst nine months of 2024. On an organic basis, transaction-based revenue increased 30.3% primarily driven by Morningstar Credit revenue.
Previous wording
Organic revenue increased 13.6% in the second quarter, driven by organic growth in Morningstar Credit, PitchBook, and Morningstar Data and Analytics. Organic revenue increased 13.3% during the first six months of 2024, driven by growth in Morningstar Credit, PitchBook, and Morningstar Data and Analytics. Foreign currency translations had a $1.4 million impact on revenue during the second quarter of 2024 and $0.2 million during the first six months of 2024.
Current wording
Organic revenue increased 10.1% in the third quarter, driven by organic growth in Morningstar Credit, PitchBook, and Morningstar Data and Analytics. Organic revenue increased 12.2% during the first nine months of 2024, driven by growth in Morningstar Credit, PitchBook, and Morningstar Data and Analytics. Foreign currency translations had a $1.6 million impact on revenue during the third quarter of 2024 and a $1.4 million impact during thefirst nine months of 2024.
Previous wording
International revenue comprised 28% of our consolidated revenue for the second quarter and first six months of 2024 and 2023. 57% and 58% of international revenue was generated in Continental Europe and the United Kingdom during the second quarter and first six months of 2024 and 2023, respectively.
Current wording
International revenue comprised 28% of our consolidated revenue for the third quarter and first nine months of 2024 and 2023. Approximately 59% of international revenue was generated in Continental Europe and the United Kingdom during the third quarters of both 2024 and 2023, compared to 58% during the first nine months of both 2024 and 2023.
Previous wording
Consolidated operating expense was relatively flat in the second quarter of 2024 and decreased $4.6 million, or 0.5%, during thesix months ended June 30, 2024. Excluding the impact of M&A-related expenses, amortization, and costs related to the transition of the company's China activities in the prior-year periods, operating expense increased 1.4% in the second quarter and 1.2% during the first six months of 2024. Foreign currency translations also had a favorable $1.7 million and $0.4 million impact on operating expense during the second quarter of 2024 and the first six months of 2024, respectively.
Current wording
Consolidated operating expense increased $8.4 million, or 1.9%, in the third quarter of 2024 and was relatively flat during the nine months ended September 30, 2024. Excluding the impact of M&A-related expenses, amortization, and costs related to the transition of the company's China activities in the prior-year periods, operating expense increased 3.7% in thethird quarter and 2.0% during thefirst nine months of 2024. Foreign currency translations also had an unfavorable $1.2 million and $0.8 million impact on operating expense during the third quarter of 2024 and the first nine months of 2024, respectively.
Previous wording
Compensation expense (which primarily consists of salaries, bonuses, and other company-sponsored benefits) increased $3.8 million in the second quarter of 2024. These higher costs primarily reflect an increase in bonus expense.
Current wording
Compensation expense (which primarily consists of salaries, bonuses, and other company-sponsored benefits) increased $16.2 million in the third quarter of 2024. These higher costs primarily reflect an increase in bonus expense as a result of increased accruals due to favorable performance compared to targets in certain parts of the business.
Previous wording
Higher SaaS-based software subscriptions of $1.8 million were also an operating expense driver during the second quarter of 2024 due to the company's investment in and renewal of various SaaS-based platforms across the business.
Current wording
Technology infrastructure costs consisting of expenses related to SaaS-based software subscriptions and cloud computingof $4.0 million were also an operating expense driver during the third quarter of 2024 due to the company's investment in and renewal of various SaaS-based platforms across the business.
Previous wording
Depreciation expense increased $2.6 million in the second quarter of 2024, driven mainly by higher levels of capitalized software development over the past several years.
Current wording
Depreciation expense increased $2.5 million in the third quarter of 2024, driven mainly by higher levels of capitalized software development over the past several years.
Previous wording
Increases in compensation expense, depreciation expense, and certain infrastructure-related costs were mostly offset by lower facilities-related expenses and professional fees during the second quarter of 2024.
Current wording
Increases in compensation expense, technology infrastructure costs, and depreciation expense were mostly offset by decreases in professional fees and facilities-related expenses during the first nine months of 2024 and the impact of DBRS, Inc. SEC settlement-related expenses during the first nine months of 2023.
Previous wording
Facilities-related expenses decreased $4.5 million during the second quarter of 2024 partially due to reduction of office space in certain geographies.
Current wording
Professional fees and facilities-related expenses decreased $9.3 million and $7.0 million, respectively, during the first nine months of 2024 compared with the prior year period. Professional fees declined due to lower expenses for third-party resources supporting M&A integration-related activity. Facilities-related expenses decreased partially due to reduction of office space in certain geographies.
Previous wording
Cost of revenue increased $6.3 million in the second quarter of 2024 and$5.6 million in the first six months of 2024. Higher compensation expense of $4.3 million and $4.2 million in the second quarter and first six months of 2024, respectively, were the primarily drivers of the increase due to the factors noted above.
Current wording
Cost of revenue increased $19.8 million in the third quarter of 2024 and $25.4 million in the first nine months of 2024. Higher compensation expense of $13.1 million and $17.3 million in the third quarter and first nine months of 2024, respectively, were the primarily drivers of the increase due to the factors noted above. Higher technology infrastructure costs also increased $2.1 million and $5.5 million during the third quarter and first nine months of 2024, respectively, due to the same factors noted above.
Previous wording
Sales and marketing expense increased $1.8 million in the second quarter of 2024. Advertising and marketing costs increased $1.5 million during the second quarter of 2024 due to higher marketing campaign and conference expense.
Current wording
Sales and marketing expense increased $1.6 million in the third quarter of 2024 and was relatively flat during the first nine months of 2024. Advertising and marketing costs increased $1.0 million during the third quarter of 2024 due to higher marketing campaign and conference expense. Professional fees also increased $1.0 million during the third quarter of 2024.
Previous wording
General and administrative expense decreased $9.8 million in the second quarter of 2024. A decline in professional fees of $5.0 million was the largest contributor to the decline during the quarter due to the factors noted above. Facilities-related expenses also declined $4.5 million during the second quarter of 2024 due to the factors noted above.
Current wording
General and administrative expense decreased $12.1 million in the third quarter of 2024. A decline in SEC-related settlement expense and professional fees of $6.0 million and $3.7 million, respectively, were the largest contributors to the decline during the quarter due to the factors noted above.
Previous wording
General and administrative expense decreased $13.5 million in the first six months of 2024. A decline in professional fees of $9.2 million was the largest contributor to the decline due to the factors noted above. Facilities-related expenses also declined $6.7 million during the first six months of 2024 due to the factors noted above. These decreases were partially offset by higher compensation expense primarily due to an increase in bonus expense and company-sponsored benefits.
Current wording
General and administrative expense decreased $25.6 million in the first nine months of 2024. A decline in professional fees and 2023 DBRS, Inc. SEC-related settlement expenses of $13.0 million and $8.0 million, respectively, were the largest contributors to the decline due to the factors noted above. Facilities-related expenses also declined $6.7 million during the first nine months of 2024 due to the factors noted above. These decreases were partially offset by higher compensation expense primarily due to an increase in bonus expense and company-sponsored benefits.
Previous wording
Depreciation expense increased $2.6 million in the second quarter of 2024 and$4.6 million in the first six months of 2024, driven mainly by higher levels of capitalized software development over the past several years.
Current wording
Depreciation expense increased $2.5 million in the third quarter of 2024 and$7.1 million in the first nine months of 2024, driven mainly by higher levels of capitalized software development over the past several years.
Previous wording
Consolidated operating income increased $66.8 million in the second quarter of 2024, reflecting an increase in revenue of $67.2 million and an increase in operating expense of $0.4 million. Operating margin was 19.0%, an increase of 10.7 percentage points compared with the second quarter of 2023.
Current wording
Consolidated operating income increased $45.5 million in the third quarter of 2024, reflecting an increase in revenue of $53.9 million and an increase in operating expense of $8.4 million. Operating margin was 20.3%, an increase of 6.7 percentage points compared with the third quarter of 2023.
Previous wording
Consolidated operating income increased $134.9 million in thefirst six months of 2024, reflecting an increase in revenue of$130.3 million and a decrease in operating expense of$4.6 million. Operating margin was 18.0%, an increase of 11.3 percentage points compared with thefirst six months of 2023.
Current wording
Consolidated operating income increased $180.4 million in thefirst nine months of 2024, reflecting an increase in revenue of$184.2 million and a decrease in operating expense of$3.8 million. Operating margin was 18.8%, an increase of 9.7 percentage points compared with thefirst nine months of 2023.
Previous wording
We reported adjusted operating income of $131.0 million and$241.8 million in the second quarter of 2024 andfirst six months of 2024, respectively, which excludes intangible amortization expense, M&A-related expenses, and expenses related to the significant reduction and shift of the company's operations in China. Adjusted operating income is a non-GAAP financial measure; the table below shows a reconciliation to the most directly comparable GAAP financial measure.
Current wording
We reported adjusted operating income of $130.3 million and$372.1 million in the third quarter of 2024 andfirst nine months of 2024, respectively, which excludes intangible amortization expense, M&A-related expenses, and expenses related to the significant reduction and shift of the company's operations in China. Adjusted operating income is a non-GAAP financial measure; the table below shows a reconciliation to the most directly comparable GAAP financial measure.
Previous wording
We reported adjusted operating margin of 22.9% in the second quarter of 2024 and 21.7% first six months of 2024, which excludes intangible amortization expense, M&A-related expenses, and expenses related to the significant reduction and shift of the company's operations in China. Adjusted operating margin is a non-GAAP financial measure; the table below shows a reconciliation to the most directly comparable GAAP financial measure.
Current wording
We reported adjusted operating margin of 22.9% in the third quarter of 2024 and 22.1% in thefirst nine months of 2024, which excludes intangible amortization expense, M&A-related expenses, and expenses related to the significant reduction and shift of the company's operations in China. Adjusted operating margin is a non-GAAP financial measure; the table below shows a reconciliation to the most directly comparable GAAP financial measure.
Previous wording
(1) Excludes finance lease amortization expense of $0.1 million and $0.4 million during the three months ended June 30, 2024 and 2023, respectively, and $0.4 million and $0.5 million during the six months ended June 30, 2024 and 2023, respectively.
Current wording
(1) Excludes finance lease amortization expense of $0.1 million and $0.5 million during the three months ended September 30, 2024 and 2023, respectively, and $0.5 million and $1.0 million during the nine months ended September 30, 2024 and 2023, respectively.
Previous wording
(4) Corporate and All Other includes unallocated corporate expenses as well as adjusted operating income (loss) from Morningstar Sustainalytics and Morningstar Indexes. During the second quarter of 2024 and 2023, unallocated corporate expenses were $46.1 million and $38.9 million, respectively. During first six months of 2024 and 2023, unallocated corporate expenses were $87.0 million and $75.0 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.
Current wording
(4) Corporate and All Other includes unallocated corporate expenses as well as adjusted operating income (loss) from Morningstar Sustainalytics and Morningstar Indexes. During the third quarter of 2024 and 2023, unallocated corporate expenses were $43.5 million and $36.3 million, respectively. During first nine months of 2024 and 2023, unallocated corporate expenses were $130.4 million and $111.4 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.
Previous wording
Morningstar Direct cont ributed $5.5 million to Morningstar Data and Analytics revenue growth, with revenue increasing 11.0%, or 11.6%, on an organic basis, reflecting growth across all geographies. Direct licenses increased 0.7%.
Current wording
Morningstar Direct cont ributed $5.9 million to revenue growth, with revenue increasing 11.5%, or 11.0%, on an organic basis, reflecting growth across all geographies. Direct licenses increased 1.4%.
Previous wording
Morningstar Data and Analytics total revenue increased $10.9 million, or 5.9%, for the three months ended June 30, 2024. Revenue grew 6.2% on an organic basis, primarily driven by growth in Morningstar Data and Morningstar Direct.
Current wording
Total revenue increased $37.6 million, or 6.8%, for thenine months ended September 30, 2024. Revenue grew 6.6% on an organic basis, primarily driven by growth in Morningstar Data and Morningstar Direct.
Previous wording
Revenue for the PitchBook platform, direct data, and Leveraged Commentary & Data (LCD) combined contributed $14.8 million to PitchBook revenue growth, with revenue increasing 11.0% ona reported and organic basis. Growth was primarily driven by the PitchBook platform with licensed users growing 16.6%, including the impact of legacy LCD clients who have moved to PitchBook licenses. PitchBook platform growth drivers were consistent with prior 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.
Current wording
Revenue for the PitchBook platform, direct data, and Leveraged Commentary & Data (LCD) combined contributed $17.1 million to revenue growth, with revenue increasing 12.5% on a reported and organic basis. Growth was primarily driven by the PitchBook platform with licensed users growing 19.0%. PitchBook clients who were not previously 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 platform 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.
Previous wording
PitchBook total revenue increased $31.4 million, or 11.7% on a reported and organic basis, for the six months ended June 30, 2024. Revenue growth was primarily driven by the PitchBook platform.
Current wording
Total revenue increased $48.4 million, or 11.9% on a reported and organic basis, for thenine months ended September 30, 2024. Revenue growth was primarily driven by the PitchBook platform.
Previous wording
PitchBook adjusted operating income increased $10.1 million, or 27.2%, and adjusted operating margin increased 4.0 percentage points for the three months ended June 30, 2024. The increase in margin was partially driven by the forfeiture of stock in the now-terminated PitchBook management bonus plan, which was a compensation vehicle designed primarily to incentivize PitchBook's former CEO.
Current wording
Adjusted operating income increased $31.0 million, or 29.1%, and adjusted operating margin increased 4.0 percentage points for the nine months ended September 30, 2024. The increase in margin was partially driven by the forfeiture of stock in the now-terminated PitchBook management bonus plan, which was a compensation vehicle designed primarily to incentivize PitchBook's former CEO.
Previous wording
Morningstar Wealth total revenue increased $10.9 million, or 9.8%, for the six months ended June 30, 2024. Revenue grew 10.1% on an organic basis, primarily driven by growth in Investment Management.
Current wording
Total revenue increased $3.8 million, or 6.6%, for the three months ended September 30, 2024. Revenue grew 6.1% on an organic basis, primarily driven by growth in Investment Management, which was partially offset by softness in advertising sales for Morningstar.com.
Previous wording
Morningstar Wealth asset-based revenue represented 57.1% of total segment revenue for the six months ended June 30, 2024. Revenue is based on quarter-end, prior quarter-end, or average asset levels during each quarter, which are often reported on a one-quarter lag for certain Investment Management products including Morningstar Managed Portfolios. The timing of this client asset reporting and the structure of our contracts often results in a lag between market movements and the impact on revenue. The following table summarizes our approximate Morningstar Wealth AUMA:
Current wording
Asset-based revenue is based on quarter-end, prior quarter-end, or average asset levels during each quarter, which are often reported on a one-quarter lag for certain Investment Management products including Morningstar Managed Portfolios. The timing of client asset reporting and the structure of our contracts often results in a lag between market movements and the impact on revenue. The following table summarizes our approximate Morningstar Wealth AUMA:
Previous wording
Investment Management contributed $6.4 million to consolidated revenue growth, with revenue increasing 21.8% ona reported or 22.0% organic basis. Growth was primarily supported by higher revenue for strategist model portfolios offered on third-party platforms and revenue growth for the International Wealth Platform. Reported AUMA increased 11.3% to $59.1 billion compared with the prior-year period, supported by strong market performance which drove higher asset values. Positive net flows to Morningstar Managed Portfolios over the trailing 12 months primarily reflected strong net inflows outside the U.S.
Current wording
Investment Management contributed $4.5 million to consolidated revenue growth, with revenue increasing 14.5% ona reported or 13.3% organic basis. Growth was primarily supported by higher revenue for strategist model portfolios offered on third-party platforms. Reported AUMA increased 25.6% to $63.7 billion compared with the prior-year period, helped by strong market performance which drove higher asset values. Positive net flows to Morningstar Managed Portfolios over the trailing 12 months primarily reflected net inflows outside the United States and to strategist portfolios in the United States.
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Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
We exclude revenue from acquired businesses from our organic revenue growth calculation for a period of 12 months after we complete the acquisition. For divestitures, we exclude revenue in the prior period for which there is no comparable revenue in the current period. Beginning in the fourth quarter of 2024, we will exclude revenue related to our Commodity and Energy Data business, which we divested in the third quarter of 2024, from our organic revenue growth calculation for a period of 12 months after we complete the divestiture.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
We present organic revenue because we believe it helps investors better compare our period-to-period results, and our management team uses this measure to evaluate the performance of our business.
Previous report — wording carried elsewhere
PitchBook adjusted operating income increased $19.7 million, or 29.1%, and adjusted operating margin increased 4.0 percentage points for the six months ended June 30, 2024.
Previous report — wording carried elsewhere
During the second quarter of 2023, the company made the final cash payments of $59.9 million related to the Termination Agreement, which were reflected in operating cash flows. Excluding the impact of the payments related to the Termination Agreement and $3.2 million of severance paid related to the significant reduction and shift of the company's operations in China, free cash flow would have been positive $57.3 million for the three months ended June 30, 2023.