62 This Quarterly Report on Form 10-Q includes forward-looking statements, which may include, from time to time, anticipated revenues, margins, cash flows or earnings, anticipated future performance of our business, our expected future net cash flows, our anticipated expense levels, capital management, financial condition, results of operations and cash flows, and/or expectations regarding market conditions. The words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "ca ...

BrightSphere Investment Group Inc. (NYSE:BSIG) Q3 2023 Earnings Conference Call November 2, 2023 11:00 AM ET Company Participants Melody Huang - SVP, Director of Finance and IR Suren Rana - President and CEO Conference Call Participants Kenneth Lee - RBC Capital Markets Michael Cyprys - Morgan Stanley John Dunn - Evercore ISI Michael Cyprys - Morgan Stanley Operator Ladies and gentlemen, thank you for standing by. Welcome to the BrightSphere Investment Group Earnings Conference Call and Webcast for the Thir ...

PART I — FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements, offering a snapshot of financial position, performance, and liquidity for the specified periods [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement presents the company's financial position, showing increased total assets and liabilities, with total equity improving from a deficit to a positive balance Condensed Consolidated Balance Sheets (in millions) | Metric | June 30, 2023 | December 31, 2022 | | :------------------------------------------------------ | :------------ | :------------------ | | Total Assets | $558.3 | $518.7 | | Cash and cash equivalents | $140.8 | $108.4 | | Investments | $47.4 | $48.4 | | Total Liabilities | $552.3 | $540.3 | | Accrued incentive compensation | $45.0 | $92.5 | | Total Equity (deficit) and redeemable non-controlling interests in consolidated Funds | $6.0 | $(21.6) | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement details revenues, expenses, and net income, showing a slight revenue increase for the three-month period but a significant decline in net income attributable to controlling interests Condensed Consolidated Statements of Operations (in millions, except per share data) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Revenue | $96.3 | $95.5 | $188.1 | $207.7 | | Net Income Attributable to Controlling Interests | $11.4 | $28.6 | $23.4 | $52.4 | | Basic EPS Attributable to Controlling Interests | $0.27 | $0.69 | $0.56 | $1.23 | | Diluted EPS Attributable to Controlling Interests | $0.27 | $0.67 | $0.55 | $1.19 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement presents comprehensive income, including net income and other components, with total comprehensive income attributable to controlling interests significantly decreasing year-over-year Total Comprehensive Income Attributable to Controlling Interests (in millions) | Period | 2023 | 2022 | | :--------------------------- | :----- | :----- | | Three Months Ended June 30 | $12.8 | $26.8 | | Six Months Ended June 30 | $26.1 | $51.5 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This statement outlines changes in stockholders' equity, reflecting impacts from net income and other adjustments, with total equity attributable to controlling interests improving to a positive balance Total Stockholders' Equity (Deficit) (in millions) | Date | Total Stockholders' Equity (Deficit) | | :----------------- | :----------------------------------- | | June 30, 2023 | $3.7 | | June 30, 2022 | $(71.0) | Net Income (in millions) | Period | 2023 | 2022 | | :----------------------- | :----- | :----- | | Six Months Ended June 30 | $23.4 | $52.4 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement breaks down cash flows, showing a significant decrease in operating cash, a shift to net inflow from financing, and an overall increase in cash and cash equivalents Net Cash Flows (in millions) | Activity | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--------------------------- | :--------------------------- | :--------------------------- | | Operating Activities | $4.4 | $29.9 | | Investing Activities | $(10.7) | $(6.4) | | Financing Activities | $37.9 | $(183.4) | Cash and Cash Equivalents at End of Period (in millions) | Date | Amount | | :----------------- | :------- | | June 30, 2023 | $152.9 | | June 30, 2022 | $92.2 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the financial statements, covering organization, accounting policies, and various financial components [1) Organization and Description of the Business](index=10&type=section&id=1)%20Organization%20and%20Description%20of%20the%20Business) BrightSphere Investment Group operates as a global asset management company through its Quant & Solutions segment, providing investment services via a profit-sharing model - The Company operates through one Affiliate, Acadian Asset Management LLC, which comprises its Quant & Solutions reportable segment[55](index=55&type=chunk) - The business model involves profit-sharing with Acadian's key management personnel to align economic interests[26](index=26&type=chunk)[71](index=71&type=chunk) - Paulson & Co. Inc. held approximately **21.6%** of the Company's common stock as of June 30, 2023[90](index=90&type=chunk) [2) Basis of Presentation and Significant Accounting Policies](index=11&type=section&id=2)%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) The unaudited Condensed Consolidated Financial Statements are prepared under U.S. GAAP, relying on management estimates, with no material impact expected from new accounting guidance - The Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP[94](index=94&type=chunk) - Management makes estimates and assumptions that affect reported amounts[95](index=95&type=chunk) - No newly issued accounting guidance is expected to have a material effect on the financial statements[75](index=75&type=chunk) [3) Investments](index=12&type=section&id=3)%20Investments) Total investments increased to $56.7 million, driven by long-term incentive compensation plans and consolidated Funds Total Investments (in millions) | Metric | June 30, 2023 | December 31, 2022 | | :------------------------------------------ | :------------ | :------------------ | | Total Investments per Condensed Consolidated Balance Sheets | $56.7 | $50.3 | | Investments related to long-term incentive compensation plans | $43.0 | $40.0 | | Investments of consolidated Funds held at fair value | $9.3 | $1.9 | [4) Fair Value Measurements](index=12&type=section&id=4)%20Fair%20Value%20Measurements) The company measures assets and liabilities at fair value, primarily as Level I or II, with total fair value assets increasing to $56.7 million and no significant transfers between levels Total Fair Value Assets (in millions) | Date | Total Fair Value Assets | | :----------------- | :---------------------- | | June 30, 2023 | $56.7 | | December 31, 2022 | $50.3 | - Assets and liabilities measured at fair value are primarily classified as Level I (quoted prices in active markets) or Level II (significant other observable inputs)[100](index=100&type=chunk)[114](index=114&type=chunk) - There were no significant transfers of financial assets or liabilities between Levels II or III during the three and six months ended June 30, 2023 and 2022[101](index=101&type=chunk) [5) Variable Interest Entities](index=15&type=section&id=5)%20Variable%20Interest%20Entities) The company sponsors and consolidates Variable Interest Entities (VIEs), primarily Funds managed by its Affiliate, with VIE assets restricted to their respective Funds - The Company sponsors various Variable Interest Entities (VIEs), primarily Funds managed by its Affiliate[117](index=117&type=chunk) - The Company generally consolidates Fund VIEs when its ownership interest, including related parties, is substantial, making it the primary beneficiary[118](index=118&type=chunk) Assets and Liabilities of Consolidated Funds (VIEs) (in millions) | Metric | June 30, 2023 | December 31, 2022 | | :--------------------------------- | :------------ | :------------------ | | Total Assets | $51.7 | $17.1 | | Total Liabilities | $28.6 | $2.5 | [6) Borrowings and Debt](index=16&type=section&id=6)%20Borrowings%20and%20Debt) The company's debt includes a $125 million revolving credit facility and $275 million Senior Notes, with a prior year's debt redemption incurring a $3.2 million loss Borrowings and Long-Term Debt (in millions) | Debt Type | June 30, 2023 | December 31, 2022 | Interest Rate | Maturity | | :--------------------------------- | :------------ | :------------------ | :------------ | :----------- | | $125 million revolving credit facility | $38.0 | $0 | Variable rate | March 7, 2025 | | $275 million 4.80% Senior Notes Due 2026 | $273.7 | $273.5 | 4.80% | July 27, 2026 | - The full redemption of **$125 million** **5.125%** Senior Notes in January 2022 resulted in a **$3.2 million** loss on extinguishment of debt[144](index=144&type=chunk)[225](index=225&type=chunk)[331](index=331&type=chunk) - Acadian's Leverage Ratio was **0.3x** and its Interest Coverage Ratio was **53.0x** as of June 30, 2023, both within contractual limits[321](index=321&type=chunk) [7) Leases](index=17&type=section&id=7)%20Leases) The company holds operating leases for offices and equipment with terms up to 11 years, and total operating lease expense decreased slightly to $4.3 million Total Operating Lease Expense (in millions) | Period | 2023 | 2022 | | :----------------------- | :----- | :----- | | Six Months Ended June 30 | $4.3 | $4.8 | - The weighted average remaining lease term was **10.0 years** and the weighted average discount rate was **3.55%** for the six months ended June 30, 2023[133](index=133&type=chunk) [8) Commitments and Contingencies](index=18&type=section&id=8)%20Commitments%20and%20Contingencies) The company faces regulatory capital requirements and legal matters, with no material accruals for claims and no expected material adverse effects from outstanding issues - Management is not aware of any violations of minimum financial or capital requirements[134](index=134&type=chunk) - No material accruals for claims were recorded as of June 30, 2023, and no outstanding matters are expected to have a material adverse effect[135](index=135&type=chunk) - The Company has a **$2.5 million** guaranty for an office space security deposit expiring in 2033[149](index=149&type=chunk) [9) Earnings Per Share](index=19&type=section&id=9)%20Earnings%20Per%20Share) Basic and diluted earnings per share attributable to controlling interests significantly decreased for both periods, reflecting lower net income Earnings Per Share Attributable to Controlling Interests | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic EPS | $0.27 | $0.69 | $0.56 | $1.23 | | Diluted EPS | $0.27 | $0.67 | $0.55 | $1.19 | [10) Revenue](index=20&type=section&id=10)%20Revenue) Management fees are driven by AUM and fee rates, performance fees by criteria, with U.S. management fees slightly decreasing and non-U.S. fees increasing - Management fees are a function of fee rates charged to clients and the levels of assets under management[143](index=143&type=chunk) - Performance fees are recorded when contractual performance criteria have been met and a significant reversal of revenue is improbable[157](index=157&type=chunk) Management Fee Revenue by Geography (Quant & Solutions, in millions) | Geography | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :---------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | U.S. | $69.3 | $71.2 | $137.3 | $148.2 | | Non-U.S. | $23.5 | $22.3 | $46.1 | $47.5 | | Total | $92.8 | $93.5 | $183.4 | $195.7 | [11) Accumulated Other Comprehensive Income (Loss)](index=21&type=section&id=11)%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) Accumulated other comprehensive loss improved to $(7.9) million, driven by positive foreign currency translation adjustments and derivative amortization Accumulated Other Comprehensive Income (Loss) (in millions) | Metric | June 30, 2023 | December 31, 2022 | | :------------------------------------------------ | :------------ | :------------------ | | Balance, as of | $(7.9) | $(10.6) | | Foreign currency translation adjustment (6 months) | $1.5 | N/A | | Amortization related to derivatives securities (6 months) | $1.2 | N/A | [12) Derivatives and Hedging](index=22&type=section&id=12)%20Derivatives%20and%20Hedging) The company used Treasury rate lock contracts as cash flow hedges, with $(11.1) million in accumulated other comprehensive income expected to be reclassified to interest expense - As of June 30, 2023, the balance in accumulated other comprehensive income (loss) related to cash flow hedges was **$(11.1) million**, net of tax[167](index=167&type=chunk) - Approximately **$3.6 million** is expected to be reclassified to interest expense during the next twelve months[167](index=167&type=chunk) Amounts Reclassified to Earnings from Derivatives (in millions) | Period | 2023 | 2022 | | :----------------------- | :----- | :----- | | Six Months Ended June 30 | $1.7 | $3.0 | [13) Segments](index=23&type=section&id=13)%20Segments) The company operates through its Quant & Solutions segment, using Economic Net Income (ENI) as the primary measure for performance evaluation and resource allocation - The Company's sole reportable segment is Quant & Solutions, comprised of Acadian Asset Management LLC[23](index=23&type=chunk)[184](index=184&type=chunk) - Economic Net Income (ENI) is the primary measure used by the Chief Operating Decision Maker (CODM) for performance evaluation and resource allocation[169](index=169&type=chunk)[185](index=185&type=chunk) Segment ENI Financial Data (Quant & Solutions, in millions) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | ENI Revenue | $95.0 | $95.5 | $186.1 | $207.7 | | ENI Operating Expenses | $47.3 | $39.7 | $90.9 | $80.8 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition, operations, and liquidity, analyzing U.S. GAAP and non-GAAP results, capital resources, and accounting policies [Overview](index=27&type=section&id=Overview) This section describes the company's business, its Quant & Solutions segment, business model economics, and performance measurement using Economic Net Income (ENI), including AUM and net client cash flows - The Company operates as a global asset management holding company through its sole Affiliate, Acadian Asset Management LLC, which constitutes the Quant & Solutions segment[23](index=23&type=chunk) - Profitability is influenced by the level and composition of average assets under management (AUM), fee rates, and expense structure, with approximately **80%** of management fees based on average AUM[24](index=24&type=chunk) - Economic Net Income (ENI) is a non-GAAP financial measure used by management to evaluate operating performance and cash generation capability[10](index=10&type=chunk)[21](index=21&type=chunk) Assets Under Management (AUM) (in billions) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :------------------ | | Total AUM | $99.9 | $93.6 | | AUM in accounts with incentive fee features | $13.2 | N/A | Net Client Cash Flows (in billions) | Period | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net client cash flows | $0.1 | $(2.8) | $0.2 | $(5.0) | Annualized Revenue Impact of Net Flows (in millions) | Period | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Annualized revenue impact of net flows | $0.9 | $(7.4) | $1.9 | $(8.5) | [U.S. GAAP Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022](index=37&type=section&id=U.S.%20GAAP%20Results%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030,%202023%20and%202022) This section details changes in U.S. GAAP revenue, expenses, and operating metrics, showing a significant decrease in net income attributable to controlling interests despite a slight three-month revenue increase [U.S. GAAP Revenues](index=38&type=section&id=U.S.%20GAAP%20Revenues) Total revenue slightly increased for the three-month period but decreased for the six-month period, primarily due to lower management and performance fees U.S. GAAP Total Revenue (in millions) | Period | 2023 | 2022 | Change (2023 vs 2022) | | :--------------------------- | :----- | :----- | :-------------------- | | Three Months Ended June 30 | $96.3 | $95.5 | $0.8 | | Six Months Ended June 30 | $188.1 | $207.7 | $(19.6) | U.S. GAAP Management Fees (in millions) | Period | 2023 | 2022 | Change (2023 vs 2022) | | :--------------------------- | :----- | :----- | :-------------------- | | Three Months Ended June 30 | $92.8 | $93.5 | $(0.7) | | Six Months Ended June 30 | $183.4 | $195.7 | $(12.3) | U.S. GAAP Performance Fees (in millions) | Period | 2023 | 2022 | Change (2023 vs 2022) | | :--------------------------- | :----- | :----- | :-------------------- | | Three Months Ended June 30 | $2.2 | $2.0 | $0.2 | | Six Months Ended June 30 | $2.7 | $12.0 | $(9.3) | - Average AUM decreased by **2.9%** to **$97.9 billion** for the three months ended June 30, 2023, and by **8.0%** to **$97.1 billion** for the six months ended June 30, 2023, primarily due to the equity market decline in 2022[219](index=219&type=chunk)[333](index=333&type=chunk)[334](index=334&type=chunk) [U.S. GAAP Expenses](index=39&type=section&id=U.S.%20GAAP%20Expenses) Total operating expenses significantly increased for both periods, driven by higher compensation and general and administrative expenses, partially offset by lower depreciation U.S. GAAP Total Operating Expenses (in millions) | Period | 2023 | 2022 | Change (2023 vs 2022) | | :--------------------------- | :----- | :----- | :-------------------- | | Three Months Ended June 30 | $75.9 | $48.8 | $27.1 | | Six Months Ended June 30 | $147.9 | $117.8 | $30.1 | U.S. GAAP Compensation and Benefits Expense (in millions) | Period | 2023 | 2022 | Change (2023 vs 2022) | | :--------------------------- | :----- | :----- | :-------------------- | | Three Months Ended June 30 | $48.5 | $27.0 | $21.5 (79.6%) | | Six Months Ended June 30 | $97.6 | $73.8 | $23.8 (32.2%) | U.S. GAAP General and Administrative Expense (in millions) | Period | 2023 | 2022 | Change (2023 vs 2022) | | :--------------------------- | :----- | :----- | :-------------------- | | Three Months Ended June 30 | $21.8 | $16.5 | $5.3 (32.1%) | | Six Months Ended June 30 | $40.2 | $33.4 | $6.8 (20.4%) | U.S. GAAP Depreciation and Amortization Expense (in millions) | Period | 2023 | 2022 | Change (2023 vs 2022) | | :--------------------------- | :----- | :----- | :-------------------- | | Three Months Ended June 30 | $4.4 | $5.3 | $(0.9) (17.0%) | | Six Months Ended June 30 | $8.2 | $10.6 | $(2.4) (22.6%) | [U.S. GAAP Other Non-Operating Items of Income and Expense](index=41&type=section&id=U.S.%20GAAP%20Other%20Non-Operating%20Items%20of%20Income%20and%20Expense) Investment and interest income increased, while interest expense showed mixed trends, with the six-month decrease attributed to the absence of a prior year's debt extinguishment loss U.S. GAAP Investment Income (Loss) (in millions) | Period | 2023 | 2022 | Change (2023 vs 2022) | | :--------------------------- | :----- | :----- | :-------------------- | | Three Months Ended June 30 | $0.2 | $(0.7) | $0.9 | | Six Months Ended June 30 | $0.5 | $(0.8) | $1.3 | U.S. GAAP Interest Income (in millions) | Period | 2023 | 2022 | Change (2023 vs 2022) | | :--------------------------- | :----- | :----- | :-------------------- | | Three Months Ended June 30 | $1.5 | $0.1 | $1.4 | | Six Months Ended June 30 | $2.6 | $0.1 | $2.5 | U.S. GAAP Interest Expense (in millions) | Period | 2023 | 2022 | Change (2023 vs 2022) | | :--------------------------- | :----- | :----- | :-------------------- | | Three Months Ended June 30 | $(5.4) | $(4.8) | $(0.6) | | Six Months Ended June 30 | $(10.3) | $(11.3) | $1.0 | - A **$3.2 million** loss on extinguishment of debt was recorded in the six months ended June 30, 2022, with no such loss in 2023[225](index=225&type=chunk)[397](index=397&type=chunk) [U.S. GAAP Income Tax Expense (Benefit)](index=43&type=section&id=U.S.%20GAAP%20Income%20Tax%20Expense%20(Benefit)) Income tax expense decreased for both periods, primarily due to a decrease in income before income taxes U.S. GAAP Income Tax Expense (in millions) | Period | 2023 | 2022 | Change (2023 vs 2022) | | :--------------------------- | :----- | :----- | :-------------------- | | Three Months Ended June 30 | $5.5 | $12.7 | $(7.2) | | Six Months Ended June 30 | $10.6 | $22.3 | $(11.7) | [U.S. GAAP Consolidated Funds](index=43&type=section&id=U.S.%20GAAP%20Consolidated%20Funds) Consolidated Funds generated revenue and expense of $1.3 million and $1.2 million respectively for the three months, with no comparable activity in prior periods U.S. GAAP Consolidated Funds' Revenue and Expense (in millions) | Metric | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2023 | | :-------------------- | :--------------------------- | :--------------------------- | | Consolidated Funds' Revenue | $1.3 | $2.0 | | Consolidated Funds' Expense | $1.2 | $1.9 | - There were no consolidated Funds for the three and six months ended June 30, 2022[228](index=228&type=chunk)[245](index=245&type=chunk) [Key U.S. GAAP Operating Metrics](index=44&type=section&id=Key%20U.S.%20GAAP%20Operating%20Metrics) Key U.S. GAAP operating metrics show a significant decline in operating margin and an increase in operating expense ratio, reflecting increased expenses relative to revenue Key U.S. GAAP Operating Metrics | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | U.S. GAAP Operating Margin | 21.2% | 48.9% | 21.4% | 43.3% | | U.S. GAAP Operating Expense / Management Fee Revenue | 80.5% | 52.2% | 79.6% | 60.2% | | U.S. GAAP Variable Compensation Ratio | 51.4% | 32.5% | 51.9% | 35.4% | | U.S. GAAP Affiliate Key Employee Distributions Ratio | 5.6% | 1.1% | 5.6% | 2.6% | [Non-GAAP Supplemental Performance Measure — Economic Net Income and Segment Analysis](index=45&type=section&id=Non-GAAP%20Supplemental%20Performance%20Measure%20%E2%80%94%20Economic%20Net%20Income%20and%20Segment%20Analysis) This section introduces Economic Net Income (ENI) as a key non-GAAP measure for performance evaluation, providing a reconciliation from U.S. GAAP and detailing segment-level ENI results [Reconciliation of U.S. GAAP Net Income to Economic Net Income](index=47&type=section&id=Reconciliation%20of%20U.S.%20GAAP%20Net%20Income%20to%20Economic%20Net%20Income) Economic Net Income (ENI) significantly decreased for both periods, reflecting adjustments to U.S. GAAP net income, including non-cash equity revaluations and capital transaction costs Economic Net Income (in millions) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Economic Net Income | $12.0 | $17.3 | $23.8 | $40.7 | | Non-cash key employee-owned equity and profit interest revaluations | $(0.7) | $(18.8) | $(1.3) | $(25.6) | | Capital transaction costs | $0.1 | $0 | $0.2 | $5.0 | [Limitations of Economic Net Income](index=48&type=section&id=Limitations%20of%20Economic%20Net%20Income) Economic Net Income (ENI) is a non-GAAP measure with material limitations, as it excludes certain ongoing expenses and should not substitute U.S. GAAP measures - ENI is a non-GAAP measure and not a substitute for net income or other performance measures derived in accordance with U.S. GAAP[235](index=235&type=chunk) - ENI has material limitations because it excludes certain ongoing expenses, including amortization expense and certain compensation costs[436](index=436&type=chunk) - ENI does not include cash costs associated with capital transactions and excludes certain U.S. GAAP expenses that are costs of doing business[311](index=311&type=chunk) [ENI Revenues](index=48&type=section&id=ENI%20Revenues) ENI revenue slightly decreased for the three-month period and significantly for the six-month period, primarily due to lower management and performance fees ENI Revenue (in millions) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | ENI Revenue | $95.0 | $95.5 | $186.1 | $207.7 | | Management fees | $92.8 | $93.5 | $183.4 | $195.7 | | Performance fees | $2.2 | $2.0 | $2.7 | $12.0 | [ENI Operating Expenses](index=49&type=section&id=ENI%20Operating%20Expenses) ENI operating expenses increased for both periods, driven by higher fixed compensation and general and administrative expenses, after non-cash adjustments ENI Operating Expense (in millions) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | ENI Operating Expense | $51.2 | $44.1 | $98.3 | $89.7 | | Fixed compensation & benefits | $23.7 | $20.5 | $47.1 | $42.4 | | General and administrative expenses | $23.1 | $18.3 | $43.0 | $36.7 | | Depreciation and amortization | $4.4 | $5.3 | $8.2 | $10.6 | [Key Non-GAAP Operating Metrics](index=50&type=section&id=Key%20Non-GAAP%20Operating%20Metrics) Key non-GAAP operating metrics show a decrease in ENI operating margin and an increase in ENI operating expense ratio, indicating reduced profitability and efficiency Key Non-GAAP Operating Metrics | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | ENI Operating Margin | 22.2% | 30.1% | 22.5% | 32.5% | | ENI Operating Expense Ratio | 55.2% | 47.2% | 53.6% | 45.8% | | ENI Variable Compensation Ratio | 51.8% | 44.2% | 52.3% | 42.9% | | ENI Affiliate Key Employee Distributions Ratio | 5.7% | 1.7% | 5.7% | 3.6% | [Tax on Economic Net Income](index=52&type=section&id=Tax%20on%20Economic%20Net%20Income) Tax on economic net income decreased for both periods, consistent with lower pre-tax ENI, while the effective tax rate remained stable around 27% Tax on Economic Net Income (in millions) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Tax on economic net income | $(4.4) | $(6.3) | $(8.8) | $(15.1) | | Economic net income effective tax rate | 26.8% | 26.7% | 27.0% | 27.1% | [Investments](index=53&type=section&id=Investments) Total seed capital investments increased to $25.0 million, reflecting investments within the Affiliate's products Total Seed Capital Investments (in millions) | Date | Amount | | :----------------- | :------- | | June 30, 2023 | $25.0 | | December 31, 2022 | $22.9 | [Segment Analysis](index=53&type=section&id=Segment%20Analysis) This section analyzes the Quant & Solutions segment's ENI revenue and expenses, showing decreased revenue due to lower fees and increased expenses from compensation and administrative costs [Segment ENI Revenue](index=54&type=section&id=Segment%20ENI%20Revenue) Quant & Solutions ENI revenue decreased for both periods, primarily due to lower management fees from reduced AUM and lower performance fees Quant & Solutions Segment ENI Revenue (in millions) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | ENI Revenue | $95.0 (down 0.5%) | $95.5 | $186.1 (down 10.4%) | $207.7 | | Management fees | $92.8 | $93.5 | $183.4 | $195.7 | | Performance fees | $2.2 | $2.0 | $2.7 | $12.0 | [Segment ENI Expense](index=55&type=section&id=Segment%20ENI%20Expense) Quant & Solutions ENI operating expense increased due to higher fixed compensation and administrative costs, while other ENI operating expense decreased from cost-saving initiatives Quant & Solutions Segment ENI Operating Expense (in millions) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total ENI Operating Expenses | $47.3 (up 19.1%) | $39.7 | $90.9 (up 12.5%) | $80.8 | | Fixed compensation & benefits | $22.0 (up 18.3%) | $18.6 | $43.6 (up 13.5%) | $38.4 | | General and administrative expense | $20.9 (up 31.4%) | $15.9 | $39.1 (up 22.2%) | $32.0 | Other ENI Operating Expense (in millions) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total ENI Operating Expenses | $3.9 (down 11.4%) | $4.4 | $7.4 (down 16.9%) | $8.9 | [Capital Resources and Liquidity](index=56&type=section&id=Capital%20Resources%20and%20Liquidity) This section discusses cash flows, Adjusted EBITDA, and borrowings, noting decreased operating cash, a shift to financing inflow, and a decline in Adjusted EBITDA [Cash Flows](index=56&type=section&id=Cash%20Flows) Net cash from operating activities significantly decreased, while financing activities shifted to a net inflow, primarily due to reduced borrowings and prior year share repurchases Net Cash Flows (excluding consolidated Funds, in millions) | Activity | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--------------------------- | :--------------------------- | :--------------------------- | | Operating activities | $7.3 | $29.9 | | Investing activities | $(10.7) | $(6.4) | | Financing activities | $35.7 | $(183.4) | [Supplemental Liquidity Measure — Adjusted EBITDA](index=57&type=section&id=Supplemental%20Liquidity%20Measure%20%E2%80%94%20Adjusted%20EBITDA) Adjusted EBITDA, a non-GAAP liquidity measure, decreased for both periods, reflecting lower net income and adjustments, and has limitations as it excludes certain cash costs Adjusted EBITDA (in millions) | Period | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Adjusted EBITDA | $24.7 | $34.0 | $48.3 | $77.0 | - Adjusted EBITDA is a non-GAAP liquidity measure, provided in addition to, but not as a substitute for, cash flows from operating activities[308](index=308&type=chunk) - Adjusted EBITDA has material limitations as it excludes cash costs associated with capital transactions and certain U.S. GAAP expenses[311](index=311&type=chunk) [Borrowings and Long-Term Debt](index=58&type=section&id=Borrowings%20and%20Long-Term%20Debt) The company's financing includes a $125 million revolving credit facility and $275 million Senior Notes, with sufficient cash and financing expected for future operations Financing Arrangements (in millions) | Debt Type | June 30, 2023 | December 31, 2022 | Interest Rate | Maturity | | :--------------------------------- | :------------ | :------------------ | :------------ | :----------- | | $125 million revolving credit facility | $38.0 | $0 | Variable rate | March 7, 2025 | | $275 million 4.80% Senior Notes Due 2026 | $273.7 | $273.5 | 4.80% | July 27, 2026 | - The Company believes its available cash and cash equivalents, supplemented by financing, will be sufficient to fund current operations and capital requirements for at least the next twelve months[330](index=330&type=chunk) [Other Compensation Liabilities](index=59&type=section&id=Other%20Compensation%20Liabilities) Other compensation liabilities, including cash-settled Affiliate equity and deferred compensation plans, increased to $62.2 million, with accrued incentive compensation at $45.0 million Other Compensation Liabilities (in millions) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :------------------ | | Total Other Compensation Liabilities | $62.2 | $59.3 | | Share-based payments liability | $19.4 | $19.4 | | Voluntary deferral plan liability | $42.8 | $39.9 | - Accrued incentive compensation was **$45.0 million** as of June 30, 2023, including the vested portion of Acadian's deferred compensation pool[345](index=345&type=chunk) - Unamortized compensation expense related to the unvested deferred compensation pool is expected to be **$11.6 million** in 2023, **$11.3 million** in 2024, and **$0.6 million** in 2025[345](index=345&type=chunk) [Critical Accounting Policies and Estimates](index=60&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) No significant changes occurred in critical accounting policies and estimates, which involve complex management judgments regarding uncertain matters - No significant changes to critical accounting policies and estimates have occurred since the most recent Form 10-K[346](index=346&type=chunk) - Critical accounting policies and estimates require complex management judgment regarding highly uncertain matters[346](index=346&type=chunk) [Recent Accounting Developments](index=60&type=section&id=Recent%20Accounting%20Developments) The company has reviewed new accounting guidance and does not anticipate any material effect on its Condensed Consolidated Financial Statements - The Company does not believe any newly issued accounting guidance will have a material effect on its Condensed Consolidated Financial Statements and related disclosures[75](index=75&type=chunk)[347](index=347&type=chunk) [Forward Looking Statements](index=60&type=section&id=Forward%20Looking%20Statements) This section contains forward-looking statements regarding financial performance and market conditions, cautioning that actual results may differ materially due to various risks - Forward-looking statements are subject to various known and unknown risks and uncertainties, and actual results may differ materially[328](index=328&type=chunk)[367](index=367&type=chunk) - The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the report date[328](index=328&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=61&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's market risk exposure as an asset manager, covering equity, interest rate, and foreign currency risks, with profit-sharing mitigating some impact [Market Risk](index=61&type=section&id=Market%20Risk) The company's market risk exposure as an asset manager is tied to AUM and investment performance, with a 10% AUM change significantly impacting revenues and post-tax ENI, partially mitigated by a variable cost structure - The Company's market risk exposure is directly related to its role as an asset manager, with revenues based on AUM value and investment performance[348](index=348&type=chunk) - A **10%** increase or decrease in AUM could cause an annualized change of approximately **$38.0 million** in gross management fee revenues and **$4.0 million** in gross performance fees[350](index=350&type=chunk) - The combined impact on post-tax economic net income from a **10%** AUM change would be an annual change of approximately **$19.2 million**[350](index=350&type=chunk) - Approximately **35%** of the Company's ENI cost structure is variable, linked to profitability, which helps share market risk with employees[370](index=370&type=chunk) [Interest Rate Risk](index=62&type=section&id=Interest%20Rate%20Risk) The company faces interest rate risk from its variable-rate revolving credit facility, with a 10% rate change having an immaterial impact, and currently does not hedge this risk - The Company is exposed to interest rate risk primarily through borrowings under Acadian's variable-rate revolving credit facility, which was **$38.0 million** as of June 30, 2023[354](index=354&type=chunk) - A hypothetical **10%** change in interest rates would have resulted in an immaterial change to interest expense for the six months ended June 30, 2023[354](index=354&type=chunk) - The Company does not currently hedge against interest rate risk[354](index=354&type=chunk) [Item 4. Controls and Procedures](index=63&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated disclosure controls and procedures as effective, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2023[375](index=375&type=chunk) - There have been no material changes in internal control over financial reporting during the quarter ended June 30, 2023[355](index=355&type=chunk) PART II — OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, other disclosures, and a list of exhibits [Item 1. Legal Proceedings](index=64&type=section&id=Item%201.%20Legal%20Proceedings) The company and its Affiliate are involved in ordinary course legal matters, which management does not believe will result in material liabilities - The Company and its Affiliate may be parties to various claims, suits, and complaints in the ordinary course of business[378](index=378&type=chunk) - Management does not believe that, in the aggregate, these matters will result in liabilities material to the consolidated financial condition, future results of operations, or cash flow[378](index=378&type=chunk) [Item 1A. Risk Factors](index=64&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred in the risk factors previously described in the company's Annual Report on Form 10-K - There have been no material changes in the risk factors described in the Company's Annual Report on Form 10-K for the year ended December 31, 2022[357](index=357&type=chunk) [Item 5. Other Information](index=64&type=section&id=Item%205.%20Other%20Information) No directors or officers entered into, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter - No directors or officers entered into, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2023[379](index=379&type=chunk) [Item 6. Exhibits](index=65&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents, certifications, and interactive data files - Exhibits include Amended and Restated Certificate of Incorporation and Bylaws[359](index=359&type=chunk)[385](index=385&type=chunk) - Certifications of the Company's principal executive officer and principal financial officer are filed[381](index=381&type=chunk)[382](index=382&type=chunk)[386](index=386&type=chunk)[387](index=387&type=chunk) - Interactive Data Files (XBRL) are included for the financial statements[360](index=360&type=chunk)[383](index=383&type=chunk)

Financial Data and Key Metrics Changes - For Q2 2023, the company reported earnings per share (ENI) of $0.28, down from $0.41 in Q2 2022 and unchanged from Q1 2023, primarily due to higher operating expenses driven by foreign currency changes, inflation, and investments in growth initiatives [5][18][32] Business Line Data and Key Metrics Changes - Acadian's investment performance remains strong, with 81% and 90% of strategies by revenue beating their benchmarks over the prior three, five, and ten-year periods, respectively [18] - The company reported modestly positive net flows of $0.1 billion, marking the fourth consecutive quarter of positive net flows [18] Market Data and Key Metrics Changes - The fee rate is currently around 38 basis points, slightly up from 37 basis points a year ago, influenced by the mix of inflows and outflows, with emerging markets having a higher fee rate [32] Company Strategy and Development Direction - The long-term strategy focuses on investing in core capabilities and leveraging a unique Quant platform to expand into new areas, while using free cash flow to support organic growth and stock buybacks [28] - The company is cautiously optimistic about client sentiment, with a strong sales pipeline and continued interest across various strategies [34] Management's Comments on Operating Environment and Future Outlook - Management noted that clients are generally looking to invest, and the pipeline remains healthy, although there were some outflows from managed volatility strategies [34] - The company expects to maintain its current expense levels in the near term, despite some fluctuations due to foreign exchange impacts [33] Other Important Information - The company ended the quarter with a cash balance of $141 million and reduced its revolving facility balance to $38 million from $87 million in the previous quarter [6][19] Q&A Session Summary Question: Update on buybacks and cash usage - Management indicated no buybacks occurred in the last quarter, with cash primarily allocated to support organic growth and potential buybacks when opportunities arise [9][29] Question: Institutional pipeline update - The institutional pipeline remains strong, with interest across various strategies, and no significant exodus from any particular strategies [26][30] Question: Client sentiment and implications for organic growth - Management observed that clients are willing to invest, and the pipeline is good, although there were some outflows from managed volatility strategies [34]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 BRIGHTSPHERE Investment Group Inc. Delaware 47-1121020 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) Boston, Massachusetts 02109 (Address of principal executive offices) (Zip Code) (617)-369-7300 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Ticker Symbol Name of each exchange on which registered C ...

BrightSphere Investment Group Inc. (NYSE:BSIG) Q1 2023 Earnings Conference Call May 4, 2023 11:00 AM ET Company Participants Melody Huang - Senior Vice President, Director of Finance & Investor Relations Suren Rana - President & Chief Executive Officer Conference Call Participants Michael Cyprys - Morgan Stanley Operator Ladies and gentlemen, thank you for standing by. Welcome to the BrightSphere Investment Group Earnings Conference Call and Webcast for the First Quarter 2023. During the call, all participa ...

BrightSphere Reports Financial and Operating Results for the First Quarter Ended March 31, 2023 BOSTON - May 4, 2023 - BrightSphere Investment Group Inc. (NYSE: BSIG) reports its results for the first quarter ended March 31, 2023. Acadian's systematic approach continues to produce long-term investment out-performance for clients in a challenging and volatile market. As of March 31, 2023, 87%, 86% and 90% of Acadian's strategies by revenue beat their respective benchmarks over the prior 3-, 5-, and 10- year ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 2) Basis of Presentation and Significant Accounting Policies The Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). All dollar amounts, except per-share data in the text and tables herein, are stated in millions unless otherwise indicated. Transactions between the Company and its related parties are included in the Consolidated Financial Statemen ...

The Company will hold a conference call and simultaneous webcast to discuss the results at 11:00 a.m. Eastern Time on February 2, 2023. To listen to the call or view the webcast, participants should: Actual results may differ materially from those in forward-looking information as a result of various factors, some of which are beyond the Company's control, including but not limited to those discussed elsewhere in this communication. Additional factors that could cause actual results to differ from the forwa ...

BrightSphere Investment Group, Inc. (NYSE:BSIG) Q4 2022 Earnings Conference Call February 2, 2023 11:00 AM ET Company Participants Elie Sugarman - Head of Strategy & Corporate Development Suren Rana - President & CEO Conference Call Participants Glenn Schorr - Evercore Kenneth Lee - RBC Capital Markets Michael Cyprys - Morgan Stanley Operator Ladies and gentlemen, thank you for standing by. Welcome to BrightSphere Investment Group Earnings Conference Call and Webcast for the Fourth Quarter 2022. During the ...