Morningstar(MORN) - 2025 Q4 - Annual Report

Revenue and Growth Metrics - Morningstar Data's annual revenue renewal rate is estimated to be 101% in 2025, up from 99% in 2024[23] - Morningstar Direct's annual revenue renewal rate is estimated to be approximately 104% in 2025, down from 106% in 2024[30] - PitchBook's annual revenue renewal rate is estimated to be approximately 103% in 2025, down from 108% in 2024[46] - Morningstar Sustainalytics' annual revenue renewal rate for license-based products was approximately 93% in both 2024 and 2025[87] - License-based revenue represented 70.3% of Morningstar's 2025 consolidated revenue, down from 71.4% in 2024[111] - Asset-based revenue accounted for 14.0% of consolidated revenue in 2025, compared to 14.6% in 2024[112] - Transaction-based revenue represented 15.7% of consolidated revenue in 2025, an increase from 14.0% in 2024[112] - In 2025, net flows across Investment Management, including Morningstar Model Portfolios, were approximately $2.0 billion[61] Market and Asset Management - Morningstar Credit's global ratings market is estimated to total approximately $11.8 billion for the trailing 12 months ended September 30, 2025[49] - As of December 31, 2025, Investment Management's assets under management (AUMA) totaled $72.8 billion[60] - As of December 31, 2025, Morningstar Retirement AUMA totaled $305.2 billion[75] - In 2025, Morningstar added around 290 retirement plans and 17,000 participants across its advisor managed accounts network[76] Product Innovations and Acquisitions - The acquisition of Lumonic Inc. is expected to enhance PitchBook's portfolio monitoring and risk assessment capabilities[40] - Morningstar Indexes introduced several new product innovations in 2025, particularly in private markets and thematic research[89] - Morningstar completed two acquisitions in 2025 to support its growth objectives[114] - Morningstar launched the AI Insights API, providing generative AI summaries of key fund and equity characteristics[24] Employee and Organizational Metrics - The company had 10,973 permanent, full-time employees globally as of December 31, 2025[100] - Morningstar's overall employee engagement score increased to 66% in 2025 from 64% in 2024[104] Regulatory Compliance and Adaptation - Morningstar operates under various regulatory frameworks across multiple jurisdictions, including the US, Canada, and the EU, ensuring compliance with local laws[128] - The company is adapting its business model for new EU ESG Rating Provider Regulations, indicating a proactive approach to regulatory changes[132] - Morningstar Investment Management is registered with the SEC and has fiduciary obligations to clients, ensuring compliance with investment advisory regulations[131] - The company continues to monitor pending ESG legislation, indicating a commitment to regulatory readiness and adaptation[132] - Morningstar Indexes GmbH is authorized to act as an EU benchmark administrator, following the transfer of UK benchmark administration[133] Financial Position and Currency Risk - As of December 31, 2025, Morningstar's cash, cash equivalents, and investments balance was $528.7 million[388] - A 100 basis-point change in the Secured Overnight Financing Rate (SOFR) is estimated to impact interest expense by $7.3 million annually based on the outstanding principal balance[389] - Foreign currency denominated revenue percentages include 2.6% from Australian Dollar, 7.8% from British Pound, 6.3% from Canadian Dollar, and 5.1% from other foreign currencies[390] - The estimated effect of a 10% adverse currency fluctuation on revenue includes a potential loss of $6.5 million from Australian Dollar and $19.3 million from British Pound[390] - The net currency position as of December 31, 2025, includes $43.2 million in Australian Dollar and $220.8 million in British Pound[390] - The estimated effect of a 10% adverse currency fluctuation on equity includes a potential loss of $4.3 million from Australian Dollar and $22.1 million from British Pound[390] - Morningstar has not engaged in currency hedging and does not currently hold positions in derivative instruments to mitigate currency risk[390] Investment Portfolio Management - The company has a diversified investment portfolio that may include stocks, bonds, options, mutual funds, and exchange-traded products[388] - Morningstar's investment portfolio is actively managed and may suffer losses from fluctuating interest rates and market prices[388] Brand and Intellectual Property - Morningstar has registered its brand name and logo in approximately 50 jurisdictions, including the EU, to protect its intellectual property[117] - The company holds several US and foreign patents, including those for portfolio management analysis and improved data processing technologies[118] Strategic Leadership - The company’s executive team includes Joe Mansueto as Executive Chairman, Kunal Kapoor as CEO, and Michael Holt as CFO, with a focus on strategic leadership[135]