Artisan Partners(US:APAM)2025-08-01 20:21Part I Financial Information This section details the company's unaudited consolidated financial statements, management's analysis, market risk, and internal controls Unaudited Consolidated Financial Statements This section presents the unaudited consolidated financial statements for Q2 and H1 2025 and 2024, with detailed notes Consolidated Statements of Financial Condition Condensed Consolidated Balance Sheet (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $244,929 | $201,172 | | Total Assets | $1,444,685 | $1,618,756 | | Borrowings | $199,512 | $199,430 | | Total Liabilities | $840,407 | $868,837 | | Total Stockholders' Equity | $419,077 | $422,002 | Consolidated Statements of Operations Key Operating Results (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $282,749 | $270,818 | $559,896 | $535,169 | | Total Operating Income | $79,772 | $86,645 | $166,307 | $164,288 | | Net Income Attributable to APAM | $67,555 | $57,574 | $128,694 | $117,055 | | Diluted EPS | $0.94 | $0.80 | $1.78 | $1.66 | Consolidated Statements of Cash Flows Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $208,816 | $222,903 | | Net cash used in investing activities | ($5,540) | ($24,651) | | Net cash used in financing activities | ($122,902) | ($139,776) | | Net increase in cash and cash equivalents | $80,374 | $58,476 | Note 5. Borrowings - As of June 30, 2025, total gross borrowings were $200 million, consisting of three series of senior notes. The company has no outstanding balance on its $100 million revolving credit facility4344 - On June 3, 2025, the company agreed to issue $50 million of Series G Senior Notes at 5.43% to pay off the $60 million Series D notes maturing in August 2025, using cash on hand for the remainder43 Note 9. Revenue From Contracts with Customers Management Fees by Vehicle (in thousands) | Vehicle | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Artisan Funds | $165,959 | $157,202 | $326,932 | $310,204 | | Artisan Global Funds | $13,596 | $13,008 | $27,369 | $25,468 | | Separate accounts and other | $103,194 | $100,587 | $205,595 | $199,447 | Note 10. Compensation and Benefits Compensation and Benefits Breakdown (in thousands) | Component | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Salaries, incentive comp & benefits | $136,533 | $129,365 | $270,512 | $258,463 | | Long-term incentive compensation | $29,343 | $17,425 | $50,525 | $38,207 | | Total Compensation & Benefits | $165,876 | $146,790 | $321,037 | $296,670 | - During H1 2025, Artisan granted $46.8 million of franchise capital awards (long-term cash awards) to investment team members. The unrecognized compensation expense for these awards was $131.1 million as of June 30, 20258082 Note 11. Income Taxes and Related Payments - The effective tax rate was 20.6% for the six months ended June 30, 2025, compared to 20.5% for the same period in 202484 - The liability for amounts payable under the Tax Receivable Agreements (TRAs) decreased from $341.5 million at year-end 2024 to $312.8 million as of June 30, 2025, primarily due to payments made89184 Note 16. Subsequent Events - On July 29, 2025, the company declared a quarterly dividend of $0.73 per share of Class A common stock, payable on August 29, 2025109 - New tax legislation (OBBBA), signed into law on July 4, 2025, is expected to reduce deferred tax assets by approximately $10 million in Q3 2025, with changes effective for the company starting in 2027110 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operational results, including AUM growth, revenue, and compensation trends Overview and Recent Highlights - AUM increased by 8% during Q2 2025 to $175.5 billion, primarily due to $15.2 billion in market appreciation, which was partially offset by $1.9 billion in net client cash outflows118 Q2 2025 Financial Highlights | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenues | $282.8M | $270.8M | | GAAP Operating Margin | 28.2% | 32.0% | | Adjusted Operating Margin | 31.7% | 32.2% | | Diluted EPS | $0.94 | $0.80 | | Adjusted EPS | $0.83 | $0.82 | AUM and Investment Performance Change in Assets Under Management (in millions) | Period | Beginning AUM | Net Client Cash Flows | Investment Returns & Other | Ending AUM | | :--- | :--- | :--- | :--- | :--- | | Q2 2025 | $162,390 | ($1,863) | $15,212 | $175,545 | | Q2 2024 | $160,384 | ($1,610) | $204 | $158,887 | | H1 2025 | $161,208 | ($4,703) | $19,350 | $175,545 | | H1 2024 | $150,167 | ($2,132) | $11,028 | $158,887 | - For Q2 2025, 14 of 27 investment strategies experienced net outflows totaling $3.0 billion, partially offset by $1.1 billion of net inflows from the remaining strategies126 AUM by Asset Class as of June 30, 2025 (in millions) | Asset Class | AUM | % of Total | | :--- | :--- | :--- | | Equity | $156,117 | 88.9% | | Fixed Income | $15,583 | 8.9% | | Alternative | $3,845 | 2.2% | | Total | $175,545 | 100.0% | Results of Operations (Q2 2025 vs Q2 2024) - Revenues increased by $12.0 million (4%) in Q2 2025 compared to Q2 2024, driven by a 5% increase in average AUM. The weighted average management fee slightly decreased from 68.8 bps to 68.1 bps140144 - Total compensation and benefits rose by $19.0 million (13%), primarily due to an $11.9 million increase in long-term incentive compensation costs, which included a $9.3 million impact from market valuation changes140147 - Non-operating income increased significantly to $41.1 million from $3.4 million, mainly due to a $37.8 million aggregate increase in net investment gains from consolidated and nonconsolidated investment products140150 Results of Operations (H1 2025 vs H1 2024) - For H1 2025, revenues increased by $24.7 million (5%) compared to H1 2024, driven by a 7% increase in average AUM. The weighted average management fee decreased from 69.0 bps to 67.8 bps154155 - Total compensation and benefits for H1 2025 increased by $24.3 million (8%), largely due to a $12.3 million rise in long-term incentive compensation and a $7.2 million increase in incentive compensation tied to higher revenues154158 Supplemental Non-GAAP Financial Information GAAP vs. Non-GAAP Reconciliation Highlights | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Diluted EPS (GAAP) | $0.94 | $0.80 | $1.78 | $1.66 | | Adjusted Net Income per Share | $0.83 | $0.82 | $1.66 | $1.58 | | Operating Margin (GAAP) | 28.2% | 32.0% | 29.7% | 30.7% | | Adjusted Operating Margin | 31.7% | 32.2% | 31.9% | 31.6% | Liquidity and Capital Resources Liquidity Position (in millions) | Component | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $244.9 | $201.2 | | Accounts receivable | $117.0 | $118.7 | | Seed investments | $139.0 | $154.9 | | Undrawn revolving credit | $100.0 | $100.0 | - The company expects to make TRA payments totaling approximately $38.9 million in fiscal 2025, of which $29.2 million was paid in Q2 2025186192 - The company's dividend policy is to pay approximately 80% of cash generated each quarter, with a potential special dividend at year-end183 Quantitative and Qualitative Disclosures About Market Risk This section confirms no material changes to market risk disclosures since the last annual Form 10-K report - There have been no material changes in Quantitative and Qualitative Disclosures Regarding Market Risk from those previously reported in the Form 10-K for the year ended December 31, 2024195 Controls and Procedures Management confirmed effective disclosure controls and no material changes to internal controls as of June 30, 2025 - Based on an evaluation as of June 30, 2025, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective197 - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls198 Part II Other Information This section addresses legal proceedings and key risk factors impacting the company's operations Legal Proceedings The company is not subject to legal proceedings expected to materially affect its financial position or operations - As of the report date, there are no legal or administrative proceedings that management believes may have a material adverse effect on the company's consolidated financial position, cash flows, or results of operations199 Risk Factors This section refers readers to the detailed discussion of potential risks in the company's latest annual Form 10-K - The company directs investors to the "Risk Factors" section in its latest annual report on Form 10-K for a discussion of potential risks and uncertainties200