Morningstar, Inc.
For the period ended Mar 31, 2025. Filed May 1, 2025.
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.
Mar 31, 2025 · Filed May 1, 2025
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 2024-09-30; filed 2024-10-25.
0001289419-24-000111
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-01.
0001289419-25-000073
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 154 current paragraphs.
55 unchanged; 52 reworded; 45 added; 76 removed; 3 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 (45)
Current report
•changing economic conditions, including prolonged volatility, recessions, or downturns affecting the financial sector and global financial markets, and impacts of global trade policies, may negatively impact our financial results, including those of our asset-based businesses;
Current report
•the impact of AI technologies on our business and reputation, and the legal risks as they are incorporated into our products and tools;
Current report
•failure of our strategic transactions, acquisitions, divestitures, and investments in companies or technologies to yield expected business or financial benefits, negatively impacting our operating results and our ability to deliver long-term value to shareholders;
Current report
•liability, costs, and reputational risks relating to environmental, social, and governance considerations;
Current report
•our dependence on third-party service providers in our operations;
Current report
•inadequacy of our insurance coverage;
Current report
•the potential and impact of vendor consolidation and clients' strategic decisions to replace our products and services with in-house products and services;
Current report
•our ability to build and maintain short-term and long-term shareholder value and pay dividends to our shareholders;
Current report
•our ability to maintain existing business and renewal rates and to gain new business;
Current report
•the impact of recently issued accounting pronouncements on our consolidated financial statements and related disclosures; and
Current report
License-based: Generated mostly by our Morningstar Direct Platform and PitchBook segments, revenue through license agreements on either a per user or enterprise-basis. 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.
Current report
Transaction-based: Revenue that is one time in nature and related Morningstar Credit recurring revenue primarily derived from surveillance and research.
Current report
•"Adjusted Operating Margin" is operating margin excluding (1) intangible amortization expense, (2) M&A-related expenses, and (3) certain other one-time, non-recurring items which management does not consider when evaluating ongoing performance.
Current report
Organic revenue increased 9.1% in the first quarter of 2025. PitchBook, Morningstar Credit, and Morningstar Direct Platform were the largest drivers of the increase in organic revenue in the first quarter of 2025.
Current report
The table below shows a reconciliation oforganic revenue to the most directly comparable GAAP financial measure.
Current report
Cost of revenue increased $13.3 million in the first quarter of 2025. Higher compensation expense of $6.2 million was the largest contributor to the increase, primarily driven by higher severance costs related to the announced sunsetting of Morningstar Office and an increase in salaries and payroll taxes. Techn ology infrastructure costs were also a driver in higher operating expense during the first quarter of 2025 due to the company's investment in and renewal of various SaaS-based platforms across the business.
Current report
General and administrative expense decreased $3.8 million in the first quarter of 2025 driven primarily by lower professional fees and stock-based compensation expense.
Current report
Depreciation expense increased $3.6 million in the first quarter of 2025 due primarily to higher capitalized software costs for product enhancements in prior periods.
Current report
We reported adjusted operating income of $135.4 million in the first quarter of 2025. The table below shows a reconciliation of adjusted operating income to the most directly comparable GAAP financial measure.
Current report
We reported adjusted operating margin of 23.3% in the first quarter of 2025. The table below shows a reconciliation of adjusted operating margin to the most directly comparable GAAP financial measure.
Current report
Morningstar Direct Platform
Current report
The following table presents the results for Morningstar Direct Platform:
Current report
Morningstar Direct Platform total revenue increased $2.5 million, or 1.3%, for the three months ended March 31, 2025. Revenue grew 4.2% on an organic basis, primarily driven by growth in Morningstar Direct and Morningstar Data. Organic revenue growth excludes revenue associated with the divested Commodity and Energy Data business from the prior-year period and foreign currency impact.
Current report
The Company has changed the name of this reportable segment to Morningstar Direct Platform. It also changed the composition of the key product areas within the segment (Morningstar Data, Morningstar Direct, and Morningstar Advisor Workstation). There were no changes to the overall composition of the reportable segment.
Current report
Morningstar Direct contributed $3.8 million to revenue growth, with revenue increasing 5.6%, or 6.8%, on an organic basis, reflecting strength in its two core products, Morningstar Direct and Morningstar Direct Reporting Solutions, with growth across geographies. Morningstar Direct licenses increased 0.6%.
Current report
Morningstar Direct Platform adjusted operating income decreased $4.1 million, or 4.5%, and adjusted operating margin decreased 2.7 percentage points for thethree months ended March 31, 2025. The decline in adjusted operating income and margin was primarily due to higher compensation costs driven in large part by merit and headcount increases; the impact of the sale of the company’s Commodity and Energy Data business; and increased depreciation.
Current report
Morningstar Direct Platform depreciation expense was $10.8 million and $8.2 million for thethree months ended March 31, 2025 and 2024, respectively. The increase was primarily driven by higher capitalized software costs for product enhancements in prior periods.
Current report
PitchBook total revenue increased $16.1 million, or 10.9%, for the three months ended March 31, 2025. Revenue grew 11.1% on an organic basis.
Current report
This was partially offset by continued softness in the corporate client segment, especially with smaller firms with more limited use cases when deal activity is depressed. PitchBook licensed users grew 13.6%, driven primarily by growth among PitchBook clients and the addition of new clients. With the Leveraged Commentary & Data (LCD) user migration near completion, the total user counts reflect legacy LCD clients, most of whom transitioned to the PitchBook platform in 2024 and are now included in licensed user counts.
Current report
PitchBook adjusted operating income increased$12.3 million, or 30.8%, and adjusted operating margin increased 4.8 percentage points for the three months ended March 31, 2025.
Current report
PitchBook depreciation expense was $7.8 million and $7.4 million for thethree months ended March 31, 2025 and 2024, respectively.
Current report
Morningstar Credit total revenue increased $12.7 million, or 21.1%, for the three months ended March 31, 2025. Revenue grew 23.2% on an organic basis. The increase was primarily driven by growth in the United States and Europe, with particular strength in commercial mortgage-backed and asset-backed securities as structured finance ratings activity remained strong. Higher corporate and residential mortgage-backed securities related-revenue also contributed to growth. Organic revenue growth excludes current-period revenue associated with Dealview Technologies Limited (DealX), which was acquired in the quarter, and foreign currency impact.
Current report
Morningstar Credit adjusted operating income increased$9.1 million, or 74.0%, and adjusted operating margin increased 8.9 percentage points for the three months ended March 31, 2025.
Current report
Morningstar Credit depreciation expense was $2.0 million and $1.9 million for the three months ended March 31, 2025 and 2024, respectively.
Current report
Morningstar Wealth total revenue increased $2.3 million, or 3.9%, for thethree months ended March 31, 2025. Revenue grew 7.9% on an organic basis, primarily driven by growth in Investment Management, supported by higher revenue for Morningstar Model Portfolios offered on third-party platforms, and an increase in advertising sales. Organic revenue growth excludes platform revenue associated with US TAMP assets sold to AssetMark from the prior-year period, interim service fees received from AssetMark in the current period, and foreign currency impact.
Current report
Morningstar Wealth adjusted operating loss decreased$4.8 million and adjusted operating margin increased 8.2 percentage points for the three months ended March 31, 2025. Adjusted operating loss excludes the impact of severance expense related to the planned sunsetting of Morningstar Office.
Current report
Morningstar Wealth depreciation expense was $4.5 million and $4.7 million for thethree months ended March 31, 2025 and 2024, respectively.
Current report
Morningstar Retirement adjusted operating income increased $0.4 million, or 2.8%, and adjusted operating margin decreased 5.6 percentage points for the three months ended March 31, 2025. The decline in margin was primarily driven by a non-recurring expense related to a correction of client accounts as well as higher compensation costs, reflecting increased headcount and merit increases.
Current report
Morningstar Retirement depreciation expense was $2.6 million and $2.8 million for thethree months ended March 31, 2025 and 2024, respectively.
Current report
Morningstar Sustainalytics revenue decreased$2.0 million or 6.5%. Organic revenue decreased 4.9%, which was primarily driven by the ongoing streamlining of the licensed-ratings offering; lower revenues for ESG Risk Ratings, due in part to vendor consolidation; and softness in second-party opinions.
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Removed paragraphs (76)
Previous report
•the impact of artificial intelligence and related new technologies on our business, legal, and regulatory exposure profile and reputation;
Previous report
•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;
Previous report
•failing to close, or achieve the anticipated economic or other benefits of, a strategic transaction on a timely basis or at all;
Previous report
•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;
Previous report
License-based: The majority of our research, data, and proprietary platforms are accessed via subscription services that grant access on either a per user or enterprise-basis for a specified period of time.
Previous report
Transaction-based: Revenue is transactional, or one-time, in nature, compared with the recurring revenue streams represented by our license and asset-based products.
Previous report
•consolidated operating income, excluding intangible amortization expense, all merger and acquisition- related expenses (related to merger, acquisition, and divestiture activity including severance and earn-outs (M&A-related expenses)), and expenses related to the significant reduction and shift of the company's operations in China (adjusted operating income);
Previous report
•consolidated operating margin, excluding intangible amortization expense, all M&A-related expenses, and expenses related to the significant reduction and shift of the company's operations in China (adjusted operating margin); and
Previous report
(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 report
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 report
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 report
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 report
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 report
The table below reconciles reported consolidated revenue with organic revenue:
Previous report
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 report
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 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.
Previous report
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 report
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 report
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 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.
Previous 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.
Previous report
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 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.
Previous report
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 report
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 report
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 report
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 report
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 report
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 report
Non-GAAP Financial Measures
Previous report
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 report
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 report
(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 report
(3) Reflects costs associated with the significant reduction of the company's operations in Shenzhen, China and the shift of work related to its global business functions to other Morningstar locations.
Previous report
Severance and personnel expenses include severance charges, incentive payments related to early signing of severance agreements, transition bonuses, and stock-based compensation related to the accelerated vesting of restricted stock unit and market stock unit awards. In addition, the reversal of accrued sabbatical liabilities is included in this category.
Previous report
Transformation costs include professional fees and the temporary duplication of headcount. As the company hired replacement roles in other markets and shifted capabilities, it employed certain Shenzhen-based staff through the transition period, which resulted in elevated compensation costs on a temporary basis.
Previous report
Asset impairment costs include the write-off or accelerated depreciation of fixed assets in the Shenzhen, China office that were not redeployed, in addition to lease abandonment costs as the company downsized its office space prior to the lease termination date.
Previous report
Morningstar Data and Analytics
Previous report
The following table presents the results for Morningstar Data and Analytics:
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Reworded paragraphs (52)
Previous wording
The discussion included in this section, as well as other under sections of this Quarterly Report on Form 10-Q (this Quarterly 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 “consider,” “estimate,” “forecast,” “future,” “goal,” “designed to,” “maintain,” “may,” “objective,” “ongoing,” “could,” “expect,” “intend,” “plan,” “possible,” “potential,” “anticipate,” “believe,” “predict,” “continue,” “strategy,” “strive,” “will,” “would,” "determine," "evaluate," or the negative thereof, and similar expressions. These statements involve known and unknown risks and uncertainties that may cause the events we discuss not to occur or to differ significantly from what we expect. For us, these risks and uncertainties include, among others:
Current wording
The discussion included in this section, as well as other under sections of this Quarterly Report on Form 10-Q (this Quarterly 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,” “predict,” “prospects,” “continue,” “strategy,” “strive,” “will,” “would,” "determine," "evaluate," or the negative thereof, and similar expressions. These statements involve known and unknown risks and uncertainties that may cause the events we discuss not to occur or to differ significantly from what we expect. For us, these risks and uncertainties include, among others:
Previous wording
•compliance failures, regulatory action, or changes in laws applicable to our credit ratings operations, investment advisory, ESG, and index businesses;
Current wording
•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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•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 (and rising interest rates) 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 can be found in our other filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2023 (our Annual Report) as supplemented by our recent Quarterly Reports on Form 10-Q. If any of these risks and uncertainties materialize, our actual future results and other future events may vary significantly from what we expect. We do not undertake to update our forward-looking statements as a result of new information, future events, or otherwise, except as may be required by law. You are, however, advised to review any further disclosures we make on related subjects, and about new or additional risks, uncertainties, and assumptions in our filings with the SEC on Forms 10-K, 10-Q, and 8-K.
Current wording
A more complete description of these risks and uncertainties can be found in our other filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2024 (our Annual Report) as supplemented by this Quarterly Report on Form 10-Q. If any of these risks and uncertainties materialize, our actual future results and other future events may vary significantly from what we expect. We do not undertake to update our forward-looking statements as a result of new information, future events, or otherwise, except as may be required by law. You are, however, advised to review any further disclosures we make on related subjects, and about new or additional risks, uncertainties, and assumptions in our filings with the SEC on Forms 10-K, 10-Q, and 8-K.
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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.
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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
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.
Current wording
The company has seven operating segments, which are presented as the following five reportable segments: Morningstar Direct Platform (formerly named Morningstar Data and Analytics), PitchBook, Morningstar Credit, Morningstar Wealth, 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 Consolidated Financial Statements.
Previous wording
Asset-based: We charge basis points and other fees for assets under management (AUM) or advisement (AUMA).
Current wording
Asset-based: Generated mostly by our Morningstar Wealth and Morningstar Retirement segments, revenue where basis points and other fees are charged for assets under management or advisement (AUMA). Our asset-based arrangements typically range from one to three years.
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Three and Nine Ended September 30, 2024 vs. Three and Nine Months Ended September 30, 2023
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Three Months Ended March 31, 2025 vs. Three Months Ended March 31, 2024
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To supplement our consolidated financial statements presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), we use the following non-GAAP measures:
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To supplement our consolidated financial statements presented in accordance with US Generally Accepted Accounting Principles (GAAP), we use the following non-GAAP measures:
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•consolidated revenue, excluding acquisitions, divestitures, adoption of new accounting standards or revisions to accounting practices (accounting changes), and the effect of foreign currency translations (organic revenue);
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•"Organic Revenue" is consolidated revenue before (1) acquisitions and divestitures, (2) adoption of new accounting standards or revisions to accounting practices (accounting changes), and (3) the effect of foreign currency translations.
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(2) Reflects non-recurring expenses related to merger, acquisition, and divestiture activity including pre-deal due diligence, transaction costs, severance, and post-close integration costs.
Current wording
•"Adjusted Operating Income (Loss)" is consolidated operating income (loss) excluding (1) intangible amortization expense, (2) the impact of merger, acquisition, and divestiture-related activity which, when applicable, may include certain non-recurring expenses such as pre-deal due diligence, transaction costs, contingent consideration, severance, and post-close integration costs (M&A-related expenses), and (3) certain other one-time, non-recurring items which management does not consider when evaluating ongoing performance.
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•cash provided by or used for operating activities less capital expenditures (free cash flow).
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•"Free Cash Flow" is cash provided by or used for operating activities less capital expenditures.
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These non-GAAP measures may not be comparable to similarly titled measures reported by other companies and should not be considered an alternative to any measure of performance as promulgated under GAAP.
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These non-GAAP measures may not be comparable to similarly titled measures reported by other companies and should not be considered an alternative to any measure of performance promulgated under GAAP.
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. 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.
Current wording
We present organic revenue because we believe it helps investors better compare our period-over-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 (including sale of assets), we exclude revenue in the prior-year period for which there is no comparable revenue in the current period.
Previous wording
We present adjusted operating income and adjusted operating margin because we believe they better reflect period-over-period comparisons and improve 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 present adjusted operating income (loss) and adjusted operating margin because we believe they better reflect period-over-period comparisons and improve overall understanding of the underlying performance of the business absent the impact of intangible amortization expense, M&A-related expenses, and certain other one-time, non-recurring items.
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. 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).
Current wording
We present free cash flow as a supplemental disclosure to help investors better understand how much cash isavailable after making capital expenditures. Our management team uses free cash flowas a metric to evaluate the health of our business.
Previous wording
(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.
Current wording
(1)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.
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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.
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In the first quarter of 2025, consolidated revenue increased 7.2% to $581.9 million. Foreign currency movements decreased revenue by$4.6 million.
Previous 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.
Current wording
License-based revenue grew 4.4%, or 6.2% on an organic basis, during the first quarter of 2025. Reported and organic revenue growth were primarily driven by strong demand for PitchBook and Morningstar Direct Platform products.
Previous wording
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 wording
Asset-based revenue increased 11.3%, or 14.5% on an organic basis, during the first quarter of 2025. Reported and organic revenue growth were primarily driven by increases in Morningstar Retirement, Morningstar Wealth, and Morningstar Indexes.
Previous 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.
Current wording
Transaction-based revenue increased 19.2%, or 21.4% on an organic basis, during the first quarter of 2025. Reported and organic revenue growth were primarily driven by Morningstar Credit revenue.
Previous 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.
Current wording
International revenue comprised 27% and 28% of our consolidated revenue in the first quarter of 2025 and 2024, respectively. Approxima tely 60% of international revenue was generated in Continental Europe and the United Kingdom during the first quarter of 2025 compared to 58% during the first quarter of 2024. Revenue from international operations increased 3.6% during the first quarter of 2025 driven by strong demand for Morningstar Credit, PitchBook, and Morningstar Wealth products.
Previous wording
Cost of revenue is our largest category of operating expense, representing about half of our total operating expense. Our business relies heavily on human capital, and cost of revenue includes the compensation expense for employees who develop our products and deliver our services. We include compensation expense for approximately 76% of our employees in this category.
Current wording
Cost of revenue is our largest category of operating expense, representing about half of our total operating expense. Our business relies heavily on human capital, and cost of revenue includes the compensation expense for employees who develop our products and deliver our services. We include compensation expense for approximately 77% of our employees in this category.
Previous 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.
Current wording
Sales and marketing expense increased $8.0 million in the first quarter of 2025. Compensation expense increased $3.9 million during the first quarter of 2025 with approximately half of the increase due to higher sales commission expense. Advertising and marketing costs increased $3.0 million during the first quarter of 2025 due to increased costs associated with brand campaigns.
Previous wording
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 wording
Intangible amortization expense decreased $3.3 million during the first quarter of 2025 as certain intangible assets from some of our earlier acquisitions became fully amortized.
Previous 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.
Current wording
Consolidated operating income increased $21.5 million in the first quarter of 2025, reflecting an increase in revenue of $39.1 million and offset by an increase in operating expense of $17.6 million. Operating margin was 19.6%, an increase of 2.5 percentage points compared with the first quarter of 2024.
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 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.
Current wording
(1) Corporate and All Other includes unallocated corporate expenses as well as adjusted operating income (loss) from Morningstar Sustainalytics and Morningstar Indexes. During the first quarter of 2025 and 2024, unallocated corporate expenses were $41.8 million and $40.9 million, respectively. Unallocated corporate expenses include finance, human resources, legal, and other management-related costs that are not considered when segment performance is evaluated.
Previous wording
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 wording
Morningstar Data contributed $3.0 million to revenue growth, with revenue increasing 3.1% or 4.1%on an organic basis. Increases in managed investment (fund) data, Morningstar Essentials, and equity data products helped drive Morningstar Data growth, partially offset by softness in research distribution, reflecting the loss of a large client who brought coverage in-house in 2024, and in Direct Web Services, which experienced higher planned churn as clients transitioned to an updated product.
Previous 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.
Current wording
Growth was primarily driven by the PitchBook platform. PitchBook platform growth drivers were consistent with recent quarters and reflected strength in PitchBook's core investor and advisor client segments, including private equity and investment banks.
Previous 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.
Current wording
Investment Management contributed $2.5 million to consolidated revenue growth, with revenue increasing 7.4% ona reported or 14.8% organic basis. Growth was primarily supported by higher revenue for Morningstar Model Portfolios offered on third-party platforms. Reported AUMA increased 10.8% to $63.8 billion compared with the prior-year period, helped by strong market performance, which drove higher asset values, and positive net flows to Morningstar Model Portfolios offered on third-party platforms outside the US and to the International Wealth Platform.
Previous wording
Total revenue increased $4.1 million, or 14.8% on a reported and organic basis for thethree months ended September 30, 2024. AUMA, calculated using the most recently available average quarterly or monthly data, increased 24.2% to $264.4 billion compared with the prior-year period, reflecting market gains and positive net flows, supported by strong growth in Advisor Managed Accounts.
Current wording
Morningstar Retirement total revenue increased $4.5 million, or 15.8% on a reported and organic basis for thethree months ended March 31, 2025. AUMA, calculated using the most recently available average quarterly or monthly data, increased 17.7% to $277.6 billion compared with the prior-year period, due to positive net flows and market gains, supported by strong growth in traditional and Advisor Managed Accounts and custom models.
Previous wording
Corporate and All Other revenue increased $1.2 million, or 2.5% on a reported basis, and$15.4 million, or 11.4% on a reported basisfor thethree and nine months ended September 30, 2024, respectively.
Current wording
Corporate and All Other revenue increased $1.0 million, or 2.0% on a reported basis for the three months ended March 31, 2025.
Previous wording
Morningstar Indexes contributed $4.3 million to Corporate and All Other revenue growth with revenue increasing 24.4%, or 23.7%, on an organic basis for the three months ended September 30, 2024. The increase in Morningstar Indexes revenue was primarily driven by higher investable product revenue as market performance and net inflows over the trailing 12 months increased asset value linked to Morningstar Indexes by 37.5% to $228.2 billion.
Current wording
Morningstar Indexes revenue increased $3.0 million or 15.0%. Organic revenue increased 15.7% primarily driven by higher investable product and licensed data revenue as market performance and net inflows over the trailing 12 months increased asset value linked to Morningstar Indexes by 9.7% to $208.7 billion.
Previous wording
Non-operating income (expense), net, Equity in investments of unconsolidated entities, and Effective tax rate and income tax expense
Current wording
Non-operating expense, net, Equity in investments of unconsolidated entities, and Effective tax rate and income tax expense
Previous wording
Other income (expense), net includes foreign currency exchange gains (losses) and unrealized gains (losses) on investments.
Current wording
Other income (expense), net primarily consists of foreign currency exchange gains (losses) and unrealized gains (losses) on investments.
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Adjusted Operating Income and Adjusted Operating Margin
Current report — wording carried from elsewhere
Corporate and All Other provides a reconciliation between revenue from our Total Reportable Segments and consolidated revenue amounts. Corporate and All Other includes Morningstar Sustainalytics and Morningstar Indexes as sources of revenues.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Organic revenue (revenue excluding acquisitions, divestitures, the adoption of new accounting standards or revisions to accounting practices (accounting changes), and the effect of foreign currency translations) is considered a non-GAAP financial measure.
Previous report — wording carried 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.
Previous report — wording carried elsewhere
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.