Morningstar, Inc. has recently provided responses to selected investor questions, shedding light on various aspects of the company's operations. The departure of James Rhodes, President of Direct Platform, was addressed, with Frannie Besztery serving as interim head until a permanent successor is appointed. The company has also engaged an executive search firm to assist in finding the next President of Direct Platform.
In terms of financial performance, Morningstar's management team has been prioritizing profitability, aiming for long-term adjusted operating income (AOI) growth by focusing on revenue growth outpacing adjusted operating expenses over time. The company has been investing in multiple areas of the business, including the development of Morningstar Credit's ratings and licensed data products, platform and operational enhancements for PitchBook, and modernizing interfaces for major products like Direct Platform.
The cash flow dynamics of the TAMP business and AssetMark relationship have affected the company's working capital and CFO, with cash provided by operating activities declining 22.9% to $190.0 million in H1 25 compared to the prior-year period, and free cash flow decreasing 32.8% to $121.2 million. Factors driving this decline include increased cash paid for income tax payments and higher bonus payments reflecting strong company performance compared to targets in 2024.
Regarding Morningstar Direct, revenue saw improvement in Q2 25, with primary client segments consisting of asset managers and wealth managers/advisors. Revenue growth trends relative to license growth were influenced by larger-than-typical price increases for Morningstar Direct starting in Q1 23, multi-year contracts, and the introduction of new capabilities. The company continues to enhance its databases and invest in modern user experiences to attract a broader range of users, including those focused on specific tasks.
Morningstar Direct's analytical capabilities are designed to support clients in meeting research and regulatory requirements, regardless of whether they are constructing portfolios with active or passive vehicles or a combination of both. Morningstar has a simplified licensing model for Morningstar Direct pricing based on the number of licenses purchased, with additional fees charged for specific use cases such as distribution or publication.
Morningstar also provided insights into Morningstar Advisor Workstation, stating that revenue was essentially flat in H1 25 compared to the prior-year period as the company focused on transitioning clients to its refreshed advisor solution, Direct Advisory Suite. The delays described in the June 2025 8-K response to investor questions were specific to 2024 delays related to the legacy solution, Advisor Workstation, impacting prior-year sales and H1 25 revenue.
Lastly, Morningstar highlighted the growth opportunities presented by the ongoing evolution of the asset management industry, including the increased prominence of both passively and actively managed exchange-traded products, and the company's efforts to expand and enhance its datasets and capabilities covering exchange-traded products.
As a result of these announcements, the company's shares have moved 1.37% on the market, and are now trading at a price of $234.90. Check out the company's full 8-K submission here.
