Artisan Partners(APAM) - 2025 Q2 - Quarterly Results

Overview and Management Commentary Management Discussion Artisan Partners achieved record AUM of $175.5 billion in Q2 2025, announced a CEO transition, and highlighted strong long-term investment performance and awards - Reached a record high quarter-end AUM of $175.5 billion, managed across 11 investment teams and 26 strategies[3] - Jason Gottlieb succeeded Eric Colson as CEO in June, with Colson remaining as Executive Chair[4] - The Artisan Credit team's portfolio manager, Bryan Krug, won the 2025 U.S. Morningstar Award for Investing Excellence in the Fixed Income category[5] - The Artisan Developing World team celebrated its ten-year anniversary, achieving an average annual outperformance of nearly 700 basis points versus its benchmark after fees[7] Financial Highlights Q2 2025 saw revenues of $282.8 million, GAAP diluted EPS of $0.94, and ending AUM growth to $175.5 billion Q2 2025 Financial Highlights | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Ending AUM (billions) | $175.5 | $162.4 | $158.9 | | Revenues (millions) | $282.8 | $277.1 | $270.8 | | Operating Income (GAAP, millions) | $79.8 | $86.5 | $86.6 | | Operating Margin (GAAP) | 28.2% | 31.2% | 32.0% | | Diluted EPS (GAAP) | $0.94 | $0.82 | $0.80 | | Adjusted Net Income (millions) | $67.5 | $67.0 | $66.0 | | Adjusted Net Income per Share | $0.83 | $0.83 | $0.82 | Financial Performance Analysis Quarter-over-Quarter Comparison (Q2 2025 vs. Q1 2025) Q2 2025 AUM grew 8% to $175.5 billion from market appreciation, while revenues increased 2% to $282.8 million despite higher operating expenses - AUM increased by $13.1 billion (8%) QoQ, primarily due to $15.2 billion in market appreciation, partially offset by $1.9 billion of net client cash outflows[13] - Operating expenses increased by $12.4 million (7%) QoQ, driven by an $8.2 million increase in long-term incentive compensation expense and a $3.1 million increase in incentive compensation[15] Q2 2025 vs Q1 2025 Performance | Metric | Q2 2025 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | | Revenues (millions) | $282.8 | $277.1 | +2% | | Operating Expenses (millions) | $203.0 | $190.6 | +7% | | GAAP Operating Margin (%) | 28.2 | 31.2 | -300 bps | | GAAP Net Income (millions) | $67.6 | $61.1 | +10.6% | | GAAP Diluted EPS ($) | $0.94 | $0.82 | +$0.12 | Year-over-Year Comparison (Q2 2025 vs. Q2 2024) Q2 2025 AUM increased 10% to $175.5 billion year-over-year, with revenues up 4% to $282.8 million, while operating expenses rose 10% - AUM increased 10% YoY, driven by $24.2 billion of investment returns, which more than offset $6.3 billion of net client cash outflows[19] - Operating expenses rose 10% YoY, primarily due to an $11.9 million increase in long-term incentive compensation costs, which included a $9.3 million increase from market valuation changes[21] Q2 2025 vs Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues (millions) | $282.8 | $270.8 | +4% | | Operating Expenses (millions) | $203.0 | $184.2 | +10% | | GAAP Operating Margin (%) | 28.2 | 32.0 | -380 bps | | GAAP Net Income (millions) | $67.6 | $57.6 | +17.4% | | GAAP Diluted EPS ($) | $0.94 | $0.80 | +$0.14 | Year-to-Date Comparison (Six Months Ended June 2025 vs. 2024) Year-to-date 2025 revenues increased 5% to $559.9 million, with operating expenses up 6% to $393.6 million, resulting in a GAAP net income of $128.7 million Six Months 2025 vs 2024 Performance | Metric | Six Months 2025 | Six Months 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues (millions) | $559.9 | $535.2 | +5% | | Operating Expenses (millions) | $393.6 | $370.9 | +6% | | GAAP Operating Margin (%) | 29.7 | 30.7 | -100 bps | | GAAP Net Income (millions) | $128.7 | $117.1 | +9.9% | | GAAP Diluted EPS ($) | $1.78 | $1.66 | +$0.12 | Capital Management and Shareholder Returns Balance Sheet and Capital Management The company maintained a strong balance sheet with $244.9 million in cash, $200.0 million in borrowings, and a 0.5x debt leverage ratio as of June 30, 2025 - Cash and cash equivalents stood at $244.9 million at June 30, 2025, up from $201.2 million at year-end 2024[31] - Agreed to issue $50 million of 5.43% Series G Senior Notes due 2030 to refinance $60 million of maturing Series D notes[32] - Total borrowings were stable at $200.0 million, and the debt leverage ratio was 0.5x at quarter-end[31][33] Dividend The Board declared a Q2 2025 variable quarterly dividend of $0.73 per share, targeting 80% of quarterly cash generation - Declared a Q2 2025 variable quarterly dividend of $0.73 per share of Class A common stock[34] - The dividend will be paid on August 29, 2025, to shareholders of record as of August 15, 2025[34] - The dividend policy targets paying approximately 80% of cash generated each quarter, with a potential special dividend considered annually from the remaining 20%[35][36] Assets Under Management (AUM) Analysis AUM Overview and Flows Q2 2025 ending AUM reached $175.5 billion, an 8.1% increase from Q1, driven by $15.2 billion in investment returns despite $1.9 billion in net outflows AUM Changes for Q2 2025 (in millions) | AUM Component | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Beginning AUM | $162,390 | $161,208 | $160,384 | | Gross Inflows | $6,233 | $7,014 | $5,604 | | Gross Outflows | ($8,096) | ($9,854) | ($7,214) | | Net Client Flows | ($1,863) | ($2,840) | ($1,610) | | Investment Returns & Other | $15,212 | $4,138 | $204 | | Ending AUM | $175,545 | $162,390 | $158,887 | AUM by Investment Team International Value, Growth, and Global Value were the largest investment teams by AUM in Q2 2025, with varied net flows and positive investment returns Ending AUM by Select Investment Team (in millions) | Investment Team | Q2 2025 AUM | Q1 2025 AUM | Q2 2025 Net Flows | | :--- | :--- | :--- | :--- | | International Value Group | $50,871 | $47,486 | $414 | | Growth | $36,748 | $34,669 | ($1,944) | | Global Value | $32,906 | $30,256 | ($122) | | Global Equity | $15,161 | $13,442 | ($543) | | Credit | $13,096 | $12,434 | $298 | AUM by Vehicle Q2 2025 AUM was primarily held in Separate Accounts ($89.9 billion) and Artisan Funds ($85.6 billion), both experiencing net outflows AUM by Vehicle (in millions) | Vehicle | Q2 2025 Ending AUM | Q2 2025 Net Flows | | :--- | :--- | :--- | | Artisan Funds & Artisan Global Funds | $85,626 | ($181) | | Separate Accounts and Other | $89,919 | ($1,682) | | Total | $175,545 | ($1,863) | Investment Strategy Performance Strategy AUM and Performance Summary Key investment strategies as of June 30, 2025, showed strong long-term outperformance against benchmarks, with International Value adding 522 bps and Developing World adding 794 bps since inception Performance of Select Strategies (as of June 30, 2025) | Strategy | AUM ($MM) | 1 YR Return | 5 YR Return | Value-Added Since Inception (bps) | | :--- | :--- | :--- | :--- | :--- | | International Value | $50,062 | 13.32% | 16.46% | 522 | | MSCI EAFE Index | - | 17.73% | 11.15% | - | | Global Value | $32,569 | 21.45% | 17.94% | 293 | | MSCI All Country World Index | - | 16.17% | 13.64% | - | | Global Opportunities | $20,065 | 10.02% | 9.67% | 401 | | MSCI All Country World Index | - | 16.17% | 13.64% | - | | High Income | $12,689 | 11.83% | 8.43% | 244 | | ICE BofA US High Yield Index | - | 10.24% | 6.00% | - | | Developing World | $4,784 | 30.19% | 9.22% | 794 | | MSCI Emerging Markets Index | - | 15.29% | 6.80% | - | Financial Statements and Reconciliations Consolidated Statements of Operations The unaudited income statement for Q2 2025 and year-to-date periods details revenues by source and operating expense categories, with prior period comparisons Q2 2025 Consolidated Statement of Operations (in millions) | Line Item | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Total revenues | $282.8 | $277.1 | $270.8 | | Total operating expenses | $203.0 | $190.6 | $184.2 | | Operating income | $79.8 | $86.5 | $86.6 | | Income before income taxes | $120.9 | $97.3 | $90.0 | | Net income attributable to APAM | $67.6 | $61.1 | $57.6 | Reconciliation of GAAP to Non-GAAP Measures This section reconciles GAAP financial results to adjusted non-GAAP measures, including Adjusted Net Income, Operating Income, and EBITDA, by removing specific market and investment impacts Q2 2025 GAAP to Non-GAAP Reconciliation (in millions) | Metric | GAAP | Adjustments | Non-GAAP (Adjusted) | | :--- | :--- | :--- | :--- | | Operating Income | $79.8 | $9.8 | $89.6 | | Operating Margin | 28.2% | | 31.7% | | Net Income (attributable to APAM) | $67.6 | ($0.1) | $67.5 | | Adjusted EBITDA | - | - | $94.2 | Condensed Consolidated Statements of Financial Condition The balance sheet as of June 30, 2025, shows increased cash and investment securities, with total assets decreasing primarily due to consolidated investment product changes Balance Sheet Highlights (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $244.9 | $201.2 | | Total assets | $1,444.7 | $1,618.8 | | Borrowings | $199.5 | $199.4 | | Total liabilities | $840.4 | $868.8 | | Total stockholders' equity | $419.1 | $422.0 | Other Information Conference Call Details A conference call to discuss Q2 2025 results will be held on July 30, 2025, at 1:00 p.m. ET, hosted by the CEO, Executive Chair, and CFO - A conference call to discuss Q2 2025 results is scheduled for July 30, 2025, at 1:00 p.m. (Eastern Time)[37] Disclosures and Forward-Looking Statements This section includes forward-looking statement disclaimers and provides definitions for key financial metrics and benchmark indexes used in the report - The release contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ[38] - Provides definitions for key metrics, including AUM, which is not based on any definition in the ADV, and Value Added, which measures outperformance against a benchmark[39][42]