These statements are based on our current expectations about future events or future financial performance, including the impacts of the current COVID-19 pandemic. Asset allocation and diversification are investment strategies designed to manage risk, but do not guarantee a profit nor protect against a loss. This was an anticipated outcome given the structure of certain contracts and the timing of client asset reporting. By the end of June, all required methodology decisions had been completed, representing a significant milestone of DBRS Morningstar's analytical integration. Free cash flow increased to $110.6 million in the second quarter of 2020, compared with $68.9 million in the prior year. We exclude revenue from acquired businesses from our organic revenue growth calculation for a period of 12 months after we complete the acquisition. Operating expense increased 19.5% to $266.6 million in the second quarter of 2020. Morningstar® Managed Portfolios℠ are offered by the entities within Morningstar’s Investment Management group, which includes subsidiaries of Morningstar, Inc. that are authorized in the appropriate jurisdiction to provide consulting or advisory services in North America, Europe, Asia, Australia, and Africa. cash provided by or used for operating activities less capital expenditures (free cash flow). Morningstar also offers investment management services through its registered investment advisor subsidiaries and had approximately $159 billion in assets under advisement and … DBRS Morningstar contributed 19.0% to operating expense growth, which includes deal-related expenses and amortization and legal costs related to regulatory matters. Past performance is no guarantee of future results. This approach allows us to better position the total portfolio. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $203 billion in assets under advisement and management as of June 30, 2018. License-based revenue grew 10.1% year over year, as demand for PitchBook, Morningstar Data, and Morningstar Direct remained steady. As such, revenue from the combined credit ratings operation is excluded from the reporting of organic revenue growth through the second quarter of 2020. Morningstar's Fourth Annual Study of Health Savings Accounts... Morningstar, Inc. Declares Quarterly Dividend of 30 Cents Per... Organic revenue growth, which excludes DBRS Morningstar and foreign currency effects, was 5.8%, or 7.4% excluding conference revenue from second-quarter 2019 results as Morningstar Investment Conferences in the current quarter have been delayed. A targeted and consistent approach to help you to reach your goals. Navigate markets with investment insights from Morningstar Investment Management. 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 every month. Morningstar Investment Services may have different opinions on certain securities. An investment made in a security may differ substantially from its historical performance and as a result, you may incur a loss. Increases in compensation and benefits, production costs, and M&A-related professional fees were largely offset by lower travel, marketing, and conference costs. mutual funds, exchange-traded funds, common stocks) involve risk and will not always be profitable. Reconciliations of Non-GAAP Measures with the Nearest Comparable GAAP Measures (Unaudited) To supplement Morningstar's condensed consolidated financial statements presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), Morningstar uses the following measures considered as non-GAAP by the Securities and … Adding diversification, time horizon, and risk tolerance together, these portfolios can provide a long-term, core solution to any portfolio. (7) Revenue for Investment Management includes Morningstar Managed Portfolios, Institutional Asset Management, and Asset Allocation Services. Morningstar's management team uses free cash flow to evaluate its business. The Company closed a new $50.0 million 364-day revolving credit facility in the second quarter, bringing total capacity under its revolving credit facilities to $350.0 million with approximately $300.0 million available at the end of the second quarter. Second-quarter operating income was $61.3 million, an increase of 20.7% compared with the prior-year period. Second-quarter 2020 results include a $2.2 million decrease in stock-based compensation, primarily driven by the renewal of the PitchBook management bonus plan. This press release contains forward-looking statements as that term is used in the Private Securities Litigation Reform Act of 1995. Operating expenses for the remainder of Morningstar stayed relatively flat as the Company managed costs and saw reductions in certain expense categories as a result of the pandemic. The Company offers an extensive line of products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors in the debt and private capital markets. In addition, the Company paid down approximately $42.8 million of debt. As of June 30, 2020, the Company had cash, cash equivalents, and investments totaling $383.2 million and $487.7 million of long-term debt, compared with cash, cash equivalents, and investments of $367.5 million and $513.1 million of long-term debt as of Dec. 31, 2019. All our portfolios are constructed with a valuation-driven approach, and we seek to get more than what we pay for. Excluding $3.8 million of conference revenue from the prior-year period, organic revenue grew by 7.4%. *The Morningstar Economic Moat Rating is not a credit or risk rating. ©2020 Morningstar, Inc. All Rights Reserved. Diversification does not eliminate the risk or experiencing investment losses. Morningstar® Managed Portfolios℠ are offered by the entities within Morningstar’s Investment Management group, which includes subsidiaries of Morningstar, Inc. that are authorized in the appropriate jurisdiction to provide consulting or advisory services in North America, Europe, Asia, Australia, and Africa. ©2020 Morningstar Investment Management LLC. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities, and real-time global market data. Structured Finance integration activities. consolidated revenue, excluding DBRS Morningstar. Spanning the risk spectrum, our all-encompassing, valuation-driven portfolios offer long-term diversified solutions to help you meet your financial goals. ©2020 Morningstar Investment Management LLC. Adjusted diluted net income per share increased 31.2% to $1.43, compared with $1.09 in the prior-year period. Due to the ongoing COVID-19 pandemic, the Company transitioned its 2020 Morningstar Investment Conference in Chicago to a digital format, and rescheduled conferences in Australia and the United Kingdom from the second quarter to later this year. Many new issuance segments of the transaction-based credit rating business in both Europe and the United States slowed or paused during the second quarter as the pandemic persisted; however, DBRS Morningstar benefited from record corporate issuance volumes in Canada, as many Canadian investment grade issuers accelerated their full year issuance plans into the second quarter. In addition, Morningstar presents free cash flow solely as supplemental disclosure to help investors better understand how much cash is available after making capital expenditures. Revenue for the three and six months ended June 30, 2020 includes revenue from DBRS Morningstar, the combined credit ratings operation. The contribution of DBRS Morningstar was $39.1 million, or 14.0 percentage points in the quarter, and the remainder of Morningstar contributed $14.9 million, or 5.7 percentage points to revenue growth. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities, and real-time global market data. It is important to note that investments in securities (e.g. Morningstar® Managed Portfolios℠ are offered by the entities within Morningstar’s Investment Management group, which includes subsidiaries of Morningstar, Inc. that are authorized in the appropriate jurisdiction to provide consulting or advisory services in North America, Europe, Asia, Australia, and Africa. Recurring annual fees tied to surveillance, research, and other services represented 40.5% of credit ratings revenue in the second quarter. Reconciliation from cash provided by operating activities to free cash flow: ______________________________________________________________________.