Artisan Partners(APAM) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue growth of 7% compared to the previous quarter and 8% year-over-year, driven by strong market conditions and lower fixed expenses, leading to a margin expansion of 450 basis points [11] - Adjusted operating income increased by 22% compared to the prior quarter and 12% year-over-year [12] - Adjusted net income per adjusted share rose by 23% quarter-over-quarter and 11% year-over-year [12] Business Line Data and Key Metrics Changes - Assets under management (AUM) reached an all-time high of $181.3 billion, with net inflows in 14 of 26 investment strategies year-to-date [6][8] - The credit business saw $1.8 billion in year-to-date net inflows, marking the 13th consecutive quarter of positive credit flows [8] - Emerging markets strategies, including Sustainable Emerging Markets and Developing World, experienced positive inflows, indicating growing demand [8][20] Market Data and Key Metrics Changes - Strong performance in equities, with several strategies generating year-to-date returns exceeding 20%, outperforming benchmarks by 425 to 934 basis points [5] - The firm noted a significant uptick in inquiries for international equity exposure, particularly in the Global Equity Franchise [20] Company Strategy and Development Direction - The company aims to expand its multi-asset class investment platform by enhancing distribution capabilities and exploring new talent acquisition [9][10] - Focus on growing capabilities in private credit, real estate, and secondaries, with a methodical approach to M&A that aligns with the company's core values [25][26][35] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of improving gross flows and reducing redemptions, with ongoing efforts to align compensation with sales orientation [30] - The company anticipates approximately $900 million in mutual fund distributions in the fourth quarter, with performance fees projected to be similar to the previous year [15][39] Other Important Information - The Board of Directors declared a quarterly dividend of $0.88 per share, a 21% increase over the prior quarter [14] - The balance sheet remains strong with $300 million in cash and $140 million in firm seed investments [13] Q&A Session Summary Question: Demand for non-U.S. strategies - Management noted growing interest in global mandates and direct international equity exposure, particularly in emerging markets, with significant performance improvements driving renewed interest [20] Question: M&A allocation and philosophy - The company is actively exploring M&A opportunities, particularly in real estate, while emphasizing that any acquisitions will not be transformative but will align with existing capabilities [26][27] Question: Efforts to improve gross flows - Management discussed initiatives to enhance distribution, including doubling the field team and modernizing the vehicle lineup to better meet client preferences [30][33] Question: Client rebalancing activity - Management observed significant rebalancing activity among sophisticated clients, particularly in the intermediate wealth space, impacting certain equity strategies [40]