Form 8-K - Current report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 8-K

______________________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 14, 2024

MORNINGSTAR, INC.

(Exact name of registrant as specified in its charter)

Illinois (State or other jurisdiction of incorporation)

000-51280 (Commission File Number)

36-3297908 (I.R.S. Employer Identification No.)

22 West Washington Street Chicago, Illinois (Address of principal executive offices)

60602 (Zip Code)

[phone] (Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report) __________________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

    o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

    o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

    o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

    o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class			Trading Symbol			Name of Each Exchange on Which Registered
Common stock, no par value			MORN			The Nasdaq Stock Market LLC

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Item 7.01. Regulation FD Disclosure

In accordance with Morningstar, Inc.’s (the “Company”) policy regarding public disclosure of corporate information, Investor questions primarily received by the Company between April 1 and April 30, 2024, and Company responses (the “Investor Q&A”) are attached to this Current Report on Form 8-K (this “Report”) as Exhibit 99.1 and incorporated herein by reference. The Investor Q&A shall be deemed furnished, not filed, for purposes of this Report.

Caution Concerning Forward-Looking Statements

This Report, including the document incorporated by reference herein, 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 "consider,” “estimate,” “forecast,” “future,” “goal,” “designed to,” “maintain,” “may,” “objective,” “ongoing,” “could,” “expect,” “intend,” “plan,” “possible,” “potential,” “anticipate,” “believe,” “predict,” “continue,” “strategy,” “strive,” “will,” “would,” "determine," "evaluate," or the negative thereof, and similar expressions. 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:

•failing to maintain and protect our brand, independence, and reputation;

•failure to prevent and/or mitigate cybersecurity events and the failure to protect confidential information, including personal information about individuals;

•compliance failures, regulatory action, or changes in laws applicable to our credit ratings operations, investment advisory, environmental, social, and governance (ESG), and index businesses;

•failing to innovate our product and service offerings or anticipate our clients’ changing needs;

•the impact of artificial intelligence (AI) and related new technologies on our business, legal, and regulatory exposure profile and reputation;

•failure to detect errors in our products or failure of our products to perform properly due to defects, malfunctions or similar problems;

•failing to recruit, develop, and retain qualified employees;

•prolonged volatility or downturns affecting the financial sector, global financial markets, and the global economy and its effect on our revenue from asset-based fees and credit ratings business;

•failing to scale our operations and increase productivity in order to implement our business plans and strategies;

•liability for any losses that result from errors in our automated advisory tools or errors in the use of the information and data we collect;

•inadequacy of our operational risk management, business continuity programs and insurance coverage in the event of a material disruptive event;

•failing to efficiently integrate and leverage acquisitions and other investments, which may not realize the expected business or financial benefits, to produce the results we anticipate;

•failing to maintain growth across our businesses in today's fragmented geopolitical, regulatory and cultural world;

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•liability relating to the information and data we collect, store, use, create, and distribute or the reports that we publish or are produced by our software products;

•the potential adverse effect of our indebtedness on our cash flows and financial and operational flexibility;

•challenges in accounting for tax complexities in the global jurisdictions we operate in could materially affect our tax obligations and tax rates; and

•failing to protect our intellectual property rights or claims of intellectual property infringement against us.

A more complete description of these risks and uncertainties can be found in our filings with the Securities and Exchange Commission (SEC), including our most recent Reports on Form 10-K and 10-Q. If any of these risks and uncertainties materialize, our actual future results and other future events may vary significantly from what we expect. We do not undertake to update our forward-looking statements as a result of new information, future events, or otherwise, except as may be required by law. You are advised to review any further disclosures we make on related subjects, and about new or additional risks, uncertainties, and assumptions in our future filings with the SEC on Forms 10-K, 10-Q, and 8-K.

Item 9.01. Financial Statements and Exhibits.

    (d)    Exhibits:

Exhibit No.						Description
99.1						Investor Q&A.
104						The cover page from this Current Report on Form 8-K formatted in Inline XBRL (included as Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

						MORNINGSTAR, INC.
Date: June 14, 2024						By:/s/ Jason Dubinsky
						Name: Jason Dubinsky
						Title: Chief Financial Officer

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Investor Questions and Answers: June 14, 2024 We encourage current shareholders, potential shareholders, and other interested parties to send questions to us in writing and we make written responses available on a periodic basis. The following answers respond to selected questions primarily received through April 30, 2024. We retain the discretion to combine answers for duplicate or similar questions into one comprehensive response. If you would like to submit a question, please send an e-mail to [e-mail] or write to us at the following address: Morningstar Inc. Investor Relations 22 W. Washington Chicago, IL 60602 Morningstar Direct 1. Why has growth in Morningstar Direct licenses stagnated? And why did U.S. licenses in particular decline in 2023? During 2023, we instituted a meaningful price increase for Morningstar Direct licenses. With the increase, some large asset managers (especially in the U.S.) reduced their licenses. This contributed to the slower growth in overall licenses you observe as well as the modest decline in US licenses over the year. Morningstar Direct licenses increased to 18,562 as of December 31, 2023 (+0.8% compared to Dec. 31, 2022), while US licenses declined to 9,072 (-1.8% compared to Dec. 31, 2022). Morningstar Direct license growth in the US and outside the US was positive in the first quarter of 2024 compared to December 2023, with total licenses increasing 0.6% to 18,680 as of March 31, 2024. Direct license counts do not tell the full story of how clients access our data and research. We’d note that several clients who reduced their Direct licenses also increased the scope of reporting and distribution licenses at renewal. This access is distinct from Morningstar Direct and allows licensed users to distribute Direct output (reports or data, depending on the license) internally and externally. Revenue from these licenses is included in Morningstar Data and Analytics but not in the Morningstar Direct product area, and grew nicely in 2023 and in the first quarter of 2024 compared to the prior-year periods. Combined Direct and Direct reporting revenue grew over and above price increases on a topline basis. Products for Advisors 2. Could you explain the difference between the Advisor Workstation sub-segment and the Morningstar Wealth segment, which both seem to cater to advisors?

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For wealth managers and advisors, Morningstar offers a connected suite of tools spanning proposal creation, investment research, investment management, and retirement services built on Morningstar research designed to empower great advice and help drive success for advisory firms, their advisors, and the investors they serve. We serve financial advisors through multiple product offerings designed to create value for clients with personalized advice. These products include: - Morningstar Advisor Workstation in our Morningstar Data and Analytics segment; - products including Morningstar Office and Morningstar Managed Portfolios in the Morningstar Wealth segment; and - advisor managed accounts in our Morningstar Retirement segment. As you note, Morningstar Advisor Workstation and the product lineup from Morningstar Wealth both serve advisors, with a focus on different use cases. Morningstar Advisor Workstation is well suited to meet the needs of financial professionals at larger wealth firms, broker dealers, or wirehouses where the firm has built a robust, customized tech stack and requires a targeted Morningstar solution to support investment research, portfolio analytics, and proposal generation. Morningstar Advisor Workstation is not a trading/execution platform, and advisors using it typically implement their investment recommendations through a separately chosen managed account platform. Advisors using Advisor Workstation are heavy users of our data, research, and analytics. The Morningstar Wealth Platform, inclusive of Morningstar Office, has similar research and proposal capabilities as Advisor Workstation, but also includes a portfolio accounting system with back-office services and transactional performance reporting. This supports registered investment advisors and broker-dealer firms looking to license a more “all-in-one” solution that encompasses rebalancing, trading/clearing/custody, and performance reporting. Morningstar Wealth also offers Morningstar Managed Portfolios, an advisor service consisting of model portfolios designed for fee-based independent financial advisors. Morningstar Managed Portfolios is offered through the Morningstar Wealth Platform and as strategist models on third- party managed account platforms. Finally, in Morningstar Retirement, we offer advisor managed accounts through registered investment advisors and broker dealers who help employers select retirement accounts. Managed accounts is a robo-advice service that takes an individual’s unique profile and data to build an investment portfolio and savings strategy that is designed to help them achieve the best retirement outcome.

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Segment Disclosures 3. At what scale would you separate Sustainalytics and Indexes into separate segments? It’s very difficult to estimate what the “Corporate and All Other” negative adjusted operating margin can trend towards given this represents these two segments and a broader cost center, could you please provide some more color here? We have five reportable segments, Morningstar Data and Analytics, PitchBook, Morningstar Wealth, Morningstar Credit, and Morningstar Retirement. Neither Morningstar Sustainalytics nor Morningstar Indexes individually meets the qualitative or quantitative segment reporting thresholds as per the accounting standards outlined in ASC 280, which include individually contributing more than 10% to either consolidated revenue or consolidated adjusted operating income. We continue to assess our reportable segments on an ongoing basis. As you note, Morningstar Sustainalytics and Morningstar Indexes are presented as part of Corporate and All Other, which is not a reportable segment. Corporate and All Other also includes unallocated corporate expenses that are not considered when segment performance is evaluated. We disclose Corporate and All Other expenses in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 10-Q and 10-K. These totaled $153.5 million in 2023 compared to $135.8 million in 2022 and $40.9 million in Q1 24 compared to $36.1 million in Q1 23. The remainder of Corporate and All Other’s contribution to consolidated adjusted operating income reflects the combined adjusted operating income/loss from Morningstar Sustainalytics and Morningstar Indexes. Margins 4. Can the group adjusted operating margin surpass 30% in the MT-LT? Given the cost reduction initiatives and the operating leverage in the business, we don’t see why it can’t but is that too optimistic? While we don’t provide margin targets, we have stated that we are focused on increasing margins to recent historical peaks and higher over time. We remain focused on sustainable growth and increasing revenue faster than expenses, while continuing to invest appropriately across the business to create value.

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Cover	Jun. 14, 2024
Entity Information [Line Items]
Document Period End Date	Jun. 14, 2024
Entity Registrant Name	MORNINGSTAR, INC.
Entity Incorporation, State or Country Code	IL
Entity File Number	000-51280
Entity Tax Identification Number	36-3297908
Entity Address, State or Province	IL
Entity Address, Address Line One	22 West Washington Street
Entity Address, City or Town	Chicago
Entity Address, Postal Zip Code	60602
Local Phone Number	696-6000
City Area Code	312
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Title of 12(b) Security	Common stock, no par value
Trading Symbol	MORN
Security Exchange Name	NASDAQ
Document Type	8-K
Entity Central Index Key	0001289419
Amendment Flag	false

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