Morningstar, Inc. MORN +0.52% , a leading provider of independent investment research, today announced its third-quarter 2011 financial results. The company reported consolidated revenue of $160.1 million in the third quarter of 2011, a 14.5% increase from $139.8 million in the third quarter of 2010. Consolidated operating income was $33.9 million in the third quarter of 2011, an increase of 12.3% compared with $30.2 million in the same period a year ago. Net income was $21.4 million, or 42 cents per diluted share, compared with $24.7 million, or 49 cents per diluted share, in the third quarter of 2010.

Morningstar Business Segment Performance:  

Investment Information Segment:  The largest products and services in this segment based on revenue are Morningstar® Licensed Data; Morningstar® Advisor Workstation(SM) (including Morningstar Office); Morningstar.com®, including Premium Memberships and Internet advertising sales; and Morningstar Direct(SM).  Revenue was $125.8 million in the third quarter of 2011, up 12.3% from $112.1 million in the third quarter of 2010.  Acquisitions contributed revenue of $0.9 million in the third quarter of 2011.  Morningstar Direct, Integrated Web Tools, and Structured Credit Ratings drove most of the revenue increase. Morningstar Advisor Workstation (including Morningstar Office) and Licensed Data also contributed to the increase. Licenses for Morningstar Direct rose 30% to 5,726. Premium Membership subscriptions for Morningstar.com fell 4.3%. Principia subscriptions were down 5.8% to 31,318, and Advisor Workstation licenses rose slightly to 155,833.

Operating income was $31.4 million in the third quarter of 2011, compared with $32.8 million in the same period in 2010. Operating expense in this segment rose $15.1 million, or 19.1%, with approximately 80% of the increase from compensation-related expense, including higher salaries, employee benefits, bonus, and commission expense.

Operating margin was 25.0% in the third quarter of 2011 versus 29.3% in the prior-year period. The margin decline primarily reflects higher salary, benefits, and bonus expense as a percentage of revenue.

Investment Management Segment:  The largest products in this segment based on revenue are Investment Consulting; Retirement Solutions, including Advice by Ibbotson® and Morningstar® Retirement Manager(SM); and Morningstar® Managed Portfolios(SM).  Revenue was $34.2 million in the third quarter of 2011, a 23.4% increase from $27.8 million in the same period in 2010.  Investment Consulting was the primary driver of the segment revenue growth. Retirement Solutions and Morningstar Managed Portfolios also made positive contributions, but to a lesser extent.

Assets under advisement and management for Investment Consulting were $128.1 billion as of Sept. 30, 2011, up 21.2% compared with $105.7 billion as of Sept. 30, 2010. The increase reflects additional assets for an existing client’s fund-of-funds program for which Morningstar now receives asset-based fees. Assets under advisement and management for Retirement Solutions rose to $36.3 billion as of Sept. 30, 2011, versus $31.6 billion as of Sept. 30, 2010. Assets under management for Morningstar Managed Portfolios increased to $2.8 billion as of Sept. 30, 2011, compared with $2.5 billion as of Sept. 30, 2010.

Operating income was $18.1 million in the third quarter of 2011, an increase of 33.6% compared with the third quarter of 2010. Operating expense in the segment was $16.1 million, an increase of $1.9 million, or 13.7%, primarily reflecting higher operating expense for operations outside of the United States as well as higher compensation expense and professional fees in the United States.  Operating margin was 52.7% in the third quarter of 2011 versus 48.7% in the prior-year period. The higher margin mainly reflects lower salary, bonus, and commission expense as a percentage of revenue.

Source:  Morning Star Press Release