Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-51280 MORNINGSTAR, INC. (Exact Name of Registrant as Specified in its Charter) (State or Other Jurisdiction of (I.R.S. Emplo ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 2022 OR MORNINGSTAR, INC. (Exact Name of Registrant as Specified in its Charter) (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 22 West Washington Street Chicago Illinois 60602 (Address of Principal Executive Offices) (Zip Code) ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-51280 MORNINGSTAR, INC. (Exact Name of Registrant as Specified in its Charter) (State or Other Jurisdiction of (I.R.S. Employe ...

PART 1: FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Morningstar, Inc.'s unaudited condensed consolidated financial statements and notes for Q3 and YTD September 30, 2021 are presented [Unaudited Condensed Consolidated Statements of Income](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income) Revenue for Q3 2021 increased to $428.9 million, driving operating income up to $67.8 million, though consolidated net income decreased to $49.0 million due to a one-time holding gain in Q3 2020 Consolidated Statements of Income Highlights (in millions) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $428.9 | $357.2 | $1,237.1 | $1,009.1 | | **Operating Income** | $67.8 | $44.3 | $182.2 | $150.1 | | **Consolidated Net Income** | $49.0 | $76.2 | $136.8 | $148.3 | | **Diluted EPS** | $1.13 | $1.76 | $3.16 | $3.43 | [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income for Q3 2021 significantly decreased to $28.9 million, primarily due to a negative foreign currency translation adjustment Comprehensive Income (in millions) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | **Consolidated Net Income** | $49.0 | $76.2 | $136.8 | $148.3 | | **Other Comprehensive Income (Loss)** | $(20.1) | $24.6 | $(12.8) | $(4.7) | | **Comprehensive Income** | $28.9 | $100.8 | $124.0 | $143.6 | [Unaudited Condensed Consolidated Balance Sheets](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2021, total assets increased to $2.74 billion, total liabilities decreased to $1.36 billion, and total equity grew to $1.39 billion Balance Sheet Summary (in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $427.0 | $422.5 | | **Total Assets** | $2,744.4 | $2,696.0 | | **Long-term debt** | $374.3 | $449.1 | | **Total Liabilities** | $1,358.9 | $1,424.6 | | **Total Equity** | $1,385.5 | $1,271.4 | [Unaudited Condensed Consolidated Statements of Equity](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Equity) Total equity increased to $1.39 billion as of September 30, 2021, primarily driven by net income, partially offset by dividends and negative accumulated other comprehensive loss - The increase in total equity during the first nine months of 2021 was mainly due to **retained earnings growth from net income**, which was partially offset by dividend payments and negative foreign currency translation adjustments[16](index=16&type=chunk)[17](index=17&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash provided by operating activities increased to $314.0 million for the nine months ended September 30, 2021, while cash used for financing activities rose due to debt repayment and earn-out payments Cash Flow Summary - Nine Months Ended Sep 30 (in millions) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | **Cash from Operating Activities** | $314.0 | $269.7 | | **Cash for Investing Activities** | $(125.4) | $(124.7) | | **Cash for Financing Activities** | $(175.5) | $(124.6) | | **Net Change in Cash** | $4.5 | $17.0 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail key accounting policies, including the acquisition of Moorgate Benchmarks, disaggregation of revenue, and information on credit arrangements, leases, and contingencies - On September 3, 2021, the company acquired Moorgate Benchmarks, a European provider of index services. The preliminary allocation of the purchase price includes **$14.8 million of goodwill** and **$13.4 million of acquired intangible assets**[36](index=36&type=chunk)[38](index=38&type=chunk) Revenue by Type - Nine Months Ended Sep 30 (in millions) | Revenue Type | 2021 | 2020 | | :--- | :--- | :--- | | **License-based** | $830.3 | $680.0 | | **Asset-based** | $194.6 | $164.4 | | **Transaction-based** | $212.2 | $164.7 | | **Total** | **$1,237.1** | **$1,009.1** | - The company reports as a single operating segment. Geographically, the United States accounted for approximately **70% of revenue** for the nine months ended September 30, 2021[55](index=55&type=chunk)[56](index=56&type=chunk) - A civil action was filed by the SEC against Morningstar Credit Ratings, LLC (MCR) in February 2021 related to its former commercial mortgage-backed securities ratings methodology. MCR withdrew its NRSRO registration in December 2019 and no longer operates as a credit rating agency[79](index=79&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 and YTD 2021 financial performance, emphasizing revenue growth, operating income, and liquidity [Consolidated Results and Revenue Analysis](index=30&type=section&id=Consolidated%20Results%20and%20Revenue%20Analysis) Consolidated revenue increased 20.1% in Q3 2021, driven by broad-based organic growth across license-based, asset-based, and transaction-based revenue streams Q3 2021 Revenue Growth by Type | Revenue Type | Revenue (in millions) | Change vs. Q3 2020 | Organic Change | | :--- | :--- | :--- | :--- | | **License-based** | $287.0 | 18.2% | 16.9% | | **Asset-based** | $68.4 | 23.5% | 22.5% | | **Transaction-based** | $73.5 | 24.8% | 21.6% | | **Total** | **$428.9** | **20.1%** | **18.6%** | - Key product area revenue growth in Q3 2021 was led by **PitchBook (+47.2%)**, **DBRS Morningstar (+22.1%)**, and **Workplace Solutions (+30.5%)**[95](index=95&type=chunk) - International revenue comprised approximately **30% of consolidated revenue** for Q3 2021, consistent with the prior year. International organic revenue grew **10.8%** in the quarter[120](index=120&type=chunk)[123](index=123&type=chunk) [Operating Expense and Margin Analysis](index=34&type=section&id=Operating%20Expense%20and%20Margin%20Analysis) Consolidated operating expense increased 15.4% in Q3 2021, but operating income grew 53.0% due to strong revenue and a decrease in G&A expenses from a prior-year earn-out accrual Q3 Operating Expense Breakdown (in millions) | Expense Category | Q3 2021 | Q3 2020 | Change | | :--- | :--- | :--- | :--- | | **Cost of revenue** | $183.1 | $138.7 | 32.0% | | **Sales and marketing** | $72.9 | $52.6 | 38.6% | | **General and administrative** | $67.0 | $85.8 | (21.9)% | | **Depreciation and amortization** | $38.1 | $35.8 | 6.4% | | **Total operating expense** | **$361.1** | **$312.9** | **15.4%** | - The decrease in G&A expense was primarily because Q3 2020 included a **$27.8 million earn-out** related to the Sustainalytics acquisition recorded in compensation expense[135](index=135&type=chunk)[140](index=140&type=chunk) Operating Margin | Metric | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | **Operating Margin** | 15.8% | 12.4% | | **Adjusted Operating Margin (Non-GAAP)** | 19.4% | 25.6% | [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with $487.3 million in cash and investments, a fully available $300.0 million revolving credit facility, and an authorized $400.0 million share repurchase program - As of September 30, 2021, the company had cash, cash equivalents, and investments of **$487.3 million** and full availability of its **$300.0 million revolving credit facility**[150](index=150&type=chunk)[152](index=152&type=chunk) Free Cash Flow - Nine Months Ended Sep 30 (in millions) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | **Cash provided by operating activities** | $314.0 | $269.7 | | **Capital expenditures** | $(71.6) | $(54.7) | | **Free cash flow** | **$242.4** | **$215.0** | - A new share repurchase program authorizes up to **$400.0 million** in repurchases through December 31, 2023. As of September 30, 2021, **$399.7 million** was available for future repurchases[158](index=158&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to market risks from investments, interest rate fluctuations on debt, and foreign currency movements, but does not currently engage in currency hedging - The company is subject to interest rate risk on its long-term debt. A **100 basis-point change** in the LIBOR rate is estimated to have a **$0.3 million impact** on annual interest expense[168](index=168&type=chunk) Estimated Effect of a 10% Adverse Currency Fluctuation (in millions) | Currency | On Revenue (YTD) | On Operating Income (YTD) | On Equity (as of Sep 30) | | :--- | :--- | :--- | :--- | | **Australian Dollar** | $(3.9) | $(0.7) | $(4.9) | | **British Pound** | $(9.8) | $(0.5) | $(25.9) | | **Canadian Dollar** | $(8.3) | $(2.0) | $(24.2) | | **Euro** | $(7.9) | $(0.5) | $(3.2) | [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with Sustainalytics' internal controls currently being integrated for the annual assessment - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of September 30, 2021[171](index=171&type=chunk) - The company is in the process of integrating the internal controls of Sustainalytics (acquired July 2, 2020) and will include it in the annual assessment of internal control over financial reporting for the year ending December 31, 2021[172](index=172&type=chunk) PART 2: OTHER INFORMATION [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 12 of the financial statements, detailing ongoing legal matters including an SEC civil action against a former subsidiary and a settlement by DBRS, Inc - The company incorporates by reference the information on legal proceedings from Note 12 of the financial statements[175](index=175&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to the risk factors disclosed in the Annual Report have occurred[176](index=176&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has a share repurchase program authorizing up to $400.0 million in repurchases, with 1,200 shares repurchased for approximately $0.3 million during Q3 2021 Share Repurchases in Q3 2021 | Period | Total Shares Purchased | Average Price Paid | Dollar Value (approx.) | | :--- | :--- | :--- | :--- | | **July 2021** | 0 | N/A | $0 | | **August 2021** | 200 | $257.14 | $51,428 | | **September 2021** | 1,000 | $261.65 | $261,650 | | **Total Q3** | **1,200** | **$260.90** | **$313,078** | [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements formatted in Inline XBRL - Exhibits filed include certifications from the CEO and CFO pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act, as well as Inline XBRL financial data[179](index=179&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-51280 MORNINGSTAR, INC. (Exact Name of Registrant as Specified in its Charter) (State or Other Jurisdiction of (I.R.S. Emplo ...

[PART 1 FINANCIAL INFORMATION](index=4&type=section&id=PART%201%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Morningstar, Inc. for Q1 2021 and 2020 [Unaudited Condensed Consolidated Statements of Income](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income) The company reported significant growth in Q1 2021, with revenue increasing by 21.2% and operating income growing by 51.0% year-over-year Q1 2021 vs Q1 2020 Income Statement Highlights | Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | Change | | :--- | :--- | :--- | :--- | | Revenue | $392.8 million | $324.0 million | +21.2% | | Operating Income | $67.2 million | $44.5 million | +51.0% | | Consolidated Net Income | $54.9 million | $23.9 million | +129.7% | | Diluted Net Income per Share | $1.27 | $0.55 | +130.9% | | Dividends Declared per Share | $0.32 | $0.30 | +6.7% | [Unaudited Condensed Consolidated Balance Sheets](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2021, total assets were $2.68 billion, a slight decrease from $2.70 billion at year-end 2020 Balance Sheet Summary | Metric | As of March 31, 2021 | As of December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $383.6 million | $422.5 million | | Goodwill | $1,201.9 million | $1,205.0 million | | Total Assets | $2,675.3 million | $2,696.0 million | | Deferred Revenue (Current) | $363.1 million | $306.8 million | | Long-term Debt | $404.2 million | $449.1 million | | Total Liabilities | $1,353.9 million | $1,424.6 million | | Total Equity | $1,321.4 million | $1,271.4 million | [Unaudited Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first three months of 2021, cash provided by operating activities increased by 31.8% to $64.2 million Q1 2021 vs Q1 2020 Cash Flow Highlights | Activity (in millions) | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Cash provided by operating activities | $64.2 | $48.7 | | Cash used for investing activities | $(33.4) | $(19.5) | | Cash used for financing activities | $(66.0) | $(26.9) | | Net decrease in cash and cash equivalents | $(38.9) | $(11.6) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of accounting policies and financial statement items, including debt, revenue, and contingencies - The company continues to monitor the impact of the COVID-19 pandemic and related government relief acts like the CARES Act and American Rescue Plan Act on its business[20](index=20&type=chunk)[21](index=21&type=chunk) - As of March 31, 2021, total long-term debt was **$404.2 million**, consisting of a Term Facility and 2.32% Senior Notes due 2030, with the company in compliance with all debt covenants[27](index=27&type=chunk)[34](index=34&type=chunk) - The company reports as a single segment, reflecting how the chief operating decision maker allocates resources and evaluates financial results[54](index=54&type=chunk) - The company faces contingencies related to an SEC civil action against its former subsidiary MCR and a Wells Notice to DBRS, Inc. from the SEC's Division of Enforcement, but does not believe these matters will have a material adverse effect[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2021 financial results, highlighting a 21.2% increase in consolidated revenue and a 51.0% rise in operating income Q1 2021 Key Financial Metrics | Key Metrics (in millions) | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Consolidated revenue | $392.8 | $324.0 | 21.2% | | Operating income | $67.2 | $44.5 | 51.0% | | Operating margin | 17.1% | 13.7% | 3.4 pp | | Free cash flow | $41.5 | $33.6 | 23.5% | - Organic revenue, a non-GAAP measure excluding acquisitions and currency effects, increased by **13.0%** in Q1 2021, primarily driven by PitchBook, DBRS Morningstar, Morningstar Data, and Morningstar Direct[113](index=113&type=chunk)[114](index=114&type=chunk) - Adjusted operating income, a non-GAAP measure excluding amortization and M&A expenses, was **$92.3 million**, a **50.3% increase** from the prior year, with the adjusted operating margin expanding by **4.7 percentage points** to **23.6%**[133](index=133&type=chunk)[134](index=134&type=chunk) [Revenue Analysis](index=30&type=section&id=MD%26A_Revenue_Analysis) Consolidated revenue grew 21.2% to $392.8 million in Q1 2021, driven by license-based, transaction-based, and international revenue growth Revenue by Type (Q1 2021 vs Q1 2020) | Revenue Type | Q1 2021 (in millions) | Q1 2020 (in millions) | Change | Organic Change | | :--- | :--- | :--- | :--- | :--- | | License-based | $266.1 | $216.0 | +23.2% | +12.1% | | Asset-based | $61.4 | $57.2 | +7.3% | +5.8% | | Transaction-based | $65.3 | $50.8 | +28.5% | +24.8% | - PitchBook revenue increased **36.0%** to **$61.6 million**, while DBRS Morningstar revenue grew **27.0%** to **$59.3 million**[95](index=95&type=chunk) - International revenue increased **37.9%** to **$123.3 million**, representing about **30% of consolidated revenue**, with international organic revenue growing **14.1%**[115](index=115&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) [Operating Expense Analysis](index=33&type=section&id=MD%26A_Operating_Expense_Analysis) Total operating expense increased 16.5% to $325.6 million, primarily due to higher compensation and professional fees - The Sustainalytics acquisition contributed **9.1 percentage points** to operating expense growth[119](index=119&type=chunk) - Compensation expense, the largest component, increased by **$41.8 million**, reflecting the addition of approximately **780 employees** from the Sustainalytics acquisition and higher M&A-related earn-outs[120](index=120&type=chunk)[123](index=123&type=chunk) - Capitalized software development increased to **$19.0 million** from **$13.5 million** in the prior-year period, which reduced operating expenses[126](index=126&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=MD%26A_Liquidity_and%20Capital%20Resources) As of March 31, 2021, the company had $433.7 million in cash, cash equivalents, and investments, with strong free cash flow - Free cash flow for Q1 2021 was **$41.5 million**, an increase of **23.5%** from **$33.6 million** in Q1 2020[102](index=102&type=chunk)[151](index=151&type=chunk) - As of March 31, 2021, the company had total outstanding debt of **$404.2 million** and full availability of its **$350.0 million** in revolving credit facilities[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) - A new share repurchase program authorizing up to **$400.0 million** was approved, effective January 1, 2021, and expiring December 31, 2023, with no shares repurchased in Q1 2021[148](index=148&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to market risks from fluctuating interest rates, investment portfolio prices, and foreign currency fluctuations - A **100 basis-point change** in the LIBOR rate would have an estimated **$0.6 million** annualized impact on interest expense based on the outstanding debt balance as of March 31, 2021[159](index=159&type=chunk) Foreign Currency Exposure on Q1 2021 Operating Income | Currency | Percentage of Operating Income (Loss) | Estimated effect of a 10% adverse currency fluctuation (in millions) | | :--- | :--- | :--- | | Australian Dollar | 4.8% | $(0.3) | | British Pound | 3.2% | $(0.2) | | Canadian Dollar | 10.0% | $(0.7) | | Euro | 4.0% | $(0.3) | | Other Foreign Currencies | (18.5)% | $1.2 | [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of March 31, 2021, with Sustainalytics integration ongoing - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of March 31, 2021[162](index=162&type=chunk) - The company is in the process of integrating the internal controls of the recently acquired Sustainalytics, which will be incorporated into the annual assessment for the fiscal year ending December 31, 2021[163](index=163&type=chunk) [PART 2 OTHER INFORMATION](index=40&type=section&id=PART%202%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, and required exhibits [Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) This section references Note 12 of the financial statements, detailing ongoing legal matters including SEC actions against MCR and DBRS, Inc - Information regarding legal proceedings is incorporated by reference from Note 12 of the Notes to the Unaudited Condensed Consolidated Financial Statements[166](index=166&type=chunk) [Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - There have been no material changes to the risk factors disclosed in the company's Annual Report[167](index=167&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company discusses its share repurchase activity, noting no shares were repurchased in Q1 2021 under the new $400.0 million program Share Repurchase Activity (Q1 2021) | Period | Total number of shares purchased | Average price paid per share | Approximate dollar value of shares that may yet be purchased | | :--- | :--- | :--- | :--- | | Jan 2021 | 0 | $0.00 | $400,000,000 | | Feb 2021 | 0 | $0.00 | $400,000,000 | | Mar 2021 | 0 | $0.00 | $400,000,000 | | **Total** | **0** | **$0.00** | **$400,000,000** | [Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements in Inline XBRL - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and financial data in Inline XBRL format (101, 104)[171](index=171&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-51280 MORNINGSTAR, INC. (Exact Name of Registrant as Specified in its Charter) (State or Other Jurisdiction of (I.R.S. Employe ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-51280 MORNINGSTAR, INC. (Exact Name of Registrant as Specified in its Charter) (State or Other Jurisdiction of (I.R.S ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-51280 MORNINGSTAR, INC. (Exact Name of Registrant as Specified in its Charter) (State or Other Jurisdiction of (I.R.S. Emplo ...

PART 1 FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Morningstar's unaudited condensed consolidated financial statements for Q1 2020, highlighting revenue growth, operating income decline, and a comprehensive loss [Unaudited Condensed Consolidated Statements of Income](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income) Q1 2020 saw revenue increase by 25.1% to $324.0 million, but operating income and net income declined due to faster expense growth Q1 2020 vs Q1 2019 Income Statement Highlights | Metric | Three months ended March 31, 2020 | Three months ended March 31, 2019 | Change | | :--- | :--- | :--- | :--- | | **Revenue** | $324.0 million | $258.9 million | +25.1% | | **Operating Income** | $44.5 million | $49.5 million | -10.1% | | **Consolidated Net Income** | $23.9 million | $33.2 million | -28.0% | | **Diluted EPS** | $0.55 | $0.77 | -28.6% | | **Dividends Declared per Share** | $0.30 | $0.28 | +7.1% | [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) The company reported a Q1 2020 comprehensive loss of $20.3 million, primarily due to negative foreign currency translation adjustments Comprehensive Income (Loss) Comparison | (in millions) | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | **Consolidated net income** | $23.9 | $33.2 | | Foreign currency translation adjustment | $(40.4) | $3.4 | | **Comprehensive income (loss)** | **$(20.3)** | **$38.0** | [Unaudited Condensed Consolidated Balance Sheets](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2020, total assets and equity slightly decreased, primarily due to goodwill reduction from foreign currency translation Balance Sheet Highlights | (in millions) | As of March 31, 2020 | As of December 31, 2019 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $322.5 | $334.1 | | **Goodwill** | $1,013.2 | $1,039.1 | | **Total Assets** | $2,292.0 | $2,370.9 | | **Long-term debt** | $519.4 | $502.1 | | **Total Liabilities** | $1,259.3 | $1,287.3 | | **Total Equity** | $1,032.7 | $1,083.6 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash provided by operating activities decreased to $48.7 million, while cash used for financing activities declined, resulting in an overall cash decrease Cash Flow Summary | (in millions) | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | **Cash provided by operating activities** | $48.7 | $59.0 | | **Cash used for investing activities** | $(19.5) | $(19.5) | | **Cash used for financing activities** | $(26.9) | $(60.7) | | **Net decrease in cash and cash equivalents** | $(11.6) | $(20.2) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, COVID-19 impact, credit, acquisitions, revenue recognition, and contingencies, including SEC settlement and subsequent acquisitions - The company is closely monitoring the impact of the COVID-19 pandemic, which remains fluid, and the CARES Act had no impact on the financial statements for the quarter ended March 31, 2020[21](index=21&type=chunk)[22](index=22&type=chunk) - Total debt stood at **$530.4 million** as of March 31, 2020, primarily from a credit facility used to finance the DBRS acquisition, with **$210.0 million** of borrowing availability under its revolving credit facility[30](index=30&type=chunk)[32](index=32&type=chunk) - Revenue is disaggregated into three types: License-based (**$216.0 million**), Asset-based (**$57.2 million**), and Transaction-based (**$50.8 million**), with license-based revenue from subscriptions being the largest component[50](index=50&type=chunk) - Morningstar Credit Ratings, LLC reached an agreement in principle with SEC staff to settle an investigation for a civil penalty of **$3.5 million**, which was accrued as of December 31, 2019[79](index=79&type=chunk) - Subsequent to the quarter end, Morningstar announced an agreement to acquire the remaining ~60% of Sustainalytics, a leader in ESG ratings and research, for approximately **EUR 55.0 million** upfront plus future performance-based payments[85](index=85&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 25.1% revenue increase driven by DBRS acquisition, offset by rising expenses, leading to an operating income decline and reduced free cash flow [COVID-19 Update](index=27&type=section&id=COVID-19%20Update) The company is managing COVID-19 impacts, anticipating potential delays in client purchases and market volatility effects on revenue streams - The full impact of the COVID-19 pandemic cannot be reasonably estimated, but it could lead clients to delay purchases or reduce spending[93](index=93&type=chunk) - Asset-based revenue will likely see impacts from Q1 market volatility in future periods due to reporting lags[93](index=93&type=chunk) - Transaction-based revenue from DBRS Morningstar was negatively impacted by tightening credit markets and volatility toward the end of Q1[93](index=93&type=chunk) - The company has implemented business continuity plans, transitioned to a remote workforce, and is focused on maintaining a strong balance sheet with **$348.8 million** in cash and investments and **$210.0 million** in credit facility availability[94](index=94&type=chunk)[95](index=95&type=chunk) [Consolidated Results of Operations](index=31&type=section&id=Consolidated%20Results%20of%20Operations) Q1 2020 consolidated revenue grew 25.1% to $324.0 million, primarily due to DBRS acquisition, while operating expenses rose 33.5%, impacting operating margin Revenue by Type (Q1 2020 vs Q1 2019) | Revenue Type | Q1 2020 (in millions) | Q1 2019 (in millions) | Change | Organic Change | | :--- | :--- | :--- | :--- | :--- | | License-based | $216.0 | $195.5 | +10.5% | +10.8% | | Asset-based | $57.2 | $48.8 | +17.2% | +18.0% | | Transaction-based | $50.8 | $14.6 | +247.9% | -17.2% | - PitchBook was a key driver of license-based revenue growth, with revenue up **40.2%** to **$45.3 million** and licenses increasing **67.5%** YoY to **41,308**[99](index=99&type=chunk)[111](index=111&type=chunk) - Total operating expense increased by **$70.1 million** (**33.5%**), with DBRS Morningstar contributing **20.1 percentage points** to this growth[123](index=123&type=chunk) Operating Income and Adjusted Operating Income Reconciliation | (in millions) | Q1 2020 | Q1 2019 | Change | | :--- | :--- | :--- | :--- | | **Operating income (GAAP)** | **$44.5** | **$49.5** | **(10.1)%** | | Add: intangible amortization expense | $14.0 | $4.9 | +185.7% | | Add: M&A-related expenses | $2.9 | $0.3 | +866.7% | | **Adjusted operating income (Non-GAAP)** | **$61.4** | **$54.7** | **+12.2%** | [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with $348.8 million in cash, despite a decline in free cash flow and ongoing share repurchases - As of March 31, 2020, cash, cash equivalents, and investments totaled **$348.8 million**, with approximately **70%** of this balance held by operations outside the U.S[140](index=140&type=chunk)[145](index=145&type=chunk) - The company has an outstanding principal balance of **$530.4 million** on its credit facility and was in compliance with all financial covenants[142](index=142&type=chunk) - In Q1 2020, the company repurchased **176,925 shares** for **$20.0 million**, with approximately **$454.4 million** remaining under the current repurchase authorization[147](index=147&type=chunk) Free Cash Flow | (in millions) | Three months ended March 31, 2020 | Three months ended March 31, 2019 | Change | | :--- | :--- | :--- | :--- | | Cash provided by operating activities | $48.7 | $59.0 | (17.5)% | | Capital expenditures | $(15.1) | $(18.7) | (19.3)% | | **Free cash flow** | **$33.6** | **$40.3** | **(16.6)%** | [Quantitative and Qualitative Disclosures about Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks from interest rate fluctuations and foreign currency exchange rates, with sensitivity analyses provided for both - The company is subject to interest rate risk on its long-term debt, where an annualized **100 basis-point** change in the LIBOR rate would impact interest expense by an estimated **$5.3 million**[157](index=157&type=chunk) - The company is subject to foreign currency risk from its international operations, where a **10%** adverse currency fluctuation would have an estimated negative impact of **$25.1 million** on equity from its British Pound exposure and **$11.8 million** from its Canadian Dollar exposure[158](index=158&type=chunk) [Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2020, with DBRS internal controls integration ongoing for the 2020 assessment - The CEO and CFO concluded that the company's disclosure controls and procedures are effective to provide reasonable assurance of timely and accurate reporting[160](index=160&type=chunk) - The integration of DBRS's operations into the company's internal control framework is ongoing and will be incorporated into the annual assessment for the fiscal year ending December 31, 2020[161](index=161&type=chunk) PART 2 OTHER INFORMATION [Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates legal proceedings information from Note 12, detailing a pending SEC settlement for Morningstar Credit Ratings - Information regarding legal proceedings is detailed in Note 12 of the Notes to Unaudited Condensed Consolidated Financial Statements[164](index=164&type=chunk) [Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) A new material risk factor addresses the uncertain and potentially adverse impacts of the COVID-19 pandemic on operations and financial condition - A new risk factor has been added regarding the uncertain and unpredictable material and adverse impacts of the COVID-19 pandemic[166](index=166&type=chunk) - Risks include operational challenges from extended remote work for employees, vendors, and customers, as well as potential degradation of cybersecurity and internal controls[166](index=166&type=chunk) - Longer-term risks involve a potential decline in demand for products and services due to a prolonged economic downturn, reduced assets under management, and a decline in credit issuance activity[167](index=167&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2020, Morningstar repurchased 176,925 shares for $20.0 million under its $500.0 million share repurchase program Issuer Purchases of Equity Securities (Q1 2020) | Period | Total Shares Purchased | Average Price Paid per Share | Total Cost (approx.) | | :--- | :--- | :--- | :--- | | Jan 2020 | — | — | — | | Feb 2020 | — | — | — | | Mar 2020 | 176,925 | $113.04 | $20.0 million | | **Total Q1** | **176,925** | **$113.04** | **$20.0 million** | - As of March 31, 2020, approximately **$454.4 million** remained available for repurchase under the existing program, which expires on December 31, 2020[171](index=171&type=chunk) [Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists Form 10-Q exhibits, including CEO and CFO certifications and financial statements in Inline XBRL format - The exhibits include CEO and CFO certifications and financial data in Inline XBRL format[172](index=172&type=chunk)