With the growth in headcount and expenses to support growth over recent quarters, do you feel that you have now sufficiently invested to build out capabilities?

March 18, 2019

We have continued to focus investment in organic opportunities to scale and grow the business and create long term value. In 2018, our headcount grew approximately 10%, and overall expense growth was 8.4% relative to organic revenue growth of 11.4%. About half of the headcount growth was driven by PitchBook, and the remaining majority was from expansion of our data and development capabilities in India and China. We also invested in business development resources, research, and product development globally.

Over the past few years, we have focused our investments in key growth areas including Morningstar Data, Morningstar Direct, PitchBook, Morningstar Managed Portfolios, Workplace Solutions, and Morningstar Credit Ratings. These have all contributed to strong revenue growth and returns. Revenue generated from these product areas collectively grew at a 12.6% compound annual growth rate from 2014 to 2017 and achieved 16.7% organic growth in 2018. We believe these solutions will continue to drive outsized growth relative to the rest of Morningstar in the near to medium-term.

Additionally, we believe we still have substantial runway across these key areas to capitalize on market opportunities and gain share, so we anticipate continuing to invest prudently across our business. This is important to do and is part of the growth mindset we maintain at Morningstar. Additionally, our share relative to larger competitors highlights that we have room to expand further from our current base. 

We believe it is equally important to drive further efficiency as we scale. This is highlighted by our efforts to increase the level of automation in our business. Across the broader Morningstar organization, we’ve been rolling out robotic process automation (RPA) with an eye toward automating labor-intensive tasks in our functional areas like data, finance, and design, as well as in our product organizations. We are also in process of migrating our technology infrastructure and parts of our data centers to the public cloud over the next several years. During this migration, we expect to run certain applications and infrastructure in parallel, bringing some transitional effects on our level of capital expenditures and operating expenses.

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