November 9, 2018

Can you provide any color on Morningstar's margin profile by segment, particularly with regard to some of your new initiatives, such as PitchBook, which are experiencing very strong growth?

We report our results in a single segment, and do not otherwise break out margins for our product lines.

We believe that most of our major products have margins that are comparable with those of our key competitors and we remain focused on the inherent operating leverage across the company. In other words, to the extent that we’re successful in increasing revenue from both our existing product portfolio and from our new product launches, we believe our costs should grow at a slower pace, on average, over time. That said, for the right opportunities, we believe there is an appropriate trade-off to increase investments in the near-term while in pursuit of longer-term value creation.

PitchBook is good example. We’ve stated in the past that PitchBook’s margin profile was lower than our corporate average when we closed the acquisition, but robust revenue growth and recent success at sharing corporate resources have contributed to some more recent margin improvement. As we disclosed in our third quarter 10-Q, our increased compensation costs were primarily related to PitchBook growth. We will continue to make the necessary investments to support growth as we still see significant opportunity in the private capital markets. We expect that these investments, along with additional expense for the management bonus plan and intangible amortization, will continue to impact operating margins in the medium term. However, over time, we expect PitchBook to reach a similar operating margin profile as the rest of Morningstar.

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