August 26, 2022

In the press release, Kunal states that he expects that higher operating expenses in the near-term will drive long-term profitability. When should investors expect to see an inflection in profitability?

As we noted in our annual meeting earlier this year, we are investing in key areas of the business to address market opportunities. This year, our investment priorities include Wealth, ESG / Morningstar Sustainalytics, and PitchBook in addition to addressing key infrastructure needs to help us scale. The near-term increase in operating expenses also reflects the impact of compensation adjustments at the beginning of this fiscal year to address the competitive environment for talent in the marketplace.

While we cannot guide to a specific inflection point in profitability, we expect that adjusted operating margins this year will be lower than a typical year and we are focused on getting back on a path toward levels seen in recent historical peaks. We would also note that certain investments have different time horizons for returns. For example, we expect shorter term returns for investments in Morningstar Sustainalytics (e.g. climate and impact data) and PitchBook (e.g. equity data) given our ability to get capabilities and products to market quickly and sell through a subscription model. This contrasts with Wealth (direct indexing and open architecture TAMP expansion) where we expect new capabilities to drive flows and AUM growth, which will take more time to realize.

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