U.S.A.
Investor Relations
About Us
Newsroom
Investor Relations
 Press Release
U.S. Media Contact+1 312 696-6383
Margaret Kirch Cohenmargaret.cohen@morningstar.com
Investors may submit questions to investors@morningstar.com
Morningstar, Inc. Reports Second Quarter 2005 Financial Results

He added, “It’s also important to note that total stock-based compensation expense was significantly lower in the second quarter of 2005 compared with the same period in 2004. Following our IPO, we no longer record stock-based compensation expense under the liability method. As a result, total stock-based compensation expense declined both year-over-year and relative to the first quarter of 2005.”

Consolidated Free Cash Flow: Morningstar generated free cash flow of $12.6 million in the second quarter of 2005, reflecting cash provided by operating activities of $13.9 million and capital expenditures of $1.3 million. Free cash flow increased by $3.7 million in the second quarter of 2005 compared with the prior-year period, reflecting a $3.2 million increase in cash flow provided by operating activities and a $0.5 million decrease in capital expenditures. In the first six months of 2005, Morningstar generated free cash flow of $9.3 million, reflecting cash from operations of $11.6 million and capital expenditures of $2.3 million. Free cash flow in the six months ended June 30, 2005, decreased $1.3 million compared with the prior-year period primarily because of higher bonus and tax payments made in the first half of 2005. Free cash flow is a non-GAAP measure that is reconciled to cash provided by or used for operating activities in the accompanying financial tables. Morningstar defines free cash flow as cash provided by or used for operating activities less capital expenditures.

Cash and Investments: As of June 30, 2005, Morningstar had cash, cash equivalents, and investments of $116.0 million, compared with $95.5 million as of Dec. 31, 2004, and $79.7 million as of June 30, 2004. In March 2005 the SEC issued guidance that auction-rate securities should not be classified as cash and cash equivalents. Accordingly, the company reclassified its investments in auction-rate securities from cash and cash equivalents to investments in amounts ranging from $18.7 million to $23.6 million for the relevant periods as presented in the accompanying financial tables. This change in classification had no effect on previously reported total current assets, total assets, net income, income per share, or cash flow from operations.

Business Segment Performance

Individual Investor Segment: The largest product in this segment is paid Premium membership service for Morningstar.com®, the company’s Web site for investors. This segment also includes independent equity research on approximately 1,600 companies and several print and online publications focusing on stocks, mutual funds, personal finance, and other investing topics.

  • Revenue was $15.6 million in the second quarter of 2005, a 57% increase from $10.0 million in the second quarter of 2004.
  • Operating income was $5.1 million in the second quarter of 2005, compared with an operating loss of $0.3 million in the second quarter of 2004.
  • Operating margin was 32.7% in the second quarter of 2005; this segment had an operating loss in the second quarter of 2004.
  • Subscriptions for Morningstar.com Premium membership service increased to 139,976 as of June 30, 2005, compared with 125,697 as of June 30, 2004.

  • Advisor Segment: The largest products in this segment are Morningstar® Advisor WorkstationSM, a Web-based investment planning system, and Principia®, a CD-ROM-based investment research product. This segment also includes Morningstar Managed PortfoliosSM, an asset management service consisting of portfolios of mutual funds offered exclusively through financial advisors.

  • Revenue was $18.8 million in the second quarter of 2005, a 16% increase from $16.2 million in the same period in 2004.
  • Operating income was $4.9 million in the second quarter of 2005, an increase of 22% compared with $4.0 million in the second quarter of 2004.
  • Operating margin was 25.8% in the second quarter of 2005, compared with 24.6% in the second quarter of 2004.
  • Advisor Workstation licenses in the United States increased to 102,443 as of June 30, 2005, compared with 79,028 as of June 30, 2004. Principia subscriptions declined to 50,797 as of June 30, 2005, compared with 54,824 as of June 30, 2004.
  • Assets under management in the Morningstar Managed Portfolios service totaled $1.1 billion as of June 30, 2005, compared with $689 million as of June 30, 2004.

  • Institutional Segment: The key products and services in the Institutional business segment are Morningstar DirectSM, a set of Web-based research tools that provide access to Morningstar’s proprietary statistics; Licensed DataSM, a set of investment data spanning eight core databases, available through electronic data feeds; Investment Consulting, which helps clients create and maintain investment portfolios; and Morningstar® Retirement ManagerSM, a suite of services for retirement plan participants.

  • Revenue was $23.0 million in the second quarter of 2005, a 21% increase from $19.0 million in the second quarter of 2004.
  • Operating income was $5.7 million in the second quarter of 2005, an increase of 49% from $3.8 million in the same period in 2004.
  • Operating margin was 24.7% in the second quarter of 2005, compared with 20.1% in the second quarter of 2004.
  • Morningstar Direct had 822 licenses as of June 30, 2005, compared with 654 as of June 30, 2004.
  • Assets under management for managed retirement accounts offered through Morningstar Retirement Manager were $185.6 million as of June 30, 2005, compared with $56.9 million as of June 30, 2004.
  • Exchange-traded funds that are based on the Morningstar Indexes and offered by a third party had assets totaling approximately $482.6 million as of June 30, 2005. These funds were introduced in July 2004.
  •  Printer-friendly version
       1 2 3   
    SEC Filings
    Annual Reports
    Earnings Releases
    Calendar of Events
    Analyst Coverage
    Corporate Governance
    Investor Communications
    Investor Questions
    Stock Information
    Safe Harbor Provision
    Investor Relations Contacts
    News and SEC Filing Alerts
    Request an investor information kit 
    © Morningstar. All rights reserved.