Morningstar Inc
For the period ended Dec 31, 2024. Filed Feb 28, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 28, 2025
MORN$246.15+0.8%Stored close · as of Nov 9, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-29.
0001289419-24-000010
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-28.
0001289419-25-000041
Item 7. 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 258 previous paragraphs and 238 current paragraphs.
99 unchanged; 83 reworded; 54 added; 71 removed; 5 previous and 2 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 (54)
Current report
•impact of AI technologies on our business and reputation, and the legal risks as they are incorporated into our products and tools;
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•failure of our strategic transaction, 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;
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•liability, costs and reputational risks relating to environmental, social and governance considerations;
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•our dependence on third-party service providers in our operations;
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•inadequacy of our insurance coverage;
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•the potential and impact of vendor consolidation and clients' strategic decisions to replace our products and services with in-house products and services;
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•our ability to build and maintain short-term and long-term shareholder value and pay dividends to our shareholders;
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•our ability to maintain existing business and renewal rates and to gain new business;
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•the impact of recently issued accounting pronouncements on our consolidated financial statements and related disclosures;
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•impact on our stock price due to future sales of our common stock and fluctuations in our operating results; and
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Our transaction-based revenue includes revenue that is one time in nature and related Morningstar Credit recurring revenue primarily derived from surveillance and research.
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EU and UK Regulatory Divergence
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For our regulated businesses in the UK and EU, following the UK’s Financial Services and Markets Act 2023, there is a growing risk of divergence as between the specifics of the EU and UK regulatory regimes, as the UK continues to adapt its post-Brexit financial services regulatory framework and to tailor its rules to suit the UK market, while seeking to strengthen its position in wholesale markets more generally.
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With respect to our credit ratings and indexes business, divergence risks further increase the costs and complexity of regulatory compliance.
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In relation to investment management, any divergence risk remains to be seen pending the next iteration of the UK Financial Conduct Authority's three-year strategy.
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Increased ESG Regulation and Anti-ESG Scrutiny
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Cybersecurity, Data Privacy and Artificial Intelligence
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The introduction of the EU’s Digital Operational Resilience Act corresponds with a growing concern among financial services regulators as to the increasing influence of information technology service providers, and the risks to financial stability posed by dependency on those firms. Ensuring resiliency necessarily captures group (rather than individual entity) arrangements and is therefore both costly and complex. Morningstar is monitoring related developments in other countries that may follow the EU’s lead.
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Other Regulatory Trends
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Asset-based revenue increased 19.2%, on both a reported and organic basis, during 2024. Reported and organic revenue growth was primarily driven by increases in Morningstar Wealth, Morningstar Indexes, and Morningstar Retirement.
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Transaction-based revenue increased 31.2%, or 28.8% on an organic basis, during 2024. Reported and organic revenue was primarily driven by Morningstar Credit.
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Consolidated Operating Results
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Facilities-related expenses also declined $6.4 million during 2024 partially due to reduction of office space in certain geographies. These decreases were partially offset by higher compensation expense primarily due to an increase in company-sponsored benefits and bonus expense.
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In 2024, depreciation and amortization increased $5.5 million, or 3.0%, primarily due to an increase in depreciation expense which was partially offset by a decrease in intangible amortization expense.
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Depreciation expense increased $12.2 million in 2024, due primarily 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.
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Intangible amortization expense decreased$6.0 million in 2024, as certain intangible assets from some of our earlier acquisitions became fully amortized.
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Gain on sale of customer assets
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In 2024, we recorded a $64.0 million gain onsale of US TAMP assets. Refer to Note 10 of the Notes to our Consolidated Financial Statements for additional information.
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Consolidated operating income increased $254.2 million in 2024, or a 110.2% increase from 2023, reflecting an increase in revenue of $236.5 million and a $64.0 million gain related to the company's sale of US TAMP assets offset by an increase in operating expense of $46.3 million. Operating margin was 21.3% in 2024, an increase of 10.0 percentage points compared with 2023. Excluding the gain on sale of US TAMP assets, reported operating income would have increased 82.5%. The sale of US TAMP assets had a 2.8 percentage point impact on operating margin.
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(3) Reflects gain on sale of US TAMP assets.
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Morningstar Data contributed $19.4 million to Morningstar Data and Analytics revenue growth, with revenue increasing 6.9%, or 6.6% 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
Morningstar Data and Analytics adjusted operating income increased $15.6 million, or 4.6%, and adjusted operating margin decreased 0.4 percentage points in 2024. Increased revenue was partially offset by higher compensation costs, reflecting growth in bonuses, merit increases, and higher headcount; increased spending on sales and marketing; and the impact of the sale of the company's Commodity and Energy Data business.
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PitchBook total revenue increased $66.5 million, or 12.0%, in 2024. Revenue grew 12.1% on an organic basis.
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Revenue for the PitchBook platform, direct data, and Leveraged Commentary & Data (LCD) combined contributed $66.7 million to PitchBook revenue growth, with revenue increasing 12.3%, or 12.4% on an organic basis. Growth 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 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 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.
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PitchBook adjusted operating income increased$38.3 million, or 25.9%, and adjusted operating margin increased 3.3 percentage points in 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.
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PitchBook depreciation expense was $31.8 million and $26.8 million for 2024 and 2023, respectively.
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Morningstar Credit total revenue increased $75.7 million, or 35.1%, in 2024. Revenue increased 35.3% on an organic basis. Ratings related revenue increased across asset classes and geographies as ratings activity rebounded compared to a relatively soft prior year, with particular strength in commercial mortgage-backed securities, residential mortgage-backed securities, and corporate ratings-related revenue. Recurring revenue, which is derived primarily from surveillance, research, and other transaction-related revenue, and also includes data licensing revenue, represented 41% of total Morningstar Credit revenue.
Current report
Morningstar Wealth total revenue increased $18.5 million, or 8.0%, in 2024. Revenue grew 8.1% on an organic basis, primarily driven by growth in Investment Management. Organic revenue growth excludes platform revenue from the US TAMP from prior year starting in December, interim service fees received from AssetMark associated with the sale of US TAMP assets, and foreign currency impact.
Current report
Investment Management contributed $19.7 million to Morningstar Wealth revenue growth, with revenue increasing 16.1% on a reported or 16.3% on an organic basis. Growth was primarily supported by higher revenue for Morningstar Model Portfolios. Reported AUMA, calculated using the most recently available average quarterly or monthly data, increased 12.3% to $62.3 billion compared with the 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.
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Morningstar Wealth adjusted operating loss decreased$31.1 million and adjusted operating margin increased 13.9 percentage points in 2024. In 2024, the adjusted operating loss excludes the gain onsale of US TAMP assets, as well as related expenses. Prior-year period operating expenses included $1.8 million in severance related to targeted reorganizations in Morningstar Wealth.
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Removed paragraphs (71)
Previous report
•the impact of artificial intelligence (AI) and related new technologies on our business, legal, and regulatory exposure profile and reputation;
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•failing to efficiently integrate and leverage acquisitions and other investments, which may not realize the expected business or financial benefits, to produce the results we anticipate;
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Our transaction-based revenue, which is recognized primarily in our Morningstar Credit and Morningstar Wealth segments, is one-time in nature, compared with the recurring revenue streams represented by our license and asset-based products.
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Even in its fragmented state, regulators globally continue to focus on certain recurring themes, including access to financial services, the quality of advice and the value of the services provided, the protection of customer data and transparency around the uses of such data, the minimization of conflicts of interest, and improvements in corporate governance and risk management.
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With respect to our credit ratings business, the European Securities Market Authority or the U.K. Financial Conduct Authority may begin to make inconsistent modifications to the laws and regulations of the credit rating agency regulatory regimes, which would increase the cost and complexity of regulatory compliance for our credit ratings business.
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In the U.K. and Continental Europe, with respect to our Investment Management business, Morningstar continues to navigate the equivalence regimes and domestic laws governing matters of access in financial services post-Brexit. In other parts of the world, recent regulations and other guidance in jurisdictions, like Australia and New Zealand, have focused on investment management compliance practices, such as design and distribution obligations, conflicts of interest and fee disclosures. The increased complexity and extent of regulatory change globally is a challenge for both Morningstar and its clients, and we continue to expend resources to remain in compliance.
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Asset-based revenue increased 3.8%, or 5.6% on an organic basis, during 2023, primarily due to increases in Morningstar Indexes as well as increases in Morningstar Retirement and Morningstar Wealth asset-based revenue, driven by the rebound in global asset values and net inflows across multiple products compared to the prior year.
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Transaction-based revenue decreased 10.4%, or 11.5% on an organic basis, during 2023, primarily due to declines in Morningstar Credit revenue.
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In 2022, our consolidated revenue rose $171.3 million, or 10.1%. Foreign currency movements decreased revenue by $45.9 million in 2022.
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Asset-based revenue increased 1.7%, or 1.5% on an organic basis, during 2022, driven by increases in Morningstar Indexes which was partially offset by lower asset-based revenue in Morningstar Wealth and Morningstar Retirement reflecting declines in global markets.
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Transaction-based revenue decreased 11.0%, or 8.3% on an organic basis, during 2022, primarily due to declines in Morningstar Credit revenue.
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Consolidated Operating Expense
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In 2023, operating expense increased $105.2 million, or 6.2%.
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In July 2022, the company began to significantly reduce its operations in Shenzhen, China and to shift the work related to its global business functions to other Morningstar locations. Costs incurred in 2023 related to this transition totaled $15.6 million, due primarily to severance and personnel costs, transformation costs, which consisted of professional fees and the temporary duplication of headcount as the company hired replacement roles in other markets and continued to employ certain Shenzhen-based staff through the transition, and asset impairment costs. This compared to $35.7 million in 2022. During the third quarter of 2023, the company substantially completed these activities.
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Excluding the impact of the China operations transition, M&A-related expenses, and intangible amortization, operating expenses increased 8.9% during 2023.
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Higher compensation expense (which primarily consists of salaries, bonuses, and other company-sponsored benefits), depreciation expense, SaaS-based software subscriptions, facilities-related expenses, and commissions were the key contributors to operating expense growth in 2023. Foreign currency translations had a favorable impact of $8.3 million on operating expense in 2023.
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Compensation expense increased $121.7 million in 2023. These higher costs reflect higher bonus expense and higher salary costs, including the impact of merit increases, in the PitchBook and Morningstar Data and Analytics segments to support growth.
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Depreciation expense increased $15.4 million during 2023 as a result of higher capitalized software costs for product enhancements in prior periods. The shift in headcount to regions with higher compensation costs due to the company's China operations transition contributed to higher capitalized software costs. Higher leasehold improvements and additions of computer equipment also drove higher depreciation expense in 2023.
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Facilities-related expense increased $8.7 million during 2023, in connection with lease expansion in certain geographies.
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Sales commission expense increased $8.2 million in 2023, due to strong sales performance and higher amortization of capitalized commissions related to prior year sales performance.
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These increases were partially offset by lower stock-based compensation, professional fees, severance expense, and capitalized labor.
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Stock-based compensation decreased $30.5 million in 2023, primarily driven by the PitchBook management bonus plan. The current year of the plan features lower target payouts versus the prior year. In 2022, higher stock-based compensation was driven in large part by the overachievement of targets under the prior year plan.
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Severance expense decreased $12.7 million in 2023, compared to the prior year when severance related to the transition and shift of the company's China operations totaled $25.9 million. This decline was partially offset by $9.0 million of severance expense during 2023, respectively, related to targeted reorganizations and headcount reductions in certain parts of the business, including Morningstar Sustainalytics, Morningstar Wealth, and Morningstar DBRS. During 2023, the most significant reductions were at Morningstar Sustainalytics. These reorganizations were in part in response to slower than anticipated progress against growth targets due in part to softening demand for ESG solutions for Morningstar Sustainalytics, the impact of sharp market declines in 2022 for Morningstar Wealth, and weak credit issuance activity, especially in U.S. CMBS, for Morningstar DBRS. In addition, the company incurred $2.4 million in severance expense related to the company's China operations transition during 2023.
Previous report
An increase of $11.7 million in capitalized software development related to the shift in headcount to regions with higher compensation costs due to the company's China operations transition and accelerated product development efforts for our key product areas reduced operating expense in 2023.
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Cost of revenue increased $64.2 million, or 8.2%, in 2023. Higher compensation expense of $66.1 million was the largest contributor to the increase, primarily due the factors noted above. Cloud computing and production expense also increased $5.6 million and $4.7 million, respectively. These increases were partially offset by lower capitalized software expense of $11.7 million and lower professional fees of $10.7 million, due to the factors described above.
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Continuous focus on the development of our major software platforms for our key product areas, in addition to bringing new products and capabilities to market, resulted in an increase in capitalized software development over the prior year, which in turn reduced operating expense. In 2023, we capitalized $100.0 million associated with software development activities, internal infrastructure, and software, compared with $88.3 million in 2022. The increase in capitalized software development related to the company's China operations transition resulted in a shift of headcount to higher compensation regions.
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General and administrative expense decreased $44.6 million, or 11.1%, in 2023. A decline in stock-based compensation expense of $32.4 million was the largest contributor to the decline during 2023. The decrease in stock-based compensation expense was primarily driven by the PitchBook management bonus plan. The current year of the plan features lower target payouts versus the prior year. In 2022, higher stock-based compensation was driven in large part by the overachievement of targets under the prior year plan.
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Severance expense also declined $18.2 million during 2023 due to the factors noted above. The decline in severance expense was partially offset by an increase of $9.0 million of severance expense related to targeted reorganizations in certain areas of business during 2023 as noted above. Professional fees decreased $6.3 million during 2023.
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These decreases were partially offset by an increase in expense related to settlements between the SEC and DBRS, Inc. totaling $8.0 million and higher rent expense of $6.8 million during 2023.
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In 2023, depreciation and amortization increased $18.3 million, or 11.0%, primarily due to depreciation expense.
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Depreciation expense increased $15.4 million in 2023, driven mainly by depreciation expense from higher levels of capitalized software development over the past several years. Higher leasehold improvements and additions of computer equipment also drove higher depreciation expense in 2023.
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Intangible amortization expense increased$3.8 million in 2023, primarily from additional amortization related to intangibles from the acquisitions of Leveraged Commentary & Data (LCD) and Praemium Portfolio Services Limited (Praemium).
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Consolidated operating income increased $62.8 million in 2023, or a 37.4% increase from 2022, reflecting an increase in revenue of $168.0 million, which was partially offset by an increase in operating expense of $105.2 million. Operating margin was 11.3% in 2023, an increase of 2.3 percentage points compared with 2022. Severance costs of $9.0 million related to certain reorganizations excluding our China activities negatively impacted operating margin and adjusted operating margin by 0.4 percentage points during 2023. In addition, the DBRS SEC settlements negatively impacted operating margin and adjusted operating margin by an additional 0.4 percentage points.
Previous report
(3) Reflects the impact of M&A-related earn-outs included in operating expense.
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Morningstar Data contributed $26.2 million to Morningstar Data and Analytics revenue growth, with revenue increasing 10.3% on a reported and organic basis, supported by growth across all major geographies. At the product level, managed investment data, including fund data, continued to be a key driver of higher revenue, followed by growth in Morningstar Essentials and equity data. In 2023, Morningstar Data's coverage continued to evolve to meet client needs, with the addition of structured products and notes data and the continued expansion of coverage on other vehicle types.
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Morningstar Data and Analytics adjusted operating income increased $26.5 million, or 8.5%, and adjusted operating margin increased 0.5 percentage points in 2023, as revenue growth outpaced expense growth. Expense growth was primarily driven by higher compensation costs.
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Morningstar Data and Analytics total revenue increased $29.1 million, or 4.4%, in 2022. Revenue grew 8.0% on an organic basis, driven primarily by demand for Morningstar Data and Morningstar Direct.
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Morningstar Data contributed $11.5 million to Morningstar Data and Analytics revenue growth, with revenue increasing 4.7% or 9.4%, on an organic basis, driven by growth across geographies and strong demand for fund data. In 2022, Morningstar Data expanded the reach of its data sets to better cover the client portfolio with enhancements to fixed-income data and analytics and expanded coverage of 529 plan portfolios, public equities, collective investment trusts, and model portfolios. We also introduced new regulatory data solutions in response to global investor protection, capital adequacy, and sustainability regulations.
Previous report
Morningstar Direct contributed $11.6 million to Morningstar Data and Analytics revenue growth, with revenue increasing 6.7%, or 10.7%, on an organic basis, driven by growth across geographies. Morningstar Direct licenses increased 5.7%, reflecting gains from both new and existing clients. In 2022, Morningstar Direct enriched and expanded Analytics Lab, which combines access to Morningstar's data and research with Jupyter Notebook, an open-source data-science tool, to allow clients to explore and analyze Morningstar data more efficiently in a flexible environment. Performance was also positively impacted by the release of the Sustainability and Portfolio Hubs, which act as a central repository of research and tools for related workflows, and broadened data coverage in fixed-income, exchange-traded funds (ETFs), ESG, model portfolios, and alternatives to better cover investor portfolios.
Previous report
Morningstar Data and Analytics adjusted operating income increased $19.8 million, or 6.7%, and adjusted operating margin increased 1.0 percentage points in 2022, as revenue growth outpaced expense growth. Expense growth was primarily driven by higher compensation costs, as well as increased professional fees.
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Reworded paragraphs (83)
Previous wording
The discussion included in this section, as well as under "Item 1—Business"and other sections of this Report, 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 “committed,” “consider,” “estimate,” “forecast,” “future,” “goal,” “is designed to,” “maintain,” “may,” “might,” “objective,” “ongoing,” “could,” “expect,” “intend,” “plan,” “possible,” “potential,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “prospects”, “continue,” “seek,” “strategy,” “strive,” “will,” “would,” 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:
Current wording
The discussion included in this section, as well as under "Item 1—Business"and other sections of this Report, 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,” “estimate,” “predict,” “potential,” “prospects”, “continue,” “seek,” “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:
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•compliance failures, regulatory action, or changes in laws applicable to our credit ratings operations, investment advisory, environmental, social, and governance (ESG), and index businesses;
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•compliance failures, regulatory action, or changes in laws applicable to our regulated businesses;
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•failing to innovate our product and service offerings or anticipate our clients’ changing needs;
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•failing to innovate our product and service offerings or meet or anticipate our clients’ changing needs;
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•prolonged volatility or downturns affecting the financial sector, global financial markets, and the global economy and its effect on our revenue from asset-based fees and credit ratings business;
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•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 credit ratings business;
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•inadequacy of our operational risk management, business continuity programs and insurance coverage in the event of a material disruptive event;
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•inadequacy of our operational risk management and business continuity programs to address materially disruptive events;
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•failing to maintain growth across our businesses in today's fragmented geopolitical, regulatory and cultural world;
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•failing to maintain growth across our businesses due to changes in geopolitics and the regulatory landscape;
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•the potential adverse effect of our indebtedness on our cash flows and financial and operational flexibility;
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•the potential adverse effect of our indebtedness on our cash flow and financial and operational flexibility;
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•challenges in accounting for tax complexities in the global jurisdictions we operate in could materially affect our tax obligations and tax rates; and
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•challenges in accounting for tax complexities in the global jurisdictions we operate in could materially affect our tax obligations and tax rates;
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A more complete description of these risks and uncertainties, among others, can be found in Item 1A—Risk Factors of this Report. 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 Securities and Exchange Commission (SEC) on Forms 10-K, 10-Q, and 8-K.
Current wording
A more complete description of these risks and uncertainties, among others, can be found in Item 1A—Risk Factors of this Report. 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.
Previous wording
This section includes comparisons of certain 2023 financial information to the same information for 2022. Year-to-year comparisons of the 2022 financial information to the same information for 2021 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 24, 2023. This section also includes comparisons of 2022 segment financial information to the same information for 2021.
Current wording
This section includes comparisons of certain 2024 financial information to the same information for 2023. Year-to-year comparisons of the 2023 financial information to the same information for 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 29, 2024.
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 investors 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 every investor with conviction that they can make better-informed decisions and realize success on their own terms.
Previous wording
Our strategy is to deliver insights and experiences that are essential to the investor workflow. Proprietary data sets, meaningful analytics, independent research, and effe ctive investment strategies are at the core of the powerful digital solutions that investors across our client segments rely on. We have a keen focus on innovation across data, research, product, and delivery so that we can effectively cater to the evolving needs and expectations of investors globally.
Current wording
Our strategy is to deliver insights and experiences that make us essential to investor workflow. Proprietary data sets, meaningful analytics, independent research, and effe ctive investment strategies are at the core of the powerful digital solutions that investors across our client segments rely on. We have a keen focus on innovation across data, research, product, and delivery so that we can effectively cater to the evolving needs and expectations of investors globally.
Previous wording
Effective as of December 31, 2023, the company concluded that it 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 6 of the Notes to our Consolidated Financial Statements in Part II of this Report.
Current wording
The companyhas 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 6 of the Notes to our Consolidated Financial Statements in Part II of this Report.
Previous wording
We offer an extensive line of investment-related products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors and other participants in the private capital markets.
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We offer an extensive line of investment-related products and services for individual and institutional investors in public and private capital markets; financial advisors and wealth managers; alliances and redistributors; asset managers; retirement plan providers, advisors and sponsors; and issuers of fixed-income securities.
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Our segments sell many of our research and data products and services through license agreements on either a per user or enterprise-basis. Morningstar Data and Analytics and PitchBook generate most of our licensed-based revenue. Our license agreements typically range from one to three years and are accounted for as subscription services available to customers and not as a license under the accounting guidance.
Current wording
Our segments sell many of our research and data products and services through license agreements on either a per user or enterprise-basis. Morningstar Data and Analytics and PitchBook generate most of our license-based revenue. Our license agreements typically range from one to three years and are accounted for as subscription services available to customers and not as licenses under the accounting guidance.
Previous wording
We invoice some of our clients and collect cash in advance of providing services or fulfilling subscription services to our customers. Deferred revenue totaled $544.0 million (of which $517.7 million was classified as a current liability with an additional $26.3 million included in long-term liabilities) at the end of 2023. We expect to recognize this deferred revenue in future periods as we fulfill the service obligations under our license and subscription agreements.
Current wording
We invoice some of our clients and collect cash in advance of providing services or fulfilling subscription services to our customers. Deferred revenue totaled $563.2 million, of which $540.8 million was classified as a current liability with an additional $22.4 million included in long-term liabilities, at the end of 2024. We expect to recognize this deferred revenue in future periods as we fulfill the service obligations under our license and subscription agreements.
Previous wording
As of December 31, 2023, we had wholly- or majority-owned subsidiaries in 31 countries outside of the U.S. and included their results of operations and financial condition in our consolidated financial statements. We also have investments outside of the U.S., and where we have significant influence, we apply the equity method of accounting.
Current wording
As of December 31, 2024, we had wholly-owned subsidiaries in 31 countries outside of the US and included their results of operations and financial condition in our consolidated financial statements. We also have investments outside of the US, and where we have significant influence, we apply the equity method of accounting.
Previous wording
Organic revenue, adjusted operating income, adjusted operating margin, and free cash flow are not measures of performance set forth under U.S. generally accepted accounting principles (GAAP).
Current wording
Organic revenue, adjusted operating income, adjusted operating margin, and free cash flow are not measures of performance set forth under US generally accepted accounting principles (GAAP).
Previous wording
We define organic revenue as consolidated revenue excluding acquisitions, divestitures, adoption of new accounting standard changes (accounting changes), and foreign currency translations. 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 businesses acquired or divested from organic revenue for a period of 12 months after we complete the acquisition or divestiture. Organic revenue is not equivalent to any measure required under GAAP and may not be comparable to similarly titled measures reported by other companies.
Current wording
We define organic revenue as consolidated revenue excluding acquisitions, divestitures, adoption of new accounting standard changes (accounting changes), and foreign currency translations. 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 and product areas. We exclude revenue from businesses acquired or divested from organic revenue for a period of 12 months after we complete the acquisition or divestiture. Organic revenue is not equivalent to any measure required under GAAP and may not be comparable to similarly titled measures reported by other companies.
Previous wording
We define adjusted operating income as operating income excluding all mergers and acquisitions (M&A)-related expenses (including M&A-related earn-outs) and amortization, as well as all expenses related to the significant reduction and shift of the company's operations in China. We define adjusted operating margin as operating margin excluding all M&A-related expenses (including M&A-related earn-outs) and amortization, as well as all expenses related to the significant reduction and shift of the company's operations in China. We present these measures because we believe they better reflect period-over-period comparisons and improves overall understanding of the underlying performance of the business absent the impact of M&A and the shift of the company's operations in China.
Current wording
We define adjusted operating income as 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. We define adjusted operating margin as 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. We present these measures because we believe they better reflect period-over-period comparisons and improves overall understanding of the underlying performance of the business absent the impact of M&A and the shift of the company's operations in China.
Previous wording
In addition to the measures described above, we calculate revenue renewal rates to evaluate how successful we've been in maintaining existing business for products and services that have revenue associated with periodic renewals. We use the annual contract value method, which tracks the dollar value of renewals compared with the total dollar value of contracts up for renewal during the period. We include changes in the contract value in the renewal amount. We also include variable-fee contracts in this calculation and use the actual revenue for the previous comparable fiscal period as the base rate for calculating the renewal percentage. The renewal rate excludes setup and customization fees and contract renewals that were pending as of January 31, 2024.
Current wording
In addition to the measures described above, we calculate revenue renewal rates to evaluate how successful we've been in maintaining existing business for products and services that have revenue associated with periodic renewals. We use the annual contract value method, which tracks the dollar value of renewals compared with the total dollar value of contracts up for renewal during the period. We include changes in the contract value in the renewal amount. We use the actual revenue for the previous comparable fiscal period as the base rate for calculating the renewal percentage. The renewal rate excludes setup and customization fees and contract renewals that were pending as of January 31, 2025.
Previous wording
In addition to the industry developments described under Part I, Item 1. Business - "Our Strategy" there are several longer-term regulatory trends we consider relevant to our business, as summarized below and as described in more detail in Part I, Item 1. Business - “Government Regulation” and in Part I, Item 1A - “Risk Factors” of this Report.
Current wording
In addition to the industry developments described under Part I, Item 1. Business - "Our Strategy," there are several longer-term regulatory trends we consider relevant to our business, as summarized below and as described in more detail in Part I, Item 1. Business - “Government Regulation” and in Part I, Item 1A - “Risk Factors” of this Report. The increased complexity and extent of regulation globally is a challenge for both Morningstar and its clients, and we continue to invest in our compliance organization, processes and controls. Additionally, current regulatory uncertainty in the US — including changes and the pace of changes enacted by the current presidential administration and related leadership changes at US government agencies such as the US Securities and Exchange Commission, as well as recent and potential future US Supreme Court rulings — may impact our business.
Previous wording
Interest from investors, regulators and other relevant stakeholders in firms adopting ESG-related business and operational risk strategies persists. Morningstar is impacted by these trends on the corporate level, as a United States (U.S.) public company with international operations, and on a business level, as a provider of ESG data, ratings and other services to help investors and companies identify, understand, and manage ESG-driven risks and opportunities and inform their decisions. These developments are expected to have long term impacts on our delivery of products and services, customer interactions, physical operations, technology systems, and dependencies on third parties.
Current wording
Interest from investors, regulators and other relevant stakeholders in firms adopting ESG-related business and operational risk strategies persists. Morningstar is impacted by these trends on a corporate level, as a US public company with international operations, and on a business level. Specifically, we anticipate that this area will experience further regulatory developments likely to have long term impacts on our delivery of products and services, customer interactions, physical operations, technology systems, and dependencies on third parties.
Previous wording
Morningstar is monitoring proposed legislation in the U.S., European Union (EU), and in other jurisdictions relevant to its ESG business activities. These and other potential regulations may impact not only the scope of our disclosure obligations and the ESG-related products and services we provide to customers, but also present an opportunity to guide and inform investors who are looking to understand the regulations and develop their own workflows to ensure their compliance with new requirements.
Current wording
Morningstar is monitoring proposed ESG legislation in the US, EU, and in other jurisdictions relevant to its business activities. The future of any US regulation of sustainability matters is uncertain and may not align with current or future regulations in other jurisdictions, including the EU. These and other potential regulations may impact not only the scope of our disclosure obligations and the products and services we provide to customers but also present an opportunity to guide and inform investors who are looking to understand the regulations and develop their own workflows to ensure their compliance with new requirements.
Previous wording
The politicization of ESG-related business activities and investments has increased in recent years, particularly in the U.S. This politicization has led to the rise of anti-ESG proponents and actions, including individual and multi-state inquiries into companies’ ESG activities, the submission of anti-ESG shareholder proposals to U.S.-based public companies, and the filing of shareholder derivative lawsuits against U.S. companies. As Morningstar provides data and analysis with respect to ESG-related investments, Morningstar, along with other financial service providers, faces scrutiny in this political environment and expends resources in responding to inquiries. Morningstar continues to closely monitor the ESG and anti-ESG landscape.
Current wording
The politicization of ESG-related business activities and investments has increased in recent years, particularly in the US. This politicization may result in Morningstar facing heightened scrutiny in this regard, and may result in the company incurring increased costs in addressing related inquiries. Morningstar continues to closely monitor the ESG and anti-ESG landscape.
Previous wording
As a related matter, issues of cybersecurity as they relate to the identification and mitigation of cyber threats also continue to grow in prominence and laws governing data breaches continue to proliferate globally. Financial regulators have also increased scrutiny on the data protection practices of the entities, such as Morningstar, that they oversee. In the U.S., the SEC recently adopted disclosure requirements regarding cybersecurity hygiene and preparedness and cyber incident reporting.
Current wording
Data privacy regulation continues to proliferate, as numerous national and state jurisdictions have adopted or are considering new data privacy regulations. As a related matter, issues of cybersecurity as they relate to the identification and mitigation of cyber threats also continue to grow in prominence and laws governing data breaches continue to proliferate globally. Financial regulators have also increased their scrutiny of the data protection practices of the entities, such as Morningstar, that they oversee.
Previous wording
Regulators in various global jurisdictions have adopted or are considering regulations governing AI technologies, including the EU’s AI Act. Additionally, regulators have sought to clarify that existing regulations apply to novel use cases involving AI technologies. Combined, this regulatory activity creates a complex and potentially costly compliance environment as Morningstar deploys AI technologies in its products and in tools used in the workplace.
Current wording
Regulators in various global jurisdictions have adopted or are considering regulations governing AI technologies, such as the EU AI Act. Additionally, regulators have sought to clarify that existing regulations apply to novel use cases involving AI technologies. Combined, this regulatory activity creates a complex and potentially costly compliance environment as Morningstar deploys AI technologies in its products and in tools used in the workplace.
Previous wording
Finally, our company is impacted by government regulation and policies focused on macroeconomic trends such as inflation and unemployment. Central banks’ increases in interest rates to combat inflationary pressures increases our interest expense on our variable rate indebtedness, while the volatile rate environment reduces credit issuance putting negative pressure on our credit rating business. Our compensation expense reflects rising wage scales in many of the markets where we operate as unemployment rates remain low. Overall, our business, balance sheet, technological infrastructure, and teams have shown resilience and flexibility navigating global macroeconomic trends.
Current wording
Finally, our company is impacted by government regulation and policies focused on macroeconomic trends such as inflation, trade, and unemployment. Central banks’ increases in interest rates to combat inflationary pressures increases our interest expense on our variable rate indebtedness, while the volatile rate environment can impact credit issuance volumes, impacting our credit rating business, as well as M&A activity more broadly. Our compensation expense reflects rising wage scales in many of the markets where we operate as unemployment rates remain low. Overall, our business, balance sheet, technological infrastructure, and teams have shown resilience and flexibility navigating global macroeconomic trends.
Previous wording
(1) Starting with the quarter ended March 31, 2023, the company updated its revenue-type classifications to account for product areas with more than one revenue type. Prior periods have not been restated to reflect the updated classifications. Revenue from Morningstar Sustainalytics' second-party opinions product was reclassified from license-based to transaction-based. Revenue from Morningstar Indexes data and services products was reclassified from asset-based to license-based. Revenue from Morningstar DBRS and Morningstar Credit data products was reclassified from transaction-based to license-based.
Current 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.
Previous wording
In 2023, our consolidated revenue rose $168.0 million, or 9.0%. Foreign currency movements decreased revenue by $3.2 million in 2023.
Current wording
In 2024, our consolidated revenue rose $236.5 million, or 11.6%. Foreign currency movements increased revenue by $1.3 million in 2024.
Previous wording
License-based revenue, which represents subscription services available to customers, increased 14.0%, or 11.8% on an organic basis, during 2023. Reported and organic revenue growth was primarily driven by strong demand for PitchBook and Morningstar Data and Analytics products.
Current wording
License-based revenue, which represents subscription services available to customers, increased 7.1%, or 7.6% on an organic basis, during 2024. Reported and organic revenue growth was primarily driven by strong demand for PitchBook and Morningstar Data and Analytics products.
Previous wording
Organic revenue (revenue excluding acquisitions, divestitures, adoption of new accounting standard changes (accounting changes), and the effect of foreign currency translations) is considered a non-GAAP financial measure. The definition of organic revenue we use may not be the same as similarly titled measures used by other companies. Organic revenue should not be considered an alternative to any measure of performance as required under GAAP.
Current wording
Organic revenue is considered a non-GAAP financial measure.
Previous 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 and product areas. 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 exclude revenue from acquired businesses from our organic revenue growth calculation for a period of 12 months after we complete the acquisi tion. For divestitures, we exclude revenue in the prior period for which there is no comparable revenue in the current period. We will exclude revenue related to our Commodity and Energy Data business, which we divested in the third quarter of 2024, as well as revenue and interim service fees associated with the sale of customer assets from the US Morningstar Wealth Turnkey Asset Management Platform (TAMP) to AssetMark (sale of US TAMP assets), which we divested in the fourth quarter of 2024, from our organic revenue growth calculation for a period of 12 months after we complete the divestitures.
Previous wording
Excluding revenue from acquisitions, accounting changes, and the impact of foreign currency translations, organic revenue increased 7.5% in 2023. PitchBook and Morningstar Data and Analytics were the largest drivers of the increase in organic revenue during 2023.
Current wording
Excluding revenue from acquisitions, divestitures, accounting changes, and the impact of foreign currency translations, organic revenue increased 11.8% in 2024. Morningstar Credit, PitchBook, and Morningstar Data and Analytics were the largest drivers of the increase in organic revenue during 2024.
Previous wording
International revenue comprised approximately 28% of our consolidated revenue in 2023 and 2022. Approximately 59% of international revenue was generated from Continental Europe and the U.K. in 2023. Revenue from international operations increased $51.3 million, or 9.9%, in 2023 driven bystrong demand for Morningstar Data and Analytics products.
Current wording
International revenue comprised approximately 28% of our consolidated revenue in 2024 and 2023. Approximately 58% of international revenue was generated from Continental Europe and the UK in 2024. Revenue from international operations increased $68.3 million, or 12.0%, in 2024 driven bystrong demand for Morningstar Data and Analytics, Morningstar Wealth, and Morningstar Credit products.
Previous wording
As discussed in How We Evaluate Our Business, we calculate revenue renewal rates to help measure how successful we've been in maintaining existing business for products and services that have renewable revenue. The figures for license-based products includes the effect of price changes; increasing client bases upon contract renewal; any loss of clients due to cancellations; changes to the contract value upon renewal (such as increased users); and changes in the value of variable-fee contracts. These factors, therefore, can result in renewal rate percentages greater or lower than 100%.
Current wording
As discussed in How We Evaluate Our Business, we calculate revenue renewal rates to help measure how successful we've been in maintaining existing business for products and services that have renewable revenue. The figures for license-based products includes the effect of price changes; increasing client bases upon contract renewal; any loss of clients due to cancellations; and changes to the contract value upon renewal (such as increased users). These factors, therefore, can result in renewal rate percentages greater or lower than 100%.
Previous wording
Our revenue renewal rate calculation includes only those products that we consider to be license-based. These are primarily weighted toward Morningstar Data and Analytics and PitchBook products, but also includes other license-based products and services. For these license-based products and services, we estimate that our annual renewal rate was approximately 103% in 2023 versus 105% in 2022.
Current wording
Our revenue renewal rate calculation includes only those products that we consider to be license-based. These are primarily weighted toward Morningstar Data and Analytics and PitchBook products, but also includes other license-based products and services. For these license-based products and services, we estimate that our annual renewal rate was approximately 100% in 2024 versus 103% in 2023.
Previous wording
Cost of revenue is our largest category of operating expense, representing about one-half of our total operating expense. Our business relies heavily on human capital, and cost of revenue includes the compensation expense for employees who produce our products and services. We include compensation expense for approximately 75% of our employees in this category.
Current wording
Cost of revenue is our largest category of operating expense, representing about one-half of our total operating expense. Our business relies heavily on human capital, and cost of revenue includes the compensation expense for employees who produce our products and services. We include compensation expense for approximately 76% of our employees in this category.
Previous wording
Higher software subscriptions were also a driver during 2023, increasing $10.9 million, due to the company's investment in various SaaS-based platforms across the business.
Current wording
Cost of revenue increased $52.2 million, or 6.2%, in 2024. Higher compensation expense of $35.8 million was the largest contributor to the increase, primarily driven by higher bonus expense due to favorable performance compared to plan targets. The company updated its definition of compensation expense to incorporate commissions, severance, and stock-based compensation, in addition to salaries, bonus, employee benefits, and payroll taxes, which were all included in the earlier definition. Compensation expense for prior periods has been retroactively adjusted for the updated definition. Technology infrastructure costs consisting of expenses related to SaaS-based software subscriptions and cloud computing of $14.0 million were also a driver in higher operating expense during 2024 due to the company's investment in and renewal of various SaaS-based platforms across the business.
Previous wording
Sales and marketing expense increased $67.3 million, or 18.9%, in 2023. Higher compensation expense of $54.3 million was the largest contributor, primarily due to the factors noted above. Sales commission expense grew by $7.6 milliondue in large part to strong sales performance and higher amortization of capitalized commissions related to prior year sales performance, primarily for PitchBook. Advertising and marketing costs increased $5.3 million during 2023 due tohigher pay-per-click advertising and marketing campaign expense.
Current wording
Sales and marketing expense increased $17.2 million, or 4.1%, in 2024. Higher compensation expense of $5.5 million was the largest contributor, primarily due to the factors noted above relating to cost of revenue. Advertising and marketing costs increased $5.4 million during 2024 due to higher advertising and marketing campaign expense.
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Current report — wording carried from elsewhere
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current report — wording carried from elsewhere
(2)Corporate and All Other provides a reconciliation between revenue from our reportable segments and consolidated revenue. Corporate and All Other includes Morningstar Sustainalytics and Morningstar Indexes as sources of revenues. Revenue from Morningstar Sustainalytics was $117.3 million in 2024 and $118.2 million in 2023. Revenue from Morningstar Indexes was $84.7 million in 2024 and $65.5 million in 2023.
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
Data privacy regulation continues to proliferate, as numerous national and state jurisdictions have adopted or are considering new data privacy regulations.
Previous report — wording carried elsewhere
License-based revenue increased 17.7%, or 18.0% on an organic basis, during 2022. Reported and organic revenue growth was primarily driven by strong demand for PitchBook and Morningstar Data and Analytics products.
Previous report — wording carried elsewhere
We describe our investments in unconsolidated entities in more detail in Note 9 of the Notes to our Consolidated Financial Statements.
Previous report — wording carried elsewhere
On July 2, 2019, we entered into a senior credit agreement (the 2019 Credit Agreement). The 2019 Credit Agreement provided the company with a five-year multi-currency credit facility with an initial borrowing capacity of up to $750.0 million, including a $300.0 million revolving credit facility (the 2019 Revolving Credit Facility) and a term loan facility of $450.0 million. On May 6, 2022, the company terminated the 2019 Credit Agreement.
Previous report — wording carried elsewhere
On May 6, 2022, the company entered into a new senior credit agreement (the 2022 Credit Agreement). The 2022 Credit Agreement provided the company with a five-year multi-currency credit facility with an initial borrowing capacity of up to$1.1 billion, including a$650.0 million term loan (the 2022 Term Facility) with an initial draw of$600.0 million and an option for a second draw of up to$50.0 million and a$450.0 million revolving credit facility (the 2022 Revolving Credit Facility). The 2022 Credit Agreement also provided for the issuance of up to$50.0 million of letters of credit and a$100.0 million sub-limit for a swingline facility under the 2022 Revolving Credit Facility.