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What changed in Morningstar, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Morningstar, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+663 added−759 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-29)

Top changes in Morningstar, Inc.'s 2024 10-K

663 paragraphs added · 759 removed · 467 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

167 edited+85 added−101 removed46 unchanged
Biggest changeOur asset management offerings help companies connect with their clients because of Morningstar’s strong brand presence with both financial advisors and individual investors. We offer a global reach and have earned investors’ trust with our independent approach, investor-centric mission, and thought leadership. We serve asset managers through our Morningstar Data and Analytics and Morningstar Credit segments.
Biggest changeWe offer a global reach and have earned investors’ trust with our independent approach, investor-centric mission, and thought leadership. We serve asset managers through our Morningstar Data and Analytics, Morningstar Credit, and PitchBook segments, as well as through Morningstar Indexes and Morningstar Sustainalytics. The main products we offer for asset management firms include Morningstar Direct, Morningstar Data, and Morningstar Indexes.
We believe that focus on putting investors first, paired with the way we use design and technology to communicate complex financial information, sets us apart from our peers in the financial services industry. 3 Table of Contents Our Data, Research, and Ratings Morningstar’s trusted data, research, and ratings underpin everything we do across our business.
We believe that our focus on putting investors first, paired with the way we use design and technology to communicate complex financial information, sets us apart from our peers in the financial services industry. 3 Table of Contents Our Data, Research, and Ratings Morningstar’s trusted data, research, and ratings underpin everything we do across our business.
We target like-minded advisors who hire us to manage a substantial portion of their client’s assets in alignment with our principles of putting investors first, keeping costs low, and investing for the long-term. We build our multi-asset strategies using mutual funds, ETFs, and individual securities, and tailor them to meet specific investment time horizons, risk levels, and projected outcomes.
We target like-minded advisors who hire us to manage a portion of their client’s assets in alignment with our principles of putting investors first, keeping costs low, and investing for the long term. We build our multi-asset strategies using mutual funds, ETFs, and individual securities, and tailor them to meet specific investment time horizons, risk levels, and projected outcomes.
Through our Morningstar Data and Analytics and PitchBook segments and our Morningstar Sustainalytics products, our customers have access to a wide selection of investment data, fundamental equity research, manager research, private capital markets research, environmental, social, and governance (ESG) ratings, fund ratings, and indexes directly on our proprietary desktop or web-based software platforms, or through direct data feeds, direct shares, streaming capabilities and application programming interfaces (APIs).
Through our Morningstar Data and Analytics and PitchBook segments and Morningstar Sustainalytics products, our customers have access to a wide selection of investment data, fundamental equity research, manager research, private capital markets research, environmental, social, and governance ratings and data, fund ratings, and indexes directly on our proprietary desktop or web-based software platforms, or through direct data feeds, direct shares, streaming capabilities and application programming interfaces (APIs).
The fiduciary duties of a registered investment adviser to its clients include an obligation of good faith and full and fair disclosure of all facts material to the client’s engagement of the advisor, an obligation to provide investment advice suitable for the particular client, an obligation to have a reasonable, independent basis for investment recommendations, an obligation when directing client brokerage transactions to seek the best execution thereof, and an obligation to vote client proxies in the best interests of the client.
The fiduciary duties of a registered investment adviser to its clients include an obligation of good faith and full and fair disclosure of all facts material to the client’s engagement of the advisor, an obligation to provide investment advice suitable for the particular client, an obligation to have a reasonable, independent basis for investment recommendations, an obligation when directing client brokerage transactions to seek the best execution for the client, and an obligation to vote client proxies in the best interests of the client.
DBRS Ratings GmbH is registered to provide independent credit rating services in sovereign and public finance, structured finance, and corporate finance, including financial institutions, corporate credit issuers, and insurance undertakings. As a registered credit rating agency, DBRS Ratings GmbH is subject to certain requirements under Regulation (EC) No 1060/2009, as amended.
DBRS Ratings GmbH is registered to provide independent credit rating services in sovereign and public finance, structured finance, and corporate finance, including financial institutions, corporate credit issuers, and insurance undertakings. As a registered credit rating agency, DBRS Ratings GmbH is subject to certain regulatory requirements under Regulation (EC) No 1060/2009, as amended.
Pricing for Morningstar Retirement is generally asset-based and depends on several factors, including the level of services offered (including whether the services involve acting as a fiduciary under the Employee Retirement Income Security Act, or ERISA), the number of participants, the level of systems integration required, total assets under management or advisement, and the availability of competing products. 13 Table of Contents Corporate and All Other Corporate and All Other includes unallocated corporate expenses as well as financial results from Morningstar Sustainalytics and Morningstar Indexes.
Pricing for Morningstar Retirement is generally asset-based and depends on several factors, including the level of services offered (including whether the services involve acting as a fiduciary under the Employee Retirement Income Security Act, or ERISA), the number of participants, the level of systems integration required, total assets under management or advisement, and the availability of competing products. 14 Table of Contents Corporate and All Other Corporate and All Other includes unallocated corporate expenses as well as financial results from Morningstar Sustainalytics and Morningstar Indexes.
The table below includes some of the trademarks and service marks referenced in this Annual Report on Form 10-K (this Report): Morningstar® Advisor Workstation SM Morningstar® Plan Advantage SM Morningstar Analyst Rating TM Morningstar® Portfolio X-Ray® Morningstar® ByAllAccounts® Morningstar Rating™ Morningstar® Data Morningstar® Retirement Manager SM Morningstar Direct SM Morningstar Style Box™ Morningstar® Direct Web Services SM Morningstar Sustainability Rating™ Morningstar® Indexes Morningstar.com® Morningstar® Managed Portfolios SM PitchBook® Morningstar Market Barometer SM DBRS® Morningstar Office Cloud SM Sustainalytics® In addition to trademark registrations, we hold several U.S. patents, either directly or through our wholly-owned subsidiary, Morningstar Investment Management LLC, and are applying for several additional patents in various jurisdictions around the world, including the U.S.
The table below includes some of the trademarks and service marks referenced in this Annual Report on Form 10-K (this Report): Morningstar® Advisor Workstation SM Morningstar® Plan Advantage SM Morningstar Analyst Rating TM Morningstar® Portfolio X-Ray® Morningstar® ByAllAccounts® Morningstar Rating™ Morningstar® Data Morningstar® Retirement Manager SM Morningstar Direct SM Morningstar Style Box™ Morningstar® Direct Web Services SM Morningstar Sustainability Rating™ Morningstar® Indexes Morningstar.com® Morningstar® Managed Portfolios SM PitchBook® Morningstar Market Barometer SM DBRS® Morningstar Office Cloud SM Sustainalytics® In addition to trademark registrations, we hold several US patents, either directly or through our wholly-owned subsidiary, Morningstar Investment Management LLC, and are applying for several additional patents in various jurisdictions around the world, including the US.
Institutional asset owners and investment consultants Institutional asset owners operate in a fiduciary capacity on behalf of their beneficiaries, overseeing large pools of capital, which according to WTW 2023 Global Pension Study, in aggregate exceed $100 trillion in assets under management across public pension funds, sovereign wealth funds, endowments, foundations, corporate pensions, and insurance general accounts.
Institutional asset owners and investment consultants Institutional asset owners operate in a fiduciary capacity on behalf of their beneficiaries, overseeing large pools of capital, which according to WTW 2024 Global Pension Study, in aggregate exceed $100 trillion in assets under management across public pension funds, sovereign wealth funds, endowments, foundations, corporate pensions, and insurance general accounts.
This augments other quantitative ratings and analytics, such as the Morningstar Rating for funds (the “star rating”), which ranks managed investment strategies such as mutual funds based on their past risk-adjusted performance versus their Morningstar category peers. We also publish research and ratings on state-sponsored college-savings plans, target-date funds, and health-savings accounts.
It augments other quantitative ratings and analytics, such as the Morningstar Rating for funds (the “star rating”), which ranks managed investment strategies such as mutual funds based on their past risk-adjusted performance versus their Morningstar category peers. We also publish research and ratings on state-sponsored college-savings plans, target-date funds, and health-savings accounts.
We are currently focused on the following four strategic priorities: Deliver differentiated insights across asset classes to public and private market investors Shifting investor needs and expectations, innovative investment approaches and technologies, and a changing political and regulatory environment continue to drive the evolution of the financial services industry.
We are currently focused on the following four strategic priorities: Deliver differentiated insights across asset classes to public and private market investors Shifting investor needs and expectations, the convergence of public and private markets, innovative investment approaches and technologies, and a changing political and regulatory environment continue to drive the evolution of the financial services industry.
This allows us to control our technology development and better manage costs, enabling us to respond quickly to market changes and to meet customer needs efficiently. Government Regulation In addition to generally applicable laws and regulations, certain subsidiaries of Morningstar are subject to various laws and regulations specific to the lines of business and activities they engage in.
This allows us to control our technology development and better manage costs, enabling us to respond quickly to market changes and to meet customer needs efficiently. Government Regulation In addition to generally applicable laws and regulations, certain subsidiaries of Morningstar are subject to laws and regulations specific to the business activities they engage in.
These requirements primarily relate to record-keeping, reporting, governance, and conflicts of interest. Investment Management and Investment Research United States Investment advisory and broker/dealer businesses are subject to extensive regulation in the U.S. at both the federal and state level, as well as by self-regulatory organizations.
These requirements primarily relate to record-keeping, reporting, governance, and conflicts of interest. Investment Management and Investment Research United States Investment advisory and broker - dealer businesses are subject to extensive regulation in the US at both federal and state level s , as well as by self-regulatory organizations.
Pricing for the PitchBook Platform is based on the number of seats, with standard base license fees per user and customized prices for large enterprises, boutiques, and startup firms. In 2023, PitchBook’s largest markets were North America and Europe. PitchBook's main competitors are CB Insights, Preqin, and S&P Global Market Intelligence as well as certain smaller, niche competitors.
Pricing for the PitchBook platform is based on the number of seats, with standard base license fees per user and customized prices for large enterprises, boutiques, and startup firms. In 2024, PitchBook’s largest markets were North America and Europe. PitchBook's main competitors are CB Insights, Preqin (BlackRock), and S&P Global Market Intelligence, as well as certain smaller, niche competitors.
Drive operational excellence and scalability to support growth targets Morningstar has grown significantly in the last few years, and as we have continued to focus on growth in 2023 and beyond, we are emphasizing execution and scalability in our operations, processes, and technology.
Drive operational excellence and scalability to support growth targets Morningstar has grown significantly in the last few years, and as we have continued to focus on growth in 2024 and beyond, we are emphasizing execution and scalability in our operations, processes, and technology.
See Note 6 of the Notes to our Consolidated Financial Statements for additional information concerning revenue from customers and assets from our business operations outside the U.S. Intellectual Property and Other Proprietary Rights We treat our brand name and logo, product names, databases and related content, software, technology, know-how, and the like as proprietary.
See Note 6 of the Notes to our Consolidated Financial Statements for additional information concerning revenue from customers and assets from our business operations outside the US. Intellectual Property and Other Proprietary Rights We treat our brand name and logo, product names, databases and related content, software, technology, know-how, and the like as proprietary.
Our largest based on engagement is our investing media site Morningstar.com, which offers data, editorial and research content available for free to registered customers and visitors. Our second product is Morningstar Investor (Morningstar Premium outside of the U.S. and Australia), which provides access to Morningstar’s research, advanced screening tools and portfolio management tools.
Our largest based on engagement is our investing media site Morningstar.com, which offers data, editorial and research content available for free to registered customers and visitors. Our second product is Morningstar Investor (Morningstar Premium outside of the US and Australia), which provides access to Morningstar’s research, advanced screening tools and portfolio management tools.
In the ordinary course of our business, we obtain and use intellectual property from a variety of sources, including, without limitation, licensing it from third-party providers, developing it internally, and gathering it through publicly available sources (e.g., regulatory filings). 23 Table of Contents Seasonality We believe our business has a minimal amount of seasonality.
In the ordinary course of our business, we obtain and use intellectual property from a variety of sources, including, without limitation, licensing it from third-party providers, developing it internally, and gathering it through publicly available sources (e.g., regulatory filings). Seasonality We believe our business has a minimal amount of seasonality.
During his tenure, he also led Morningstar.com® and the firm’s data business as well as its global products and client solutions group. Kapoor holds a bachelor’s degree in economics and environmental policy from Monmouth College and a master’s degree in business administration from the University of Chicago Booth School of Business.
During his tenure, he also led Morningstar.com® and the firm’s data business as well as its global products and client solutions group. 28 Table of Contents Kapoor holds a bachelor’s degree in economics and environmental policy from Monmouth College and a master’s degree in business administration from the University of Chicago Booth School of Business.
We also post quarterly press releases on our financial results and other documents containing additional information related to Morningstar on this site. We provide this website and the information contained in or connected to it for informational purposes only. That information is not part of this Report. 30 Table of Contents
We also post quarterly press releases on our financial results and other documents containing additional information related to Morningstar on this site. We provide this website and the information contained in or connected to it for informational purposes only. That information is not part of this Report.
The Morningstar Direct desktop application connects over the internet to databases and application servers hosted primarily in Morningstar data centers, with some use of cloud (AWS) infrastructure. A large portion of Morningstar Direct’s features and functionality are delivered using modern web components and frameworks delivered within the legacy application.
The Morningstar Direct desktop application connects over the internet to databases and application servers hosted primarily in Morningstar data centers, with some use of cloud (Amazon Web Services) infrastructure. A large portion of Morningstar Direct’s features and functionality are delivered using modern web components and frameworks delivered within the legacy application.
European Union Morningstar DBRS ´s credit rating entity in the European Union (EU), DBRS Ratings GmbH (located in Frankfurt, Germany), which together with its branches, DBRS Ratings GmbH Sucursal en España (located in Madrid, Spain) and DBRS Ratings GmbH, Branch India (located in Mumbai, India) is registered with, and regulated by the European Securities and Markets Authority (ESMA) as a credit rating agency.
European Union Morningstar DBRS ´s credit rating entity in the EU, DBRS Ratings GmbH (located in Frankfurt, Germany), which together with its branches, DBRS Ratings GmbH Sucursal en España (located in Madrid, Spain) and DBRS Ratings GmbH, Branch India (located in Mumbai, India) is registered with, and regulated by the ESMA as a credit rating agency.
We provide access to Morningstar Data utilizing an application programming interface (API) format to download and process large data files. The Morningstar Data team applies emerging methods in AI to regression, classification, deep learning, natural language processing, and optical character recognition to extract data from structured and unstructured content.
We provide access to Morningstar Data utilizing an API format to download and process large data files. The Morningstar Data team applies emerging methods in AI to regression, classification, deep learning, natural language processing, and optical character recognition to extract data from structured and unstructured content.
Today, we offer a variety of products and solutions that serve a wide range of market participants, including individual and institutional investors in public and private capital markets, financial advisors and wealth managers, asset managers, retirement plan providers and sponsors, and issuers of fixed-income securities.
We offer a variety of products and solutions that serve a wide range of market participants, including individual and institutional investors in public and private capital markets; financial advisors and wealth managers; alliances and redistributors; asset managers; retirement plan providers, advisors and sponsors; and issuers of fixed-income securities.
He is responsible for the firm’s global revenue and client-facing functions including global marketing, sales, client solutions, customer success, field operations, services and support. 29 Table of Contents Before joining Morningstar in 2016, Dunn was vice president of IBM’s Midwest enterprise unit.
He is responsible for the firm’s global revenue and client-facing functions including global marketing, sales, client solutions, customer success, field operations, services and support. Before joining Morningstar in 2016, Dunn was vice president of IBM’s Midwest enterprise unit.
These broker/dealers include wirehouses, regional broker/dealers, and banks, which together with RIA firms help comprise the wealth manager component of this customer group. The advisor landscape is broad in both the U.S. and in other parts of the world where we focus.
These broker/dealers include wirehouses, regional broker/dealers, and banks, which together with RIA firms help comprise the wealth manager component of this customer group. The advisor landscape is broad in both the US and in other parts of the world where we focus.
As of December 31, 2023, the team provides coverage of the private equity, venture capital, real assets, leveraged loan, high-yield bond, and private credit asset classes.
As of December 31, 2024, the team provides coverage of the private equity, venture capital, real assets, leveraged loan, high-yield bond, and private credit asset classes.
This includes: • Combining the breadth of Morningstar’s data, research, and analytical capabilities with latest advances in AI to provide better, faster, and targeted insights to investors. • Utilizing AI to improve the quality and efficiency of data collection, synthesis, and dissemination processes. • Using AI as a tool to improve business productivity and enable team members to focus on more high-value work.
This includes: • Combining the breadth of Morningstar’s data, research, and analytical capabilities with the latest advances in AI to provide better, faster, and targeted insights to investors. • Utilizing AI to improve the quality and efficiency of data collection, synthesis, and dissemination processes. • Modernizing Morningstar’s employee experience with AI as a tool to improve business productivity and enable team members to focus on more high-value work.
We focus our data, research, and ratings efforts on several areas: Manager research (including mutual funds, exchange-traded funds, separately-managed accounts, and other vehicles) We’ve been providing independent analyst research on managed investment strategies since the mid-1980s.
We focus our data, research, and ratings efforts on several areas: Manager research (including mutual funds, exchange-traded funds (ETFs), separately-managed accounts, and other vehicles) We have been providing independent analyst research on managed investment strategies since the mid-1980s.
Morningstar DBRS also offers a micro-website dedicated to ESG factors deemed relevant to credit ratings analysis. In addition to ratings and research opinions, Morningstar DBRS also offers data products derived from its ratings activities and analytical tools. These include ratings data feeds that can be integrated into companies’ internal databases, web-based research, and analytical tools.
Morningstar DBRS also offers a micro-website dedicated to environmental, social and governance factors deemed relevant to credit ratings analysis. In addition to ratings and research opinions, Morningstar DBRS also offers data products derived from its ratings activities and analytical tools. These include ratings data feeds that can be integrated into companies’ internal databases, web-based research, and analytical tools.
Our primary products for this customer group include Morningstar Direct (in Morningstar Data and Analytics), Morningstar Indexes, Morningstar Sustainalytics, and PitchBook. 20 Table of Contents Private market participants PitchBook covers the full lifecycle of venture capital, private equity, private credit, and M&A activities, including the limited partners, investment funds, lenders, and service providers involved.
Our primary products for this customer group include Morningstar Direct (in Morningstar Data and Analytics), Morningstar Indexes, Morningstar Sustainalytics, and PitchBook. Private market participants PitchBook covers the full lifecycle of venture capital, private equity, private credit, and M&A activities, including the corporates, limited partners, investment funds, lenders, and service providers involved.
To accommodate our clients' diverse needs, the platform offers data and analytical tools including company profiles for both private and public companies, advanced search functionality, and other features that help to inform discovery and research, and optimize workflow by surfacing relevant information and insights.
To accommodate our clients' diverse needs, the platform offers data and analytical tools including company profiles for both private and public companies, advanced search functionality, and other intellectual property (IP) tools that help to inform discovery and research and optimize workflow by surfacing relevant information and insights.
As sponsor and investment adviser to the Trust, Morningstar Investment Management is subject to examinations by the SEC, which may include on-site examinations. Connected with the Trust, Morningstar Investment Management is registered with the U.S. Commodity Futures Trading Commission as a commodity pool operator (CPO) and a member of the National Futures Association (NFA).
As sponsor and investment adviser to the Trust, Morningstar Investment Management is subject to examinations by the SEC, which may include on-site examinations. Connected with the Trust, Morningstar Investment Management is registered with the US Commodity Futures Trading Commission (CFTC) as a commodity pool operator (CPO) and a member of the National Futures Association (NFA).
We also reach individuals who want to learn more about investing or want to validate the advice they receive from brokers or financial advisors. We serve this market through our Morningstar Wealth segment. We offer three products for individual investors.
We also reach individuals who want to learn more about investing or want to validate the advice they receive from brokers or financial advisors. 20 Table of Contents We serve this market through our Morningstar Wealth segment. We offer three products for individual investors.
As of December 31, 2023, PitchBook served over 10,600 clients, including investment and research firms, venture capital and private equity firms, investment banks, limited partners, lenders, law firms, and accounting firms. We also served corporate development teams at firms across industry sectors.
As of December 31, 2024, PitchBook served over 10,600 clients, including investment and research firms, venture capital and private equity firms, investment banks, limited partners, lenders, law firms, accounting firms, and asset managers. We also served corporate development teams at firms across industry sectors.
Our largest market is the U.S., where there were more than 327,000 financial advisors in 2022 according to recent data from the U.S. Bureau of Labor Statistics. We believe our deep understanding of individual investors’ needs allows us to work with advisors to help them make more efficient use of their time and deliver better investment outcomes for their clients.
Our largest market is the US, where there were more than 321,000 financial advisors in 2023 according to recent data from the US Bureau of Labor Statistics. We believe our deep understanding of individual investors’ needs allows us to work with advisors to help them make more efficient use of their time and deliver better investment outcomes for their clients.
New technologies, specifically those that employ AI, are facilitating these trends by accelerating the sourcing and use of unstructured ESG data. We estimate that our annual revenue renewal rate for Morningstar Sustainalytics' license-based products was approximately 97% in 2023 versus 100% in 2022.
New technologies, specifically those that employ AI, are facilitating these trends by accelerating the sourcing and use of unstructured data. We estimate that our annual revenue renewal rate for Morningstar Sustainalytics' license-based products was approximately 89% in 2024 versus 97% in 2023.
While other companies may offer research, ratings, data, software products, indexes, or investment management services, we are one of the few companies that can deliver all of these with the mission of empowering investor success.
While other companies may offer research, ratings, data, software products, indexes, or investment management services, we believe that we are one of the few companies that can deliver all of these in alignment with our mission of empowering investor success.
While the traditional ESG research market continues to consolidate, we expect that the market will continue to evolve as new entrants emerge and investors acquire ESG data from new distributors (for example, directly from stock exchanges). Large asset managers like BlackRock, State Street, UBS, and JP Morgan are also investing heavily to build in-house ESG capabilities and sustainable investing products.
While the traditional research market in this area continues to consolidate, we expect that the market will evolve as new entrants emerge and investors acquire data of this type from new distributors (for example, directly from stock exchanges). Large asset managers like BlackRock, State Street, UBS, and JP Morgan are also investing to build in-house capabilities and sustainable investing products.
We work with retirement plan record-keepers to design scalable solutions for their investment lineups, including target maturity models and risk-based models. We also provide custom model services direct to large plan sponsors, creating target date funds that are customized around a plan’s participant demographics and investment menus. For custom models, we often compete with retirement plan consultants.
We work with retirement plan recordkeepers to design scalable solutions for their investment lineups, including target maturity models and risk-based models. We also provide custom model services direct to large plan sponsors, creating target date funds that are customized around a plan’s participant demographics and investment menus.
Morningstar DBRS generates its revenue from providing independent credit ratings on financial institutions, corporates, and sovereigns, as well as on securitizations and other structured finance instruments, such as asset-backed securities (ABS), residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), and collateralized loan obligations (CLO).
Morningstar DBRS generates its revenue from providing independent credit ratings on financial institutions, corporates, and sovereigns, as well as on securitizations and other structured finance instruments, such as asset-backed securities (ABS), residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), and CLOs.
Pricing for Morningstar Direct is based on the number of licenses purchased. We have simplified our licensing model to eliminate charges for add-on features to maximize our customer experience and allow users to extract more value from our products. Morningstar Direct's primary markets are North America and Europe.
Pricing for Morningstar Direct is based on the number of licenses purchased, and our simplified licensing model eliminates charges for add-on features to maximize the customer experience and allow users to extract more value. Morningstar Direct's primary markets are North America and Europe.
Morningstar Data and Analytics Morningstar Data and Analytics provides investors comprehensive data, research and insights, and investment analysis to empower investment decision-making. Morningstar Data and Analytics includes Morningstar Data, Morningstar Direct, Morningstar Advisor Workstation, Direct Web Services, Morningstar Research Distribution, and Morningstar Publishing System.
Morningstar Data and Analytics Morningstar Data and Analytics provides investors comprehensive data, research and insights, and investment analysis to empower investment decision-making. Morningstar Data and Analytics includes Morningstar Data, Morningstar Direct, Morningstar Advisor Workstation, Profiles and Morningstar Direct Reporting, Direct Web Services, and Morningstar Research Distribution.
DBRS Limited’s affiliated rating agencies, DBRS, Inc., DBRS Ratings Limited, and DBRS Ratings GmbH, are each also designated as DRO affiliates in Canada. United Kingdom Morningstar DBRS ’s credit rating entity located in the U.K., DBRS Ratings Limited, is registered with, and regulated, by the U.K. Financial Conduct Authority (FCA) as a credit rating agency.
DBRS Limited’s affiliated rating agencies, DBRS, Inc., DBRS Ratings Limited, and DBRS Ratings GmbH, are each also designated as DRO affiliates in Canada. 24 Table of Contents United Kingdom Morningstar DBRS ’s credit rating entity located in the UK, DBRS Ratings Limited, is registered with, and regulated by, the UK Financial Conduct Authority (FCA) as a credit rating agency.
We believe the most important competitive factors in our industry are brand and reputation, data accuracy and quality, technology, breadth of data coverage, quality of investment and credit research and analytics, design, product reliability, and value of the products and services provided.
Business of this Report. 23 Table of Contents We believe the most important competitive factors in our industry are brand and reputation, data accuracy and quality, technology, breadth of data coverage, quality of investment and credit research and analytics, design, product reliability, and value of the products and services provided.
Morningstar Direct's primary competitors are Bloomberg, eVestment Alliance, FactSet Research System’s Cognity and SPAR, Refinitiv’s Eikon, Strategic Insight’s Simfund, and Zephyr. We estimate that our annual revenue renewal rate for Morningstar Direct in 2023 was approximately 101% versus 99% in 2022.
Morningstar Direct's primary competitors are Bloomberg, eVestment Alliance, FactSet Research System’s Cognity and SPAR, LSEG's (Refinitiv) Eikon, Strategic Insight’s Simfund, and Zephyr. We estimate that our annual revenue renewal rate for Morningstar Direct was approximately 101% in 2024 and 2023.
Jason Dubinsky Jason Dubinsky is chief financial officer of Morningstar, responsible for controllership, tax, internal audit, financial planning and analysis, procurement, treasury, real estate and facilities, and investor relations.
Michael Holt Michael Holt, CFA, is chief financial officer of Morningstar, responsible for controllership, tax, internal audit, financial planning and analysis, procurement, treasury, real estate and facilities, and investor relations.
Clients rely on PitchBook for a central, easy-to-use platform that provides access to the broadest collection of data and research covering the private capital markets as well as Morningstar's data and research on public equities.
Clients rely on PitchBook for a central, easy-to-use platform that provides access to what we believe is the broadest and most in-depth collection of data and research covering the private capital markets, as well as Morningstar's data and research on public equities.
PitchBook PitchBook provides investors with access to a broad collection of data and research covering the private capital markets, including venture capital, private equity, private credit and bank loans, and merger and acquisition (M&A) activities. Investors can also access Morningstar's data and research on public equities.
PitchBook PitchBook provides investors with access to a broad collection of data and research covering the private capital markets, including venture capital, private equity, private credit and bank loans, and merger and acquisition (M&A) activities, as well as Morningstar’s data and research on public equities, all delivered through the PitchBook platform.
In some jurisdictions, we may also choose to register one or more product names. “Morningstar” and the Morningstar logo are both registered marks of Morningstar in the U.S.
In some jurisdictions, we may also choose to register one or more product names. 22 Table of Contents “Morningstar” and the Morningstar logo are both registered marks of Morningstar in the US.
Acquisitions and Divestitures Since our founding in 1984, we've supported our organic growth by introducing new products and services and expanding our existing offerings. From 2006 through 2023, we also completed 43 acquisitions to support our growth objectives. We had one asset acquisition in 2023 and had no divestitures in 2023.
Acquisitions and Divestitures Since our founding in 1984, we've supported our organic growth by introducing new products and services and expanding our existing offerings. From 2006 through 2024, we also completed 44 acquisitions to support our growth objectives. We had two divestitures and no acquisitions in 2024.
Our People and Culture At Morningstar, our people are our most important asset. We are committed to fostering an environment where the people who power our mission know their ideas are welcome, their voices are heard, and their contributions are rewarded.
We are committed to fostering an environment where the people who power our mission know their ideas are welcome, their voices are heard, and their contributions are rewarded.
The group leverages PitchBook’s proprietary data, such as valuations, deal multiples, and fund returns, to deliver analysis that allows clients to quickly gauge trends, price transactions, assess risks and identify notable company sets in the private capital markets.
PitchBook’s Institutional Research Group is a provider of investment strategy, fund performance and industry research. The group leverages PitchBook’s proprietary data, such as valuations, deal multiples, and fund returns, to deliver analysis that allows clients to quickly gauge trends, price transactions, assess risks and identify notable company sets in the private capital markets.
Credit ratings Morningstar DBRS provides global credit ratings as the world’s fourth largest credit rating agency. We rate more than 4,000 issuers and 60,000 securities worldwide, providing independent credit ratings for financial institutions, corporate and sovereign entities, and structured finance products and instruments. Our goal is to bring more clarity, diversity, and responsiveness to the ratings process.
We rate more than 4,000 issuers and 60,000 securities worldwide, providing independent credit ratings for financial institutions, corporate and sovereign entities, and structured finance products and instruments. Our goal is to bring more clarity, diversity, and responsiveness to the ratings process.
Morningstar Sustainalytics provides ESG data, research, analysis, and insights to institutional investors globally, covering equity, fixed income, and sovereign asset classes. Our flagship ESG Risk Rating allows investors to assess financially material ESG risks that could affect the long-term performance of their investments.
Morningstar Sustainalytics provides environmental, social, and governance data, research, and ratings to institutional investors globally, covering equity, fixed income, and sovereign asset classes. Our flagship ESG Risk Ratings service helps investors assess financially material risks that could affect the long-term performance of their investments.
In 2022, via its subsidiary GES International AB, Morningstar Sustainalytics notified the Swedish Finansinspektionen under Section 3 of the Act on Proxy Advisors of its business activity as a proxy advisor in Sweden. Morningstar Sustainalytics UK Ltd. was added to the FCA’s list of Proxy Advisors in early 2022.
Morningstar Sustainalytics In 2022, via its subsidiary GES International AB, Morningstar Sustainalytics notified the Swedish Finansinspektionen under Section 3 of the Act on Proxy Advisors of its business activity as a proxy advisor in Sweden.
Investment Management’s flagship offering is Morningstar® Managed Portfolios, an advisor service consisting of model portfolios designed for fee-based independent financial advisors. Our core markets are the U.S., U.K., South Africa, and Australia.
Investment Management’s flagship offering is Morningstar Model Portfolios (also referred to as Morningstar® Managed Portfolios), an advisor service consisting of model portfolios designed for fee-based independent financial advisors. Our core markets are the US, UK, South Africa, and Australia.
We serve this customer group through our PitchBook segment. Our main product for this customer group is the PitchBook Platform, an all-in-one research and analysis web-hosted solution that gives clients the ability to access data, discover new connections, and conduct research on potential investment opportunities.
We serve this customer group through our PitchBook segment, primarily through the PitchBook platform, an all-in-one research and analysis web-hosted solution that gives clients the ability to access data, inform investment strategies, and conduct research on potential investment opportunities.
ESG ratings Morningstar Sustainalytics’ ESG Risk Ratings empower investors by providing them with the tools to assess financially material ESG risks that could affect the long-term performance of their investments at the security, fund, and portfolio levels. The ratings introduce a single measurement unit to assess ESG risks across 20 different material ESG issues (MEIs).
ESG Risk Ratings Morningstar Sustainalytics’ ESG Risk Ratings look to provide investors with tools to assess financially material environmental, social and governance risks that could affect the long-term performance of their investments at the security, fund, and portfolio levels. The ratings introduce a single measurement unit to assess these risks across 22 different material issues (MEIs).
Drawing on Morningstar's intellectual property, our global family of indexes tracks major global regions, strategies, and asset classes, including equity, fixed income, and multi-asset as well as private markets and sustainability.
Combining Morningstar's intellectual property with our industry leading index methodology, our global family of indexes tracks major global regions, strategies, and asset classes, including equity, fixed income, and multi-asset as well as private markets and sustainability.
These laws and regulations are primarily designed to protect investors and are most pervasive across all or most markets in which we operate in our credit rating, investment management, investment research, ESG research, ratings and data, and indexes businesses.
These laws and regulations are most pervasive across all or most of the markets in which we operate our credit ratings, investment management, investment research, ESG research, ratings and data, and indexes businesses.
Our approach and size provide the agility to respond to customers’ needs with the necessary expertise and resources. As of December 31, 2023, we had 549 credit rating analysts and analytical support staff based in the United States (U.S.), Canada, Europe, and India.
We believe that our approach and size provide the agility to respond to customers’ needs with the necessary expertise and resources. As of December 31, 2024, we had more than 500 credit rating analysts and analytical support staff based in the United States (US), Canada, Europe, and India.
We also offer a wide range of other data sets, including information on investment performance, risk analytics, full historical portfolio holdings, operations data (such as managed investments’ fees and expenses), cash flows, financial statement data, consolidated industry statistics, and investment ownership.
We distribute our proprietary statistics, including the Morningstar Category, Morningstar Style Box, and Morningstar Rating, through licensed data feeds. We also offer a wide range of other data sets, including information on investment performance, risk analytics, full historical portfolio holdings, operations data (such as managed investments’ fees and expenses), cash flows, financial statement data, consolidated industry statistics, and investment ownership.
In addition to Morningstar Managed Portfolios, other services we provide include institutional asset-management (e.g., act as a subadvisor) and asset-allocation services for asset managers, broker/dealers, and insurance providers. We offer these services through a variety of registered entities in Australia, Canada, the United Arab Emirates (UAE), France, Japan, South Africa, the U.K., and the U.S.
In addition to Morningstar Model Portfolios and the International Wealth Platform, we also offer institutional asset-management (e.g., act as a subadvisor) and asset-allocation services for asset managers, broker/dealers, and insurance providers. We offer these services through a variety of registered entities in Australia, Canada, the United Arab Emirates (UAE), France, Japan, South Africa, the UK, and the US.
We also evaluate perceptions of managers, psychological safety, and overall well-being via methods such as surveys, exit interviews, and focus groups. Based on our average measurement across the year, Morningstar’s overall engagement score declined to 69% compared to 80% in 2022.
We also evaluate perceptions of managers, psychological safety, and overall well-being through surveys, focus groups, and exit interviews. Based on our average measurement across the year, Morningstar’s overall engagement score declined to 64% versus 69% in 2023.
License-based revenue represented 74.4% of our 2023 consolidated revenue compared to 71.2% in 2022 and 66.6% in 2021. Asset-based: We charge basis points and other fees for assets under management or advisement. Asset-based revenue represented 13.7% of our 2023 consolidated revenue compared to 14.4% in 2022 and 15.6% in 2021.
License-based revenue represented 71.4% of our 2024 consolidated revenue compared to 74.4% in 2023 and 71.2% in 2022. Asset-based: We charge basis points and other fees for AUMA. Asset-based revenue represented 14.6% of our 2024 consolidated revenue compared to 13.7% in 2023 and 14.4% in 2022.
This includes: • Expanding our data, research, and analytics to deliver unique, personalized, and impactful insights to investors across asset classes. • Optimizing our advisor platform and service position by driving innovation and delivering exceptional investment solutions to advisors, facilitating great outcomes for the clients they serve around the world. • Providing regulatory and compliance solutions for our wealth, buy-side, and asset management clients. • Pursuing actionable information and developing workflow tools to serve core use cases of identifying private market investment opportunities, raising capital, valuing companies and investments, and buying/selling a company.
This includes: • Expanding our data, research, and analytics to deliver unique, personalized, and impactful insights to investors across asset classes in public and private markets alike. • Optimizing our advisor platform and service position and partnerships by driving innovation and delivering exceptional investment solutions to advisors, facilitating great outcomes for the clients they serve around the world. 16 Table of Contents • Providing regulatory and compliance solutions for our wealth, buy-side, and asset management clients to help them navigate the dynamic regulatory environment with an ecosystem of data, research, content, tools, and analytics. • Pursuing actionable information and developing workflow tools to serve core use cases of sourcing private market investment opportunities, raising and allocating capital, valuing companies and investments, buying/selling a company, and monitoring and reporting on relative portfolios.
The Medalist Rating covers more than 179,000 mutual funds, exchange-traded funds (ETFs), separately managed accounts, and model portfolios and more than 412,000 share classes worldwide.
The Medalist Rating covers more than 64,000 distinct mutual funds, ETFs, separately managed accounts, and model portfolios and more than 450,000 share classes worldwide.
Major Customer Groups Given our strategy and core capabilities discussed above, we focus on seven primary customer groups: • Advisors and wealth managers (including independent financial advisors and those affiliated with Registered Investment Advisors (RIAs), broker/dealers or other intermediaries) • Asset managers (including fund companies, insurance companies, and other companies that build and manage portfolios of securities for their clients) • Institutional asset owners and consultants • Fixed-income security issuers and arrangers • Private market investors • Retirement (including retirement plan providers, advisors, and sponsors) • Individual investors 19 Table of Contents Advisors and wealth managers Financial adv isors are professionals who offer guidance on different aspects of personal finance, aiding individuals and businesses in making more informed investment decisions to reach their financial goals.
Note that some of our clients may have activities that are classified in more than one of these groups. • Advisors and wealth managers (including independent financial advisors and those affiliated with RIAs, broker/dealers or other intermediaries) • Alliances and redistributors • Asset managers (including fund companies, insurance companies, and other companies that build and manage portfolios of securities for their clients) • Fixed-income security issuers and arrangers • Individual investors • Institutional asset owners and consultants • Private market investors • Retirement (including retirement plan providers, advisors, and sponsors) Advisors and wealth managers Financial adv isors are professionals who offer guidance on different aspects of personal finance, aiding individuals and businesses in making more informed investment decisions to reach their financial goals.
Morningstar Investment Services LLC is a broker/dealer registered under the Exchange Act and a member of FINRA. The regulation of broker/dealers has, to a large extent, been delegated by the federal securities laws to self-regulatory organizations, including FINRA. Subject to approval by the SEC, FINRA adopts rules that govern its members.
The regulation of broker-dealers has, to a large extent, been delegated by the federal securities laws to self-regulatory organizations, including FINRA. Subject to approval by the SEC, FINRA adopts rules that govern its members. FINRA and the SEC conduct periodic examinations of the brokerage operations of Morningstar Investment Services.
Morningstar Advisor Workstation is a connected suite of tools spanning proposal creation, investment research, investment planning, and more designed to help our clients provide great advice to their clients. It is powered by Morningstar’s data, research, investor profiling tools, and robust portfolio analytics.
Morningstar Advisor Workstation is a connected suite of tools spanning proposal creation, investment research, investment planning, and more designed to help our clients provide great advice to their clients.
The software is typically sold through an enterprise contract and is primarily for retail advisors because of its strong ties and integration with home-office applications and processes and a library of Financial Industry Regulatory Authority (FINRA) reviewed reports that meet compliance needs.
It is powered by Morningstar’s data, research, investor profiling tools, and robust portfolio analytics. 7 Table of Contents The software is typically sold through an enterprise contract and is primarily for retail advisors because of its strong ties and integration with home-office applications and processes and a library of Financial Industry Regulatory Authority (FINRA) reviewed reports that meet compliance needs.
Morningstar Wealth's managed portfolio offerings help advisors deliver investor-friendly products based on our valuation-driven, fundamentals-based approach to investing, applying Morningstar's expertise in asset allocation, investment selection, and portfolio construction.
Second, through our Morningstar Wealth and Morningstar Retirement segments, we provide investment management services and advisor tools and platforms. Morningstar Wealth's managed portfolio offerings help advisors deliver investor-friendly products based on our valuation-driven, fundamentals-based approach to investing, applying Morningstar's expertise in asset allocation, investment selection, and portfolio construction.
Kiplinger, TheStreet.com, and The Wall Street Journal all compete for the advertising dollars of entities wishing to reach an engaged audience of investors. 11 Table of Contents As of December 31, 2023, Morningstar.com had more than 100,000 paid Morningstar Investor members in the U.S. plus an additional roughly 12,500 Premium and Morningstar Investor members across other global markets.
Kiplinger, TheStreet.com, and The Wall Street Journal all compete for the advertising dollars of entities wishing to reach an engaged audience of investors. As of December 31, 2024, Morningstar.com had 97,311 paid Morningstar Investor members in the US plus an additional approximately 12,000 Premium and Morningstar Investor members across other global markets.
Shareholders and other interested parties may access our investor relations website at http://shareholders.morningstar.com , which we use as a primary channel for disclosing key information to our investors, some of which may contain material and previously non-public information.
Our corporate headquarters is located at 22 West Washington Street, Chicago, Illinois, 60602. We maintain a corporate website at http://www.morningstar.com/company . Shareholders and other interested parties may access our investor relations website at http://shareholders.morningstar.com , which we use as a primary channel for disclosing key information to our investors, some of which may contain material and previously non-public information.
The PitchBook Platform is an all-in-one web-hosted solution for investment and research professionals, including venture capital and private equity firms, corporate development teams, investment banks, limited partners, lenders, law firms, and accounting firms.
The PitchBook segment also includes our Morningstar Institutional Equity Research product. 8 Table of Contents The PitchBook platform is an all-in-one web-hosted solution for investment and research professionals, including venture capital and private equity firms, corporate development teams, investment banks, limited partners, lenders, law firms, accounting firms, and asset managers.
Our goal is to provide a meaningful set of development options and experiences for colleagues at all levels, in all relevant job fields, and in all locations across the company.
Professional Growth Morningstar offers a variety of educational and career development programs to ensure ongoing growth opportunities for all colleagues. Our goal is to provide a meaningful set of development options and experiences for colleagues at all levels, in all relevant job fields, and in all locations across the company.
Research sites, such as Seeking Alpha, The Motley Fool, and Zacks Investment Research, also compete with us for paid membership. In addition, free or “freemium” websites, such as Dow Jones/Marketwatch and Yahoo Finance, are also competitors for some customers.
Morningstar.com primarily competes with trading platforms that concurrently offer research and investing advice, such as Fidelity, Schwab, and TD Ameritrade. Research sites, such as Seeking Alpha, The Motley Fool, and Zacks Investment Research, also compete with us for paid membership. In addition, free or “freemium” websites, such as Dow Jones/Marketwatch and Yahoo Finance, are also competitors for some customers.
A Gallup survey released in 2023 found that approximately 61% of individuals in the U.S. invest in the stock market either directly, through mutual funds, or self-directed retirement plans. We design products for individual investors who are actively involved in the investing process and want to take charge of their own investment decisions.
According to Statista, in 2024 approximately 62% of adults in the US invest in the stock market either directly, through mutual funds, or self-directed retirement plans. We design products for individual investors who are actively involved in the investing process and want to take charge of their own investment decisions.
Notably, we offer our employees annual educational stipends to spend on their choice of professional development resources, while also providing financial support for continuing education and the pursuit of professional certifications. We also offer programs for employee learning and growth. The Morningstar Development Program is the primary entry point to Morningstar for recent college graduates.
Notably, we offer our employees annual educational stipends to spend on their choice of professional development resources, while also providing financial support for continuing education and the pursuit of professional certifications.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFrom a human resources perspective, we may face difficulties in assimilating, integrating, or retraining acquired employees, which may lead to retention risk with respect to both key acquired employees and our existing key employees or disruption to existing teams; differences between our values and those of our acquired companies, as well as disruptions to our workplace culture; difficulties in and financial costs of addressing acquired compensation structures inconsistent with our compensation structure; and additional stock-based compensation issued or assumed in connection with the acquisition, including the impact on stockholder dilution and our results of operations. 46 Table of Contents From an operational perspective, we may face diversion of financial and managerial resources from existing operations; challenges relating to the potential entry into new markets in which we have little experience or where competitors may have stronger market positions; difficulties in integrating acquired operations, challenges with the acquired company’s customers and partners, including our ability to maintain such relationships and changes to perception of the acquired business as a result of the acquisition; challenges with the acquired company’s third-party service providers, including those that are required for ongoing access to third-party data; challenges in incorporating the acquired company's disaster recovery and cyber security protocols with those of Morningstar; the potential for acquired products to impact the profitability of existing products; and in the case of foreign acquisitions, challenges caused by integrating operations over distance, and across different languages, cultures and political environments.
Biggest changeIn addition, although we conduct robust due diligence through cross-functional teams when making an acquisition, each acquisition presents potential challenges and risks, including the following: – difficulties in assimilating, integrating, or retraining acquired employees; – differences between our values and those of our acquired companies, as well as disruptions to our workplace culture; – diversion of financial and managerial resources from existing operations; – challenges relating to the potential entry into new markets in which we have little experience or where competitors may have stronger market positions; – difficulties in integrating acquired operations, including challenges with the acquired company’s customers and partners; – challenges with the acquired company’s third-party service providers; – challenges with integrating the acquired companies' technology, and – challenges and costs relating to known and potential unknown liabilities, technology or security vulnerabilities or regulatory investigations associated with the acquired businesses. 44 Table of Contents From time to time, we engage in dispositions and divestitures of assets and entities, as a means to implement our business strategy, including the recent disposal of certain of our US TAMP assets and the sale of our Commodity and Energy Data business in 2024.
Failing to create innovative, proprietary and insightful product and service offerings, keep pace with new investor requirements and technology developments, and trends, or anticipate our clients’ changing needs may negatively affect our competitive position and business results.
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.
Problems could arise if these programs do not work as intended, particularly if we failed to detect program errors over an extended period and are found to be liable for such errors, which may include liability for breach of our fiduciary duty or applicable law. Such program errors may not be detected despite quality assurance practices.
Problems could arise if these programs do not work as intended, particularly if we failed to detect program errors over an extended period and are found to be liable for such errors, which may include liability for breach of our fiduciary duty or applicable law. Such program errors may not be detected despite our quality assurance practices.
Governments may continue to adopt or tighten restrictions of this nature, and such restrictions or government actions could negatively impact our acquisition and investment opportunities, business and financial results. Acquisitions may expose us to litigation from our shareholders or other third parties, which, even if unsuccessful, could be costly to defend and serve as a distraction to management.
Governments may continue to adopt or tighten restrictions of this nature, and such restrictions or government actions could negatively impact our acquisition and investment opportunities, business and financial results. Acquisitions or divestitures may expose us to litigation from our shareholders or other third parties, which, even if unsuccessful, could be costly to defend and serve as a distraction to management.
We offer a hybrid work environment, which provides employees with the flexibility to work remotely (and use personal devices) which introduces 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.
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.
We also have, and expect to continue to make, various investments in companies where we do not have or obtain a controlling interest. Such investments are motivated both by their prospective financial return and the access they give us to certain new technologies, products, business ideas, and management teams.
We also have made, and expect to continue to make, various investments in companies where we do not have or obtain a controlling interest. Such investments are motivated both by their prospective financial return and the access they give us to certain new technologies, products, business ideas, and management teams.
We provide ratings, analyst research, and investment recommendations on mutual funds, ETFs and other investment products offered by our institutional clients. While we don’t charge asset management firms for their products to be rated, we do charge licensing fees for the use of our ratings.
For example, we provide ratings, analyst research, and investment recommendations on mutual funds, ETFs and other investment products offered by our institutional clients. While we don’t charge asset management firms for their products to be rated, we do charge licensing fees for the use of our ratings.
Customer opinions about such products, or preferences regarding their methodology or approach, are at times impacted by regional or national political trends which may differ significantly. Preferred terminology and information sources may similarly differ from place to place.
Stakeholder and customer opinions about such products, or preferences regarding their methodology or approach, are at times impacted by regional or national political trends which may differ significantly. Preferred terminology and information sources may similarly differ from place to place.
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 capacities around asset management, data aggregation and client portfolio management software.
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.
The public release of our proprietary source code will put us at a competitive disadvantage, allowing competitors to develop similar products in less time and with minimal development efforts. In addition, many open-source licenses contain provisions which are ambiguous and have not been interpreted by U.S. or other courts.
The public release of our proprietary source code will put us at a competitive disadvantage, allowing competitors to develop similar products in less time and with minimal development efforts. In addition, many open-source licenses contain provisions which are ambiguous and have not been interpreted by US or other courts.
We could also be subject to claims from regulators that we have mishandled private ratings or nonpublic data and information, in particular in our business component containing our credit ratings products. These regulatory bodies have audit rights regarding our data use which could have similar adverse consequences in terms of time, expense, or fines.
We could also be subject to claims from regulators that we have mishandled private ratings or nonpublic data and information, in particular in our business unit containing our credit ratings products. These regulatory bodies have audit rights regarding our data use which could have similar adverse consequences in terms of time, expense, or fines.
Further, we may not be able to effectively utilize trademark, copyright, and trade secret protection in every country in which we offer our services or utilize our intellectual property. We believe our trademark rights with respect to the Morningstar name and logo, along with our subsidiaries' names and logos represent materially valuable intangible assets.
Further, we may not be able to effectively utilize trademark, copyright, and trade secret protection in every country in which we offer our services or utilize our intellectual property. We believe our trademark rights with respect to the “Morningstar” name and logo, along with our subsidiaries' names and logos represent materially valuable intangible assets.
Although we may in the future decide to undertake foreign exchange hedging transactions, to date, we have not engaged in currency hedging, and we do not currently have any positions in derivative instruments to hedge our currency risk. Our indebtedness, could adversely affect our cash flows and financial flexibility.
Although we may in the future decide to undertake foreign exchange hedging transactions, to date, we have not engaged in currency hedging, and we do not currently have any positions in derivative instruments to hedge our currency risk. Our indebtedness could adversely affect our cash flow and financial flexibility.
Finally, our ability to acquire other businesses or technologies, make strategic investments or integrate acquired businesses effectively may be impaired by trade tensions and increased global scrutiny of foreign investments and acquisitions and investments in the technology sector.
Our ability to acquire or dispose of other businesses or technologies, make strategic investments or integrate acquired businesses effectively may be impaired by trade tensions and increased global scrutiny of foreign investments and acquisitions and investments in the technology sector.
New laws, regulations and regulatory implementation guidance may also affect the day-to-day operation of these businesses and our customers, including by imposing new or expanded requirements. The failure to timely or adequately address changing or expanding regulatory requirements could have a material adverse impact on our business, operations and financial results.
New and changing laws, regulations and regulatory implementation guidance may also affect the day-to-day operation of these businesses and our customers, including by imposing new or expanded requirements. Any failure to timely or adequately address these changes could have a material adverse impact on our business, operations and financial results.
For example, several countries, including the U.S. and countries in Europe and the Asia-Pacific region, are considering or have adopted restrictions of varying kinds on transactions involving foreign investments. Antitrust authorities in a number of countries have also reviewed acquisitions and investments in the technology industry with increased scrutiny.
For example, several countries, including the US and countries in Europe and the Asia-Pacific region, are considering or have adopted restrictions of varying kinds on transactions involving foreign investments. Antitrust authorities in a number of countries have also reviewed acquisitions and investments in the technology industry with increased scrutiny.
Our effective tax rate is based on the mix of income and losses in our U.S. and non-U.S. operations, statutory tax rates, and tax-planning opportunities available in the various jurisdictions in which we operate. We could be subject to changes in our tax rates, the adoption of new U.S. or non-U.S. tax legislation or exposure to additional tax liabilities.
Our effective tax rate is based on the mix of income and losses in our US and non-US operations, statutory tax rates, and tax-planning opportunities available in the various jurisdictions in which we operate. We could be subject to changes in our tax rates, the adoption of new US or non-US tax legislation or exposure to additional tax liabilities.
If the level of assets on which we provide investment advisory or investment management services goes down, we would expect our fee-based revenue to show a corresponding decline. The industrywide trend toward lower asset-based fees may also impact our fee-based revenue.
If the level of assets on which we provide investment advisory or investment management services declines, we would expect our fee-based revenue to show a corresponding decline. The industrywide trend toward lower asset-based fees may also impact our fee-based revenue.
For example, in order to provide the personalized holistic advice that clients value, we need to collect, organize, and protect large, non-homogenous 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.
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.
Such limitations, which seem likely to proliferate as global consensus regarding regulatory principles wanes, may impact our ability to execute on our strategy. The dynamics of today’s geopolitical discourse may also impact business opportunities across different markets.
Such limitations, which seem likely to proliferate as global consensus regarding regulatory principles wanes, may impact our ability to execute on our strategy. 45 Table of Contents The dynamics of today’s geopolitical discourse may also impact business opportunities across different markets.
Movements in the exchange rates can impact the U.S. dollar reported value of our revenues, expenses, assets and liabilities denominated in non-U.S. dollar currencies or where the currency of such items is different than the functional currency of the entity where these items were recorded.
Movements in the exchange rates can impact the US dollar reported value of our revenues, expenses, assets, and liabilities denominated in non-US dollar currencies or where the currency of such items is different than the functional currency of the entity where these items were recorded.
We rely on automated investment technology for our retirement advice and managed retirement accounts services. The Wealth Forecasting Engine is our core advice and managed accounts engine that determines appropriate asset allocations for retirement plan participants and assigns individuals to portfolios. We also rely on automated portfolio construction tools.
The Wealth Forecasting Engine is our core advice and managed accounts engine that determines appropriate asset allocations for retirement plan participants and assigns individuals to portfolios. We also rely on automated portfolio construction tools.
Our business has and continues to experience significant growth in our diversity of products and services and operational scale, which has placed a strain on and in the future may stress the capabilities of our management, administrative, operational and financial infrastructure.
Our business has and continues to experience significant growth in our wide array of products and services and operational scale, which has placed a strain on and in the future may stress the capabilities of our management, administrative, operational and financial infrastructure.
These AI technologies also may 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.
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.
In addition to individual losses triggered by these attacks, these spoofing attacks could harm our brand, our reputation and negatively impact our ability to attract new clients and customers. Risks Related to Legal and Regulatory Matters Compliance failures, regulatory action, or changes in laws could adversely affect our business.
In addition to individual losses triggered by these attacks, these spoofing attacks could harm our brand and reputation, and negatively impact our ability to attract new clients and customers. 38 Table of Contents Risks Related to Legal and Regulatory Matters Compliance failures, regulatory action, or changes in laws could adversely affect our business.
In addition, the value of assets in indexed investment products can fluctuate significantly over short periods of time and such volatility may be further impacted by fluctuations in foreign currency exchange rates. 48 Table of Contents We incur expenses for employee compensation and other operating expenses at our non-U.S. locations in the local currency.
In addition, the value of assets in indexed investment products can fluctuate significantly over short periods of time and such volatility may be further impacted by fluctuations in foreign currency exchange rates. 46 Table of Contents We incur expenses for employee compensation and other operating expenses at our non-US locations in the local currency.
From time to time, we encounter jurisdictions in which one or more third parties have a pre-existing trademark registration in certain relevant international classes that may prevent us from registering these or other marks in those jurisdictions.
We have encountered and may continue to encounter jurisdictions in which one or more third parties have a pre-existing trademark registration in certain relevant international trademark classes that may prevent us from registering these or other marks in those jurisdictions.
Additionally, as we have global business activities, we are subject to international trade restraints including economic and financial sanction laws and embargoes administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, which prohibit or restrict the sale or supplying of certain products and services to embargoed or sanctioned countries, regions, governments, individuals, and entities.
Additionally, as we engage in global business activities, we are subject to international trade restraints, including economic and financial sanction laws and embargoes administered by the US Treasury Department’s Office of Foreign Assets Controls, which prohibit or restrict the sale or supplying of certain products and services to embargoed or sanctioned countries, regions, governments, individuals, and entities.
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 $940.3 million at December 31, 2023.
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 $698.6 million at December 31, 2024.
The use or adoption of AI technologies into our products may result in exposure to claims by third parties of copyright infringement or other intellectual property misappropriation, which may require us to pay compensation or license fees to third parties.
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.
The agreements with such exchanges and other data providers give them extensive data use audit rights, and such audits can be expensive and time consuming and potentially result in substantial fines.
The agreements with such exchanges and other data providers give them extensive data use audit rights, and such audits can be expensive and time consuming and potentially result in substantial fees becoming payable.
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 has also created a need for applicable datasets and analytical expertise.
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 ability to effectively market certain products and/or services or obtain adequate trademark protection in those locations could be adversely affected by these pre-existing usages. 40 Table of Contents We have from time to time been subject to claims by third parties alleging infringement of their intellectual property rights.
Our ability to effectively market certain products and/or services or obtain adequate trademark protection in those locations could be adversely affected by these pre-existing usages. We have been and may continue to be subject to claims by third parties alleging infringement of their intellectual property rights.
A sustained global recession or other financial downturn or crisis would likely lead to material spending cutbacks among many of the companies to which we sell and longer sales cycles. Consolidation in the financial services sector reduces the number of potential clients for our products and services.
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.
In the recent past, the scope and pace of global regulatory change has both increased and involved shorter compliance time frames, which has increased both the risk that we may fail to properly identify and respond to regulatory changes applicable to our operations and the risk that we may fail to implement such changes on a timely and complete basis.
In the recent past, the scope and pace of global regulatory change has both increased and involved shorter compliance time frames, which has increased the risk that we may fail to properly and timely identify, and adequately respond to the regulatory changes applicable to our operations.
Our business results are partly driven by factors outside of our control, including general economic and financial market trends which may be impacted by changes in interest rates, availability of credit, inflation rates, changes in laws, trade barriers, commodity prices, currency exchange rates and controls, and national and international geopolitical circumstances and uncertainties.
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.
If we are unable to maintain rights to use these AI technologies on commercially reasonable terms, we may be forced to acquire or develop alternate AI technologies, which may limit or delay our ability to provide competitive offerings and may increase our costs.
We use AI technologies from third parties, which may include open-source software. If we are unable to maintain rights to use these AI technologies on commercially reasonable terms, we may be forced to acquire or develop alternate AI technologies, which may limit or delay our ability to provide competitive offerings and may increase our costs.
However, the talents and experience of these individuals make them attractive candidates to many of our competitors, as well as to early-stage companies that can offer the potential for outsize financial rewards if they are successful. Thus, competition for these employees is intense and the loss of such business leaders could pose substantial challenges to our business.
However, the talents and experience of these individuals make them attractive candidates to many of our competitors, as well as to early-stage companies that can offer the potential for outsize financial rewards if they are successful. Thus, the loss of such business leaders or our failure to adequately plan for such a loss, could pose substantial challenges to our business.
For example, AI technologies can lead to unintended consequences, 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 business and expose us to liability. We may also not identify inaccurate information, which may expose us to liability.
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.
As a result, there can be no assurance that SOFR will perform in the same way as USD LIBOR would have at any time, which may result in increased volatility in the interest rates payable under our credit facility and potentially increase our funding costs.
While SOFR is a secured rate, LIBOR was an unsecured rate, thus, 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 facility and potentially increase our funding costs.
Our success will depend in part upon the ability of our senior management – including the senior management of companies we acquire — to manage our business and plans for growth efficiently.
Our success will depend in part upon the ability of our senior management – including the senior management of any companies we acquire — to manage our business and strategies efficiently.
The AI technologies we are incorporating into certain of our products and processes may present business, legal, and reputational risks. We use, and may continue to expand our use of, machine learning and AI technologies into certain of our products and processes.
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.
The introduction of AI technologies, particularly generative AI, into new or existing offerings may result in new or expanded risks and liabilities, including due to enhanced governmental or regulatory scrutiny, litigation, compliance issues, ethical concerns, confidentiality or security risks, as well as other factors that could adversely affect our business, reputation, and financial results.
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.
Our reputation may also be harmed by factors outside of our control, such as news reports about our clients, consultants, or suppliers, adverse publicity about certain types of investment and ratings products generally.
In addition our methodology may be scrutinized or may attract negative publicity. 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.
Such transitions can involve material 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.
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.
We have implemented policies and trainings to discourage these types of practices by our employees and agents. However, our policies, trainings, processes or future improvements thereof, may prove to be less than fully effective, and our employees or agents may engage in conduct for which we might be held responsible.
While we have implemented policies and trainings to prohibit these types of practices by our employees and agents, they may prove to be less than fully effective, and our employees or agents may engage in conduct for which we might be held responsible.
In addition, although we conduct robust due diligence through cross-functional teams when making an acquisition, each acquisition presents potential challenges and risks, including the following: From a technology perspective, we may face potential identified or unknown security vulnerabilities in acquired products that expose us to additional security risks and penalties or 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.
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.
As of December 31, 2023, Joe Mansueto, our Executive Chairman and Chairman of the Board, owned approximately 37.4% o f our outstanding common stock.
As of December 31, 2024, Joe Mansueto, our Executive Chairman and Chairman of the Board, owned approximately 35.8% o f our outstanding common stock.
Similarly, from time to time, we encounter situations in certain jurisdictions where one or more third parties are already using the Morningstar name, either as part of a registered corporate name, a registered domain name, or otherwise.
Similarly, we have encountered and may continue to encounter situations in certain jurisdictions where one or more third parties are already using the “Morningstar” name, either as part of a registered corporate name, a registered domain name, or otherwise.
Prolonged economic and financial downturns, sustained volatility in the financial markets, interest and inflation rate fluctuations and periods of stagflation, and a lack of investor confidence can reduce investor interest and investment activity and decrease demand for our software, data, analyst ratings, and research products and flows of funds into our investment management products.
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.
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 use AI technologies from third parties, which may include open-source software.
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.
While we perform extensive due diligence on the technology systems and practices of these companies, there can be no assurance that such companies have not suffered data breaches or system intrusions prior to or continuing after our acquisition for which we may be liable.
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.
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 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 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 ◦ The AI technologies we are incorporating into certain of our products and processes may present business, legal and reputational risks ◦ Our business, products and facilities are at risk of a number of material disruptive events, which our operational risk management and business continuity programs and insurance coverage may not be adequate to address ◦ We could face liability for failing to adequately protect or properly 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 applicable to our credit ratings operations, investment advisory, ESG and index businesses could adversely affect our business ◦ 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 ◦ 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 acquisitions and investments in companies or technologies may not realize the expected business or financial benefits and acquisitions could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results and the market value of our common stock ◦ 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 ◦ Today’s fragmented geopolitical, regulatory, and cultural world could adversely affect our ability to expand 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 rate ◦ Our indebtedness could adversely affect our cash flow and financial flexibility.
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 30 Table of Contents ◦ 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 • Risks Related to Ownership of Our Common Stock ◦ The concentrated ownership position of Joe Mansueto could adversely affect our other shareholders ◦ Fluctuations in our operating results may negatively affect our stock price ◦ The future sale of shares of our common stock may negatively affect our stock price 31 Table of Contents Risk Factors You should carefully consider the risks and uncertainties described below and all of the other information included in this Report when deciding whether to invest in our common stock or otherwise evaluating our business.
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 You should carefully consider the risks and uncertainties described below and all of the other information included in this Report when deciding whether to invest in our common stock or otherwise evaluating our business.
The loss of any such employees could negatively impact our development process. 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.
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.
However, these measures do not guarantee absolute security, and improper access to or release of confidential information may still occur through employee error or malfeasance, system error, other inadvertent release, failure to properly purge and protect data, failure to apply consistent security measures throughout our business or cyberattack.
However, these measures do not guarantee absolute security, and improper access to or the release of confidential information may still occur through employee error or malfeasance, system error, inadvertent release, failure to properly purge and protect data, failure to apply consistent security measures throughout our business, or cyberattack. 34 Table of Contents We may also be subject to specific obligations relating to personal information and personal financial information.
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. In addition, only a limited number of employees have expertise in the software used for certain of our products.
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.
Our reputation and business may also be harmed by allegations made about possible conflicts of interest, by other negative publicity or media reports, or by adverse outcomes in regulatory proceedings.
Our reputation and business may also be negatively impacted by allegations made about possible conflicts of interest, or by other negative publicity or media reports.
Our revenues, expenses, assets and liabilities are subject to fluctuations in foreign currency exchange rate. As a business with international business activities, we are subject to risks related to fluctuations in foreign currency exchange rates.
As a business with international business activities, we are subject to risks related to fluctuations in foreign currency exchange rates.
Compliance failures by any of these highly regulated businesses could lead to negative publicity, fines, settlements (as was the case with the previously-disclosed settlements between the SEC and DBRS, Inc. in 2023), and/or temporary or permanent operating restrictions, which could have a material adverse impact on our operating results or financial condition.
Compliance failures by any of these highly regulated businesses could lead to negative publicity, fines, settlements, and/or temporary or permanent operating restrictions, which could have a material adverse impact on our operating results or financial condition.
The laws, rules, and regulations, and their interpretations, applicable to our business are extensive and may change in the future and may be inconsistent or vary by jurisdiction. We have not always been able to, and in the future may not be able to comply with these changes or variances without extensive changes to our business practices.
We have not always been able to, and in the future may not be able to, comply with changes or variances in the laws, rules and regulations applicable to our businesses without making extensive changes to our business practices.
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 and our customers are often subject to federal, state, and foreign laws relating to privacy, cybersecurity, and data protection.
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.
These efforts are constrained by data privacy legislation, such as GDPR, which defines standards for storage, transfer, and use of certain personal information from and about individuals, and which may limit the processing of information about individuals outside their home jurisdictions.
These efforts may be constrained by data privacy legislation, such as the General Data Protection Regulation (GDPR), which includes obligations regarding storage, transfer, and use of personal information from and about individuals, and which may limit the processing of information about individuals outside their home jurisdictions.
Furthermore, many of our vendors are also competitors, and our ability to continue to provide our products and develop new products could be impacted if the vendors terminate our agreements with them or decide to change the terms or restrict use of the data and products, which could materially harm our business. 34 Table of Contents Prolonged volatility or downturns affecting the financial sector, global financial markets, and the global economy may impact our financial results.
Furthermore, many of our vendors are also competitors, and our ability to continue to provide our products and develop new products could be impacted if the vendors terminate our agreements with them or decide to change the terms or restrict use of the data and products, which could materially harm our business.
Our regulated investment services operations are subject to regulation in markets outside the U.S. Post Brexit, we made a strategic decision to restrict the provision of regulated investment management activity to EU domiciled clients in part to reduce regulatory risk.
Post Brexit, we made a strategic decision to restrict the provision of regulated investment management activity to EU domiciled clients in part to reduce regulatory risk.
A failure in the performance of our due diligence processes and controls related to the supervision and oversight of these firms in detecting and addressing conflicts of interest, fraudulent activity, data breaches and cyber-attacks or noncompliance with relevant securities and other laws could cause us to suffer financial loss, regulatory sanctions or damage to our reputation. 49 Table of Contents Risks Related to Ownership of Our Common Stock The concentrated ownership position of Joe Mansueto could adversely affect our other shareholders.
A failure in the performance of our due diligence processes and controls related to the supervision and oversight of these firms in detecting and addressing conflicts of interest, fraudulent activity, data breaches and cyberattacks or noncompliance with relevant securities and other laws could cause us to suffer financial loss, expose us to regulatory sanctions or damage to our reputation.
The 2022 acquisition of the U.K. and international operations of Praemium (the Morningstar Wealth Platform) has resulted in increased 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 U.K.
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.
In general, changes in our business condition or changes in fair market valuations and our operating performance may result in future impairments of goodwill or intangible assets which could have a material adverse impact on our operating results.
In general, changes in our business condition or changes in fair market valuations and our operating performance may result in future impairments of goodwill or intangible assets which could have a material adverse impact on our operating results. Additionally, our goodwill and intangible assets may become impaired if we fail to obtain our anticipated operating efficiencies associated with our acquisitions.
Such regulatory regimes could impose significant compliance burdens and costs on Morningstar Sustainalytics and, as with all new regulation, could be subject to ambiguous interpretation that could result in inadvertent noncompliance.
The final form of any of these regulations or other measures is still uncertain. Such regulatory regimes could impose significant compliance burdens and costs on Morningstar Sustainalytics and, as with all new regulation, could be subject to ambiguous interpretation that could result in inadvertent noncompliance.
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 of empowering investor success, our independence of editorial judgment, our insistence on methodological rigor, and our transparency concerning our processes.
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.
Work continues to reduce the associated risk by consolidating the regulatory exposure to just the EU and U.K. entities. In addition, Morningstar Indexes has continued to monitor previously identified developments whereby the SEC sought comment on whether index providers, model portfolio providers and pricing services should be regulated as investment advisers or outsourced service providers in the U.S.
In addition, Morningstar Indexes has continued to monitor previously identified developments whereby the SEC sought comment on whether index providers, model portfolio providers and pricing services should be regulated as investment advisers or outsourced service providers in the US.
If we make an error, we may be subject to potentially large liabilities for make-whole payments and/or litigation. Risks Related to Our Operations Our future success depends on our ability to recruit, develop, and retain qualified employees. Execution of our business plan requires identifying, attracting, hiring, and on-boarding new qualified employees.
If we make an error, we may be subject to potentially large liabilities for make-whole payments and/or litigation. Risks Related to Our Operations Our future success depends on our ability to recruit, develop, and retain qualified employees. Our ability to identify, attract, hire, and on-board new qualified employees is integral to our continued success.
The EU regulation for registering and supervising companies that act as external reviewers for green bonds aligned with the European Green Bond Standards (EuGBS) framework, as well as the draft EU legislative proposal for registering and supervising companies that provide ESG ratings would require significant investments to build and maintain appropriate internal control and compliance processes for these teams.
The EU regulation for registering and supervising companies acting as external reviewers for green bonds aligned with the European Green Bond Standards (EuGBS) framework,and the EU legislation for registering and supervising companies that provide ESG ratings both require significant investments to build, implement and maintain appropriate operational and governance structures, internal controls and compliance processes.
In some cases, such as with respect to our credit ratings business, interactions with regulators are extensive and continuous, raising the risk of enforcement investigations and proceedings. To the extent any of those investigations or proceedings result in a finding of misconduct or noncompliance, they could pose a significant reputational risk to us and negatively impact our business.
In some cases, such as with our credit ratings business, interactions with regulators are extensive and continuous, which is increasingly costly and resource intensive to manage. To the extent any of those interactions result in a finding of noncompliance, they could pose a significant reputational risk to us, expose us to fines, sanction and penalties and negatively impact our business.
Moreover, increasingly different stakeholder groups have divergent views on ESG matters, which increases the risk that any action or lack thereof with respect to ESG will be perceived negatively by at least some stakeholders and adversely impact our reputation. 43 Table of Contents Our Morningstar Sustainalytics business could be negatively affected by increased regulation of ESG research, ratings and data.
Increasingly, different stakeholder groups have divergent views on ESG matters, which increases the risk that any action or lack thereof will be perceived negatively by at least some stakeholders and adversely impact our reputation.
In addition, in our business component containing our credit ratings offerings, we have access to significant amounts of material nonpublic information on issuers of securities, the inadvertent disclosure of which, or the misappropriation by employees or others, could expose us to various liabilities under securities and other laws.
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.
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.
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.
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. We are dependent on third-party service providers in our operations.
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. Our insurance coverage may be inadequate or expensive.
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 cause us to experience 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 failures or incidents.
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. 35 Table of Contents 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.
Any unanticipated restrictions or conditions on our ability to use, or claims involving our use of, open-source licenses could require us to seek alternative third-party licenses at increased costs or reduced scope, re-engineer products or systems, or discontinue the licensing of certain products.
Any unanticipated restrictions or conditions on our ability to use, or claims involving our use of, open-source licenses could require us to seek alternative third-party licenses at increased costs or reduced scope, re-engineer products or systems, or discontinue the licensing of certain products. 37 Table of Contents Finally, our global business regularly seeks to optimize our data storage in order to improve information accuracy and streamline the technology, which supports our business operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe believe that currently we have not encountered a cybersecurity event that has had a material impact on our business, financial condition, or results of our operation. We continue to invest in our IT security infrastructure and framework and to enhance our internal controls and processes to help protect our data from cybersecurity threats.
Biggest changeThe enterprise resilience team manages both disaster recovery as well as business continuity plans in preparation to recover from high-impact incidents. We believe that currently we have not encountered a cybersecurity event that has had a material impact on our business, financial condition, or results of our operation.
Cybersecurity incidents are responded to and managed by our 24-hour Security Operations Center (SOC), and technical outages/accidental occurrences are reviewed and managed by operational teams at the relevant Morningstar product and by the Technology Operations Center (TOC). Upon resolution of a cybersecurity incident, we conduct a retrospective analysis to inform our security and operational efforts going forward.
Cybersecurity incidents are responded to and managed by our 24-hour Security Operations Center (SOC), and technical outages/accidental occurrences are reviewed and managed by operational teams at the relevant Morningstar product and by the SOC. Upon resolution of a cybersecurity incident, we conduct a retrospective analysis to inform our security and operational efforts going forward.
We engage third parties, such as incident response service providers, as appropriate, based on the severity of the cybersecurity event and/or the work required to remediate. Upon identification of a cybersecurity event, we assign a significance rating to the event. All cybersecurity events that meet or exceed designated criteria are escalated to the CISO or Chief Information Officer (CIO).
We engage third parties, such as incident response service providers, as appropriate, based on the severity of the cybersecurity event and/or the work required to remediate. Upon identification of a cybersecurity event, we assign a significance rating to the event. All cybersecurity events that meet or exceed designated criteria are escalated to the CISO or CIO.
Cybersecurity events which may be significant are further escalated to the Cyber Incident Disclosure Committee (Cyber Committee). The Cyber Committee consists of the CTO, the CIO, the CISO, the chief privacy officer, the chief legal officer, the chief communications officer, representatives of the affected business unit and/or their respective delegates.
Cybersecurity events which may be significant are further escalated to the Cyber Incident Disclosure Committee (Cyber Committee). The Cyber Committee consists of the CIO, the CISO, the chief privacy officer, the chief legal officer, the head of corporate communications, representatives of the affected business unit and/or their respective delegates.
Cybersecurity is a critical component of our enterprise risk management and the company has identified cybersecurity as one of the key risk categories it faces. Risk Management and Strategy Morningstar takes a risk-based approach for managing its cybersecurity program. Currently, the program is evaluated periodically, including against the NIST Cybersecurity Framework.
Cybersecurity is a critical component of our enterprise risk management and the company has identified cybersecurity as one of the key risk categories it faces. Risk Management and Strategy Morningstar takes a risk-based approach for managing its cybersecurity program. The program is evaluated periodically, including against the NIST Cybersecurity Framework, most recently in 2024.
The outcome of these reviews, as well as any changes implemented as a result of these reviews, are reported to the audit committee of the board of directors (the “Audit Committee”).
The outcome of these reviews, as well as any changes implemented as a result of these reviews, are reported to the audit committee of our board of directors (the Audit Committee).
The Audit Committee reviews and discusses with management risks relating to our cybersecurity and data privacy practices and has oversight of our cybersecurity risks.
Our Board of Directors has delegated oversight of cybersecurity risks to the Audit Committee. The Audit Committee reviews and discusses with management risks relating to our cybersecurity and data privacy practices and has oversight of our cybersecurity risks.
The Audit Committee is also provided a summary of events and reporting on how any such events were resolved. Cybersecurity Event Management We have instituted a specific event management process for the identification and resolution of cybersecurity incidents.
The Audit Committee is also provided a summary of events and reporting on how any such events were resolved. Cybersecurity Event Management We have instituted a specific event management process for the monitoring, prevention, detection, identification, mitigation, and remediation of cybersecurity incidents.
Our CTO and CISO provide an update to the Audit Committee at each of its regular meetings, which covers recent trends, identifies emergent risks to our technology infrastructure, DR plan statistics, employee training metrics, and updates on vulnerability assessments and threat landscape as needed.
Our Chief Information Officer (CIO) and CISO provide an update to the Audit Committee at each of its regular meetings, which covers recent trends, identifies emergent risks to our technology infrastructure, DR plan statistics, employee training metrics, and major updates on security assessments and threat landscape as needed.
Quarterly security incident tabletop exercises are conducted with appropriate stakeholders to practice response procedures, and an annual tabletop exercise is conducted with the executive leadership team to test our enterprise resilience.
Employees undergo annual security awareness training, and a quarterly phishing exercise is conducted. Quarterly security incident tabletop exercises are conducted with appropriate stakeholders to practice response procedures, and an annual tabletop exercise is conducted with the executive leadership team to test our enterprise resilience.
The InfoSec Team, under the supervision of the chief information security officer (CISO), has also implemented processes to evaluate cybersecurity controls of third-party service providers. As part of the Company’s processes for engaging vendors, subcontractors and other third-parties, the InfoSec Team evaluates any such entities that may process confidential information prior to conducting business with them.
As part of the company’s processes for engaging vendors, subcontractors and other third-parties, the InfoSec Team evaluates any such entities that may process confidential information prior to conducting business with them. We also evaluate the security status of our critical third parties periodically to determine whether they continue to meet our security standards.
The InfoSec Team, under the leadership of our CISO, manages our Information Security Program (InfoSec Program), which has oversight of IT risk governance, IT third-party risk management, software and product security, security operations and incident management, IT compliance, technical disaster recovery, and establishing enterprise-wide information security policies and procedures.
The InfoSec Team manages our Information Security Program (InfoSec Program), which has oversight of IT risk governance, IT third-party risk management, software and product security, security operations and incident management, IT compliance, technical disaster recovery, and establishing enterprise-wide information security policies and procedures. 49 Table of Contents Our CISO also meets regularly with senior leaders from the IT, Legal, Audit, and Compliance departments to discuss environmental, regulatory, and technological changes and associated risks to the security and confidentiality of our information.
For in-house software, Morningstar deploys various security tools to detect vulnerabilities, including but not limited to, static application security and dynamic application security testing, SAC tooling, cloud security posture management and central logging. The InfoSec Team conducts vulnerability scans and third-party security assessments of operating systems, network devices, and web-facing applications.
For in-house developed software, Morningstar deploys various security tools to detect vulnerabilities, including but not limited to, static application security and dynamic application security testing, software composition analysis tooling, cloud security posture management and central logging.
In order to ensure the resilience of Morningstar products, we require all products to follow enterprise-wide Disaster Recovery (DR) standards. Identified vulnerabilities and DR tasks are assigned to appropriate owners and on a weekly basis we produce a cybersecurity scorecard for each Morningstar product. These scorecards are disseminated to the relevant leadership team.
The company's team of information security professionals (InfoSec Team), conducts vulnerability scans and third-party security assessments of operating systems, network devices, and web-facing applications. We require all Morningstar products to follow enterprise-wide Disaster Recovery (DR) standards. Identified vulnerabilities and DR tasks are assigned to appropriate owners and on a weekly basis we produce a cybersecurity scorecard for each Morningstar product.
Our CISO holds a Ph.D. in Computer Science with a focus on Cybersecurity and Privacy and has more than 15 years of information security experience. The InfoSec Team is responsible for assessing and managing cybersecurity risks and threats.
Risk Factors — Risks Related to Our Information Technology and Security” in this Report. Governance Our experienced InfoSec Team is headed by our CISO, who reports to a member of our executive leadership team. Our CISO holds a Ph.D. in Computer Science with a focus on Cybersecurity and Privacy and has more than 15 years of information security experience.
For a discussion of the risks cybersecurity threats pose to our business strategy, results of operations and financial condition, please see “Item 1A. Risk Factors — Risks Related to Our Information Technology and Security” in this Report. 52 Table of Contents
We continue to invest in our IT security infrastructure, InfoSec Program and to enhance our internal controls and processes to help protect our business from cybersecurity threats. For a discussion of the risks cybersecurity threats pose to our business strategy, results of operations and financial condition, please see “Item 1A.
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We evaluate the security status of our critical third parties periodically to determine whether they continue to meet our security standards. Employees undergo annual security awareness training, and a quarterly phishing exercise is conducted.
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We engage a third-party to conduct a NIST CSF assessment to measure the completeness and readiness of our cybersecurity program and have a third-party perform a security assessment of our network annually. Additionally, we have application security assessments and SOC 2 certifications performed by a third-party on products where we deem them beneficial.
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The enterprise resilience team manages both disaster recovery as well as business continuity plans in preparation to recover from high-impact incidents. 51 Table of Contents Governance We have a team of experienced information security professionals (InfoSec Team) headed by our CISO, who reports to our chief technology officer (CTO), a member of our executive leadership team.
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These scorecards are disseminated to the relevant leadership team. The InfoSec Team, under the supervision of the chief information security officer (CISO), has also implemented processes to evaluate cybersecurity controls of third-party service providers.
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Our CISO co-chairs an internal Security and Privacy Advisory Council (SPAC), comprised of senior leaders from the IT, Legal, Audit, and Compliance departments, that meets on a quarterly basis to discuss environmental, regulatory, and technological changes and associated risks to the security and confidentiality of our information.
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The InfoSec Team is responsible for assessing and managing cybersecurity risks and threats.
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The InfoSec team is tasked with executing this strategy through the implementation of cybersecurity policies, procedures, and strategies. The SPAC receives regular updates on pertinent objectives of the InfoSec Program, as well as a summary of recent security events and reporting on how any incidents were resolved.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease approximately 710,000 square feet of office space in 26 other countries around the world, including approximately 272,000 square feet in Mumbai, India and approximately 90,000 square feet in Toronto, Canada.
Biggest changeWe also lease approximately 727,000 square feet of office space in 22 other countries around the world, including approximately 360,000 square feet in Mumbai, India and approximately 95,000 square feet in Toronto, Canada.
Item 2. Properties As of December 31, 2023, we leased approximately 526,000 square feet of office space for our U.S. operations, with approximately half of the space for our corporate headquarters located in Chicago, Illinois.
Item 2. Properties As of December 31, 2024, we leased approximately 527,000 square feet of office space for our US operations, with approximately half of the space for our corporate headquarters located in Chicago, Illinois.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings We incorporate by reference the information regarding legal proceedings set forth in Note 15 of the Notes to our Consolidated Financial Statements contained in Part II, Item 8 of this Report. Item 4. Mine Safety Disclosures Not applicable. 53 Table of Contents Part II
Biggest changeItem 3. Legal Proceedings We incorporate by reference the information regarding legal proceedings set forth in Note 17 of the Notes to our Consolidated Financial Statements contained in Part II, Item 8 of this Report. Item 4. Mine Safety Disclosures Not applicable. 50 Table of Contents Part II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 53 Part II 54 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 54 Item 6. [Reserved] 55 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 55 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 83 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 50 Part II 51 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 51 Item 6. [Reserved] 51 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 51 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 75 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRefer to Note 16 of the Notes to our Consolidated Financial Statements for more information regarding our share repurchase program: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced programs Approximate dollar value of shares that may yet be purchased under the programs (a) October 1, 2023 - October 31, 2023 — $ — — $ 498,550,338 November 1, 2023 - November 30, 2023 — — — $ 498,550,338 December 1, 2023 - December 31, 2023 — — — $ 498,550,338 Total — $ — — ______________________________________ (a) Repurchases will only be effected pursuant to the $500.0 million share repurchase program authorized by our board of directors and announced publicly on December 6, 2022, which commenced on January 1, 2023 and which will expire on December 31, 2025. 54 Table of Contents Rule 10b5-1 Sales Plans Our directors and executive officers may exercise stock options or purchase or sell shares of our common stock in the market from time to time.
Biggest changeRefer to Note 18 of the Notes to our Consolidated Financial Statements for more information regarding our share repurchase program: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced programs Approximate dollar value of shares that may yet be purchased under the programs (a) October 1, 2024 - October 31, 2024 — $ — — $ 498,550,338 November 1, 2024 - November 30, 2024 15,300 $ 345.27 15,300 $ 493,267,705 December 1, 2024 - December 31, 2024 18,000 $ 349.42 18,000 $ 486,978,224 Total 33,300 $ 347.51 33,300 ______________________________________ (a) Repurchases will only be effected pursuant to the $500.0 million share repurchase program authorized by our board of directors and announced publicly on December 6, 2022, which commenced on January 1, 2023 and which will expire on December 31, 2025.
The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. We paid four quarterly dividends during 2023.
The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. We paid four quarterly dividends during 2024.
The table below presents information related to repurchases of common stock we made during the three months ended December 31, 2023.
The table below presents information related to repurchases of common stock we made during the three months ended December 31, 2024.
In the fourth quarter of 2023, we announced an increase of our quarterly cash dividend from 37.5 cents per share to 40.5 cents per share. While subsequent dividends will be subject to board approval, we expect to pay a regular quarterly dividend of 40.5 cents per share in 2024.
In the fourth quarter of 2024, we announced an increase of our quarterly cash dividend from 40.5 cents per share to 45.5 cents per share. While subsequent dividends will be subject to board approval, we expect to pay a regular quarterly dividend of 45.5 cents per share in 2025.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the Nasdaq Global Select Market under the symbol "MORN." As of February 16, 2024, there wer e 601 shareholders of record of our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the Nasdaq Global Select Market under the symbol "MORN." As of February 21, 2025, there were 527 shareholders of record of our common stock.
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We encourage them to make these transactions through plans that comply with Exchange Act Rule 10b5-1(c). Morningstar will not receive any proceeds, other than proceeds from the exercise of stock options, related to these transactions.
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The following table, which we are providing on a voluntary basis, shows the Rule 10b5-1 sales plans entered into by our directors and executive officers that were in effect as of February 16, 2024: Name and Position Date of Plan Plan Termination Date Plan Duration Number of Shares to be Sold under the Plan Timing of Sales under the Plan Number of Shares Sold under the Plan through February 16, 2024 Projected Beneficial Ownership (1) Joe Mansueto Executive Chairman 2/28/2023 4/30/2024 05/29/2023 to 04/30/2024 700,000 Shares to be sold under the plan if the stock reaches specified prices 575,425 15,804,659 Joe Mansueto Executive Chairman 11/17/2023 4/30/2025 05/01/2024 to 04/30/2025 500,000 Shares to be sold under the plan if the stock reaches specified prices — 15,304,659 Steven Kaplan Director 8/3/2023 11/11/2024 03/11/2024 to 11/11/2024 5,000 Shares to be sold under the plan at market price — 39,151 During the year ended December 31, 2023, the previously disclosed Rule 10b5-1 plan dated March 23, 2023 for Gail Landis and the Rule 10b5-1 plan dated August 31, 2022 for Joe Mansueto, completed in accordance with their respective terms. _______________________________ (1) This column reflects an estimate of the number of shares each identified director and executive officer will beneficially own following the sale of all shares under the Rule 10b5-1 sales plan.
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This information reflects the beneficial ownership of our common stock on February 16, 2024 and includes shares of our common stock subject to options that were then exercisable or that will have become exercisable by April 16, 2024 and restricted stock units that will vest by April 16, 2024.
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The estimates do not reflect any changes to beneficial ownership that may have occurred since February 16, 2024. Each director and executive officer identified in the table may amend or terminate his or her Rule 10b5-1 sales plan and may adopt additional Rule 10b5-1 plans in the future.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOverall, our business, balance sheet, technological infrastructure, and teams have shown resilience and flexibility navigating global macroeconomic trends. 60 Table of Contents Consolidated Results Key metrics (in millions) 2023 2022 Change Revenue $ 2,038.6 $ 1,870.6 9.0 % Operating income 230.6 167.8 37.4 % Operating margin 11.3 % 9.0 % 2.3 pp Cash provided by operating activities $ 316.4 $ 297.8 6.2 % Capital expenditures (119.1) (129.5) (8.0) % Free cash flow $ 197.3 $ 168.3 17.2 % Cash used for investing activities $ (81.9) $ (799.3) (89.8) % Cash provided by (used for) financing activities $ (278.4) $ 415.1 (167.1) % ___________________________________________________________________________________________ pp — percentage points 61 Table of Contents Consolidated Revenue Revenue by type (1) Change (in millions) 2023 2022 2021 2023 vs 2022 2022 vs 2021 Morningstar Data and Analytics License-based $ 745.5 $ 695.1 $ 666.5 7.3 % 4.3 % Asset-based — — — — % — % Transaction-based 1.7 1.5 1.0 13.3 % 50.0 % Morningstar Data and Analytics total $ 747.2 $ 696.6 $ 667.5 7.3 % 4.4 % PitchBook License-based $ 551.9 $ 450.7 $ 301.6 22.5 % 49.4 % Asset-based — — — — % — % Transaction-based — — — — % — % PitchBook total $ 551.9 $ 450.7 $ 301.6 22.5 % 49.4 % Morningstar Wealth License-based $ 80.8 $ 80.9 $ 82.7 (0.1) % (2.2) % Asset-based 122.6 117.6 125.5 4.3 % (6.3) % Transaction-based 26.5 30.4 30.2 (12.8) % 0.7 % Morningstar Wealth total $ 229.9 $ 228.9 $ 238.4 0.4 % (4.0) % Morningstar Credit License-based $ 11.7 $ — $ — NMF — % Asset-based — — — — % — % Transaction-based 203.7 236.9 271.2 (14.0) % (12.6) % Morningstar Credit total $ 215.4 $ 236.9 $ 271.2 (9.1) % (12.6) % Morningstar Retirement License-based $ 1.7 $ 2.0 $ 2.0 (15.0) % — % Asset-based 108.5 101.8 102.5 6.6 % (0.7) % Transaction-based 0.3 0.2 0.1 50.0 % 100.0 % Morningstar Retirement total $ 110.5 $ 104.0 $ 104.6 6.3 % (0.6) % Corporate and All Other (2) License-based $ 125.9 $ 103.0 $ 78.9 22.2 % 30.5 % Asset-based 48.5 50.0 36.9 (3.0) % 35.5 % Transaction-based 9.3 0.5 0.2 NMF 150.0 % Corporate and All Other total $ 183.7 $ 153.5 $ 116.0 19.7 % 32.3 % License-based $ 1,517.5 $ 1,331.7 $ 1,131.7 14.0 % 17.7 % Asset-based 279.6 269.4 264.9 3.8 % 1.7 % Transaction-based 241.5 269.5 302.7 (10.4) % (11.0) % Consolidated revenue $ 2,038.6 $ 1,870.6 $ 1,699.3 9.0 % 10.1 % _________________________________________________________________________ NMF — Not meaningful (1) Starting with the quarter ended March 31, 2023, the company updated its revenue-type classifications to account for product areas with more than one revenue type.
Biggest changeConsolidated Results Key metrics (in millions) 2024 2023 Change Revenue $ 2,275.1 $ 2,038.6 11.6 % Operating income 484.8 230.6 110.2 % Operating margin 21.3 % 11.3 % 10.0 pp Cash provided by operating activities $ 591.6 $ 316.4 87.0 % Capital expenditures (142.7) (119.1) 19.8 % Free cash flow $ 448.9 $ 197.3 127.5 % Cash used for investing activities $ (21.3) $ (81.9) (74.0) % Cash used for financing activities $ (384.4) $ (278.4) 38.1 % __________________________________________________________________________________________ pp — percentage points 57 Table of Contents Consolidated Revenue Revenue by type (1) (in millions) 2024 2023 Change Morningstar Data and Analytics License-based $ 786.7 $ 745.5 5.5 % Asset-based — — — % Transaction-based 1.4 1.7 (17.6) % Morningstar Data and Analytics total $ 788.1 $ 747.2 5.5 % PitchBook License-based $ 611.6 $ 551.9 10.8 % Asset-based — — — % Transaction-based 6.8 — NMF PitchBook total $ 618.4 $ 551.9 12.0 % Morningstar Credit License-based $ 16.4 $ 11.7 40.2 % Asset-based — — — % Transaction-based 274.7 203.7 34.9 % Morningstar Credit total $ 291.1 $ 215.4 35.1 % Morningstar Wealth License-based $ 80.4 $ 80.8 (0.5) % Asset-based 142.3 122.6 16.1 % Transaction-based 25.7 26.5 (3.0) % Morningstar Wealth total $ 248.4 $ 229.9 8.0 % Morningstar Retirement License-based $ 1.8 $ 1.7 5.9 % Asset-based 125.3 108.5 15.5 % Transaction-based — 0.3 NMF Morningstar Retirement total $ 127.1 $ 110.5 15.0 % Corporate and All Other (2) License-based $ 128.2 $ 125.9 1.8 % Asset-based 65.6 48.5 35.3 % Transaction-based 8.2 9.3 (11.8) % Corporate and All Other total $ 202.0 $ 183.7 10.0 % License-based $ 1,625.1 $ 1,517.5 7.1 % Asset-based 333.2 279.6 19.2 % Transaction-based 316.8 241.5 31.2 % Consolidated revenue $ 2,275.1 $ 2,038.6 11.6 % _________________________________________________________________________ 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.
These and other potential regulations may impact not only the scope of our disclosure obligations and the ESG-related products and services we provide to customers, but also present an opportunity to guide and inform investors who are looking to understand the regulations and develop their own workflows to ensure their compliance with new requirements.
These and other potential regulations may impact not only the scope of our disclosure obligations and the products and services we provide to customers but also present an opportunity to guide and inform investors who are looking to understand the regulations and develop their own workflows to ensure their compliance with new requirements.
Data privacy regulation continues to proliferate, as numerous national and state jurisdictions have adopted or are considering new data privacy regulations. As a related matter, issues of cybersecurity as they relate to the identification and mitigation of cyber threats also continue to grow in prominence and laws governing data breaches continue to proliferate globally.
Cybersecurity, Data Privacy and Artificial Intelligence Data privacy regulation continues to proliferate, as numerous national and state jurisdictions have adopted or are considering new data privacy regulations. As a related matter, issues of cybersecurity as they relate to the identification and mitigation of cyber threats also continue to grow in prominence and laws governing data breaches continue to proliferate globally.
We present organic revenue because we believe it helps investors better compare our period-to-period results, and our management team uses this measure to evaluate the performance of our business. We exclude revenue from businesses acquired or divested from organic revenue for a period of 12 months after we complete the acquisition or divestiture.
We present organic revenue because we believe it helps investors better compare our period-to-period results, and our management team uses this measure to evaluate the performance of our business and product areas. We exclude revenue from businesses acquired or divested from organic revenue for a period of 12 months after we complete the acquisition or divestiture.
Our strategy is to deliver insights and experiences that are essential to the investor workflow. Proprietary data sets, meaningful analytics, independent research, and effe ctive investment strategies are at the core of the powerful digital solutions that investors across our client segments rely on.
Our strategy is to deliver insights and experiences that make us essential to investor workflow. Proprietary data sets, meaningful analytics, independent research, and effe ctive investment strategies are at the core of the powerful digital solutions that investors across our client segments rely on.
Private Placement Debt Offering On October 26, 2020, we completed the issuance and sale of $350.0 million aggregate principal amount of 2.32% senior notes due October 26, 2030 (the 2030 Notes), in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended.
Private Placement Debt Offering On October 26, 2020, we completed the issuance and sale of $350.0 million a ggregate principal amount of 2.32% senior notes due October 26, 2030 (the 2030 Notes), in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended.
Forward-looking statements by their nature address matters that are, to different degrees, uncertain, and often contain words such as “committed,” “consider,” “estimate,” “forecast,” “future,” “goal,” “is designed to,” “maintain,” “may,” “might,” “objective,” “ongoing,” “could,” “expect,” “intend,” “plan,” “possible,” “potential,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “prospects”, “continue,” “seek,” “strategy,” “strive,” “will,” “would,” or the negative thereof, and similar expressions.
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.
Organic revenue, adjusted operating income, adjusted operating margin, and free cash flow are not measures of performance set forth under U.S. generally accepted accounting principles (GAAP). We define organic revenue as consolidated revenue excluding acquisitions, divestitures, adoption of new accounting standard changes (accounting changes), and foreign currency translations.
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.
These intangible assets generally consist of customer relationships, trademarks and trade names, technology-related intangibles (including internally developed software and databases), and in certain acquisitions, noncompete agreements. 81 Table of Contents • Estimate the fair value of these intangible assets: We may consider various approaches to value the intangible assets.
These intangible assets generally consist of customer relationships, trademarks and trade names, technology-related intangibles (including internally developed software and databases), and in certain acquisitions, noncompete agreements. • Estimate the fair value of these intangible assets: We may consider various approaches to value the intangible assets.
Morningstar Data and Analytics and PitchBook generate most of our licensed-based revenue. Our license agreements typically range from one to three years and are accounted for as subscription services available to customers and not as a license under the accounting guidance.
Morningstar Data and Analytics and PitchBook generate most of our license-based revenue. Our license agreements typically range from one to three years and are accounted for as subscription services available to customers and not as licenses under the accounting guidance.
Year-to-year comparisons of the 2022 financial information to the same information for 2021 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 24, 2023.
Year-to-year comparisons of the 2023 financial information to the same information for 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 29, 2024.
We describe our investments in unconsolidated entities in more detail in Note 9 of the Notes to our Consolidated Financial Statements.
We describe our investments in unconsolidated entities in more detail in Note 11 of the Notes to our Consolidated Financial Statements.
(5) Corporate and All Other includes unallocated corporate expenses of $153.5 million in 2023 and $135.8 million in 2022, as well as adjusted operating income/loss from Morningstar Sustainalytics and Morningstar Indexes. Unallocated corporate expenses include finance, human resources, legal, and other management-related costs that are not considered when segment performance is evaluated.
(5) Corporate and All Other includes unallocated corporate expenses of $181.4 million in 2024 and $153.5 million in 2023, as well as adjusted operating income/loss from Morningstar Sustainalytics and Morningstar Indexes. Unallocated corporate expenses include finance, human resources, legal, and other management-related costs that are not considered when segment performance is evaluated.
Consolidated Free Cash Flow As described in more detail above, we define free cash flow as cash provided by or used for operating activities less capital expenditures. We present free cash flow solely as a supplemental disclosure to help investors better understand how much cash is available after making capital expenditures.
Consolidated Free Cash Flow As described in more detail above, free cash flow is a non-GAAP financial measure defined as cash provided by or used for operating activities less capital expenditures. We present free cash flow solely as a supplemental disclosure to help investors better understand how much cash is available after making capital expenditures.
The significance of this policy varies from period to period depending upon the volume of applicable acquisition transactions occurring. Recently Adopted and Issued Accounting Pronouncements Refer to Note 17 of the Notes to our Consolidated Financial Statements for recently adopted and issued accounting pronouncements as of December 31, 2023. 82 Table of Contents
The significance of this policy varies from period to period depending upon the volume of applicable acquisition transactions occurring. Recently Adopted and Issued Accounting Pronouncements Refer to Note 19 of the Notes to our Consolidated Financial Statements for recently adopted and issued accounting pronouncements as of December 31, 2024. 74 Table of Contents
Segment Results Segment adjusted operating income reflects the impact of direct segment expenses as well as certain allocated centralized costs, such as information technology, sales and marketing, and research and data.
Segment Results Segment adjusted operating income reflects the impact of direct segment expenses as well as certain allocated centralized costs, such as technology, investment research, sales, facilities, and marketing.
You are, however, advised to review any further disclosures we make on related subjects, and about new or additional risks, uncertainties, and assumptions in our future filings with the Securities and Exchange Commission (SEC) on Forms 10-K, 10-Q, and 8-K. 56 Table of Contents This section includes comparisons of certain 2023 financial information to the same information for 2022.
You are, however, advised to review any further disclosures we make on related subjects, and about new or additional risks, uncertainties, and assumptions in our future filings with the SEC on Forms 10-K, 10-Q, and 8-K. This section includes comparisons of certain 2024 financial information to the same information for 2023.
Understanding Our Company Key Business Characteristics Our mission is to empower investor success. The investing ecosystem is complex, and navigating it with confidence requires a trusted, independent voice. We deliver our perspective to institutions, advisors, and individuals with a single-minded purpose: to empower investors with the conviction that they can make better-informed decisions and realize success on their own terms.
The investing ecosystem is complex, and navigating it with confidence requires a trusted, independent voice. We deliver our perspective to institutions, advisors, and individuals with a single-minded purpose: to empower every investor with conviction that they can make better-informed decisions and realize success on their own terms.
Under the terms of the settlements, DBRS paid a $6.0 million civil monetary penalty to the SEC to resolve the investigation related to record-keeping, and paid 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.
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.
Proceeds were primarily used to pay off a portion of the company's outstanding debt under the 2019 Credit Agreement. Interest on the 2030 Notes will be paid semi-annually on each October 30 and April 30 during the term of the 2030 Notes and at maturity.
Proceeds were primarily used to pay off a portion of the company's outstanding debt under the prior credit agreement. Interest on the 2030 Notes will be paid semi-annually on each October 30 and April 30 during the term of the 2030 Notes and at maturity, with the first interest payment date occurring on April 30, 2021.
We define adjusted operating income as operating income excluding all mergers and acquisitions (M&A)-related expenses (including M&A-related earn-outs) and amortization, as well as all expenses related to the significant reduction and shift of the company's operations in China.
We define adjusted operating 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.
In addition, the reversal of accrued sabbatical liabilities is included in this category. Transformation costs include professional fees and the temporary duplication of headcount. As the company hired replacement roles in other markets and shifted capabilities, it employed certain Shenzhen-based staff through the transition period, which resulted in elevated compensation costs on a temporary basis.
Transformation costs include professional fees and the temporary duplication of headcount. As the company hired replacement roles in other markets and shifted capabilities, it employed certain Shenzhen-based staff through the transition period, which resulted in elevated compensation costs on a temporary basis.
Our goal is to increase the intrinsic value of our business over time, which we believe is the best way to create value for our shareholders.
Our approach to evaluating our own business works the same way. Our goal is to increase the intrinsic value of our business over time, which we believe is the best way to create value for our shareholders.
We define adjusted operating margin as operating margin excluding all M&A-related expenses (including M&A-related earn-outs) and amortization, as well as all expenses related to the significant reduction and shift of the company's operations in China.
We 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.
Revenue is based on quarter-end, prior quarter-end, or average asset levels during each quarter, which are often reported on a one-quarter lag for certain Investment Management products including Morningstar Managed Portfolios. The timing of this client asset reporting and the structure of our contracts often results in a lag between market movements and the impact on revenue.
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. The timing of this client asset reporting and the structure of our contracts often results in a lag between market movements and the impact on revenue.
Adjusted operating margin is a non-GAAP financial measure; the table below shows a reconciliation to the most directly comparable GAAP financial measure. 2023 2022 Change Operating margin 11.3 % 9.0 % 2.3 pp Add: intangible amortization expense (1) 3.5 % 3.6 % (0.1) pp Add: M&A-related expenses (2) 0.4 % 0.9 % (0.5) pp Add: M&A-related earn-outs (3) — % 0.6 % (0.6) pp Add: Severance and personnel expenses (4) 0.3 % 1.5 % (1.2) pp Add: Transformation costs (4) 0.3 % 0.4 % (0.1)pp Add: Asset impairment costs (4) 0.2 % — % 0.2 pp Adjusted operating margin 16.0 % 16.0 % 0.0 pp ______________________________________________________________________________________________________ (1) Excludes finance lease amortization expense of $1.2 million in 2023 and $2.1 million in 2022.
Adjusted operating margin is a non-GAAP financial measure; the table below shows a reconciliation to the most directly comparable GAAP financial measure. 2024 2023 Change Operating margin 21.3 % 11.3 % 10.0 pp Intangible amortization expense (1) 2.8 % 3.5 % (0.7) pp M&A-related expenses (2) 0.4 % 0.4 % — pp M&A-related gains (3) (2.8) % — % (2.8) pp Severance and personnel expenses (4) — % 0.3 % (0.3) pp Transformation costs (4) — % 0.3 % (0.3) pp Asset impairment costs (4) — % 0.2 % (0.2) pp Adjusted operating margin 21.7 % 16.0 % 5.7 pp ______________________________________________________________________________________________________ (1) Excludes finance lease amortization expe nse of $0.5 million in 2024 and $1.2 million in 2023 .
Revenue We offer an extensive line of investment-related products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors and other participants in the private capital markets. Our segments sell many of our research and data products and services through license agreements on either a per user or enterprise-basis.
Revenue We offer an extensive line of investment-related products and services for individual and institutional investors in public and private capital markets; financial advisors and wealth managers; alliances and redistributors; asset managers; retirement plan providers, advisors and sponsors; and issuers of fixed-income securities. 53 Table of Contents Our segments sell many of our research and data products and services through license agreements on either a per user or enterprise-basis.
(DBRS) entered into two settlements with the SEC requiring DBRS to pay an aggregate of $8.0 million in civil monetary penalties, thus resulting in $8.0 million of expense in 2023.
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.
Morningstar Direct contributed $17.1 million to Morningstar Data and Analytics revenue growth, with revenue increasing 9.3%, or 9.2%, on an organic basis, reflecting growth across all major geographies. Morningstar Direct licenses increased 0.8%.
Morningstar Direct contributed $22.1 million to Morningstar Data and Analytics revenue growth, with revenue increasing 10.9%, or 10.8%, on an organic basis, reflecting growth across all major geographies. Morningstar Direct licenses increased 1.1%. Morningstar Data contributed $19.4 million to Morningstar Data and Analytics revenue growth, with revenue increasing 6.9%, or 6.6% on an organic basis.
Pursuant to the Termination Agreement, Wealth Advisors agreed to cease use of the Morningstar brand and Morningstar, and Wealth Advisors agreed to terminate the License Agreement originally entered into in 1998.
Wealth Advisors On January 27, 2023, we entered into the Termination Agreement and the Tender Offer Agreement. Pursuant to the Termination Agreement, Wealth Advisors agreed to cease use of the Morningstar brand, and Morningstar and Wealth Advisors agreed to terminate the License Agreement originally entered into in 1998.
We describe these investments in Note 9 of the Notes to our Consolidated Financial Statements. Divestitures We had no divestitures in 2023, 2022, or 2021. Application of Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial Statements, which have been prepared in accordance with GAAP.
We describe these divestitures in Note 10 of the Notes to our Consolidated Financial Statements. 72 Table of Contents Application of Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial Statements, which have been prepared in accordance with GAAP.
Acquisitions We paid a total of $672.3 million, less cash acquired, related to acquisitions over the past three years. We describe these acquisitions in Note 8 of the Notes to our Consolidated Financial Statements. We paid a total of $62.9 million related to additional investments in unconsolidated entities over the past three years.
We describe these acquisitions in Note 9 of the Notes to our Consolidated Financial Statements. We paid a total of $40.4 million related to additional investments in unconsolidated entities over the past three years. We describe these investments in Note 11 of the Notes to our Consolidated Financial Statements.
Deferred revenue totaled $544.0 million (of which $517.7 million was classified as a current liability with an additional $26.3 million included in long-term liabilities) at the end of 2023. We expect to recognize this deferred revenue in future periods as we fulfill the service obligations under our license and subscription agreements.
Deferred revenue totaled $563.2 million, of which $540.8 million was classified as a current liability with an additional $22.4 million included in long-term liabilities, at the end of 2024. We expect to recognize this deferred revenue in future periods as we fulfill the service obligations under our license and subscription agreements.
To account for each business combination, we utilize the acquisition method of accounting which requires the following steps (1) identifying the acquirer, (2) determining the acquisition date, (3) recognizing and measuring identifiable assets acquired and liabilities assumed, and (4) recognizing and measuring goodwill or a gain from a bargain purchase.
To account for each business combination, we utilize the acquisition method of accounting which requires the following steps (1) identifying the acquirer, (2) determining the acquisition date, (3) recognizing and measuring identifiable assets acquired and liabilities assumed, and (4) recognizing and measuring goodwill or a gain from a bargain purchase. 73 Table of Contents Regardless of whether an acquisition is considered to be a business combination or an asset acquisition, allocating the purchase price to the acquired assets and liabilities involves management judgment.
We use the annual contract value method, which tracks the dollar value of renewals compared with the total dollar value of contracts up for renewal during the period. We include changes in the contract value in the renewal amount.
We use the annual contract value method, which tracks the dollar value of renewals compared with the total dollar value of contracts up for renewal during the period. We include changes in the contract value in the renewal amount. We use the actual revenue for the previous comparable fiscal period as the base rate for calculating the renewal percentage.
The 2019 Credit Agreement provided the company with a five-year multi-currency credit facility with an initial borrowing capacity of up to $750.0 million, including a $300.0 million revolving credit facility (the 2019 Revolving Credit Facility) and a term loan facility of $450.0 million. On May 6, 2022, the company terminated the 2019 Credit Agreement.
Credit Agreement On May 6, 2022, the company entered into a senior credit agreement (the 2022 Credit Agreement), providing the company with a five-year multi-currency credit facility with an initial borrowing capacity of up to $1.1 billion, including a $650.0 million term loan and a $450.0 million revolving credit facility.
PitchBook and Morningstar Data and Analytics were the largest drivers of the increase in organic revenue during 2023. 63 Table of Contents The tables below reconcile consolidated revenue to organic revenue: (in millions) 2023 2022 Change Consolidated revenue $ 2,038.6 $ 1,870.6 9.0 % Less: acquisitions (30.9) — NMF Less: accounting changes — — — % Effect of foreign currency translations 3.2 — NMF Organic revenue $ 2,010.9 $ 1,870.6 7.5 % Revenue by geographical area (in millions) 2023 2022 Change United States $ 1,470.6 $ 1,353.9 8.6 % Asia 49.3 44.8 10.0 % Australia 58.4 55.8 4.7 % Canada 116.3 109.8 5.9 % Continental Europe 185.5 162.9 13.9 % United Kingdom 148.0 133.6 10.8 % Other 10.5 9.8 7.1 % Total International 568.0 516.7 9.9 % Consolidated revenue $ 2,038.6 $ 1,870.6 9.0 % International revenue comprised approximately 28% of our consolidated revenue in 2023 and 2022.
Morningstar Credit, PitchBook, and Morningstar Data and Analytics were the largest drivers of the increase in organic revenue during 2024. 59 Table of Contents The tables below reconcile consolidated revenue to organic revenue: (in millions) 2024 2023 Change Consolidated revenue $ 2,275.1 $ 2,038.6 11.6 % Acquisitions — — — % Divestitures (1.3) (5.3) NMF Accounting changes — — — % Effect of foreign currency translations (1.3) — NMF Organic revenue $ 2,272.5 $ 2,033.3 11.8 % Revenue by geographical area (in millions) 2024 2023 Change United States $ 1,638.8 $ 1,470.6 11.4 % Asia 49.6 49.3 0.6 % Australia 62.4 58.4 6.8 % Canada 140.4 116.3 20.7 % Continental Europe 203.8 185.5 9.9 % United Kingdom 167.4 148.0 13.1 % Other 12.7 10.5 21.0 % Total International 636.3 568.0 12.0 % Consolidated revenue $ 2,275.1 $ 2,038.6 11.6 % International revenue comprised approximately 28% of our consolidated revenue in 2024 and 2023.
We hold our cash reserves in cash equivalents and investments and maintain a conservative investment policy. We invest most of our investment balance in stocks, bonds, options, mutual funds, money market funds, or exchange-traded products that replicate the model portfolios and strategies created by Morningstar. These investment accounts may also include exchange-traded products where Morningstar is an index provider.
We are focused on maintaining a strong balance sheet and liquidity position. We hold our cash reserves in cash equivalents and investments and maintain a conservative investment policy. We invest most of our investment balance in stocks, bonds, options, mutual funds, money market funds, or exchange-traded products that replicate the model portfolios and strategies created by Morningstar.
Compliance with Covenants Each of the Amended 2022 Credit Agreement and the 2030 Notes include customary representations, warranties, and covenants, including financial covenants, that require us to maintain specified ratios of consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) to consolidated interest charges and consolidated funded indebtedness to consolidated EBITDA, which are tested on a quarterly basis.
As of December 31, 2024, our total outstanding debt, net of issuance costs, under the 2030 Notes was $348.8 million. 70 Table of Contents Compliance with Covenants Each of the Amended 2022 Credit Agreement and the 2030 Notes include customary representations, warranties, and covenants, including financial covenants, that require us to maintain specified ratios of consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) to consolidated interest charges and consolidated funded indebtedness to consolidated EBITDA, which are evaluated on a quarterly basis.
These developments are expected to have long term impacts on our delivery of products and services, customer interactions, physical operations, technology systems, and dependencies on third parties. Morningstar is monitoring proposed legislation in the U.S., European Union (EU), and in other jurisdictions relevant to its ESG business activities.
Specifically, we anticipate that this area will experience further regulatory developments likely to have long term impacts on our delivery of products and services, customer interactions, physical operations, technology systems, and dependencies on third parties. Morningstar is monitoring proposed ESG legislation in the US, EU, and in other jurisdictions relevant to its business activities.
Effective tax rate and income tax expense The following table summarizes the components of our effective tax rate: (in millions) 2023 2022 Income before income taxes and equity in investments of unconsolidated entities $ 181.5 $ 130.6 Equity in investments of unconsolidated entities (7.4) (3.6) Income before income taxes $ 174.1 $ 127.0 Income tax expense $ 33.0 $ 56.5 Effective tax rate 19.0 % 44.5 % 76 Table of Contents Our effective tax rate in 2023 was 19.0%, a decrease of 25.5 percentage points, compared with 44.5% in the prior year.
Effective tax rate and income tax expense The following table summarizes the components of our effective tax rate: (in millions) 2024 2023 Income before income taxes and equity in investments of unconsolidated entities $ 491.3 $ 181.5 Equity in investments of unconsolidated entities (17.4) (7.4) Income before income taxes $ 473.9 $ 174.1 Income tax expense $ 104.0 $ 33.0 Effective tax rate 21.9 % 19.0 % 68 Table of Contents Our effective tax rate in 2024 was 21.9%, an increase of 2.9 percentage points, compared with 19.0% in the prior year.
Regulatory Trends Affecting Our Business 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 - "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.
(in millions) 2023 2022 Change Operating income $ 230.6 $ 167.8 37.4 % Add: intangible amortization expense (1) 70.5 66.7 5.7 % Add: M&A-related expenses (2) 9.8 17.1 (42.7) % Add: M&A-related earn-outs (3) — 11.6 NMF Add: Severance and personnel expenses (4) 5.5 27.5 (80.0) % Add: Transformation costs (4) 7.0 8.2 (14.6) % Add: Asset impairment costs (4) 3.1 — NMF Adjusted operating income $ 326.5 $ 298.9 9.2 % Morningstar Data and Analytics $ 339.8 $ 313.3 8.5 % PitchBook 148.1 71.5 107.1 % Morningstar Wealth (40.4) (14.3) 182.5 % Morningstar Credit 21.7 59.1 (63.3) % Morningstar Retirement 54.1 51.4 5.3 % Less: Corporate and All Other (5) (196.8) (182.1) 8.1 % Adjusted operating income $ 326.5 $ 298.9 9.2 % We reported adjusted operating margin of 16.0% in 2023 and 2022, which excludes intangible amortization expense, M&A-related expenses (including M&A-related earn-outs), and expenses related to the significant reduction and shift of the company's operations in China .
(in millions) 2024 2023 Change Operating income $ 484.8 $ 230.6 110.2 % Intangible amortization expense (1) 64.5 70.5 (8.5) % M&A-related expenses (2) 8.5 9.8 (13.3) % M&A-related gains (3) (64.0) — NMF Severance and personnel expenses (4) — 5.5 NMF Transformation costs (4) — 7.0 NMF Asset impairment costs (4) — 3.1 NMF Adjusted operating income $ 493.8 $ 326.5 51.2 % Morningstar Data and Analytics $ 355.4 $ 339.8 4.6 % PitchBook 186.4 148.1 25.9 % Morningstar Credit 75.6 21.7 248.4 % Morningstar Wealth (9.3) (40.4) NMF Morningstar Retirement 65.6 54.1 21.3 % Corporate and All Other (5) (179.9) (196.8) NMF Adjusted operating income $ 493.8 $ 326.5 51.2 % 63 Table of Contents We reported adjusted operating margin of 21.7% in 2024 and 16.0% in 2023, which excludes intangible amortization expense, M&A-related expenses and gains, and expenses related to the significant reduction and shift of the company's operations in China .
For us, these risks and uncertainties include, among others: • failing to maintain and protect our brand, independence, and reputation; • failure to prevent and/or mitigate cybersecurity events and the failure to protect confidential information, including personal information about individuals; • compliance failures, regulatory action, or changes in laws applicable to our credit ratings operations, investment advisory, environmental, social, and governance (ESG), and index businesses; • failing to innovate our product and service offerings or anticipate our clients’ changing needs; • the impact of artificial intelligence (AI) and related new technologies on our business, legal, and regulatory exposure profile and reputation; • failure to detect errors in our products or failure of our products to perform properly due to defects, malfunctions or similar problems; • failing to recruit, develop, and retain qualified employees; • prolonged volatility or downturns affecting the financial sector, global financial markets, and the global economy and its effect on our revenue from asset-based fees and credit ratings business; • failing to scale our operations and increase productivity in order to implement our business plans and strategies; • liability for any losses that result from errors in our automated advisory tools or errors in the use of the information and data we collect; • inadequacy of our operational risk management, business continuity programs and insurance coverage in the event of a material disruptive event; • failing to efficiently integrate and leverage acquisitions and other investments, which may not realize the expected business or financial benefits, to produce the results we anticipate; • failing to maintain growth across our businesses in today's fragmented geopolitical, regulatory and cultural world; • liability relating to the information and data we collect, store, use, create, and distribute or the reports that we publish or are produced by our software products; • the potential adverse effect of our indebtedness on our cash flows and financial and operational flexibility; • challenges in accounting for tax complexities in the global jurisdictions we operate in could materially affect our tax obligations and tax rates; and • failing to protect our intellectual property rights or claims of intellectual property infringement against us.
For us, these risks and uncertainties include, among others: • failing to maintain and protect our brand, independence, and reputation; • failure to prevent and/or mitigate cybersecurity events and the failure to protect confidential information, including personal information about individuals; • compliance failures, regulatory action, or changes in laws applicable to our regulated businesses; • failing to innovate our product and service offerings or meet or anticipate our clients’ changing needs; • impact of AI technologies on our business and reputation, and the legal risks as they are incorporated into our products and tools; • failure to detect errors in our products or failure of our products to perform properly due to defects, malfunctions or similar problems; • failing to recruit, develop, and retain qualified employees; • 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 strategies; • liability for any losses that result from errors in our automated advisory tools or errors in the use of the information and data we collect; • inadequacy of our operational risk management and business continuity programs to address materially disruptive events; • failure of our strategic transaction, acquisitions, divestitures and investments in companies or technologies to yield expected business or financial benefits, negatively impacting our operating results and our ability to deliver long-term value to shareholders; • failing to maintain growth across our businesses due to changes in geopolitics and the regulatory landscape; • liability relating to the information and data we collect, store, use, create, and distribute or the reports that we publish or are produced by our software products; • the potential adverse effect of our indebtedness on our cash flow and financial and operational flexibility; • liability, costs and reputational risks relating to environmental, social and governance considerations; • our dependence on third-party service providers in our operations; • inadequacy of our insurance coverage; • challenges in accounting for tax complexities in the global jurisdictions we operate in could materially affect our tax obligations and tax rates; • the potential and impact of vendor consolidation and clients' strategic decisions to replace our products and services with in-house products and services; • our ability to build and maintain short-term and long-term shareholder value and pay dividends to our shareholders; • our ability to maintain existing business and renewal rates and to gain new business; 52 Table of Contents • the impact of recently issued accounting pronouncements on our consolidated financial statements and related disclosures; • impact on our stock price due to future sales of our common stock and fluctuations in our operating results; and • failing to protect our intellectual property rights or claims of intellectual property infringement against us.
(in millions) 2023 2022 Change Cash provided by operating activities $ 316.4 $ 297.8 6.2 % Capital expenditures (119.1) (129.5) (8.0) % Free cash flow $ 197.3 $ 168.3 17.2 % We generated free cash flow of $197.3 million in 2023, an increase of $29.0 million compared with 2022.
(in millions) 2024 2023 Change Cash provided by operating activities $ 591.6 $ 316.4 87.0 % Capital expenditures (142.7) (119.1) 19.8 % Free cash flow $ 448.9 $ 197.3 127.5 % We generated free cash flow of $448.9 million in 2024, an increase of $251.6 million compared with 2023.
The figures for license-based products includes the effect of price changes; increasing client bases upon contract renewal; any loss of clients due to cancellations; changes to the contract value upon renewal (such as increased users); and changes in the value of variable-fee contracts. These factors, therefore, can result in renewal rate percentages greater or lower than 100%.
The figures for license-based products includes the effect of price changes; increasing client bases upon contract renewal; any loss of clients due to cancellations; and changes to the contract value upon renewal (such as increased users).
As part of such transaction, pursuant to the Tender Offer Agreement, Morningstar agreed to tender up to 10 million shares in Wealth Advisors to SBI. The tender offer closed on February 28, 2023, and SBI purchased 8,040,600 shares of Wealth Advisors from Morningstar, resulting in net proceeds of $26.2 million and a pre-tax gain of $18.4 million.
The tender offer closed on February 28, 2023, and SBI purchased 8,040,600 shares of Wealth Advisors from Morningstar, resulting in net proceeds of $26.2 million and a pre-tax gain of $18.4 million. Refer to Note 11 of the Notes to our Consolidated Financial Statements for additional information on the Termination Agreement and the Tender Offer Agreement.
In 2023, cash provided by operating activities was $316.4 million, reflecting $288.3 million of net income, adjusted for non-cash items, and an additional $28.1 million i n positive changes from our net operating assets and liabilities. Cash provided by operating activities increased $18.6 million, or 6.2%, in 2023.
In 2024, cash provided by operating activities was $591.6 million, reflecting $498.8 million of net income adjusted for non-cash items and $92.8 million i n positive changes from our net operating assets and liabilities. Cash provided by operating activities increased $275.2 million, from $316.4 million in 2023 primarily driven by higher cash earnings .
If actual amounts are different from previous estimates, we include revisions in our results of operations for the period in which the actual amounts become known. 80 Table of Contents We believe the following critical accounting policies reflect the significant judgments and estimates used in the preparation of our Consolidated Financial Statements: Revenue Recognition Most of our revenue comes from the sale of subscriptions for data, software, and Internet-based products and services.
We believe the following critical accounting policies reflect the significant judgments and estimates used in the preparation of our Consolidated Financial Statements: Revenue Recognition A majority of our revenue comes from the sale of subscriptions for data, software, and Internet-based products and services.
Excluding the $4.5 million LCD contingent payment within operating cash flow, payments related to the Termination Agreement of $59.9 million, and $26.4 million of severance and other related costs paid for the China transition, which together totaled $90.8 million, as well as comparable items in the prior year, cash flow from operations would have increased 19.7% to $407.2 million and free cash flow would have increased 36.7% to $288.1 million in 2023.
In 2023, free cash flow was impacted by $4.5 million LCD contingent payment within operating cash flow, payments related to the Termination Agreement of $59.9 million, and $26.4 million of severance and other related costs paid for the China transition, which together totaled $90.8 million.
On April 6, 2023, we made the first cash payment of 6 billion Japanese yen ($45.1 million), and on April 19, 2023, we made the second and final cash payment of 2 billion Japanese yen ($14.8 million), pursuant to the Termination Agreement.
On April 6, 2023, we made the first cash payment of 6 billion Japanese yen ($45.1 million), and on April 19, 2023, we made the second and final cash payment of 2 billion Japanese yen ($14.8 million), pursuant to the Termination Agreement. 71 Table of Contents As part of such transaction, pursuant to the Tender Offer Agreement, Morningstar agreed to tender up to 10 million shares in Wealth Advisors to SBI.
This section also includes comparisons of 2022 segment financial information to the same information for 2021. All dollar and percentage comparisons, which are often accompanied by words such as “increase,” “decrease,” “grew,” “declined,” “was up,” “was down,” “was flat,” or “was similar”, refer to a comparison with the prior year unless otherwise stated.
All dollar and percentage comparisons, which are often accompanied by words such as “increase,” “decrease,” “grew,” “declined,” “was up,” “was down,” “was flat,” or “was similar” refer to a comparison with the prior year unless otherwise stated. Understanding Our Company Key Business Characteristics Our mission is to empower investor success.
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.
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. Segments The company has seven operating segments which are presented as the following five reportable segments: Morningstar Data and Analytics, PitchBook, Morningstar Wealth, Morningstar Credit, and Morningstar Retirement.
International Operations As of December 31, 2023, we had wholly- or majority-owned subsidiaries in 31 countries outside of the U.S. and included their results of operations and financial condition in our consolidated financial statements. We also have investments outside of the U.S., and where we have significant influence, we apply the equity method of accounting.
International Operations As of December 31, 2024, we had wholly-owned subsidiaries in 31 countries outside of the US and included their results of operations and financial condition in our consolidated financial statements.
The 2022 Credit Agreement also provided for the issuance of up to $50.0 million of letters of credit and a $100.0 million sub-limit for a swingline facility under the 2022 Revolving Credit Facility.
The 2022 Credit Agreement also provided for the issuance of letters of credit and a swingline facility.
Acquisitions, Goodwill, and Other Intangible Assets We generally acquire businesses which are accounted for as business combinations. Our financial statements reflect the operations of an acquired business starting from the completion of the transaction. We record the estimated fair value of assets acquired and liabilities assumed as of the date of acquisition.
The timing of future revenue recognition may change depending on the terms of the applicable agreements and the timing of fulfilling our service obligations. Acquisitions, Goodwill, and Other Intangible Assets We generally acquire businesses which are accounted for as business combinations. Our financial statements reflect the operations of an acquired business starting from the completion of the transaction.
Cost of revenue Cost of revenue is our largest category of operating expense, representing about one-half of our total operating expense. Our business relies heavily on human capital, and cost of revenue includes the compensation expense for employees who produce our products and services. We include compensation expense for approximately 75% of our employees in this category.
Our business relies heavily on human capital, and cost of revenue includes the compensation expense for employees who produce our products and services. We include compensation expense for approximately 76% of our employees in this category. 61 Table of Contents Cost of revenue increased $52.2 million, or 6.2%, in 2024.
Reported and organic revenue growth was primarily driven by strong demand for PitchBook and Morningstar Data and Analytics products. Asset-based revenue increased 1.7%, or 1.5% on an organic basis, during 2022, driven by increases in Morningstar Indexes which was partially offset by lower asset-based revenue in Morningstar Wealth and Morningstar Retirement reflecting declines in global markets.
Reported and organic revenue grow th was primarily driven by strong demand for PitchBook and Morningstar Data and Analytics products. Asset-based revenue increased 19.2%, on both a reported and organic basis, during 2024. Reported and organic revenue growth was primarily driven by increases in Morningstar Wealth, Morningstar Indexes, and Morningstar Retirement.
The amount of deferred revenue may increase or decrease based on the mix of contracted products and services and the volume of new and renewal subscriptions. The timing of future revenue recognition may change depending on the terms of the applicable agreements and the timing of fulfilling our service obligations.
We expect to recognize this deferred revenue in future periods as we fulfill our performance obligations under our subscription and service agreements. The amount of deferred revenue may increase or decrease based on the mix of contracted products and services and the volume of new and renewal subscriptions.
We do not make public financial forecasts for our business because we want to avoid creating any incentives for our management team to make speculative statements about our financial results that could influence our stock price or take actions that help us meet short-term forecasts, but may not build long-term shareholder value. 58 Table of Contents We pro vide the following measures that can help investors generate their own assessment of how our intrinsic value has changed over time: • Revenue (including organic revenue); • Operating income (including adjusted operating income); • Operating margin (including adjusted operating margin); and • Free cash flow.
We do not make public financial forecasts for our business because we want to avoid creating any incentives for our management team to make speculative statements about our financial results that could influence our stock price or take actions that help us meet short-term forecasts, but may not build long-term shareholder value.
Our transaction-based revenue, which is recognized primarily in our Morningstar Credit and Morningstar Wealth segments, is one-time in nature, compared with the recurring revenue streams represented by our license and asset-based products. 57 Table of Contents Deferred Revenue We invoice some of our clients and collect cash in advance of providing services or fulfilling subscription services to our customers.
Our transaction-based revenue includes revenue that is one time in nature and related Morningstar Credit recurring revenue primarily derived from surveillance and research. Deferred Revenue We invoice some of our clients and collect cash in advance of providing services or fulfilling subscription services to our customers.
How We Evaluate Our Business When our analysts evaluate a stock, they focus on assessing the company's estimated intrinsic value, which is based on estimated future cash flows, discounted to their value in today's dollars. Our approach to evaluating our own business works the same way.
We also have investments outside of the US, and where we have significant influence, we apply the equity method of accounting. 54 Table of Contents How We Evaluate Our Business When our analysts evaluate a stock, they focus on assessing the company's estimated intrinsic value, which is based on estimated future cash flows, discounted to their value in today's dollars.
In addition, the DBRS SEC settlements negatively impacted operating margin and adjusted operating margin by an additional 0.4 percentage points. 68 Table of Contents Non-GAAP Financial Measures We reported adjusted operating income of $326.5 million in 2023 compared with $298.9 million in 2022, which excludes intangible amortization expense, M&A-related expenses (including M&A-related earn-outs), and expenses related to the significant reduction and shift of the company's operations in China .
Non-GAAP Financial Measures We reported adjusted operating income of $493.8 million in 2024 compared with $326.5 million in 2023, which excludes intangible amortization expense, M&A-related expenses and gains, and expenses related to the significant reduction and shift of the company's operations in China .
Revenue from international operations increased $51.3 million, or 9.9%, in 2023 driven by strong demand for Morningstar Data and Analytics products. 64 Table of Contents Revenue Renewal Rates As discussed in How We Evaluate Our Business , we calculate revenue renewal rates to help measure how successful we've been in maintaining existing business for products and services that have renewable revenue.
Revenue Renewal Rates As discussed in How We Evaluate Our Business , we calculate revenue renewal rates to help measure how successful we've been in maintaining existing business for products and services that have renewable revenue.
This authorization replaced the then-existing share repurchase program and expires on December 31, 2025. Under this authorization, we may repurchase shares from time to time at prevailing market prices on the open market or in private transactions in amounts that we deem appropriate.
Under this authorization, we may repurchase shares from time to time at prevailing market prices on the open market or in private transactions in amounts that we deem appropriate. For the year ended December 31, 2024, we repurchased a total of 33,300 shares for $11.6 million .
These actions will continue to have some transitional effects on our level of capital expenditures and operating expenses. 79 Table of Contents We also expect to use a portion of our cash and investments balances in the first quarter of 2024 to make annual bonus payments of approxima tely $124.3 million rela ted to the 2023 bonus program compared with $98.3 million paid in the first quarter of 2023 for the 2022 bonus program.
We also expect to use a portion of our cash and investments balances in the first quarter of 2025 to make annual bonus payments of approxima tely $164.8 million rela ted to the 2024 bonus program compared with $123.9 million paid in the first quarter of 2024 for the 2023 bonus program.
The increase was primarily due to the financial results of Morningstar Sustainalytics and Morningstar Indexes, as well as higher compensation costs and increases in stock-based compensation in corporate areas. 75 Table of Contents Non-operating expense, n et, Equity in investments of unconsolidated entities, and Effective tax rate and Income tax expense Non-operating expense, net The following table presents the components of non-operating expense, net: (in millions) 2023 2022 Interest income $ 9.0 $ 1.7 Interest expense (60.7) (30.1) Realized gains (losses) on sale of investments, reclassified from other comprehensive income 2.9 (2.1) Expense from equity method transaction, net (11.8) — Other income (expense), net 11.5 (6.7) Non-operating expense, net $ (49.1) $ (37.2) Interest income reflects interest from our investment portfolio.
Revenue was also negatively impacted by the streamlining of the licensed-ratings offering. 67 Table of Contents Non-operating income (expense), n et, Equity in investments of unconsolidated entities, and Effective tax rate and Income tax expense Non-operating income (expense), net The following table presents the components of non-operating income (expense), net: (in millions) 2024 2023 Interest income $ 12.2 $ 9.0 Interest expense (49.9) (60.7) Net realized gains (losses) on sale of investments, reclassified from other comprehensive income 3.8 2.9 Gain on sale of business 45.3 — Expense from equity method transaction, net — (11.8) Other income (expense), net (4.9) 11.5 Non-operating income (expense), net $ 6.5 $ (49.1) Interest income reflects interest from our cash, cash equivalents, and investment portfolio.
Morningstar Data and Analytics The following table presents the results for Morningstar Data and Analytics: Change (in millions) 2023 2022 2021 2023 vs 2022 2022 vs 2021 Revenue $ 747.2 $ 696.6 $ 667.5 7.3 % 4.4 % Adjusted operating income $ 339.8 $ 313.3 $ 293.5 8.5 % 6.7 % Adjusted operating margin 45.5 % 45.0 % 44.0 % 0.5 pp 1.0 pp Morningstar Data and Analytics depreciation expense was $31.0 million, $23.4 million, and $29.5 million for 2023, 2022, and 2021, respectively. 2023 versus 2022 Morningstar Data and Analytics total revenue increased $50.6 million, or 7.3%, in 2023.
Morningstar Data and Analytics The following table presents the results for Morningstar Data and Analytics: (in millions) 2024 2023 Change Revenue $ 788.1 $ 747.2 5.5 % Adjusted operating income $ 355.4 $ 339.8 4.6 % Adjusted operating margin 45.1 % 45.5 % (0.4) pp 64 Table of Contents Morningstar Data and Analytics total revenue increased $40.9 million, or 5.5%, in 2024.
Our compensation expense reflects rising wage scales in many of the markets where we operate as unemployment rates remain low.
Our compensation expense reflects rising wage scales in many of the markets where we operate as unemployment rates remain low. Overall, our business, balance sheet, technological infrastructure, and teams have shown resilience and flexibility navigating global macroeconomic trends.
Our revenue renewal rate calculation includes only those products that we consider to be license-based. These are primarily weighted toward Morningstar Data and Analytics and PitchBook products, but also includes other license-based products and services. For these license-based products and services, we estimate that our annual renewal rate was approximat ely 103% in 2023 versus 105% in 2022.
These factors, therefore, can result in renewal rate percentages greater or lower than 100%. 60 Table of Contents Our revenue renewal rate calculation includes only those products that we consider to be license-based. These are primarily weighted toward Morningstar Data and Analytics and PitchBook products, but also includes other license-based products and services.
Morningstar Wealth The following table presents the results for Morningstar Wealth: Change (in millions) 2023 2022 2021 2023 vs 2022 2022 vs 2021 Revenue $ 229.9 $ 228.9 $ 238.4 0.4 % (4.0) % Adjusted operating income (loss) $ (40.4) $ (14.3) $ 19.4 182.5 % NMF Adjusted operating margin (17.6) % (6.2) % 8.1 % (11.4) pp (14.3) pp Morningstar Wealth asset-based revenue represented 53.3% of total segment revenue in 2023.
Morningstar Wealth The following table presents the results for Morningstar Wealth: (in millions) 2024 2023 Change Revenue $ 248.4 $ 229.9 8.0 % Adjusted operating income (loss) $ (9.3) $ (40.4) NMF Adjusted operating margin (3.7) % (17.6) % 13.9 pp Morningstar Wealth total revenue increased $18.5 million, or 8.0%, in 2024.
If arrangements include an acceptance provision, which exists infrequently, we begin recognizing revenue upon the receipt of customer acceptance. We make judgments at the beginning of an arrangement regarding whether collection of the consideration to which we are entitled is probable and assess the likelihood of collection on a customer-by-customer basis.
We make judgments at the beginning of an arrangement regarding whether collection of the consideration to which we are entitled is probable and assess the likelihood of collection on a customer-by-customer basis. We typically sell to institutional customers with whom we have a history of successful collections.
We were in compliance with these financial covenants as of December 31, 2023, with consolidated funded indebtedness to consolidated EBITDA calculated at approximately 1.7x. 78 Table of Contents Share repurchases On December 6, 2022, the board of directors approved a share repurchase program that authorizes the company to repurchase up to $500.0 million in shares of the company's outstanding common stock, effective January 1, 2023.
Share Repurchases On December 6, 2022, the board of directors approved a share repurchase program that authorizes the company to repurchase up to $500.0 million in shares of the company's outstanding common stock, effective January 1, 2023. This authorization replaced the then-existing share repurchase program and expires on December 31, 2025.
(Wealth Advisors)) and the Tender Offer Agreement (the Tender Offer Agreement) with SBI Global Asset Management Co., Ltd. (now known as SBI Asset Management Group Co., Ltd. (SBI)). Refer to Note 9 of the Notes to our Consolidated Financial Statements for additional information on the Termination Agreement and the Tender Offer Agreement.
(now known as SBI Global Asset Management Co., Ltd. (Wealth Advisors)) and the Tender Offer Agreement (the Tender Offer Agreement) with SBI Global Asset Management Co., Ltd. (now known as SBI Asset Management Group Co., Ltd. (SBI)).
Cost of revenue increased $64.2 million, or 8.2%, in 2023. Higher compensation expense of $66.1 million was the largest contributor to the increase, primarily due the factors noted above. Cloud computing and production expense also increased $5.6 million and $4.7 million, respectively.
Sales and marketing Sales and marketing expense increased $17.2 million, or 4.1%, in 2024. Higher compensation expense of $5.5 million was the largest contributor, primarily due to the factors noted above relating to cost of revenue. Advertising and marketing costs increased $5.4 million during 2024 due to higher advertising and marketing campaign expense.
In July 2022, the company began to significantly reduce its operations in Shenzhen, China and to shift the work related to its global business functions to other Morningstar locations.
(4) Reflects costs associated with the significant reduction of the company's operations in Shenzhen, China and the shift of work related to its global business functions to other Morningstar locations.
Consolidated Operating Expense (in millions) 2023 2022 Change Cost of revenue $ 843.5 $ 779.3 8.2 % % of revenue 41.4 % 41.7 % (0.3) pp Sales and marketing 423.8 356.5 18.9 % % of revenue 20.8 % 19.1 % 1.7 pp General and administrative 355.8 400.4 (11.1) % % of revenue 17.5 % 21.4 % (3.9) pp Depreciation and amortization 184.9 166.6 11.0 % % of revenue 9.1 % 8.9 % 0.2 pp Total operating expense $ 1,808.0 $ 1,702.8 6.2 % % of revenue 88.7 % 91.0 % (2.3) pp 65 Table of Contents In 2023, operating expense increased $105.2 million, or 6.2%.
Consolidated Operating Results (in millions) 2024 2023 Change Cost of revenue $ 895.7 $ 843.5 6.2 % % of revenue 39.4 % 41.4 % (2.0) pp Sales and marketing 441.0 423.8 4.1 % % of revenue 19.4 % 20.8 % (1.4) pp General and administrative 327.2 355.8 (8.0) % % of revenue 14.4 % 17.5 % (3.1) pp Depreciation and amortization 190.4 184.9 3.0 % % of revenue 8.3 % 9.1 % (0.8) pp Total operating expense $ 1,854.3 $ 1,808.0 2.6 % % of revenue 81.5 % 88.7 % (7.2) pp Cost of revenue Cost of revenue is our largest category of operating expense, representing about one-half of our total operating expense.
Determining the fair value of intangible assets requires significant management judgment in the following areas: • Identify the acquired intangible assets: For each acquisition, we identify the intangible assets acquired.
We base the fair value estimates on available historical information and on future expectations and assumptions that we believe are reasonable, but these estimates are inherently uncertain. Determining the fair value of intangible assets requires significant management judgment in the following areas: • Identify the acquired intangible assets: For each acquisition, we identify the intangible assets acquired.
Corporate and All Other includes Morningstar Sustainalytics and Morningstar Indexes as sources of revenues. 2023 versus 2022 In 2023, our consolidated revenue rose $168.0 million, or 9.0%. Foreign currency movements decreased revenue by $3.2 million in 2023. License-based revenue, which represents subscription services available to customers, increased 14.0%, or 11.8% on an organic basis, during 2023.
Revenue from Morningstar Indexes was $84.7 million in 2024 and $65.5 million in 2023. 58 Table of Contents In 2024, our consolidated revenue rose $236.5 million, or 11.6%. Foreign currency movements increased revenue by $1.3 million in 2024. License-based revenue, which represents subscription services available to customers, increased 7.1%, or 7.6% on an organic basis, during 2024.
As of December 31, 2023, our total outstanding debt under the Amended 2022 Credit Agreement was $623.9 million, net of debt issuance costs, with borrowing availability of $635.0 million under the 2022 Revolving Credit Facility. Except for incremental borrowing capacity, there were no material changes to the existing terms and conditions of the 2022 Credit Agreement.
Aside from the increased borrowing capacity, the Amended 2022 Credit Agreement left the 2022 Credit Agreement terms largely unchanged. As of December 31, 2024, our total outstanding debt under the Amended 2022 Credit Agreement was $349.8 million, net of debt issuance costs, with borrowing availability of $650.0 million under the 2022 Revolving Credit Facility.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe table below shows our exposure to foreign currency denominated revenue and operating income for the year ended December 31, 2023: (in millions, except foreign currency rates) Australian Dollar British Pound Canadian Dollar Euro Other Foreign Currencies Foreign currency rate in U.S. dollars as of December 31, 2023 0.6818 1.2732 0.7549 1.1038 n/a Foreign denominated percentage of revenue 2.8 % 7.3 % 5.7 % 6.6 % 5.5 % Foreign denominated percentage of operating income (loss) 6.4 % (21.3) % (10.4) % 8.5 % (41.0) % Estimated effect of a 10% adverse currency fluctuation on revenue $ (5.8) $ (15.1) $ (11.9) $ (13.8) $ (11.4) Estimated effect of a 10% adverse currency fluctuation on operating income (loss) $ (1.5) $ 5.0 $ 2.4 $ (2.0) $ 9.3 The table below shows our net investment exposure in foreign currencies as of December 31, 2023: (in millions) Australian Dollar British Pound Canadian Dollar Euro Other Foreign Currencies Assets, net of unconsolidated entities $ 61.9 $ 271.8 $ 238.4 $ 231.6 $ 178.2 Less: liabilities (32.9) (79.4) (135.1) (155.7) 24.8 Net currency position $ 29.0 $ 192.4 $ 103.3 $ 75.9 $ 203.0 Estimated effect of a 10% adverse currency fluctuation on equity $ (2.9) $ (19.2) $ (10.3) $ (7.6) $ (20.3) 83 Table of Contents
Biggest changeThe table below shows our exposure to foreign currency denominated revenue and operating income for the year ended December 31, 2024: (in millions, except foreign currency rates) Australian Dollar British Pound Canadian Dollar Euro Other Foreign Currencies Foreign currency rate in US dollars as of December 31, 2024 0.6205 1.2537 0.6958 1.0388 n/a Foreign denominated percentage of revenue 2.7 % 7.4 % 6.2 % 6.4 % 5.3 % Foreign denominated percentage of operating income (loss) 4.1 % (7.7) % 1.6 % 4.7 % (14.0) % Estimated effect of a 10% adverse currency fluctuation on revenue $ (5.7) $ (16.4) $ (13.4) $ (14.1) $ (11.8) Estimated effect of a 10% adverse currency fluctuation on operating income (loss) $ (1.8) $ 3.7 $ (0.7) $ (2.1) $ 6.7 The table below shows our net investment exposure in foreign currencies as of December 31, 2024: (in millions) Australian Dollar British Pound Canadian Dollar Euro Other Foreign Currencies Assets, net of unconsolidated entities $ 64.0 $ 294.3 $ 222.8 $ 259.7 $ 251.1 Less: liabilities (33.4) (97.2) (102.2) (113.3) (103.2) Net currency position $ 30.6 $ 197.1 $ 120.6 $ 146.4 $ 147.9 Estimated effect of a 10% adverse currency fluctuation on equity $ (3.1) $ (19.7) $ (12.1) $ (14.6) $ (14.8) 75 Table of Contents
These investment accounts may also include exchange-traded products where Morningstar is an index provider. As of December 31, 2023, our cash, cash equivalents, and investments balance w as $389.0 m illion. Based on our estimates, a 100 basis-point change in interest rates would not have a material effect on the fair value of our investment portfolio.
These investment accounts may also include exchange-traded products where Morningstar is an index provider. As of December 31, 2024, our cash, cash equivalents, and investments balance w as $551.0 m illion. Based on our estimates, a 100 basis-point change in interest rates would not have a material effect on the fair value of our investment portfolio.
On an annualized basis, we estimate a 100 basis-point change in the SOFR rate would have a $6.2 million impact on our interest expense based on our outstanding principal balance and SOFR rates around December 31, 2023. We are subject to risk from fluctuations in foreign currencies from our operations outside of the U.S.
On an annualized basis, we estimate a 100 basis-point change in the SOFR rate would have a $3.5 million impact on our interest expense based on our outstanding principal balance and SOFR rates around December 31, 2024. We are subject to risk from fluctuations in foreign currencies from our operations outside of the US.

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