[PART I—FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial information for the company, including financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Affiliated Managers Group, Inc. for Q2 2022, including income, comprehensive income, balance sheets, equity changes, and cash flows [Consolidated Statements of Income](index=4&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Consolidated revenue increased to **$604.1 million** for Q2 2022, with diluted EPS rising to **$2.68**, while six-month net income to controlling interest slightly decreased Consolidated Statements of Income (in millions, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Consolidated Revenue** | $604.1 | $586.3 | $1,211.4 | $1,145.4 | | **Total Consolidated Expenses** | $400.6 | $389.9 | $795.7 | $768.4 | | **Net Income** | $174.0 | $184.2 | $392.6 | $398.2 | | **Net Income (controlling interest)** | $109.4 | $109.0 | $255.4 | $258.9 | | **Earnings Per Share (basic)** | $2.83 | $2.62 | $6.52 | $6.15 | | **Earnings Per Share (diluted)** | $2.68 | $2.55 | $6.10 | $5.96 | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Comprehensive income attributable to controlling interest significantly decreased to **$56.9 million** for Q2 2022, primarily due to foreign currency translation losses Consolidated Statements of Comprehensive Income (in millions) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Net Income** | $174.0 | $184.2 | $392.6 | $398.2 | | **Other Comprehensive Income (Loss)** | $(74.0) | $7.9 | $(85.8) | $32.2 | | **Comprehensive Income** | $100.0 | $192.1 | $306.8 | $430.4 | | **Comprehensive Income (controlling interest)** | $56.9 | $118.0 | $197.6 | $292.4 | [Consolidated Balance Sheets](index=6&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Total assets decreased to **$8.47 billion** as of June 30, 2022, primarily due to reduced cash, while total liabilities also decreased Consolidated Balance Sheet Highlights (in millions) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | $8,468.7 | $8,876.4 | | Cash and cash equivalents | $606.8 | $908.5 | | Goodwill | $2,660.0 | $2,689.2 | | **Total Liabilities** | $4,277.1 | $4,491.9 | | Debt | $2,534.3 | $2,490.4 | | **Total Stockholders' Equity** | $2,741.0 | $2,786.4 | | **Total Liabilities and Equity** | $8,468.7 | $8,876.4 | [Consolidated Statements of Cash Flows](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Operating cash flow decreased to **$506.5 million** for the six months ended June 30, 2022, with significant cash used in financing activities, leading to a **$301.7 million** net decrease in cash Consolidated Statements of Cash Flows (in millions) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | **Cash flow from operating activities** | $506.5 | $550.9 | | **Cash flow used in investing activities** | $(172.0) | $(170.7) | | **Cash flow used in financing activities** | $(616.2) | $(642.0) | | **Net decrease in cash and cash equivalents** | $(301.7) | $(257.9) | | **Cash and cash equivalents at end of period** | $606.8 | $777.9 | [Notes to the Consolidated Financial Statements](index=10&type=section&id=NOTES%20TO%20THE%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Notes detail accounting policies, including ASU 2020-06 adoption, investments, debt structure, and the pending sale of the company's interest in Baring Private Equity Asia - Effective January 1, 2022, the company adopted ASU 2020-06, which changed the accounting for its junior convertible securities to be wholly classified as debt, resulting in a **$101.5 million** increase in Debt and a **$4.5 million** increase in Retained Earnings[39](index=39&type=chunk) - The company agreed to sell its equity interest in Baring Private Equity Asia (BPEA) to EQT AB, expecting to receive **$240.0 million** in cash and **28.68 million** EQT ordinary shares, with the transaction expected to close in Q4 2022[106](index=106&type=chunk) - As of June 30, 2022, the company had total debt of **$2.53 billion**, consisting of senior bank debt, senior notes, junior subordinated notes, and junior convertible securities[81](index=81&type=chunk) - The company has unfunded commitments of **$146.1 million** to co-invest in certain Affiliate sponsored investment products as of June 30, 2022[93](index=93&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2022 financial performance, including **$691 billion** AUM, revenue and expense drivers, non-GAAP measures, liquidity, and the pending BPEA sale [Executive Overview and Operating Performance](index=28&type=section&id=Executive%20Overview%20and%20Operating%20Performance) Aggregate assets under management decreased to **$690.9 billion** as of June 30, 2022, primarily due to market changes, alongside strategic investments and the pending BPEA sale - Aggregate assets under management were approximately **$691 billion** as of June 30, 2022[145](index=145&type=chunk) - The company agreed to sell its interest in Baring Private Equity Asia (BPEA) to EQT, expecting to receive **$240.0 million** in cash and **28.68 million** EQT ordinary shares, with the transaction expected to close in Q4 2022[147](index=147&type=chunk) AUM Roll-Forward by Strategy - Year to Date (in billions) | Strategy | Dec 31, 2021 | Net Client Flows | Market Changes | Other | June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | | Alternatives | $238.2 | $12.7 | $1.1 | $(8.2) | $243.8 | | Global Equities | $277.5 | $(21.5) | $(48.7) | $(6.2) | $201.1 | | U.S. Equities | $170.7 | $(4.1) | $(31.3) | $(1.0) | $134.3 | | Fixed Income & Multi-Asset | $127.4 | $(0.7) | $(13.9) | $(1.1) | $111.7 | | **Total** | **$813.8** | **$(13.6)** | **$(92.8)** | **$(16.5)** | **$690.9** | [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Consolidated revenue for Q2 2022 increased to **$604.1 million** driven by performance-based fees, while equity method income and investment income declined due to lower performance fees and unrealized losses - Consolidated revenue for Q2 2022 increased by **3%** YoY to **$604.1 million**, mainly due to a **$42.3 million** (**7%**) increase in performance-based fees from illiquid alternative strategies[172](index=172&type=chunk) - Equity method revenue for Q2 2022 decreased by **4%** YoY to **$575.5 million**, as a **$45.5 million** drop in performance-based fees from liquid alternatives offset a **$21.7 million** rise in asset-based fees[183](index=183&type=chunk) - Investment and other income decreased by **$43.1 million** in Q2 2022 compared to Q2 2021, primarily due to unrealized losses on Other Investments (**$28.3 million**) and Marketable Securities (**$12.0 million**)[190](index=190&type=chunk) - Income tax expense for Q2 2022 decreased **46%** to **$38.0 million**, largely because a **$25.1 million** deferred tax expense from a UK tax rate change in Q2 2021 did not recur[191](index=191&type=chunk) [Supplemental Financial Performance Measures](index=38&type=section&id=Supplemental%20Financial%20Performance%20Measures) Non-GAAP measures show Adjusted EBITDA and Economic Net Income (controlling interest) decreased for Q2 2022, while Economic Earnings Per Share remained flat at **$4.03** Reconciliation to Non-GAAP Measures (in millions, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net income (controlling interest) | $109.4 | $109.0 | | **Adjusted EBITDA (controlling interest)** | **$213.4** | **$227.3** | | **Economic net income (controlling interest)** | **$160.5** | **$171.2** | | **Economic earnings per share** | **$4.03** | **$4.03** | [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) The company ended Q2 2022 with **$606.8 million** in cash, utilizing funds for share repurchases and Affiliate investments, while maintaining a **$1.25 billion** revolving credit facility - Cash and cash equivalents were **$606.8 million** as of June 30, 2022[205](index=205&type=chunk) - During the six months ended June 30, 2022, the company repurchased **1.9 million** shares of its common stock for **$264.6 million** (net of proceeds from issuances)[31](index=31&type=chunk)[215](index=215&type=chunk) - The company has a **$1.25 billion** senior unsecured revolving credit facility, which had no outstanding borrowings as of June 30, 2022[218](index=218&type=chunk) - Following the closing of the BPEA sale, the company expects to use approximately **60%** of gross proceeds for growth investments and share repurchases over time[207](index=207&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes occurred in the company's quantitative and qualitative market risk disclosures for the quarter ended June 30, 2022 - There were no material changes to the company's market risk disclosures for the quarter ended June 30, 2022[228](index=228&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[229](index=229&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[230](index=230&type=chunk) [PART II—OTHER INFORMATION](index=43&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This section provides additional information, including details on equity security repurchases and a list of exhibits filed with the quarterly report [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **621,810** shares at an average price of **$128.75** during Q2 2022, with **3.5 million** shares remaining available for repurchase Issuer Purchases of Equity Securities (Q2 2022) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2022 | 264,213 | $133.44 | | May 2022 | 131,435 | $125.67 | | June 2022 | 226,162 | $125.07 | | **Total** | **621,810** | **$128.75** | - As of June 30, 2022, there were **3.5 million** shares available for repurchase under the company's outstanding share repurchase programs[233](index=233&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including CEO/CFO certifications and XBRL financial data - The exhibits filed with this report include CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906, and financial data in XBRL format[235](index=235&type=chunk)

Financial Data and Key Metrics Changes - Economic earnings per share for Q2 2022 were $4.03, consistent with the same quarter last year, despite challenging market conditions [18][23] - Net client cash outflows totaled $11 billion, with $6 billion in outflows when excluding certain quantitative strategies, primarily due to redemptions in global equities [18][21] - Adjusted EBITDA for Q2 was $213 million, down 6% year-over-year, mainly driven by lower performance fee earnings [22][23] Business Line Data and Key Metrics Changes - Alternatives businesses saw strong performance with $6 billion in net inflows, led by private markets with $5 billion [19] - Liquid alternatives attracted approximately $1 billion in net inflows, reflecting a shift in investor behavior towards diversification [20] - Active equities faced challenges with net outflows of $9.8 billion, particularly in growth strategies, while U.S. equities experienced $1.7 billion in outflows [21] Market Data and Key Metrics Changes - The market environment has shifted towards increased volatility, leading to a reduction in risk among investors [6][8] - There is a notable uptick in industry flows into liquid alternatives, indicating a change in client behavior towards seeking uncorrelated return streams [9][10] Company Strategy and Development Direction - The company is focused on investing in areas of secular growth, including private markets, liquid alternatives, wealth management, Asia, and ESG [13][30] - AMG's unique partnership model allows for alignment with independent asset management firms, enhancing growth opportunities [12][14] - The company aims to maintain a disciplined capital allocation strategy while returning excess capital to shareholders through share repurchases [15][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to generate earnings growth in 2022 and beyond, despite market challenges [26][62] - The current environment is seen as an opportunity to capitalize on high-quality investment opportunities, particularly in periods of market dislocation [12][30] - There is an expectation for continued strength in performance fee earnings due to the diversity of strategies and strong investment performance [26][39] Other Important Information - The company has a strong balance sheet and plans to repurchase at least $400 million of shares for the full year [29][60] - The Baring transaction is expected to close by year-end, providing additional capital for growth investments and share repurchases [29][60] Q&A Session Summary Question: Outlook for the second half of the year and performance fee numbers - Management indicated confidence in performance fee earnings due to the breadth and excellence of performance across the business, not tied to contractual components [32][35][41] Question: Update on the M&A pipeline - The current pipeline reflects growth strategies in areas of secular growth, with independent firms increasingly seeking partnerships for support [44][48][50] Question: Capital allocation strategy in light of investment opportunities - Management plans to balance investments in new affiliates with returning capital to shareholders, maintaining a strong capital position [52][56][59]

Financial Data and Key Metrics Changes - AMG reported economic earnings per share of $4.65, reflecting a 9% year-over-year increase driven by growth in management fee earnings and capital deployment [4][18] - Adjusted EBITDA for the first quarter was $255 million, a 3% increase year-over-year [16][18] - Net client cash inflows, excluding certain quantitative strategies, were $2.7 billion for the quarter [18] Business Line Data and Key Metrics Changes - In alternatives, AMG reported net inflows of $6 billion, with $4 billion coming from private market flows [18] - Liquid alternatives generated $2 billion of inflows as clients sought uncorrelated return streams [19] - Global equities experienced net outflows of $3 billion, with strong sales activity but offset by redemptions in growth strategies [20] Market Data and Key Metrics Changes - The market environment for asset management has shifted, with a pronounced resurgence in value performance benefiting affiliates like Yacktman and EIG [6][7] - ESG strategies are being tested, but demand remains strong for established managers like Boston Common and Parnassus [8] - The company noted a fundamental shift in client behavior towards active management in response to geopolitical tensions and inflation [6][30] Company Strategy and Development Direction - AMG's strategy focuses on diversifying its business and enhancing its position through strategic transactions, such as the merger of Baring with EQT [9][10] - The company aims to capitalize on opportunities in high-demand areas, including private markets and liquid alternatives [12][15] - AMG's partnership model is designed to align with the long-term strategic goals of its affiliates, enhancing their growth potential [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to navigate the changing market environment and capitalize on opportunities for growth [15][27] - The company anticipates that the ongoing rotation within the industry will present new opportunities for high-quality active managers [5][6] - Management highlighted the importance of maintaining a strong balance sheet to support growth investments and return capital to shareholders [25][26] Other Important Information - AMG plans to allocate approximately 60% of the proceeds from the Baring transaction towards growth investments and share repurchases [25][70] - The company has repurchased $185 million of shares in the first quarter and targets $400 million for the full year, subject to market conditions [26][70] Q&A Session Summary Question: Changes in Investor Behavior - Management noted that the market environment is favorable for active management, with clients increasingly taking an active approach to managing exposures [30][31] Question: Deferred Payments and Cash Flow - Management indicated that deferred payments from transactions are relatively modest and structured to align with performance [42][44] Question: Decline in EBITDA and Future Investments - Management explained that the expected decline in EBITDA for the second quarter is primarily due to market conditions, with strong performance in absolute return strategies expected to drive future growth [46][51] Question: Non-U.S. Strategies and Currency Impact - Management acknowledged modest headwinds from currency impacts but emphasized strong long-term performance in non-U.S. strategies [58][60] Question: Accretion Timeline and Capital Allocation - Management detailed plans for capital allocation post-Baring transaction, focusing on growth initiatives and share repurchases while maintaining a disciplined approach [69][71]

Financial Data and Key Metrics Changes - AMG generated over $1 billion of EBITDA, up 33% year-over-year, and record economic earnings per share of $18.28, representing annual growth of 37% [6][18] - Adjusted EBITDA for Q4 was $357 million, growing 40% year-over-year, while economic earnings per share totaled $6.10, up 45% year-over-year [18][23] - For the full year, adjusted EBITDA was $1.06 billion and economic earnings per share grew more than 30% compared to the prior year [18][27] Business Line Data and Key Metrics Changes - In alternatives, net inflows totaled $12 billion, driven by strength across private markets and liquid alternatives [19] - Private markets saw net inflows of $9 billion for the quarter and nearly $25 billion for the full year, reflecting strong fundraising levels [20] - Liquid alternative strategies generated significant returns and performance fees, with strong flow trends continuing for Capula and Garda [11][20] Market Data and Key Metrics Changes - Global equities experienced net outflows of $8 billion, primarily due to two large institutional redemptions [21][63] - US equities reported net outflows of $1 billion, reflecting Q4 seasonality, but long-term investment performance remains strong [22] - Multi-asset and fixed income generated inflows of $1.5 billion for the quarter and $4 billion for the full year [22] Company Strategy and Development Direction - AMG is focusing on fast-growing areas such as private markets, liquid alternatives, Asia, wealth management, and ESG, which are well positioned for strong growth [8][14] - The company aims to reshape its business in favor of these growth areas, enhancing long-term earnings power [10][15] - AMG's partnership approach is resonating with high-quality partner-owned investment firms, positioning the company favorably in the current transaction environment [16][42] Management's Comments on Operating Environment and Future Outlook - Management noted that the investment environment has fundamentally changed, with elevated inflation and rising interest rates necessitating an active approach to investing [9][10] - The company is confident in its ability to execute on new investment opportunities, given a favorable transaction environment and strong competitive position [16][44] - AMG expects to continue to invest in high-quality new affiliates and growth opportunities at existing affiliates, enhancing its growth profile over time [16][53] Other Important Information - AMG repurchased $510 million of shares in 2021, reducing shares outstanding by 8% for the year, and plans to repurchase approximately $400 million of shares in 2022 [28] - The company deployed more than $1 billion of capital into growth investments in 2021, with a focus on private markets and sustainable investing firms [27][28] Q&A Session Summary Question: Update on Systematica and future capital usage - Management expressed excitement about the investment in Systematica, highlighting its strong performance and growth potential [32][34] - The company plans to continue recycling equity across generations and expects to invest $100 million to $150 million annually in affiliate equity repurchases [37] Question: Competitive landscape in private markets - Management emphasized AMG's unique partnership solution, which supports independent firms while allowing them to maintain operational independence [41][42] - The company is focused on long-term secular trends in private markets, liquid alternatives, ESG, and Asia [44] Question: Capital allocation and buyback strategy - Management provided a framework for earnings guidance and capital allocation, indicating a disciplined approach to investments and share repurchases [49][53] - The company has a robust pipeline for new investments and is committed to returning capital to shareholders while pursuing growth opportunities [54][55]

Affiliated Managers Group, Inc. (NYSE:AMG) Q3 2021 Earnings Conference Call November 1, 2021 8:30 AM ET Company Participants Anjali Aggarwal - Investor Relations Jay Horgen - President and Chief Executive Officer Tom Wojcik - Chief Financial Officer Conference Call Participants Bill Katz - Citi Dan Fannon - Jefferies Alex Blostein - Goldman Sachs Brian Bedell - Deutsche Bank Operator Greetings, and welcome to the AMG Third Quarter 2021 Earnings Call. [Operator Instructions] As a reminder, this conference is ...