Morningstar, Inc. - Quarter Report: 2024 June (Form 10-Q)

Expense from equity method transaction, net ()Other income (expense), net() () Non-operating expense, net()()()()Income before income taxes and equity in investments of unconsolidated entities Equity in investments of unconsolidated entities()()()()Income tax expense (benefit) () Consolidated net income$ $ $ $ Net income per share: Basic$ $ $ $ Diluted$ $ $ $ Dividends per common share:Dividends declared per common share$ $ $ $ Dividends paid per common share$ $ $ $ Weighted average shares outstanding:Basic Diluted

See notes to unaudited consolidated financial statements.

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Morningstar, Inc. and Subsidiaries

Unaudited Consolidated Statements of Comprehensive Income

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	Three months ended June 30,		Six months ended June 30,
(in millions)	2024	2023	2024	2023
Consolidated net income	$	$	$	$

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	()		()
Unrealized gains on securities:
Unrealized holding gains arising during period
Reclassification of realized gains on investments included in net income	()	()	()	()
Other comprehensive income (loss), net	()		()

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See notes to unaudited consolidated financial statements.

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Morningstar, Inc. and Subsidiaries

Unaudited Consolidated Statements of Cash Flows



	Six months ended June 30,
(in millions)	2024	2023
Operating activities
Consolidated net income	$	$
Adjustments to reconcile consolidated net income to net cash flows from operating activities:
Depreciation and amortization
Deferred income taxes	()	()
Stock-based compensation expense
Provision for bad debt
Equity in investments of unconsolidated entities
Gain on equity method transaction		()
Other, net		()
Changes in operating assets and liabilities:
Accounts receivable		()
Accounts payable and accrued liabilities		()
Accrued compensation and deferred commissions	()	()
Income taxes, current		()
Deferred revenue
Other assets and liabilities	()	()
Cash provided by operating activities

Investing activities
Purchases of investment securities	()	()
Proceeds from maturities and sales of investment securities
Capital expenditures	()	()
Proceeds from sale of equity method investments, net
Purchases of investments in unconsolidated entities	()	()
Cash used for investing activities	()	()

Financing activities
Common shares repurchased		()
Dividends paid	()	()
Proceeds from revolving credit facility
Repayment of revolving credit facility	()	()
Repayment of term facility	()	()
Employee taxes withheld for stock awards	()	()
Payment of acquisition-related earn-outs		()
Other, net
Cash used for financing activities	()	()

Effect of exchange rate changes on cash and cash equivalents	()
Net increase (decrease) in cash and cash equivalents		()
Cash and cash equivalents—beginning of period
Cash and cash equivalents—end of period	$	$

Supplemental disclosure of cash flow information
Cash paid for income taxes	$	$
Cash paid for interest	$	$

See notes to unaudited consolidated financial statements.

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MORNINGSTAR, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Recently Issued Accounting Pronouncements Not Yet Adopted

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$ Amended 2022 Revolving Credit Facility

% Senior Notes due October 26, 2030, net of unamortized debt issuance costs of $1.2 million and $1.5 million, respectively

Total debt$ $

Credit Agreement

On May 6, 2022, the company entered into a senior credit agreement (the 2022 Credit Agreement), providing the company with a multi-currency credit facility with an initial borrowing capacity of up to $ billion, including a $ million term loan and a $ million revolving credit facility. The 2022 Credit Agreement also provided for the issuance of letters of credit and a swingline facility. The 2022 Credit Agreement was amended twice in September 2022 and again most recently in June 2024 (Amended 2022 Credit Agreement) to, among other items, eliminate the options for a second term loan draw and increase both the term loan and revolving credit facility to $ million each, raising the total borrowing capacity to $ billion (Amended 2022 Term Facility and Amended 2022 Revolving Credit Facility, respectively), and, most recently in June 2024, to update the reference rate for credit extensions in Canadian dollars. Aside from the increased borrowing capacity, the Amended 2022 Credit Agreement left the 2022 Credit Agreement terms largely unchanged. As of June 30, 2024, our total outstanding debt under the Amended 2022 Credit Agreement was $ million, net of debt issuance costs, with borrowing availability of $ million under the Amended 2022 Revolving Credit Facility.

The interest rate applicable to any loan under the Amended 2022 Credit Agreement is, at the company's option, either: (i) the applicable Secured Overnight Financing Rate plus an applicable margin for such loans, which ranges between % and %, based on the company's consolidated leverage ratio or (ii) the lender's base rate plus the applicable margin for such loans, which ranges between % and %, based on the company's consolidated leverage ratio.

The portions of deferred debt issuance costs related to the Amended 2022 Revolving Credit Facility are included in other current and non-current assets, and the portion of deferred debt issuance costs related to the Amended 2022 Term Facility is reported as a reduction to the carrying amount of the Amended 2022 Term Facility. Debt issuance costs related to the Amended 2022 Revolving Credit Facility are amortized on a straight-line basis to interest expense over the term of the Amended 2022 Credit Agreement. Debt issuance costs related to the Amended 2022 Term Facility are amortized to interest expense using the effective interest method over the term of the Amended 2022 Credit Agreement.

Private Placement Debt Offering

On October 26, 2020, we completed the issuance and sale of $ million aggregate principal amount of % 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. Proceeds were primarily used to repay a portion of the company's outstanding debt under the company's prior credit facility. Interest on the 2030 Notes is 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 having occurred on April 30, 2021. As of June 30, 2024, our total outstanding debt, net of issuance costs, under the 2030 Notes was $ million.

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operating segments, which are presented as the following reportable segments: Morningstar Data and Analytics, PitchBook, Morningstar Wealth, Morningstar Credit, and Morningstar Retirement. The company's operating segments also represent the company's reporting units to which goodwill is assigned. The company allocated goodwill by reporting unit in accordance with FASB ASC 350 Intangibles—Goodwill and Other (FASB ASC 350). Under this reporting unit structure, the consolidated goodwill balance was allocated based on each reporting unit's relative fair value at January 1, 2021. The company used a market approach and assigned goodwill to the reporting units. The following table shows the changes in our goodwill balances from December 31, 2023 to June 30, 2024:

$ $ $ $ $ $ $ Foreign currency translation and other() ()() ()()()Balance as of June 30, 2024$ $ $ $ $ $ $ $

Changes in the carrying amount of the company’s recorded goodwill are mainly the result of business acquisitions, divestitures, and the effect of foreign currency translations. In accordance with FASB ASC 350, the company does not amortize goodwill; instead, goodwill is subject to an impairment test annually, or whenever indicators of impairment exist. When reviewing goodwill for impairment, we assess a number of qualitative factors to determine whether it is more likely than not that the fair value of our reporting units is less than their respective carrying values. Examples of qualitative factors that we assess include macroeconomic conditions affecting our reporting units, financial performance of our reporting units, market and competitive factors related to our reporting units, and other events specific to our reporting units. If we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we perform a quantitative impairment test. The quantitative impairment test compares the estimated fair value of the reporting unit to its carrying value, and recognizes an impairment loss for the amount by which a reporting unit’s carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit. We determine the fair value of a reporting unit using a market approach. Determining the fair value of a reporting unit involves judgment and the use of significant estimates and assumptions, which include assumptions regarding the revenue growth rates and operating margins used to calculate estimated future cash flows, as well as revenue and earnings multiples of publicly traded companies whose services and markets are comparable.

We perform our annual impairment reviews in the fourth quarter or when impairment indicators and triggering events are identified. The company did not record any goodwill impairment in the first six months of 2024. Refer to Note 7 for detailed segment information.

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$()$ $ $()$ Technology-based assets () () Intellectual property & other () () Total intangible assets$ $()$ $ $()$

$ $ $

We amortize intangible assets using the straight-line method over their estimated useful lives.

2025 2026 2027 2028 Thereafter Total$

Our estimates of future amortization expense for intangible assets may be affected by future acquisitions, divestitures, changes in the estimated useful lives, impairments, and foreign currency translation.

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$ $ $ Weighted average common shares outstanding Basic net income per share$ $ $ $ Diluted net income per share:Consolidated net income$ $ $ $ Remainder of 2024 (July 1 through December 31)$ 2025 2026 2027 2028 Thereafter Total$

The aggregate amount of revenue we expect to recognize for the remainder of 2024 and subsequent years is higher than our contract liability balance of $ million as of June 30, 2024. The difference represents the value of future obligations for signed contracts that have yet to be billed.

The table above does not include variable consideration for unsatisfied performance obligations related to certain of our license-based, asset-based, and transaction-based contracts as of June 30, 2024. We are applying the optional exemption available under ASC Topic 606, as the variable consideration relates to these unsatisfied performance obligations being fulfilled as a series. The performance obligations related to these contracts are expected to be satisfied over the next to years as services are provided to the client. For license-based contracts, the consideration received for services performed is based on the number of future users, which is not known until the services are performed. The variable consideration for this revenue can be affected by the number of user licenses, which cannot be reasonably estimated. For asset-based contracts, the consideration received for services performed is based on future asset values, which are not known until the services are performed. The variable consideration for this revenue can be affected by changes in the underlying value of fund assets due to client redemptions, additional investments, or movements in the market. For transaction-based contracts, the consideration received for most Internet advertising services performed is based on the number of impressions, which is not known until the impressions are created. The variable consideration for this revenue can be affected by the timing and quantity of impressions in any given period and cannot be reasonably estimated.

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$ Deferred commissions Total contract assets$ $

operating segments which are presented as the following reportable segments:

•Morningstar Data and Analytics

•PitchBook

•Morningstar Wealth

•Morningstar Credit

•Morningstar Retirement

The operating segments of Morningstar Sustainalytics and Morningstar Indexes do not individually meet the quantitative segment reporting thresholds and have been combined and presented as part of Corporate and All Other, which is not a reportable segment. Corporate and All Other provides a reconciliation between revenue from our total reportable segments and consolidated revenue amounts.

Morningstar Data and Analytics provides investors comprehensive data, research and insights, and investment analysis to empower investment decision-making. Morningstar Data and Analytics includes product areas such as Morningstar Data, Morningstar Direct, and Morningstar Advisor Workstation.

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.

Morningstar Wealth brings together our model portfolios and wealth platform; practice and portfolio management software for registered investment advisers; data aggregation and enrichment capabilities; and our individual investor platform. Morningstar Wealth includes the Investment Management product area.

Morningstar Credit provides investors with credit ratings, research, data, and credit analytics solutions that contribute to the transparency of international and domestic credit markets. Morningstar Credit includes the Morningstar DBRS product area and the Morningstar Credit data and credit analytics product areas.

Morningstar Retirement offers products designed to help individuals reach their retirement goals. Its offerings include managed retirement accounts, fiduciary services, Morningstar Lifetime Allocation funds, and custom models.

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and 2023, along with the items necessary to reconcile the segment information to the totals reported in the accompanying consolidated financial statements. Prior period segment information is presented on a comparable basis to the basis on which current period segment information is presented and reviewed by the CODM.


	Three months ended June 30,				Six months ended June 30,
(in millions)	2024		2023		2024		2023
Revenue:
Morningstar Data and Analytics	$		$		$		$
PitchBook
Morningstar Wealth
Morningstar Credit
Morningstar Retirement
Total Reportable Segments	$		$		$		$
Corporate and All Other (1)
Total Revenue	$		$		$		$

Adjusted Operating Income (Loss):
Morningstar Data and Analytics	$		$		$		$
PitchBook
Morningstar Wealth	()		()		()		()
Morningstar Credit
Morningstar Retirement
Total Reportable Segments	$		$		$		$

Less reconciling items to Operating Income:
Corporate and All Other (2)	$	()	$	()	$	()	$	()
Intangible amortization expense (3)	()		()		()		()
M&A-related expenses (4)	()		()		()		()
Severance and personnel expenses (5)			()				()
Transformation costs (5)			()				()
Asset impairment costs (5)			()				()
Operating Income
Non-operating expense, net	()		()		()		()
Equity in investments of unconsolidated entities	()		()		()		()
Income before income taxes	$		$		$		$

____________________________________________________________________________________________

(1) Corporate and All Other provides a reconciliation between revenue from our Total Reportable Segments and consolidated revenue amounts. Corporate and All Other includes Morningstar Sustainalytics and Morningstar Indexes as sources of revenues. Revenue from Morningstar Sustainalytics was $ million and $ million for the three months ended June 30, 2024 and 2023, respectively, and $ million and $ million for the six months ended June 30, 2024 and 2023, respectively. Revenue from Morningstar Indexes was $ million and $ million for the three months ended June 30, 2024 and 2023, respectively, and $ million and $ million for the six months ended June 30, 2024 and 2023, respectively.

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million and $ million, respectively. During first six months of 2024 and 2023, unallocated corporate expenses were $ million and $ million, respectively. Unallocated corporate expenses include finance, human resources, legal, marketing, and other management-related costs that are not considered when segment performance is evaluated.

(3) Excludes finance lease amortization expense of $ million and $ million during the three months ended June 30, 2024 and 2023, respectively, and $ million and $ million during the six months ended June 30, 2024 and 2023, respectively.

(4) Reflects non-recurring expenses related to merger, acquisition, and divestiture activity including pre-deal due diligence, transaction costs, severance, and post-close integration costs.

(5) 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.

Severance and personnel expenses include severance charges, incentive payments related to early signing of severance agreements, transition bonuses, and stock-based compensation related to the accelerated vesting of RSU and MSU awards. 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.

Asset impairment costs include the write-off or accelerated depreciation of fixed assets in the Shenzhen, China office that were not redeployed, in addition to lease abandonment costs as the company downsized its office space prior to the lease termination date.

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$ $ $ $ $ $ $ Asset-based Transaction-based Total$ $ $ $ $ $ $ $ Six months ended June 30, 2024(in millions)Morningstar Data and AnalyticsPitchBookMorningstar WealthMorningstar CreditMorningstar RetirementTotal Reportable Segments

Corporate and All Other (7)

Total

Revenue by Type: (8)

License-based$ $ $ $ $ $ $ $ Asset-based Transaction-based Total$ $ $ $ $ $ $ $ Three months ended June 30, 2023Morningstar Data and AnalyticsPitchBookMorningstar WealthMorningstar CreditMorningstar RetirementTotal Reportable Segments

Corporate and All Other (7)

Total

Revenue by Type: (8)

License-based$ $ $ $ $ $ $ $ Asset-based Transaction-based Total$ $ $ $ $ $ $ $ Six months ended June 30, 2023(in millions)Morningstar Data and AnalyticsPitchBookMorningstar WealthMorningstar CreditMorningstar RetirementTotal Reportable Segments

Corporate and All Other (7)

Total

Revenue by Type: (8)

License-based$ $ $ $ $ $ $ $ Asset-based Transaction-based Total$ $ $ $ $ $ $ $

____________________________________________________________________________________________

(7) Corporate and All Other provides a reconciliation between revenue from our Total Reportable Segments and consolidated revenue amounts. Corporate and All Other includes Morningstar Sustainalytics and Morningstar Indexes as sources of revenues.

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Geographical Area Information

$ $ $ Asia Australia Canada Continental Europe United Kingdom Other Total International Consolidated revenue$ $ $ $

Property, equipment, and capitalized software, net by geographical area

(in millions)

As of June 30, 2024

As of December 31, 2023

United States

Asia

Australia

Canada

Continental Europe

United Kingdom

Other

Total International

Consolidated property, equipment, and capitalized software, net

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$ Asia Australia Canada Continental Europe United Kingdom Other Total International Consolidated operating lease assets$ $

million and $ million, respectively. Our investment portfolio consists of 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. As of June 30, 2024, all investments in our investment portfolio have valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access, and, therefore, are classified as Level 1 within the fair value hierarchy. We recognize unrealized holding gains or losses within "Other income (expense), net" on our Consolidated Statements of Income.

million and $ million, respectively. We have investments in both equity method investments and investments in equity securities with and without a readily determinable fair value.

The carrying amount of other investments in unconsolidated entities without a readily determinable fair value was $ million and $ million as of June 30, 2024 and December 31, 2023, respectively. We did not record any material adjustments or impairment losses in the first six months of 2024 or 2023.

On January 27, 2023, we entered into a Termination Agreement (the Termination Agreement) with Morningstar Japan K.K. (now known as SBI Global Asset Management Co., Ltd. (Wealth Advisors)), and a Tender Offer Agreement (the Tender Offer Agreement) with SBI Global Asset Management Co., Ltd. (now known as SBI Asset Management Group Co., Ltd. (SBI)).

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. As consideration for the transaction, Morningstar agreed to pay Wealth Advisors billion Japanese yen upon the termination of the license agreement and the achievement of certain conditions related primarily to the termination of the use of the Morningstar brand by Wealth Advisors’ customers.

On April 6, 2023, we made the first cash payment of billion Japanese yen ($ million) and on April 19, 2023, we made the second and final cash payment of billion Japanese yen ($ million), pursuant to the Termination Agreement. The expense related to the Termination Agreement is recorded within "Expense from equity method transaction, net" in our Consolidated Statements of Income for the six months ended June 30, 2023.

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million shares in Wealth Advisors to SBI. The tender offer closed on February 28, 2023, and SBI purchased shares of Wealth Advisors from Morningstar, resulting in net proceeds of $ million and a pre-tax gain of $ million. The pre-tax gain is recorded within "Expense from equity method transaction, net" in our Consolidated Statements of Income for the six months ended June 30, 2023.

Immediately following the tender offer, the company's ownership percentage in Wealth Advisors decreased to % from %, and as a result, we no longer account for our investment in Wealth Advisors as an equity method investment. Each reporting period, we remeasure our remaining investment in Wealth Advisors, an equity security with a readily determinable value, at fair value and recognize unrealized holding gains or losses within "Other income (expense), net" on our Consolidated Statements of Income. During the first quarter of 2023, we recognized an unrealized holding gain of $ million, which is recorded within "Expense from equity method transaction, net" in our Consolidated Statement of Income for the six months ended June 30, 2023.

10.

Our leases have remaining lease terms of approximately year to years, which may include the option to extend the lease when it is reasonably certain we will exercise that option. We do not have lease agreements with residual value guarantees, sale leaseback terms, or material restrictive covenants.

Leases with an initial term of 12 months or less are not recognized on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term.

Our operating lease expense for the three months ended June 30, 2024 was $ million, compared with $ million for the three months ended June 30, 2023. Charges related to our operating leases that are variable and, therefore, not included in the measurement of the lease liabilities, were $ million for the three months ended June 30, 2024, compared with $ million for the three months ended June 30, 2023. We made lease payments of $ million during the three months ended June 30, 2024, compared with $ million during the three months ended June 30, 2023.

Our operating lease expense for the six months ended June 30, 2024 was $ million, compared with $ million for the six months ended June 30, 2023. Charges related to our operating leases that are variable and, therefore, not included in the measurement of the lease liabilities were $ million for the six months ended June 30, 2024, compared with $ million for the six months ended June 30, 2023. We made lease payments of $ million during the six months ended June 30, 2024, compared with $ million during the six months ended June 30, 2023.

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2025 2026 2027 2028 Thereafter Total minimum lease commitments Adjustment for discount to present value

Present value of lease liabilities

Weighted-average discount rate %

11.

$ $ $ Sales and marketing General and administrative Total stock-based compensation expense$ $ $ $

As of June 30, 2024, the total unrecognized stock-based compensation cost related to outstanding RSUs, performance share awards, and MSUs expected to vest was $ million, which we expect to recognize over a weighted average period of months.

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12.

$ $ $ Equity in investments of unconsolidated entities()()()()Income before income taxes$ $ $ $ Income tax expense (benefit)$ $()$ $ Effective tax rate %()% % %

Our effective tax rate in the second quarter and first six months of 2024 was % and %, respectively. Our effective tax rate in prior periods was not meaningful due to the low level of pretax income in the prior-year periods.

In October 2021, the Organization for Economic Co-operation and Development (OECD) agreed to a two-pillar approach to global taxation focusing on global profit allocation (Pillar One) and a global minimum tax rate (Pillar Two). In December 2022, the European Union member states agreed to implement the OECD’s global corporate minimum tax rate of 15% under Pillar Two which became effective in January 2024. Other countries are also considering changes to their tax laws to adopt certain parts of the OECD’s proposals. This legislation represents a significant change in the international tax regime and could result in increases to our effective tax rate as a result of the imposition of minimum taxes. Pillar Two did not have a material impact to our consolidated financial statements as of June 30, 2024. We are continuing to monitor developments and administrative guidance in addition to evaluating the potential impact of Pillar Two on our consolidated financial statements for future periods.

Unrecognized Tax Benefits

$ Gross unrecognized tax benefits that would affect income tax expense$ $ Decrease in income tax expense upon recognition of gross unrecognized tax benefits$ $

$ Non-current liability Total liability for unrecognized tax benefits$ $

Because we conduct business globally, we file income tax returns in U.S. federal, state, local, and foreign jurisdictions. We are currently under audit by federal, state, and local tax authorities in the U.S. as well as tax authorities in certain non-U.S. jurisdictions. It is likely that the examination phase of some of these federal, state, local, and non-U.S. audits will conclude in 2024. It is not possible to estimate the effect of current audits on previously recorded unrecognized tax benefits.

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% of our cash, cash equivalents, and investments balance as of June 30, 2024 was held by our operations outside of the United States. We generally consider our U.S. directly-owned foreign subsidiary earnings to be permanently reinvested. We believe that our cash balances and investments in the United States, along with cash generated from our U.S. operations, will be sufficient to meet our U.S. operating and cash needs for the foreseeable future, without requiring us to repatriate earnings from these foreign subsidiaries.

Certain of our non-U.S. operations have incurred net operating losses (NOLs), which may become deductible to the extent these operations become profitable. For each of our operations, we evaluate whether it is more likely than not that the tax benefits related to NOLs will be realized. As part of this evaluation, we consider evidence such as tax planning strategies, historical operating results, forecasted taxable income, and recent financial performance. In the year that certain non-U.S. operations record a loss, we do not recognize a corresponding tax benefit, which increases our effective tax rate. Upon determining that it is more likely than not that the NOLs will be realized, we reduce the tax valuation allowances related to these NOLs, which results in a reduction to our income tax expense and our effective tax rate in that period.

13.

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14.

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. 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 three and six months ended June 30, 2024, we did not repurchase any shares under the share repurchase program. As of June 30, 2024, we have $ million available for future repurchases under the current share repurchase program.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion included in this section, as well as other under sections of this Quarterly Report on Form 10-Q (this Quarterly Report), contains forward-looking statements as that term is used in the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations about future events or future financial performance. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, and often contain words such as “consider,” “estimate,” “forecast,” “future,” “goal,” “designed to,” “maintain,” “may,” “objective,” “ongoing,” “could,” “expect,” “intend,” “plan,” “possible,” “potential,” “anticipate,” “believe,” “predict,” “continue,” “strategy,” “strive,” “will,” “would,” "determine," "evaluate," or the negative thereof, and similar expressions. These statements involve known and unknown risks and uncertainties that may cause the events we discuss not to occur or to differ significantly from what we expect. For us, these risks and uncertainties include, among others:

•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, ESG, and index businesses;

•failing to innovate our product and service offerings or anticipate our clients’ changing needs;

•the impact of artificial intelligence 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 close, or achieve the anticipated economic or other benefits of, a strategic transaction on a timely basis or at all;

•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.

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A more complete description of these risks and uncertainties can be found in our other filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2023 (our Annual Report) as supplemented by our recent Quarterly Reports on Form 10-Q. If any of these risks and uncertainties materialize, our actual future results and other future events may vary significantly from what we expect. We do not undertake to update our forward-looking statements as a result of new information, future events, or otherwise, except as may be required by law. You are, however, advised to review any further disclosures we make on related subjects, and about new or additional risks, uncertainties, and assumptions in our filings with the SEC on Forms 10-K, 10-Q, and 8-K.

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 same period in the previous year unless otherwise stated.

Understanding our company

Our Business

Our mission is to empower investor success. The investing ecosystem is complex, and navigating it with confidence requires a trusted, independent voice. We deliver our perspective to institutions, advisors, and individuals with a single-minded purpose: to empower every investor with the conviction that they can make better-informed decisions and realize success on their own terms.

Our strategy is to deliver insights and experiences that are essential to the investor workflow. Proprietary data sets, meaningful analytics, independent research, and effective investment strategies are at the core of the powerful digital solutions that investors across our client segments rely on. We have a keen focus on innovation across data, research, product, and delivery so that we can effectively cater to the evolving needs and expectations of investors globally.

The company has seven operating segments which are presented as the following five reportable segments: Morningstar Data and Analytics, PitchBook, Morningstar Wealth, Morningstar Credit, and Morningstar Retirement. The operating segments of Morningstar Sustainalytics and Morningstar Indexes do not individually meet the quantitative segment reporting thresholds and have been combined and presented as part of Corporate and All Other, which is not a reportable segment. Prior period segment information is presented on a comparable basis to the basis on which current period segment information is presented and reviewed by the chief operating decision maker (CODM). For additional information about our segment reporting, refer to Note 7 of the Notes to our Unaudited Financial Statements.

In addition to reviewing revenue by our reportable segments, we review revenue by type. We leverage our proprietary data and research to sell products and services across our portfolio that generate revenue in three primary ways:

License-based: The majority of our research, data, and proprietary platforms are accessed via subscription services that grant access on either a per user or enterprise-basis for a specified period of time.

Asset-based: We charge basis points and other fees for assets under management (AUM) or advisement (AUMA).

Transaction-based: Revenue is transactional, or one-time, in nature, compared with the recurring revenue streams represented by our license and asset-based products.

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Three and Six Months Ended June 30, 2024 vs. Three and Six Months Ended June 30, 2023

Consolidated Results


	Three months ended June 30,									Six months ended June 30,
Key Metrics (in millions)	2024			2023			Change			2024			2023			Change
Consolidated revenue	$	571.9		$	504.7		13.3	%		$	1,114.7		$	984.4		13.2	%
Operating income	108.5			41.7			160.2	%		201.1			66.2			203.8	%
Operating margin	19.0		%	8.3		%	10.7		pp	18.0		%	6.7		%	11.3		pp

Cash provided by operating activities	$	152.7		$	24.5		NMF			$	246.3		$	47.9		414.2	%
Capital expenditures	(31.9)			(30.3)			5.3	%		(66.0)			(59.8)			10.4	%
Free cash flow	$	120.8		$	(5.8)		NMF			$	180.3		$	(11.9)		NMF

Cash used for investing activities	$	(32.8)		$	(27.1)		21.0	%		$	(59.5)		$	(27.8)		114.0	%
Cash used for financing activities	$	(81.6)		$	(6.1)		NMF			$	(125.1)		$	(54.9)		127.9	%

___________________________________________________________________________________________

pp — percentage points

NMF — not meaningful

Supplemental Information

To supplement our consolidated financial statements presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), we use the following non-GAAP measures:

•consolidated revenue, excluding acquisitions, divestitures, adoption of new accounting standards or revisions to accounting practices (accounting changes), and the effect of foreign currency translations (organic revenue);

•consolidated operating income, excluding intangible amortization expense, all merger and acquisition related expenses (related to merger, acquisition, and divestiture activity including severance and earn-outs (M&A-related expenses)), and expenses related to the significant reduction and shift of the company's operations in China (adjusted operating income);

•consolidated operating margin, excluding intangible amortization expense, all M&A-related expenses, and expenses related to the significant reduction and shift of the company's operations in China (adjusted operating margin); and

•cash provided by or used for operating activities less capital expenditures (free cash flow).

These non-GAAP measures may not be comparable to similarly titled measures reported by other companies and should not be considered an alternative to any measure of performance as promulgated under GAAP.

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 present adjusted operating income and adjusted operating margin because we believe they better reflect period-over-period comparisons and improve overall understanding of the underlying performance of the business absent the impact of M&A and the shift of the company's operations in China.

We present free cash flow solely as supplemental disclosure to help investors better understand how much cash is available after capital expenditures. Our management team uses free cash flow as a metric to evaluate the health of our business.

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Consolidated Revenue


Revenue by type (1)	Three months ended June 30,						Six months ended June 30,
(in millions)	2024		2023		Change		2024		2023		Change
Morningstar Data and Analytics
License-based	$	195.7	$	184.6	6.0	%	$	392.4	$	364.4	7.7	%
Asset-based	—		—		—	%	—		—		—	%
Transaction-based	1.2		1.4		(14.3)	%	1.2		1.4		(14.3)	%
Morningstar Data and Analytics total	$	196.9	$	186.0	5.9	%	$	393.6	$	365.8	7.6	%

PitchBook
License-based	$	150.1	$	136.8	9.7	%	$	295.7	$	267.9	10.4	%
Asset-based	—		—		—	%	—		—		—	%
Transaction-based	1.6		—		NMF		3.6		—		NMF
PitchBook total	$	151.7	$	136.8	10.9	%	$	299.3	$	267.9	11.7	%

Morningstar Wealth
License-based	$	19.9	$	20.0	(0.5)	%	$	40.4	$	40.4	—	%
Asset-based	35.8		29.4		21.8	%	69.4		59.0		17.6	%
Transaction-based	6.9		6.4		7.8	%	11.8		11.3		4.4	%
Morningstar Wealth total	$	62.6	$	55.8	12.2	%	$	121.6	$	110.7	9.8	%

Morningstar Credit
License-based	$	3.7	$	2.9	27.6	%	$	7.9	$	5.7	38.6	%
Asset-based	—		—		—	%	—		—		—	%
Transaction-based	73.9		51.3		44.1	%	130.0		95.3		36.4	%
Morningstar Credit total	$	77.6	$	54.2	43.2	%	$	137.9	$	101.0	36.5	%

Morningstar Retirement
License-based	$	0.5	$	0.5	—	%	$	1.0	$	0.9	11.1	%
Asset-based	32.8		26.7		22.8	%	60.7		51.5		17.9	%
Transaction-based	—		0.2		NMF		—		0.2		NMF
Morningstar Retirement total	$	33.3	$	27.4	21.5	%	$	61.7	$	52.6	17.3	%

Corporate and All Other (2)
License-based	$	31.8	$	31.2	1.9	%	$	64.5	$	60.7	6.3	%
Asset-based	16.1		11.2		43.8	%	31.6		22.1		43.0	%
Transaction-based	1.9		2.1		(9.5)	%	4.5		3.6		25.0	%
Corporate and All Other total	$	49.8	$	44.5	11.9	%	$	100.6	$	86.4	16.4	%

License-based	$	401.7	$	376.0	6.8	%	$	801.9	$	740.0	8.4	%
Asset-based	84.7		67.3		25.9	%	161.7		132.6		21.9	%
Transaction-based	85.5		61.4		39.3	%	151.1		111.8		35.2	%
Consolidated revenue	$	571.9	$	504.7	13.3	%	$	1,114.7	$	984.4	13.2	%

___________________________________________________________________________________________

(1) Starting with the quarter ended March 31, 2024, revenue from PitchBook media sales product was reclassified from license-based to transaction-based. Prior periods have not been restated to reflect the updated classifications.

(2) Corporate and All Other provides a reconciliation between revenue from our reportable segments and consolidated revenue. Corporate and All Other includes Morningstar Sustainalytics and Morningstar Indexes as sources of revenues.

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In the second quarter of 2024, consolidated revenue increased 13.3% to $571.9 million. Foreign currency translations had a negative impact in the quarter, decreasing revenue by $1.4 million.

License-based revenue grew $25.7 million, or 6.8%, during the second quarter of 2024. On an organic basis, license-based revenue increased 7.5%. Reported and organic revenue growth was primarily driven by strong demand for PitchBook and Morningstar Data and Analytics products.

Asset-based revenue increased $17.4 million, or 25.9% on a reported and organic basis, in the second quarter of 2024. Reported and organic revenue growth was primarily driven by increases in Morningstar Wealth, Morningstar Retirement, and Morningstar Indexes.

Transaction-based revenue increased $24.1 million, or 39.3%, in the second quarter of 2024. On an organic basis, transaction-based revenue increased 37.2%, primarily driven by Morningstar Credit revenue.

In the first six months of 2024, consolidated revenue increased 13.2% to $1,114.7 million. Foreign currency translations had a negative impact in the first six months of 2024, decreasing revenue by $0.2 million.

License-based revenue grew $61.9 million, or 8.4%, during the first six months of 2024. On an organic basis, license-based revenue increased 8.7%. Reported and organic revenue growth was primarily driven by strong demand for PitchBook and Morningstar Data and Analytics products.

Asset-based revenue increased $29.1 million, or 21.9%, in the first six months of 2024. Organic revenue increased 22.1%, due to increases in Morningstar Wealth, Morningstar Indexes, and Morningstar Retirement.

Transaction-based revenue increased $39.3 million, or 35.2%, in the first six months of 2024. On an organic basis, transaction-based revenue increased 32.7% primarily driven by Morningstar Credit revenue.

Organic Revenue

Organic revenue (revenue excluding acquisitions, divestitures, the adoption of new accounting standards or revisions to accounting practices (accounting changes), and the effect of foreign currency translations) is considered a non-GAAP financial measure.

We exclude revenue from acquired businesses from our organic revenue growth calculation for a period of 12 months after we complete the acquisition. For divestitures, we exclude revenue in the prior period for which there is no comparable revenue in the current period.

The table below reconciles reported consolidated revenue with organic revenue:


	Three months ended June 30,						Six months ended June 30,
(in millions)	2024		2023		Change		2024		2023		Change
Consolidated revenue	$	571.9	$	504.7	13.3	%	$	1,114.7	$	984.4	13.2	%
Less: acquisitions	—		—		—	%	—		—		—	%

Less: accounting changes	—		—		—	%	—		—		—	%
Effect of foreign currency translations	1.4		—		NMF		0.2		—		NMF
Organic revenue	$	573.3	$	504.7	13.6	%	$	1,114.9	$	984.4	13.3	%

Organic revenue increased 13.6% in the second quarter, driven by organic growth in Morningstar Credit, PitchBook, and Morningstar Data and Analytics. Organic revenue increased 13.3% during the first six months of 2024, driven by growth in Morningstar Credit, PitchBook, and Morningstar Data and Analytics. Foreign currency translations had a $1.4 million impact on revenue during the second quarter of 2024 and $0.2 million during the first six months of 2024.

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Consolidated Revenue by Geographical Area


	Three months ended June 30,						Six months ended June 30,
(in millions)	2024		2023		Change		2024		2023		Change
United States	$	410.3	$	365.5	12.3	%	$	801.2	$	712.8	12.4	%

Asia	13.0		11.6		12.1	%	25.7		23.7		8.4	%
Australia	15.7		14.6		7.5	%	30.7		29.0		5.9	%
Canada	37.8		30.1		25.6	%	70.4		57.4		22.6	%
Continental Europe	50.1		45.6		9.9	%	99.8		88.7		12.5	%
United Kingdom	42.0		34.7		21.0	%	80.9		67.8		19.3	%
Other	3.0		2.6		15.4	%	6.0		5.0		20.0	%
Total International	161.6		139.2		16.1	%	313.5		271.6		15.4	%

Consolidated revenue	$	571.9	$	504.7	13.3	%	$	1,114.7	$	984.4	13.2	%

International revenue comprised 28% of our consolidated revenue for the second quarter and first six months of 2024 and 2023. 57% and 58% of international revenue was generated in Continental Europe and the United Kingdom during the second quarter and first six months of 2024 and 2023, respectively.

Consolidated Operating Expense


	Three months ended June 30,									Six months ended June 30,
(in millions)	2024			2023			Change			2024			2023			Change
Cost of revenue	$	222.7		$	216.4		2.9	%		$	440.8		$	435.2		1.3	%
% of consolidated revenue	38.9		%	42.9		%	(4.0)		pp	39.5		%	44.2		%	(4.7)		pp
Sales and marketing	111.3			109.5			1.6	%		215.9			217.1			(0.6)	%
% of consolidated revenue	19.5		%	21.7		%	(2.2)		pp	19.5		%	22.1		%	(2.6)		pp
General and administrative	80.3			90.1			(10.9)	%		160.6			174.1			(7.8)	%
% of consolidated revenue	14.0		%	17.9		%	(3.9)		pp	14.4		%	17.7		%	(3.3)		pp
Depreciation and amortization	49.1			47.0			4.5	%		96.3			91.8			4.9	%
% of consolidated revenue	8.6		%	9.3		%	(0.7)		pp	8.6		%	9.3		%	(0.7)		pp


Total operating expense	$	463.4		$	463.0		0.1	%		$	913.6		$	918.2		(0.5)	%
% of consolidated revenue	81.0		%	91.7		%	(10.7)		pp	82.0		%	93.3		%	(11.3)		pp

Consolidated operating expense was relatively flat in the second quarter of 2024 and decreased $4.6 million, or 0.5%, during the six months ended June 30, 2024. Excluding the impact of M&A-related expenses, amortization, and costs related to the transition of the company's China activities in the prior-year periods, operating expense increased 1.4% in the second quarter and 1.2% during the first six months of 2024. Foreign currency translations also had a favorable $1.7 million and $0.4 million impact on operating expense during the second quarter of 2024 and the first six months of 2024, respectively.

Increases in compensation expense, depreciation expense, and certain infrastructure-related costs were mostly offset by lower facilities-related expenses and professional fees during the second quarter of 2024.

Compensation expense (which primarily consists of salaries, bonuses, and other company-sponsored benefits) increased $3.8 million in the second quarter of 2024. These higher costs primarily reflect an increase in bonus expense.

Depreciation expense increased $2.6 million in the second quarter of 2024, driven mainly by higher levels of capitalized software development over the past several years.

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Higher SaaS-based software subscriptions of $1.8 million were also an operating expense driver during the second quarter of 2024 due to the company's investment in and renewal of various SaaS-based platforms across the business.

Professional fees declined $4.0 million during the second quarter of 2024 due to lower expenses for third-party resources supporting M&A integration-related activity. The company’s strategic focus on building internal capabilities and optimizing resource allocation also resulted in a reduction of professional fees.

Facilities-related expenses decreased $4.5 million during the second quarter of 2024 partially due to reduction of office space in certain geographies.

Declines in professional fees, facilities-related expenses, and commission expense were the biggest contributors to the decrease in consolidated operating expense during the first six months of 2024.

Professional fees and facilities-related expenses decreased $8.5 million and $6.9 million, respectively, in the first six months of 2024, due to the factors noted above. Commission expense also decreased $2.0 million during the first six months of 2024, primarily due to sales performance against targets in certain areas relative to the prior year.

These declines were partially offset by higher compensation expense of $7.5 million in the first six months of 2024. These higher costs primarily reflect an increase in bonus expense and company-sponsored benefits.

Higher depreciation expense and SaaS-based software subscriptions of $4.6 million and $4.2 million, respectively, also helped offset decreases in other expenses during the first six months of 2024, due to the factors noted above.

Cost of Revenue

Cost of revenue is our largest category of operating expense, representing about half of our total operating expense. Our business relies heavily on human capital, and cost of revenue includes the compensation expense for employees who develop our products and deliver our services. We include compensation expense for approximately 76% of our employees in this category.

Cost of revenue increased $6.3 million in the second quarter of 2024 and $5.6 million in the first six months of 2024. Higher compensation expense of $4.3 million and $4.2 million in the second quarter and first six months of 2024, respectively, were the primarily drivers of the increase due to the factors noted above.

Sales and Marketing

Sales and marketing expense increased $1.8 million in the second quarter of 2024. Advertising and marketing costs increased $1.5 million during the second quarter of 2024 due to higher marketing campaign and conference expense.

Sales and marketing expense decreased $1.2 million in the first six months of 2024. Compensation expense decreased $2.9 million primarily due to lower bonus expense. Sales commission expense also declined by $1.0 million, primarily due to sales performance against targets in certain areas relative to the prior year. These declines were offset by increases in advertising and marketing costs and professional fees during the first six months of 2024 due to the factors noted above.

General and Administrative

General and administrative expense decreased $9.8 million in the second quarter of 2024. A decline in professional fees of $5.0 million was the largest contributor to the decline during the quarter due to the factors noted above. Facilities-related expenses also declined $4.5 million during the second quarter of 2024 due to the factors noted above.

General and administrative expense decreased $13.5 million in the first six months of 2024. A decline in professional fees of $9.2 million was the largest contributor to the decline due to the factors noted above. Facilities-related expenses also declined $6.7 million during the first six months of 2024 due to the factors noted above. These decreases were partially offset by higher compensation expense primarily due to an increase in bonus expense and company-sponsored benefits.

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Depreciation and Amortization

Depreciation expense increased $2.6 million in the second quarter of 2024 and $4.6 million in the first six months of 2024, driven mainly by higher levels of capitalized software development over the past several years.

Intangible amortization expense was relatively flat during the second quarter of 2024 and the first six months of 2024.

Consolidated Operating Income and Operating Margin


	Three months ended June 30,									Six months ended June 30,
(in millions)	2024			2023			Change			2024			2023			Change
Operating income	$	108.5		$	41.7		160.2	%		$	201.1		$	66.2		203.8	%
% of revenue	19.0		%	8.3		%	10.7		pp	18.0		%	6.7		%	11.3		pp

Consolidated operating income increased $66.8 million in the second quarter of 2024, reflecting an increase in revenue of $67.2 million and an increase in operating expense of $0.4 million. Operating margin was 19.0%, an increase of 10.7 percentage points compared with the second quarter of 2023.

Consolidated operating income increased $134.9 million in the first six months of 2024, reflecting an increase in revenue of $130.3 million and a decrease in operating expense of $4.6 million. Operating margin was 18.0%, an increase of 11.3 percentage points compared with the first six months of 2023.

Non-GAAP Financial Measures

We reported adjusted operating income of $131.0 million and $241.8 million in the second quarter of 2024 and first six months of 2024, respectively, which excludes intangible amortization expense, M&A-related expenses, and expenses related to the significant reduction and shift of the company's operations in China. Adjusted operating income is a non-GAAP financial measure; the table below shows a reconciliation to the most directly comparable GAAP financial measure.


	Three months ended June 30,						Six months ended June 30,
(in millions)	2024		2023		Change		2024		2023		Change
Operating income	$	108.5	$	41.7	160.2	%	$	201.1	$	66.2	203.8	%
Add: Intangible amortization expense (1)	17.5		17.7		(1.1)	%	35.2		35.2		—	%
Add: M&A-related expenses (2)	5.0		3.0		66.7	%	5.5		7.2		(23.6)	%

Add: Severance and personnel expenses (3)	—		2.9		NMF		—		4.1		NMF
Add: Transformation costs (3)	—		2.2		NMF		—		6.4		NMF
Add: Asset impairment costs (3)	—		2.2		NMF		—		2.4		NMF
Adjusted operating income	$	131.0	$	69.7	87.9	%	$	241.8	$	121.5	99.0	%

Morningstar Data and Analytics	$	87.3	$	80.1	9.0	%	$	178.5	$	161.0	10.9	%
PitchBook	47.3		37.2		27.2	%	87.3		67.6		29.1	%
Morningstar Wealth	(2.2)		(12.3)		(82.1)	%	(7.8)		(26.9)		(71.0)	%
Morningstar Credit	27.9		5.0		458.0	%	40.2		1.0		NMF
Morningstar Retirement	17.3		13.4		29.1	%	31.5		24.6		28.0	%
Less: Corporate and All Other (4)	(46.6)		(53.7)		(13.2)	%	(87.9)		(105.8)		(16.9)	%
Adjusted operating income	$	131.0	$	69.7	87.9	%	$	241.8	$	121.5	99.0	%

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We reported adjusted operating margin of 22.9% in the second quarter of 2024 and 21.7% first six months of 2024, which excludes intangible amortization expense, M&A-related expenses, and expenses related to the significant reduction and shift of the company's operations in China. Adjusted operating margin is a non-GAAP financial measure; the table below shows a reconciliation to the most directly comparable GAAP financial measure.


	Three months ended June 30,					Six months ended June 30,
	2024		2023		Change	2024		2023		Change
Operating margin	19.0	%	8.3	%	10.7 pp	18.0	%	6.7	%	11.3 pp
Add: Intangible amortization expense (1)	3.0	%	3.5	%	(0.5) pp	3.2	%	3.6	%	(0.4) pp
Add: M&A-related expenses (2)	0.9	%	0.6	%	0.3 pp	0.5	%	0.7	%	(0.2) pp

Add: Severance and personnel expenses (3)	—	%	0.6	%	(0.6) pp	—	%	0.4	%	(0.4) pp
Add: Transformation costs (3)	—	%	0.4	%	(0.4) pp	—	%	0.7	%	(0.7) pp
Add: Asset impairment costs (3)	—	%	0.4	%	(0.4) pp	—	%	0.2	%	(0.2) pp
Adjusted operating margin	22.9	%	13.8	%	9.1 pp	21.7	%	12.3	%	9.4 pp

____________________________________________________________________________________________

(1) Excludes finance lease amortization expense of $0.1 million and $0.4 million during the three months ended June 30, 2024 and 2023, respectively, and $0.4 million and $0.5 million during the six months ended June 30, 2024 and 2023, respectively.

(2) Reflects non-recurring expenses related to merger, acquisition, and divestiture activity including pre-deal due diligence, transaction costs, severance, and post-close integration costs.

(3) Reflects costs associated with the significant reduction of the company's operations in Shenzhen, China and the shift of work related to its global business functions to other Morningstar locations.

Severance and personnel expenses include severance charges, incentive payments related to early signing of severance agreements, transition bonuses, and stock-based compensation related to the accelerated vesting of restricted stock unit and market stock unit awards. In addition, the reversal of accrued sabbatical liabilities is included in this category.

(4) Corporate and All Other includes unallocated corporate expenses as well as adjusted operating income (loss) from Morningstar Sustainalytics and Morningstar Indexes. During the second quarter of 2024 and 2023, unallocated corporate expenses were $46.1 million and $38.9 million, respectively. During first six months of 2024 and 2023, unallocated corporate expenses were $87.0 million and $75.0 million, respectively. Unallocated corporate expenses include finance, human resources, legal, marketing, and other management-related costs that are not considered when segment performance is evaluated.

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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.

Morningstar Data and Analytics

The following table presents the results for Morningstar Data and Analytics:


	Three months ended June 30,								Six months ended June 30,
(in millions)	2024			2023			Change		2024			2023			Change




Total revenue	$	196.9		$	186.0		5.9	%	$	393.6		$	365.8		7.6	%

Adjusted operating income	$	87.3		$	80.1		9.0	%	$	178.5		$	161.0		10.9	%
Adjusted operating margin	44.3		%	43.1		%	1.2 pp		45.4		%	44.0		%	1.4 pp

Morningstar Data and Analytics total revenue increased $10.9 million, or 5.9%, for the three months ended June 30, 2024. Revenue grew 6.2% on an organic basis, primarily driven by growth in Morningstar Data and Morningstar Direct.

Morningstar Data contributed $3.1 million to Morningstar Data and Analytics revenue growth, with revenue increasing 4.5% or 4.7% on an organic basis. Managed investment (mutual fund) data, especially in Europe, continued to be a key driver of higher revenue, partially offset by lower contributions to growth from Morningstar Essentials and equity and exchange market data.

Morningstar Direct contributed $5.5 million to Morningstar Data and Analytics revenue growth, with revenue increasing 11.0%, or 11.6%, on an organic basis, reflecting growth across all geographies. Direct licenses increased 0.7%.

Morningstar Data and Analytics adjusted operating income increased $7.2 million, or 9.0%, and adjusted operating margin increased 1.2 percentage points for the three months ended June 30, 2024.

Morningstar Data and Analytics total revenue increased $27.8 million, or 7.6%, for the six months ended June 30, 2024. Revenue grew 7.5% on an organic basis, primarily driven by growth in Morningstar Data and Morningstar Direct.

Morningstar Data and Analytics adjusted operating income increased $17.5 million, or 10.9%, and adjusted operating margin increased 1.4 percentage points for the six months ended June 30, 2024.

Morningstar Data and Analytics depreciation expense was $9.5 million and $7.8 million for the three months ended June 30, 2024 and 2023, respectively, and $17.7 million and $15.2 million for the six months ended June 30, 2024 and 2023, respectively.

PitchBook

The following table presents the results for PitchBook:


	Three months ended June 30,								Six months ended June 30,
(in millions)	2024			2023			Change		2024			2023			Change




Total revenue	$	151.7		$	136.8		10.9	%	$	299.3		$	267.9		11.7	%

Adjusted operating income	$	47.3		$	37.2		27.2	%	$	87.3		$	67.6		29.1	%
Adjusted operating margin	31.2		%	27.2		%	4.0 pp		29.2		%	25.2		%	4.0 pp

PitchBook total revenue increased $14.9 million, or 10.9% on a reported and organic basis, for the three months ended June 30, 2024.

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Revenue for the PitchBook platform, direct data, and Leveraged Commentary & Data (LCD) combined contributed $14.8 million to PitchBook revenue growth, with revenue increasing 11.0% on a reported and organic basis. Growth was primarily driven by the PitchBook platform with licensed users growing 16.6%, including the impact of legacy LCD clients who have moved to PitchBook licenses. PitchBook platform growth drivers were consistent with prior recent quarters and reflected strength in PitchBook's core investor and advisor client segments, including venture capital, private equity, and investment banks. This was partially offset by continued softness in the corporate client segment, especially with smaller firms with more limited use cases.

PitchBook adjusted operating income increased $10.1 million, or 27.2%, and adjusted operating margin increased 4.0 percentage points for the three months ended June 30, 2024. The increase in margin was partially driven by the forfeiture of stock in the now-terminated PitchBook management bonus plan, which was a compensation vehicle designed primarily to incentivize PitchBook's former CEO.

PitchBook total revenue increased $31.4 million, or 11.7% on a reported and organic basis, for the six months ended June 30, 2024. Revenue growth was primarily driven by the PitchBook platform.

PitchBook adjusted operating income increased $19.7 million, or 29.1%, and adjusted operating margin increased 4.0 percentage points for the six months ended June 30, 2024.

PitchBook depreciation expense was $8.3 million and $6.4 million for the three months ended June 30, 2024 and 2023, respectively, and $15.7 million and $12.7 million for the six months ended June 30, 2024 and 2023, respectively.

Morningstar Wealth

The following table presents the results for Morningstar Wealth:


	Three months ended June 30,								Six months ended June 30,
(in millions)	2024			2023			Change		2024			2023			Change




Total revenue	$	62.6		$	55.8		12.2	%	$	121.6		$	110.7		9.8	%

Adjusted operating loss	$	(2.2)		$	(12.3)		(82.1)	%	$	(7.8)		$	(26.9)		(71.0)	%
Adjusted operating margin	(3.5)		%	(22.0)		%	18.5 pp		(6.4)		%	(24.3)		%	17.9 pp

Morningstar Wealth asset-based revenue represented 57.1% of total segment revenue for the six months ended June 30, 2024. Revenue is based on quarter-end, prior quarter-end, or average asset levels during each quarter, which are often reported on a one-quarter lag for certain Investment Management products including Morningstar Managed Portfolios. The timing of this client asset reporting and the structure of our contracts often results in a lag between market movements and the impact on revenue. The following table summarizes our approximate Morningstar Wealth AUMA:


	As of June 30,
(in billions)	2024		2023		Change







Morningstar Managed Portfolios	$	41.8	$	35.1	19.1	%
Institutional Asset Management	7.3		10.2		(28.4)	%
Asset Allocation Services	10.0		7.8		28.2	%
Investment Management (total)	$	59.1	$	53.1	11.3	%

Morningstar Wealth total revenue increased $6.8 million, or 12.2%, for the three months ended June 30, 2024. Revenue grew 12.4% on an organic basis, primarily driven by growth in Investment Management.

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Investment Management contributed $6.4 million to consolidated revenue growth, with revenue increasing 21.8% on a reported or 22.0% organic basis. Growth was primarily supported by higher revenue for strategist model portfolios offered on third-party platforms and revenue growth for the International Wealth Platform. Reported AUMA increased 11.3% to $59.1 billion compared with the prior-year period, supported by strong market performance which drove higher asset values. Positive net flows to Morningstar Managed Portfolios over the trailing 12 months primarily reflected strong net inflows outside the U.S.

Morningstar Wealth adjusted operating loss decreased $10.1 million, or 82.1%, and adjusted operating margin increased 18.5 percentage points for the three months ended June 30, 2024. In conjunction with the recent announcement of the expected sale of assets from the Morningstar Wealth Turnkey Asset Management Platform to AssetMark, the company recorded $3.3 million in severance expense in the quarter. These costs are excluded from Morningstar Wealth adjusted operating income and consolidated adjusted operating income.

Morningstar Wealth total revenue increased $10.9 million, or 9.8%, for the six months ended June 30, 2024. Revenue grew 10.1% on an organic basis, primarily driven by growth in Investment Management.

Morningstar Wealth adjusted operating loss decreased $19.1 million, or 71.0%, and adjusted operating margin increased 17.9 percentage points for the six months ended June 30, 2024.

Morningstar Wealth depreciation expense was $5.0 million and $3.9 million for the three months ended June 30, 2024 and 2023, respectively, and $9.7 million and $7.7 million for the six months ended June 30, 2024 and 2023, respectively.

Morningstar Credit

The following table presents the results for Morningstar Credit:


	Three months ended June 30,								Six months ended June 30,
(in millions)	2024			2023			Change		2024			2023			Change




Total revenue	$	77.6		$	54.2		43.2	%	$	137.9		$	101.0		36.5	%

Adjusted operating income	$	27.9		$	5.0		458.0	%	$	40.2		$	1.0		NMF
Adjusted operating margin	36.0		%	9.2		%	26.8 pp		29.2		%	1.0		%	28.2 pp

Morningstar Credit total revenue increased $23.4 million, or 43.2%, for the three months ended June 30, 2024. Revenue grew 44.2% on an organic basis, as ratings-related revenue increased significantly across asset classes and geographies, compared to a relatively soft prior-year period, with particular strength in commercial mortgage-backed securities, asset-backed securities, and corporate ratings. Increases in residential mortgage-backed securities and financial institution ratings also contributed to growth.

Morningstar Credit adjusted operating income increased $22.9 million and adjusted operating margin increased 26.8 percentage points for the three months ended June 30, 2024.

Morningstar Credit total revenue increased $36.9 million, or 36.5%, for the six months ended June 30, 2024. Revenue grew 36.6% on an organic basis. Year-to-date growth, similar to the three months ended June 30, 2024, was supported by ratings-related revenue increasing across asset classes and geographies.

Morningstar Credit adjusted operating income increased $39.2 million and adjusted operating margin increased 28.2 percentage points for the six months ended June 30, 2024.

Morningstar Credit depreciation expense was $1.7 million and $3.0 million for the three months ended June 30, 2024 and 2023, respectively, and $3.6 million and $5.2 million for the six months ended June 30, 2024 and 2023, respectively.

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Morningstar Retirement

The following table presents the results for Morningstar Retirement:


	Three months ended June 30,								Six months ended June 30,
(in millions)	2024			2023			Change		2024			2023			Change




Total revenue	$	33.3		$	27.4		21.5	%	$	61.7		$	52.6		17.3	%

Adjusted operating income	$	17.3		$	13.4		29.1	%	$	31.5		$	24.6		28.0	%
Adjusted operating margin	52.0		%	48.9		%	3.1 pp		51.1		%	46.8		%	4.3 pp

Morningstar Retirement asset-based revenue represented 98.4% of total segment revenue for the six months ended June 30, 2024 and 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. The following table summarizes our approximate Morningstar Retirement AUMA:


	As of June 30,
(in billions)	2024		2023		Change


Managed Accounts	$	149.9	$	118.1	26.9	%
Fiduciary Services	62.6		55.4		13.0	%
Custom Models/CIT	44.7		36.9		21.1	%
Morningstar Retirement (total)	$	257.2	$	210.4	22.2	%

Morningstar Retirement total revenue increased $5.9 million, or 21.5% on a reported and organic basis for the three months ended June 30, 2024. AUMA, calculated using the most recently available average quarterly or monthly data, increased 22.2% to $257.2 billion compared with the prior-year period, reflecting market gains and significant positive net flows, supported by rapid growth in Advisor Managed Accounts.

Morningstar Retirement adjusted operating income increased $3.9 million, or 29.1%, and adjusted operating margin increased 3.1 percentage points for the three months ended June 30, 2024.

Morningstar Retirement total revenue increased $9.1 million, or 17.3% on a reported and organic basis for the six months ended June 30, 2024. Year-to-date growth, similar to the three months ended June 30, 2024, was supported by higher AUMA, reflecting market gains and net positive flows to Managed Accounts, including Advisor Managed Accounts.

Morningstar Retirement adjusted operating income increased $6.9 million, or 28.0%, and adjusted operating margin increased 4.3 percentage points for the six months ended June 30, 2024.

Morningstar Retirement depreciation expense was $2.6 million and $2.7 million for the three months ended June 30, 2024 and 2023, respectively, and $5.4 million and $5.2 million for the six months ended June 30, 2024 and 2023, respectively.

Corporate and All Other

Corporate and All Other revenue increased $5.3 million, or 11.9% on a reported basis, and $14.2 million, or 16.4% on a reported basis for the three and six months ended June 30, 2024, respectively.

Morningstar Indexes contributed $5.6 million to Corporate and All Other revenue growth with revenue increasing 37.3%, or 37.8%, on an organic basis for the three months ended June 30, 2024. The increase in revenue was driven primarily by higher investable product revenue as market performance and net inflows over the trailing 12 months increased asset value linked to Morningstar Indexes by 22.3% to $207.6 billion. Morningstar Indexes licensed data sales also increased.

Morningstar Indexes contributed $11.0 million to Corporate and All Other revenue growth with revenue increasing 37.2%, or 37.5%, on an organic basis for the for the six months ended June 30, 2024.

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Morningstar Sustainalytics revenues were relatively flat compared to the prior period for both license- and transaction-based products for the three months ended June 30, 2024. In Europe, regulatory use cases and demand from institutional clients were areas of strength. This strength was largely offset by increased cancellations due to vendor consolidation and softness in parts of the asset management and wealth client segments. Revenue was also negatively impacted by actions taken to streamline the corporate solutions product lineup, specifically the licensed ratings product.

Morningstar Sustainalytics contributed $3.5 million to Corporate and All Other revenue growth with revenue increasing 6.2%, or 6.3%, on an organic basis for the six months ended June 30, 2024.

Non-operating expense, net, Equity in investments of unconsolidated entities, and Effective tax rate and income tax expense (benefit)

Non-Operating Expense, Net


(in millions)	2024		2023		2024		2023
Interest income	$	2.8	$	1.7	$	5.3	$	2.9
Interest expense	(13.1)		(15.8)		(27.1)		(30.3)
Realized gain on sale of investments, reclassified from other comprehensive income	0.2		0.3		2.8		0.5


Expense from equity method transaction, net	—		—		—		(11.8)

Other income (expense), net	(8.9)		3.8		(5.6)		6.3
Non-operating expense, net	$	(19.0)	$	(10.0)	$	(24.6)	$	(32.4)

Interest income reflects interest from our investment portfolio. Interest expense mainly relates to the outstanding principal balance under our Amended 2022 Credit Agreement and the $350.0 million aggregate principal amount of our 2030 Notes.

Expense from equity method transaction, net for the six months ended June 30, 2023 primarily reflects the impact of the Termination Agreement with Morningstar Japan K.K. (now known as SBI Global Asset Management Co., Ltd. (Wealth Advisors)) and the Tender Offer Agreement with SBI Global Asset Management Co., Ltd. (now known as SBI Asset Management Group Co., Ltd. (SBI)). See Note 9 of the Notes to our Unaudited Consolidated Financial Statements for additional information on the Termination Agreement and Tender Offer Agreement.

Other income (expense), net includes foreign currency exchange gains (losses) and unrealized gains (losses) on investments.

Equity in Investments of Unconsolidated Entities


	Three months ended June 30,				Six months ended June 30,
(in millions)	2024		2023		2024		2023
Equity in investments of unconsolidated entities	$	(1.2)	$	(1.8)	$	(2.7)	$	(3.1)

Equity in investments of unconsolidated entities primarily reflects income and losses from certain of our unconsolidated entities.

Effective Tax Rate and Income Tax Expense (Benefit)


	Three months ended June 30,						Six months ended June 30,
(in millions)	2024			2023			2024			2023
Income before income taxes and equity in investments of unconsolidated entities	$	89.5		$	31.7		$	176.5		$	33.8
Equity in investments of unconsolidated entities	(1.2)			(1.8)			(2.7)			(3.1)
Income before income taxes	$	88.3		$	29.9		$	173.8		$	30.7
Income tax expense (benefit)	$	19.2		$	(6.2)		$	40.5		$	2.2
Effective tax rate	21.7		%	(20.7)		%	23.3		%	7.2		%

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Our effective tax rate in the second quarter and first six months of 2024 was 21.7% and 23.3%, respectively. Our effective tax rate in prior periods was not meaningful due to the low level of pretax income in the prior-year periods.

Liquidity and Capital Resources

As of June 30, 2024, we had cash, cash equivalents, and investments of $439.2 million, compared with $389.0 million as of December 31, 2023, an increase of $50.2 million.

Cash provided by operating activities is our main source of cash. In the first six months of 2024, cash provided by operating activities was $246.3 million compared to $47.9 million in the prior-year period. Free cash flow increased to $180.3 million compared to negative $11.9 million in the prior-year period. Operating cash flow and free cash flow were driven by higher cash earnings and improvements in working capital. We made annual bonus payments of $123.9 million during the first quarter of 2024 compared with $98.3 million in the first quarter of 2023.

We believe our available cash balances and investments, along with cash generated from operations and our Amended 2022 Credit Facility, will be sufficient to meet our operating and cash needs for at least the next 12 months. 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. These investment accounts may also include exchange-traded products where Morningstar is an index provider.

Approximately 81% of our cash, cash equivalents, and investments balance as of June 30, 2024 was held by our operations outside the United States, up from 76% as of December 31, 2023. We generally consider our U.S. directly-owned foreign subsidiary earnings to be permanently reinvested.

We intend to use our cash, cash equivalents, and investments for general corporate purposes, including working capital and funding future growth.

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. The 2022 Credit Agreement also provided for the issuance of letters of credit and a swingline facility. The 2022 Credit Agreement was amended twice in September 2022 and again most recently in June 2024 (Amended 2022 Credit Agreement) to, among other items, eliminate the options for a second term loan draw and increase both the term loan and revolving credit facility to $650.0 million each, raising the total borrowing capacity to $1.3 billion (Amended 2022 Term Facility and Amended 2022 Revolving Credit Facility, respectively), and, most recently in June 2024, to update the reference rate for credit extensions in Canadian dollars. Aside from the increased borrowing capacity, the Amended 2022 Credit Agreement left the 2022 Credit Agreement terms largely unchanged. As of June 30, 2024, our total outstanding debt under the Amended 2022 Credit Agreement was $550.8 million, net of debt issuance costs, with borrowing availability of $650.0 million under the Amended 2022 Revolving Credit Facility.

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The interest rate applicable to any loan under the Amended 2022 Credit Agreement is, at the company's option, either: (i) the applicable Secured Overnight Financing Rate plus an applicable margin for such loans, which ranges between 1.00% and 1.48%, based on the company's consolidated leverage ratio or (ii) the lender's base rate plus the applicable margin for such loans, which ranges between 0.00% and 0.38%, based on the company's consolidated leverage ratio.

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. Proceeds were primarily used to repay a portion of the company's outstanding debt under the company's prior credit facility. Interest on the 2030 Notes is 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 having occurred on April 30, 2021. As of June 30, 2024, our total outstanding debt, net of issuance costs, under the 2030 Notes was $348.8 million.

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. We were in compliance with these financial covenants as of June 30, 2024, with consolidated funded indebtedness to consolidated EBITDA calculated at approximately 1.4x.

Dividend

In June 2024, our board of directors approved a regular quarterly dividend of $0.405 per share, or $17.4 million, payable on July 31, 2024 to shareholders of record as of July 12, 2024. We paid $34.6 million in dividends in the first six months of 2024.

Share Repurchase Program

In December 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 expires on December 31, 2025. For the three and six months ended June 30, 2024, we did not repurchase any shares under the share repurchase program. As of June 30, 2024 we have $498.6 million available for future repurchases under the current share repurchase program.

Other

We expect to continue making capital expenditures in 2024, primarily for computer hardware and software provided by third parties, internally developed software, and leasehold improvements for new and existing office locations.

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Consolidated Free Cash Flow

We define free cash flow as cash provided by or used for operating activities less capital expenditures, and it is considered a non-GAAP financial measure.


	Three months ended June 30,						Six months ended June 30,
(in millions)	2024		2023		Change		2024		2023		Change
Cash provided by operating activities	$	152.7	$	24.5	NMF		$	246.3	$	47.9	414.2	%
Capital expenditures	(31.9)		(30.3)		5.3	%	(66.0)		(59.8)		10.4	%
Free cash flow	$	120.8	$	(5.8)	NMF		$	180.3	$	(11.9)	NMF

We generated free cash flow of $120.8 million in the second quarter of 2024 compared with negative $5.8 million in the second quarter of 2023. The change reflects a $128.2 million increase in cash provided by operating activities and an increase in capital expenditures compared to the prior-year period. The increase in cash flow from operations was primarily driven by higher cash earnings and improvements in working capital.

During the second quarter of 2023, the company made the final cash payments of $59.9 million related to the Termination Agreement, which were reflected in operating cash flows. Excluding the impact of the payments related to the Termination Agreement and $3.2 million of severance paid related to the significant reduction and shift of the company's operations in China, free cash flow would have been positive $57.3 million for the three months ended June 30, 2023.

For the first six months of 2024, we had free cash flow of $180.3 million compared with negative $11.9 million in the first six months of 2023. The change reflects a $198.4 million increase in cash provided by operating activities and an increase in capital expenditures. The increase in cash flow from operations was primarily driven by higher cash earnings and improvements in working capital. Capital expenditures increased primarily due to investment in our product development efforts across our key product areas.

During the first quarter of 2023, the company made its final $50.0 million payment related to the acquisition of LCD, of which $4.5 million is reflected in operating cash flows and $45.5 million is reflected in financing cash flows. Excluding the impact of the LCD payment, payments related to the Termination Agreement, and $10.1 million of severance paid related to the significant reduction and shift of the company's operations in China, free cash flow would have been positive $62.6 million for the six months ended June 30, 2023.

Application of Critical Accounting Policies and Estimates

We discuss our critical accounting policies and estimates in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report. We also discuss our significant accounting policies in Note 2 of the Notes to our Audited Consolidated Financial Statements included in our Annual Report and in Note 2 of the Notes to our Unaudited Consolidated Financial Statements contained in Part 1, Item 1 of this Quarterly Report. There have not been any material changes during the three months ended June 30, 2024 to the methodologies applied by management for critical accounting policies previously disclosed in our Annual Report.

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Item 3.Quantitative and Qualitative Disclosures about Market Risk

Our investment portfolio is actively managed and may suffer losses from fluctuating interest rates, market prices, or adverse security selection. These accounts may consist of 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. As of June 30, 2024, our cash, cash equivalents, and investments balance was $439.2 million. 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.

We are subject to risk from fluctuations in the interest rates related to a portion of our long-term debt. The interest rates are based upon the applicable Secured Overnight Financing Rate (SOFR) rate plus an applicable margin for such loans or the lender's base rate plus an applicable margin for such loans. On an annualized basis, we estimate a 100 basis-point change in the SOFR rate would have a $5.5 million impact on our interest expense based on our outstanding principal balance and SOFR rates at June 30, 2024.

We are subject to risk from fluctuations in foreign currencies from our operations outside of the United States. We do not currently have any positions in derivative instruments to hedge our foreign currency risk.

The table below shows our exposure to foreign currency denominated revenue and operating income for the six months ended June 30, 2024:


	Six months ended June 30, 2024
(in millions, except foreign currency rates)	Australian Dollar			British Pound			Canadian Dollar			Euro			Other Foreign Currencies
Currency rate in U.S. dollars as of June 30, 2024	0.6671			1.2647			0.7311			1.0718			n/a

Percentage of revenue	2.7		%	7.3		%	6.3		%	6.5		%	5.4		%
Percentage of operating income (loss)	5.7		%	(7.1)		%	5.0		%	8.8		%	(13.1)		%

Estimated effect of a 10% adverse currency fluctuation on revenue	$	(3.0)		$	(8.1)		$	(7.0)		$	(7.2)		$	(6.0)
Estimated effect of a 10% adverse currency fluctuation on operating income (loss)	$	(1.2)		$	1.4		$	(1.0)		$	(1.8)		$	2.6

The table below shows our net investment exposure to foreign currencies as of June 30, 2024:


	As of June 30, 2024
(in millions)	Australian Dollar		British Pound		Canadian Dollar		Euro		Other Foreign Currencies
Assets, net of unconsolidated entities	$	61.9	$	285.9	$	227.1	$	231.5	$	196.4
Less: liabilities	(28.2)		(85.6)		(109.5)		(148.2)		29.3
Net currency position	$	33.7	$	200.3	$	117.6	$	83.3	$	225.7

Estimated effect of a 10% adverse currency fluctuation on equity	$	(3.4)	$	(20.0)	$	(11.8)	$	(8.3)	$	(22.6)

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Item 4.Controls and Procedures

(a)Evaluation and Disclosure Controls and Procedures

Disclosure controls and procedures are designed to reasonably assure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934, as amended (the Exchange Act) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to reasonably assure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of June 30, 2024. Based on that evaluation, our chief executive officer and chief financial officer concluded that as of June 30, 2024, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms and to provide reasonable assurance that such information is accumulated and communicated to management, including the chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

(b)Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2024, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our chief executive officer and chief financial officer, believe that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been or would be detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART 2.OTHER INFORMATION

Item 1.Legal Proceedings

We incorporate by reference the information regarding legal proceedings set forth in Note 13 of the Notes to our Unaudited Consolidated Financial Statements contained in Part 1, Item 1 of this Quarterly Report.

Item 1A.Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors in Part I, “Item 1A. Risk Factors” in our Annual Report, as updated in this Quarterly Report, when deciding whether to invest in our common stock or otherwise evaluating our business. If any of those risks or uncertainties materialize, our business, financial condition, and/or operating results could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. Our operations could also be affected by other risks and uncertainties that are not presently known to us or that we currently consider immaterial to our operations.

Failure to successfully complete certain strategic transactions could adversely impact our ability to execute our business strategy and our business and operating results.

We periodically evaluate and pursue strategic opportunities including dispositions, acquisitions, and investments, as a means to implement our business strategy, including the recent entry into an agreement to dispose of certain of our U.S. turnkey asset management platform assets. The strategic transactions we ultimately pursue may be subject to various closing conditions, including review or approval by foreign and domestic regulatory authorities. If regulatory approval or clearance is not obtained or any such transaction does not close on a timely basis or at all, such failure could adversely impact on our financial and operating results. In addition, strategic transactions may present financial, managerial and operational challenges such as diversion of managerial resources from core business functions, increased expenses associated with the transaction, potential disputes with customers, suppliers, or acquirers of disposed assets, and failure to achieve the expected economic benefits of the transaction, any of which could have a material adverse effect on our business and operating results.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The table below presents month-to-month information related to repurchases of common stock we made during the three months ended June 30, 2024. Refer to Note 14 of the Notes to our Unaudited 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 (a)	Approximate dollar value of shares that may yet be purchased under the programs (a)
April 1, 2024 - April 30, 2024	—	$	—	—	$	498,550,338
May 1, 2024 - May 31, 2024	—	—		—	$	498,550,338
June 1, 2024 - June 30, 2024	—	—		—	$	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.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Trading Arrangements

During the three months ended June 30, 2024, none of the company’s officers (as defined in Section 16 of the Exchange Act) and directors adopted or terminated contracts, instructions, or written plans for the purchase or sale of the company’s securities.

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Other 10b5-1 Plan Information

The following table, which we are providing on a voluntary basis, shows the Rule 10b5-1 sales plans entered into by our directors and officers (as defined in Section 16 of the Exchange Act) that were in effect as of July 12, 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
July 12, 2024

Projected Beneficial Ownership (1)

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

125,000

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

2,500

39,871

Jason Dubinsky Chief Financial Officer

3/15/2024

12/31/2024

06/18/2024 to 12/31/2024 (2)

3,400

Shares to be sold under the plan if the stock reaches specified prices

3,400

16,076

William Lyons Director

3/5/2024

11/30/2024

06/04/2024 to 11/30/2024

4,500

Shares to be sold under the plan if the stock reaches specified prices

1,500

11,395

________________________________________

(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. This information reflects the beneficial ownership of our common stock on July 12, 2024 and includes RSUs that will vest by September 10, 2024. The estimates do not reflect any changes to beneficial ownership that may have occurred since July 12, 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.

(2) All transactions under this plan were completed on July 2, 2024.

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Item 6.Exhibits


Exhibit No						Description of Exhibit
3.1						Amended and Restated Articles of Incorporation of Morningstar are incorporated by reference to Exhibit 3.1 to our Registration Statement on Form S-1, as amended, Registration No. 333-115209.

3.2						By-laws of Morningstar, as in effect on February 27, 2018, are incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K that we filed with the SEC on February 28, 2018.

10.1*†						Morningstar, Inc. ELT Policy on Recoupment of Compensation

10.2*†						Form of Morningstar Amended and Restated 2011 Stock Incentive Plan Stretch Performance Stock Unit Award Agreement, for awards on or after May 15, 2024

10.3*†						Form of Morningstar Amended and Restated 2011 Stock Incentive Plan Market Stock Unit Award Agreement, for awards on or after May 15, 2024

10.4*†						Form of Morningstar Amended and Restated 2011 Stock Incentive Plan Restricted Stock Unit Award Agreement, for awards on or after May 15, 2024

10.5†						Amendment No.3 to the Credit Agreement dated as of June 27, 2024, among Morningstar, Inc. and certain subsidiaries of Morningstar, Inc., Bank of America, N.A. and the other lenders party thereto.

31.1†						Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended

31.2†						Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended

32.1**						Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**						Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101†						The following financial information from Morningstar, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, filed with the SEC on July 26, 2024 formatted in Inline XBRL: (i) Cover Page, (ii) Unaudited Consolidated Statements of Income, (iii) Unaudited Consolidated Statements of Comprehensive Income (iv) Unaudited Consolidated Balance Sheets, (v) Unaudited Consolidated Statement of Equity, (vi) Unaudited Consolidated Statements of Cash Flows and (vii) the Notes to Unaudited Consolidated Financial Statements

104†						Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101)

† Filed herewith.

* Management contract with a director or executive officer or a compensatory plan or arrangement in which directors or executive officers are eligible to participate. Management contract with a director or executive officer or a compensatory plan or arrangement in which directors or executive officers are eligible to participate.

** The certificates furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		MORNINGSTAR, INC.

Date: July 26, 2024	By:	/s/ Jason Dubinsky
		Jason Dubinsky
		Chief Financial Officer (principal financial officer)

Morningstar, Inc. - Quarter Report: 2024 June (Form 10-Q)

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