Artisan Partners(APAM)

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Artisan U.S. Mid-Cap Growth Strategy Portfolio Management Update
GlobeNewswire News Room· 2024-11-18 17:01
MILWAUKEE, Nov. 18, 2024 (GLOBE NEWSWIRE) -- Artisan Partners Asset Management Inc. (NYSE: APAM) announced today that Jason White will join Matt Kamm as Co-Lead Portfolio Manager of the U.S. Mid-Cap Growth Strategy, effective January 1, 2025. Jason will serve as Co-Lead Portfolio Manager of the U.S. Mid-Cap Growth Strategy, in addition to his existing role as Lead Portfolio Manager of the Global Discovery Strategy. He will continue in his role as Portfolio Manager of the Growth team’s other two strategies – ...
Artisan Partners(APAM) - 2024 Q3 - Quarterly Report
2024-11-01 21:02
[Form 10-Q Cover Page Information](index=1&type=section&id=Form%2010-Q%20Cover%20Page%20Information) This section details Artisan Partners Asset Management Inc.'s Form 10-Q filing information for Q3 2024 - Artisan Partners Asset Management Inc. (APAM) filed its Form 10-Q for the quarter ended September 30, 2024, as a **large accelerated filer**[1](index=1&type=chunk)[2](index=2&type=chunk) Class of Stock | Class of Stock | Trading Symbol | Exchange on which registered | | :------------------- | :------------- | :--------------------------- | | Class A common stock | APAM | New York Stock Exchange | Outstanding Shares as of October 30, 2024 | Class of Stock | Shares Outstanding | | :------------------- | :----------------- | | Class A common stock | 70,069,120 | | Class B common stock | 1,579,068 | | Class C common stock | 8,712,951 | [Part I — Financial Information](index=4&type=section&id=Part%20I%20%E2%80%94%20Financial%20Information) This part presents the unaudited consolidated financial statements and management's discussion and analysis for the company [Item 1. Unaudited Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Consolidated%20Financial%20Statements) This section presents Artisan Partners Asset Management Inc.'s unaudited consolidated financial statements and detailed notes for the three and nine months ended September 30, 2024 and 2023 [Unaudited Condensed Consolidated Statements of Financial Condition](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) This statement details the company's assets, liabilities, and equity as of September 30, 2024, compared to December 31, 2023 Key Financial Condition Data (in thousands USD) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :------------------------- | :----------- | :----------- | | Total assets | $1,610,601 | $1,405,858 | | Total liabilities | $906,586 | $802,101 | | Total stockholders' equity | $405,028 | $351,351 | - Total assets increased by **$204.7 million (14.6%)** from December 31, 2023, to September 30, 2024, driven by cash, accounts receivable, and investment securities[8](index=8&type=chunk)[9](index=9&type=chunk) - Accrued incentive compensation significantly increased from **$52.2 million** at December 31, 2023, to **$164.3 million** at September 30, 2024[9](index=9&type=chunk) [Unaudited Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, operating expenses, non-operating income/expense, and net income for the three and nine months ended September 30, 2024 and 2023 Consolidated Statements of Operations (in thousands USD) | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :------------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total revenues | $279,582 | $248,722 | $814,751 | $726,134 | | Total operating expenses | $186,402 | $166,567 | $557,283 | $498,970 | | Total operating income | $93,180 | $82,155 | $257,468 | $227,164 | | Net income attributable to Artisan Partners Asset Management Inc. | $72,990 | $53,155 | $190,045 | $157,533 | | Basic earnings per share | $1.03 | $0.76 | $2.68 | $2.27 | | Diluted earnings per share | $1.03 | $0.76 | $2.68 | $2.27 | | Dividends declared per Class A common share | $0.71 | $0.61 | $2.34 | $2.01 | - Net income attributable to Artisan Partners Asset Management Inc. increased by **37.3%** for the three months and by **20.6%** for the nine months ended September 30, 2024, compared to the respective prior year periods[10](index=10&type=chunk) - Total revenues grew by **12.4%** for the three months and **12.2%** for the nine months ended September 30, 2024, primarily driven by management fees[10](index=10&type=chunk) [Unaudited Consolidated Statements of Comprehensive Income](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement provides a breakdown of comprehensive income, including net income and other comprehensive income (loss), for the three and nine months ended September 30, 2024 and 2023 Consolidated Statements of Comprehensive Income (in thousands USD) | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :------------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income before noncontrolling interests | $104,185 | $73,428 | $262,137 | $219,004 | | Foreign currency translation gain (loss) | $930 | $(770) | $827 | $144 | | Comprehensive income attributable to Artisan Partners Asset Management Inc. | $73,773 | $52,500 | $191,139 | $157,443 | - Comprehensive income attributable to Artisan Partners Asset Management Inc. increased by **40.5%** for the three months and **21.4%** for the nine months ended September 30, 2024, compared to the prior year periods[12](index=12&type=chunk) [Unaudited Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This section details changes in stockholders' equity for the three and nine months ended September 30, 2024 and 2023, including net income, other comprehensive income, equity-based compensation, and dividends Total Stockholders' Equity (in thousands USD) | Period | Total Stockholders' Equity | | :--------------------- | :------------------------- | | Sep 30, 2024 (3 months) | $405,028 | | Jul 1, 2024 (3 months) | $371,704 | | Sep 30, 2023 (3 months) | $323,324 | | Jan 1, 2024 (9 months) | $351,351 | | Sep 30, 2024 (9 months) | $405,028 | | Jan 1, 2023 (9 months) | $279,357 | - For the nine months ended September 30, 2024, total stockholders' equity increased by **$53.6 million**, primarily due to net income of **$190.0 million**, partially offset by dividends of **$163.9 million**[17](index=17&type=chunk) - Amortization of equity-based compensation contributed **$21.7 million** to additional paid-in capital for the nine months ended September 30, 2024[17](index=17&type=chunk) [Unaudited Consolidated Statements of Cash Flows](index=9&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) This statement outlines cash flows from operating, investing, and financing activities for the nine months ended September 30, 2024 and 2023, showing a net increase in cash and cash equivalents Consolidated Statements of Cash Flows (in thousands USD) | Metric | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :------------------------------------------------ | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $335,666 | $262,802 | | Net cash used in investing activities | $(24,419) | $(36,532) | | Net cash used in financing activities | $(205,918) | $(134,310) | | Net increase in cash, cash equivalents, and restricted cash | $105,329 | $91,960 | | Cash, cash equivalents and restricted cash (End of period) | $279,800 | $230,529 | - Net cash provided by operating activities increased by **$72.9 million (27.7%)** for the nine months ended September 30, 2024, compared to the same period in 2023[20](index=20&type=chunk) - Net cash used in financing activities increased significantly by **$71.6 million (53.3%)** for the nine months ended September 30, 2024, primarily due to higher dividends paid and lower capital contributions[20](index=20&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the unaudited consolidated financial statements, covering business nature, accounting policies, investment securities, fair value measurements, borrowings, variable interest entities, noncontrolling interests, stockholders' equity, revenue, compensation, income taxes, earnings per share, indemnifications, related party transactions, and subsequent events [Note 1. Nature of Business and Organization](index=10&type=section&id=Note%201.%20Nature%20of%20Business%20and%20Organization) Artisan Partners Asset Management Inc. (APAM) is an investment management firm providing active investment strategies globally through autonomous investment teams - APAM operates as an investment management firm offering diverse U.S., non-U.S., and global investment strategies to sophisticated clients[21](index=21&type=chunk) - As of September 30, 2024, APAM held approximately **87%** of the equity ownership interest in Artisan Partners Holdings LP, consolidating its financial statements[22](index=22&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=10&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the basis of presentation for the unaudited interim financial statements, principles of consolidation, reclassification of prior period amounts, and recent accounting pronouncements - The consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial reporting and include all subsidiaries where APAM has a controlling financial interest[23](index=23&type=chunk)[25](index=25&type=chunk) - The company adopted ASU 2023-07, 'Improvements to Reportable Segment Disclosures,' for the year ending December 31, 2024, which will result in additional disclosures but no material impact on financial statements[27](index=27&type=chunk) - ASU 2023-09, 'Improvements to Income Tax Disclosures,' will be adopted for the year ending December 31, 2025, with no material impact on consolidated financial statements[28](index=28&type=chunk) [Note 3. Investment Securities](index=12&type=section&id=Note%203.%20Investment%20Securities) This note details Artisan's investment securities, primarily in Artisan Funds, Artisan Global Funds, and Artisan Private Funds, and reports unrealized gains/losses Total Investment Securities (in thousands USD) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :------------------------------- | :----------- | :----------- | | Investments in equity securities | $196,329 | $139,240 | | Investments in equity securities accounted for under the equity method | $15,611 | $11,282 | | Total investment securities | $211,940 | $150,522 | Unrealized Gain (Loss) on Investment Securities (in thousands USD) | Period | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :--------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Unrealized gain (loss) | $10,697 | $(3,901) | $20,198 | $6,458 | - As of September 30, 2024, **$137.8 million** of investment securities were related to funded long-term incentive compensation plans[30](index=30&type=chunk) [Note 4. Fair Value Measurements](index=12&type=section&id=Note%204.%20Fair%20Value%20Measurements) This note describes the fair value hierarchy (Level 1, 2, and 3) used to measure Artisan's assets and liabilities, primarily money market funds and equity securities Assets at Fair Value (in thousands USD) | Asset | Sep 30, 2024 Total | Sep 30, 2024 Level 1 | Dec 31, 2023 Total | Dec 31, 2023 Level 1 | | :----------------- | :----------------- | :------------------- | :----------------- | :------------------- | | Money market funds | $230,923 | $230,923 | $118,768 | $118,768 | | Equity securities | $211,940 | $197,017 | $150,522 | $139,778 | - A significant portion of Artisan's assets, including money market funds and most equity securities, are measured using **Level 1 inputs** (quoted market prices in active markets)[33](index=33&type=chunk)[34](index=34&type=chunk) - Investments in Artisan Private Funds are measured at NAV using the ASC 820 practical expedient and do not have a fair value level[34](index=34&type=chunk) [Note 5. Borrowings](index=13&type=section&id=Note%205.%20Borrowings) This note details Artisan's borrowings, consisting of senior notes and a revolving credit agreement, and related interest expenses Borrowings (in thousands USD) | Debt Type | Maturity | Sep 30, 2024 | Dec 31, 2023 | Interest Rate | | :------------------------ | :------- | :----------- | :----------- | :------------ | | Revolving credit agreement | Aug 2027 | $0 | $0 | NA | | Senior notes (Series D) | Aug 2025 | $60,000 | $60,000 | 4.29% | | Senior notes (Series E) | Aug 2027 | $50,000 | $50,000 | 4.53% | | Senior notes (Series F) | Aug 2032 | $90,000 | $90,000 | 3.10% | | Total gross borrowings | | $200,000 | $200,000 | | | Total borrowings | | $199,389 | $199,267 | | - The company had **$200 million** in total gross borrowings as of September 30, 2024, primarily from senior notes, with no outstanding borrowings under its **$100 million** revolving credit facility[35](index=35&type=chunk)[36](index=36&type=chunk) - Interest expense on unsecured notes and the revolving credit agreement was **$1.9 million** for both the three months ended September 30, 2024 and 2023, and **$5.8 million** for both nine-month periods[36](index=36&type=chunk) [Note 6. Variable Interest Entities and Consolidated Investment Products](index=13&type=section&id=Note%206.%20Variable%20Interest%20Entities%20and%20Consolidated%20Investment%20Products) This note explains Artisan's consolidation policy for Variable Interest Entities (VIEs) and Consolidated Investment Products (CIPs), detailing its controlling financial interests and the fair value measurement of assets and liabilities held by CIPs - As of September 30, 2024, Artisan had a controlling financial interest in **five sub-funds** of Artisan Global Funds and **two Artisan Private Funds**, with an aggregate direct equity investment of **$99.6 million**[37](index=37&type=chunk)[42](index=42&type=chunk) - During the nine months ended September 30, 2024, one series of Artisan Funds was deconsolidated due to a loss of controlling financial interest, resulting in a reclassification of Artisan's **$23.8 million** direct equity investment to investment securities[38](index=38&type=chunk) Assets Held by CIPs at Fair Value (in thousands USD) | Asset | Sep 30, 2024 Total | Sep 30, 2024 Level 1 | Sep 30, 2024 Level 2 | Sep 30, 2024 Level 3 | | :---------------------------------------- | :----------------- | :------------------- | :------------------- | :------------------- | | Money market funds | $16,489 | $16,489 | $0 | $0 | | Equity securities - long position | $69,721 | $67,418 | $2,303 | $0 | | Fixed income instruments - long position | $335,881 | $0 | $328,256 | $7,625 | | Private equity | $6,895 | $0 | $0 | $6,895 | [Note 7. Noncontrolling Interests - Holdings](index=15&type=section&id=Note%207.%20Noncontrolling%20Interests%20-%20Holdings) This note explains the noncontrolling interests in Artisan Partners Holdings, detailing how APAM's equity ownership changes through Holdings Common Unit Exchanges and other equity transactions - As of September 30, 2024, APAM held approximately **87%** of the equity ownership interests in Holdings, an increase from **86%** at December 31, 2023[43](index=43&type=chunk)[44](index=44&type=chunk) - During the nine months ended September 30, 2024, Holdings Common Unit Exchanges increased APAM's equity ownership by **1%**[44](index=44&type=chunk) - Changes in ownership of Holdings are accounted for as equity transactions, adjusting additional paid-in capital and noncontrolling interests[45](index=45&type=chunk) [Note 8. Stockholders' Equity](index=16&type=section&id=Note%208.%20Stockholders%27%20Equity) This note provides details on APAM's authorized and outstanding equity, including Class A, B, and C common stock, and summarizes stock transactions and dividends declared APAM Common Stock Outstanding | Class of Stock | Authorized Shares | Outstanding Sep 30, 2024 | Outstanding Dec 31, 2023 | | :------------------- | :---------------- | :----------------------- | :----------------------- | | Class A common stock | 500,000,000 | 70,069,120 | 68,554,078 | | Class B common stock | 200,000,000 | 1,579,068 | 2,435,739 | | Class C common stock | 400,000,000 | 8,712,951 | 9,024,947 | Dividends Declared per Class A Common Share | Type of Dividend | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :--------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Quarterly | $0.71 | $0.61 | $2.00 | $1.66 | | Special Annual | $0 | $0 | $0.34 | $0.35 | - Holdings partnership distributions to limited partners increased from **$12.9 million** to **$13.2 million** for the three months ended September 30, 2024, and from **$30.3 million** to **$33.4 million** for the nine months ended September 30, 2024[52](index=52&type=chunk) [Note 9. Revenue From Contracts with Customers](index=18&type=section&id=Note%209.%20Revenue%20From%20Contracts%20with%20Customers) This note disaggregates investment advisory revenue by type and vehicle, and presents balances of receivables related to contracts with customers Investment Advisory Revenue (in thousands USD) | Revenue Source | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Artisan Funds | $161,433 | $145,269 | $471,637 | $420,244 | | Artisan Global Funds | $13,287 | $11,220 | $38,755 | $32,388 | | Separate accounts and other | $104,826 | $92,202 | $304,273 | $273,348 | | Total revenues | $279,582 | $248,722 | $814,751 | $726,134 | Receivables from Contracts with Customers (in thousands USD) | Customer | Sep 30, 2024 | Dec 31, 2023 | | :-------------------------- | :----------- | :----------- | | Artisan Funds | $9,037 | $8,251 | | Artisan Global Funds | $6,151 | $5,047 | | Separate accounts and other | $85,940 | $81,441 | | Total receivables | $101,128 | $94,739 | - Total revenues increased by **12.4%** for the three months and **12.2%** for the nine months ended September 30, 2024, driven by growth across all client segments[54](index=54&type=chunk) [Note 10. Compensation and Benefits](index=18&type=section&id=Note%2010.%20Compensation%20and%20Benefits) This note details the components of compensation and benefits, including salaries, incentive compensation, and long-term incentive awards, and their associated expenses Total Compensation and Benefits (in thousands USD) | Component | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Salaries, incentive compensation and benefits | $128,604 | $118,271 | $387,067 | $350,147 | | Long-term cash incentive compensation expense | $12,941 | $4,625 | $35,088 | $17,969 | | Restricted share-based award compensation expense | $7,489 | $7,752 | $23,549 | $24,477 | | Total compensation and benefits | $149,034 | $130,648 | $445,704 | $392,593 | - Total compensation and benefits increased by **14.1%** for the three months and **13.5%** for the nine months ended September 30, 2024, primarily due to higher incentive compensation and long-term cash incentive compensation[56](index=56&type=chunk) - During the nine months ended September 30, 2024, Artisan granted **$38.4 million** of franchise capital awards and **502,774** restricted stock awards[58](index=58&type=chunk)[62](index=62&type=chunk) [Note 11. Income Taxes and Related Payments](index=21&type=section&id=Note%2011.%20Income%20Taxes%20and%20Related%20Payments) This note covers the provision for income taxes, APAM's effective tax rate, and details regarding the Tax Receivable Agreements (TRAs), including deferred tax assets and amounts payable Provision for Income Taxes (in thousands USD) | Component | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :----------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Current taxes | $13,075 | $5,527 | $31,315 | $19,377 | | Deferred taxes | $11,529 | $9,043 | $33,992 | $32,286 | | Total income tax expense | $24,604 | $14,570 | $65,307 | $51,663 | - APAM's effective income tax rate was **19.9%** for the nine months ended September 30, 2024, compared to **19.1%** for the same period in 2023[65](index=65&type=chunk) Deferred Tax Assets and TRA Liabilities (in thousands USD) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :------------------------------------ | :----------- | :----------- | | Net deferred tax assets | $419,465 | $436,529 | | Amounts payable under tax receivable agreements | $341,400 | $364,048 | [Note 12. Earnings Per Share](index=23&type=section&id=Note%2012.%20Earnings%20Per%20Share) This note details the computation of basic and diluted earnings per share (EPS) using the two-class method, and identifies anti-dilutive securities Basic and Diluted Earnings Per Share | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :------------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income available to common stockholders | $66,814 | $48,464 | $173,977 | $143,734 | | Basic weighted average number of common shares outstanding | 65,123,054 | 63,520,402 | 64,802,431 | 63,419,587 | | Diluted weighted average number of common shares outstanding | 65,162,898 | 63,563,044 | 64,840,056 | 63,449,804 | | Earnings per share - Basic | $1.03 | $0.76 | $2.68 | $2.27 | | Earnings per share - Diluted | $1.03 | $0.76 | $2.68 | $2.27 | - Basic and diluted EPS increased to **$1.03** for the three months and **$2.68** for the nine months ended September 30, 2024, from **$0.76** and **$2.27** respectively in the prior year[76](index=76&type=chunk) - Holdings limited partnership units and unvested restricted share-based awards were anti-dilutive and excluded from diluted EPS calculations[77](index=77&type=chunk)[78](index=78&type=chunk) [Note 13. Indemnifications](index=24&type=section&id=Note%2013.%20Indemnifications) This note states that Artisan enters into agreements with indemnities in favor of third parties and indemnifies its general partner, directors, officers, and employees, with maximum exposure unknown - Artisan indemnifies its general partner, directors, officers, employees, and agents, with the maximum exposure under these arrangements being unknown[79](index=79&type=chunk) [Note 14. Related Party Transactions](index=24&type=section&id=Note%2014.%20Related%20Party%20Transactions) This note describes transactions with related parties, including limited partners of Holdings and affiliated Artisan Funds, Artisan Global Funds, and Artisan Private Funds, detailing investment advisory fees and expense reimbursements - Several executive officers and directors of APAM are limited partners of Holdings, making certain transactions, such as TRA payments, related party transactions[80](index=80&type=chunk) Consolidated Investment Advisory Fees (Gross of expense reimbursements) (in thousands USD) | Fund Type | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Artisan Funds | $162,174 | $145,671 | $473,175 | $421,194 | | Artisan Global Funds | $13,313 | $11,208 | $38,814 | $32,376 | | Artisan Private Funds | $1,988 | $2,470 | $5,883 | $8,468 | - Artisan reimburses certain Artisan Funds and Artisan Global Funds for expenses to limit annualized ordinary operating expenses to a fixed percentage of average daily net assets[81](index=81&type=chunk)[83](index=83&type=chunk) [Note 15. Subsequent Events](index=26&type=section&id=Note%2015.%20Subsequent%20Events) This note reports subsequent events, specifically the declaration of a distribution by Artisan Partners Holdings and a quarterly dividend by APAM, both effective October 29, 2024 - Effective October 29, 2024, Artisan Partners Holdings declared a distribution of **$24.6 million** to its partnership unit holders[87](index=87&type=chunk) - APAM's board of directors declared a quarterly dividend of **$0.82 per share** of Class A common stock, payable on November 29, 2024[87](index=87&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, including an overview, recent highlights, organizational structure, key performance indicators, assets under management, investment performance, detailed results of operations, non-GAAP financial measures, liquidity, capital resources, and contractual obligations [Overview and Recent Highlights](index=27&type=section&id=Overview%20and%20Recent%20Highlights) Artisan is an investment management firm offering high-value active strategies globally, focusing on attracting talent, providing resources, and maintaining a transparent financial model - Assets under management (AUM) increased to **$167.8 billion** at September 30, 2024, a **6%** increase from June 30, 2024, primarily due to **$9.9 billion** in market appreciation[89](index=89&type=chunk) - Revenue for the three months ended September 30, 2024, was **$279.6 million**, up **12%** from **$248.7 million** in the prior year period[89](index=89&type=chunk) Key Financial Highlights (3 Months Ended Sep 30, 2024) | Metric | Value | | :------------------------ | :------------- | | AUM (period end) | $167.8 billion | | Revenue | $279.6 million | | GAAP Operating Margin | 33.3% | | Adjusted Operating Margin | 35.0% | | Basic/Diluted EPS | $1.03 | | Adjusted EPS | $0.92 | | Dividends declared per Class A common share | $0.71 | [Organizational Structure](index=28&type=section&id=Organizational%20Structure) Artisan's operations are conducted through Artisan Partners Holdings LP and its subsidiaries, with APAM consolidating Holdings' financial statements - Artisan operates its business in a single segment[90](index=90&type=chunk) - APAM's equity ownership interest in Holdings increased from **86%** at December 31, 2023, to **87%** at September 30, 2024, due to Holdings Unit Exchanges[90](index=90&type=chunk) [Financial Overview](index=28&type=section&id=Financial%20Overview) The company's financial performance is significantly influenced by global financial market volatility and AUM fluctuations, with generally positive market conditions for the nine months ended September 30, 2024 - Revenue is primarily based on the value of assets under management (AUM), making market conditions a key driver of financial performance[90](index=90&type=chunk) Market Index Total Returns | Index | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :--------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | S&P 500 total returns | 5.9% | (3.3)% | 22.1% | 13.1% | | MSCI All Country World total returns | 6.6% | (3.4)% | 18.7% | 10.1% | | MSCI EAFE total returns | 7.3% | (4.1)% | 13.0% | 7.1% | [Key Performance Indicators](index=29&type=section&id=Key%20Performance%20Indicators) This section presents key financial and operational metrics used by management to assess business performance, including AUM, net client cash flows, weighted average management fee, and operating margins Key Performance Indicators (in millions USD, except percentages) | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Assets under management at period end | $167,840 | $136,495 | $167,840 | $136,495 | | Average assets under management | $162,783 | $142,199 | $158,514 | $138,982 | | Net client cash flows | $(743) | $(1,339) | $(2,875) | $(3,678) | | Total revenues | $279.6 | $248.7 | $814.8 | $726.1 | | Weighted average management fee | 68.5 bps | 69.5 bps | 68.8 bps | 70.0 bps | | Operating margin | 33.3% | 33.0% | 31.6% | 31.3% | | Adjusted operating margin | 35.0% | 32.5% | 32.7% | 31.5% | - Net client cash outflows improved significantly, decreasing from **$(1,339) million** to **$(743) million** for the three months, and from **$(3,678) million** to **$(2,875) million** for the nine months ended September 30, 2024[95](index=95&type=chunk) - Adjusted operating margin increased to **35.0%** for the three months and **32.7%** for the nine months ended September 30, 2024, reflecting improved operational efficiency[95](index=95&type=chunk) [Assets Under Management and Investment Performance](index=29&type=section&id=Assets%20Under%20Management%20and%20Investment%20Performance) This section analyzes changes in AUM, driven by investment performance, client cash flows, and strategic capacity management, and provides detailed investment performance data by team and strategy, and AUM breakdowns by distribution channel and vehicle type Changes in Assets Under Management (in millions USD) | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Beginning AUM | $158,887 | $142,989 | $150,167 | $127,892 | | Net client cash flows | $(743) | $(1,339) | $(2,875) | $(3,678) | | Investment returns and other | $9,918 | $(5,080) | $20,946 | $12,471 | | Ending AUM | $167,840 | $136,495 | $167,840 | $136,495 | - AUM increased by **$8.9 billion** during the quarter, primarily due to **$9.9 billion** in market appreciation, partially offset by **$0.8 billion** in net client cash outflows[99](index=99&type=chunk) - As of September 30, 2024, **13 of 25** investment strategies experienced net outflows totaling **$2.1 billion**, while the remaining strategies had **$1.3 billion** in net inflows[99](index=99&type=chunk) AUM by Distribution Channel (in millions USD) | Channel | Sep 30, 2024 AUM | Sep 30, 2024 % of Total | Sep 30, 2023 AUM | Sep 30, 2023 % of Total | | :------------ | :--------------- | :---------------------- | :--------------- | :---------------------- | | Institutional | $104,470 | 62.3% | $85,770 | 62.8% | | Intermediary | $57,753 | 34.4% | $45,435 | 33.3% | | Retail | $5,617 | 3.3% | $5,290 | 3.9% | | Total | $167,840 | 100.0% | $136,495 | 100.0% | AUM by Vehicle Type (in millions USD) | Vehicle Type | Sep 30, 2024 AUM | Sep 30, 2023 AUM | | :---------------------------- | :--------------- | :--------------- | | Artisan Funds & Artisan Global Funds | $81,054 | $66,630 | | Separate Accounts and Other | $86,786 | $69,865 | | Total | $167,840 | $136,495 | AUM by Asset Class (in millions USD) | Asset Class | Sep 30, 2024 AUM | Sep 30, 2023 AUM | | :----------- | :--------------- | :--------------- | | Equity | $151,267 | $124,448 | | Fixed Income | $13,072 | $8,935 | | Alternative | $3,501 | $3,112 | | Total | $167,840 | $136,495 | [Results of Operations (Three Months Ended September 30, 2024 vs 2023)](index=39&type=section&id=Results%20of%20Operations%20(Three%20Months%20Ended%20September%2030%2C%202024%20vs%202023)) This section analyzes the company's financial performance for the three months ended September 30, 2024, compared to the same period in 2023, covering revenues, operating expenses, non-operating income/expense, provision for income taxes, and earnings per share [Investment Advisory Revenues](index=39&type=section&id=Investment%20Advisory%20Revenues%20(Three%20Months)) Investment advisory revenues increased by 12% for the three months ended September 30, 2024, driven by a 14% increase in average AUM, despite a slight decrease in the weighted average management fee Investment Advisory Revenues (in millions USD) | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :--------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Management fees | $279.6 | $248.6 | $31.0 | 12% | | Performance fees | $0 | $0.1 | $(0.1) | (100)% | | Total revenues | $279.6 | $248.7 | $30.9 | 12% | - The weighted average investment management fee decreased from **69.5 basis points** to **68.5 basis points**, primarily due to changes in strategy mix[117](index=117&type=chunk) Weighted Average Management Fee by Vehicle (3 Months Ended Sep 30) | Vehicle Type | 2024 Fee Rate | 2023 Fee Rate | | :---------------------------- | :------------ | :------------ | | Separate Accounts and Other | 49.5 bps | 50.1 bps | | Artisan Funds and Artisan Global Funds | 88.4 bps | 90.1 bps | [Operating Expenses](index=40&type=section&id=Operating%20Expenses%20(Three%20Months)) Total operating expenses increased by 12% for the three months ended September 30, 2024, mainly due to higher compensation and benefits, and increased occupancy-related charges Compensation and Benefits (in millions USD) | Component | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Salaries, incentive compensation and benefits | $128.6 | $118.3 | $10.3 | 9% | | Long-term incentive compensation awards | $20.4 | $12.4 | $8.0 | 65% | | Total compensation and benefits | $149.0 | $130.7 | $18.3 | 14% | - The increase in salaries, incentive compensation, and benefits was primarily due to an **$8.4 million** increase in incentive compensation driven by higher revenues[119](index=119&type=chunk) - Long-term incentive compensation costs increased by **$8.0 million**, including **$5.8 million** from market valuation changes and **$1.2 million** from retirement acceleration features[119](index=119&type=chunk) [Non-Operating Income (Expense)](index=41&type=section&id=Non-Operating%20Income%20(Expense)%20(Three%20Months)) Total non-operating income significantly increased by 512% for the three months ended September 30, 2024, primarily due to higher net investment gains from consolidated and nonconsolidated investment products Non-Operating Income (Expense) (in millions USD) | Component | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :-------------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Interest expense | $(2.2) | $(2.3) | $0.1 | (4)% | | Interest income on cash and cash equivalents and other | $2.7 | $2.1 | $0.6 | 29% | | Net investment gain (loss) of consolidated investment products | $23.1 | $9.8 | $13.3 | 136% | | Net investment gain (loss) on nonconsolidated seed investments | $3.6 | $0.2 | $3.4 | 1,700% | | Net investment gain (loss) on nonconsolidated franchise capital investments | $8.8 | $(4.5) | $13.3 | 296% | | Total non-operating income (expense) | $35.5 | $5.8 | $29.7 | 512% | - Net investment gains from consolidated and nonconsolidated investment products increased by **$30.0 million** in aggregate, predominantly due to favorable market conditions[121](index=121&type=chunk) [Provision for Income Taxes](index=41&type=section&id=Provision%20for%20Income%20Taxes%20(Three%20Months)) The provision for income taxes increased by 68% for the three months ended September 30, 2024, with the effective tax rate rising to 19.1% from 16.6% in the prior year, influenced by APAM's increasing equity ownership in Holdings - The provision for income taxes increased by **$10.0 million (68%)** to **$24.6 million** for the three months ended September 30, 2024[115](index=115&type=chunk) - APAM's effective income tax rate was **19.1%** for the three months ended September 30, 2024, up from **16.6%** in the prior year, partly due to a lower percentage of Holdings' earnings attributable to other partners[122](index=122&type=chunk) [Earnings Per Share](index=41&type=section&id=Earnings%20Per%20Share%20(Three%20Months)) Basic and diluted earnings per share increased to $1.03 for the three months ended September 30, 2024, up from $0.76 in the prior year, driven by higher net income and increased weighted average shares outstanding due to equity award grants - Basic and diluted earnings per share were **$1.03** for the three months ended September 30, 2024, compared to **$0.76** in the prior year[115](index=115&type=chunk) - Weighted average basic and diluted shares outstanding were higher due to equity award grants[123](index=123&type=chunk) [Results of Operations (Nine Months Ended September 30, 2024 vs 2023)](index=42&type=section&id=Results%20of%20Operations%20(Nine%20Months%20Ended%20September%2030%2C%202024%20vs%202023)) This section analyzes the company's financial performance for the nine months ended September 30, 2024, compared to the same period in 2023, covering revenues, operating expenses, non-operating income/expense, provision for income taxes, and earnings per share [Investment Advisory Revenues](index=42&type=section&id=Investment%20Advisory%20Revenues%20(Nine%20Months)) Investment advisory revenues increased by 12% for the nine months ended September 30, 2024, primarily due to a 14% increase in average AUM, despite a slight decrease in the weighted average management fee Investment Advisory Revenues (in millions USD) | Metric | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :--------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Management fees | $814.7 | $725.9 | $88.8 | 12% | | Performance fees | $0.1 | $0.2 | $(0.1) | (50)% | | Total revenues | $814.8 | $726.1 | $88.7 | 12% | - The weighted average management fee decreased from **70.0 basis points** to **68.8 basis points**, predominantly due to changes in strategy mix[126](index=126&type=chunk) Weighted Average Management Fee by Vehicle (9 Months Ended Sep 30) | Vehicle Type | 2024 Fee Rate | 2023 Fee Rate | | :---------------------------- | :------------ | :------------ | | Separate Accounts and Other | 49.7 bps | 51.0 bps | | Artisan Funds and Artisan Global Funds | 88.7 bps | 90.3 bps | [Operating Expenses](index=43&type=section&id=Operating%20Expenses%20(Nine%20Months)) Total operating expenses increased by 12% for the nine months ended September 30, 2024, driven by higher compensation and benefits, increased travel, third-party distribution, occupancy, and information technology costs Compensation and Benefits (in millions USD) | Component | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Salaries, incentive compensation and benefits | $387.1 | $350.1 | $37.0 | 11% | | Long-term incentive compensation awards | $58.6 | $42.5 | $16.1 | 38% | | Total compensation and benefits | $445.7 | $392.6 | $53.1 | 14% | - Salaries, incentive compensation, and benefits increased by **$29.9 million** due to higher revenues and a **$7.0 million** increase in salaries and benefits from more full-time associates and salary increases[129](index=129&type=chunk) - Other operating expenses increased by **$5.3 million**, primarily due to higher travel, third-party distribution, occupancy, and information technology costs[130](index=130&type=chunk) [Non-Operating Income (Expense)](index=44&type=section&id=Non-Operating%20Income%20(Expense)%20(Nine%20Months)) Total non-operating income increased by 61% for the nine months ended September 30, 2024, driven by higher net investment gains from consolidated and nonconsolidated investment products and increased interest income Non-Operating Income (Expense) (in millions USD) | Component | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | Change ($) | Change (%) | | :-------------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Interest expense | $(6.5) | $(6.5) | $0 | 0% | | Interest income on cash and cash equivalents and other | $6.6 | $3.8 | $2.8 | 74% | | Net investment gain (loss) of consolidated investment products | $45.6 | $38.2 | $7.4 | 19% | | Net investment gain (loss) on nonconsolidated seed investments | $6.9 | $1.4 | $5.5 | 393% | | Net investment gain (loss) on nonconsolidated franchise capital investments | $17.8 | $6.1 | $11.7 | 192% | | Total non-operating income (expense) | $69.9 | $43.5 | $26.4 | 61% | - Net investment gains from consolidated and nonconsolidated investment products increased by **$24.6 million** in aggregate, primarily due to favorable market conditions[132](index=132&type=chunk) - Interest income on cash and cash equivalents increased by **$2.8 million** due to higher yields and cash balances[132](index=132&type=chunk) [Provision for Income Taxes](index=44&type=section&id=Provision%20for%20Income%20Taxes%20(Nine%20Months)) The provision for income taxes increased by 26% for the nine months ended September 30, 2024, with the effective tax rate rising to 19.9% from 19.1% in the prior year, influenced by APAM's increasing equity ownership in Holdings - The provision for income taxes increased by **$13.6 million (26%)** to **$65.3 million** for the nine months ended September 30, 2024[125](index=125&type=chunk) - APAM's effective income tax rate was **19.9%** for the nine months ended September 30, 2024, up from **19.1%** in the prior year, partly due to a lower percentage of Holdings' earnings attributable to other partners[133](index=133&type=chunk) [Earnings Per Share](index=44&type=section&id=Earnings%20Per%20Share%20(Nine%20Months)) Basic and diluted earnings per share increased to $2.68 for the nine months ended September 30, 2024, up from $2.27 in the prior year, driven by higher net income and increased weighted average shares outstanding due to Holdings' unit exchanges and equity award grants - Basic and diluted earnings per share were **$2.68** for the nine months ended September 30, 2024, compared to **$2.27** in the prior year[125](index=125&type=chunk) - Weighted average basic and diluted shares outstanding were higher due to Holdings' unit exchanges and equity award grants[134](index=134&type=chunk) [Supplemental Non-GAAP Financial Information](index=45&type=section&id=Supplemental%20Non-GAAP%20Financial%20Information) This section provides non-GAAP financial measures, including adjusted net income, adjusted net income per adjusted share, adjusted operating income, adjusted operating margin, and adjusted EBITDA, which management uses to evaluate profitability and efficiency, excluding certain non-operational impacts - Adjusted net income excludes the impact of net gain/loss on tax receivable agreements, compensation expense related to market valuation changes, and net investment gain/loss of investment products[136](index=136&type=chunk) Adjusted Non-GAAP Financial Measures (in millions USD, except per share data) | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Adjusted net income | $74.5 | $60.8 | $202.1 | $170.3 | | Adjusted net income per adjusted share | $0.92 | $0.75 | $2.50 | $2.11 | | Adjusted operating income | $97.8 | $80.9 | $266.7 | $228.4 | | Adjusted operating margin | 35.0% | 32.5% | 32.7% | 31.5% | | Adjusted EBITDA | $103.6 | $85.5 | $282.2 | $239.6 | - Adjusted operating margin improved to **35.0%** for the three months and **32.7%** for the nine months ended September 30, 2024, indicating enhanced operational efficiency[138](index=138&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) Artisan's liquidity is primarily met through cash generated by operations, with working capital needs including accrued incentive compensation, and the company manages cash balances, accounts receivable, seed investments, and borrowings, maintaining compliance with debt covenants Liquidity Position (in millions USD) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :---------------------------- | :----------- | :----------- | | Cash and cash equivalents | $253.9 | $141.0 | | Accounts receivable | $110.0 | $101.2 | | Seed investments | $157.9 | $150.1 | | Undrawn revolving credit facility | $100.0 | $100.0 | - The company had **$200 million** in unsecured notes outstanding and a **$100 million** unused revolving credit facility as of September 30, 2024[142](index=142&type=chunk) - Artisan was in compliance with all debt covenants as of September 30, 2024[142](index=142&type=chunk) [Distributions and Dividends](index=48&type=section&id=Distributions%20and%20Dividends) This section details Artisan Partners Holdings' distributions and APAM's declared dividends, outlining the company's dividend policy of paying approximately 80% of quarterly cash generation as a variable quarterly dividend Holdings Partnership Distributions (in millions USD) | Recipient | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Holdings Partnership Distributions to Limited Partners | $13.2 | $12.9 | $33.4 | $30.3 | | Holdings Partnership Distributions to APAM | $84.4 | $72.4 | $208.4 | $169.1 | | Total Holdings Partnership Distributions | $97.6 | $85.3 | $241.8 | $199.4 | Dividends Declared per Class A Common Share | Type of Dividend | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :--------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Quarterly | $0.71 | $0.61 | $2.00 | $1.66 | | Special Annual | $0 | $0 | $0.34 | $0.35 | - A variable quarterly dividend of **$0.82 per share** of Class A common stock was declared for the September quarter of 2024, representing approximately **80%** of cash generated[144](index=144&type=chunk) [Tax Receivable Agreements ("TRAs")](index=49&type=section&id=Tax%20Receivable%20Agreements%20(%22TRAs%22)) This section discusses the company's obligations under Tax Receivable Agreements (TRAs), which require payments based on realized tax savings, with the TRA liability decreasing to $341.4 million as of September 30, 2024 - The TRA liability decreased from **$364.0 million** at December 31, 2023, to **$341.4 million** at September 30, 2024[148](index=148&type=chunk) - Payments totaling **$36.7 million** were made related to TRAs during the nine months ended September 30, 2024[148](index=148&type=chunk) - The company expects to make approximately **$38.9 million** in TRA payments in 2025[148](index=148&type=chunk) [Cash Flows](index=49&type=section&id=Cash%20Flows) This section summarizes the cash flows from operating, investing, and financing activities for the nine months ended September 30, 2024 and 2023, highlighting increases in operating cash and changes in investing and financing activities Cash Flows Summary (in millions USD) | Activity | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :------------------------------------------------ | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $335.7 | $262.8 | | Net cash used in investing activities | $(24.5) | $(36.5) | | Net cash used in financing activities | $(205.9) | $(134.3) | | Cash, cash equivalents and restricted cash (End of period) | $279.8 | $230.5 | - Net cash provided by operating activities increased by **$72.9 million**, driven by higher operating income and activity within consolidated investment products[147](index=147&type=chunk) - Net cash used in financing activities increased by **$71.6 million**, primarily due to a **$25.6 million** increase in dividends paid and a **$42.0 million** decrease in contributions from noncontrolling interests[147](index=147&type=chunk) [Certain Contractual Obligations](index=50&type=section&id=Certain%20Contractual%20Obligations) There have been no material changes to contractual obligations outside the ordinary course of business, except for changes in the TRA liability, which decreased to $341.4 million at September 30, 2024 - The TRA liability decreased from **$364.0 million** at December 31, 2023, to **$341.4 million** at September 30, 2024[148](index=148&type=chunk) - The company expects to make approximately **$38.9 million** in TRA payments in 2025[148](index=148&type=chunk) [Critical Accounting Policies and Estimates](index=50&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) There have been no updates to the company's critical accounting policies and estimates from those disclosed in the latest annual report on Form 10-K - No updates to critical accounting policies and estimates were reported for the quarter ended September 30, 2024[149](index=149&type=chunk) [New or Revised Accounting Standards](index=50&type=section&id=New%20or%20Revised%20Accounting%20Standards) No new or revised accounting standards were reported in this period - No new or revised accounting standards were reported[149](index=149&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no material changes in the company's quantitative and qualitative disclosures regarding market risk from those previously reported in its Form 10-K for the year ended December 31, 2023 - No material changes in market risk disclosures were reported compared to the previous annual report[151](index=151&type=chunk) [Item 4. Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter [Disclosure Controls and Procedures](index=51&type=section&id=Disclosure%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of September 30, 2024, and concluded they are effective - The company's disclosure controls and procedures were evaluated and deemed effective as of September 30, 2024[152](index=152&type=chunk) [Changes in Internal Control over Financial Reporting](index=51&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) There have been no changes in internal control over financial reporting during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2024[153](index=153&type=chunk) [Part II — Other Information](index=52&type=section&id=Part%20II%20%E2%80%94%20Other%20Information) This part covers legal proceedings, risk factors, unregistered sales of equity securities, defaults, mine safety disclosures, other information, and exhibits [Item 1. Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal and administrative proceedings in the normal course of business, but currently, there are no proceedings that management believes may have a material adverse effect on its consolidated financial position, cash flows, or results of operations - No legal or administrative proceedings are expected to have a material adverse effect on the company's financial position, cash flows, or results of operations[155](index=155&type=chunk) [Item 1A. Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) For a discussion of related and other potential risks and uncertainties, readers are referred to the 'Risk Factors' section in the company's latest annual report on Form 10-K - Readers are directed to the Form 10-K for a discussion of risk factors[155](index=155&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section describes the exchange of employee-partner Class B common units for Class E common units and corresponding Class C common stock upon termination of employment, with no such issuances occurring during the three months ended September 30, 2024 - No unregistered sales of equity securities occurred during the three months ended September 30, 2024[155](index=155&type=chunk) [Item 3. Defaults Upon Senior Securities](index=52&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - No defaults upon senior securities were reported[155](index=155&type=chunk) [Item 4. Mine Safety Disclosures](index=52&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[155](index=155&type=chunk) [Item 5. Other Information](index=52&type=section&id=Item%205.%20Other%20Information) No other information was reported under this item - No other information was reported under this item[155](index=155&type=chunk) [Item 6. Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed or furnished with the Form 10-Q, including certifications and the Cover Page Interactive Data File (XBRL) - Exhibits include certifications from the CEO and CFO (31.1, 31.2, 32.1, 32.2) and the Cover Page Interactive Data File (XBRL) as Exhibit 101[157](index=157&type=chunk)[158](index=1
Artisan Partners(APAM) - 2024 Q3 - Earnings Call Transcript
2024-10-30 20:24
Financial Data and Key Metrics Changes - Revenues rose 3% compared to the June quarter and 12% year-over-year, driven by higher average AUM [34][38] - Adjusted operating income increased 12% sequentially and 21% year-over-year [41][43] - Assets under management (AUM) ended the September quarter at $168 billion, up 6% from the previous quarter and up 23% from September 2023 [35] Business Line Data and Key Metrics Changes - Net client cash outflows during the quarter were approximately $750 million, partially offset by an $860 million inflow into the emerging markets debt opportunity strategy [36] - Average AUM for the quarter was up 3% sequentially and 14% year-over-year [36] Market Data and Key Metrics Changes - The non-U.S. institutional business has been strong, with total assets from clients outside the U.S. representing approximately 26% of total AUM [14][58] - Emerging market debt has been a significant contributor to growth, with expectations for continued strength in this area [59] Company Strategy and Development Direction - The company is focused on thoughtful growth, investing in new talent and expanding capabilities while maintaining financial discipline [9][30] - The current phase of growth emphasizes absolute return strategies and aligns with demand from the growing wealth channel [15][22] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of compounding performance and cautious capacity management to drive revenue growth [56] - The company remains optimistic about the institutional business outside the U.S. and sees promising opportunities in emerging markets [59] Other Important Information - The company declared a quarterly dividend of $0.82 per share, reflecting strong growth in earnings [46] - The balance sheet remains strong with $158 million of seed capital in investment products and a $100 million unused revolving credit facility [45] Q&A Session Summary Question: Margin and Expense Outlook - Management indicated that a high percentage of variable expenses allows for margin expansion primarily driven by revenue growth [50] - Fixed expenses have grown rapidly due to investments in new teams, but a pause in this growth is expected [51] Question: International Value Strategy - Management acknowledged that capacity management is crucial, and they are cautious about inflows for mature strategies [56] Question: Non-U.S. Institutional Business - The non-U.S. institutional business has shown positive growth, with emerging market debt strategies contributing significantly [58][59] Question: Seed Capital Needs - The company has sufficient seed capital and is recouping some as strategies gain traction [71] Question: New Product Development - Management is engaged in productive conversations across various asset classes, with a focus on private real estate as a key area of interest [73]
Artisan Partners(APAM) - 2024 Q3 - Quarterly Results
2024-10-29 20:25
[Company Overview and Strategic Highlights](index=1&type=section&id=Company%20Overview%20and%20Strategic%20Highlights) Artisan Partners' CEO highlights long-term value creation and strategic evolution towards fixed income and private assets, supported by strong financial performance and AUM growth [CEO's Strategic Commentary](index=1&type=section&id=CEO%27s%20Strategic%20Commentary) CEO Eric Colson emphasized long-term value creation and strategic evolution towards fixed income, alternatives, and private assets due to a shrinking public equity market - Since its IPO in 2013, Artisan Partners has returned **$36.47 per share** in cumulative dividends and delivered an annual total shareholder return of **12.38%**, outperforming the S&P 500 (**12.05%**) and Russell 2000 (**7.80%**)[1](index=1&type=chunk) - Early strategies (1995-2002) represent nearly **$79 billion** of AUM, delivering average annual absolute returns of **10.66%** and alpha of **289 basis points**[2](index=2&type=chunk) - Strategies launched between 2005-2011 (global equities) represent nearly **$59 billion** of AUM, with average annual absolute returns of **8.63%** and alpha of **142 basis points**[3](index=3&type=chunk) - The latest growth phase focuses on fixed income, alternatives, and private assets, driven by a shrinking public equity opportunity set (U.S. public companies declined over **40%** since 1996 peak)[4](index=4&type=chunk)[5](index=5&type=chunk)[8](index=8&type=chunk) - Over the last five years, the company launched **eight new strategies** (five credit-oriented or alternative), returning **$16.94 per share** in cumulative dividends and delivering an annual total shareholder return of **18.56%**, outperforming the S&P 500 (**14.11%**) and Russell 2000 (**7.91%**)[9](index=9&type=chunk) [Key Financial and AUM Summary](index=3&type=section&id=Key%20Financial%20and%20AUM%20Summary) Artisan Partners reported strong financial results for 3Q24 and 9M24, with significant increases in Assets Under Management (AUM), revenues, and net income across both GAAP and adjusted measures. AUM reached $167.8 billion by September 30, 2024, driven by market appreciation Consolidated Financial Results (GAAP & Adjusted) - Key Metrics (millions, except AUM in billions) | Metric | Sep 30, 2024 (3M) | Jun 30, 2024 (3M) | Sep 30, 2023 (3M) | Sep 30, 2024 (9M) | Sep 30, 2023 (9M) | | :-------------------------------------------------------- | :---------------- | :---------------- | :---------------- | :---------------- | :---------------- | | **Assets Under Management (billions)** | | | | | | | Ending AUM | $167.8 | $158.9 | $136.5 | $167.8 | $136.5 | | Average AUM | $162.8 | $158.6 | $142.2 | $158.5 | $139.0 | | **Revenues (millions)** | $279.6 | $270.8 | $248.7 | $814.8 | $726.1 | | **Operating Income (millions)** | | | | | | | GAAP Operating Income | $93.2 | $86.6 | $82.2 | $257.5 | $227.2 | | GAAP Operating Margin | 33.3% | 32.0% | 33.0% | 31.6% | 31.3% | | Adjusted Operating Income | $97.8 | $87.3 | $80.9 | $266.7 | $228.4 | | Adjusted Operating Margin | 35.0% | 32.2% | 32.5% | 32.7% | 31.5% | | **Net Income Attributable to APAM (millions)** | | | | | | | GAAP Net Income | $72.9 | $57.6 | $53.1 | $190.0 | $157.5 | | Basic EPS | $1.03 | $0.80 | $0.76 | $2.68 | $2.27 | | Diluted EPS | $1.03 | $0.80 | $0.76 | $2.68 | $2.27 | | Adjusted Net Income | $74.5 | $66.0 | $60.8 | $202.1 | $170.3 | | Adjusted Net Income per Adjusted Share | $0.92 | $0.82 | $0.75 | $2.50 | $2.11 | | **Adjusted EBITDA (millions)** | $103.6 | $92.3 | $85.5 | $282.2 | $239.6 | [Quarterly Financial Performance (3Q24)](index=4&type=section&id=Quarterly%20Financial%20Performance%20%283Q24%29) Artisan Partners' Q3 2024 performance showed sequential and year-over-year growth in AUM, revenues, and net income, driven by market appreciation and improved operating margins [Comparison: 3Q24 vs. 2Q24](index=4&type=section&id=Comparison%3A%203Q24%20vs.%202Q24) In Q3 2024, Artisan Partners saw AUM increase by 6% sequentially, primarily due to market appreciation. Revenues grew by 3%, while operating expenses increased by 1% due to higher long-term incentive compensation. Both GAAP and adjusted operating margins improved, and net income and EPS significantly increased 3Q24 vs. 2Q24 Key Financial Changes (millions, except AUM in billions) | Metric | 3Q24 (millions) | 2Q24 (millions) | Change (millions) | % Change | | :------------------------------------ | :-------------- | :-------------- | :---------------- | :------- | | Ending AUM (billions) | $167.8 | $158.9 | $8.9 | 6% | | Average AUM (billions) | $162.8 | $158.6 | $4.2 | 3% | | Revenues | $279.6 | $270.8 | $8.8 | 3% | | Operating Expenses | $186.4 | $184.2 | $2.2 | 1% | | GAAP Operating Margin | 33.3% | 32.0% | 1.3 pp | | | Adjusted Operating Margin | 35.0% | 32.2% | 2.8 pp | | | Total Investment Gains | $35.5 | $3.5 | $32.0 | 914% | | APAM's Investment Gains | $18.2 | $0.8 | $17.4 | 2175% | | GAAP Net Income | $72.9 | $57.6 | $15.3 | 27% | | GAAP Basic/Diluted EPS | $1.03 | $0.80 | $0.23 | 29% | | Adjusted Net Income | $74.5 | $66.0 | $8.5 | 13% | | Adjusted Net Income per Adjusted Share| $0.92 | $0.82 | $0.10 | 12% | - AUM increase was primarily driven by **$9.9 billion** of market appreciation, partially offset by **$0.8 billion** of net client cash outflows and **$0.2 billion** of Artisan Funds' distributions not reinvested[11](index=11&type=chunk) - Operating expense increase was primarily due to a **$3.0 million** increase in long-term incentive compensation, mainly driven by market valuation changes[11](index=11&type=chunk) [Comparison: 3Q24 vs. 3Q23](index=4&type=section&id=Comparison%3A%203Q24%20vs.%203Q23) Artisan Partners demonstrated strong year-over-year growth in Q3 2024, with AUM increasing by 23% and revenues by 12%. Operating expenses also rose by 12%, mainly due to higher incentive and long-term incentive compensation. Both GAAP and adjusted operating margins improved, leading to a substantial increase in net income and EPS 3Q24 vs. 3Q23 Key Financial Changes (millions, except AUM in billions) | Metric | 3Q24 (millions) | 3Q23 (millions) | Change (millions) | % Change | | :------------------------------------ | :-------------- | :-------------- | :---------------- | :------- | | Ending AUM (billions) | $167.8 | $136.5 | $31.3 | 23% | | Average AUM (billions) | $162.8 | $142.2 | $20.6 | 14% | | Revenues | $279.6 | $248.7 | $30.9 | 12% | | Operating Expenses | $186.4 | $166.5 | $19.9 | 12% | | GAAP Operating Margin | 33.3% | 33.0% | 0.3 pp | | | Adjusted Operating Margin | 35.0% | 32.5% | 2.5 pp | | | Total Investment Gains | $35.5 | $5.5 | $30.0 | 545% | | APAM's Investment Gains (Losses) | $18.2 | ($3.6) | $21.8 | NM | | GAAP Net Income | $72.9 | $53.1 | $19.8 | 37% | | GAAP Basic/Diluted EPS | $1.03 | $0.76 | $0.27 | 36% | | Adjusted Net Income | $74.5 | $60.8 | $13.7 | 23% | | Adjusted Net Income per Adjusted Share| $0.92 | $0.75 | $0.17 | 23% | - AUM increase was primarily due to **$35.5 billion** of investment returns, partially offset by **$3.3 billion** of net client cash outflows and **$0.9 billion** of Artisan Funds' distributions not reinvested[12](index=12&type=chunk) - Operating expense increase was primarily due to an **$8.4 million** increase in incentive compensation (driven by higher revenues) and an **$8.0 million** increase in long-term incentive compensation costs[13](index=13&type=chunk) [Year-to-Date Financial Performance (9M24)](index=5&type=section&id=Year-to-Date%20Financial%20Performance%20%289M24%29) Year-to-date performance for 9M24 showed significant AUM and revenue growth, alongside increased operating expenses, resulting in improved net income and EPS [Comparison: 9M24 vs. 9M23](index=5&type=section&id=Comparison%3A%209M24%20vs.%209M23) For the nine months ended September 30, 2024, Artisan Partners reported a 23% increase in AUM and a 12% rise in revenues compared to the prior year period. Operating expenses also increased by 12%, mainly due to higher compensation and benefits. Both GAAP and adjusted operating margins improved, contributing to a significant increase in net income and EPS 9M24 vs. 9M23 Key Financial Changes (millions, except AUM in billions) | Metric | 9M24 (millions) | 9M23 (millions) | Change (millions) | % Change | | :------------------------------------ | :-------------- | :-------------- | :---------------- | :------- | | Ending AUM (billions) | $167.8 | $136.5 | $31.3 | 23% | | Average AUM (billions) | $158.5 | $139.0 | $19.5 | 14% | | Revenues | $814.8 | $726.1 | $88.7 | 12% | | Operating Expenses | $557.3 | $498.9 | $58.4 | 12% | | GAAP Operating Margin | 31.6% | 31.3% | 0.3 pp | | | Adjusted Operating Margin | 32.7% | 31.5% | 1.2 pp | | | Total Investment Gains | $70.3 | $45.7 | $24.6 | 54% | | APAM's Investment Gains | $35.5 | $19.2 | $16.3 | 85% | | GAAP Net Income | $190.0 | $157.5 | $32.5 | 21% | | GAAP Basic/Diluted EPS | $2.68 | $2.27 | $0.41 | 18% | | Adjusted Net Income | $202.1 | $170.3 | $31.8 | 19% | | Adjusted Net Income per Adjusted Share| $2.50 | $2.11 | $0.39 | 18% | - Operating expense increase was primarily due to a **$53.1 million** increase in compensation and benefits, including a **$29.9 million** increase in incentive compensation and a **$16.1 million** increase in long-term incentive compensation[17](index=17&type=chunk) - APAM's portion of investment gains for the nine months ended September 30, 2024, was comprised of **$19.8 million** from hedging compensation plans and **$15.7 million** from seed investments[18](index=18&type=chunk) [Capital Management and Dividends](index=5&type=section&id=Capital%20Management%20and%20Dividends) The company's balance sheet shows increased cash and equity with stable borrowings, supporting a consistent dividend policy of approximately 80% of cash generated [Balance Sheet Overview](index=5&type=section&id=Balance%20Sheet%20Overview) Artisan Partners' balance sheet shows a significant increase in cash and cash equivalents to $253.9 million at September 30, 2024, from $141.0 million at December 31, 2023. Total stockholders' equity also grew to $405.0 million, while borrowings remained stable at $200.0 million, resulting in a low debt leverage ratio of 0.5x Balance Sheet Highlights (millions) | Metric | Sep 30, 2024 (millions) | Dec 31, 2023 (millions) | | :-------------------------- | :---------------------- | :---------------------- | | Cash and cash equivalents | $253.9 | $141.0 | | Total borrowings | $200.0 | $200.0 | | Total stockholders' equity | $405.0 | $351.4 | | Class A common shares outstanding | 70.1 million | N/A | | Debt leverage ratio | 0.5x | N/A | - During the September 2024 quarter, limited partners exchanged **176,213 common units** for Class A common shares, increasing the Company's public float by **0.3%**[20](index=20&type=chunk) [Dividend Declaration and Policy](index=5&type=section&id=Dividend%20Declaration%20and%20Policy) Artisan Partners declared a variable quarterly dividend of $0.82 per share for the September 2024 quarter, representing approximately 80% of the cash generated. The company expects to continue paying a quarterly dividend of approximately 80% of cash generated, with a potential special dividend at year-end - A variable quarterly dividend of **$0.82 per share** of Class A common stock was declared for the September 2024 quarter[22](index=22&type=chunk) - The dividend represents approximately **80%** of the cash generated in the September 2024 quarter[22](index=22&type=chunk) - The company expects to pay a quarterly dividend of approximately **80%** of the cash generated each quarter, with a potential special dividend after year-end[22](index=22&type=chunk) [Non-GAAP Financial Measures](index=10&type=section&id=Non-GAAP%20Financial%20Measures) This section explains Artisan Partners' non-GAAP adjusted financial measures, which exclude specific items to provide a clearer view of operational profitability and efficiency [Explanation and Reconciliation](index=10&type=section&id=Explanation%20and%20Reconciliation) Artisan Partners uses non-GAAP 'adjusted' measures (Adjusted net income, Adjusted net income per adjusted share, Adjusted operating income, Adjusted operating margin, and Adjusted EBITDA) to evaluate profitability and efficiency, removing impacts from tax receivable agreements, market valuation changes in compensation plans, and net investment gains/losses. These adjustments also account for noncontrolling interests and assume full vesting/exchange of partnership units for a clearer operational view - Adjusted measures remove the impact of (1) net gain (loss) on tax receivable agreements, (2) compensation expense (reversal) related to market valuation changes in compensation plans, and (3) net investment gain (loss) of investment products[30](index=30&type=chunk)[31](index=31&type=chunk) - Adjusted net income assumes full vesting of unvested Class A share-based awards and exchange of all outstanding limited partnership units for Class A common stock, treating all income of Artisan Partners Holdings as allocated to APAM[31](index=31&type=chunk) - The adjusted tax rate was **24.7%** for all periods presented[31](index=31&type=chunk) Reconciliation of GAAP to Adjusted Net Income (millions) | Metric | Sep 30, 2024 (3M) | Jun 30, 2024 (3M) | Sep 30, 2023 (3M) | Sep 30, 2024 (9M) | Sep 30, 2023 (9M) | | :-------------------------------------------------------------------------------------------------- | :---------------- | :---------------- | :---------------- | :---------------- | :---------------- | | Net income attributable to Artisan Partners Asset Management Inc. (GAAP) | $72.9 | $57.6 | $53.1 | $190.0 | $157.5 | | Add back: Net income attributable to noncontrolling interests - Artisan Partners Holdings LP | 14.5 | 11.5 | 11.3 | 38.9 | 35.5 | | Add back: Provision for income taxes | 24.6 | 18.7 | 14.6 | 65.3 | 51.7 | | Add back: Compensation expense (reversal) related to market valuation changes in compensation plans | 4.6 | 0.7 | (1.3) | 9.2 | 1.2 | | Add back: Net (gain) loss on the tax receivable agreements | 0.5 | — | (0.5) | 0.5 | (0.5) | | Add back: Net investment (gain) loss of investment products attributable to APAM | (18.2) | (0.8) | 3.6 | (35.5) | (19.2) | | Less: Adjusted provision for income taxes | 24.4 | 21.7 | 20.0 | 66.3 | 55.9 | | **Adjusted net income (Non-GAAP)** | **$74.5** | **$66.0** | **$60.8** | **$202.1** | **$170.3** | [Exhibits: Detailed Financials](index=9&type=section&id=Exhibits%3A%20Detailed%20Financials) This section provides detailed consolidated financial statements, including statements of operations and financial condition, for the reported periods [Consolidated Statements of Operations](index=9&type=section&id=Consolidated%20Statements%20of%20Operations) The Consolidated Statements of Operations detail Artisan Partners' revenues, operating expenses, and net income for the three and nine months ended September 30, 2024 and 2023. Management fees constitute the vast majority of revenues, while compensation and benefits are the largest operating expense. Non-operating income includes significant net investment gains Consolidated Statements of Operations (Selected Data, millions) | Metric | Sep 30, 2024 (3M) | Jun 30, 2024 (3M) | Sep 30, 2023 (3M) | Sep 30, 2024 (9M) | Sep 30, 2023 (9M) | | :------------------------------------------------------------------ | :---------------- | :---------------- | :---------------- | :---------------- | :---------------- | | Management fees - Artisan Funds & Artisan Global Funds | $174.7 | $170.2 | $156.4 | $510.4 | $452.6 | | Management fees - Separate accounts and other | $104.9 | $100.5 | $92.2 | $304.3 | $273.3 | | Total revenues | $279.6 | $270.8 | $248.7 | $814.8 | $726.1 | | Compensation and benefits | $149.0 | $146.8 | $130.7 | $445.7 | $392.6 | | Total operating expenses | $186.4 | $184.2 | $166.5 | $557.3 | $498.9 | | Operating income | $93.2 | $86.6 | $82.2 | $257.5 | $227.2 | | Total non-operating income (expense) | $35.5 | $3.4 | $5.8 | $69.9 | $43.5 | | Income before income taxes | $128.7 | $90.0 | $88.0 | $327.4 | $270.7 | | Net income attributable to Artisan Partners Asset Management Inc. | $72.9 | $57.6 | $53.1 | $190.0 | $157.5 | | Basic earnings per share - Class A common shares | $1.03 | $0.80 | $0.76 | $2.68 | $2.27 | | Diluted earnings per share - Class A common shares | $1.03 | $0.80 | $0.76 | $2.68 | $2.27 | [Condensed Consolidated Statements of Financial Condition](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) The Condensed Consolidated Statements of Financial Condition show Artisan Partners' financial position as of September 30, 2024, compared to December 31, 2023. Key changes include a substantial increase in cash and cash equivalents and total stockholders' equity, while total liabilities also increased Condensed Consolidated Statements of Financial Condition (millions) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :------------------------------------------------------------------ | :----------- | :----------- | | **Assets** | | | | Cash and cash equivalents | $253.9 | $141.0 | | Accounts receivable | $110.0 | $101.2 | | Investment securities | $211.9 | $150.5 | | Assets of consolidated investment products | $419.5 | $436.5 | | Total assets | $1,610.6 | $1,405.9 | | **Liabilities and equity** | | | | Accounts payable, accrued expenses, and other | $193.2 | $77.7 | | Borrowings | $199.4 | $199.3 | | Amounts payable under tax receivable agreements | $341.4 | $364.0 | | Liabilities of consolidated investment products | $66.9 | $47.7 | | Total liabilities | $906.6 | $802.1 | | Redeemable noncontrolling interests | $299.0 | $252.4 | | Total stockholders' equity | $405.0 | $351.4 | | Total liabilities, redeemable noncontrolling interests and stockholders' equity | $1,610.6 | $1,405.9 | [Exhibits: Assets Under Management (AUM) Breakdown](index=13&type=section&id=Exhibits%3A%20Assets%20Under%20Management%20%28AUM%29%20Breakdown) This section details Artisan Partners' Assets Under Management, including changes, client flows, and breakdowns by investment team, vehicle, and strategy performance [AUM Changes and Flows](index=13&type=section&id=AUM%20Changes%20and%20Flows) Artisan Partners' AUM increased significantly to $167.8 billion by September 30, 2024, primarily driven by strong investment returns. While gross client cash inflows were substantial, they were largely offset by outflows, resulting in net client cash outflows for both the quarter and the nine-month period AUM Changes for Three Months Ended September 30, 2024 (millions) | Metric | Sep 30, 2024 | Jun 30, 2024 | Sep 30, 2023 | | :-------------------------------------- | :----------- | :----------- | :----------- | | Beginning assets under management | $158,887 | $160,384 | $142,989 | | Gross client cash inflows | $6,210 | $5,604 | $5,601 | | Gross client cash outflows | ($6,953) | ($7,214) | ($6,940) | | Net client cash flows | ($743) | ($1,610) | ($1,339) | | Artisan Funds' distributions not reinvested | ($222) | ($91) | ($75) | | Investment returns and other | $9,918 | $204 | ($5,080) | | Ending assets under management | $167,840 | $158,887 | $136,495 | | Average assets under management | $162,783 | $158,579 | $142,199 | AUM Changes for Nine Months Ended September 30, 2024 (millions) | Metric | Sep 30, 2024 | Sep 30, 2023 | | :-------------------------------------- | :----------- | :----------- | | Beginning assets under management | $150,167 | $127,892 | | Gross client cash inflows | $18,001 | $15,889 | | Gross client cash outflows | ($20,876) | ($19,567) | | Net client cash flows | ($2,875) | ($3,678) | | Artisan Funds' distributions not reinvested | ($398) | ($190) | | Investment returns and other | $20,946 | $12,471 | | Ending assets under management | $167,840 | $136,495 | | Average assets under management | $158,514 | $138,982 | [AUM by Investment Team and Vehicle](index=14&type=section&id=AUM%20by%20Investment%20Team%20and%20Vehicle) AUM is diversified across various investment teams and vehicles. The International Value Team holds the largest AUM, followed by the Growth Team and Global Value Team. AUM is split between Artisan Funds & Artisan Global Funds and Separate Accounts & Other, with both categories showing growth Ending AUM by Investment Team (Sep 30, 2024, millions) | Investment Team | Ending AUM | | :-------------------------- | :----------- | | Growth Team | $39,662 | | Global Equity Team | $13,765 | | U.S. Value Team | $7,811 | | International Value Team | $46,948 | | Global Value Team | $29,728 | | Sustainable Emerging Markets| $2,006 | | Credit Team | $11,622 | | Developing World Team | $4,225 | | Antero Peak Group | $2,403 | | International Small-Mid Team| $7,311 | | EMsights Capital Group | $2,359 | | **Total** | **$167,840** | Ending AUM by Vehicle (Sep 30, 2024, millions) | Vehicle | Ending AUM | | :------------------------------------- | :----------- | | Artisan Funds & Artisan Global Funds | $81,054 | | Separate Accounts and Other | $86,786 | | **Total** | **$167,840** | - The International Small-Mid team became its own autonomous investment franchise effective March 31, 2024[43](index=43&type=chunk)[47](index=47&type=chunk) [Investment Strategy AUM and Performance](index=19&type=section&id=Investment%20Strategy%20AUM%20and%20Performance) Artisan Partners' investment strategies demonstrate varied performance across different time horizons, with many strategies outperforming their respective benchmarks since inception. Notable strategies include Global Opportunities, U.S. Mid-Cap Growth, International Value, and Credit Opportunities, which have generated significant value-added Selected Investment Strategy AUM and Performance (As of Sep 30, 2024) | Investment Team and Strategy | Strategy AUM ($MM) | 1 YR Return (%) | 5 YR Return (%) | Inception Return (%) | Value-Added Since Inception (bps) | | :------------------------------------ | :----------------- | :-------------- | :-------------- | :------------------- | :-------------------------------- | | **Growth Team** | | | | | | | Global Opportunities Strategy | $22,005 | 33.31% | 13.02% | 11.30% | 439 | | U.S. Mid-Cap Growth Strategy | $12,792 | 17.31% | 10.57% | 14.19% | 443 | | U.S. Small-Cap Growth Strategy | $3,177 | 26.30% | 8.64% | 10.64% | 285 | | **Global Equity Team** | | | | | | | Non-U.S. Growth Strategy | $13,217 | 26.72% | 7.01% | 9.58% | 435 | | China Post-Venture Strategy | $188 | 24.23% | --- | (6.90)% | 492 | | **U.S. Value Team** | | | | | | | Value Equity Strategy | $4,931 | 25.22% | 14.56% | 9.78% | 156 | | U.S. Mid-Cap Value Strategy | $2,863 | 21.84% | 10.65% | 12.10% | 241 | | **International Value Team** | | | | | | | International Value Strategy | $46,605 | 27.80% | 13.84% | 12.01% | 562 | | **Credit Team** | | | | | | | High Income Strategy | $11,295 | 15.87% | 7.14% | 7.21% | 244 | | Credit Opportunities Strategy | $254 | 21.20% | 16.86% | 13.82% | 1,148 | | **Developing World Team** | | | | | | | Developing World Strategy | $4,225 | 44.55% | 13.81% | 11.82% | 728 | | **EMsights Capital Group** | | | | | | | Global Unconstrained Strategy | $655 | 10.31% | --- | 10.38% | 619 | - Artisan High Income Fund was ranked **4 of 302 funds** in its Lipper category over the ten years since its inception[6](index=6&type=chunk)[25](index=25&type=chunk) - Value-added is measured as the basis point difference between the strategy's average annual gross composite return and its respective benchmark[24](index=24&type=chunk)[52](index=52&type=chunk) [General Information](index=6&type=section&id=General%20Information) This section provides details on the upcoming conference call, important forward-looking statements, and a brief overview of Artisan Partners as an investment management firm [Conference Call](index=6&type=section&id=Conference%20Call) Artisan Partners will host a conference call on October 30, 2024, at 1:00 p.m. ET to discuss the 3Q24 results, featuring CEO Eric Colson, President Jason Gottlieb, and CFO C.J. Daley. Supplemental materials and webcast access are available on the company's website - Conference call to discuss results scheduled for **October 30, 2024**, at **1:00 p.m. (Eastern Time)**[23](index=23&type=chunk) - Key speakers include CEO Eric Colson, President Jason Gottlieb, and CFO C.J. Daley[23](index=23&type=chunk) - Supplemental materials and webcast available on www.apam.com[23](index=23&type=chunk) [Forward-Looking Statements and Disclosures](index=7&type=section&id=Forward-Looking%20Statements%20and%20Disclosures) This section outlines the forward-looking nature of certain statements in the release, emphasizing that actual results may differ due to various risks, including loss of key personnel, adverse market conditions, and regulatory changes. It also defines key terms like Assets Under Management (AUM), Value Added, and Excess Returns, and clarifies how composite returns and benchmarks are calculated - Statements regarding future events and performance are forward-looking and subject to risks and uncertainties[24](index=24&type=chunk) - Key risk factors include loss of key investment professionals, adverse market conditions, poor strategy performance, and changes in the regulatory environment[24](index=24&type=chunk) - AUM definition includes non-discretionary model portfolios reported on a lag, and is not based on ADV or fund management agreements[24](index=24&type=chunk) - Value Added is the difference between a strategy's average annual return and its benchmark, while Excess Returns (alpha) estimate outperformance in dollars[24](index=24&type=chunk) [About Artisan Partners](index=8&type=section&id=About%20Artisan%20Partners) Artisan Partners is a global investment management firm established in 1994, known for providing high value-added investment strategies to sophisticated clients worldwide. The firm emphasizes attracting experienced, disciplined investment professionals and operates with autonomous investment teams managing diverse strategies across multiple asset classes through various investment vehicles - Artisan Partners is a global investment management firm providing high value-added investment strategies[25](index=25&type=chunk) - Established in **1994**, the firm focuses on attracting experienced, disciplined investment professionals[25](index=25&type=chunk) - Autonomous investment teams oversee diverse strategies across multiple asset classes and investment vehicles[25](index=25&type=chunk)
Artisan Partners(APAM) - 2024 Q2 - Quarterly Report
2024-07-26 20:14
Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024 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 4 ...
Artisan Partners(APAM) - 2024 Q2 - Earnings Call Presentation
2024-07-24 20:14
Financial Performance - The company's Assets Under Management (AUM) reached $158.9 billion as of June 30, 2024 [22] - Revenues for YTD 2Q24 were $535.2 million, a 12% increase compared to $477.4 million for YTD 2Q23 [24] - Adjusted operating income for YTD 2Q24 was $168.9 million, a 15% increase from $147.5 million in YTD 2Q23 [24] - Adjusted net income per adjusted share for YTD 2Q24 was $1.58, a 16% increase from $1.36 in YTD 2Q23 [24] Asset Allocation and Flows - Equity assets under management totaled $143.9 billion as of June 30, 2024 [22] - Fixed income assets under management totaled $11.7 billion as of June 30, 2024 [22] - Alternative assets under management totaled $3.3 billion as of June 30, 2024 [22] - Net client cash flows for the six months ended June 30, 2024, resulted in an outflow of $2.1 billion [22] Investment Strategies and Performance - Artisan EM Debt Opportunities strategy had a value-added of 724 bps ITD (Inception-to-Date) [4, 15] - Artisan EM Local Opportunities strategy had a value-added of 202 bps ITD [4, 15] - Developing World strategy had a value-added of 611 bps ITD [15] - China Post-Venture strategy had a value-added of 442 bps ITD [15]
Artisan Partners(APAM) - 2024 Q2 - Earnings Call Transcript
2024-07-24 20:14
Financial Data and Key Metrics Changes - Assets under management (AUM) ended the June quarter at $159 billion, down slightly from the previous quarter but up 11% from June 2023 [20] - Net client cash outflows during the quarter were $1.6 billion, with net outflows in growth and value strategies partially offset by inflows in Sustainable Emerging Markets and Fixed Income strategies [20] - Average AUM for the quarter was up 3% sequentially and up 14% compared to June 2023 [21] - Revenues for the quarter increased by 2% compared to the previous quarter and were up 11% year-over-year [21] - Adjusted net income per adjusted share improved by 8% compared to the previous quarter and 15% compared to June 2023 [22] Business Line Data and Key Metrics Changes - The Emerging Markets Debt Opportunities strategy generated an average annual return of 11.71%, beating its index by an average of 724 basis points annually since inception [10] - The Emerging Markets local opportunities strategy generated an average annual return of 8.01%, beating its index by 202 basis points since inception [10] - All five open-ended Alternative strategies have performed well, with four generating more than 300 basis points of annual outperformance since inception [15] Market Data and Key Metrics Changes - The competitive landscape in Emerging Markets is highly fragmented, with the top 10 funds accounting for just 25% of category AUM as of March 31, 2024 [10] - Institutional interest in Emerging Markets is expected to grow, with significant allocations anticipated as allocators reconsider their strategies [18][44] Company Strategy and Development Direction - The company focuses on high-value-added investing, expanding capabilities by adding breadth to existing investment franchises and onboarding exceptional talent in new areas [6][8] - The strategy includes a strong emphasis on Alternatives and Private Assets, with a commitment to developing new strategies in less liquid and more Alternative spaces [8][15] - The company aims to leverage its established network in the intermediary channel to enhance distribution for Alternative strategies [41] Management's Comments on Operating Environment and Future Outlook - Management believes that Emerging Markets equity and debt will remain meaningful long-term allocations for sophisticated allocators despite recent underperformance [17] - The company is optimistic about the growth potential in Emerging Markets, particularly in the institutional channel, as allocators look to rebalance their portfolios [44] - Management expressed confidence in the business model and philosophy being well-suited for Alternatives talent and strategies, expecting to see continued growth in this area [16] Other Important Information - The company declared a quarterly dividend of $0.71 per share, representing approximately 80% of the cash generated in the quarter [26] - The balance sheet remains strong, with $150 million of seed capital in investment products and a $100 million revolving credit facility that remains unused [25] Q&A Session Summary Question: Discussion on Alternative strategies and fundraising goals - Management expects all strategies in the Alternatives bucket to be active over the next 12 to 18 months, highlighting Global Unconstrained and Credit Opportunities as key areas [28][29] Question: Impact of the $800 million win in Emerging Market Debt on fee rates - The fee rate for the large mandate was competitive, indicating a shift in the marketplace towards high-quality active managers rather than just low fee rates [34] Question: Incremental investment in Alternatives and distribution strategies - The company is evaluating both internal and external opportunities for growth in Alternatives, focusing on talent and diversification [38][40]
Artisan Partners (APAM) Q2 Earnings Miss Estimates on Lower AUM
ZACKS· 2024-07-24 13:40
Artisan Partners Asset Management Inc. (APAM) reported second-quarter 2024 adjusted net income per adjusted share of 82 cents, missing the Zacks Consensus Estimate of 87 cents. The bottom line, however, increased 15% from the prior-year quarter.Results were adversely affected by the declining assets under management (AUM) balance, along with the rising operating costs. Nonetheless, an increase in Global Funds and Separate accounts resulted in top-line growth. Also, the balance sheet position improved in the ...
Artisan Partners Asset Management (APAM) Q2 Earnings Miss Estimates
ZACKS· 2024-07-23 22:40
Artisan Partners Asset Management (APAM) came out with quarterly earnings of $0.82 per share, missing the Zacks Consensus Estimate of $0.87 per share. This compares to earnings of $0.71 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -5.75%. A quarter ago, it was expected that this investment management firm would post earnings of $0.79 per share when it actually produced earnings of $0.76, delivering a surprise of -3.80%.Over ...
Artisan Partners(APAM) - 2024 Q2 - Quarterly Results
2024-07-23 20:43
Artisan Partners Asset Management Inc. Reports 2Q24 Results Milwaukee, WI - July 23, 2024 - Artisan Partners Asset Management Inc. (NYSE: APAM) (the "Company" or "Artisan Partners") today reported its results for the three and six months ended June 30, 2024, and declared a quarterly dividend. Chief Executive Officer Eric Colson said, "Since our founding in 1994, we have focused on areas where we see a combination of investment talent, attractive absolute returns, long-term demand from sophisticated clients, ...