MORN Morningstar, Inc. - 10-K

Item 1A. Risk Factors

Risk Factors

You should carefully consider the risks and uncertainties described below and all of the other information included in this Report when deciding whether to invest in our common stock or otherwise evaluating our business. If any of the following risks or uncertainties materialize, our business, financial condition, 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 to be immaterial to our operations.

Risks Related to Our Business and Industry

Failing to maintain and protect our brand, independence, and reputation may harm our business. Our reputation and business may also be negatively impacted by allegations made about possible conflicts of interest, lack of independence, or by other negative publicity or media reports.

We believe our reputation, brand, and the value of our products and services are built on the trust that our users have in our commitment to empowering investor success through independence, transparency, and a long-term focus. Any real or perceived failure to uphold these principles, including lapses in employee integrity or independence, may harm our reputation. Additionally, real or perceived errors in our products or negative customer or employee experiences could further damage our reputation. Our reputation and brand could also be impacted by factors beyond our control, such as negative news about our clients, suppliers, employees, consultants, or competitors, regulatory scrutiny, and adverse publicity about our products or industries that we operate in. Expanding our brand to less mission-aligned products may also harm our reputation or dilute our brand.

As our business continues to evolve and expand, we have entered and may in the future enter into business lines and/or arrangements that may raise concerns about potential conflicts of interest or perceived independence failures. We provide ratings and research on our clients’ investment products, such as ETFs and mutual funds, and we typically charge a licensing fee to use our ratings. We also provide investment advisory and management services, including through our own series of mutual funds, which expose us to claims that we are both the referee and the player in the same industry. Our issuer-pay model in our credit ratings business and for certain of our other ratings products, for which we receive payments from issuers for our ratings versus from the investor consuming such ratings, may also lead to perceptions that our research and ratings in these areas are not independently determined.

Certain of our products and methodologies, including those of Morningstar Sustainalytics, have placed, and may in the future, place us at the center of public debate on sustainability, social, and corporate governance issues, or result in scrutiny of our clients. This scrutiny may affect product demand and may result in negative media coverage, reputational harm, or increased regulatory attention.

Failure to effectively and successfully navigate these independence and reputational challenges could adversely affect our business, operating results, and financial condition.

Failing to create and maintain innovative, proprietary, and insightful product and service offerings, keep pace with new investor requirements, technology developments, and trends, or anticipate our clients’ changing needs may negatively affect our competitive position and business.

We believe rapid innovation and technological advances in financial information services and investable products are changing how investors and intermediaries’ access and use data. These changes may result in our existing products becoming less competitive or obsolete. Our future success will continue to depend on our ability to develop new products and enhancements that address and support the evolving needs of our current and target markets, as well as on our ability to keep pace with competitors.

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If we fail to continuously innovate and effectively incorporate or deploy new datasets, research, AI technologies, content, or software to meet evolving customer needs, our competitive position may suffer. Our reputation would be harmed if we are seen as slow to adapt to meet the changing needs of investors or their financial advisors, especially as customers expect more personalized advice and greater data security. Increased interest in alternative assets, such as private market offerings, require new expertise and data. Competitors who innovate faster or offer broader solutions may outpace us. Our investments in new products, especially those involving AI technologies, carry execution risks and challenges and may not deliver expected benefits, such as generating revenue or cost savings, or creating efficiencies in our processes. Additionally, we cannot guarantee we will successfully adapt or seamlessly transition to new product offerings. Failure to successfully manage these transitions and investments would materially and adversely affect our reputation, operating results and financial condition.

As financial intermediary customers further automate their processes, demand for our products may shift, making technological flexibility and system interoperability increasingly important. Clients increasingly expect technology solutions that address specific needs, such as integrated wealth management capabilities. Our technology heavily relies on the quality and comprehensiveness of our data and our ability to build valuable analytics, research, and intellectual property around it. Delivering personalized advice that clients value requires collecting, organizing, and analyzing large, diverse datasets. If we fail to adequately allocate resources to meet client demands, we may lose our competitive advantage, which could adversely impact our business, operating results, and financial condition.

Changing economic conditions, including prolonged volatility, recessions, or downturns affecting the financial sector and global financial markets, fluctuating interest rates, and the impacts of global trade policies, may negatively impact our business.

Our business performance is influenced by external factors such as economic and financial market trends, credit availability, changing laws or trade policy, currency fluctuations, and geopolitical uncertainties. Extended economic or market downturns, or volatility, interest and inflation rate shifts, and stagflation, among other factors, may dampen investment activity, thereby reducing demand for our products and services. In recent years, uncertain economic conditions, including those caused by tariffs and retaliatory trade measures, have decreased asset values under management and may do so again in the future. Further, market sentiment regarding the impact of AI on software an data company growth prospects has driven meaningful recent sector-wide stock price declines, including Morningstar's. We cannot predict the timing or duration of economic cycles, sector-focused market downturns or the direct and indirect effects or duration of trade or other economic policy impacts on our business, assets, operating results, and financial condition.

Our asset-based revenue depends on the value of assets under our advisory services, which fluctuates with market performance. Economic or market declines, reduced inflows, or increased redemptions, driven by market conditions or poor investment performance, can lower asset levels and, consequently, our fee-based revenue. Industry trends toward lower asset-based fees may further impact revenue. Additionally, if investors shift to non-traditional asset classes such as cryptocurrencies, private debt, real estate, structured products, or collectibles, and we cannot effectively incorporate or anticipate their performance, our assets under management may be negatively affected.

Many of our license-based customers are asset management and financial advisory firms, whose businesses may be impacted by global market trends. The rise of passive investment strategies may diminish the perceived value of our research on active strategies. Prolonged recessions, financial crises, and other economic uncertainties have in the past and could in the future prompt significant spending cuts and lengthen sales cycles among clients. Industry consolidation has the potential to reduce our client base, and clients may discontinue using our products and services if they fail, merge, or are acquired by non-clients or firms using fewer of our services. These factors may decrease demand for our offerings.

Fluctuations in interest rates and central bank decisions have reduced credit issuance in the past and may do so in the future, negatively impacting our credit ratings business. For example, our credit ratings business depends on the volume and value of debt securities issued, making it vulnerable to market volatility, rising interest rates, widening credit spreads, and economic slowdowns. Demand for credit ratings may also decline due to negative publicity, regulatory or political changes, increased use of alternative credit sources, or defaults by major issuers. Our ability to reduce costs in adverse conditions may be limited by our obligations to monitor and maintain outstanding ratings.

Our PitchBook business is also subject to cyclical trends specific to the private capital markets. Many of PitchBook’s clients are investment banks and other participants in the capital and M&A markets, which are subject to periodic business downturns driven by changes in such markets. During these downturns, they often seek to reduce spending on third-party services, as well as the number of employees, which would directly and adversely affect the length of sales cycles and the number of prospective users for the PitchBook platform.

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Changing economic conditions or market trends could affect demand for products and services or asset values, which may have a material and adverse effect on our business, operating results, and financial condition.

Risks Related to Our Information Technology and Security

We could face significant reputational, operational, and financial consequences relating to cybersecurity and the protection of confidential information, including personal information about individuals.

Our business requires that we securely collect, process, store, and transmit confidential information including sensitive personal information relating to our operations, customers, employees and other third parties. We continuously invest in measures designed to protect this information, but we cannot guarantee absolute security. Improper access or release of data may still occur due to employee or vendor error, system issues, failure to consistently apply security practices across our business, or cyberattacks.

We may also be subject to specific legal or contractual obligations relating to personal information and personal financial information, as in certain cases our products and services handle, store, and transmit personal information. Due to the global nature of our business, personal information is routinely moved from one jurisdiction to another, subjecting us and our customers to complex and evolving federal, state and foreign privacy, cybersecurity, and data protection laws, which may vary across geographies. Restrictions on cross-border data transfers and conflicting regulations may enhance compliance obligations and associated costs.

As a global business, we regularly seek to optimize our data storage to enhance information accuracy and streamline our technology, which supports our operations. However, data privacy laws such as the General Data Protection Regulation (GDPR) impose obligations on the storage, transfer, and use of personal information, potentially restricting the processing of data about individuals outside of their home jurisdictions. Legislation aimed at protecting material nonpublic information or mitigating potential conflicts of interest further defines how we access and retain certain data, potentially resulting in less efficient or more costly technological processes and infrastructure.

One of our core strengths is our ability to collect data and enrich it with data from another part of our business to provide valuable information and insights to investors. As data is accessible across our products, consistent data privacy practices and disclosure become more important and challenging. Failure to comply with our public statements or to adequately disclose our privacy or data protection practices could result in costly investigations by government authorities, litigation, and fines, as well as reputational damage and customer loss.

We may be subject to increasingly frequent and sophisticated cyberattacks by actors with substantial resources and advanced capabilities that could overcome the defensive measures of our security program. These actors have targeted, and may target, our products, people, services, and network infrastructure to access intellectual property, confidential or personal information, or disrupt operations (e.g., distributed denial of service attacks or ransomware). Though we have dedicated resources and protective measures designed to identify and mitigate cyberattacks, such attacks continue to evolve, can be difficult to detect, and may go unnoticed for extended periods. Our measures may not be adequate or designed to prevent all eventualities or all types of attacks. We may be vulnerable to circumvention of security systems, denial of service attacks or other cyberattacks, hacking including “hacktivism,” “phishing,” or other social engineering attacks, malware, ransomware, employee or insider errors, employee or vendor malfeasance, physical breaches, or other malicious actions. Additionally, remote work and the use of personal devices introduce additional risk management challenges.

We may also be impacted by a cyberattack targeting one of our vendors or other supplier/service provider within our technology supply chain or infrastructure, including cloud providers. As we expand our product and service offerings, we increasingly share confidential and proprietary data with third-party vendors, service providers, and software as a service (SaaS) platforms. This growing exposure to third parties introduces the risk that inadequacies in their security technologies, practices, or monitoring could result in unauthorized access, data breaches, or other cybersecurity incidents, that could impact us and our customers.

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From time to time, we have acquired, and may in the future acquire, other businesses or assets. While we conduct due diligence on the products, technology systems, and practices of these companies, we may inherit existing or undiscovered security vulnerabilities, data breaches, or system intrusions for which we could be liable. Acquired products and technologies may expose us to additional security risks, integration delays, increased costs to meet our security standards, and challenges in augmenting the acquired technologies to levels consistent with our brand and reputation. These businesses may also have less advanced security or data privacy controls, introducing further risks as their systems are integrated with ours.

While we maintain recovery capabilities intended to restore operations and data integrity following a cybersecurity incident, these capabilities are not absolute and are subject to similar limitations and uncertainties as our preventive measures. Accordingly, we cannot guarantee that all attack vectors can be fully mitigated or that recovery will be complete or timely in all circumstances.

Any failure to protect confidential information or any material significant cybersecurity incident, whether in our systems or those of third parties handling our data, could lead to reputational damage, operational challenges, loss of customers, regulatory actions, sanctions, or other penalties, litigation, financial losses, and increased mitigation costs, which could have a material adverse effect on our business, operating results, and financial condition.

AI technologies may present business, legal, compliance, and reputational risks as they are incorporated into our products and tools.

We use, and may expand our use of, AI technologies across our products, internal tools, and third ‑ party SaaS platforms. While AI offers opportunities to improve efficiency and innovation, it also introduces risks. If we fail to keep pace with AI advancements, or if competitors adopt AI more effectively, our competitive position may be harmed. Slow internal adoption could reduce operational effectiveness, while AI ‑ generated errors may be incorporated into our processes or products. Our use of AI technologies may require investment of resources and costs to develop, test, and maintain related products and services, and there is no assurance that these investments will be successful. The rapid evolution and adoption of AI may create operational risks that may be difficult to anticipate or control, particularly where we rely on third ‑ party platforms. These risks could lead to operational inefficiencies, reputational harm, or compliance challenges.

The pace of adoption and use of AI technologies, including generative AI, in our products and processes may increase compliance obligations, regulatory scrutiny, litigation exposure, ethical concerns, and confidentiality or security risks. For example, AI systems may generate content that appears correct but is inaccurate, misleading, biased, or discriminatory, which, if relied upon and attributed to us, could harm our reputation and expose us to liability. We may also face risks relating to data privacy or cybersecurity incidents stemming from our use of AI technologies. Emerging laws and regulations governing AI - such as the EU Artificial Intelligence Act and other evolving global frameworks - may impose burdensome requirements or restrict the deployment of certain AI capabilities in our offerings, and regulations on AI are developing at varying paces, meaning the global regulatory landscape is uncertain and could potentially require significant changes to comply with emerging laws, which could have significant costs. As regulators introduce new or updated AI ‑ related rules, we may incur substantial compliance costs or be required to adjust our business practices, and failure to timely or adequately address these evolving obligations could result in significant costs, liabilities, or fines. Because AI is complex and rapidly developing, it is not possible to predict all of the legal, operational, or technological risks that may arise relating to our use of AI.

AI technologies may use or incorporate data from third-party sources, which may expose us to risks associated with data rights and protection and may also lead to the unintended consequences of using AI discussed above. Current laws and court decisions governing intellectual property ownership and license rights may not address new questions relating to AI technologies, which may negatively affect our ability to safeguard our intellectual property, as well as increase the compliance costs associated with navigating an uncertain legal and regulatory environment. The use or adoption of AI technologies into our products may expose us to claims of copyright infringement or other intellectual property misappropriation by third parties, which may require us to pay compensation or license fees. In addition, increased use of AI technologies may affect our workforce needs, including our ability to recruit, attract, or retain employees with the skills necessary to support AI-enabled products and processes. We may also face challenges if portions of our existing workforce do not possess, or cannot efficiently develop, the rapidly evolving skill sets required to meet changing business demands, which could adversely impact our operations and competitiveness.

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In addition, the implementation of AI technologies by competitors and disruptors presents risks to our business. The value of our products and services may be negatively affected by the increasing amount of information and external tools that are available online for free, or at low cost, that use AI to scrape data – including our own content – from the Internet. These technologies integrate machine learning abilities and other AI systems to process and organize large data sets aggregated from products that previously were paid for, posing an external risk to our product suite. The rapidly evolving regulatory environment for AI technologies may also impact our ability to protect our own data and intellectual property against infringement or unintended use through these external AI tools.

We could face liability stemming from the accuracy and use of our research, ratings, and published data, and our dependence on ingested third-party data, licensed content, and open-source components.

We may face claims related to securities law violations, defamation, negligence, or other issues arising from the information we publish, including our research and ratings. For example, investors could take legal action against us if they rely on published information that contains an error, or companies may claim we have made a defamatory statement about them or their employees. In our credit ratings business, we have access to significant amounts of material non-public information on issuers of securities, and any inadvertent disclosure or real or perceived misuse of such information could expose us to legal liability. Even minor errors may require us to temporarily remove ratings or research, potentially reducing the perceived value of our products or causing us to fall short of service-level commitments to customers.

Some of our products are used by clients to support investment processes, account reporting, and other activities involving significant third-party assets. This creates the risk that clients, or the parties whose assets they manage, may bring claims against us for losses linked to our products. We may also face regulatory investigations related to our products and their use by clients. While the contracts for our software products generally contain limitations on our liability, we may still need to compensate clients or their customers to preserve business relationships. Additionally, we could face claims related to content that is accessible through links on our website.

Products and enhancements that we develop or license have contained, and may in the future contain, undetected errors or defects despite testing or other quality-assurance practices. Use of our products or services as part of the investment processes and other activities, by our customers, investors, companies that we rate or assess, or their shareholders could subject us to claims for errors in our data, calculations, methodologies, inputs, analysis, or system failures. We may also face claims from providers of data and information we compile from websites and other sources, alleging we have obtained the data in violation of the source’s terms of use or copyrights.

We may face claims from third parties, such as securities exchanges from which we license and redistribute data and information, alleging improper use or redistribution of licensed data, or that we have inadequately permissioned our clients to use such data. These agreements often grant extensive audit rights, which have in the past and in the future may be triggered, and can be costly, time-consuming, and may result in substantial fees. Regulators may also claim we have mishandled private ratings or nonpublic data, particularly in our credit ratings business. These regulators have audit rights regarding our data use which could have similar adverse consequences in terms of time, expenses, or fines. Defending claims based on the information we publish could be expensive and time-consuming and could adversely affect our business, operating results, and financial condition.

Additionally, we use and incorporate open-source code in our software development and products, which could expose us to additional security risks, increase costs, and complicate the commercialization of our products and services. Security vulnerabilities due to the use of open-source software could require additional testing, change control, or re-engineering, potentially increasing costs and impacting our development processes and products. Open-source licenses typically lack warranties for infringement claims or covering the quality or security of the code, and some may require public release of our proprietary source code if combined in certain ways, potentially putting us at a competitive disadvantage. Many open-source licenses are ambiguous and have not been widely interpreted by US or other courts, and any unexpected restrictions or claims could require us to seek alternative licenses at increased costs or reduced scope, re-engineer products or systems, or discontinue the licensing of certain products.

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Failure to protect our intellectual property rights, or claims of intellectual property infringement against us, could harm our brand, our financial results, and our competitive position.

We rely primarily on trademarks, copyright, patents and trade secret rights, as well as contractual protections and technical safeguards, to protect our intellectual property and proprietary information. These measures may not be adequate to safeguard our brand or competitive advantage, and third parties could challenge, circumvent, or improperly access our intellectual property and proprietary information. Additionally, jurisdictions in which we operate may lack strong intellectual property protections, which increases our vulnerability to unauthorized use or disclosure and may undermine our competitive position, particularly in non-US markets. Even where legal protections exist, defending these rights can require significant cost, time, and resources with no guarantee of success.

We believe our trademark rights in the “Morningstar” name and logo, and those of our subsidiaries represent materially valuable intangible assets. We have encountered and may continue to encounter jurisdictions in which third parties hold pre-existing trademark registrations or use the “Morningstar” name, either as part of a registered corporate name or domain name, or otherwise. This may prevent us from registering or using our marks and could limit our ability to market products or secure trademark protection in those locations.

We have been and may continue to be subject to claims by third parties alleging infringement of their intellectual property rights. Such claims can also be alleged against clients, customers, or distributors of our products and services with whom we have agreed to provide indemnification protection. The defense of such claims can be costly, time consuming, and disruptive and lead to unfavorable outcomes requiring us to pay damages, enter disadvantageous licensing or royalty agreements, incur litigation and settlement costs, or suspend affected products or services, any of which could materially adversely affect our business, operating results, or financial condition.

Our reputation, financial condition, and operating results may be adversely impacted by any failure by us to successfully assert or enforce our intellectual property rights or by any alleged intellectual property infringement claims by a third party. In addition, unauthorized third parties may attempt to imitate or fraudulently use our brand, websites, or other digital assets, such as through website spoofing or phishing attacks, which could result in reputational harm, financial loss for individuals, or impede our ability to attract and retain customers.

Risks Related to Legal and Regulatory Matters

Compliance failures, regulatory action, or changes in laws could adversely affect our business.

Our business is subject to extensive and evolving laws, rules, and regulations that vary by jurisdiction. We have not always been able to, and in the future may not be able to, comply with the changing substance, application, and interpretation of such laws, rules, and regulations without making significant modifications to our operations. The increasing pace and scope of global regulatory changes heightens the potential risk of failing to identify or respond to new or expanded obligations in a timely manner. Regulations focused on increasing investor transparency or providing individuals with greater control over their own data may reduce the value or utility of the investments we have made in our data sets. The global nature of our operations makes monitoring and implementing regulatory changes more complex. Noncompliance could result in fines, sanctions, restrictions, and/or other penalties that could affect our products and services, and harm our reputation, operating results, and financial condition.

We are also subject to certain anti-corruption laws in the jurisdictions where we do business, which prohibit the improper offering, promising, authorizing, or giving anything of value to foreign government officials, or business employees for the purpose of directing, obtaining, or retaining business. We conduct business in countries and regions with varying anti-corruption laws and that have experienced government corruption to some degree, which may increase the pressure and risk of inadvertent violations by our employees or agents, despite our policies and training. Any violation of anti-corruption laws could lead to regulatory penalties, government investigations, administrative, civil or criminal penalties, government investigations, and/or other remedial measures, which could adversely affect our business, operating results, and financial condition, and also cause reputational and brand damage.

As we engage in global business activities, we are subject to international trade restraints, including economic and financial sanction laws and embargoes, administered by the US Treasury Department’s Office of Foreign Assets Controls, which prohibit or restrict the sale or supply of certain products or services to certain regions, countries, entities, governments, and individuals. These restrictions have impacted and may in the future impact our ability to continue to market and sell our products in these geographies, resulting in loss of revenue. While we have compliance measures in place to promote adherence to applicable restrictions, they may not always be effective.

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These and new restrictions could further impact our operations, increase compliance costs, and expose us to fines or investigations, which could adversely affect our business, operating results, and financial condition.

Several of our businesses are highly regulated throughout the world, and the regulatory environment is increasingly complicated and rapidly evolving.

The expansion of our business, including through acquisitions, has increased our exposure to government regulation across our product lines. Some areas require extensive and ongoing interactions with regulators, which is an increasingly costly and resource intensive process and could result in a finding of noncompliance, which could expose us to fines, sanctions, penalties and reputational risk.

Morningstar DBRS, our credit ratings business, operates in highly regulated environments in Canada, the US, the UK, Australia, and the EU, with substantial ongoing compliance obligations. The scope and interpretation of these regulations can be uncertain and inconsistent across jurisdictions, making compliance challenging and costly. Adhering to any current or expanded requirements that may arise under these frameworks can be complex, resource-intensive, and time-consuming. In addition, Morningstar DBRS is subject to regular regulatory examinations and occasional investigations, which can be time consuming and impact day to day operations.

In the US, Morningstar Investment Management LLC (MIM), is a registered investment adviser under the Investment Advisers Act of 1940 (the 40 Act), and is subject to SEC requirements for record-keeping, reporting, standards of care, and fiduciary obligations. The Morningstar Funds Trust, an open-end mutual fund advised by MIM, subjects MIM to additional 40 Act requirements and the Commodity Exchange Act. These entities face SEC examinations and, when advising retirement plans, may act as Employee Retirement Income Security Act of 1974 (ERISA) fiduciaries, which would require compliance with strict obligations. Breaches, actual or alleged, could result in liability, particularly in retirement advice and managed accounts. Some contracts designate us as ERISA fiduciaries, including selecting and monitoring plan options, and we offer managed account services for plan participants. Such activities have been and may again be subject to class action litigation, including one current case. Many asset management and financial advisor clients are similarly regulated. The failure of our licensed products to meet their regulatory requirements could lead to loss of business.

Our regulated investment services operations are subject to regulation in markets outside the US. Post Brexit, we made a strategic decision to restrict the provision of regulated investment management activity to EU domiciled clients in part to reduce regulatory risk. The UK-based Morningstar Wealth Platform (Platform) has regulatory compliance obligations related to, among other things, the safeguarding and administration of client monies and assets, due to the offering of regulated products and services in the UK. The Platform business has offices in Jersey, South Africa, and the United Arab Emirates, all of which are or have been subject to the Financial Action Task Force (FATF) grey list. Increased regulatory scrutiny in Jersey, which was recently removed from the FATF grey list, and South Africa, which is currently on the FATF grey list, increase compliance costs and exposes us to potential reputational harm.

Our Indexes business, Morningstar Indexes, is subject to the EU Benchmarks Regulation, which mandates certain governance requirements, conflict management, and controls over the benchmark process and require administrators to improve the quality of input data and methodologies. We also closely monitor US regulatory developments, as the SEC has sought comment on whether index providers, model portfolio providers, and pricing services should be regulated as investment advisers or outsourced service providers. If adopted, these changes could significantly increase our regulatory exposure and compliance costs.

Morningstar Sustainalytics may face increased regulation of its research, ratings, and data activities. EU rules for ESG ratings providers, which become effective in 2026, will require significant investment in governance, internal controls, and compliance processes. We have established a regulatory readiness program, and we continue to make significant investments in governance, internal controls, and compliance processes. Many jurisdictions have already established regulations regarding the provision and distribution of ESG data and ratings. Others, such as the UK, are developing similar frameworks, which may differ from EU requirements. The final form of these regulations remains uncertain, but they could impose substantial compliance burdens and risk of inadvertent noncompliance. As Sustainalytics operates globally, future regulations may be inconsistent across markets. Conversely, deregulation could reduce demand for our products. Failure to address this evolving landscape adequately and promptly could adversely affect our business, operating results, and financial condition.

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Environmental, social, and governance considerations could result in enhanced regulatory obligations and expose us to potential liabilities and increased costs.

In response to market demand, we offer products, including those from Morningstar Sustainalytics, that may expose us to liability and higher regulatory costs. New and evolving environmental, social, and governance regulations are being introduced, amended, or revoked in the EU, the US, and other jurisdictions, requiring compliance with specific frameworks and disclosure obligations. For example, the EU Corporate Sustainability Reporting Directive (CSRD) applies to both EU and non-EU entities in scope and mandates extensive disclosures on sustainability topics such as climate change, biodiversity, workforce, supply chain, and business ethics, and may apply to our operations based on recent legal developments.

In contrast, the future of any US regulation of sustainability matters is uncertain, and if adopted may not align with the disclosures required by the CSRD or other legal and regulatory requirements. Similarly, a number of US states have passed, or are in the process of adopting, broad climate change disclosure requirements, such as the Climate Corporate Data Accountability Act and Climate-Related Financial Risk Act in California, the future scope and implementation of which also remains uncertain.

We have announced decarbonization goals and other initiatives, guided by standards such as the Task Force on Climate-Related Financial Disclosure (TCFD), the Sustainability Accounting Standards Board (SASB), and Global Reporting Initiative (GRI). Morningstar has committed to decarbonizing 50% of our scope 1 and scope 2 greenhouse gas emissions by 2030 and to publicly disclosing our emissions annually. Implementing these initiatives and complying with new or amended regulations may require significant resources and management attention. Any failure, or perceived failure, to fully comply with mandatory ESG requirements or voluntary ESG standards could adversely affect our business, operating results, and financial condition.

At the same time, we may face evolving and sometimes conflicting expectations from various stakeholders regarding our business practices and company activities, including environmental, social and governance matters. These expectations may increase operational complexity and place additional demands on our employees, systems, and resources. Different stakeholders may hold differing views on such matters, increasing the risk that actions we take, or fail to take, are perceived negatively by certain groups. Public sentiment and the broader sociopolitical environment may shift rapidly and unpredictably, and we may not be able to anticipate or respond to such changes within expected timeframes or without incurring significant costs. If we do not effectively manage such evolving expectations, we could experience reputational harm, stakeholder disengagement, litigation, or other adverse consequences, which may adversely impact our business, operating results, and financial condition.

Errors in our automated advisory tools may subject us to liability for any losses that result.

We rely on automated investment technology for retirement advice and managed accounts, including the Wealth Forecasting Engine, which determines asset allocations and assigns portfolios, as well as other automated portfolio construction tools. As these systems become more interconnected with other product offerings and integrate with client and third-party technology, complexity increases, requiring greater expertise and testing. Problems could arise if these systems do not work as intended. Any errors, especially ones undetected over time, could result in liability, including breaches of fiduciary duty or applicable law, despite our quality assurance practices. We continually invest in training to maintain in-house expertise and educate record-keepers, plan sponsors, and participants on the proper use and differentiation of these offerings, which is costly and time-consuming.

We seek to continually enhance our retirement services, adding capabilities such as modeling and advising on income-generating products, and regularly release technology updates and methodology changes. Clients may require additional support to implement updates and understand their implications, including strategy suitability. We also allocate resources to support legacy versions of the Wealth Forecasting Engine still in use. Errors in updates or methodology could result in significant liabilities, including make-whole payments or litigation.

Risks Related to Our Operations

Our future success depends on our ability to recruit, develop, and retain qualified employees.

Our continued success depends on attracting, hiring, and onboarding qualified employees. Many of our key offerings require specialized skills in areas such as engineering, research, quantitative analysis, fixed income data, and credit analysis, as well as emerging strategic disciplines. These skills are highly sought after, creating strong competition for talent. The development, maintenance, and support of our products also rely on the expertise and experience of our existing employees.

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As a global business with a distributed workforce, we face recruiting challenges across many locations. Managing employees across geographies introduces complexities, including implementing systems, policies, benefits, and compliance programs, and addressing external factors such as geopolitical unrest. Rising wage scales in key markets, inflationary pressures, strong sector stock performance in the sectors where we focus hiring efforts, immigration policies, regulatory changes, and skill shortages increase compensation costs and can make it harder to attract and retain qualified employees.

We invest in employee development through programs such as learning tools and educational stipends and encourage engagement. Shifts in labor markets, such as moves toward or away from remote or hybrid work, may affect retention. Integration of acquired businesses or sunsetting brands can also impact culture and morale, potentially leading to unforeseen attrition.

We believe our success depends on the continued service of our executive officers, including Joe Mansueto, our executive chairman, and Kunal Kapoor, our chief executive officer, as well as senior leaders and other key employees. Their experience and expertise make them attractive to competitors and early-stage companies that can offer significant financial incentives. Loss of these leaders, or inadequate succession planning, or loss of key employees could pose substantial challenges, including loss of potential or existing clients, and adversely affect our operating results and financial condition.

Our operations are dependent on third-party service providers.

We rely on certain external sources for data and research, including securities exchanges, fund companies, issuers, and other providers, as well as third-party data for many of our products. Certain data feeds create sole-source dependency, and any service degradation could harm our products and expose us to downstream risk. External data may contain errors, affecting product accuracy and customer confidence. Our innovation depends on vendor products, including data, software, and services. Some offerings require ongoing updates and access to historical data. Many vendors are also competitors, and termination of agreements, changes in terms, or restrictions on data use relating to such vendors could materially harm our business.

We use AI technologies from third parties, including AI product engines and open-source software. If we are unable to maintain rights to use these AI technologies on commercially reasonable terms, or if third-party suppliers discontinue or materially change their offerings, we may be forced to acquire or develop alternate AI technologies. Such changes could be difficult and costly to implement, may limit or delay our ability to provide competitive offerings, and could significantly increase our costs. Additionally, reliance on third-party AI suppliers may create switching challenges due to integration complexity, proprietary dependencies, and retraining requirements. Moreover, the risks described above with respect to our own AI systems—including the possibility that such systems generate inaccurate, misleading, biased, or discriminatory content that could harm our reputation and expose us to liability—would similarly apply to AI technologies supplied by third ‑ party vendors and could materially harm us if they occur.

We rely on numerous third-party service providers, including for contract labor, SaaS, and data backup facilities. Failure by a provider could disrupt our ability to deliver products and services and require significant costs to internalize functions or find adequate alternatives. For limited products and regions, we are subject to vendor oversight regulations, such as the EU’s Digital Operational Resilience Act, which increases compliance obligations and costs. Inadequate due diligence relating to or oversight of third parties, such as failing to detect conflicts of interest, fraud, data breaches, cyberattacks, or legal noncompliance, could result in financial loss, regulatory sanctions, or reputational harm.

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Our strategic transactions, acquisitions, dispositions, and investments in companies or technologies may not result in the expected business or financial benefits, ultimately having an adverse effect on our operating results and our ability to deliver long-term value to our shareholders.

As a means to implement our business strategy, we periodically evaluate and make investments in, or acquisitions of, complementary businesses, services and technologies, and intellectual property rights, or dispose of assets or products, and expect to continue to do so in the future. However, there can be no assurance we can identify suitable investment, acquisition, or disposition candidates at acceptable prices. In addition, although we conduct robust due diligence through cross-functional teams when making an acquisition, each acquisition presents potential challenges and risks, including the following:

– difficulties in assimilating, integrating, or retraining acquired employees.

– differences between our values and those of our acquired companies, as well as disruptions to our workplace culture.

– diversion of financial and managerial resources from existing operations.

– challenges relating to the potential entry into new markets in which we have little experience or where competitors may have stronger market positions.

– difficulties in integrating acquired operations, including challenges with the acquired company’s customers and partners.

– challenges with the acquired company’s third-party service providers.

– challenges with integrating the acquired companies' technology.

– challenges and costs relating to known and potential unknown liabilities, technology or security vulnerabilities, or regulatory investigations associated with the acquired businesses.

We have also made, and expect to continue to make, investments in companies where we do not have or obtain a controlling interest. Such investments are motivated both by their prospective financial return and the access they give us to certain new technologies, products, business ideas, and management teams. While we obtain various rights in connection with such investments, the future value of such investments is highly dependent on the management skill of the managers of those companies, among other factors.

The strategic transactions we ultimately pursue may be subject to various closing conditions, including review or approval by foreign and domestic regulatory authorities and obtaining third party consents, which we may not obtain on a timely basis or at all. In addition, these 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, financial condition and operating results.

Our ability to acquire or dispose of businesses, make strategic investments, or integrate acquisitions may be hindered by trade tensions and heightened scrutiny of foreign investments, particularly in technology. Several countries, including the United States, Europe, and Asia-Pacific, have adopted or are considering restrictions on such transactions, and antitrust authorities are reviewing technology deals with greater rigor. Our business strategy includes expanding into new and adjacent product lines, but regulatory requirements across different Morningstar businesses may limit our ability to pursue these opportunities. Regulatory sanctions in one area could affect operations in unrelated regulated sectors, and sharing intellectual property across product lines may be restricted by regulatory concerns. Future restrictions or government actions could also limit acquisition and investment opportunities and negatively impact our business and financial results. Acquisitions or divestitures may also expose us to shareholder or third-party litigation, which could be costly and distract management even if unsuccessful.

The goodwill of our business and other intangible assets could be impaired in the future, requiring us to record substantial impairments that could impact future earnings.

We assess goodwill for impairment on an annual basis or when evidence of potential impairment exists. Intangible and long-lived assets are evaluated for impairment when events or changes in circumstances arise that indicate the carrying value of the asset may be unrecoverable. Some factors that may be considered include changes in our business related to acquisitions, a significant and sustained decline in stock price and market capitalization, or other changes in fair market valuations. Impairment testing is based on several factors which require judgment from management and may result in non-cash impairment charges in future periods, which could have a material adverse impact on our operating results and financial condition.

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As a global taxpayer, we face challenges due to increasing complexities in accounting for taxes (e.g., base erosion, minimum taxes, and tax transparency), which are high priorities in jurisdictions in which we operate and could materially affect our tax obligations and effective tax rate.

Our effective tax rate is based on the mix of income and losses in our US and non-US operations, statutory tax rates, and tax-planning opportunities available in the various jurisdictions in which we operate. We have been, and could in the future be, subject to changes in our tax rates, the adoption of new or evolving US or non-US tax legislation or exposure to additional tax liabilities. Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change. Our future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates including impacts related to transfer pricing, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation by relevant authorities.

Corporate tax reform, base-erosion efforts, and tax transparency continue to be high priorities in many jurisdictions in which we operate. Changes in tax laws or regulation around the world, including efforts led by the Organization for Economic Co-operation and Development (OECD), could result in increases to our effective tax rate. We continue to monitor developments and administrative guidance in the countries where we operate in addition to evaluating the potential impact on our consolidated financial statements for future periods.

Our revenues, expenses, assets, and liabilities are subject to fluctuations in foreign currency exchange rates.

As a business with international business activities, we are subject to risks related to fluctuations in foreign currency exchange rates. Movements in the exchange rates can impact the US dollar reported value of our revenues, expenses, assets, and liabilities denominated in non-US dollar currencies or where the currency of such items is different than the functional currency of the entity where these items were recorded. In addition, the value of assets in indexed investment products can fluctuate significantly over short periods of time and such volatility may be further impacted by fluctuations in foreign currency exchange rates.

We incur expenses for employee compensation and other operating expenses at our non-US locations in the local currency. In the future, if there is an increase or decrease in our international business activities that are recorded in local currencies, our exposure to fluctuations in foreign currency exchange rates may correspondingly increase or decrease, which could materially adversely affect our business, financial condition, or operating results. Although we may in the future decide to undertake foreign exchange hedging transactions, to date, we have not engaged in currency hedging, and we do not currently have any positions in derivative instruments to hedge our currency risk.

Our indebtedness could adversely affect our cash flow and financial flexibility. Our variable rate indebtedness could subject us to interest rate risk, which could cause our debt service obligations to increase significantly.

For an overview of our current outstanding indebtedness, refer to Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources below. Our long-term debt was $1,072.6 million on December 31, 2025. While our business has historically generated strong cash flow and we are in compliance with all of our debt covenants, borrowings under our current credit facilities are floating rate. As a result, our annual debt service requirements are affected by rising interest rates, and we cannot provide assurance that we will generate and maintain cash flows sufficient to permit us to service our indebtedness. Our ability to make payments on our indebtedness and to fund expected capital expenditures depends on our ability to generate and access cash in the future, which, in turn, is subject to general economic, financial, competitive, regulatory, tax and other factors, many of which are beyond our control. If we cannot refinance or otherwise pay our obligations as they mature and fund our liquidity needs, our business, financial condition, results of operations, cash flows, liquidity, ability to obtain financing, and ability to compete in our industry could be materially adversely affected.

In addition, any borrowings under our current credit facilities bear interest in fluctuating interest rates based on the Secured Overnight Financing Rate (SOFR), which replaced London Interbank Offered Rate (LIBOR) as the reference rate under our credit facilities. There can be no assurance that SOFR will perform in the same way as LIBOR would have at any time, which may result in increased volatility in the interest rates payable under our credit facilities and potentially increase our funding costs.

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Furthermore, the terms of our debt agreements include restrictive covenants that limit, among other things, our and our subsidiaries’ financial flexibility and ability to implement certain transactions. If we are unable to comply with the restrictions and covenants in our debt agreements, there could be a default that, in some cases, if continuing, could result in the accelerated payment of our debt obligations or the termination of borrowing commitments on the part of the lenders under our Credit Agreement. Additionally, our current credit facilities mature in October 2028 and October 2030. We may not be able to renegotiate or obtain additional or new financing on a timely basis or on terms favorable or acceptable to us. If we are unable to refinance or otherwise fund our liquidity needs, our business, financial condition, results of operations, cash flows, liquidity, and ability to compete in our industry could be materially adversely affected. Refer to Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources for a description of the restrictive covenants in our debt agreements.

Our insurance coverage may be inadequate or expensive.

We maintain voluntary and required insurance coverages, including, among others, general liability, property, director and officer, technical professional liability, media liability, network cybersecurity and privacy liability, investment advisory professional liability, fidelity bond, and worker’s compensation/employers liability at a significant annual cost, which is generally expected to increase over time. While we endeavor to maintain coverage that we feel is appropriate to our operations, size, and general risk profile, certain types of claims may not be covered by this insurance. Further, we are unable to predict with certainty the frequency, nature, or magnitude of claims under our policies or our actual claims recovery experience. Our business may be negatively affected if insurance coverage proves to be inadequate or unavailable on acceptable terms or at all.

Risks Related to Ownership of Our Common Stock

The concentrated ownership position of Joe Mansueto could adversely affect our other shareholders.

As of December 31, 2025, Joe Mansueto, our Executive Chairman and Chairman of the Board, owned approximately 37.5% of our outstanding common stock. While Joe has reduced his share ownership of the company in recent years as part of a personal plan to diversify his assets, his concentrated ownership position gives him substantial influence over substantially all matters submitted to our shareholders for approval, including the election and removal of directors and any merger, consolidation, or sale of a significant portion of our assets. This concentration of ownership may disincentivize other shareholders from proposing the election of other persons to our board of directors, delay or prevent a change in control, impede a merger, consolidation, takeover, or other business combination involving Morningstar, discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the company, or result in actions that may be opposed by other shareholders.

Our stock price may not reflect our assessment of intrinsic value and future sales of our common stock by our significant shareholders and fluctuations in our operating results may negatively affect our stock price.

We believe our business has relatively high fixed costs, mainly for compensation and benefits, and low variable costs, making our operating results sensitive to revenue fluctuations. A decline in our revenue may lead to a proportionally larger drop in operating income. As a result of managing our business with a long-term view, we typically do not make significant adjustments to our strategy or cost structure in response to short-term changes. For example, if the US economy were to experience prolonged inflationary pressures, increased compensation and other expenses, could adversely impact our operating results. As we do not provide earnings guidance and our executive team generally doesn’t take individual meetings with investors and analysts, and given limited analyst coverage of our stock, our stock price may not now, or in the future, reflect the intrinsic value of our business and assets.For example, recent market sentiment regarding the impact of AI on software and data company growth prospects has driven meaningful sector-wide stock price declines, including Morningstar's, despite strong operating performance. Additionally, we opportunistically repurchase shares of our common stock when we believe that valuations are attractive relative to our assessment of our intrinsic value. However, the repurchases we make may not yield positive returns in the future and may not create value or increase investor confidence in our stock. If our results or metrics fall short of expectations, our stock price and trading volume may decrease.

Additionally, our stock price may be susceptible to decline if our significant shareholders, including Joe Mansueto, were to sell substantial amounts of our common stock. A significant reduction in ownership by Joe or any other large shareholder over a short period of time could cause the market price of our common stock to fall.

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We cannot guarantee we will pay dividends in the future or make any repurchases of our common stock under our repurchase program.

We have historically paid cash dividends on our common stock, but there is no guarantee that such dividends will continue in the future. Whether our Board authorizes future dividends will depend on a number of factors, including, our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law, and other factors. Moreover, our Board may determine not to repurchase shares of our common stock pursuant to the share repurchase program we authorized on October 29, 2025. Refer to Note 18 of our Notes to our Consolidated Financial Statements for more information regarding our share repurchase program. Any failure to repurchase stock after we have announced our intention to do so may adversely impact our reputation and investor confidence in us and may adversely impact our stock price.

The existence of our share repurchase program could cause our stock price to be higher than it otherwise would and could potentially reduce the market liquidity for our stock. Repurchase programs are also subject to potential excise tax under the Inflation Reduction Act of 2022.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operatio ns

The discussion included in this section, as well as under "I tem 1— Business" and other sections of this 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 "aim," “committed,” “consider,” “estimate,” “future,” “goal,” “is designed to,” “maintain,” “may,” “might,” “objective,” “ongoing,” “could,” “expect,” “intend,” “plan,” “possible,” “potential,” “anticipate,” “believe,” “predict,” “prospects”, “continue,” “seek,” “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 achieve the anticipated benefits of the Center for Research in Security Prices, LLC (CRSP) acquisition;

• failing to maintain and protect our brand, independence, and reputation;

• failing to prevent and/or mitigate cybersecurity events and the failure to protect confidential information, including personal information about individuals;

• changing economic and market conditions, including prolonged volatility, recessions, or downturns affecting the financial, data and software sectors and global financial markets, fluctuating interest rates, and the impacts of global trade policies, may negatively impact our financial results, including those of our asset-based businesses;

• compliance failures, regulatory action, or changes in or expansion of laws applicable to our regulated businesses;

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

• the impact of AI technologies on our business, as well as legal and reputational risks as they are incorporated into our products and tools;

• failing to detect errors in our products or methodology or our products performing improperly due to defects, malfunctions, or similar problems;

• failing to recruit, develop, and retain qualified employees;

• failing to scale our operations and increase productivity in order to implement our business plans and strategies, including failing to manage costs related thereto;

• liability for any losses that result from errors in our automated advisory tools or errors in the use of the information and data we collect;

• inadequacy of our operational risk management and business continuity programs to address materially disruptive events;

• our strategic transactions, acquisitions, dispositions, and investments in companies or technologies failing to yield expected business or financial benefits, negatively impacting our operating results and our ability to deliver long-term value to shareholders;

• triggering events for impairment of goodwill or assets;

• failing to maintain growth across our businesses due to changes in geopolitics and the regulatory landscape;

• failing to recognize deferred revenue;

• 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 (and rising interest rates) on our cash flow and financial and operational flexibility;

• liability, costs, and reputational risks relating to environmental, social, and governance considerations;

• our dependence on third-party service providers in our operations;

• inadequacy of our insurance coverage;

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• challenges in accounting for tax complexities in the global jurisdictions we operate in could materially affect our tax obligations and tax rates;

• the potential impact of vendor consolidation and clients' strategic decisions to replace our products and services with in-house products and services;

• our ability to build and maintain short-term and long-term shareholder value and pay dividends to our shareholders;

• our ability to repurchase shares of our common stock;

• our ability to maintain existing business and renewal rates and to gain new business;

• the impact of recently issued accounting pronouncements on our consolidated financial statements and related disclosures;

• impact on our stock price due to market conditions, future sales of our common stock and fluctuations in our operating results; and

• failing to protect our intellectual property rights or claims of intellectual property infringement against us.

A more complete description of these risks and uncertainties, among others, can be found in Item 1A—Risk Factors of this Report. 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 future filings with the SEC on Forms 10-K, 10-Q, and 8-K.

This section includes comparisons of certain 2025 financial information to the same information for 2024. Year-to-year comparisons of the 2024 financial information to the same information for 2023 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 28, 2025.

All dollar and percentage comparisons, which are often accompanied by words such as “increase,” “decrease,” “grew,” “declined,” “was up,” “was down,” “was flat,” or “was similar” refer to a comparison with the prior year unless otherwise stated.

Understanding Our Company

Key Business Characteristics

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

Our strategy is to deliver insights and experiences that make us essential to the investor workflow.

Segments

The company has seven operating segments which are presented as the following five reportable segments: Morningstar Direct Platform, PitchBook, Morningstar Credit, Morningstar Wealth, 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 in a manner consistent with how 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 6 of the Notes to our Consolidated Financial Statements in Part II of this Report.

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Revenue

We offer an extensive line of investment-related products and services for individual and institutional investors in public and private capital markets, financial advisors and wealth managers, alliances and redistributors, asset managers, retirement plan providers, advisors and sponsors, and issuers of fixed-income securities.

Our segments sell many of our research and data products and services through license agreements on either a per user or enterprise-basis. Morningstar Direct Platform and PitchBook generate most of our license-based revenue. Our license agreements typically range from one to three years and are accounted for as subscription services available to customers and not as licenses under the accounting guidance.

Our Morningstar Wealth and Morningstar Retirement segments generate most of our asset-based revenue where basis points and other fees are charged for assets under management or advisement (AUMA). Our asset-based arrangements typically range from one to three years.

Our transaction-based revenue includes revenue that is one time in nature and related Morningstar Credit recurring revenue primarily derived from surveillance and research.

Deferred Revenue

We invoice some of our clients and collect cash in advance of providing services or fulfilling subscription services to our customers. Deferred revenue totaled $607.1 million, of which $586.1 million was classified as a current liability with an additional $21.0 million included in long-term liabilities, at the end of 2025. We expect to recognize this deferred revenue in future periods as we fulfill the service obligations under our agreements.

Operating Expense

We classify our operating expense into separate categories for cost of revenue, sales and marketing, general and administrative, and depreciation and amortization, as described below.

• Cost of revenue. This category includes compensation expense for employees who produce the products and services we deliver to our customers. For example, this category covers production teams and analysts who write investment research reports. It also includes compensation expense for programmers, designers, and other employees who develop new products and enhance existing products. In some cases, we capitalize the compensation costs associated with certain software development projects resulting in reduced expense that we would otherwise report in this category. Cost of revenue also includes other expenses, such as third-party data purchases and data lines as well as professional fees for third-party development activities.

• Sales and marketing. This category includes compensation expense for our sales teams, product managers, and marketing professionals. We also include the cost of advertising, digital marketing campaigns, and other marketing and promotion efforts in this category.

• General and administrative. This category includes compensation expense for our management team and other corporate functions, including employees in our compliance, finance, human resources, and legal departments. It also includes costs for corporate systems and facilities.

• Depreciation and amortization. Our capital expenditures mainly relate to capitalized software development costs, information technology equipment, and leasehold improvements. We amortize capitalized software development costs on a straight-line basis over their estimated economic life, generally three years. We depreciate property and equipment using the straight-line method based on the useful lives of the assets, which range from three to seven years. We amortize leasehold improvements over the lease term or their useful lives, whichever is shorter. We also include amortization related to identifiable intangible assets, which is mainly driven by acquisitions, in this category. We amortize intangible assets using the straight-line method over their estimated economic useful lives, which range from one to 20 years.

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International Operations

As of December 31, 2025, we had wholly-owned subsidiaries in 31 countries outside of the US and included their results of operations and financial condition in our consolidated financial statements. We also have investments outside of the US, and where we have significant influence, we apply the equity method of accounting.

How We Evaluate Our Business

When our analysts evaluate a stock, they focus on assessing the company's estimated intrinsic value, which is based on estimated future cash flows, discounted to their value in today's dollars. Our approach to evaluating our own business works the same way.

Our goal is to increase the intrinsic value of our business over time, which we believe is the best way to create value for our shareholders. We do not make public financial forecasts for our business because we want to avoid creating any incentives for our management team to make speculative statements about our financial results that could influence our stock price or take actions that help us meet short-term forecasts, but may not build long-term shareholder value.

We pro vide the following measures that can help investors generate their own assessment of how our intrinsic value has changed over time:

•     Revenue;

•    Operating Income;

•    Operating Margin; and

•    Operating Cash Flow.

Non-GAAP Measures

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

• "Organic Revenue" is consolidated revenue before (1) acquisitions and divestitures, (2) adoption of new accounting standards or revisions to accounting practices (accounting changes), and (3) the effect of foreign currency translations.

• "Adjusted Operating Income (Loss)" is consolidated operating income (loss) excluding (1) intangible amortization expense, (2) the impact of merger, acquisition, and divestiture-related activity which, when applicable, may include certain non-recurring expenses such as pre-deal due diligence, transaction costs, contingent consideration, severance, and post-close integration costs (M&A-related expenses), and (3) certain other one-time, non-recurring items which management does not consider when evaluating ongoing performance (other non-recurring items).

• "Adjusted Operating Margin" is operating margin excluding (1) intangible amortization expense, (2) M&A-related expenses, and (3) other non-recurring items.

• "Free Cash Flow" is cash provided by or used for operating activities less capital expenditures.

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 promulgated under GAAP.

We present organic revenue because we believe it helps investors better compare our period-over-period results, and our management team uses this measure to evaluate the performance of our business. 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 (including sale of assets), we exclude revenue in the prior-year period for which there is no comparable revenue in the current period.

We present adjusted operating income (loss) 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 intangible amortization expense, M&A-related expenses, and certain other one-time, non-recurring items.

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We present free cash flow as a supplemental disclosure to help investors better understand how much cash is available after making capital expenditures. Our management team uses free cash flow as a metric to evaluate the health of our business, and it should not be considered an indicator of liquidity.

In addition to the measures described above, we calculate revenue renewal rates to evaluate how successful we've been in maintaining existing business for products and services that have revenue associated with periodic renewals. We use the annual contract value method, which tracks the dollar value of renewals compared with the total dollar value of contracts up for renewal during the period. In 2025, we revised our annual renewal rate methodology to include changes in the contract value in the renewal amount, including updates made mid-contract. Prior to 2025, mid-contract updates were not included except in the calculation of PitchBook's revenue renewal rate. We use the actual revenue for the previous comparable fiscal period as the base rate for calculating the renewal percentage. The renewal rate excludes setup and customization fees and contract renewals that were pending as of mid-January 2026.

Regulatory Trends Affecting Our Business

In addition to the industry developments described under Part I, Item 1. Business - "Our Strategy," there are several longer-term regulatory trends we consider relevant to our business, as summarized below and as described in more detail in Part I, Item 1. Business - “Government Regulation” and in Part I, Item 1A - “Risk Factors” of this Report. The increased complexity and extent of regulation globally is a challenge for both Morningstar and its clients, and we continue to invest in our compliance organization, processes, and controls. Additionally, current regulatory uncertainty in the US — including changes and the pace of changes enacted by the current presidential administration and related leadership changes at US government agencies such as the US Securities and Exchange Commission, as well as recent and potential future US Supreme Court rulings — may impact our business.

EU and UK Regulatory Divergence

For our regulated businesses in the UK and EU, following the UK’s Financial Services and Markets Act 2023, there is a growing risk of divergence between the specifics of the EU and UK regulatory regimes, as the UK continues to adapt its post-Brexit financial services regulatory framework and tailors its rules to suit the UK market, while seeking to strengthen its position in wholesale markets more generally.

With respect to our credit ratings business, divergence risks further increase the costs and complexity of regulatory compliance. The UK Financial Conduct Authority issued a five-year strategy in early 2025. Morningstar’s wealth management business has noted no immediate impact but continues to monitor and evaluate for any divergence risks.

Increased ESG Regulation and Scrutiny

Interest from investors, regulators, and other relevant stakeholders in firms adopting ESG-related business and strategies persists. Morningstar is impacted by these trends on a corporate level, as a US public company with international operations, and on a business level. Specifically, we anticipate that this area will experience further regulatory developments likely to have long-term impacts on our delivery of products and services, customer interactions, physical operations, technology systems, and dependencies on third parties.

Morningstar is monitoring proposed ESG-related laws and regulations in the US, EU, and in other jurisdictions relevant to its business activities, including those developments aimed at limiting or challenging ESG-related practices. The future of any US regulation of sustainability matters is uncertain and may not align with current or future regulations in other jurisdictions, including the EU. These and other potential regulations may impact not only the scope of our disclosure obligations and the products and services we provide to customers but also present an opportunity to guide and inform investors who are looking to understand the regulations and develop their own workflows to support their compliance with new requirements.

The politicization of ESG-related business activities and investments has increased in recent years, particularly in the US. This politicization may result in Morningstar facing heightened scrutiny in this regard, and may result in the company incurring increased costs in addressing related inquiries. Morningstar continues to closely monitor the ESG landscape.

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Cybersecurity, Data Privacy and Artificial Intelligence

Data privacy regulation continues to proliferate, as numerous national and state jurisdictions have adopted or are considering new data privacy regulations. As a related matter, issues of cybersecurity as they relate to the identification and mitigation of cyber threats also continue to grow in prominence and laws governing data breaches continue to proliferate globally. Financial regulators have also increased their scrutiny of the data protection practices of the entities, such as Morningstar, that they oversee.

The introduction of the EU’s Digital Operational Resilience Act (DORA) corresponds with a growing concern among financial services regulators as to the increasing influence of information technology service providers, and the risks to financial stability posed by dependency on those firms. Ensuring resiliency necessarily captures group (rather than individual entity) arrangements and is therefore both costly and complex. Morningstar is monitoring related developments in other countries that may follow the EU’s lead.

Regulators in various global jurisdictions have adopted or are considering regulations governing AI technologies, such as the EU AI Act. Additionally, regulators have sought to clarify that existing regulations apply to novel use cases involving AI technologies. Combined, this regulatory activity creates a complex and potentially costly compliance environment as Morningstar deploys AI technologies in its products and in tools used in the workplace.

Other Regulatory Trends

Global Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations are expanding. For example, the EU’s enactment of its 6th AML Directive, enhanced beneficial‑ownership verification under the US Corporate Transparency Act, and instituted stricter risk‑based standards from the Financial Action Task Force (FATF). These developments increase compliance complexity for financial services providers and their affiliates. For Morningstar, this may require additional investment in technology, data quality, and due‑diligence processes, as well as increased oversight of third‑party vendors. Morningstar is actively monitoring all relevant updates to AML and KYC regulation to ensure compliance with its obligations.

Finally, our company is impacted by government regulation and policies focused on macroeconomic trends such as inflation, trade, and unemployment. Central banks’ increases in interest rates to combat inflationary pressures increases our interest expense on our variable rate indebtedness, while the volatile rate environment can impact credit issuance volumes, impacting our credit rating business, as well as M&A activity more broadly. Our compensation expense reflects rising wage scales in many of the markets where we operate as unemployment rates remain low. Overall, our business, balance sheet, technological infrastructure, and teams have shown resilience and flexibility navigating global macroeconomic trends.

Consolidated Results

Key metrics (in millions)

Change

Revenue

Operating income

Operating margin

Cash provided by operating activities

Capital expenditures

Free cash flow

Cash used for investing activities

NMF

Cash used for financing activities

pp — percentage points

NMF — not meaningful

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Consolidated Revenue

Revenue by type

(in millions)

Change

Morningstar Direct Platform

License-based

Asset-based

Transaction-based

Morningstar Direct Platform total

PitchBook

License-based

Asset-based

Transaction-based

PitchBook total

Morningstar Credit

License-based

Asset-based

Transaction-based

Morningstar Credit total

Morningstar Wealth

License-based

Asset-based

Transaction-based

Morningstar Wealth total

Morningstar Retirement

License-based

Asset-based

Transaction-based

Morningstar Retirement total

Corporate and All Other (1)

License-based

Asset-based

Transaction-based

Corporate and All Other total

License-based

Asset-based

Transaction-based

Consolidated revenue

(1) 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 revenue. Revenue from Morningstar Sustainalytics was $112.0 million in 2025 and $117.3 million in 2024. Revenue from Morningstar Indexes was $87.7 million in 2025 and $84.7 million in 2024.

Our consolidated revenue rose $170.4 million, or 7.5%, in 2025, with foreign currency movements increasing revenue by $12.7 million.

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License-based revenue, which represents subscription services available to customers, increased 5.8%, or 5.6% on an organic basis. Reported and organic revenue grow th were primarily driven by strong demand for PitchBook and Morningstar Direct Platform products.

Asset-based revenue increased 2.9%, or 7.8% on an organic basis, with both reported and organic revenue growth reflecting increases in Morningstar Retirement and Morningstar Wealth.

Transaction-based revenue increased 21.0%, or 20.5% on an organic basis, primarily due to growth in Morningstar Credit.

Organic revenue

Organic revenue increased 8.0% in 2025, driven primarily by strong performance from Morningstar Credit, PitchBook, and Morningstar Direct Platform.

The table below shows a reconciliation of organic revenue to the most directly comparable GAAP financial measure.

(in millions)

Change

Consolidated revenue

Acquisitions

NMF

Divestitures

NMF

Effect of foreign currency translations

NMF

Organic revenue

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Revenue by geographical area

(in millions)

Change

United States

Asia

Australia

Canada

Continental Europe

United Kingdom

Other

Total International

Consolidated revenue

International revenue accounted for approximately 28% of our consolidated revenue in 2025 and 2024. Approximately 59% of international revenue was generated from Continental Europe and the UK in 2025. Revenue from international operations increased $54.3 million, or 8.5%, driven by strong demand for products across Morningstar Credit, Morningstar Direct Platform, and Morningstar Wealth .

Revenue Renewal Rates

As discussed in How We Evaluate Our Business , we calculate revenue renewal rates to assess our success in retaining business for products and services with renewable revenue streams. The renewal rate for license‑based products reflects several factors, including the impact of price changes, increases in the number of users or client bases at renewal, client cancellations, and other changes to contract value upon renewal. As a result, renewal rates may be above or below 100%. In 2025, we revised our annual renewal rate methodology as discussed in more detail in How We Evaluate Our Business. In addition, the revenue renewal rate for Morningstar Advisor Workstation was not available in 2025 due to ongoing updates to our billing system and a product transition.

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Consolidated Operating Results

(in millions)

Change

Cost of revenue

% of revenue

Sales and marketing

% of revenue

General and administrative

% of revenue

Depreciation and amortization

% of revenue

Total operating expense

% of revenue

Cost of revenue

Cost of revenue increased $57.2 million, or 6.4%, in 2025. Higher compensation expense of $44.0 million was the largest contributor to the increase, primarily driven by an increase in salaries related in part to the company's annual merit increase and higher severance costs of $14.4 million in 2025 related to the targeted reorganizations in certain areas of the business including Morningstar Sustainalytics and Morningstar Direct Platform as well as the sunsetting of Morningstar Wealth's Office product.

Sales and marketing

Sales and marketing expense increased $26.0 million, or 5.9%, in 2025. Higher compensation expense of $15.5 million was the largest contributor, mainly due to severance costs associated with targeted reorganizations in PitchBook, as well as increased sales commission expense and salaries. Advertising and marketing costs increased $7.2 million during 2025 due to increased costs associated with marketing and brand campaigns, as well as paid advertising.

General and administrative

General and administrative expense increased $6.8 million, or 2.1%, in 2025. Higher compensation expense was the largest contributor to the increase, driven primarily by higher company-sponsored benefits and salaries.

Depreciation and amortization

Depreciation and amortization decreased $0.5 million, or 0.3% in 2025, primarily due to a decrease in intangible amortization expense, which was partially off set by an increase in depreciation expense. Depreciation expense increased primarily due to higher capitalized software costs for product enhancements in prior periods.

Intangible amortization expense decreased as certain intangible assets from some of our earlier acquisitions became fully amortized.

Gain on sale of customer assets

We recorded a $22.7 million gain in 2025 from the contingent payment related to the sale of customer assets from the US Morningstar Wealth Turnkey Asset Management Platform (TAMP) to AssetMark (sale of US TAMP assets), compared to a $64.0 million gain in 2024. Refer to Note 10 of the Notes to our Consolidated Financial Statements for additional information.

Consolidated Operating Income and Operating Margin

(in millions)

Change

Operating income

Operating margin

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Consolidated operating income increased $41.8 million, or 8.6%, in 2025, reflecting an increase in revenue of $170.4 million and a $22.7 million contingent payment gain related to the company's sale of US TAMP assets in 2024, partially offset by an $89.5 million increase in operating expense. During 2024, the company recorded a $64.0 million gain related to the company's sale of US TAMP assets. Operating margin was 21.5% in 2025, an increase of 0.2 percentage points compared with 2024 . Excluding the gain on the sale of US TAMP assets during both periods, reported operating income would have increased 19.7%. The gain on the sale of US TAMP assets had a 0.9 and 2.8 percentage point impact on operating margin in 2025 and 2024, respectively.

Adjusted Operating Income and Adjusted Operating Margin

We reported adjusted operating income of $582.9 million in 2025 compared with $493.8 million in 2024. The table below shows a reconciliation of adjusted operating income to the most directly comparable GAAP financial measure.

(in millions)

Change

Operating income

Intangible amortization expense

M&A-related expenses

Other non-recurring items (1)

NMF

Adjusted operating income

Morningstar Direct Platform

PitchBook

Morningstar Credit

Morningstar Wealth

NMF

Morningstar Retirement

Corporate and All Other (2)

NMF

Adjusted operating income

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We reported adjusted operating margin of 23.8% in 2025 and 21.7% in 2024. The table below shows a reconciliation of adjusted operating margin to the most directly comparable GAAP financial measure.

Change

Operating margin

Intangible amortization expense

M&A-related expenses

Other non-recurring items (1)

Adjusted operating margin

(1) Other non-recurring items primarily reflect the gain on sale of US TAMP assets for the years ended December 31, 2025 and 2024.

(2) Corporate and All Other includes unallocated corporate expenses of $186.1 million in 2025 and $181.4 million in 2024, as well as adjusted operating income/loss from Morningstar Sustainalytics and Morningstar Indexes. Unallocated corporate expenses include finance, human resources, legal, and other management-related costs that are not considered when segment performance is evaluated.

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 Direct Platform

The following table presents the results for Morningstar Direct Platform:

(in millions)

Change

Revenue

Adjusted operating income

Adjusted operating margin

Morningstar Direct Platform total revenue increased $42.5 million, or 5.4%, in 2025. Revenue grew 5.7% on an organic basis, driven by increases in Morningstar Direct and Morningstar Data. Organic revenue growth excludes revenue associated with the divested Commodity and Energy Data business beginning in the fourth quarter of 2024 and foreign currency impact.

Starting in the first quarter of 2025, the company changed the name of this reportable segment to Morningstar Direct Platform. It also changed the composition of the key product areas within the segment (Morningstar Data, Morningstar Direct, and Morningstar Advisor Workstation). There were no changes to the overall composition of the reportable segment.

Morningstar Data contributed $34.8 million to Morningstar Direct Platform revenue growth, with revenue increasing 9.0%, or 7.4% on an organic basis. Revenue growth was driven in part by expansion with existing clients supported by new use cases, with particular strength in managed investment data and Morningstar Essentials.

Morningstar Direct contributed $19.3 million to Morningstar Direct Platform revenue growth, with revenue increasing 6.9%, or 5.8%, on an organic basis reflecting growth across all major geographies supported by increased revenue per license and expansion with existing clients in reporting solutions. Morningstar Direct licenses were flat compared to the prior-year period.

Morningstar Direct Platform adjusted operating income increased $14.0 million, or 3.9%, and adjusted operating margin decreased 0.6 percentage points in 2025. The decline in adjusted operating margin reflected higher compensation costs due to annual merit increases and severance costs, the impact of the sale of the company’s Commodity and Energy Data business in 2024, and higher depreciation related to capitalized software costs for prior-period product enhancements. Morningstar Direct Platform's adjusted operating income includes the impact of $4.3 million in severance costs primarily related to targeted reorganizations.

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Morningstar Direct Platform depreciation expense was $44.7 million and $37.9 million for 2025 and 2024, respectively.

PitchBook

The following table presents the results for PitchBook:

(in millions)

Change

Revenue

Adjusted operating income

Adjusted operating margin

PitchBook total revenue increased $53.4 million, or 8.6%, in 2025. Revenue grew 8.5% on an organic basis.

Growth was primarily driven by the PitchBook platform with contributions from the small-but-growing direct data business. PitchBook platform growth drivers reflected strength in PitchBook's core investor and advisor client segments. This was partially offset by continued softness in the corporate client segment, especially with smaller firms with more limited use cases. PitchBook licensed users were relatively flat compared to the prior-year period, reflecting the addition of new logos offset by churn.

PitchBook adjusted operating income increased $23.7 million , or 12.7%, and adjusted operating margin increased 1.2 percentage points in 2025. The increase in adjusted operating income and margin was primarily driven by higher revenue, partially offset by increased compensation costs. The increase in compensation was primarily driven by higher salaries resulting from annual merit increases, while headcount remained largely flat compared to the prior-year period. PitchBook's adjusted operating income includes the impact of $4.5 million in severance costs primarily related to targeted reorganizations.

PitchBook depreciation expense was $33.6 million and $31.8 million for 2025 and 2024, respectively.

Morningstar Credit

The following table presents the results for Morningstar Credit:

(in millions)

Change

Revenue

Adjusted operating income

Adjusted operating margin

Morningstar Credit total revenue increased $63.3 million, or 21.7%, in 2025. Revenue increased 20.9% on an organic basis. Revenue grew across asset classes and geographies supported by a healthy issuance market, with particular strength in US commercial mortgage- and asset-backed securities ratings revenue and Canadian and European corporate ratings revenue. Organic revenue growth excludes revenue associated with the Dealview Technologies Limited (DealX) acquisition, which was completed in the first quarter of 2025, and foreign currency impact.

Morningstar Credit adjusted operating income increased $39.2 million, or 51.9%, and adjusted operating margin increased 6.4 percentage points in 2025. Adjusted operating income and margin growth in 2025 was driven by higher revenue, partially offset by higher compensation costs. The increase in compensation was primarily driven by higher salaries and benefits due to increased headcount to support growth and higher bonus expense, reflecting strong performance relative to targets.

Morningstar Credit depreciation expense was $8.1 million and $8.9 million for 2025 and 2024, respectively.

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Morningstar Wealth

The following table presents the results for Morningstar Wealth:

(in millions)

Change

Revenue

Adjusted operating income (loss)

NMF

Adjusted operating margin

Morningstar Wealth total revenue increased $3.0 million, or 1.2%, in 2025. Revenue grew 7.8% on an organic basis, primarily driven by growth in Investment Management and increased advertising sales. Organic revenue growth excludes platform revenue associated with US TAMP assets sold to AssetMark, interim service fees received from AssetMark, and foreign currency impact. Reported and organic revenue growth includes a $5.1 million negative impact from the ongoing sunsetting of Morningstar Office.

Asset-based revenue is based on quarter-end, prior quarter-end, or average asset levels during each quarter, which are often reported on a one-quarter lag for certain Investment Management products including Morningstar Model 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 December 31,

(in billions)

Change

Morningstar Model Portfolios

Institutional Asset Management

Asset Allocation Services

Investment Management (total)

Investment Management contributed $0.2 million to Morningstar Wealth revenue growth, with revenue increasing 0.1% on a reported or 12.3% on an organic basis. Growth was primarily supported by higher revenue for Morningstar Model Portfolios and the International Wealth Platform. Rep orted AUMA, calculated using the most recently available average quarterly or monthly data, increased 16.9% to $72.8 billion compared with the prior year. The increase in AUMA was helped by strong market performance, which drove higher asset values, and positive net flows to Morningstar Model Portfolios on third-party platforms and to the International Wealth Platform, partially offset by net outflows related to the sale of US TAMP assets to AssetMark.

Morningstar Wealth adjusted operating income increased $18.9 million and adjusted operating margin increased 7.5 percentage points in 2025. Morningstar Wealth's adjusted operating income (loss) in the current and prior-year quarter excludes the gain on the sale of US TAMP assets, as well as related expenses.

Morningstar Wealth depreciation expense was $14.9 million and $18.5 million for 2025 and 2024, respectively.

Morningstar Retirement

The following table presents the results for Morningstar Retirement:

(in millions)

Change

Revenue

Adjusted operating income

Adjusted operating margin

Morningstar Retirement total revenue increased $10.5 million, or 8.3%, on both a reported and organic basis, in 2025. AUMA, calculated using the most recently available average quarterly or monthly data, increased 10.6% to $305.2 billion compared with the prior year, reflecting market gains and positive net flows, supported by strong growth in traditional and Advisor Managed Accounts, fiduciary services, and custom models.

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Asset-based revenue is based on quarter-end, prior quarter-end, or average asset levels during each quarter, which are often reported on a one-quarter lag. The timing of this client asset reporting and the structure of our contracts often results in a lag between market movements and the impact on revenue. The following table summarizes our approximate Morningstar Retirement AUMA:

As of December 31,

(in billions)

Change

Managed Accounts

Fiduciary Services

Custom Models/CITs

Morningstar Retirement (total)

Morningstar Retirement adjusted operating incom e increased $2.1 million , or 3.2%, and adjusted operating margin de creased 2.4 percentage points in 2025. The decline in adjusted operating margin was primarily driven by higher compensation costs, which included the impact of the annual merit increase and increased commissions, as well as higher marketing expenses, including costs related to campaign tracking and management.

Morningstar Retirement depreciation expense was $10.4 million and $10.0 million for 2025 and 2024, respectively.

Corporate and All Other

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.

In 2025, Corporate and All Other revenue decreased $2.3 million, or 1.1% on a reported basis.

Morningstar Sustainalytics revenue decreased $5.3 million or 4.5%. Organic revenue decreased 7.1%, largely driven by the continued streamlining of the licensed-ratings offering as the company transitions to a model focused on licensing the use and distribution of existing ratings and underlying data, as well as softness in second-party opinions.

Morningstar Indexes revenue increased $3.0 million or 3.5%. Organic revenue increased 3.4% primarily driven by higher licensed data revenue. Market performance and net inflows over the trailing 12-months increased asset value linked to Morningstar Indexes of 19.6% to $252.3 billion.

Non-operating income (expense), n et, Equity in investments of unconsolidated entities, and Effective tax rate and Income tax expense

Non-operating income (expense), net

The following table presents the components of non-operating income (expense), net:

(in millions)

Interest income

Interest expense

Gain on sale of business

Other income (expense), net

Non-operating income (expense), net

Interest income reflects interest from our cash, cash equivalents, and investment portfolio. Interest expense mainly relates to the Amended 2022 Credit Agreement, the 2025 Credit Agreement, and the 2030 Notes.

Effective September 30, 2024, we sold our Commodity and Energy Data business from the Morningstar Direct Platform segment for a purchase price of $52.4 million. In the third quarter of 2024, we recorded a $45.3 million gain on sale of business in the Consolidated Statements of Income. Refer to Note 10 of the Notes to our Consolidated Financial Statements for additional information.

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Other income (expense), net primarily consists of foreign currency exchange gains (losses) and gains (losses) on investments.

Equity in investments of unconsolidated entities

(in millions)

Equity in investments of unconsolidated entities

Equity in investments of unconsolidated entities primarily reflects losses from our unconsolidated entities and impairment. We recorded a $12.4 million impairment loss in 2024 related to our investment in SmartX Advisory Solutions. We describe our investments in unconsolidated entities in more detail in Note 11 of the Notes to our Consolidated Financial Statements.

Effective tax rate and income tax expense

The following table summarizes the components of our effective tax rate:

(in millions)

Income before income taxes and equity in investments of unconsolidated entities

Equity in investments of unconsolidated entities

Income before income taxes

Income tax expense

Effective tax rate

Our effective tax rate in 2025 was 24.5%, an increase of 2.6 percentage points, compared with 21.9% in the prior year. The company's 2024 effective tax rate was favorably impacted by the book gain in excess of taxable gain on the sale of its Commodity and Energy Data business and was offset by deferred taxes that we recorded with respect to unremitted foreign earnings.

The Organization for Economic Co-operation and Development (OECD) has proposed a global minimum tax of 15% of reported profits (Pillar Two) that has been agreed upon in principle by over 140 countries. Since the proposal, many countries incorporated Pillar Two model rule concepts into their domestic laws. Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar Two slightly different than the model rules and on different timelines. On January 5, 2026, the OECD announced changes to the model rules to include the “side by side” arrangement, which contains simplification measures as well as an exemption for US parented companies from certain aspects of the Pillar Two regime. The updated model rules will need to be enacted into local legislation to be effective. Pillar Two did not have a material impact to our consolidated financial statements as of December 31, 2025. 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.

On July 4, 2025, the One Big Beautiful Bill Act (the OBBB) was enacted in the United States. The OBBB contains several changes impacting corporate taxpayers, including modifications to the capitalization of research and development expenses, changes to calculations for the limitation on deductions for interest expense, and the reestablishment of accelerated depreciation (full expensing) on fixed assets. The OBBB also includes adjustments to the calculation of certain international tax framework provisions, which were initially established by the Tax Cuts and Jobs Act of 2017. The OBBB has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The OBBB did not have a material impact on our consolidated financial statements as of December 31, 2025.

Liquidity and Capital Resources

As of December 31, 2025, we had cash, cash equivalents, and investments of $528.7 million, down $22.3 million from the prior year.

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Cash provided by operating activities is our main source of cash. In 2025, cash provided by operating activities was $589.7 million, reflecting $560.8 million of net income adjusted for non-cash items and $28.9 million i n changes from our net operating assets and liabilities. Cash provided by operating activities decreased $1.9 million, from $591.6 million in 2024 primarily driven by higher income tax and bonus tax payments, largely offset by higher cash earnings.

Cash used for investing activities increased $118.0 million from $21.3 million in 2024 to $139.3 million in 2025. In 2025, we paid a total of $39.0 million, net of cash acquired, related to acquisitions. We received $22.7 million and $65.0 million in proceeds from sale of US TAMP assets in 2025 and 2024, respectively. We also received $52.4 million in proceeds from the sale of our Commodity and Energy Data business during 2024.

Cash used for financing activities increased $130.3 million from $384.4 million in 2024 to $514.7 million in 2025. Financing cash flows reflected a $775.4 million increase in share repurchase activity in 2025, offset by $375.0 million net proceeds from our financing arrangements in 2025 as compared to $274.4 million net repayments in 2024.

We believe our available cash balances and investments, along with cash generated from operations and our 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 were held by our operations outside the US as of December 31, 2025, up from 76% as of December 31, 2024. In the fourth quarter of 2024, we determined $142.0 million in earnings of certain of our foreign subsidiaries to be no longer permanently reinvested. During 2025, we completed a one-time repatriation of these earnings totaling $150.0 million to the US. We generally consider the remainder of the accumulated undistributed earnings of most of our foreign subsidiaries to be indefinitely reinvested, and it is not practicable to determine the amount of the unrecognized deferred tax liability related to these earnings. The amount of indefinitely reinvested earnings is based on our estimates and assumptions. This amount is subject to change in the normal course of business as we evaluate operational cash flows, working capital and regulatory requirements, investment needs, and other factors. Accordingly, we regularly update our earnings and profits analysis to reflect these developments.

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

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Credit Agreement

On October 31, 2025, the company terminated the 2022 Credit Agreement and entered into a new senior credit agreement (the 2025 Credit Agreement). The 2025 Credit Agreement provides the company with a multi-currency credit facility with a borrowing capacity of up to $1.5 billion, including a five-year $750.0 million revolving credit facility (the 2025 Revolving Credit Facility), a five-year delayed draw term facility of up to $375.0 million (the 2025 A-1 Facility), and a three-year term facility of up to $375.0 million (the 2025 A-2 Facility and, together with the 2025 A-1 Facility, the 2025 Term Facility; and, together with the 2025 Revolving Credit Facility, the 2025 Facility). The 2025 Credit Agreement also provides for the issuance of up to $50.0 million of letters of credit and a $100.0 million sublimit for a swingline facility under the 2025 Revolving Credit Facility.

As of December 31, 2025, the total outstanding debt under the 2025 Credit Agreement was $723.5 million, net of debt issuance costs, including $373.5 million drawn under the 2025 A-2 Facility and $350.0 million drawn under the 2025 Revolving Credit Facility. The company's borrowing availability includes $400.0 million under the 2025 Revolving Credit Facility and $375.0 million under the 2025 A-1 Facility.

The interest rate applicable to loans under the 2025 Credit Agreement will be based on the SOFR, SONIA, EURIBOR, Term CORRA, or BBSY depending on the currency of the loan and will include an applicable margin for such loans, which ranges between 1.05% and 1.425%, based on Morningstar’s consolidated net leverage ratio and other applicable adjustments as further described in the 2025 Credit Agreement.

Refer to Note 3 of the Notes to our Consolidated Financial Statements for additional information regarding our credit arrangements.

Private Placement Debt Offering

On October 26, 2020, we completed the issuance and sale of $350.0 million a ggregate principal amount of 2.32% senior notes due October 26, 2030 (the 2030 Notes), in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended. Proceeds were primarily used to pay off a portion of the company's outstanding debt under a prior credit agreement. Interest on the 2030 Notes will be paid semi-annually on each October 30 and April 30 during the term of the 2030 Notes and at maturity, with the first interest payment date occurring on April 30, 2021. As of December 31, 2025, our total outstanding debt, net of issuance costs, under the 2030 Notes was $349.1 million.

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Compliance with Covenants

Each of the 2025 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 net funded indebtedness (in the case of the 2025 Credit Agreement ) or consolidated funded indebtedness (in the case of the 2030 Notes) to consolidated EBITDA, which are evaluated on a quarterly basis. We were in compliance with these financial covenants as of December 31, 2025, with consolidated funded indebtedness to consolidated EBITDA calculated at approximately 1.3x.

Share Repurchases

On December 6, 2022, the board of directors approved a share repurchase program that authorized the company to repurchase up to $500.0 million in shares of the company's outstanding common stock, effective January 1, 2023 (the prior share repurchase program). The prior share repurchase program was completed in October 2025.

On October 29, 2025, the board of directors approved a new share repurchase program that authorizes the company to repurchase up to $1.0 billion in shares of the company's outstanding common stock, effective October 31, 2025 (the new share repurchase program). The new share repurchase program, which is set to expire on October 30, 2028, replaced the prior share repurchase program. We may repurchase shares pursuant to the new share repurchase program from time to time at prevailing market prices on the open market or in private transactions in amounts that we deem appropriate.

For the year ended December 31, 2025, we repurchased a total of 1,873,729 shares for $487.0 million under the prior share repurchase program, thereby completing the program, and 1,402,849 shares for $300.0 million under the new share repurchase program. As of December 31, 2025, we have $700.0 million available for future repurchases under the new share repurchase program.

Dividends

We also paid dividends of $76.9 million in 2025. In December 2025, our board of directors approved a regular quarterly dividend of $0.50 per share, or $19.9 million, payable on January 30, 2026 to shareholders of record as of January 2, 2026. While subsequent dividends will be subject to board approval, we expect to make regular quarterly dividend payments o f 50.0 cents per share in 2026.

Other

We expect to continue making capital expenditures in 2026, primarily for computer hardware, software, and leasehold improvements for new and existing office locations.

We also expect to use a portion of our cash and investments balances in the first quarter of 2026 to make annual bonus payments of approxima tely $165.6 million rela ted to the 2025 bonus program compared with $163.5 million paid in the first quarter of 2025 for the 2024 bonus program.

On February 2, 2026, we completed our previously announced acquisition of CRSP for a closing cash payment of approximately $365.0 million, subject to customary adjustments. The acquisition was financed through borrowings under the 2025 A-1 Facility, which were drawn in 2026.

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Consolidated Free Cash Flow

T he table below shows a reconciliation of free cash flow to the most directly comparable GAAP financial measure.

(in millions)

Change

Cash provided by operating activities

Capital expenditures

Free cash flow

We generated free cash flow of $442.6 million in 2025, a decrease of $6.3 million compared with 2024. The change reflects a $1.9 million decrease in cash provided by operating activities as well as a $4.4 million increase in capital expenditures. The decrease in cash flow from operations was primarily driven by higher income tax and bonus tax payments, largely offset by higher cash earnings. We made annual bonus payments of $163.5 million during the first quarter of 2025 compared with $123.9 million in the first quarter of 2024. We made income tax payments of $171.8 million during 2025 compared with $115.6 million during 2024. 2025 income tax payments were primarily related to US federal and state income taxes, including 2025 estimated tax installments for 2025 and catch-up installments for 2024 tax liabilities. Capital expenditures increased primarily due to investment in our product development efforts across our key product areas.

Acquisitions

We paid a total of $39.8 million, net of cash acquired, related to acquisitions over the past three years. We describe these acquisitions in Note 9 of the Notes to our Consolidated Financial Statements.

Divestitures

Over the last three years, we received a total of $52.4 million from the sale of business and $87.7 million from the sale of customer assets. We describe these divestitures in Note 10 of the Notes to our Consolidated Financial Statements.

Application of Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial Statements, which have been prepared in accordance with GAAP. We discuss our significant accounting policies in Note 2 of the Notes to our Consolidated Financial Statements. The preparation of financial statements in accordance with GAAP requires our management team to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expense, and related disclosures included in our Consolidated Financial Statements.

We continually evaluate our estimates. We base our estimates on historical experience and various other assumptions that we believe are reasonable. Based on these assumptions and estimates, we make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results could vary from these estimates and assumptions. If actual amounts are different from previous estimates, we include revisions in our results of operations for the period in which the actual amounts become known.

We believe the following critical accounting policies reflect the significant judgments and estimates used in the preparation of our Consolidated Financial Statements:

Revenue Recognition

A majority of our revenue comes from the sale of subscriptions for data, software, and Internet-based products and services. We recognize this revenue in equal amounts over the noncancellable term of the subscription or license, which generally ranges from one to three years. Our license-based revenue represents subscription services available to customers and not a license under the accounting guidance. We also provide research, investment management, retirement advice, and other services. We recognize this revenue when the service is provided or during the service obligation period defined in the contract.

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Our contracts with customers may include multiple performance obligations. For most of these arrangements, we generally allocate revenue to each performance obligation based on its estimated standalone selling price. We generally determine standalone selling prices based on prices charged to customers when the same performance obligation is sold separately or historical pricing.

Asset-based revenue is generated through contracts with daily asset management. Significant changes in the underlying fund assets, or significant disruptions in the market, are evaluated to determine if revisions to estimates of earned asset-based fees for the current quarter are needed. An estimate of the average daily portfolio balance is a key input in determining revenue for a given period. Estimates are based on the most recently reported quarter, and, as a result, it is unlikely a significant reversal of revenue would occur.

We make judgments at the beginning of an arrangement regarding whether collection of the consideration to which we are entitled is probable and assess the likelihood of collection on a customer-by-customer basis.

Deferred revenue is the amount billed or collected in advance for subscriptions or services that has not yet been recognized as revenue. Deferred revenue totaled $607.1 million at the end of 2025 (of which $586.1 million was classified as a current liability with an additional $21.0 million, mainly credit rating surveillance, included in long-term liabilities). We expect to recognize this deferred revenue in future periods as we fulfill our performance obligations under our subscription and service agreements.

The amount of deferred revenue may increase or decrease based on the mix of contracted products and services and the volume of new and renewal subscriptions. The timing of future revenue recognition may change depending on the terms of the applicable agreements and the timing of fulfilling our service obligations.

Acquisitions, Goodwill, and Other Intangible Assets

We generally acquire businesses which are accounted for as business combinations. Our financial statements reflect the operations of an acquired business starting from the completion of the transaction. We record the estimated fair value of assets acquired and liabilities assumed as of the date of acquisition.

To account for each business combination, we utilize the acquisition method of accounting, which requires the following steps (1) identifying the acquirer, (2) determining the acquisition date, (3) recognizing and measuring identifiable assets acquired and liabilities assumed, and (4) recognizing and measuring goodwill or a gain from a bargain purchase.

Regardless of whether an acquisition is considered to be a business combination or an asset acquisition, allocating the purchase price to the acquired assets and liabilities involves management judgment. We base the fair value estimates on available historical information and on future expectations and assumptions that we believe are reasonable, but these estimates are inherently uncertain.

Determining the fair value of intangible assets requires significant management judgment in the following areas:

• Identify the acquired intangible assets: For each acquisition, we identify the intangible assets acquired. These intangible assets generally consist of customer relationships, trademarks and trade names, technology-related intangibles (including internally developed software and databases), and in certain acquisitions, noncompete agreements.

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• Estimate the fair value of these intangible assets: We may consider various approaches to value the intangible assets. These include the cost approach, which measures the value of an asset based on the cost to reproduce it or replace it with another asset of like utility by applying the reproduction cost method or replacement cost method; the market approach, which values the asset through an analysis of sales and offerings of comparable assets which can be adjusted to reflect differences between the investment or asset being valued and the comparable investments or assets, such as historical financial condition and performance, expected economic benefits, time and terms of sale, utility, and physical characteristics; and the income approach, which measures the value of an asset based on the present value of the economic benefits it is expected to produce utilizing inputs such as estimated future cash flows based on forecasted revenue growth rates and margins, estimated attrition rates, estimated royalty rates, and discount rate assumptions.

• Estimate the remaining useful life of the assets: For each intangible asset, we use judgment and assumptions to establish the remaining useful life of the asset. For example, for customer relationships, we determine the estimated useful life with reference to observed customer attrition rates. For technology-related assets such as databases, we make judgments about the demand for current data and historical metrics in establishing the remaining useful life. For internally developed software, we estimate an obsolescence factor associated with the software.

We record any excess of the purchase price over the estimated fair values of the net assets acquired as goodwill, which is not amortized.

We recognize the fair value of any contingent payments at the date of acquisition as part of the consideration transferred to acquire a business. Contingent payments are recognized at fair value at the date of acquisition using either a Monte Carlo simulation, which requires the use of management assumptions and inputs, such as projected financial information related to revenue growth and expected margin percentage, among other valuation related items, or calculating the weighted average of the estimated contingent payment scenarios. The liability associated with contingent consideration is remeasured to fair value at each reporting period subsequent to the date of acquisition considering factors that may impact the timing and amount of contingent payments until the term of the agreement has expired or the contingency is resolved. Any changes in the fair value measurement will be recorded in our Consolidated Statements of Income. In evaluating the characterization of contingent and deferred payments, we analyze relevant factors, including the nature of the payment, continuing employment requirements, incremental payments to employees of the acquired business, and timing and rationale underlying the transaction, to determine whether the payments should be accounted for as additional purchase consideration or post-combination related services.

We believe the accounting estimates related to purchase price allocations, subsequent goodwill impairment testing, and contingent payments are critical accounting estimates because changes in these assumptions could materially affect the amounts and classifications of assets and liabilities presented in our Consolidated Balance Sheets, as well as the amount of amortization and depreciation expense, if any, recorded in our Consolidated Statements of Income. The significance of this policy varies from period to period depending upon the volume of applicable acquisition transactions occurring.

Recently Adopted and Issued Accounting Pronouncements

Refer to Note 19 of the Notes to our Consolidated Financial Statements for recently adopted and issued accounting pronouncements as of December 31, 2025.

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