Affiliated Managers (AMG) - 2025 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements The unaudited consolidated financial statements for the period ended June 30, 2025, show a slight increase in net income for the quarter but a significant decrease for the six-month period year-over-year, primarily driven by a large intangible impairment charge, with total assets remaining stable and cash decreasing due to investing and financing activities Consolidated Statements of Income Consolidated revenue saw a slight decrease, while total expenses significantly increased for the six-month period due to higher intangible amortization and impairments, leading to a notable decline in year-to-date net income Consolidated Income Statement Highlights (in millions, except EPS) | Metric | Q2 2025 | Q2 2024 | YoY Change | YTD 2025 | YTD 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Consolidated Revenue | $493.2 | $500.3 | -1.4% | $989.8 | $1,000.3 | -1.1% | | Total Consolidated Expenses | $412.7 | $359.4 | +14.8% | $869.6 | $740.7 | +17.4% | | Net Income | $135.9 | $135.0 | +0.7% | $235.1 | $333.8 | -29.6% | | Net Income (controlling interest) | $84.3 | $76.0 | +11.0% | $156.6 | $225.8 | -30.6% | | Earnings per share (diluted) | $2.80 | $2.26 | +23.9% | $5.01 | $6.49 | -22.8% | - For the six months ended June 30, 2025, total consolidated expenses increased significantly to $869.6 million from $740.7 million in the prior year, largely due to a substantial rise in 'Intangible amortization and impairments' from $14.5 million to $89.6 million[16] Consolidated Statements of Comprehensive Income Comprehensive income for Q2 2025 increased significantly year-over-year, primarily driven by a substantial foreign currency translation gain, offsetting a slight increase in net income Consolidated Comprehensive Income (in millions) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $135.9 | $135.0 | $235.1 | $333.8 | | Other Comprehensive Income (Loss) | $63.7 | $(2.1) | $58.9 | $4.2 | | Comprehensive Income | $199.6 | $132.9 | $294.0 | $338.0 | | Comprehensive Income (controlling interest) | $135.0 | $70.1 | $195.2 | $229.7 | - A significant driver of Other Comprehensive Income in Q2 and YTD 2025 was a foreign currency translation gain of $63.3 million and $57.6 million, respectively, compared to a loss in Q2 2024[18] Consolidated Balance Sheets The balance sheet shows a significant decrease in cash and cash equivalents, while goodwill increased and total assets remained relatively stable Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | Dec 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $361.0 | $950.0 | $(589.0) | | Goodwill | $2,537.6 | $2,504.9 | $32.7 | | Acquired client relationships (net) | $1,716.1 | $1,777.8 | $(61.7) | | Total Assets | $8,807.6 | $8,830.9 | $(23.3) | | Debt | $2,621.2 | $2,620.2 | $1.0 | | Total Stockholders' Equity | $3,238.7 | $3,345.3 | $(106.6) | Consolidated Statements of Cash Flows Cash and cash equivalents experienced a significant net decrease for the six months ended June 30, 2025, primarily due to substantial investing and financing activities Consolidated Cash Flow Summary - Six Months Ended June 30 (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Operating Activities | $439.7 | $454.4 | | Investing Activities | $(529.3) | $314.8 | | Financing Activities | $(518.4) | $(716.1) | | Net (Decrease) Increase in Cash | $(595.0) | $51.6 | - The significant decrease in cash for the first six months of 2025 was driven by a $510.1 million investment in Affiliates and $277.5 million in common stock repurchases[36] Notes to the Consolidated Financial Statements Key notes highlight a significant impairment charge on client relationships, strategic minority investments, and an increase in compensation expense due to equity award modifications - In Q1 2025, the company recorded a $70.0 million impairment charge on indefinite-lived acquired client relationships due to declines in assets under management for certain mutual fund assets[100] - The company completed minority investments in NorthBridge Partners and Verition Fund Management during the first half of 2025[102][103] - In Q2 2025, a modification to certain equity awards at an Affiliate led to a reclassification from equity to liability, resulting in an incremental compensation expense of $30.5 million attributable to the controlling interest[129] Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports a 10% year-over-year increase in assets under management (AUM) to $771 billion, driven by new investments and market appreciation, with aggregate fees rising 7% in Q2 2025, though YTD fees are down 5% due to lower performance fees earlier in the year, while net income for the controlling interest was impacted by a significant intangible impairment and increased affiliate equity compensation, with the company remaining active in strategic M&A and maintaining strong liquidity Executive Overview The company's strategy focuses on partnering with independent investment firms, providing strategic capabilities while maintaining their autonomy, and has been actively engaged in M&A activities - AMG's strategy focuses on partnering with high-quality independent investment firms (Affiliates), providing them with strategic capabilities while allowing management to retain autonomy and significant equity[150] - The company has been active in M&A, completing investments in NorthBridge and Verition, agreeing to acquire an interest in Qualitas Energy and Montefiore, and divesting its interest in Peppertree while agreeing to sell a portion of its interest in Comvest[151][152][153] Operating Performance Measures Assets under management (AUM) increased by 10% year-over-year to $771 billion, driven by new investments and market changes, with aggregate fees also showing a 7% increase in Q2 2025 Key Aggregate Operating Performance Measures | Metric (in billions, except % change) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Assets under management | $771.0 | $701.0 | 10% | | Average assets under management | $736.6 | $693.1 | 6% | | Aggregate fees (in millions) | $1,173.5 | $1,098.1 | 7% | Assets Under Management Roll-Forward (Q2 2025, in billions) | Category | March 31, 2025 | Net Client Flows | New Investments | Market Changes & Other | June 30, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total AUM | $712.2 | $8.1 | $12.4 | $38.3 | $771.0 | - Client demand for alternative strategies remains strong, with positive net inflows, while equity strategies experienced net outflows, consistent with industry trends[160] Results of Operations Consolidated revenue slightly decreased, while expenses rose significantly due to increased affiliate equity compensation and a substantial intangible impairment charge, though equity method income improved due to the absence of a prior-year impairment - Consolidated revenue decreased 1% for both the three and six months ended June 30, 2025, primarily due to changes in the composition of assets under management[180][181] - Compensation and related expenses increased 22% for Q2 2025, mainly due to a $41.0 million increase in Affiliate equity compensation expense from a modification of certain equity awards[184] - Intangible amortization and impairments for the six-month period increased significantly to $89.6 million from $14.5 million in the prior year, driven by a $77.0 million impairment charge on indefinite-lived acquired client relationships[182][189][99] - Equity method income (net) increased to $65.6 million in Q2 2025 from $18.1 million in Q2 2024, largely because the prior year period included a $39.9 million impairment charge that did not recur[196][201] Supplemental Financial Performance Measures Non-GAAP performance measures show a slight increase in Adjusted EBITDA and Economic net income for Q2 2025, with Economic earnings per share also rising Non-GAAP Performance Measures (in millions, except per share) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDA (controlling interest) | $219.7 | $217.5 | $447.9 | $477.3 | | Economic net income (controlling interest) | $159.2 | $155.9 | $317.9 | $342.6 | | Economic earnings per share | $5.39 | $4.67 | $10.58 | $10.06 | Liquidity and Capital Resources Cash and cash equivalents significantly decreased due to investments and share repurchases, while the company repaid maturing senior notes and maintained access to its revolving credit facility - Cash and cash equivalents decreased from $950.0 million at year-end 2024 to $361.0 million as of June 30, 2025, primarily due to investments in new Affiliates and share repurchases[223] - During the six months ended June 30, 2025, the company repurchased 1.6 million shares of its common stock for $277.5 million[232][36] - The company's $350.0 million 3.50% senior notes matured and were fully repaid on August 1, 2025, with the nearest term non-senior bank debt maturity now in June 2030[234] - As of June 30, 2025, the company had no outstanding borrowings under its $1.25 billion revolving credit facility, though $100.0 million was subsequently borrowed on July 30, 2025[235] Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the company's market risk disclosures for the first six months of 2025, as detailed in its 2024 Annual Report on Form 10-K - There have been no material changes to the company's market risk disclosures during the first six months of 2025[251] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures are effective at a reasonable assurance level[252] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[253] PART II—OTHER INFORMATION Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 592,682 shares at an average price of $168.72 per share, with approximately 3.7 million shares remaining available under the current authorization Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2025 | 316,538 | $157.17 | | May 2025 | 142,418 | $175.46 | | June 2025 | 133,726 | $188.90 | | Total | 592,682 | $168.72 | - As of June 30, 2025, 3.7 million shares were still available for repurchase under the share repurchase program authorized in July 2024[255] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements in XBRL format - The exhibits filed with this report include certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as well as XBRL data files[256][261]