Artisan Partners(APAM) - 2023 Q2 - Quarterly Report

Part I Financial Information This section presents Artisan Partners Asset Management Inc.'s unaudited financial statements, management's analysis, and related disclosures Item 1. Unaudited Consolidated Financial Statements This section provides Artisan Partners Asset Management Inc.'s unaudited consolidated financial statements and comprehensive notes for the periods ended June 30, 2023, and December 31, 2022 Unaudited Condensed Consolidated Statements of Financial Condition The company's financial condition as of June 30, 2023, shows an increase in total assets and liabilities compared to December 31, 2022, with a notable rise in investment securities and redeemable noncontrolling interests | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----- | :--------------------------- | :------------------------------- | | Total assets | $1,406,230 | $1,234,608 | | Total liabilities | $893,205 | $819,971 | | Redeemable noncontrolling interests | $206,288 | $135,280 | | Total stockholders' equity | $306,737 | $279,357 | - Cash and cash equivalents increased by $50,193 thousand from $114,832 thousand at December 31, 2022, to $165,025 thousand at June 30, 2023[10] - Investment securities increased by $39,001 thousand from $85,415 thousand at December 31, 2022, to $124,416 thousand at June 30, 2023[10] Unaudited Consolidated Statements of Operations For the six months ended June 30, 2023, total revenues decreased compared to the prior year, while net income attributable to Artisan Partners Asset Management Inc. also saw a slight decline, despite an increase in income before income taxes | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | | Total revenues | $477,412 | $532,986 | | Total operating expenses | $332,403 | $337,587 | | Total operating income | $145,009 | $195,399 | | Income before income taxes | $182,669 | $161,621 | | Net income attributable to Artisan Partners Asset Management Inc. | $104,378 | $109,712 | | Basic earnings per share | $1.50 | $1.52 | | Diluted earnings per share | $1.50 | $1.52 | | Dividends declared per Class A common share | $1.40 | $2.51 | - Total revenues decreased by 10.4% for the six months ended June 30, 2023, compared to the same period in 2022[13] - Net investment gain (loss) of consolidated investment products significantly improved, moving from a loss of $10,669 thousand in 2022 to a gain of $28,402 thousand in 2023 for the six-month period[13] Unaudited Consolidated Statements of Comprehensive Income The company reported an increase in comprehensive income attributable to Artisan Partners Asset Management Inc. for the six months ended June 30, 2023, primarily driven by higher net income before noncontrolling interests and a foreign currency translation gain | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | | Net income before noncontrolling interests | $145,576 | $129,610 | | Foreign currency translation gain (loss) | $914 | $(1,958) | | Total other comprehensive income (loss) | $914 | $(1,958) | | Comprehensive income attributable to Artisan Partners Asset Management Inc. | $104,943 | $108,051 | - Foreign currency translation shifted from a loss of $1,958 thousand in 2022 to a gain of $914 thousand in 2023 for the six-month period[15] Unaudited Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased for the six months ended June 30, 2023, primarily due to net income and amortization of equity-based compensation, partially offset by dividends and distributions | Metric | January 1, 2023 (in thousands) | June 30, 2023 (in thousands) | | :----- | :----------------------------- | :--------------------------- | | Total Stockholders' Equity | $279,357 | $306,737 | | Net income | $104,378 (6 months) | | | Amortization of equity-based compensation | $18,117 (6 months) | | | Dividends | $(96,223) (6 months) | | - Total stockholders' equity increased by $27,380 thousand from January 1, 2023, to June 30, 2023[21] - Redeemable noncontrolling interests increased significantly from $135,280 thousand at January 1, 2023, to $206,288 thousand at June 30, 2023, largely due to capital contributions[21] Unaudited Consolidated Statements of Cash Flows Net cash provided by operating activities decreased for the six months ended June 30, 2023, compared to the prior year, while net cash used in financing activities also saw a substantial decrease, leading to an overall net increase in cash and cash equivalents | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | | Net cash provided by operating activities | $183,105 | $218,113 | | Net cash used in investing activities | $(35,004) | $(53,068) | | Net cash used in financing activities | $(93,700) | $(201,897) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $54,401 | $(36,852) | | Cash, cash equivalents and restricted cash, End of period | $197,649 | $163,919 | - Net cash provided by operating activities decreased by $35,008 thousand (16.1%) year-over-year[24] - Net cash used in financing activities decreased by $108,197 thousand (53.6%) year-over-year, primarily due to lower dividends paid[24] Notes to Unaudited Consolidated Financial Statements These notes provide essential context for the unaudited consolidated financial statements, detailing business operations, accounting policies, investments, debt, equity, revenue, compensation, and taxes Note 1. Nature of Business and Organization Artisan Partners Asset Management Inc. (APAM) is an investment management firm providing active investment strategies globally through its subsidiaries. APAM controls Artisan Partners Holdings LP, holding approximately 86% equity interest as of June 30, 2023, and consolidates its financial statements - APAM held approximately 86% of the equity ownership interest in Artisan Partners Holdings LP as of June 30, 2023[28] - The company offers investment management services primarily to institutions and through intermediaries with long-term investment horizons[27] Note 2. Summary of Significant Accounting Policies This note outlines the basis of presentation for the unaudited interim financial statements, confirming adherence to U.S. GAAP and SEC rules, and details the principles of consolidation, particularly for Variable Interest Entities (VIEs) and Voting Interest Entities (VOEs). It also mentions a reclassification of certain expenses for improved presentation - Artisan consolidates entities where it has a controlling financial interest, evaluating using either the voting interest entity (VOE) or variable interest entity (VIE) model[31] - As of June 30, 2023, Artisan consolidated two series of Artisan Funds, five sub-funds of Artisan Global Funds, and two Artisan Private Funds[31] - Expenditures for computers and mobile devices were reclassified from 'General and administrative' to 'Communication and technology' for improved presentation, with no impact on operating income, net income, or financial position[32] Note 3. Investment Securities Artisan's investment securities, excluding money market funds and consolidated investment products, primarily consist of equity securities in Artisan Funds, Artisan Global Funds, and Artisan Private Funds. The company reported a significant unrealized gain on investment securities for the six months ended June 30, 2023, a notable improvement from a loss in the prior year | Investment Type | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------- | :--------------------------- | :------------------------------- | | Investments in equity securities | $113,197 | $76,156 | | Investments in equity securities accounted for under the equity method | $11,219 | $9,259 | | Total investment securities | $124,416 | $85,415 | | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | | Unrealized gain (loss) on investment securities | $10,359 | $(17,470) | | Other net investment gain (loss) | $13,481 | $(18,166) | - Artisan held $101.1 million in investment securities related to funded long-term incentive compensation plans as of June 30, 2023[34] Note 4. Fair Value Measurements This note details the fair value hierarchy (Level 1, 2, 3) used for Artisan's assets and liabilities, excluding those held by consolidated investment products. As of June 30, 2023, the majority of assets measured at fair value, such as money market funds and equity securities, were categorized as Level 1, indicating quoted market prices in active markets | Asset Type | Total (June 30, 2023, in thousands) | Level 1 (June 30, 2023, in thousands) | | :--------- | :---------------------------------- | :------------------------------------ | | Money market funds | $139,705 | $139,705 | | Equity securities | $124,416 | $113,726 | - Equity securities without a fair value level (NAV practical expedient) amounted to $10,690 thousand as of June 30, 2023[39] Note 5. Borrowings Artisan's borrowings consist of $200 million in senior notes across three series (D, E, F) with maturities ranging from August 2025 to August 2032, and a $100 million revolving credit facility that was unused as of June 30, 2023. Interest expense decreased for both the three and six months ended June 30, 2023, compared to the prior year | Series | Maturity | As of June 30, 2023 (in thousands) | Interest Rate Per Annum | | :----- | :------- | :--------------------------------- | :---------------------- | | Series D | August 2025 | $60,000 | 4.29% | | Series E | August 2027 | $50,000 | 4.53% | | Series F | August 2032 | $90,000 | 3.10% | | Total gross borrowings | | $200,000 | | - The fair value of borrowings was approximately $180.3 million as of June 30, 2023, categorized as Level 2 in the fair value hierarchy[42] - Interest expense for the six months ended June 30, 2023, was $3.9 million, down from $5.1 million in the prior year[43] Note 6. Variable Interest Entities and Consolidated Investment Products Artisan consolidates investment products where it holds a controlling financial interest, including two series of Artisan Funds, five sub-funds of Artisan Global Funds, and two Artisan Private Funds, with a direct equity investment of $128.3 million as of June 30, 2023. The note also details the fair value measurements of assets and liabilities held by these consolidated investment products - Artisan's direct equity investment in consolidated investment products (CIPs) was $128.3 million as of June 30, 2023[44][51] - The maximum exposure to loss in CIPs is limited to Artisan's direct equity investment[44] | Asset Type (CIPs) | Total (June 30, 2023, in thousands) | Level 1 (June 30, 2023, in thousands) | Level 2 (June 30, 2023, in thousands) | | :---------------- | :---------------------------------- | :------------------------------------ | :------------------------------------ | | Money market funds | $28,323 | $28,323 | $— | | Equity securities - long position | $37,086 | $34,916 | $2,170 | | Fixed income instruments - long position | $291,089 | $— | $286,625 | Note 7. Noncontrolling Interests - Holdings Noncontrolling interests in Artisan Partners Holdings represent the equity ownership of limited partners, which was approximately 14% as of June 30, 2023. APAM's equity ownership increased from 85% to 86% during the six months ended June 30, 2023, due to Holdings Common Unit Exchanges and other equity transactions - APAM's equity ownership interest in Holdings increased from 85% at December 31, 2022, to 86% at June 30, 2023[52][53] - Holdings Common Unit Exchanges resulted in 128,937 common units being exchanged for Class A common stock during the six months ended June 30, 2023[53] Note 8. Stockholders' Equity This note details APAM's authorized and outstanding common stock classes (A, B, C) and their voting/economic rights. It also outlines the company's dividend policy, with quarterly dividends paid from Holdings' distributions, and summarizes stock transactions for the six months ended June 30, 2023 | Class of Stock | Authorized Shares | Outstanding Shares (June 30, 2023) | Voting Rights | | :------------- | :---------------- | :--------------------------------- | :------------ | | Class A common stock | 500,000,000 | 68,467,607 | 1 vote per share | | Class B common stock | 200,000,000 | 2,470,147 | 1 vote per share | | Class C common stock | 400,000,000 | 9,024,947 | 1 vote per share | | Dividend Type | Class of Stock | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------ | :------------- | :----------------------------- | :----------------------------- | | Quarterly | Class A Common | $1.05 | $1.79 | | Special Annual | Class A Common | $0.35 | $0.72 | - Holdings partnership distributions to limited partners for the six months ended June 30, 2023, were $17,458 thousand, down from $31,695 thousand in the prior year[59] Note 9. Revenue From Contracts with Customers Investment advisory revenue is disaggregated by type and vehicle, showing a decrease in total revenues for the six months ended June 30, 2023, compared to the prior year. Receivables from contracts with customers remained stable | Revenue Type/Vehicle | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :------------------- | :------------------------------------------ | :------------------------------------------ | | Management fees - Artisan Funds | $274,975 | $309,341 | | Management fees - Artisan Global Funds | $21,168 | $22,769 | | Management fees - Separate accounts and other | $181,146 | $200,600 | | Performance fees - Separate accounts and other | $123 | $276 | | Total revenues | $477,412 | $532,986 | | Receivable Type | As of June 30, 2023 (in thousands) | As of December 31, 2022 (in thousands) | | :-------------- | :--------------------------------- | :------------------------------------- | | Total receivables from contracts with customers | $85,526 | $84,986 | | Non-customer receivables | $9,849 | $13,648 | | Accounts receivable | $95,375 | $98,634 | Note 10. Compensation and Benefits Total compensation and benefits decreased slightly for the six months ended June 30, 2023, primarily due to lower incentive compensation tied to revenue, partially offset by an increase in long-term incentive compensation awards. The note details various restricted share-based awards and long-term cash awards (franchise capital awards), including their vesting conditions and accounting treatment | Compensation Component | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :--------------------- | :------------------------------------------ | :------------------------------------------ | | Salaries, incentive compensation and benefits | $231,876 | $242,658 | | Long-term cash incentive compensation expense | $13,344 | $4,612 | | Restricted share-based award compensation expense | $16,725 | $20,056 | | Total compensation and benefits | $261,945 | $267,326 | - Unrecognized compensation expense for unvested restricted stock awards and units was $75.1 million with a weighted average recognition period of 3.4 years remaining as of June 30, 2023[69] - Artisan granted $39.0 million of franchise capital awards during the six months ended June 30, 2023, with an unrecognized compensation expense of $89.6 million and a weighted average recognition period of 4.1 years remaining[70][72] Note 11. Income Taxes and Related Payments APAM's provision for income taxes increased for the six months ended June 30, 2023, with an effective tax rate of 20.3%. The company has two tax receivable agreements (TRAs) that provide for payments based on realized tax savings, with a liability of $372.8 million as of June 30, 2023. Deferred tax assets related to amortizable basis decreased | Tax Component | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :------------ | :------------------------------------------ | :------------------------------------------ | | Current taxes | $13,850 | $17,621 | | Deferred taxes | $23,243 | $14,390 | | Income tax expense (benefit) | $37,093 | $32,011 | - APAM's effective income tax rate was 20.3% for the six months ended June 30, 2023, compared to 19.9% for the same period in 2022[72] | Metric | December 31, 2022 (in thousands) | June 30, 2023 (in thousands) | | :----- | :------------------------------- | :--------------------------- | | Deferred Tax Asset - Amortizable Basis | $426,468 | $405,989 | | Amounts Payable Under TRAs | $398,789 | $372,813 | Note 12. Earnings Per Share Basic and diluted earnings per share for the six months ended June 30, 2023, were $1.50, a slight decrease from $1.52 in the prior year. The calculation uses the two-class method, considering participating securities like unvested share-based awards with non-forfeitable dividend rights | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----- | :----------------------------- | :----------------------------- | | Net income attributable to APAM | $104,378 (in thousands) | $109,712 (in thousands) | | Basic earnings per share | $1.50 | $1.52 | | Diluted earnings per share | $1.50 | $1.52 | | Basic weighted average shares outstanding | 63,368,343 | 62,180,483 | | Diluted weighted average shares outstanding | 63,384,352 | 62,211,148 | - Holdings limited partnership units and unvested restricted share-based awards were anti-dilutive and excluded from diluted EPS calculation[79] Note 13. Indemnifications Artisan enters into agreements that include indemnities in favor of third parties and indemnifies its general partner, directors, officers, and employees. The maximum exposure under these arrangements is unknown, but the company maintains insurance policies for coverage - The company's maximum exposure under indemnification arrangements is unknown, as it involves future claims[80] - APAM maintains insurance policies that may provide coverage against certain claims under these indemnities[80] Note 14. Related Party Transactions This note details transactions with related parties, including limited partners of Holdings and affiliated Artisan Funds. It outlines investment advisory fees earned from Artisan Funds, Artisan Global Funds, and Artisan Private Funds, as well as expense reimbursements, with consolidated fees eliminated upon consolidation - Accounts receivable included $6.4 million of partnership tax reimbursements due from Holdings' limited partners (including related parties) as of June 30, 2023[81] | Fund Type | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :-------- | :------------------------------------------ | :------------------------------------------ | | Consolidated investment advisory fees (Artisan Funds) | $275,523 | $310,137 | | Consolidated investment advisory fees (Artisan Global Funds) | $21,168 | $22,794 | | Consolidated investment advisory fees (Artisan Private Funds) | $5,996 | $7,776 | Note 15. Subsequent Events Subsequent to the quarter end, Artisan Partners Holdings declared a distribution of $34.3 million, and APAM's board declared a quarterly dividend of $0.61 per share of Class A common stock, payable on August 31, 2023 - Artisan Partners Holdings declared a distribution of $34.3 million, effective August 1, 2023[88] - APAM declared a quarterly dividend of $0.61 per share of Class A common stock, payable on August 31, 2023[88] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition, highlighting key drivers such as assets under management (AUM), investment performance, revenue, expenses, and liquidity. It also includes a reconciliation of non-GAAP financial measures Overview and Recent Highlights Artisan is an investment management firm focused on high-value active strategies globally. For the three months ended June 30, 2023, AUM increased to $143.0 billion, driven by investment returns, despite net client cash outflows. Revenues decreased by 3% year-over-year, and GAAP operating margin was 31.6% - Assets under management (AUM) increased to $143.0 billion as of June 30, 2023, a $4.5 billion (3%) increase from March 31, 2023[91] - The AUM increase was primarily due to $5.7 billion in investment returns, partially offset by $1.1 billion in net client cash outflows[91] | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :----- | :------------------------------- | :------------------------------- | | Revenue | $242.9 million | $251.4 million | | GAAP operating margin | 31.6% | 35.2% | | Adjusted operating margin | 31.9% | 34.4% | | Basic and diluted EPS | $0.76 | $0.62 | | Dividends declared per Class A common share | $0.50 | $0.76 | Organizational Structure Artisan's operations are conducted through Artisan Partners Holdings LP, with APAM controlling its business as the sole general partner. As of June 30, 2023, limited partners held approximately 14% of Holdings' equity interests, resulting in a significant noncontrolling interest reflected in the financial results - Limited partners of Holdings held approximately 14% of the equity interests as of June 30, 2023[93] - The company operates its business in a single segment[93] Holdings Unit Exchanges During the first half of 2023, certain limited partners exchanged 128,937 common units of Holdings for Class A common stock, increasing APAM's equity ownership in Holdings from 85% to 86% - 128,937 common units of Holdings were exchanged for Class A common stock during the six months ended June 30, 2023[94] - APAM's equity ownership interest in Holdings increased from 85% at December 31, 2022, to 86% at June 30, 2023[94] Financial Overview Global market conditions significantly impact Artisan's financial performance, with volatility easing in Q2 2023. Key performance indicators show a decrease in average AUM and total revenues for the six months ended June 30, 2023, compared to the prior year, while the weighted average management fee remained stable | Market Index | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2023 | | :----------- | :--------------------------- | :--------------------------- | | S&P 500 total returns | 8.7% | 16.9% | | MSCI All Country World total returns | 6.2% | 13.9% | | MSCI EAFE total returns | 3.0% | 11.7% | | Metric | 3 Months Ended June 30, 2023 | 6 Months Ended June 30, 2023 | | :----- | :--------------------------- | :--------------------------- | | Assets under management at period end | $142,989 million | $142,989 million | | Average assets under management | $139,323 million | $137,360 million | | Net client cash flows | $(1,107) million | $(2,338) million | | Total revenues | $242.9 million | $477.4 million | | Weighted average management fee | 70.1 bps | 70.2 bps | | Operating margin | 31.6% | 30.4% | | Adjusted operating margin | 31.9% | 30.9% | Assets Under Management and Investment Performance Artisan's AUM increased by $4.5 billion in Q2 2023, primarily due to investment returns, despite net client cash outflows. The company actively manages investment capacity by closing or restricting strategies when appropriate. Investment performance is measured by composites, with several strategies outperforming their benchmarks over various time horizons | Metric | 3 Months Ended June 30, 2023 (in millions) | 6 Months Ended June 30, 2023 (in millions) | | :----- | :--------------------------------------- | :--------------------------------------- | | Beginning assets under management | $138,498 | $127,892 | | Net client cash flows | $(1,107) | $(2,338) | | Investment returns and other | $5,666 | $17,550 | | Ending assets under management | $142,989 | $142,989 | | Average assets under management | $139,323 | $137,360 | - For the quarter, 14 of 25 investment strategies experienced net outflows totaling $2.0 billion, partially offset by $0.9 billion of net inflows across 10 strategies[103] | Distribution Channel | As of June 30, 2023 (in millions) | % of Total | | :------------------- | :-------------------------------- | :--------- | | Institutional | $90,398 | 63.2% | | Intermediary | $46,734 | 32.7% | | Retail | $5,857 | 4.1% | | Ending Assets Under Management | $142,989 | 100.0% | | Vehicle Type | As of June 30, 2023 (in millions) | As of June 30, 2022 (in millions) | | :----------- | :-------------------------------- | :-------------------------------- | | Artisan Funds & Artisan Global Funds | $69,144 | $63,033 | | Separate Accounts and Other | $73,845 | $67,514 | | Total Ending AUM | $142,989 | $130,547 | Results of Operations Artisan's results of operations for the three and six months ended June 30, 2023, show a decrease in total revenues and operating income compared to the prior year, primarily due to lower average AUM. However, non-operating income significantly improved, driven by net investment gains. Compensation and benefits decreased slightly, while the provision for income taxes increased | Metric | 3 Months Ended June 30, 2023 (in millions) | 3 Months Ended June 30, 2022 (in millions) | | :----- | :--------------------------------------- | :--------------------------------------- | | Revenues | $242.9 | $251.4 | | Total operating expenses | $166.2 | $163.0 | | Total operating income | $76.7 | $88.4 | | Income before income taxes | $92.3 | $60.4 | | Net income attributable to Artisan Partners Asset Management Inc. | $53.6 | $44.3 | | Metric | 6 Months Ended June 30, 2023 (in millions) | 6 Months Ended June 30, 2022 (in millions) | | :----- | :--------------------------------------- | :--------------------------------------- | | Revenues | $477.4 | $533.0 | | Total operating expenses | $332.4 | $337.6 | | Total operating income | $145.0 | $195.4 | | Income before income taxes | $182.7 | $161.6 | | Net income attributable to Artisan Partners Asset Management Inc. | $104.4 | $109.7 | - The decrease in revenues for the six months ended June 30, 2023, was primarily due to a $15.5 billion (10%) decrease in average AUM[136] - Non-operating income (expense) for the six months ended June 30, 2023, was a gain of $37.7 million, a significant improvement from a loss of $33.8 million in the prior year, driven by net investment gains[140] Supplemental Non-GAAP Financial Information 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. These measures exclude the impact of tax receivable agreements, market valuation changes in compensation plans, and net investment gains/losses to offer a clearer view of underlying business operations | Non-GAAP Metric | 3 Months Ended June 30, 2023 (in millions) | 6 Months Ended June 30, 2023 (in millions) | | :-------------- | :--------------------------------------- | :--------------------------------------- | | Adjusted net income | $57.7 | $109.5 | | Adjusted net income per adjusted share | $0.71 | $1.36 | | Adjusted operating income | $77.5 | $147.5 | | Adjusted operating margin | 31.9% | 30.9% | | Adjusted EBITDA | $81.1 | $154.1 | - The adjusted tax rate used for non-GAAP calculations was 24.7% for all periods presented[144] - Adjusted shares are calculated by assuming the vesting of all unvested Class A share-based awards and the exchange of all outstanding limited partnership units of Artisan Partners Holdings for Class A common stock[144] Liquidity and Capital Resources Artisan's liquidity is primarily supported by cash generated from operations, with cash and cash equivalents increasing to $165.0 million as of June 30, 2023. The company maintains seed investments of $144.2 million and has $200 million in unsecured notes outstanding, along with an unused $100 million revolving credit facility. Net cash provided by operating activities decreased, while net cash used in financing activities significantly decreased due to lower dividends | Metric | June 30, 2023 (in millions) | December 31, 2022 (in millions) | | :----- | :-------------------------- | :------------------------------ | | Cash and cash equivalents | $165.0 | $114.8 | | Accounts receivable | $95.4 | $98.6 | | Seed investments | $144.2 | $124.8 | | Undrawn commitment on revolving credit facility | $100.0 | $100.0 | - The company mitigates concentration risk by diversifying financial institutions holding cash and investing excess cash in money market funds ($139.7 million as of June 30, 2023)[148] | Cash Flow Activity | 6 Months Ended June 30, 2023 (in millions) | 6 Months Ended June 30, 2022 (in millions) | | :----------------- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by operating activities | $183.1 | $218.1 | | Net cash used in investing activities | $(35.0) | $(53.1) | | Net cash used in financing activities | $(93.7) | $(201.9) | | Cash, cash equivalents and restricted cash as of June 30 | $197.6 | $163.9 | Certain Contractual Obligations There have been no material changes to contractual obligations since December 31, 2022, except for the Tax Receivable Agreements (TRAs) liability, which decreased from $398.8 million to $372.8 million. The company expects to make approximately $36.2 million in TRA payments in fiscal 2023, with $27.2 million already paid by June 30, 2023 - The TRA liability decreased from $398.8 million at December 31, 2022, to $372.8 million at June 30, 2023[155] - Artisan expects to make approximately $36.2 million in TRA payments in fiscal 2023, with $27.2 million paid during the quarter ended June 30, 2023[155] Critical Accounting Policies and Estimates There have been no updates to the company's critical accounting policies and estimates from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022 - No updates to critical accounting policies and estimates since the December 31, 2022, Form 10-K[156] New or Revised Accounting Standards There are no new or revised accounting standards to report for the period - No new or revised accounting standards to report[156] Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the company's quantitative and qualitative disclosures regarding market risk from those previously reported in its Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes in market risk disclosures since the December 31, 2022, Form 10-K[158] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2023, and concluded they are effective. There were no material changes in internal control over financial reporting during the quarter Disclosure Controls and Procedures The company's management, including the CEO and CFO, concluded that its disclosure controls and procedures were effective as of June 30, 2023 - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2023[159] Changes in Internal Control over Financial Reporting There were no changes in internal control over financial reporting during the quarter ended June 30, 2023, that 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 during the quarter ended June 30, 2023[160] Part II Other Information This section includes information on legal proceedings, risk factors, equity sales, defaults, and other required disclosures Item 1. Legal Proceedings 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 would 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[162] Item 1A. Risk Factors For a discussion of risks and uncertainties, readers are referred to the 'Risk Factors' section in the company's latest annual report on Form 10-K - Refer to the 'Risk Factors' section in the latest annual report on Form 10-K for a discussion of risks and uncertainties[162] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the three months ended June 30, 2023. The note clarifies the exchange process for employee-partner Class B common units upon termination of employment - No unregistered sales of equity securities occurred during the three months ended June 30, 2023[162] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report - No defaults upon senior securities[162] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[162] Item 5. Other Information No other information is required to be reported under this item - No other information to report[162] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including incentive compensation plans, certifications from the CEO and CFO, and XBRL documents - Includes Artisan Partners Asset Management Inc. 2023 Omnibus Incentive Compensation Plan (Exhibit 10.1) and 2023 Non-Employee Director Plan (Exhibit 10.2)[165][166] - Certifications from the CEO and CFO pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 are included[167][168][169][170] - XBRL documents for the consolidated financial statements are included as Exhibit 101[171]