Morningstar(MORN) - 2025 Q1 - Quarterly Report

Revenue Growth - Consolidated revenue for Q1 2025 increased by 7.2% to $581.9 million compared to$542.8 million in Q1 2024[110] - License-based revenue grew by 4.4%, or 6.2% on an organic basis, primarily driven by strong demand for PitchBook and Morningstar Direct Platform products[117] - Asset-based revenue increased by 11.3%, or 14.5% on an organic basis, mainly due to growth in Morningstar Retirement, Morningstar Wealth, and Morningstar Indexes[118] - Transaction-based revenue rose by 19.2%, or 21.4% on an organic basis, primarily driven by Morningstar Credit revenue[118] - Organic revenue increased by 9.1% in Q1 2025, with PitchBook, Morningstar Credit, and Morningstar Direct Platform being the largest contributors[119] - International revenue accounted for 27% of consolidated revenue in Q1 2025, with a 3.6% increase driven by strong demand for Morningstar Credit, PitchBook, and Morningstar Wealth products[122] - PitchBook total revenue increased by 10.9% to $163.7 million, with adjusted operating income rising by 30.8$52.3 million[142][145] - Morningstar Credit revenue grew by 21.1% to $73.0 million, with adjusted operating income increasing by 74.0$21.4 million[146][147] - Morningstar Wealth revenue increased by 3.9% to $61.3 million, with an adjusted operating loss of$0.8 million, improving from a loss of $5.6 million in the previous year[148] - Morningstar Retirement total revenue rose by 15.8$32.9 million for the three months ended March 31, 2025, with AUMA increasing by 17.7% to $277.6 billion[151] - Morningstar Indexes revenue increased by 15.0$3.0 million, with organic revenue growth of 15.7% due to higher investable product and licensed data revenue[156] Operating Performance - Operating income for Q1 2025 was $114.1 million, reflecting a 23.2$92.6 million in Q1 2024[110] - Operating margin improved to 19.6%, up 2.5 percentage points from 17.1% in the same period last year[110] - Adjusted operating income for Q1 2025 was $135.4 million, a 22.2$110.8 million in 2024, with an adjusted operating margin of 23.3%[131][133] - Total operating expenses were $467.8 million, representing 80.4$91.0 million compared to $93.6 million in Q1 2024[110] - Free cash flow for Q1 2025 was$58.8 million, a slight decrease of 1.2% from $59.5 million in Q1 2024[110] - Cash used for investing activities increased significantly by 164.8$70.7 million from $26.7 million in Q1 2024[110] - Capital expenditures slightly decreased by 5.6$32.2 million from $34.1 million in the previous year[177] - As of March 31, 2025, Morningstar had cash, cash equivalents, and investments totaling$559.2 million, an increase of $8.2 million from December 31, 2024[162] Shareholder Returns - The company repurchased 368,199 shares for$109.6 million during the three months ended March 31, 2025, leaving $377.4 million available for future repurchases under the Share Repurchase Program[174] - The company paid$19.5 million in dividends during the three months ended March 31, 2025, with a quarterly dividend of $0.455 per share approved for April 30, 2025[172] Tax and Currency Exposure - Morningstar's effective tax rate increased to 25.9$1.5 million from Australian Dollar and $4.5 million from British Pound[181] - Estimated effect of a 10$3.3 million from Australian Dollar and $23.0 million from British Pound[181] Other Financial Metrics - Cost of revenue increased by$13.3 million, primarily due to higher compensation expenses related to severance costs and increased salaries[125] - Sales and marketing expenses rose by $8.0 million, with compensation expenses increasing by$3.9 million, largely due to higher sales commissions[126] - The decline in cash flow was primarily driven by higher bonus payments in 2025 related to 2024 performance[177] - A 100 basis-point change in interest rates is estimated to have a $4.6 million impact on interest expense based on the outstanding principal balance[180]