MORN 10-K & 10-Q changes, risk factors and insider trading
Morningstar, Inc. · Nasdaq · Investment Advice · CIK 1289419 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “AI technologies may present business, legal, compliance, and reputational risks as they are incorporated into our products and tools.”
New heading “We could face liability stemming from the accuracy and use of our research, ratings, and published data, and our dependence on ingested third-party data, licensed content, and open-source components.”
Removed heading “Risk Factor Summary”
Removed heading “•Risks Related to Our Business and Industry”
Removed heading “•Risks Related to Our Information Technology and Security”
Removed heading “•Risks Related to Legal and Regulatory Matters”
Removed heading “•Risks Related to Our Operations”
Removed heading “•Risks Related to Ownership of Our Common Stock”
Removed heading “AI technologies may present business, legal, and reputational risks as they are incorporated into our products and tools.”
Removed heading “We could face liability for failing to properly protect or use the information and data we collect, store, use, create, and distribute or the reports and other documents we publish or that are produced by our software products.”
Removed heading “Our business is complex and has experienced significant growth in recent years which could strain our resources and infrastructure, and if we are unable to effectively scale our operations and increase productivity, we may not be able to successfully implement our business plan.”
Removed heading “Changes in geopolitics and the regulatory landscape could adversely affect our ability to expand (and the demand for) our product and service offerings.”
Largest changes
“The pace of adoption and use of AI technologies, including generative AI, in our products and processes may increase compliance obligations, regulatory scrutiny, litigation exposure, ethical concerns, and confidentiality or security risks. For example, AI systems may generate content that appears correct but is inaccurate, misleading, biased, or discriminatory, which, if relied upon and attributed to us, could harm our reputation and expose us to liability. We may also face risks relating to data privacy or cybersecurity incidents stemming from our use of AI technologies. …”see in full comparison
“We are subject to various anti-corruption laws that prohibit improper payments or benefits or offers of payments or benefits to foreign governments and their officials and, in some cases, to employees of a business for the purpose of directing, obtaining or retaining business. We conduct business in countries and regions with anti-corruption laws that may vary in substance, complexity and application when compared to that of the US, which could result in unauthorized payments or offers of payments by our employees or agents that may be in violation of anti-corruption laws. …”see in full comparison
see in full comparisonAdditionally, asAs we engage in global business activities, we are subject to international trade restraints, including economic and financial sanction laws andembargoesembargoes, administered by the US Treasury Department’s Office of Foreign Assets Controls, which prohibit or restrict the sale orsupplyingsupply of certain productsandor services toembargoedcertainor sanctionedregions, countries,regions,entities, governments,individuals,andentities.individuals.AlthoughThesewerestrictions havepolicies and procedures in place to promote compliance with such laws, there can be no assurance that they will be followed at all times or effectively detect and prevent all violations of such laws. These restraints have impacted,impacted and may in the future impact our ability to continue to market and/orsell our productsand servicesin these geographies, resulting in lossinofrevenue, and subject us to significant fines and penalties or cause us to incur expenses relating to government investigations, inquiries, or subpoenas if we fail to comply.revenue. While we haveestablishedcompliancepoliciesmeasuresandintrainingsplaceaimedtoatpromotepreventingadherencethesetotypesapplicableof activities,restrictions, they maybenotineffective. Furthermore, new, and additional trade restrictions mayalways beintroduced at any time and may require us to change our operations and increase our risk of noncompliance, and may expose us to increased compliance costs, which could have a material adverse effect on our business, operations, and financial results.effective.
Wesee in full comparisonutilizerely on numerous third-party serviceproviders in our operations,providers, including forthe provision ofcontractlaborlabor,in several locationsSaaS, and data backupfacilitiesfacilities.for our data. A failureFailure by athird-party serviceprovider couldexposedisruptusour ability toandeliverinabilityproductsto provide contractualand servicestoandour clients in a timely manner. Additionally, if a third-party service provider is unable to provide these services, we may incurrequire significant costs toeitherinternalizesome of these servicesfunctions or findaadequatesuitablealternatives.alternative.ForWelimited products and regions, we are subject toregulatory expectations for thevendor oversightofregulations,vendorssuchand service providers, includingas the EU’s Digital Operational Resilience Act, whichfurther increase ourincreases compliance obligations and costs.A failure in the performance of ourInadequate due diligenceprocesses and controls relatedrelating tothe supervision andor oversight ofthesethirdfirmsparties,insuchdetectingasandfailingaddressingto detect conflicts of interest,fraudulent activity,fraud, databreachesbreaches,and cyberattackscyberattacks, ornoncompliancelegalwith relevant securities and other lawsnoncompliance, couldcauseresultus to sufferin financial loss,expose us toregulatorysanctionssanctions, ordamagereputationalto our reputation.harm.
see in full comparisonTheOur business is subject to extensive and evolving laws, rules, andregulations,regulationsand their interpretations, applicable to our business are extensive, may change in the future and may be inconsistent orthat vary by jurisdiction. We have not always been able to, and in the future may not be able to, comply withchangestheorchangingvariancessubstance,inapplication,theand interpretation of such laws,rulesrules, and regulationsapplicablewithout making significant modifications to ourbusinessesoperations.withoutThemakingincreasingextensive changes to our business practices. In the recent past, the scopepace andpacescope of global regulatorychangechangeshas both increased and involved shorter compliance time frames, which has increasedheightens the potential riskthatofwe may failfailing toproperlyidentifyand timely identify, and adequatelyor respond tothenewregulatoryorchangesexpandedapplicableobligationstoinouraoperations.timely manner. Regulationsaimedfocusedaton increasing investor transparencyfor investorsor providing individuals with greater control over their own data maydevaluereduce the value or utility of the investments we have made in our datasetssets.or reduce their use cases. In addition, the broad, diverse andThe globalscopenature of ourbusinessoperations makesitmonitoring and implementing regulatory changes moredifficultcomplex.toNoncompliancemonitorcouldareasresult in fines, sanctions, restrictions, and/or other penalties thatmay be subject to regulatory and compliance risk, as well as monitor and implement changes that may vary by jurisdiction. If we fail to comply with any applicable law, rule, or regulation, wecouldbeaffectfined, sanctioned, or barred from providing certainour products andservicesservices,inandthe future, which could adversely affectharm our reputation,businessoperating results, and financialresults.condition.
“Any failure to protect confidential information or any material significant cybersecurity incident, whether in our systems or those of third parties handling our data, could lead to reputational damage, operational challenges, loss of customers, regulatory actions, sanctions, or other penalties, litigation, financial losses, and increased mitigation costs, which could have a material adverse effect on our business, operating results, and financial condition.”see in full comparison
Full comparison: every changed paragraph (152)
Risk Factor Summary
Below is a summary of the principal risk factors that could impact our business, financial condition, or operating results. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found after this summary, and should be carefully considered.
•Risks Related to Our Business and Industry
◦Failing to maintain and protect our brand, independence, and reputation may harm our business ◦Failing to create innovative, proprietary and insightful product and service offerings, keep pace with new investor requirements, technology developments, and trends, or anticipate our clients’ changing needs may negatively affect our competitive position and business results ◦Prolonged volatility or downturns affecting the financial sector, global financial markets, and the global economy may impact our financial results
•Risks Related to Our Information Technology and Security
◦We could face significant reputational and financial consequences relating to cybersecurity and the protection of confidential information, including personal information about individuals ◦AI technologies may present business, legal and reputational risks as they are incorporated into our products and tools ◦Our operational risk management and business continuity programs may not be adequate to address materially disruptive events.
◦We could face liability for failing to properly protect or use the information and data we collect, store, use, create, and distribute or the reports and other documents we publish or that are produced by our software products ◦Failure to protect our intellectual property rights, or claims of intellectual property infringement against us, could harm our brand, our financial performance and our ability to compete effectively
•Risks Related to Legal and Regulatory Matters
◦Compliance failures, regulatory action, or changes in laws could adversely affect our business ◦Several of our businesses are highly regulated throughout the world and the regulatory environment is increasingly complicated and rapidly evolving ◦Environmental, social, and governance considerations could result in enhanced regulatory obligations and expose us to potential liabilities and increased costs ◦Errors in our automated advisory tools may subject us to liability for any losses that result
•Risks Related to Our Operations
◦Our future success depends on our ability to recruit, develop, and retain qualified employees ◦We are dependent on third-party service providers in our operations ◦Our business is complex and has experienced significant growth in recent years which could strain our resources and infrastructure, and if we are unable to effectively scale our operations and increase productivity, we may not be able to successfully implement our business plan ◦Our strategic transactions, acquisitions and investments in companies or technologies may not result in the expected business or financial benefits, ultimately having an adverse effect on our operating results and our ability to deliver long-term value to our shareholders ◦The goodwill of our business and other intangible assets from our acquisitions could be impaired as a result of business conditions in the future, requiring us to record substantial impairments that would impact our operating income ◦Changes in geopolitics and the regulatory landscape could adversely affect our ability to expand (and the demand for) our product and service offerings ◦As a global taxpayer, we face challenges due to increasing complexities in accounting for taxes (e.g., base erosion, minimum taxes, and tax transparency), which are high priorities in jurisdictions in which we operate and could materially affect our tax obligations and effective tax rate ◦Our revenues, expenses, assets and liabilities are subject to fluctuations in foreign currency exchange rates ◦Our indebtedness could adversely affect our cash flow and financial flexibility. Our variable rate indebtedness could subject us to interest rate risk, which could cause our debt service obligations to increase significantly ◦Our insurance coverage may be inadequate or expensive
•Risks Related to Ownership of Our Common Stock
◦The concentrated ownership position of Joe Mansueto could adversely affect our other shareholders ◦Future sales of our common stock and fluctuations in our operating results may negatively affect our stock price ◦We cannot guarantee we will pay dividends in the future or make any repurchases of our common stock under our repurchase program
Risk Factors
Failing to maintain and protect our brand, independence, and reputation may harm our business. Our reputation and business may also be negatively impacted by allegations made about possible conflicts of interest, lack of independence, or by other negative publicity or media reports.
We believe our reputation, brand, and the value of our products and services are built on the trust that our users have in our commitment to empowering investor success through independence, transparency, and a long-term focus. Any real or perceived failure to uphold these principles, including lapses in employee integrity or independence, may harm our reputation. Additionally, real or perceived errors in our products or negative customer or employee experiences could further damage our reputation. Our reputation and brand could also be impacted by factors beyond our control, such as negative news about our clients, suppliers, employees, consultants, or competitors, regulatory scrutiny, and adverse publicity about our products or industries that we operate in. Expanding our brand to less mission-aligned products may also harm our reputation or dilute our brand.
We believe that the reputation of our company and our brand generally, as well as the perception of our research and ratings products and services, is based on the trust that users of our products and services have in our commitment to our mission to empower investor success underscored by principles of independence, transparency and long-term focus. Any failures by us to instill in our employees the expectation of independence and integrity may devalue our reputation over time and negatively affect both hiring and retention efforts. Any failure to uphold these standards, and any real or perceived failure of our customers to have consistently positive experiences with us could damage our reputation. Our reputation may also be harmed if any errors are found in our products or services.
As our business hascontinues evolved,to evolve and expand, we have entered,entered and may in the future enter into,into business lines of business and business/or arrangements that may giveraise riseconcerns toabout allegations ofpotential conflicts of interest or perceived failuresindependence offailures. We provide ratings and research on our independence and objectivity. For example, we provide ratings, analyst research, andclients’ investment recommendationsproducts, onsuch as ETFs and mutual funds, ETFs and other investment products offered by our institutional clients. While we don’ttypically charge asseta managementlicensing firms for their productsfee to be rated, we do charge licensing fees for the use of our ratings. We also provide investment advisory and investment management services, including through our own series of mutual funds, which expose us to the claimclaims that we are acting as both athe referee and athe player in the investment managementsame industry. InOur issuer-pay model in our credit ratings business and Morningstarfor Sustainalytics’certain Sustainableof Financeour Solutionsother productsratings weproducts, are participants in an issuer-pay business model underfor which we receive payments from issuers for our ratings rather thanversus from the investorsinvestor who consumeconsuming such ratings. These paymentsratings, may createalso thelead perceptionto perceptions that our ratingsresearch and researchratings in these areas are not independently determined.
Certain of our productproducts offeringsand suchmethodologies, asincluding those offered byof Morningstar SustainalyticsSustainalytics, have,have placed, and may in the future, putplace us at the center of public debate over a variety of issues surroundingon sustainability, social concerns, and corporate governance. Scrutiny over sustainability, social concernssocial, and corporate governance issues, or result in scrutiny of our clients. This scrutiny may impactaffect theproduct demand forand ourmay products.result This could lead toin negative media coverage, reputational harmharm, or increased government or regulatory scrutiny. Failure to successfully navigate these issues as they arise may have an adverse effect on our reputation and our business. In addition our methodology may be scrutinized or may attract negative publicity.attention.
Failure to effectively and successfully navigate these independence and reputational challenges could adversely affect our business, operating results, and financial condition.
Our reputation may also be harmed by factors outside of our control, such as news reports about our clients, consultants, or suppliers, regulatory scrutiny, and adverse publicity about certain types of investment and ratings products generally. Scrutiny of our competitors could damage the reputation of the industries that we operate in, which could harm the reputation of the company or certain of our products and services. We may also suffer brand dilution as our brand becomes associated with an increasingly broad array of products and services that may align less directly with our corporate mission.
Failing to create and maintain innovative, proprietaryproprietary, and insightful product and service offerings, keep pace with new investor requirements, technology developments, and trends, or anticipate our clients’ changing needs may negatively affect our competitive position and business results.business.
We believe rapid innovation and technological advances in financial information services and investable products availableare tochanging how investors and theintermediaries’ various advisersaccess and otheruse intermediaries who serve them continues to accelerate. Developments in technology are fundamentally changing the ways investors, financial intermediaries, and other market participants access data and content, allowing for greater personalization of products customized to individual investor profiles and interests.data. These developmentschanges canmay renderresult in our existing products becoming less competitive, obsoletecompetitive or unmarketable.obsolete. As a result, ourOur future success will continue to depend uponon our ability to identify and develop new products and enhancements that address and support the futureevolving needs of our current and target marketsmarkets, andas towell deliver them in ways that support our customers’ investing needs and business models, andas on our ability to keep pace with the competitive landscape for our products.competitors.
If we fail to continuously innovate and effectively incorporate or deploy new datasets, research, AI technologies, content, or software to meet evolving customer needs, our competitive position may suffer. Our reputation would be harmed if we are seen as slow to adapt to meet the changing needs of investors or their financial advisors, especially as customers expect more personalized advice and greater data security. Increased interest in alternative assets, such as private market offerings, require new expertise and data. Competitors who innovate faster or offer broader solutions may outpace us. Our investments in new products, especially those involving AI technologies, carry execution risks and challenges and may not deliver expected benefits, such as generating revenue or cost savings, or creating efficiencies in our processes. Additionally, we cannot guarantee we will successfully adapt or seamlessly transition to new product offerings. Failure to successfully manage these transitions and investments would materially and adversely affect our reputation, operating results and financial condition.
As financial intermediary customers further automate their processes, demand for our products may shift, making technological flexibility and system interoperability increasingly important. Clients increasingly expect technology solutions that address specific needs, such as integrated wealth management capabilities. Our technology heavily relies on the quality and comprehensiveness of our data and our ability to build valuable analytics, research, and intellectual property around it. Delivering personalized advice that clients value requires collecting, organizing, and analyzing large, diverse datasets. If we fail to adequately allocate resources to meet client demands, we may lose our competitive advantage, which could adversely impact our business, operating results, and financial condition.
Our core competencies are data, research, design, and technology, and we employ each of these to create products built on the depth and breadth of our data that are designed to clearly convey complex investment information. Our customers have access to our research, data and ratings directly on our proprietary desktop or web-based software platforms, or through subscriptions, data feeds, and third-party distributors. Our financial technology solutions also allow advisors to serve investors at all stages of the investing process. Morningstar’s managed portfolio offerings help advisors outsource investment selection and asset allocation through proprietary portfolio strategies based on Morningstar’s valuation-driven, fundamentals-based approach to investing. Applying its expertise in asset allocation, investment selection, and portfolio construction, our global investment team creates long-term investment strategies built on Morningstar’s data and ratings. We also help retirement plan sponsors build high-quality savings programs for employees and advise participants in retirement plans on saving for retirement and choosing plan investments. We believe the breadth and depth of our current service offerings set us apart from our competitors, which we believe is a significant competitive advantage.
If we fail to continuously innovate, incorporate, deploy and develop, as applicable, new datasets, research, methodologies, AI technologies, content or software to meet the needs of our customers, or fail to successfully communicate such innovations and developments in our offerings to our customers, our competitive position and business results may suffer. In addition, our reputation could be harmed if we are perceived as not moving quickly enough to meet the changing needs of investors or their financial advisors and may sacrifice new business opportunities or renewals from existing customers. These changing needs include a greater expectation that advice be delivered with a high degree of personalization. Investors are also increasingly focused on the security of data we collect from them, as well as the sharing of their data with third parties. Increased interest in alternative asset classes, including a focus on private market offerings, has also created a need for applicable datasets, research and analytical expertise. Our competitive position and business results may suffer if other companies have greater breadth of product offerings or are able to successfully and more quickly introduce innovative, proprietary research tools and software, including through the application of AI technologies. Further, despite our investments in, and commitment of resources to, leveraging AI in our products and activities, we may not be successful in generating revenues, creating efficiencies in our processes or generating cost savings from these efforts. The development of any new or updated products or capabilities can involve material investment, execution risks and challenges and we cannot guarantee that we will successfully adapt our product offerings to meet evolving customer needs or that the transition to such new offerings will be seamless. If we are unable to manage these investments and transitions successfully, our business, financial condition, and results of operations could be materially and adversely affected.
As our financial intermediary customers further automate their business processes, their need for our products may change and the technological flexibility and interoperability of our systems may become more important. In addition, there has been an increasing focus on technology not merely supplying additional tools for users, but also offering solutions to specific client problems, such as those we are seeking to address for wealth advisors through bringing together our multiple wealth management capabilities around asset management, data aggregation and client portfolio management software. We have a myriad of potential technology investments across our product lines and need to prioritize scarce technology development resources to focus on products that best anticipate the needs and priorities of our customers. For example, in 2024 we made a strategic decision to sunset the Morningstar Wealth TAMP which was expected to require significant resources to maintain and improve, and instead have turned our focus to marketing our professionally managed investments products to more advisors across the US.
Our technology is also heavily dependent on the quality and comprehensiveness of our data and our ability to successfully build analytics, research, and other intellectual property around that data. For example, in order to provide the personalized holistic advice that clients value, we need to collect and organize large, heterogeneous datasets and synthesize and effectively analyze the insights offered by this data. We are investing significant resources in consolidating our various data assets and improving their usability and deliverability across our platform of products. Our competitive position and business results may suffer if we fail to realize the value and potential of our data assets.
ProlongedChanging volatilityeconomic conditions, including prolonged volatility, recessions, or downturns affecting the financial sector,sector and global financial markets, fluctuating interest rates, and the impacts of global economytrade policies, may negatively impact our financial results.business.
Our business performance is influenced by external factors such as economic and financial market trends, credit availability, changing laws or trade policy, currency fluctuations, and geopolitical uncertainties. Extended economic or market downturns, or volatility, interest and inflation rate shifts, and stagflation, among other factors, may dampen investment activity, thereby reducing demand for our products and services. In recent years, uncertain economic conditions, including those caused by tariffs and retaliatory trade measures, have decreased asset values under management and may do so again in the future. Further, market sentiment regarding the impact of AI on software an data company growth prospects has driven meaningful recent sector-wide stock price declines, including Morningstar's. We cannot predict the timing or duration of economic cycles, sector-focused market downturns or the direct and indirect effects or duration of trade or other economic policy impacts on our business, assets, operating results, and financial condition.
Our business results are partly driven by factors outside of our control including, but not limited to, general economic and financial market trends which may be impacted by availability of credit, changes in laws, trade barriers, currency exchange rates and controls, and national and international geopolitical circumstances and uncertainties. Prolonged economic and financial downturns, sustained volatility in the financial markets, interest and inflation rate fluctuations and periods of stagflation, among other conditions impacting investor sentiment can reduce investor interest and investment activity and have, and may in the future, decrease demand for our software, data, analyst ratings, research products, and decrease net flows of funds into our investment management products. We cannot predict the occurrence, timing or duration of any economic cycle generally or in the markets in which our businesses operate. Fluctuations in interest rates and rate uncertainty brought on by central bank decisions that have reduced credit issuance in prior periods may in the future put negative pressure on our credit ratings business.
Our credit ratings business, as well as our SPO business, have been, and may again be, impacted by volatility in US and international financial markets due to their dependence on the number and dollar volume of debt securities issued in the capital markets. Market disruptions, rising interest rates, widening credit spreads, and economic slowdowns historically have impacted and may in the future impact the volume of debt securities issued in global capital markets and the demand for credit ratings. Demand for credit ratings can also be negatively affected by negative publicity about the credit ratings business, regulatory and political developments, growth in the use of alternative sources of credit, and defaults by significant issuers. Our ability to reduce costs in the event of such adverse developments can be negatively impacted by, among other things, our obligations to monitor and maintain outstanding ratings. Declines or other changes in the markets for debt securities may materially and adversely affect our business, operating results, and financial condition.
For our license-based businesses, many of our customers are asset management and financial advisory firms and other financial-services companies, who are also subject to global market trends. The ascendance of passive investment strategies may affect both the profitability of asset managers that focus on actively managed strategies, on whose success we in part depend, and the perceived value of our research regarding actively managed such strategies. A sustained global recession or other financial downturn or crisis would likely lead to material spending cutbacks among certain of our clients, and create longer sales cycles. Consolidation in the financial services sector reduces the number of potential clients for our products and services. Further, clients may discontinue their use of our products and services should they fail and/or merge with or become acquired by other entities that are not our clients or that use fewer of our products and services. These trends could impact demand for our products and services or change the financial services landscape in which we operate, resulting in lower revenue and operating income.
Our PitchBook business is also subject to cyclical trends specific to the private capital markets. Many of PitchBook’s clients are investment banks and other participants in the capital and M&A markets, which are subject to periodic business downturns driven by changes in such markets. During these downturns, they often seek to reduce spending on third-party services, as well as the number of employees, which would directly and adversely affect the number of prospective users for the PitchBook platform.
The amount ofOur asset-based revenue we earn primarily depends on the value of assets onunder which we provideour advisory services, andwhich thefluctuates size of our asset base can increase or decrease based onwith market performance. OurEconomic revenue from asset-based fees has been, and may in the future be, adversely affected byor market declines.declines, Assetreduced levels can also be affected if inflows into the portfolios for which we provide investment advisory services dropinflows, or ifincreased theseredemptions, portfoliosdriven experience redemptions. A drop in inflows or an increase in redemptions can result from a variety of factors, including overallby market conditions or uncompetitivepoor investment performance.performance, Ifcan thelower levelasset oflevels assetsand, on which we provide investment advisory or investment management services declines, we would expectconsequently, our fee-based revenuerevenue. toIndustry show a corresponding decline. The industrywide trendtrends toward lower asset-based fees may alsofurther impact our fee-based revenue. AAdditionally, if investors shift by investors to non-traditional asset classes such as cryptocurrencies, private debt, real estate, structured products, or collectibles, and collectibleswe maycannot affecteffectively incorporate or anticipate their performance, our assets under management ifmay webe arenegatively unable to incorporate them into our investment strategies or if they fail to perform in the manner that our research anticipates.affected.
Many of our license-based customers are asset management and financial advisory firms, whose businesses may be impacted by global market trends. The rise of passive investment strategies may diminish the perceived value of our research on active strategies. Prolonged recessions, financial crises, and other economic uncertainties have in the past and could in the future prompt significant spending cuts and lengthen sales cycles among clients. Industry consolidation has the potential to reduce our client base, and clients may discontinue using our products and services if they fail, merge, or are acquired by non-clients or firms using fewer of our services. These factors may decrease demand for our offerings.
Fluctuations in interest rates and central bank decisions have reduced credit issuance in the past and may do so in the future, negatively impacting our credit ratings business. For example, our credit ratings business depends on the volume and value of debt securities issued, making it vulnerable to market volatility, rising interest rates, widening credit spreads, and economic slowdowns. Demand for credit ratings may also decline due to negative publicity, regulatory or political changes, increased use of alternative credit sources, or defaults by major issuers. Our ability to reduce costs in adverse conditions may be limited by our obligations to monitor and maintain outstanding ratings.
Our PitchBook business is also subject to cyclical trends specific to the private capital markets. Many of PitchBook’s clients are investment banks and other participants in the capital and M&A markets, which are subject to periodic business downturns driven by changes in such markets. During these downturns, they often seek to reduce spending on third-party services, as well as the number of employees, which would directly and adversely affect the length of sales cycles and the number of prospective users for the PitchBook platform.
Changing economic conditions or market trends could affect demand for products and services or asset values, which may have a material and adverse effect on our business, operating results, and financial condition.
We could face significant reputationalreputational, operational, and financial consequences relating to cybersecurity and the protection of confidential information, including personal information about individuals.
Our business requires that we securely collect, process, store, and transmit confidential information,information including sensitive personal information,information relating to our operations, customers, employees,employees and other third parties. We continuously invest in systems, processes, controls, and other security measures designed to guardprotect againstthis theinformation, riskbut ofwe impropercannot guarantee absolute security. Improper access to or release of such information. However, these measures do not guarantee absolute security, and improper access to or the release of confidential informationdata may still occur throughdue to employee error or malfeasance,vendor error, system error, inadvertent release,issues, failure to properly purge and protect data, failure toconsistently apply consistent security measurespractices throughoutacross our business, or cyberattack.cyberattacks.
We may also be subject to specific legal or contractual obligations relating to personal information and personal financial information, as in certain cases our products and services handle, store, and transmit personal information. Due to the global nature of our business, personal information is routinely moved from one jurisdiction to another, subjecting us and our customers to complex and evolving federal, state and foreign privacy, cybersecurity, and data protection laws, which may vary across geographies. Restrictions on cross-border data transfers and conflicting regulations may enhance compliance obligations and associated costs.
We may also be subject to specific obligations relating to personal information and personal financial information. In certain cases, our products and websites collect, store, process, and transmit personal information about an individual, including financial information such as portfolio holdings, account numbers, and credit card information. Our business also operates across national borders and routinely moves personal information from one jurisdiction to another. Regulators and political leaders in various countries are increasingly interested in restricting cross-border data transfers that they perceive as problematic. We are and our customers often are subject to federal, state, and foreign laws relating to privacy, cybersecurity, and data protection. The scope of applicable laws may be uncertain and require practices that may be inconsistent with laws of other jurisdictions. In addition, the proliferation of personal information privacy regimes across the globe has made scalable and comprehensive compliance practices more complex and costly to implement. Consequently, our business is subject to a variety of continuously evolving and possibly conflicting regulations and customer requirements. Our compliance with these changing and increasingly burdensome regulations and requirements may cause us to incur substantial costs or require us to change our business practices, which may impact our financial results. If we fail to timely or adequately comply with these regulations or requirements, we may be exposed to litigation expenses and possible significant liability, fees, or fines.
One of our core strengths is our ability to collect data and enrich it with data from another part of our business to provide valuable information and insights to investors. As data is accessible across our products, consistent data privacy practices and disclosure becomes more important and challenging. Failure to comply with our public statements or to adequately disclose our privacy or data protection practices could result in costly investigations by governmental authorities, litigation, and fines, as well as reputational damage and customer loss.
We may be targeted by actors who are more sophisticated and have more resources than the actors our security program is designed to protect against. These actors may seek to attack our products and services or penetrate our network infrastructure to gain access to intellectual property, confidential or personal information, or to facilitate distributed denial of service attacks. While we have dedicated resources responsible for cybersecurity and have implemented systems and processes intended to help identify cyberattacks and protect and remediate security issues in our software and network infrastructure, these attacks have become increasingly frequent, sophisticated, and difficult to detect. Even in cases where an attack is ultimately detected, based on industry data, incidents may go undetected for several months. Our measures may not be adequate or designed to prevent all eventualities or all types or sources of attacks, and we may be vulnerable to circumvention of security systems, denial of service attacks or other cyberattacks, hacking including “hacktivism”, “phishing” or other social engineering attacks, computer viruses, ransomware or malware, employee or insider error, employee or vendor malfeasance, physical breaches or other malicious actions. We offer a hybrid work environment, which provides employees with the flexibility to work remotely (and use personal devices) which introduces additional and unique risk management challenges.
We may also be impacted by a cyberattack targeting one of our vendors or within our technology supply chain or infrastructure, including cloud providers. Our information technology systems interact with those of customers, vendors, and service providers and collect an increasing amount of confidential and other proprietary data as we expand our product and service offerings. As a result, inadequacies of third-party security technologies and practices introduce additional risk to our business in the event of ineffective cybersecurity programs and/or monitoring by these third parties.
From time to time, we have acquired, and may in the future acquire, other businesses, and while we conduct due diligence on the technology systems and practices of these companies, there can be no assurance that acquired companies have not suffered data breaches or system intrusions prior to and potentially continuing after our acquisition for which we may be liable. We may face potential identified or unknown security vulnerabilities in acquired products that expose us to additional security risks and penalties, or that delay our ability to integrate the product into our service offerings; difficulties in increasing or maintaining at an acceptable cost the security standards for acquired technology consistent with our other services; difficulty in transitioning the acquired technology onto our existing platforms and customer acceptance of multiple platforms on a temporary or permanent basis; and challenges augmenting the acquired technologies and platforms to the levels that are consistent with our brand and reputation. In addition, acquired businesses may not have invested as heavily in security measures or data privacy controls as we have, and they may introduce additional cybersecurity and data privacy risks as their systems are integrated with ours.
Any failure to safeguard confidential information or any material cybersecurity failures or incidents in our systems (or the systems of a customer, vendor, or service provider which stores or processes confidential information for which we are responsible, including cloud providers) could result in reputational harm, loss of customers, regulatory actions, sanctions or other statutory penalties, litigation, or financial losses and increased expenses related to addressing or mitigating the risks associated with any such material cybersecurity failures or incidents, which could have a material adverse effect on our operating results and financial condition.
AI technologies may present business, legal, and reputational risks as they are incorporated into our products and tools.
We use, and may continue to expand our use of, machine learning and AI technologies into certain of our products and processes. If we fail to keep pace with rapidly evolving AI technological developments or if other firms implement AI technologies more effectively than we do, our competitive position and business results may suffer. As AI technology is highly complex and rapidly evolving, and our ability to foresee all the legal, operational or technological risks that may arise from our use of AI is limited. Use of AI is also the subject to an evolving governmental and regulatory landscape, which may subject the company to additional scrutiny.
The introduction of AI technologies, particularly generative AI, into new or existing offerings may result in errors and new or expanded risks and liabilities, including enhanced compliance obligations and regulatory scrutiny, litigation, ethical concerns, confidentiality or security risks, that could adversely affect our business, reputation, and financial results. For example, AI technologies can lead to unintended consequences and errors, including generating content that appears correct but is factually inaccurate, misleading or otherwise flawed, or that results in unintended biases and discriminatory outcomes, which could harm our reputation and expose us to liability. Laws, regulations or industry standards that develop in response to the use of AI may be burdensome or may significantly restrict the deployment of AI, particularly generative AI technologies, in our products or processes.
We have taken steps designed to manage risks related to our adoption of AI; however, these steps may not sufficiently mitigate these risks, which include but are not limited to risks related to employee error or malfeasance, the loss of intellectual property, claims of bias or discrimination, or product liability claims.
We may be subject to specific obligations relating to the use of AI technologies in our operations or the incorporation of AI technologies in our products and services, including the EU Artificial Intelligence Act (EU AI Act). We expect that regulators in the various global locations we do business in will pursue new rules governing AI, whether through regulations specific to AI or through updating existing laws to incorporate new AI-specific provisions. This evolving regulatory environment may cause us to incur substantial costs or require us to change our business practices, which may impact our financial results. Any failure to timely or adequately address these regulations, or any future changes to or expanded regulations, may expose us to significant compliance costs, potential liabilities or fines.
AI technologies may use or incorporate data from third-party sources, which may expose us to risks associated with data rights and protection and may also lead to the unintended consequences of using AI discussed above. Current laws and court decisions governing intellectual property ownership and license rights may not address new questions relating to AI technologies, which may negatively affect our ability to safeguard our intellectual property, as well as increase the compliance costs associated with navigating an uncertain legal and regulatory environment. The use or adoption of AI technologies into our products may expose us to claims of copyright infringement or other intellectual property misappropriation by third parties, which may require us to pay compensation or license fees.
In addition to the implementation of AI in our tools and products, there is risk associated with the implementation of AI technologies by competitors or disruptors. The value of our products and services may be negatively affected by the increasing amount of information and external tools that are available for free, or at low cost, through Internet sources that use AI to scrape data – including our own content – from the Internet. These technologies integrate machine learning abilities and other AI systems to process and organize large data sets aggregated from products that previously were paid for, posing an external risk to our product suite. The rapidly evolving regulatory environment for AI technologies may also impact our ability to protect our own data and intellectual property against infringement through these AI external tools.
We could face liability for failing to properly protect or use the information and data we collect, store, use, create, and distribute or the reports and other documents we publish or that are produced by our software products.
We may be subject to claims for securities law violations, defamation (including libel and slander), negligence, or other claims relating to the information we publish, including our research and ratings. For example, investors may take legal action against us if they rely on published information that contains an error, or a company may claim that we have made a defamatory statement about it or its employees. In addition, in our business unit containing our credit ratings offerings, we have access to significant amounts of material nonpublic information on issuers of securities and if such information is inadvertently disclosed or misappropriated by employees or others, we could be exposed to various liabilities under securities and other laws. Less significant errors could still require us to remove ratings, research, or data temporarily which could diminish the perceived value of the product or cause us to be deficient in our service-level agreements with clients that require us to meet certain obligations for delivering time-sensitive, up-to-date data and information.
Some of our products support the investment processes or the client account reporting practices and other activities of our clients who manage significant assets of other parties. Use of our products as part of such activities creates the risk that clients, or the parties whose assets are managed by our clients, may pursue claims against us for losses that may have some connection to our products, and we may be subject to investigation of our products and their use by government regulators who regulate the business of our clients. In the case of software products, even though most of our contracts for such products contain limitations of our liability in such cases, we may be required to compensate such clients or their customers for losses in order to maintain our business relationships. We could also be subject to claims based on the content that is accessible from our website through links to other websites.
Products and enhancements we develop or license have contained, and in the future may contain, undetected errors or defects despite testing or other quality assurance practices. Use of our products or services as part of the investment process and other activities creates the risk that our customers, investors, the companies that we rate or assess across our products, or the shareholders of those companies, may pursue claims against us based on even a small error in our data, calculations, methodologies, input, or analysis, or a malfunction or failure in our systems, products or services.
Management's Discussion & Analysis (MD&A)
New heading “•failing to achieve the anticipated benefits of the Center for Research in Security Prices, LLC (CRSP) acquisition;”
New heading “•changing economic and market conditions, including prolonged volatility, recessions, or downturns affecting the financial, data and software sectors and global financial markets, fluctuating interest rates, and the impacts of global trade policies, may negatively impact our financial results, including those of our asset-based businesses;”
New heading “•triggering events for impairment of goodwill or assets;”
New heading “•failing to recognize deferred revenue;”
New heading “•our ability to repurchase shares of our common stock;”
New heading “Non-GAAP Measures”
New heading “NMF — not meaningful”
New heading “Adjusted Operating Income and Adjusted Operating Margin”
Removed heading “•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;”
Removed heading “Non-GAAP Financial Measures”
Removed heading “Wealth Advisors”
Largest changes
“•triggering events for impairment of goodwill or assets;”see in full comparison
“•changing economic and market conditions, including prolonged volatility, recessions, or downturns affecting the financial, data and software sectors and global financial markets, fluctuating interest rates, and the impacts of global trade policies, may negatively impact our financial results, including those of our asset-based businesses;”see in full comparison
“•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;”see in full comparison
“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 civil monetary penalty to the SEC to resolve the investigation related to record-keeping, and a $2.0 million civil monetary penalty to the SEC to resolve the investigation related to commercial mortgage-backed securities (CMBS) ratings methodologies, both in early October 2023.”see in full comparison
“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. …”see in full comparison
“•failing to achieve the anticipated benefits of the Center for Research in Security Prices, LLC (CRSP) acquisition;”see in full comparison
Full comparison: every changed paragraph (163)
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:
•failing to achieve the anticipated benefits of the Center for Research in Security Prices, LLC (CRSP) acquisition;
•failurefailing to prevent and/or mitigate cybersecurity events and the failure to protect confidential information, including personal information about individuals;
•changing economic and market conditions, including prolonged volatility, recessions, or downturns affecting the financial, data and software sectors and global financial markets, fluctuating interest rates, and the impacts of global trade policies, may negatively impact our financial results, including those of our asset-based businesses;
•compliance failures, regulatory action, or changes in or expansion of laws applicable to our regulated businesses;
•failing to innovate or streamline our product and service offerings or meet or anticipate our clients’ changing needs;
•the impact of AI technologies on our businessbusiness, as well as legal and reputation, and the legalreputational risks as they are incorporated into our products and tools;
•failurefailing to detect errors in our products or failuremethodology ofor our products toperforming perform properlyimproperly due to defects, malfunctionsmalfunctions, or similar problems;
•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;
•failing to scale our operations and increase productivity in order to implement our business plans and strategiesstrategies, including failing to manage costs related thereto;
•failure of our strategic transaction,transactions, acquisitions, divestituresdispositions, and investments in companies or technologies failing to yield expected business or financial benefits, negatively impacting our operating results and our ability to deliver long-term value to shareholders;
•triggering events for impairment of goodwill or assets;
•failing to recognize deferred revenue;
•the potential adverse effect of our indebtedness (and rising interest rates) on our cash flow and financial and operational flexibility;
•liability, costscosts, and reputational risks relating to environmental, socialsocial, and governance considerations;
•the potential and impact of vendor consolidation and clients' strategic decisions to replace our products and services with in-house products and services;
•our ability to repurchase shares of our common stock;
•impact on our stock price due to market conditions, future sales of our common stock and fluctuations in our operating results; and
Our strategy is to deliver insights and experiences that make us essential to the investor workflow.
Our strategy is to deliver insights and experiences that make us essential to investor workflow. Proprietary data sets, meaningful analytics, independent research, and effective 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.
The company has seven operating segments which are presented as the following five reportable segments: Morningstar DataDirect and Analytics,Platform, PitchBook, Morningstar Wealth,Credit, Morningstar Credit,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 onin a comparablemanner basisconsistent towith thehow basis on which current periodcurrent-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.
We offer an extensive line of investment-related products and services for individual and institutional investors in public and private capital markets;markets, financial advisors and wealth managers;managers, alliances and redistributors;redistributors, asset managers;managers, retirement plan providers, advisors and sponsors;sponsors, and issuers of fixed-income securities.
Our segments sell many of our research and data products and services through license agreements on either a per user or enterprise-basis. Morningstar DataDirect and AnalyticsPlatform 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.
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$607.1 million, of which $540.8$586.1 million was classified as a current liability with an additional $22.4$21.0 million included in long-term liabilities, at the end of 2024.2025. We expect to recognize this deferred revenue in future periods as we fulfill the service obligations under our license and subscription agreements.
• Depreciation and amortization. Our capital expenditures mainly relate to capitalized software development costs, information technology equipment, and leasehold improvements. We amortize capitalized software development costs on a straight-line basis over their estimated economic life, generally three years. We depreciate property and equipment using the straight-line method based on the useful lives of the assets, which range from three to seven years. We amortize leasehold improvements over the lease term or their useful lives, whichever is shorter. We also include amortization related to identifiable intangible assets, which is mainly driven by acquisitions, in this category. We amortize intangible assets using the straight-line method over their estimated economic useful lives, which range from one to twenty20 years.
• Revenue;
• Revenue (including organic revenue);
• Operating income (including adjusted operating income)Income;
• Operating margin (including adjusted operating margin)Margin; and
• FreeOperating cashCash flow.Flow.
Non-GAAP Measures
To supplement our consolidated financial statements presented in accordance with US Generally Accepted Accounting Principles (GAAP), we use the following non-GAAP measures:
•"Organic Revenue" is consolidated revenue before (1) acquisitions and divestitures, (2) adoption of new accounting standards or revisions to accounting practices (accounting changes), and (3) the effect of foreign currency translations.
•"Adjusted Operating Income (Loss)" is consolidated operating income (loss) excluding (1) intangible amortization expense, (2) the impact of merger, acquisition, and divestiture-related activity which, when applicable, may include certain non-recurring expenses such as pre-deal due diligence, transaction costs, contingent consideration, severance, and post-close integration costs (M&A-related expenses), and (3) certain other one-time, non-recurring items which management does not consider when evaluating ongoing performance (other non-recurring items).
•"Adjusted Operating Margin" is operating margin excluding (1) intangible amortization expense, (2) M&A-related expenses, and (3) other non-recurring items.
•"Free Cash Flow" is cash provided by or used for operating activities less capital expenditures.
These non-GAAP measures may not be comparable to similarly titled measures reported by other companies and should not be considered an alternative to any measure of performance promulgated under GAAP.
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).
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-periodperiod-over-period results, and our management team uses this measure to evaluate the performance of our business and product areas.business. We exclude revenue from acquired businesses acquiredfrom or divested fromour organic revenue growth calculation for a period of 12 months after we complete the acquisitionacquisition. orFor divestiture.divestitures Organic(including sale of assets), we exclude revenue in the prior-year period for which there is not equivalent to any measure required under GAAP and may not beno comparable torevenue similarlyin titledthe measurescurrent reported by other companies.period.
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.
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.
We definepresent free cash flow as cash provided by or used for operating activities less capital expenditures. Free cash flow is presented solely as a supplemental disclosure to help investors better understand how much cash is available after making capital expenditures. Our management team uses free cash flow as a metric to evaluate the health of our business. Free cash flow is not equivalent to any measure required under GAAPbusiness, and it should not be considered an indicator of liquidity. Moreover, the free cash flow definition we use may not be comparable to similarly titled measures reported by other companies.
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. WeIn 2025, we revised our annual renewal rate methodology to include changes in the contract value in the renewal amount.amount, including updates made mid-contract. Prior to 2025, mid-contract updates were not included except in the calculation of PitchBook's revenue renewal rate. 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 Januarymid-January 31, 2025.2026.
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, processesprocesses, 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.
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 tailortailors its rules to suit the UK market, while seeking to strengthen its position in wholesale markets more generally.
With respect to our credit ratings and indexes business, divergence risks further increase the costs and complexity of regulatory compliance. The UK Financial Conduct Authority issued a five-year strategy in early 2025. Morningstar’s wealth management business has noted no immediate impact but continues to monitor and evaluate for any divergence risks.
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.
Increased ESG Regulation and Anti-ESG Scrutiny
Interest from investors, regulatorsregulators, 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 termlong-term impacts on our delivery of products and services, customer interactions, physical operations, technology systems, and dependencies on third parties.
Morningstar is monitoring proposed ESGESG-related legislationlaws and regulations in the US, EU, and in other jurisdictions relevant to its business activities.activities, including those developments aimed at limiting or challenging ESG-related practices. 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 ensuresupport their compliance with new requirements.
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.
The introduction of the EU’s Digital Operational Resilience Act (DORA) 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.
Global Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations are expanding. For example, the EU’s enactment of its 6th AML Directive, enhanced beneficial‑ownership verification under the US Corporate Transparency Act, and instituted stricter risk‑based standards from the Financial Action Task Force (FATF). These developments increase compliance complexity for financial services providers and their affiliates. For Morningstar, this may require additional investment in technology, data quality, and due‑diligence processes, as well as increased oversight of third‑party vendors. Morningstar is actively monitoring all relevant updates to AML and KYC regulation to ensure compliance with its obligations.
NMF — not meaningful
_________________________________________________________________________
NMF — Not meaningful (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.
______________________________________________________________________________________________________ (21) 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. Revenue from Morningstar Sustainalytics was $112.0 million in 2025 and $117.3 million in 2024 and $118.2 million in 2023.2024. Revenue from Morningstar Indexes was $87.7 million in 2025 and $84.7 million in 2024 and $65.5 million in 2023.2024.
In 2024, ourOur consolidated revenue rose $236.5$170.4 million, or 11.6%.7.5%, Foreignin 2025, with foreign currency movements increasedincreasing revenue by $1.3$12.7 million in 2024.million.
License-based revenue, which represents subscription services available to customers, increased 7.1%,5.8%, or 7.6%5.6% on an organic basis, during 2024.basis. Reported and organic revenue growth waswere primarily driven by strong demand for PitchBook and Morningstar DataDirect and AnalyticsPlatform products.
Asset-based revenue increased 19.2%,2.9%, or 7.8% on both a reported andan organic basis, duringwith 2024.both Reportedreported and organic revenue growth was primarily driven byreflecting increases in Morningstar Wealth, Morningstar Indexes,Retirement and Morningstar Retirement.Wealth.
What changed in the latest 10-Q
Risk Factors
New heading “The adoption and use of AI technologies, whether incorporated into or accessing our products and tools or implemented by third parties, may present business, legal, compliance, and reputational risks.”
New heading “Several of our businesses are highly regulated throughout the world, and the regulatory environment is increasingly complicated and rapidly evolving.”
New heading “Our indebtedness could adversely affect our cash flow and financial flexibility. Our variable rate indebtedness could subject us to interest rate risk, which could cause our debt service obligations to increase significantly.”
Largest changes
“The pace of adoption and use of AI technologies, including generative AI, in our products and processes and by our clients and end users may increase compliance obligations, regulatory scrutiny, litigation exposure, ethical concerns, and confidentiality or security risks. For example, AI systems may generate content that appears correct but is inaccurate, misleading, biased, or discriminatory, which, if relied upon and attributed to us, could harm our reputation and expose us to liability. …”see in full comparison
“Furthermore, the terms of our debt agreements include restrictive covenants that limit, among other things, our and our subsidiaries’ financial flexibility and ability to implement certain transactions. If we are unable to comply with the restrictions and covenants in our debt agreements, there could be a default that, in some cases, if continuing, could result in the accelerated payment of our debt obligations or the termination of borrowing commitments on the part of the lenders under our Credit Agreement. Additionally, our current credit facilities mature in October 2028 and October 2030. …”see in full comparison
“The expansion of our business, including through acquisitions, has increased our exposure to government regulation across our product lines. Some areas require extensive and ongoing interactions with regulators, which is an increasingly costly and resource intensive process and could result in a finding of noncompliance, which could expose us to fines, sanctions, penalties and reputational risk.”see in full comparison
“In the US, Morningstar Investment Management LLC (MIM), is a registered investment adviser under the Investment Advisers Act of 1940 (the 40 Act), and is subject to SEC requirements for record-keeping, reporting, standards of care, and fiduciary obligations. The Morningstar Funds Trust, an open-end mutual fund advised by MIM, subjects MIM to additional 40 Act requirements and the Commodity Exchange Act. …”see in full comparison
“For an overview of our current outstanding indebtedness, refer to Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources below. Our long-term debt was $1,713.3 million as of June 30, 2025. While our business has historically generated strong cash flow and we are in compliance with all of our debt covenants, borrowings under our current credit facilities are floating rate. …”see in full comparison
“Morningstar DBRS, our credit ratings business, operates in highly regulated environments in Canada, the US, the UK, Australia, and the EU, with substantial ongoing compliance obligations. The scope and interpretation of these regulations can be uncertain and inconsistent across jurisdictions, making compliance challenging and costly. Adhering to any current or expanded requirements that may arise under these frameworks can be complex, resource-intensive, and time-consuming. …”see in full comparison
Full comparison: every changed paragraph (17)
In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors in Part I, “Item 1A. Risk Factors” in our Annual Report and in this Report when deciding whether to invest in our common stock or otherwise evaluating our business. If any of those risks or uncertainties materialize, our business, financial condition, and/or operating results could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. Our operations could also be affected by other risks and uncertainties that are not presently known to us or that we currently consider immaterial to our operations.operations.There have been no material changes to the risk factors we have disclosed in the “Risk Factors” section of our Annual Report other than as provided herein.
The adoption and use of AI technologies, whether incorporated into or accessing our products and tools or implemented by third parties, may present business, legal, compliance, and reputational risks.
We use, and may expand our use of, AI technologies across our products, internal tools, and third‑party SaaS platforms. While AI offers opportunities to improve efficiency and innovation, it also introduces risks. If we fail to keep pace with AI advancements, or if competitors adopt AI more effectively, our competitive position may be harmed. Slow internal adoption could reduce operational effectiveness, while AI‑generated errors may be incorporated into our processes or products. Our use of AI technologies may require investment of resources and costs to develop, test, and maintain related products and services, and there is no assurance that these investments will be successful. The rapid evolution and adoption of AI may create risks that may be difficult to anticipate or control, particularly where we rely on third‑party platforms or where our data, analytics or insights are delivered to end users through third-party AI tools or other intermediaries. These risks could lead to operational inefficiencies, reputational harm, or compliance challenges. Inconsistent or decentralized adoption of AI tools across business units, or use of AI tools outside of established governance framework, could increase operational, legal, regulatory and reputational risk.
The pace of adoption and use of AI technologies, including generative AI, in our products and processes and by our clients and end users may increase compliance obligations, regulatory scrutiny, litigation exposure, ethical concerns, and confidentiality or security risks. For example, AI systems may generate content that appears correct but is inaccurate, misleading, biased, or discriminatory, which, if relied upon and attributed to us, could harm our reputation and expose us to liability. We may also face risks relating to data privacy or cybersecurity incidents stemming from our use of AI technologies. Emerging laws and regulations governing AI - such as the EU Artificial Intelligence Act and other evolving global frameworks - may impose burdensome requirements or restrict the deployment of certain AI capabilities in our offerings, and regulations on AI are developing at varying paces, meaning the global regulatory landscape is uncertain, potentially divergent, overlapping and conflicting and could require meaningful compliance efforts and adjustment to our business practices at significant costs. Failure to timely or adequately address these evolving obligations could result in liabilities or fines. Because AI is complex and rapidly developing, it is not possible to predict all of the legal, operational, or technological risks that may arise relating to our use of AI.
AI technologies may use or incorporate data from third-party sources, which may expose us to risks associated with data rights and protection and may also lead to the unintended consequences of using AI discussed above. Also licensing permissions, permitted-use restrictions, ownership of outputs or redistribution rights of third-party data may be uncertain, which could expose us to vendor claims, audits, restrictions on use, remediation obligations, additional fees or litigation. Current laws and court decisions governing intellectual property ownership and license rights may not address new questions relating to AI technologies, which may negatively affect our ability to safeguard our intellectual property, as well as increase the compliance costs associated with navigating an uncertain legal and regulatory environment. In addition, increased use of AI technologies may affect our workforce needs, including our ability to recruit, attract, or retain employees with the skills necessary to support AI-enabled products and processes. We may also face challenges if portions of our existing workforce do not possess, or cannot efficiently develop, the rapidly evolving skill sets required to meet changing business demands, which could adversely impact our operations and competitiveness.
In addition, the implementation of AI technologies by competitors and disruptors presents risks to our business. The value of our products and services may be negatively affected by the increasing amount of information and external tools that are available online for free, or at low cost, that use AI to scrape data – including our own content – from the Internet. These technologies integrate machine learning abilities and other AI systems to process and organize large data sets aggregated from products that previously were paid for, posing an external risk to our product suite. Third-party AI systems may also ingest, train on, reproduce, summarize, simulate or otherwise use our proprietary data, research, ratings, methodologies, content or other intellectual property without permission in ways that are difficult to detect or enforce against.
Several of our businesses are highly regulated throughout the world, and the regulatory environment is increasingly complicated and rapidly evolving.
The expansion of our business, including through acquisitions, has increased our exposure to government regulation across our product lines. Some areas require extensive and ongoing interactions with regulators, which is an increasingly costly and resource intensive process and could result in a finding of noncompliance, which could expose us to fines, sanctions, penalties and reputational risk.
Morningstar DBRS, our credit ratings business, operates in highly regulated environments in Canada, the US, the UK, Australia, and the EU, with substantial ongoing compliance obligations. The scope and interpretation of these regulations can be uncertain and inconsistent across jurisdictions, making compliance challenging and costly. Adhering to any current or expanded requirements that may arise under these frameworks can be complex, resource-intensive, and time-consuming. In addition, Morningstar DBRS is subject to regular regulatory examinations and occasional investigations, which can be time consuming and impact day to day operations.
In the US, Morningstar Investment Management LLC (MIM), is a registered investment adviser under the Investment Advisers Act of 1940 (the 40 Act), and is subject to SEC requirements for record-keeping, reporting, standards of care, and fiduciary obligations. The Morningstar Funds Trust, an open-end mutual fund advised by MIM, subjects MIM to additional 40 Act requirements and the Commodity Exchange Act. These entities face SEC examinations and, when advising retirement plans, may act as Employee Retirement Income Security Act of 1974 (ERISA) fiduciaries, which would require compliance with strict obligations. Breaches, actual or alleged, could result in liability, particularly in retirement advice and managed accounts. Some contracts designate us as ERISA fiduciaries, including selecting and monitoring plan options, and we offer managed account services for plan participants. Such activities have been and may again be subject to class action litigation, including one current case. Many asset management and financial advisor clients are similarly regulated. The failure of our licensed products to meet their regulatory requirements could lead to loss of business.
Our regulated investment services operations are subject to regulation in markets outside the US. Post Brexit, we made a strategic decision to no longer engage new EU domiciled clients for regulated investment management activity, in part to reduce regulatory risk. The UK-based Morningstar Wealth Platform (Platform) has regulatory compliance obligations related to, among other things, the safeguarding and administration of client monies and assets, due to the offering of regulated products and services in the UK. The Platform business has offices in Jersey, South Africa, and the United Arab Emirates, all of which are or have been subject to the Financial Action Task Force (FATF) grey list. Increased regulatory scrutiny in Jersey, which was recently removed from the FATF grey list, and South Africa, which is currently on the FATF grey list, increase compliance costs and exposes us to potential reputational harm.
Our Indexes business, Morningstar Indexes, is subject to the EU Benchmarks Regulation, which mandates certain governance requirements, conflict management, and controls over the benchmark process and require administrators to improve the quality of input data and methodologies. We also closely monitor US regulatory developments, as the SEC has sought comment on whether index providers, model portfolio providers, and pricing services should be regulated as investment advisers or outsourced service providers. If adopted, these changes could significantly increase our regulatory exposure and compliance costs. In addition, the UK is currently consulting on a proposed new Specified Authorized Benchmark Regulation. We do not currently expect our Morningstar Indexes business in the UK to be in scope of the new regulation if adopted, and continue to engage with the relevant authorities as part of the consultation.
Morningstar Sustainalytics may face increased regulation of its research, ratings, and data activities. EU rules for ESG ratings providers, which became effective in 2026, and ongoing compliance with EU rules may require significant incremental investment in governance, internal controls, and compliance processes. Many jurisdictions have already established regulations regarding the provision and distribution of ESG data and ratings that are currently in effect or will take effect in the near future. Others are developing, similar frameworks, which may differ from EU requirements in material respects. The final form of any new or modified regulations could impose substantial compliance burdens and risk of inadvertent noncompliance. As Morningstar Sustainalytics operates globally, future regulations may be inconsistent across markets. Conversely, deregulation could reduce demand for our products. Failure to address this evolving landscape adequately and promptly could adversely affect our business, operating results, and financial condition.
Our indebtedness could adversely affect our cash flow and financial flexibility. Our variable rate indebtedness could subject us to interest rate risk, which could cause our debt service obligations to increase significantly.
For an overview of our current outstanding indebtedness, refer to Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources below. Our long-term debt was $1,713.3 million as of June 30, 2025. While our business has historically generated strong cash flow and we are in compliance with all of our debt covenants, borrowings under our current credit facilities are floating rate. As a result, our annual debt service requirements are affected by rising interest rates, and we cannot provide assurance that we will generate and maintain cash flows sufficient to permit us to service our indebtedness. Our ability to make payments on our indebtedness and to fund expected capital expenditures depends on our ability to generate and access cash in the future, which, in turn, is subject to general economic, financial, competitive, regulatory, tax and other factors, many of which are beyond our control. If we cannot refinance or otherwise pay our obligations as they mature and fund our liquidity needs, our business, financial condition, results of operations, cash flows, liquidity, ability to obtain financing, and ability to compete in our industry could be materially adversely affected.
In addition, any borrowings under our current credit facilities bear interest in fluctuating interest rates based on the Secured Overnight Financing Rate (SOFR), which replaced London Interbank Offered Rate (LIBOR) as the reference rate under our credit facilities. There can be no assurance that SOFR will perform in the same way as LIBOR would have at any time, which may result in increased volatility in the interest rates payable under our credit facilities and potentially increase our funding costs.
Furthermore, the terms of our debt agreements include restrictive covenants that limit, among other things, our and our subsidiaries’ financial flexibility and ability to implement certain transactions. If we are unable to comply with the restrictions and covenants in our debt agreements, there could be a default that, in some cases, if continuing, could result in the accelerated payment of our debt obligations or the termination of borrowing commitments on the part of the lenders under our Credit Agreement. Additionally, our current credit facilities mature in October 2028 and October 2030. We may not be able to renegotiate or obtain additional or new financing on a timely basis or on terms favorable or acceptable to us. If we are unable to refinance or otherwise fund our liquidity needs, our business, financial condition, results of operations, cash flows, liquidity, and ability to compete in our industry could be materially adversely affected. Refer to Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources for a description of the restrictive covenants in our debt agreements.
Management's Discussion & Analysis (MD&A)
Largest changes
“Cost of revenue increased $8.7 million in the second quarter and $16.2 million in the first six months of 2026. An increase in certain technology infrastructure costs of $6.1 million and $9.0 million in the second quarter and first six months of 2026, respectively, was the largest contributor to the increase, which included higher cloud spending primarily related to the migration from on-premise data centers and computer and software costs associated with AI initiatives. Professional fees also contributed to the increase in both periods.”see in full comparison
PitchBook adjusted operating incomesee in full comparisondecreasedincreased$0.7$0.2 million, or1.3%,0.4%, and adjusted operating margin decreased2.01.4 percentage points for the three months endedMarchJune31,30, 2026. The decline in adjusted operating margin wasduelargelyindrivenpart to higher advertising expenses andby an increase in compensation costs, which included the impact of additional headcount to support new growth initiatives. Increased technology infrastructure costs primarily related to AI initiatives also contributed.
Three and Six Months Endedsee in full comparisonMarchJune31,30, 2026 vs. Three and Six Months EndedMarchJune31,30, 2025
“Approximately 85% of our cash, cash equivalents, and investments balance as of June 30, 2026 was held by our operations outside the US, an increase from 81% as of December 31, 2025. We generally consider the accumulated undistributed earnings of most of our foreign subsidiaries to be permanently reinvested. During the second quarter of 2026, we identified $84.0 million of accumulated undistributed earnings of certain of our foreign subsidiaries that we anticipate to be distributed to the US later in 2026 or early 2027. …”see in full comparison
“Our effective tax rate in the second quarter and first six months of 2026 was 26.2% and 25.3%, respectively, reflecting an increase of 3.4 and 1.0 percentage points compared with the same prior year periods. Our effective tax rate increased in 2026 due to deferred taxes recorded in the second quarter of 2026 with respect to unremitted foreign earnings from some of our non-US subsidiaries as well as from a negative tax impact due to the vesting of employee stock-based compensation compared with the excess tax benefits that were recognized in 2025. …”see in full comparison
“Sales and marketing expense decreased $1.6 million in the second quarter and increased $1.0 million in the first six months of 2026. The quarterly decrease was primarily driven by lower compensation expense and professional fees of $1.6 million and $1.4 million, respectively, partially offset by a $0.9 million increase in advertising and marketing costs. The decrease in compensation expense was primarily due to lower salary and severance costs, while higher paid advertising drove the increase in advertising and marketing costs. …”see in full comparison
Full comparison: every changed paragraph (85)
•failing to achieve the anticipated benefits of the Center for Research in Security Prices, LLC (CRSP) acquisition;
•the impact of artificial intelligence (AI) technologies and related costs on our business,business and reputation, as well as legal and reputational risks as they are incorporated into our products and tools;
•impactvolatility onin our stock price due to market conditions, any future sales of our common stock, and fluctuations in our operating results; and
A more complete description of these risks and uncertainties, among others, 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, 2025 (our Annual Report)., and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, 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.
Three and Six Months Ended MarchJune 31,30, 2026 vs. Three and Six Months Ended MarchJune 31,30, 2025
To supplement our interim consolidated financial statements presented in accordance with US Generally Accepted Accounting Principles (GAAP), we use the following non-GAAP measures:
(1) Corporate and All Other provides a reconciliation between revenue from our Total Reportable Segments and consolidated revenue amounts. Corporate and All Other includes Morningstar Sustainalytics and Morningstar Indexes as sources of revenues. Revenue from Morningstar Sustainalytics was $26.6$25.5 million and $28.8$27.3 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $52.1 million and $56.1 million for the six months ended June 30, 2026 and 2025, respectively. Revenue from Morningstar Indexes was $32.8$37.8 million and $23.0$20.4 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $70.6 million and $43.4 million for the six months ended June 30, 2026 and 2025, respectively.
In the firstsecond quarter of 2026, consolidated revenue increased 10.8%9.6% to $644.8$663.2 million. Foreign currency movements increased revenue by $13.5$3.5 million.
License-based revenue increased 6.4%,6.2%, or 2.6%3.1% on an organic basis, during the firstsecond quarter of 2026, primarily driven by strong demand for Morningstar Direct Platform and PitchBook products.
Asset-based revenue increased 11.0%17.5%, or 13.8% on a both a reported andan organic basis, during the firstsecond quarter of 2026. The increase in reported and organic asset-based revenue was primarily driven by an increase in sales of Morningstar Retirement and Morningstar Wealth products.
Transaction-based revenue increased 34.0%,18.0%, or 30.6%17.8% on an organic basis, during the firstsecond quarter of 2026, primarily driven by Morningstar Credit revenue.
In the first six months of 2026, consolidated revenue increased 10.2% to $1,308.0 million. Foreign currency movements increased revenue by $17.0 million.
License-based revenue increased 6.3%, or 2.8% on an organic basis, during the first six months of 2026, primarily driven by demand for Morningstar Direct Platform and PitchBook products.
Asset-based revenue increased 14.2%, or 12.4% on an organic basis, during the first six months of 2026. The increase in reported and organic asset-based revenue was primarily driven by an increase in sales of Morningstar Retirement and Morningstar Wealth products.
Transaction-based revenue increased 25.3%, or 23.6% on an organic basis, during the first six months of 2026, primarily driven by Morningstar Credit revenue.
Organic revenue increased 7.6%6.8% in the second quarter of 2026 and 7.2% in the first quartersix months of 2026, driven by organic revenue growth in Morningstar Credit, Morningstar Direct Platform, and PitchBook.
International revenue comprised 28% of our consolidated revenue in both the second quarter and first quartersix months of 2026, which was comparable to the same periodperiods in 2025. Approximately 58%56% of international revenue was generated in Continental Europe and the United Kingdom during both the second quarter and first quartersix months of 2026, which was comparabledown slightly compared to the same periodperiods in 2025. Revenue from international operations increased 16.1%6.1% and 10.9% during the second quarter and first quartersix months of 2026, respectively, driven by strong demand for Morningstar Credit and Morningstar Wealth products as well as Morningstar Direct Platform products.during the first six months of 2026.
Cost of revenue increased $8.7 million in the second quarter and $16.2 million in the first six months of 2026. An increase in certain technology infrastructure costs of $6.1 million and $9.0 million in the second quarter and first six months of 2026, respectively, was the largest contributor to the increase, which included higher cloud spending primarily related to the migration from on-premise data centers and computer and software costs associated with AI initiatives. Professional fees also contributed to the increase in both periods.
Cost of revenue increased $7.5 million in the first quarter of 2026. Higher compensation expense of $4.6 million in the first quarter of 2026 was the largest contributor to the increase, primarily driven by unfavorable currency translation related to US dollar weakness. Technology infrastructure costs were also a driver due to the company's investment in and renewal of various SaaS-based platforms across the business.
Sales and marketing expense decreased $1.6 million in the second quarter and increased $1.0 million in the first six months of 2026. The quarterly decrease was primarily driven by lower compensation expense and professional fees of $1.6 million and $1.4 million, respectively, partially offset by a $0.9 million increase in advertising and marketing costs. The decrease in compensation expense was primarily due to lower salary and severance costs, while higher paid advertising drove the increase in advertising and marketing costs. For the first six months of 2026, advertising and marketing costs increased $2.8 million and were partially offset by a $1.7 million decrease in compensation expense, primarily due to the same factors noted above.
Sales and marketing expense increased $2.6 million in the first quarter of 2026. Advertising and marketing costs increased $1.9 million due to an increase in paid advertising.
General and administrative expense increased $7.5$16.5 million in the second quarter and $24.0 million in the first quartersix months of 2026. Higher compensation expense of $3.0$12.6 million and $15.7 million in the second quarter and first six months of 2026, respectively, was the largest contributor to the increase, driven primarily by unfavorablestock-based currencycompensation, translation relatedattributable to USstrong dollarperformance weaknesscompared to targets, and stock-basedsalary compensation.costs. Facilities-related expenses and professional fees also contributed to the increase.increase in both periods.
Depreciation expense decreased slightly in the firstsecond quarter and first six months of 20262026, while intangible amortization expense increased $4.6$5.6 million,million in the second quarter and $10.2 million in the first six months of 2026, primarily from additional amortization related to intangibles from the acquisition of the Center for Research in Security Prices (CRSP).CRSP.
Consolidated operating income increased $41.8$35.5 million in the firstsecond quarter of 2026, reflecting an increaseincreases in revenue of $62.9$58.1 million and other operating income of $6.0 million, partially offset by an increase in operating expense of $22.0$28.6 million. Operating margin was 24.2%, an increase of 4.63.5 percentage points compared with the firstprior quarteryear of 2025.period.
Consolidated operating income increased $77.3 million in the first six months of 2026, reflecting increases in revenue of $121.0 million and other operating income of $6.9 million, partially offset by an increase in operating expense of $50.6 million. Operating margin was 24.2% in the first six months of 2026, an increase of 4.0 percentage points compared with the prior year period.
We reported adjusted operating income of $178.6$175.9 million and $354.5 million in the firstsecond quarter and first six months of 2026.2026, respectively. The table below shows a reconciliation of adjusted operating income to the most directly comparable GAAP financial measure.
(1) Corporate and All Other includes unallocated corporate expenses as well as adjusted operating income (loss) from Morningstar Sustainalytics and Morningstar Indexes. For the firstthree quartersmonths ofended June 30, 2026 and 2025, unallocated corporate expenses were $41.8$55.6 million inand each$50.1 period.million, respectively. For the six months ended June 30, 2026 and 2025, unallocated corporate expenses were $97.4 million and $91.9 million, respectively. Unallocated corporate expenses include finance, human resources, legal, and other management-related costs that are not considered when segment performance is evaluated.
We reported adjusted operating margin of 27.7%26.5% in the second quarter and 27.1% in the first quartersix months of 2026. The table below shows a reconciliation of adjusted operating margin to the most directly comparable GAAP financial measure.
Morningstar Direct Platform total revenue increased $16.0$12.9 million, or 8.0%,6.2%, for the three months ended MarchJune 31,30, 2026. Revenue grew 5.0%4.8% on an organic basis, primarily driven by growth in Morningstar Data and Morningstar Direct.
Morningstar Data contributed $9.4$6.8 million to revenue growth, with revenue increasing 9.4%6.4% or 6.3%4.2% on an organic basis. The increase in Morningstar Data was driven in part by expansion with existing clients supported by new use cases, with continued strength in managed investment data and Morningstar Essentials products.products, partially offset by softness in exchange market data.
Morningstar Direct contributed $6.8$6.1 million to revenue growth, with revenue increasing 9.4%8.2% or 6.0%7.1% on an organic basis, reflecting increased revenue per license and expansion with existing clients in reporting solutions despite a decline of 1.8% insolutions. Direct Licenseslicenses were relatively flat compared with the prior-year period as some client workflows shifted.period.
Morningstar Direct Platform adjusted operating income increased $3.9$4.0 million, or 4.5%,4.2%, and adjusted operating margin decreased 1.40.8 percentage points for the three months ended MarchJune 31,30, 2026. The decline in adjusted operating margin was due in part to higher compensation costs largely driven by a shift of additional research and sales resources to support Direct Platform growth priorities, partially offset by targeted reorganizations in the fourth quarter of 2025. Increased technology infrastructure costs primarily driven by the cloud migration also contributed.
Morningstar Direct Platform total revenue increased $28.9 million, or 7.1%, for the six months ended June 30, 2026. Revenue grew 4.9% on an organic basis, primarily driven by growth in Morningstar Data and Morningstar Direct.
Morningstar Direct Platform adjusted operating income increased $7.9 million, or 4.3%, and adjusted operating margin decreased 1.2 percentage points for the six months ended June 30, 2026. The decline in adjusted operating margin was driven by the same factors noted above Morningstar Direct Platform depreciation expense was $9.2 million and $11.2 million for the three months ended June 30, 2026 and 2025, respectively, and $18.7 million and $22.0 million for the six months ended June 30, 2026 and 2025, respectively.
Morningstar Direct Platform depreciation expense was $9.5 million and $10.8 million for the three months ended March 31, 2026 and 2025, respectively.
PitchBook total revenue increased $8.7$8.2 million, or 5.3%,4.9% on both a reported and organic basis for the three months ended MarchJune 31,30, 2026. Revenue grew 4.8% on an organic basis.
Growth reflected contributions from most core investor and advisor client segments, partially offset by softness in venture capital and elevated churn in the corporate client segment. Increased revenue was primarily driven by the PitchBook platform and strength in the direct data business, which continued to expand from a smaller revenue base. Licensed user counts were relatively flat compared to the prior-year period.
Growth was primarily driven by the PitchBook platform with strength in the direct data business, which continued to expand from a smaller base. The increase in PitchBook revenue reflected contributions from its core investor and advisor client segments, although growth slowed, especially in venture capital, while the corporate client segment continued to experience softness. Licensed user counts were relatively flat compared to the prior-year period, reflecting the addition of new logos offset by churn within the corporate segment.
PitchBook adjusted operating income decreasedincreased $0.7$0.2 million, or 1.3%,0.4%, and adjusted operating margin decreased 2.01.4 percentage points for the three months ended MarchJune 31,30, 2026. The decline in adjusted operating margin was duelargely indriven part to higher advertising expenses andby an increase in compensation costs, which included the impact of additional headcount to support new growth initiatives. Increased technology infrastructure costs primarily related to AI initiatives also contributed.
PitchBook depreciationtotal expenserevenue wasincreased $7.9$16.9 millionmillion, andor $7.8 million5.1% for the threesix months ended MarchJune 31,30, 2026. Revenue grew 4.9% on an organic basis.
PitchBook adjusted operating income decreased $0.5 million, or 0.5%, and adjusted operating margin decreased 1.7 percentage points for the six months ended June 30, 2026. The decline in adjusted operating margin was driven by the same factors noted above, as well as higher advertising expenses.
PitchBook depreciation expense was $8.8 million and $8.1 million for the three months ended June 30, 2026 and 2025, respectively, and $16.7 million and $15.9 million for the six months ended June 30, 2026 and 2025, respectively.
Morningstar Credit total revenue increased $28.0$19.9 million, or 38.4%,23.4%, for the three months ended MarchJune 31,30, 2026. Revenue grew 34.3%23.3% on an organic basis, supported by a robust issuance market.issuance. Revenue grew across geographies and most asset classes, with particular strength in Canadian and European corporates and US structured finance ratings revenue.and Organic revenue growth excludes revenue associated with DealX for the first two months of the quarter,Canadian and foreignUS currency impact.corporates.
Morningstar Credit adjusted operating income increased $19.8$8.0 million, or 92.5%,26.2%, and adjusted operating margin increased 11.50.8 percentage points for the three months ended MarchJune 31,30, 2026. The increase in adjusted operating income and margin reflected higherrevenue revenue,growth, partially offset by higher compensation costs. The increase in compensation was primarily driven by higher salaries and benefits due to increases inadded headcount to support growth.growth and higher bonus expense reflecting strong performance against targets.
Morningstar Credit total revenue increased $47.9 million, or 30.3%, for the six months ended June 30, 2026. Revenue grew 28.3% on an organic basis. Revenue grew across geographies and most asset classes, with particular strength in US structured finance ratings and global corporates.
Morningstar Credit depreciationadjusted expenseoperating wasincome $1.4increased million$27.8 million, or 53.6%, and $2.0adjusted millionoperating margin increased 5.9 percentage points for the threesix months ended MarchJune 31,30, 2026 and 2025.2026.
Morningstar Credit depreciation expense was $1.4 million and $2.0 million for the three months ended June 30, 2026 and 2025, respectively, and $2.8 million and $4.0 million for the six months ended June 30, 2026 and 2025, respectively.
Morningstar Wealth total revenue decreased $3.3$4.0 million, or 5.4%,6.2%, for the three months ended MarchJune 31,30, 2026. Revenue decreased 1.6%4.6% on an organic basis. Organic revenue growth excludes interim service fees received from AssetMark associated with the company's sale of customer assets from the US Morningstar Wealth Turnkey Asset Management Platform from the prior-year period, and foreign currency impact. ReportedExcluding and organic revenue growth included a $5.5 million negativethe impact from the sunsetting of Morningstar Office, whichorganic wasrevenue partiallywould offsethave increased 5.3%, supported by growth in ad sales and Investment Management, which grew on an organic basis.Management.
Asset-based revenue is based on quarter-end, prior quarter-end, or average asset levels during each quarter, which are often reported on a one-quarter lag for certain Investment Management products including Morningstar ManagedModel Portfolios. The timing of client asset reporting and the structure of our contracts often results in a lag between market movements and the impact on revenue. The following table summarizes our approximate Morningstar Wealth AUMA:
Investment Management total revenue increased $0.4$2.5 million, or 1.1%7.1% on a reported basis for the three months ended MarchJune 31,30, 2026. Revenue increased 10.6%11.9% on an organic basis. Reported AUMA decreased 5.3%4.5% to $60.4$63.8 billion compared with the prior-year period. Excluding the impact of the loss of an Asset Allocation Services client, which accounted for a negligible share of Investment Management revenue, AUMA would have increased compared to the prior-year period,period. Combined Morningstar Model Portfolio and International Wealth Platform AUMA increased 16.2% to $55.3 million, supported by market appreciation and positive net flows to Morningstar Model Portfolios offered on third-party platforms andoutside the International Wealth Platform.US.
Morningstar Wealth adjusted operating income increased $6.4$4.9 million and adjusted operating margin increased 11.08.4 percentage points for the three months ended MarchJune 31,30, 2026.
Morningstar Wealth total revenue decreased $7.3 million, or 5.8%, for the six months ended June 30, 2026. Revenue declined 3.2% on an organic basis. Organic revenue growth excludes interim service fees received from AssetMark associated with the company's sale of customer assets from the US Morningstar Wealth Turnkey Asset Management Platform from the prior-year period, and foreign currency impact. Excluding the impact of the sunsetting of Morningstar Office, organic revenue would have increased 7.0%, supported by growth in Investment Management.
Morningstar Wealth depreciationadjusted expenseoperating wasincome $1.6increased $11.3 million and $4.5adjusted millionoperating margin increased 9.6 percentage points for the threesix months ended MarchJune 31,30, 2026 and 2025.2026.
Morningstar Wealth depreciation expense was $1.2 million and $4.4 million for the three months ended June 30, 2026 and 2025, respectively, and $2.8 million and $8.9 million for the six months ended June 30, 2026 and 2025, respectively.
Morningstar Retirement total revenue increased $5.9$5.5 million, or 17.9%17.0% on both a reported and organic basis for the three months ended MarchJune 31,30, 2026. AUMA, calculated using the most recently available average quarterly or monthly data, increased 11.7%9.0% to $310.0$311.0 billion compared with the prior-year period, primarily due to market gains and supported by positive net flows to traditional and Advisor Managed Accounts.
Morningstar Retirement adjusted operating income increased $5.2$4.0 million and adjusted operating margin increased 6.63.7 percentage points for the three months ended MarchJune 31,30, 2026. Adjusted operating income included the impact of a discrete expense related to a correction of a client's participant accounts.
Morningstar Retirement total revenue increased $11.4 million, or 17.5% on a reported and organic basis for the six months ended June 30, 2026. Growth was driven by market gains and positive net flows, supported by growth in traditional and Advisor Managed Accounts.
Morningstar Retirement depreciationadjusted expenseoperating wasincome $2.3increased $9.2 million and $2.6adjusted millionoperating margin increased 5.2 percentage points for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.2026.
Morningstar Retirement depreciation expense was $2.2 million and $2.7 million for the three months ended June 30, 2026 and 2025, respectively, and $4.5 million and $5.3 million for the six months ended June 30, 2026 and 2025, respectively.
Corporate and All Other revenue increased $7.6$15.6 million, or 14.7%32.7% on a reported basis, and increased $23.2 million, or 23.3% on a reported basis, for the three and six months ended MarchJune 31,30, 2026.2026, respectively.
MORN insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 16 filings (3 insiders, 32 trade dates, 201,970 shares, about $38.1M; 13 of these filings say the sales were made under a Rule 10b5-1 trading plan). Net open-market shares: -201,970 (purchases minus sales); net value about -$38.1M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-30 | Mansueto Daniel |
Other | 657,779 | — | — |
| 2026-09-01 | Wiersema Conan |
Shares withheld for tax | 29 | $218.94 | $6.3K |
| 2026-09-01 | Holt Michael |
Shares withheld for tax | 54 | $218.94 | $11.8K |
| 2026-08-24 | Mansueto Daniel |
Other | 376,969 | — | — |
| 2026-08-24 | Mansueto Joseph D |
Open-market sale |
1,740 | $218.43 | $380.1K |
| 2026-08-24 | Mansueto Joseph D |
Open-market sale |
226 | $221.12 | $50.0K |
| 2026-08-24 | Mansueto Joseph D |
Open-market sale |
220 | $216.01 | $47.5K |
| 2026-08-24 | Mansueto Joseph D |
Open-market sale |
1,181 | $217.26 | $256.6K |
| 2026-08-24 | Mansueto Joseph D |
Open-market sale |
978 | $219.44 | $214.6K |
| 2026-08-24 | Mansueto Joseph D |
Open-market sale |
1,314 | $220.42 | $289.6K |
| 2026-08-21 | Mansueto Joseph D |
Open-market sale |
3,827 | $216.70 | $829.3K |
| 2026-08-21 | Mansueto Joseph D |
Open-market sale |
268 | $217.57 | $58.3K |
| 2026-08-20 | Mansueto Joseph D |
Open-market sale |
501 | $217.13 | $108.8K |
| 2026-08-20 | Mansueto Joseph D |
Open-market sale |
295 | $216.16 | $63.8K |
| 2026-08-20 | Mansueto Joseph D |
Open-market sale |
1,938 | $215.18 | $417.0K |
| 2026-08-20 | Mansueto Joseph D |
Open-market sale |
3,157 | $212.87 | $672.0K |
| 2026-08-20 | Mansueto Joseph D |
Open-market sale |
1,359 | $214.17 | $291.1K |
| 2026-08-19 | Mansueto Joseph D |
Open-market sale |
1,785 | $214.81 | $383.4K |
| 2026-08-19 | Mansueto Joseph D |
Open-market sale |
3,031 | $213.96 | $648.5K |
| 2026-08-19 | Mansueto Joseph D |
Open-market sale |
189 | $217.01 | $41.0K |
| 2026-08-19 | Mansueto Joseph D |
Open-market sale |
114 | $208.21 | $23.7K |
| 2026-08-19 | Mansueto Joseph D |
Open-market sale |
680 | $210.24 | $143.0K |
| 2026-08-19 | Mansueto Joseph D |
Open-market sale |
426 | $211.52 | $90.1K |
| 2026-08-19 | Mansueto Joseph D |
Open-market sale |
369 | $215.93 | $79.7K |
| 2026-08-18 | Mansueto Joseph D |
Open-market sale |
913 | $208.13 | $190.0K |
| 2026-08-18 | Mansueto Joseph D |
Open-market sale |
1,935 | $209.48 | $405.3K |
| 2026-08-18 | Mansueto Joseph D |
Open-market sale |
2,708 | $210.32 | $569.5K |
| 2026-08-18 | Mansueto Joseph D |
Open-market sale |
1,588 | $211.26 | $335.5K |
| 2026-08-18 | Mansueto Joseph D |
Open-market sale |
106 | $212.20 | $22.5K |
| 2026-08-18 | Mansueto Joseph D |
Open-market sale |
656 | $212.53 | $139.4K |
| 2026-08-17 | Mansueto Joseph D |
Open-market sale |
5,749 | $206.84 | $1.2M |
| 2026-08-17 | Mansueto Joseph D |
Open-market sale |
1,501 | $207.81 | $311.9K |
| 2026-08-14 | Mansueto Joseph D |
Open-market sale |
277 | $209.38 | $58.0K |
| 2026-08-14 | Mansueto Joseph D |
Open-market sale |
3,924 | $206.28 | $809.4K |
| 2026-08-14 | Mansueto Joseph D |
Open-market sale |
2,809 | $207.33 | $582.4K |
| 2026-08-14 | Mansueto Joseph D |
Open-market sale |
240 | $208.45 | $50.0K |
| 2026-08-13 | Mansueto Joseph D |
Open-market sale |
26 | $199.75 | $5.2K |
| 2026-08-13 | Mansueto Joseph D |
Open-market sale |
430 | $198.96 | $85.6K |
| 2026-08-13 | Mansueto Joseph D |
Open-market sale |
3,498 | $197.06 | $689.3K |
| 2026-08-13 | Mansueto Joseph D |
Open-market sale |
2,936 | $197.88 | $581.0K |
| 2026-08-13 | Mansueto Joseph D |
Open-market sale |
52 | $202.09 | $10.5K |
| 2026-08-13 | Mansueto Joseph D |
Open-market sale |
78 | $203.79 | $15.9K |
| 2026-08-13 | Mansueto Joseph D |
Open-market sale |
52 | $205.66 | $10.7K |
| 2026-08-13 | Mansueto Joseph D |
Open-market sale |
178 | $206.78 | $36.8K |
| 2026-08-12 | Mansueto Joseph D |
Open-market sale |
26 | $197.63 | $5.1K |
| 2026-08-12 | Mansueto Joseph D |
Open-market sale |
5,027 | $194.96 | $980.1K |
| 2026-08-12 | Mansueto Joseph D |
Open-market sale |
1,906 | $195.77 | $373.1K |
| 2026-08-12 | Mansueto Joseph D |
Open-market sale |
291 | $197.09 | $57.4K |
| 2026-08-11 | Mansueto Joseph D |
Open-market sale |
974 | $200.32 | $195.1K |
| 2026-08-10 | Mansueto Joseph D |
Open-market sale |
7,250 | $201.84 | $1.5M |
| 2026-08-07 | Mansueto Joseph D |
Open-market sale |
506 | $201.53 | $102.0K |
| 2026-08-07 | Mansueto Joseph D |
Open-market sale |
1,453 | $198.49 | $288.4K |
| 2026-08-07 | Mansueto Joseph D |
Open-market sale |
2,559 | $199.34 | $510.1K |
| 2026-08-07 | Mansueto Joseph D |
Open-market sale |
166 | $196.16 | $32.6K |
| 2026-08-07 | Mansueto Joseph D |
Open-market sale |
2,566 | $200.40 | $514.2K |
| 2026-08-06 | Mansueto Joseph D |
Open-market sale |
2,272 | $198.38 | $450.7K |
| 2026-08-05 | Mansueto Joseph D |
Open-market sale |
1,246 | $199.58 | $248.7K |
| 2026-08-05 | Mansueto Joseph D |
Open-market sale |
4,310 | $201.12 | $866.8K |
| 2026-08-05 | Mansueto Joseph D |
Open-market sale |
1,664 | $201.98 | $336.1K |
| 2026-08-05 | Mansueto Joseph D |
Open-market sale |
30 | $202.51 | $6.1K |
Well-known investors holding MORN (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 1,304,388 | $203.5M | 0.07% | Added 109% |
| Two Sigma Investments | 2026-06-30 | 484,249 | $75.6M | 0.06% | Reduced 44% |
| Renaissance Technologies | 2026-06-30 | 238,770 | $37.3M | 0.05% | Reduced 47% |
| Millennium Management (Israel Englander) | 2026-06-30 | 162,620 | $25.4M | 0.02% | Reduced 50% |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 142,299 | $22.2M | 0.05% | Reduced 16% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 32,754 | $5.1M | 0.01% | Reduced 81% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 27,906 | $4.4M | 0.0% | Added 18% |
| D. E. Shaw & Co. | 2026-06-30 | 5,594 | $872.8K | 0.0% | Reduced 73% |
| Bridgewater Associates | 2026-06-30 | 4,249 | $662.9K | 0.0% | New position |