Artisan Partners Asset Management Inc. (NYSE:APAM) Q1 2023 Earnings Conference Call May 3, 2023 1:00 PM ET Company Participants Makela Taphorn - IR Eric Colson - CEO C.J. Daley - CFO Conference Call Participants Mike Brown - KBW John Dunn - Evercore ISI Bill Katz - Credit Suisse Operator Hello, and thank you for standing by. My name is Roger and I will be your conference operator today. At this time all participants are in a listen-only mode. After the prepared remarks, management will come back the questio ...

Artisan Partners Asset Management BUSINESS UPDATE AND FIRST QUARTER 2023 EARNINGS PRESENTATION BUSINESS PHILOSOPHY & APPROACH High Value Added Talent Driven Thoughtful Investment Firm Business Model Growth Designed for Investment Active Strategies Active Talent Identification Talent to Thrive Autonomous Franchises Managed by Business Professionals Entrepreneurial Commitment Focus on Long-Term Proven Results Structured to Align Interests Global Demand ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission file number: 001-35826 Artisan Partners Asset Management Inc. (Exact name of registrant as specified in its charter) Delaware 45-0969585 (State or ot ...

Financial Data and Key Metrics Changes - Assets under management (AUM) decreased from $175 billion to $128 billion, a 27% decline [4][17] - Net outflows totaled $9.8 billion for the year, with over $5 billion occurring in the fourth quarter [4][17] - Revenues declined by 19% year-over-year, reflecting the decrease in average AUM [17][19] - Adjusted operating income fell by 37% for the year compared to 2021 [21] - Average AUM for 2022 was down 18% year-over-year [19] Business Line Data and Key Metrics Changes - The Artisan High Income strategy generated average annual returns of 5.1% after fees, outperforming its benchmark by 178 basis points [9] - The Credit team has generated cumulative net flows of $7 billion since inception, averaging approximately $750 million per year [10] - The firm diversified from five long-only equity investment teams managing 12 strategies to 10 investment teams managing 25 strategies [17] Market Data and Key Metrics Changes - Non-U.S. equity strategies outperformed in the fourth quarter, contributing to over $12 billion in investment returns [15] - Approximately 55% of equity AUM is invested in companies domiciled outside the U.S. [14] - The index yield to worst for high-yield credit is currently about 8%, significantly higher than the 4% to 6% range of the past decade [12] Company Strategy and Development Direction - The company is focusing on fixed income and global equities, anticipating increased demand due to rising rates and spreads [6][8] - The firm aims to leverage its investment capabilities to capture growth opportunities in fixed income and credit-oriented strategies [8][12] - The company is optimistic about the current level of market volatility, which may benefit active management strategies [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for growth in fixed income and non-U.S. equities despite a challenging 2022 [6][16] - The firm is focused on executing growth opportunities and filling capacity in 2023 [32] - Management acknowledged the uncertainty in the market but highlighted the importance of client research and due diligence in driving future asset flows [28][30] Other Important Information - The company declared a quarterly dividend of $0.55 per share and a special annual dividend of $0.35 per share [22] - Seed capital investments increased to $125 million, up from $72 million a year ago, indicating a focus on future growth [22] - The firm plans to maintain a flat year-over-year expense structure while managing variable costs based on revenue levels [47] Q&A Session Summary Question: Opportunities in non-U.S. equities and emerging markets - Management noted an increase in due diligence activity and a strong list of meetings for non-U.S. strategies, but emphasized the mixed asset flow trends [27][28] Question: Expense margins and operating leverage - Management highlighted the strength of their model in managing expenses during revenue declines and discussed the focus on growth opportunities in 2023 [31][32] Question: Institutional vs. retail growth opportunities - Management indicated a focus on institutional markets for growth, while also recognizing the potential in retail democratization through partnerships [39][41] Question: EMsights opportunity and asset ramp-up - Management acknowledged the longer sales cycle for institutional assets but expressed confidence in the strong position of the EMsights team [43][45] Question: Future seed capital investments - Management stated that there are no major seed capital requirements planned for 2023, focusing instead on filling existing capacity [50][51]

Artisan Partners Business Model & Philosophy - Artisan Partners' business is built on a consistent philosophy and business model focused on high value-added active strategies, talent-driven autonomous franchises, and thoughtful long-term growth [2] - The company's financial model emphasizes sustainable long-term growth, fee discipline, high variable costs, a conservative balance sheet, and aligned interests [14] Artisan Partners Historical Financial Performance - Since 2012, Artisan Partners has experienced a compounded annual growth rate of 8% in average AUM, 7% in revenue, and 5% in adjusted operating income [16] - For the year 2022, Artisan Partners' revenue was $993.3 million, a decrease of 19% compared to $1227.2 million in 2021 [30] - The adjusted operating income for 2022 was $340.3 million, a decrease of 37% compared to $540.8 million in 2021 [30] - The adjusted operating margin for 2022 was 34.3%, a decrease of 980 bps compared to 44.1% in 2021 [30] - In Q4 2022, revenues decreased by 4% to $226 million compared to Q3 2022's $234.3 million [29] - Adjusted operating expenses in Q4 2022 decreased by 1% to $157.2 million compared to Q3 2022's $155.4 million [29] Assets Under Management (AUM) - Assets Under Management (AUM) decreased by 27% from $174.8 billion in 2021 to $127.9 billion in 2022 [24] - Average AUM decreased by 18% from $171.8 billion in 2021 to $141.5 billion in 2022 [24] - Net client cash flows for the year 2022 were $(9.8) billion [24] Credit Team Performance - Since inception, the High Income strategy has an average annual value added of 178 bps [4] - Since inception, the Credit Opportunities strategy has an average annual value added of 631 bps [4] - Since its launch on January 1, 2022, the Floating Rate strategy has a value added of -42 bps [4]

Artisan Partners Asset Management Inc. (NYSE:APAM) Q3 2022 Earnings Conference Call November 2, 2022 1:00 PM ET Company Participants Makela Taphorn - IR Eric Colson - CEO Charles Daley - CFO Conference Call Participants Alex Blostein - Goldman Sachs Kenneth Lee - RBC Capital Markets Operator Hello, and thank you for standing by. My name is Rocco, and I will be your conference operator today. At this time all participants are in a listen-only mode. [Operator Instructions]. As a reminder, this conference call ...

Assets Under Management - As of September 30, 2022, assets under management declined to $120.6 billion, a decrease of $9.9 billion, or 8%, from $130.5 billion at June 30, 2022, due to $8.8 billion in negative investment returns and $1.1 billion in net client cash outflows[91]. - Average assets under management for the three months ended September 30, 2022, were $132.9 billion, a 25% decrease from $177.6 billion for the same period in 2021[91]. - Total assets under management (AUM) reached $120.607 billion, with a decrease from the previous quarter[105]. - The ending AUM for Artisan Funds and Artisan Global Funds was $120,607 million as of September 30, 2022, down from $173,623 million a year earlier[114]. - The institutional channel accounted for 63.6% of total AUM as of September 30, 2022, slightly up from 63.2% in the previous year[111]. Revenue and Income - Revenue for the three months ended September 30, 2022, was $234.3 million, a decrease of 26% from $316.6 million for the same period in 2021[91]. - Total operating income fell to $78.7 million, down $64.4 million or 45% compared to $143.1 million in the same period last year[121]. - Net income attributable to Artisan Partners Asset Management Inc. was $44.2 million, a decrease of $42.2 million or 49% from $86.4 million in the prior year[121]. - Revenues for the nine months ended September 30, 2022, decreased by $144.9 million, or 16%, to $767.3 million compared to $912.2 million in the same period of 2021[129]. - Net income attributable to Artisan Partners Asset Management Inc. decreased by $98.0 million, or 39%, to $153.9 million from $251.9 million[129]. Client Cash Flows - Net client cash flows for the three months ended September 30, 2022, were $(1.1) billion, compared to a positive inflow of $11 million for the same period in 2021[99]. - Net client cash flows turned negative at $(4,621) million, a significant decline of 287.6% compared to $2,463 million in 2021[100]. - Gross client cash inflows decreased by 13.2% to $22,397 million, down from $25,814 million[100]. - Gross client cash outflows for the nine months ended September 30, 2022, totaled $(27,018) million, compared to $(23,351) million in the same period of 2021, indicating an increase in outflows[110]. Investment Performance - The total returns of the S&P 500 for the three months ended September 30, 2022, were (4.9)%, compared to 0.6% for the same period in 2021[93]. - The Developing World Strategy reported a performance decline of (47.70)%[105]. - The Antero Peak Strategy experienced a decrease of (19.55)% in performance[105]. - The Global Unconstrained Strategy had an ending AUM of $15 million, with a performance increase of 3.00%[105]. - The Emerging Markets Debt Opportunities Strategy had an ending AUM of $41 million, with a performance decrease of (0.18)%[105]. Expenses and Compensation - Total compensation and benefits decreased to $122.1 million, a reduction of $20.1 million or 14% compared to $142.2 million in the previous year[123]. - Other operating expenses increased by $2.2 million, primarily due to higher travel, occupancy, and technology expenses[123]. - Total compensation and benefits decreased by $30.3 million, or 7%, to $389.4 million, representing 51% of revenues for the nine months ended September 30, 2022[134]. - Other operating expenses increased by $14.0 million, or 16%, primarily due to higher travel, occupancy, and technology costs[134]. Dividends and Shareholder Returns - The company declared a quarterly dividend of $0.56 per share of Class A common stock, effective November 1, 2022[91]. - Artisan Partners Holdings declared a variable quarterly dividend of $0.56 per share of Class A common stock for the September quarter of 2022, representing approximately 80% of the cash generated in that quarter[145]. Tax and Liabilities - As of September 30, 2022, the Tax Receivable Agreements (TRAs) liability was recognized at $398.2 million, representing 85% of expected tax benefits from the IPO-related transactions[146]. - The TRA liability decreased from $425.4 million at December 31, 2021, to $398.2 million at September 30, 2022[149]. Cash Flow and Investments - Net cash provided by operating activities decreased by $97.6 million to $306.6 million for the nine months ended September 30, 2022, compared to $404.2 million for the same period in 2021[148]. - Net cash used in investing activities increased by $34.3 million to $(60.5) million for the nine months ended September 30, 2022, primarily due to a $23.2 million increase in net purchases of investment securities[148]. - The company made seed investments totaling $118.0 million as of September 30, 2022, which includes $61.5 million related to funded long-term incentive compensation plans[142].

Financial Data and Key Metrics Changes - Assets Under Management (AUM) declined 26% from $175 billion to $131 billion, with a year-over-year revenue decline of 11% and adjusted operating margin decreasing by 750 basis points from 43.6% to 36.1% [4][14] - Quarterly revenues decreased by 11% sequentially and 18% compared to the second quarter of 2021, with performance fee revenues being negligible in 2022 compared to $4.1 million in Q2 2021 [15][16] - Adjusted operating income declined 18% sequentially and 26% year-to-date compared to 2021, with adjusted net income per share down 19% from the previous quarter and 27% year-to-date [17] Business Line Data and Key Metrics Changes - Net client outflows were $4.2 billion in the quarter, primarily from growth strategies, particularly within global equity and growth teams [14] - Average AUM for the quarter was $143.9 billion, down 11% sequentially and 16% year-over-year [15] Market Data and Key Metrics Changes - Global equity market indices declined approximately 15% for the quarter and about 20% for the year, contributing to the decline in AUM [14] - Emerging markets debt saw $50 billion in redemptions, the worst outflows in over a decade, with the dollar-denominated EM debt index declining nearly 20% [9] Company Strategy and Development Direction - The company aims to leverage market disruptions to capture long-term growth opportunities, focusing on disciplined investment and maintaining a flexible financial model [5][8] - Investments in new teams and strategies, such as the EMsights Capital Group, are seen as critical for future growth, with a commitment to long-term performance rather than short-term outcomes [9][10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging environment due to inflation, geopolitical tensions, and market volatility, emphasizing the importance of a long-term perspective [4][5] - The company remains confident in its ability to navigate through market shocks and believes that investments made during these periods will yield long-term benefits [17][18] Other Important Information - The company declared a quarterly dividend of $0.60 per share, representing approximately 80% of cash generated, while planning to retain some cash for future seed investments [18] - The firm has invested approximately $60 million in seed investments for new products over the past year [18] Q&A Session Summary Question: Investment capacity in the current market volatility - Management indicated that they have increased capacity in some strategies due to market drawdowns and will manage flows carefully to maintain strategy integrity [20] Question: Details on retention of special dividends for seed investments - The amount retained for seed investments is expected to be in the range of $10 million to $15 million, with a commitment to maintain an 80% cash generation payout policy [22] Question: Conversations with asset allocators regarding performance - Management noted that asset allocators are increasingly moving towards tactical asset allocation, influenced by market conditions, while the firm focuses on long-term strategies [24][26] Question: Non-compensation expenses for the second half of the year - Management confirmed that they are on track with guidance for compensation and operational expenses, with a notable increase in travel expenses returning to pre-COVID levels [27][28] Question: Opportunities for new teams and talent in a volatile environment - The firm is actively engaging in discussions with potential new teams, maintaining a high bar for selection due to existing capacity and strategy alignment [30][31] Question: Demand dynamics on fund and separate account sides - Management explained that outflows were primarily due to clients reassessing their risk exposure, with significant reallocations from a couple of clients [35][38] Question: Future strategy launches for EMsights - Management indicated that the current three strategies launched by EMsights are sufficient for now, with a focus on building scale before considering additional launches [40]