Morningstar Updates on Management Changes and Financial Performance

By Hao Liu • Saturday, September 27 15:38 • Permanent Link

Morningstar, Inc. has provided responses to various investor questions, shedding light on the company's recent developments and financial performance. Here are the key highlights from the Q&A session:

Management Transitions: James Rhodes, President of Direct Platform, left the company to pursue other interests. Frannie Besztery, Chief Operating Officer of Direct Platform, is serving as interim head, with a formal search process underway to find a permanent successor.
Margin and Expense Trends: Morningstar is prioritizing profitability, aiming for long-term adjusted operating income (AOI) growth by balancing business investment and expense management.
Cash Flows: Cash provided by operating activities declined 22.9% to $190.0 million in H1 25, while free cash flow decreased 32.8% to $121.2 million, driven by higher income tax payments and bonus outlays.
Morningstar Direct Platform: Q2 25 saw a 6.0% increase in Morningstar Direct revenue, driven by timing of renewals and catch-up revenue. The company is observing cost sensitivity in the US asset management market but sees growth opportunities in EMEA and APAC.
Revenue Growth Deceleration: Morningstar Direct's revenue growth has decelerated due to larger price increases in previous years, multi-year contracts limiting expansion opportunities, and changes in revenue reporting between Morningstar Direct and Morningstar Data.
Growth Strategies: Morningstar continues to invest in enhancing its databases and user experiences in Morningstar Direct, focusing on expanding datasets, modernizing user experiences, and leveraging AI to attract a broader range of users.
Pricing Strategy: Morningstar follows a simplified licensing model for Morningstar Direct pricing based on the number of licenses purchased, with additional fees for specific use cases such as distribution or publication. The company regularly reviews prices based on added value and input costs.
Advisor Workstation: Morningstar Advisor Workstation revenue was flat in H1 25, with the company focusing on transitioning clients to the refreshed advisor solution, Direct Advisory Suite. Delays in the legacy solution impacted prior-year sales and H1 25 revenue.
Data Revenue: Redistribution partners accounted for approximately 30% of Morningstar Data revenue in 2024, with the company observing growth in data feeds and new use cases driven by alliance and redistribution channels.

These responses provide insights into Morningstar's financial performance, management changes, growth strategies, and pricing models, offering investors a deeper understanding of the company's operations. The market has reacted to these announcements by moving the company's shares 1.37% to a price of $234.90. For the full picture, make sure to review Morningstar's 8-K report.

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