Morningstar, Inc.MORN
Morningstar, Inc. Stock Compensation Disclosure
Stock-Based Compensation
Stock-Based Compensation Plans
Our shareholders approved the Morningstar, Inc. Amended and Restated 2011 Stock Incentive Plan (the 2021 Plan) on May 14, 2021 and authorized an additional 1,050,000 shares for issuance under the 2021 Plan. The 2021 Plan amended and restated the Morningstar, Inc. 2011 Stock Incentive Plan (the 2011 Plan), which itself had amended and restated the Morningstar, Inc. 2004 Stock Incentive Plan.
The 2021 Plan provides for a variety of equity-based awards, including restricted stock units, restricted stock, performance stock units, market stock units, and stock options. Under the 2021 Plan, we primarily grant restricted stock units, market stock units, and performance stock units. Under the 2011 Plan, we primarily granted restricted stock units, stock options, and market stock units.
All officers, other employees, non-employee directors, and consultants or other independent contractors of the company and its subsidiaries and persons expected to become the same are eligible to receive awards under the 2021 Plan.
Shares delivered under the 2021 Plan may be authorized but unissued shares, or authorized but issued shares that we reacquired and held as treasury shares or otherwise, or any combination of the foregoing. The 2021 Plan does not permit the replenishment of its share reserve with shares withheld by the company to pay the exercise price of an option or to pay tax withholdings on any award. Further, the 2021 Plan prohibits the replenishment of the share reserve with shares that are not issued as a result of the net settlement of a stock option or stock appreciation right (SAR) or shares that are repurchased on the open market using proceeds from the exercise of a stock option.
The following table summarizes the number of shares available for future grants under our 2021 Plan:
| (in millions) | As of December 31, 2025 | |||||||
| Shares available for future grants | 1.7 | |||||||
Accounting for Stock-Based Compensation Awards
The following table summarizes our stock-based compensation expense and the related income tax benefit we recorded in the past three years:
| Year ended December 31, | ||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Restricted stock units | $ | 37.1 | $ | 38.4 | $ | 38.8 | ||||||||||||||
| Market stock units | 17.2 | 16.2 | 7.5 | |||||||||||||||||
| Performance stock units | 2.1 | 0.1 | 6.5 | |||||||||||||||||
| Total stock-based compensation expense | $ | 56.4 | $ | 54.7 | $ | 52.8 | ||||||||||||||
| Income tax benefit related to the stock-based compensation expense | $ | 11.3 | $ | 11.2 | $ | 10.3 | ||||||||||||||
The following table summarizes the stock-based compensation expense included in each of our operating expense categories for the past three years:
| Year ended December 31, | ||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Cost of revenue | $ | 26.4 | $ | 23.3 | $ | 23.8 | ||||||||||||||
| Sales and marketing | 8.4 | 9.0 | 8.3 | |||||||||||||||||
| General and administrative | 21.6 | 22.4 | 20.7 | |||||||||||||||||
| Total stock-based compensation expense | $ | 56.4 | $ | 54.7 | $ | 52.8 | ||||||||||||||
The following table summarizes the amount of unrecognized stock-based compensation expense as of December 31, 2025 and the expected number of months over which the expense will be recognized:
| Unrecognized stock-based compensation expense (in millions) | Weighted average expected amortization period (months) | |||||||||||||
| Restricted stock units | $ | 49.0 | 30 | |||||||||||
| Market stock units | 23.4 | 26 | ||||||||||||
| Performance stock units | 0.9 | 16 | ||||||||||||
| Total unrecognized stock-based compensation expense | $ | 73.3 | 29 | |||||||||||
In accordance with FASB ASC 718, we estimate forfeitures of employee stock-based awards and recognize compensation cost only for those awards expected to vest.
Restricted Stock Units
RSUs represent the right to receive a share of Morningstar common stock when that unit vests. RSUs granted to employees typically vest within a -year period. RSUs granted to non-employee directors vest ratably over a -year period.
The following table summarizes restricted stock unit activity during the year:
| Restricted Stock Units (RSUs) | Shares | Weighted Average Grant Date Fair Value | ||||||||||||
| RSUs Outstanding - December 31, 2024 | 280,859 | $ | 254.75 | |||||||||||
| Granted | 198,103 | 291.72 | ||||||||||||
| Vested | (197,591) | 272.56 | ||||||||||||
| Forfeited | (22,146) | 269.39 | ||||||||||||
| RSUs Outstanding - December 31, 2025 | 259,225 | $ | 268.17 | |||||||||||
The total fair value of RSUs that vested in 2025, 2024, and 2023 was $53.9 million, $50.1 million, and $47.4 million, respectively.
Market Stock Units
MSUs represent the right to receive a target number of shares that will vest at the end of a -year performance period depending on the company’s total shareholder return over that three-year period. The MSUs granted to the executive officers and certain other employees in 2021, 2022, and 2023 also had a feature to provide an increased number of shares to be earned at the vesting date if certain revenue metrics were exceeded.
We used the following assumptions to estimate the fair value of our MSUs:
| Assumptions for Monte Carlo Valuation Model | ||||||||||||||||||||
| Grant Date | Expected volatility | Dividend yield | Risk-free interest rate | |||||||||||||||||
| May 15, 2023 | 31.7 | % | 0.79 | % | 3.65 | % | ||||||||||||||
| November 15, 2023 | 31.9 | % | 0.56 | % | 4.56 | % | ||||||||||||||
| May 15, 2024 | 31.1 | % | 0.54 | % | 4.62 | % | ||||||||||||||
| November 15, 2024 | 31.1 | % | 0.47 | % | 4.30 | % | ||||||||||||||
| May 15, 2025 | 29.6 | % | 0.59 | % | 4.05 | % | ||||||||||||||
| November 15, 2025 | 27.3 | % | 0.86 | % | 3.61 | % | ||||||||||||||
The risk-free interest rate was determined based on the US Constant Maturity Treasury yield curve on the measurement date with a maturity commensurate with the terms. The expected volatility was determined using our historical stock price volatility over the three years preceding the measurement date.
The following table summarizes market stock unit activity during the year:
| Market Stock Units (MSUs) | Shares | Weighted Average Grant Date Fair Value | ||||||||||||
| MSUs Outstanding - December 31, 2024 | 169,859 | $ | 277.37 | |||||||||||
| Granted | 66,826 | 261.48 | ||||||||||||
| Vested | (31,409) | 235.69 | ||||||||||||
| Forfeited | (35,823) | 278.51 | ||||||||||||
| MSUs Outstanding - December 31, 2025 | 169,453 | $ | 278.59 | |||||||||||
The total fair value of MSUs that vested in 2025, 2024, and 2023 was $7.4 million, $5.6 million, and $6.5 million, respectively.
Performance Stock Units
PSUs represent the right to receive a target number of shares that will vest at the end of a -year performance period depending on the company's financial results over that three-year period. Starting in 2024, the company awarded PSU opportunities to certain members of management (stretch PSUs). The number of PSUs that shall be eligible to be earned is based on adjusted operating income as of the end of the performance period. However, no PSUs will be earned unless performance exceeds the target performance level set by the Compensation Committee of the Board of Directors of the company.
In 2023, we renewed the PitchBook management bonus plan (the PitchBook Plan), a compensation vehicle designed to incentivize PitchBook leadership for the 2023-2025 period. Pursuant to the terms of this renewal, awards having an aggregate target value equal to $28.6 million would have been available for issuance with annual grants of $7.15 million for 2023, $7.15 million in 2024, and $14.3 million in 2025. In July 2024, we terminated the PitchBook Plan and all outstanding awards were forfeited.
The following table summarizes performance stock unit activity during the year:
| Performance Stock Units (PSUs) | Shares | Weighted Average Grant Date Fair Value | ||||||||||||
| PSUs Outstanding - December 31, 2024 | 44,644 | $ | 295.14 | |||||||||||
Granted(1) | 42,022 | 306.41 | ||||||||||||
| Vested | (866) | 242.95 | ||||||||||||
| Forfeited | (9,806) | 302.03 | ||||||||||||
| PSUs Outstanding - December 31, 2025 | 75,994 | $ | 301.08 | |||||||||||
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(1) Includes 42,009 stretch PSUs granted at the base number of shares issuable under the agreement; for these awards, zero percent is earned for target performance and up to 200% of the base number can be earned for performance exceeding target. The number of shares issuable under the stretch PSUs can range from zero to 84,018.
The total fair value of PSUs that vested in 2025, 2024, and 2023 was $0.2 million, $6.4 million, and $37.1 million, respectively.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.