Morningstar, Inc. recently provided responses to selected questions received through August 31, 2025. The company disclosed the departure of James Rhodes, President of Direct Platform, effective September 12, 2025, and announced Frannie Besztery as the interim head until a permanent successor is appointed. Morningstar has also engaged an executive search firm to assist with the search process.
In terms of financial performance, Morningstar's adjusted operating income (AOI) is being prioritized for long-term growth, with a focus on revenue growth outpacing adjusted operating expenses over time. The company has been investing in various areas, including the development of Morningstar Credit's ratings and licensed data products, platform and operational enhancements for PitchBook, modernizing interfaces for major products, scaling the Morningstar Indexes business, and expanding databases and research and analytics.
Regarding cash flows, Morningstar saw a decline in cash provided by operating activities and free cash flow in the first half of 2025. The decline was primarily driven by increased cash paid for income tax payments and higher bonus payments reflecting strong company performance compared to targets in 2024.
In terms of Morningstar Direct Platform, the company reported improved sales in the second quarter of 2025, with primary client segments being asset managers and wealth managers including advisors. Morningstar Direct's revenue growth trend relative to license growth was influenced by larger-than-typical price increases, multi-year contracts, and the introduction of new capabilities. Morningstar is focused on enhancing its databases beyond traditional mutual funds and investing in modern user experiences to attract a broader range of users.
The ongoing evolution of the asset management industry, including the increased prominence of both passively and actively managed exchange-traded products, presents growth opportunities for Morningstar Direct. The company is expanding and enhancing its datasets and capabilities covering exchange-traded products to reach new users and expand existing client engagement.
Morningstar follows a simplified licensing model with Morningstar Direct pricing based on the number of licenses purchased. The company regularly reviews prices and makes adjustments based on the added value provided and input costs. Morningstar introduced a larger-than-usual price increase with annual renewals in 2023, reflecting significant product enhancements.
In terms of Morningstar Advisor Workstation, revenue was essentially flat in the first half of 2025, with a focus on transitioning clients to the refreshed advisor solution, Direct Advisory Suite. Product delays described in the June 2025 8-K release were specific to 2024 delays related to the legacy solution, Advisor Workstation, impacting prior-year sales and first-half 2025 revenue.
Morningstar Data revenue from redistribution partners accounted for approximately 30% of total data revenue in 2024. The company continues to see growth driven by alliance and redistribution channels and has observed an increasing demand for data feeds over the past few years, leading to new use cases and growth from specific customer groups.
Following these announcements, the company's shares moved 1.37%, and are now trading at a price of $234.90. Check out the company's full 8-K submission here.
