Morningstar, Inc. (MORN)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 delivered revenue of $605.1M (+5.8% YoY) and operating margin expansion to 20.7% as adjusted operating income rose to $143.4M (+9.5% YoY) .
• Adjusted diluted EPS of $2.40 beat S&P Global consensus of $2.1941 by ~9.4%; revenue was roughly in line, modestly above the $604.6M consensus (+0.1%). Bold beat on EPS reflects stronger operating performance and lower non‑operating expense YoY* .
• Segment drivers: PitchBook (+9.8% reported revenue YoY) and Morningstar Credit (+9.5%) led growth; Morningstar Direct Platform (+6.2%) also contributed, while Corporate & All Other declined (-4.2%) on Sustainalytics softness .
• Free cash flow fell to $62.4M (-48.3% YoY) on higher tax payments; share repurchases were $112.0M and net debt increased $35.0M in the quarter, balancing capital returns with leverage .
• Potential stock reaction catalysts: EPS beat and margin expansion; Wealth segment’s turn to positive adjusted operating income; caution on weak FCF driven by tax timing and ongoing Sustainalytics headwinds .

What Went Well and What Went Wrong

What Went Well

• “PitchBook, Morningstar Direct Platform, and Morningstar Credit led the way in the second quarter, contributing to solid growth,” highlighting core franchise momentum .
• PitchBook revenue grew 9.8% YoY with licensed users up 7.6%; adjusted operating income rose 11.6% and margin to 31.7%, driven by core investor/advisor segments (banks, PE, credit investors, IBs) .
• Morningstar Wealth achieved positive adjusted operating income ($3.0M vs. a loss in prior year) as AUMA rose 13.0% to $66.8B; the TAMP transition to AssetMark completed, supporting a more focused and profitable Wealth footprint .

What Went Wrong

• Corporate & All Other revenue fell 4.2% YoY on Sustainalytics softness amid licensed‑ratings streamlining and ESG Risk Ratings pressure tied to vendor consolidation; adjusted corporate loss widened to -$54.6M .
• Retirement revenue declined 2.7% YoY and adjusted operating margin compressed 450 bps to 47.5% due to revenue pressure, higher marketing/data management costs, and increased compensation/commissions .
• Free cash flow dropped 48.3% YoY to $62.4M, driven by a step‑up in income tax payments ($79.5M vs. $31.6M YoY), a timing headwind despite higher cash earnings .

Financial Results

Segment Revenue

Segment Adjusted Operating Income

KPIs

Guidance Changes

Earnings Call Themes & Trends

Note: A Q2 2025 earnings call transcript was not available; Morningstar provides written Q&A via periodic 8‑Ks .

Management Commentary

• “Our teams remain focused on delivering insights and experiences that make us essential to the investor workflow… creating a common language to help investors navigate the convergence of public and private markets.” — CEO Kunal Kapoor .
• “We passed a significant milestone in Morningstar Wealth during the quarter as we successfully completed the transition of assets from our US TAMP to AssetMark, sunsetting the platform… Morningstar Wealth generated $3.0M in adjusted operating income.” — CEO letter .
• “Morningstar Credit continued to capitalize on recent investments… strength in asset‑backed securities (private credit aviation, data center transactions) and European corporates.” — CEO letter .

Q&A Highlights

• No Q2 2025 earnings call transcript was available. Morningstar conducts written investor Q&A published via periodic Form 8‑Ks; stakeholders are encouraged to submit questions to [email protected] .

Estimates Context

Values retrieved from S&P Global.*

Implications: Results warrant upward estimate revisions for adjusted EPS/margin trajectory; revenue close to consensus suggests segment mix more than topline magnitude drove the EPS beat .

Key Takeaways for Investors

• EPS beat and margin expansion: Adjusted EPS $2.40 vs. $2.1941 consensus; operating margin up to 20.7%, adjusted margin to 23.7% — driven by segment strength and lower non‑operating expense YoY .*
• Growth engines intact: PitchBook (+9.8% YoY revenue; licenses +7.6%) and Morningstar Credit (+9.5%) remain primary drivers; Morningstar Direct Platform solid at +6.2% .
• Wealth inflection: Positive adjusted operating income, AUMA up 13.0%, post‑TAMP transition; supports thesis for improved segment profitability .
• Sustainalytics pressure persists: Licensed‑ratings streamlining and vendor consolidation weigh on Corporate & All Other; monitor pace of stabilization .
• FCF softness is tax‑timing driven: Elevated tax payments depressed FCF; not indicative of underlying earnings power; watch normalization in H2 .
• Capital allocation: $112.0M buybacks and dividends ($19.3M) alongside modest net debt increase (+$35.0M); balanced returns with leverage .
• Medium‑term thesis: Public‑private convergence and private credit growth provide multi‑year tailwinds for PitchBook, Credit, and Direct; near‑term headwinds in ESG product line likely to moderate as the model transition advances .

Appendix: Additional Data Points and Reconciliations

• Non‑GAAP reconciliation drivers in Q2: $15.3M intangible amortization, $3.8M M&A‑related expenses, and $(0.8)M other non‑recurring items; adjusted operating margin of 23.7% (+80 bps YoY) .
• Non‑operating expense declined YoY: Interest expense net ($7.4M vs. $10.3M), other expense net ($1.2M vs. $8.7M), supporting EPS growth .

Sources: Morningstar Q2 2025 8‑K and press release (including Exhibits) ; Q1 2025 8‑K ; Q4 2024 8‑K .*