Business Context and Reporting Period
This Form 8-K is a Current Report filed by Morningstar, Inc. on June 1, 2012. The filing serves as a Regulation FD disclosure, providing written responses to investor inquiries received through May 31, 2012. The company operates in the financial information and investment research sector, headquartered in Chicago, Illinois.
Key Financial Metrics and Share Data
The filing provides specific historical revenue data for the company's top five products and current share count information, but does not report consolidated revenue, profit, cash flow, or debt metrics for the current period.
Top Five Products Revenue (Reclassified Historical Data)
| Product | 2011 Revenue ($000) | 2011 % of Total | 2010 Revenue ($000) | 2010 % of Total |
|---|---|---|---|---|
| Morningstar Data | $140,594 | 22.3% | $131,488 | 23.7% |
| Morningstar Advisor Workstation | $77,882 | 12.3% | $69,782 | 12.6% |
| Investment Advisory Services | $71,253 | 11.3% | $58,742 | 10.6% |
| Morningstar.com | $56,352 | 8.9% | $51,756 | 9.3% |
| Morningstar Direct | $52,481 | 8.3% | $38,069 | 6.9% |
Shares Outstanding: As of May 9, 2012, the company had 49,433,675 shares outstanding. This figure reflects the repurchase of 997,165 shares for a total of $60.2 million during the year-to-date period through that date.
Material Changes and Reclassifications
- Revenue Reclassification: The company reclassified its top five products beginning in 2012. Historical data for 2008–2011 has been revised to align with current reporting standards. Notably, "Investment Advisory Services" was previously labeled "Investment Consulting."
- Product Mix Shift: In 2011, "Morningstar Data" remained the largest revenue contributor (22.3%), followed by "Morningstar Advisor Workstation" (12.3%). In 2008, "Investment Advisory Services" was the top product (15.2%), while "Principia" was the fifth product, having been replaced by "Morningstar Direct" in subsequent years.
- Share Repurchases: The company actively reduced its share count, repurchasing nearly 1 million shares in the first four months of 2012.
Guidance, Risks, and Management Commentary
The filing contains a standard caution regarding forward-looking statements, noting that actual results may differ due to various risks. No specific financial guidance or outlook for 2012 is provided in this document.
Identified Risks
- General industry conditions and global financial uncertainty.
- Impact of market volatility on revenue from asset-based fees.
- Reputational damage from claims of conflicts of interest.
- Liability for breaches of fiduciary duties.
- Financial services industry consolidation.
- Prolonged outages of database and network facilities.
- Challenges in non-U.S. operations.
- Availability of free or low-cost investment information.
Investor Communication Policy: Morningstar plans to publish written responses to investor questions on the first Friday of every month. The next scheduled release of answers is July 6, 2012.
Key Facts for Investor Verification
- Share Count Accuracy: Verify the 49,433,675 shares outstanding figure against the latest 10-Q or subsequent filings to confirm no further repurchases or issuances occurred after May 9, 2012.
- Revenue Reclassification Impact: Confirm how the 2012 reclassification of "Morningstar Advisor Workstation" and "Morningstar.com" revenue affects year-over-year growth comparisons in future earnings reports.
- Product Performance: Monitor the growth trajectory of "Morningstar Direct," which showed significant revenue growth from 2010 ($38M) to 2011 ($52M), replacing "Principia" as a top product.
- Capital Allocation: Track the $60.2 million spent on share repurchases in the first four months of 2012 to assess the company's ongoing commitment to returning capital to shareholders.