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Margaret Kirch Cohenmargaret.cohen@morningstar.com
Morningstar, Inc. Reports First-Quarter 2015 Financial Results

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CHICAGO, April 22, 2015—Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today announced its first-quarter 2015 financial results. The company reported net income of $29.7 million, or 67 cents per diluted share, compared with $26.4 million, or 58 cents per diluted share, in the first quarter of 2014.

Key Operating Metrics
• Revenue for the quarter was $189.8 million, an increase of 4.8% compared with the same period in 2014, as the U.S. dollar strengthened significantly against most foreign currencies. Organic revenue, which excludes the effect of acquisitions, divestitures, and foreign currency translations, rose 6.6%, or $12.0 million.
• Operating income increased 15.6% to $44.5 million, and operating margin was 23.5%, an improvement from 21.3% in the same period in 2014.
• Free cash flow was $20.6 million, reflecting cash provided by operating activities of $35.0 million and capital expenditures of $14.4 million, an increase of $29.5 million in free cash flow compared with the same period in 2014. First-quarter cash provided by operating activities tends to be lower than subsequent quarters because of the timing of annual bonus payments, which totaled $47.8 million in the first quarter of 2015.

Joe Mansueto, chairman and chief executive officer of Morningstar, said, “Organic revenue rose about 6% during the quarter, driven by Morningstar Direct, Morningstar Credit Ratings, and Morningstar Managed Portfolios. Morningstar Advisor Workstation and Morningstar Office also contributed nicely to our growth. We released Morningstar Direct Cloud, the next generation of our flagship investment research platform, and we’ve received great feedback from clients. It’s an important step forward as we enhance the user experience with a new web-based version of one of our key products.”

Mansueto added, “Our results reflect the strong upturn in the U.S. dollar, which lowered revenue from our international operations when translated into U.S. dollars. Operating expense was up slightly because of additional headcount, but we did a good job managing expenses while continuing to invest in the business.”

Balance Sheet and Capital Allocation
• As of March 31, 2015, cash, cash equivalents, and investments totaled $243.2 million, compared with $224.6 million as of Dec. 31, 2014. The company had $45.0 million of short-term debt as of March 31, 2015.
• The company expects to pay approximately $8.4 million for its regular quarterly dividend on April 30, 2015.
• In the first quarter of 2015, the company repurchased approximately 32,000 shares for $2.3 million. As of March 31, 2015, the company had $171.1 million remaining for future repurchases and 44.4 million shares outstanding.

Comparability of Year-Over-Year Results
Certain items affected the comparability of first-quarter 2015 results versus the same period in 2014:
• As a result of a change in accounting estimate for certain investment management contracts with minimum fee features, the company recognized an additional $1.7 million of revenue in the first quarter of 2014 that did not recur in subsequent quarters.
• Effective Jan. 1, 2014, the company made changes to its sales commission plan that require a different accounting treatment, resulting in an additional $2.7 million and $1.2 million of commission expense in the first quarters of 2014 and 2015, respectively.
• Foreign currency translations reduced operating income by $1.5 million during the quarter, including a negative effect on revenue and a favorable effect on operating expense of $6.5 million and $5.0 million, respectively.
• First-quarter results included $3.1 million in revenue and approximately $5.7 million of incremental operating expense from the ByAllAccounts and HelloWallet acquisitions.

Use of Non-GAAP Financial Measures
The table at the end of this press release includes a reconciliation of organic revenue and free cash flow to comparable GAAP measures and an explanation of why the company uses these non-GAAP financial measures.

Annual Meeting
Investors are invited to attend Morningstar’s annual meeting at 9 a.m. Central Time on Tuesday, May 12, 2015, at its corporate headquarters at 22 W. Washington Street in Chicago. If you would like to attend, please register at http://corporate.morningstar.com/US/asp/meetingregistration.aspx.

Investor Communication
Morningstar encourages all interested parties—including securities analysts, current shareholders, potential shareholders, and others—to submit questions in writing. Investors and others may send questions about Morningstar’s business to investors@morningstar.com or write to the company at:

Morningstar, Inc.
Investor Relations
22 W. Washington Street
Chicago, IL 60602

Morningstar will make written responses to selected inquiries available to all investors at the same time in Form 8-Ks furnished to the Securities and Exchange Commission, generally on the first Friday of every month.

About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. Morningstar provides data on approximately 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 15 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had more than $179 billion in assets under advisement and management as of March 31, 2015. The company has operations in 27 countries.

Caution Concerning Forward-Looking Statements
This press release 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 “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue.” 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, liability for any losses that result from an actual or claimed breach of our fiduciary duties; failing to maintain and protect our brand, independence, and reputation; failing to differentiate our products and continuously create innovative, proprietary research tools; failing to respond to technological change, keep pace with new technology developments, or adopt a successful technology strategy; liability related to our storage of personal information related to individuals as well as portfolio and account-level information; compliance failures, regulatory action, or changes in laws applicable to our investment advisory or credit rating operations; downturns in the financial sector, global financial markets, and global economy; the effect of market volatility on revenue from asset-based fees; a prolonged outage of our database, technology-based products and services, or network facilities; challenges faced by our non-U.S. operations, including the concentration of data and development work at our offshore facilities in China and India; and trends in the mutual fund industry, including the increasing popularity of passively managed investment vehicles. A more complete description of these risks and uncertainties can be found in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2014. If any of these risks and uncertainties materialize, our actual future results may vary significantly from what we expected. We do not undertake to update our forward-looking statements as a result of new information or future events.

All dollar and percentage comparisons, which are often accompanied by words such as "increase," "decrease," "grew," "declined, " or "was similar" refer to a comparison with the same period in the previous year unless otherwise stated.


©2015 Morningstar, Inc. All Rights Reserved.


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