- Economic net income of $32.0 million
($0.27 per share) for the quarter, down (14.2)% from the
comparative quarter in 2015
- U.S. GAAP earnings of $30.8 million
($0.26 per share) for the quarter, down (9.9)% from the comparative
quarter in 2015
- AUM of $218.0 billion at March 31,
2016, an increase of 2.6% from December 31, 2015
- Net client cash flows (“NCCF”) for the
quarter of $2.4 billion yielding a positive annualized revenue
impact of $7.3 million
OM Asset Management plc (NYSE: OMAM) reports its results for the
first quarter ended March 31, 2016.
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“Our results for the quarter demonstrate the strength and
diversity of our multi-boutique franchise, as our Affiliates
generated solid organic NCCF growth of $2.4 billion in a period
marked by extreme volatility and challenging macroeconomic trends,”
said Peter L. Bain, President and Chief Executive Officer of OMAM.
“Our financial results were impacted by a (5.3)% market driven
decline in average assets, and higher expenses as we continued to
invest in the business.”
“Our business model is designed to generate growth opportunities
across our existing Affiliates through collaborative initiatives
and our Global Distribution platform, and we continue to make
progress in both of these areas. Our Affiliate Management Team is
working with a number of Affiliates on product expansion
initiatives, and seed-related products were meaningful contributors
to our gross inflows in the first quarter. Our Global Distribution
platform had a strong quarter, and has reached profitability ahead
of schedule. In addition, we remain focused on efficient capital
management and increasing shareholder value through effective
capital allocation strategies. On March 15, shareholders approved
the open market component of our share repurchase program, and we
commenced opportunistic repurchases of our shares during the
remainder of the quarter.”
Mr. Bain concluded, “We have been active in cultivating
relationships with high quality asset management boutiques.
Entrepreneurial asset managers understand and appreciate our unique
approach and the value we bring to our Affiliate partnerships, and
we are pleased with the quality and breadth of firms with which we
have engaged.”
Table 1: Key Performance Metrics
(unaudited)
($ in millions, unless otherwise noted)
Three Months Ended March 31,
Increase (Decrease)
Economic Net
Income Basis
2016 2015 $
% (Non-GAAP measure used by management) ENI revenue $
152.9 $ 163.3 $ (10.4 ) (6.4 )% Pre-tax economic net income 42.9
51.0 (8.1 ) (15.9 )% Economic net income 32.0 37.3 (5.3 ) (14.2 )%
ENI diluted earnings per share, $ $ 0.27 $ 0.31 $ (0.04 ) (12.9 )%
Adjusted EBITDA 45.3 53.5 (8.2 ) (15.3 )% ENI operating margin 34 %
37 % (331) bps
U.S. GAAP
Basis
Revenue $ 149.6 $ 160.6 $ (11.0 ) (6.8 )% Net income 30.8 34.2 (3.4
) (9.9 )% U.S. GAAP operating margin 27 % 28 % (24) bps Diluted
shares outstanding (in millions) 120.0 120.4 Diluted earnings per
share, $ $ 0.26 $ 0.28 $ (0.02 ) (7.1 )%
Other Operational
Information
Assets under management at period end ($ in billions) $ 218.0 $
224.0 $ (6.0 ) (2.7 )% Net client cash flows ($ in billions) 2.4
(0.2 ) 2.6 n/m Annualized revenue impact of net flows ($ in
millions) 7.3 11.3 (4.0 ) (35.4 )%
Please see “Definitions and Additional Notes.” Please see Table
7 for a reconciliation of U.S. GAAP net income to economic net
income.
Assets Under Management and Flows
At March 31, 2016, OMAM’s total assets under management
(“AUM”) were $218.0 billion, up $5.6 billion or 2.6% compared to
$212.4 billion at December 31, 2015, and down $(6.0) billion
or (2.7)% compared to $224.0 billion at March 31, 2015. The
increase in AUM during the three months ended March 31, 2016
reflects net market appreciation of $3.1 billion, net inflows of
$2.4 billion and other movements of $0.1 billion.
For the three months ended March 31, 2016, OMAM’s net flows
were $2.4 billion compared to $(3.2) billion for the three months
ended December 31, 2015 and $(0.2) billion for the three
months ended March 31, 2015. Hard asset disposals of $(1.3)
billion, $(1.0) billion, and $(0.3) billion are reflected in the
net flows for the three months ended March 31, 2016,
December 31, 2015 and March 31, 2015, respectively.
Inflows in the three months ended March 31, 2016 of $9.4
billion significantly exceeded quarterly inflows in 2015 and
include increases in U.S. sub-advisory and global/non-U.S. managed
volatility assets. For the three months ended March 31, 2016,
the annualized revenue impact of the net flows was positive $7.3
million, which compares to $(6.6) million for the three months
ended December 31, 2015 and $11.3 million for the three months
ended March 31, 2015 (see “Definitions and Additional Notes”).
Gross inflows of $9.4 billion yielded approximately 38 bps, while
gross outflows and hard asset disposals of $(7.0) billion in the
same period yielded approximately 40 bps. The higher fee rate on
outflows compared to inflows represented a reversal of the trend
the Company has seen in previous quarters. In general, the Company
expects a reversion to the prior trend of higher fees on inflows
from non-U.S. and alternative mandates, though perhaps not to the
same degree.
Table 2: Assets Under Management
Rollforward Summary
($ in billions, unless otherwise noted)
Three Months Ended March 31, 2016
December 31,2015
September 30,2015
June 30, 2015 March 31,
2015 Beginning AUM $ 212.4 $ 208.7 $ 226.6 $ 224.0 $ 220.8
Gross inflows 9.4 5.9 6.2 7.5 7.0 Gross outflows (5.7 ) (8.1 ) (7.8
) (6.5 ) (6.9 ) Hard asset disposals (1.3 ) (1.0 ) (0.9 ) (0.2 )
(0.3 )
Net flows 2.4 (3.2 ) (2.5
) 0.8 (0.2 ) Market appreciation
(depreciation) 3.1 7.2 (15.4 ) 1.1 3.4 Other* 0.1 (0.3 ) —
0.7 —
Ending AUM $ 218.0
$ 212.4 $ 208.7
$ 226.6 $ 224.0
Basis points: inflows 37.7 45.4 45.6 46.1 46.6 Basis points:
outflows 40.0 36.7 31.6 31.4 29.5
Annualized revenue impact of
net flows ($ in millions) $ 7.3 $
(6.6 ) $ 0.7 $ 13.5
$ 11.3 Derived average weighted NCCF ($ in billions)
2.1 (1.9 ) 0.2 3.9 3.3
* “Other” in 2015 primarily relates to an Affiliate’s purchase
of a joint venture and other Fund disposals. In 2016, “Other”
reflects the standardization of AUM definitions across Affiliates
and mandates and the revaluation of certain hard assets. These
changes align the definition of AUM with management fees charged to
clients.
Please see “Definitions and Additional Notes”
Balance Sheet and Capital Management
Condensed and Consolidated Balance Sheets as of March 31,
2016 and December 31, 2015 are provided in Table 3 below.
During the three months ended March 31, 2016 the Company made
net payments of $5.0 million against third party borrowings. At
March 31, 2016, the Company had third party borrowings of
$85.0 million and shareholders’ equity of $176.2 million. The
Company’s ratio of third party borrowings to trailing twelve months
Adjusted EBITDA was 0.4x, well below the maximum 3.0x leverage
covenant under OMAM’s revolving credit facility. Of the Company’s
cash and cash equivalents of $70.4 million at March 31, 2016,
$45.5 million was held at Affiliates and $24.9 million was
available at the Company.
As of March 31, 2016, the Company had access to
approximately $150 million of seed capital, provided by Old Mutual
plc (“the Parent”), to invest in products managed by OMAM’s
Affiliates. This seed capital is not reflected on the balance sheet
of OMAM, as it is directly owned by a subsidiary of the Parent. In
addition, at March 31, 2016, the Company had $33.1 million of
co-investments in funds managed by its Affiliates on its balance
sheet, with an off-setting liability to reflect those investments
where economic ownership is retained by the Parent.
On March 16, 2016, the Company launched its share repurchase
program. As of March 31, 2016, the Company had purchased 300,983
shares in the open market at a weighted average price of
$12.64/share.
Table 3: Condensed and Consolidated
Balance Sheets
($ in millions) March 31, 2016 December 31,
2015 Assets Cash and cash equivalents $ 70.4 $ 135.9
Investment advisory fees receivable 137.0 151.8 Investments 211.5
202.6 Other assets 520.9 523.8
Total assets
$ 939.8 $ 1,014.1
Liabilities and equity Accounts payable and accrued expenses
$ 100.0 $ 179.7 Due to related parties 214.5 222.9 Third party
borrowings 85.0 90.0 Other liabilities 364.1 355.6
Total liabilities 763.6 848.2 Total
equity 176.2 165.9 Total
liabilities and equity $ 939.8 $
1,014.1 Third party borrowings / trailing
twelve months Adjusted EBITDA 0.4 x 0.4 x
Please see “Definitions and Additional Notes”
Investment Performance
Table 4 below presents a summary of the Company’s investment
performance as of March 31, 2016, December 31, 2015 and
March 31, 2015. Performance is shown on a revenue-weighted
basis, an equal-weighted basis and an asset-weighted basis. Please
see “Definitions and Additional Notes” for further information on
the calculation of performance.
Table 4: Investment Performance
Revenue-Weighted March 31, 2016 December 31,
2015 March 31, 2015 1-Year 46 % 60 % 55 % 3-Year 68 % 83
% 70 % 5-Year 77 % 92 % 77 %
Equal-Weighted March
31, 2016 December 31, 2015 March 31, 2015 1-Year
63 % 72 % 57 % 3-Year 82 % 83 % 82 % 5-Year 84 % 88 % 88 %
Asset-Weighted March 31, 2016 December 31,
2015 March 31, 2015 1-Year 53 % 72 % 43 % 3-Year 66 % 73
% 58 % 5-Year 65 % 91 % 64 %
Please see “Definitions and Additional Notes”
As of March 31, 2016, assets representing 46%, 68% and 77%
of revenue were outperforming benchmarks on a 1-, 3- and 5- year
basis, respectively, compared to 60%, 83% and 92% at
December 31, 2015 and 55%, 70% and 77% at March 31, 2015.
The decline in one-year results compared to December 31, 2015
was primarily related to underperformance in large cap value
products in the volatile markets of Q1 2016 and growth equity
headwinds in non-U.S. markets during this period, combined with the
rolling off of strong performance in Q1 2015. The three year
decline was primarily related to the rolling off of exceptional Q1
2013 performance in certain global/non-U.S. products.
Financial Results: U.S. GAAP
Table 5 below presents the Company’s U.S. GAAP Statement of
Operations. For the three months ended March 31, 2016 and
2015, diluted earnings per share was $0.26 and $0.28, respectively.
For the three months ended March 31, 2016 and 2015, net income
was $30.8 million and $34.2 million, respectively, a decrease of
$(3.4) million, or (9.9)%. For the three months ended
March 31, 2016, compared to the three months ended
March 31, 2015, U.S. GAAP revenue decreased $(11.0) million,
or (6.8)%, from $160.6 million to $149.6 million, primarily as a
result of a decline in average assets and lower performance fees.
Expenses decreased $(7.6) million, or (6.5)%, from $116.2 million
for the three months ended March 31, 2015, to $108.6 million
for the three months ended March 31, 2016, primarily as a
result of decreases in both variable compensation and the
revaluation of Affiliate equity and profit interests.
Table 5: U.S. GAAP Statement of
Operations
($ in millions) Three Months Ended March 31,
Increase (Decrease) 2016 2015 $
% Management fees $ 149.6 $ 156.9 $ (7.3 ) (4.7 )%
Performance fees — 3.6 (3.6 ) (100.0 )% Other revenue — 0.1
(0.1 ) (100.0 )%
Total revenue 149.6
160.6 (11.0 ) (6.8 )%
Compensation and benefits (see Table 6) 84.6 94.8 (10.2 ) (10.8 )%
General and administrative 21.8 19.8 2.0 10.1 % Depreciation and
amortization
2.2
1.6
0.6
37.5
%
Total expenses 108.6 116.2
(7.6 ) (6.5 )% Operating income
41.0 44.4 (3.4 ) (7.7 )%
Investment income 3.5 2.7 0.8 29.6 % Interest expense (0.5 ) (0.9 )
0.4 44.4 %
Income from continuing operations before
taxes 44.0 46.2 (2.2 ) (4.8
)% Income tax expense 13.4 12.2 1.2 9.8
%
Income from continuing operations 30.6 34.0
(3.4 ) (10.0 )% Gain on disposal of
discontinued operations, net of tax 0.2 0.2 —
— %
Net income $ 30.8 $
34.2 $ (3.4 ) (9.9
)% Earnings per share, basic, $ $ 0.26 $ 0.28 $ (0.02 ) (7.1
)% Earnings per share, diluted, $ 0.26 0.28 (0.02 ) (7.1 )% Basic
shares outstanding (in millions) 120.0 120.0 Diluted shares
outstanding (in millions) 120.0 120.4 U.S. GAAP operating
margin 27 % 28 % (24) bps
Pre-tax income from continuing
operations
44.0 46.2 (2.2 ) (4.8 )%
Net income from continuing operations
30.6 34.0 (3.4 ) (10.0 )%
Please see “Definitions and Additional Notes”
Table 6: Components of U.S. GAAP
Compensation Expense
($ in millions) Three Months Ended March 31,
Increase (Decrease) 2016 2015 $
% Fixed compensation and benefits* $ 35.4 $ 33.5 $ 1.9 5.7 %
Sales-based compensation 4.8 4.6 0.2 4.3 % Variable compensation**
37.4 43.4 (6.0 ) (13.8 )% Affiliate key employee distributions***
8.3 8.5 (0.2 ) (2.4 )% Non-cash Affiliate key employee equity
revaluations (1.3 ) 4.8 (6.1 ) n/m
Total U.S. GAAP
compensation expense $ 84.6 $
94.8 $ (10.2 ) (10.8
)%
* Agrees to ENI fixed compensation and benefits** Agrees to ENI
variable compensation*** Agrees to ENI Affiliate key employee
distributionsPlease see “Definitions and Additional Notes”
Financial Results: Non-GAAP Economic Net Income
For the three months ended March 31, 2016 and 2015, diluted
economic net income per share was $0.27 and $0.31, respectively, on
economic net income of $32.0 million and $37.3 million,
respectively, a decrease of $(5.3) million, or (14.2)%. See Table 7
for a reconciliation of U.S. GAAP net income to economic net
income.
ENI revenue (see Table 8) decreased $(10.4) million or (6.4)%,
from $163.3 million to $152.9 million, driven primarily by a (4.7)%
decrease in management fees from $156.9 million to $149.6 million.
Average assets under management in those respective periods,
excluding equity-accounted Affiliates (see Table 12), decreased
(7.4)% to $178.8 billion, while the bps yield on these assets rose
from 33.0 bps to 33.7 bps primarily due to an increase in the mix
of higher fee rate products. Net performance fees were $0.0 million
for the current quarter, as a result of volatile markets and
management fee adjustments in certain sub-advisory accounts. During
a quarter of market uncertainty, OMAM made a conscious decision to
continue investing in its business, despite the decline of revenue.
Total ENI operating expenses (see Table 9) grew 7.6% to $64.0
million, from $59.5 million in the prior-year quarter. Total
operating expenses as a percentage of management fee revenue
increased to 42.8% for the three months ended March 31, 2016,
from 37.9% in the prior year period, in part due to the decline of
revenue during the period. Of the $4.5 million increase in
operating expense between the three months ended March 31,
2016 and 2015, $1.9 million was due to fixed compensation and
benefits, primarily as a result of hires made in 2015 and annual
cost of living increases, with the remainder mostly related to
technology investments and new initiatives. The first quarter
typically has higher costs as a result of seasonal expenses and the
Company expects the ratio of expenses to management fees to fall
during the remainder of 2016, primarily due to market driven
increases in management fees. Total variable compensation fell
(13.8)% quarter-over-quarter from $43.4 million to $37.4 million
and the ENI variable compensation ratio remained flat at
approximately 42%. While the sum of operating expense and variable
compensation declined $(1.5) million, or (1.5)%
quarter-over-quarter, the greater (6.4)% decrease in revenue over
this period resulted in a decline in OMAM’s ENI operating margin to
33.7% from 37.0%. Affiliate key employee distributions decreased
(2.4)% quarter-over-quarter, from $8.5 million to $8.3 million, due
to lower ENI operating earnings. The ratio of Affiliate key
employee distributions over ENI operating earnings was 16.1%,
compared to 14.1% in the year-ago quarter, primarily due to the
allocation of performance fee revenue in the three months ended
March 31, 2015. Net interest expense was $0.3 million for the three
months ended March 31, 2016, compared to net interest expense
of $0.9 million in the prior-year period.
For the three months ended March 31, 2016, Adjusted EBITDA
was $45.3 million, down (15.3)% compared to $53.5 million for the
same period of 2015. See Table 21 for a reconciliation of U.S. GAAP
net income to EBITDA, Adjusted EBITDA and ENI.
Table 7: Reconciliation of U.S. GAAP
Net Income to Economic Net Income
($ in millions) Three Months
Ended March 31, 2016 2015 U.S.
GAAP net income $ 30.8 $ 34.2
Adjustments to reflect the economic earnings of the Company: i.
Non-cash key employee-owned equity and profit interest
revaluations (1.3 ) 4.8 ii. Amortization and impairment of goodwill
and acquired intangible assets 0.1 — iii. Capital transaction costs
0.1 — iv.
Discontinued operations and
restructuring
(0.2 ) (0.2 ) v. ENI tax normalization 2.0 0.4 Tax effect of above
adjustments, as applicable* 0.5 (1.9 )
Economic net
income $ 32.0 $ 37.3
* Reflects the sum of lines i., ii. and iii, multiplied by the
40.2% U.S. statutory tax rate (including state tax).See Table 18
for a per-share presentation of the above reconciliationPlease see
“Definitions and Additional Notes”
The following table identifies the components of ENI
revenue:
Table 8: Components of ENI
revenue
($ in
millions) Three Months Ended March 31, Increase
(Decrease) 2016 2015 $ % Management
fees $ 149.6 $ 156.9 $ (7.3 ) (4.7 )% Performance fees — 3.6 (3.6 )
(100.0 )%
Other income, including equity-accounted
Affiliates
3.3 2.8 0.5 17.9 %
ENI revenue $
152.9 $ 163.3 $
(10.4 ) (6.4 )%
See Table 19 for a reconciliation from U.S. GAAP revenue to ENI
revenue
Please see “Definitions and Additional Notes”
The following table identifies the components of ENI operating
expense:
Table 9: Components of ENI operating
expense
($ in millions) Three Months Ended March 31,
Increase (Decrease) 2016 2015 $
% Fixed compensation & benefits $ 35.4 $ 33.5 $ 1.9 5.7
% General and administrative expenses 26.5 24.4 2.1 8.6 %
Depreciation and amortization 2.1 1.6 0.5 31.3
%
ENI operating expense $ 64.0 $
59.5 $ 4.5 7.6 %
See Table 20 for a reconciliation from U.S. GAAP operating
expense to ENI operating expensePlease see “Definitions and
Additional Notes”
The following tables show our key non-GAAP operating metrics for
the three months ended March 31, 2016 and 2015. We present
these metrics because they are the measures our management uses to
evaluate the profitability of our business and are useful to
investors because they represent the key drivers and measures of
economic performance within our business model. Please see
“Definitions and Additional Notes” for an explanation of each ratio
and its usefulness in measuring the economics and operating
performance of our business.
Table 10: Key ENI operating metrics
($ in millions) Three
Months Ended March 31, 2016
2015
Increase(Decrease)
Numerator: ENI operating earnings* $ 51.5 $ 60.4 (14.7 )%
Denominator: ENI revenue $ 152.9 $ 163.3 (6.4 )%
ENI operating
margin
34
%
37
% (331) bps Numerator: ENI operating expense $
64.0 $ 59.5 7.6 % Denominator: ENI management fee revenue $ 149.6 $
156.9 (4.7 )%
ENI operating expense ratio
43
%
38
%
486 bps
Numerator: ENI variable compensation $ 37.4 $ 43.4 (13.8 )%
Denominator: ENI earnings before variable compensation** $ 88.9 $
103.8 (14.4 )%
ENI variable compensation ratio
42
%
42
%
26 bps
Numerator: Affiliate key employee distributions $ 8.3 $ 8.5
(2.4 )%
Denominator: ENI operating earnings*
$ 51.5 $ 60.4 (14.7 )%
ENI Affiliate key employee distributions
ratio
16
%
14
% 204 bps
Numerator: Tax on economic net income
$
10.9
$
13.7
(20.4
)%
Denominator: Pre-tax economic net
income
$
42.9
$
51.0
(15.9
)%
Economic net income effective tax rate
25.4
%
26.9
% (145) bps
* ENI operating earnings represents ENI earnings before
Affiliate key employee distributions and is calculated as ENI
revenue, less ENI operating expense, less ENI variable
compensation.** ENI earnings before variable compensation is
calculated as ENI revenue, less ENI operating expense.Please see
“Definitions and Additional Notes”
Recent Events
On April 29, 2016, at the Company’s Annual General Meeting,
shareholders (excluding Old Mutual plc) authorized a form of
contract by which OMAM would be permitted to repurchase shares
directly from Old Mutual plc.
Dividend Declaration
The Company’s Board of Directors approved a quarterly interim
dividend of $0.08 per share payable on June 30, 2016 to
shareholders of record as of the close of business on June 17,
2016.
About OMAM
OMAM is a global, multi-boutique asset management company with
$218.0 billion of assets under management as of March 31,
2016. Its diverse Affiliates offer leading, alpha generating
investment products to investors around the world. OMAM’s
partnership approach, which includes equity ownership at the
Affiliate level and a profit sharing relationship between OMAM and
its Affiliates, aligns the interests of the Company and its
Affiliates to work collaboratively in accelerating their growth.
OMAM’s business model combines the investment talent,
entrepreneurialism, focus and creativity of leading asset
management boutiques with the resources and capabilities of a
larger firm. For more information about OMAM, please visit the
Company’s website at www.omam.com.
Forward Looking Statements
This press release includes forward-looking statements, as that
term is used in the Private Securities Litigation Reform Act of
1995, including information relating to anticipated growth in
revenues, margins or earnings, anticipated changes in the Company’s
business, anticipated future performance of the Company’s business,
anticipated future investment performance of the Company’s
Affiliates, expected future net cash flows, anticipated expense
levels, changes in expense, the expected effects of acquisitions
and expectations regarding market conditions. The words or phrases
‘‘will likely result,’’ ‘‘are expected to,’’ ‘‘will continue,’’
‘‘is anticipated,’’ ‘‘can be,’’ ‘‘may be,’’ ‘‘aim to,’’ ‘‘may
affect,’’ ‘‘may depend,’’ ‘‘intends,’’ ‘‘expects,’’ ‘‘believes,’’
‘‘estimate,’’ ‘‘project,’’ and other similar expressions are
intended to identify such forward-looking statements. Such
statements are subject to various known and unknown risks and
uncertainties and readers should be cautioned that any
forward-looking information provided by or on behalf of the Company
is not a guarantee of future performance.
Actual results may differ materially from those in
forward-looking information as a result of various factors, some of
which are beyond the Company’s control, including but not limited
to those discussed above and elsewhere in this press release and in
the Company’s most recent Annual Report on Form 10-K, filed with
the Securities and Exchange Commission on March 15, 2016. Due to
such risks and uncertainties and other factors, the Company
cautions each person receiving such forward-looking information not
to place undue reliance on such statements. Further, such
forward-looking statements speak only as of the date of this press
release and the Company undertakes no obligations to update any
forward looking statement to reflect events or circumstances after
the date of this press release or to reflect the occurrence of
unanticipated events.
Conference Call Dial-in
The Company will hold a conference call and simultaneous webcast
to discuss the results at 10:00 a.m. Eastern Time on May 5,
2016. The Company has also released an earnings presentation that
will be discussed during the conference call. Please go to
http://ir.omam.com to download the presentation. To listen to the
call or view the webcast, participants should:
Dial-in:Toll Free Dial-in Number: (877)
201-0168International Dial-in Number: (647) 788-4901Conference ID:
60328973
Link to Webcast:http://event.on24.com/r.htm?e=1143935&s=1&k=570614F5895521929822B87E4EDB93E7
Dial-in Replay:A replay of the call will be available
beginning approximately one hour after its conclusion either on
OMAM’s website, at http://ir.omam.com or at:Toll Free Dial-in
Number: (855) 859-2056International Dial-in Number: (404)
537-3406Conference ID: 60328973
Financial Tables
Table 11: Assets Under Management Rollforward by Asset
Class
($ in billions, unless otherwise noted)
Three Months Ended March 31, 2016 December 31,
2015 September 30, 2015 June 30, 2015 March
31, 2015 U.S. equity Beginning balance $ 76.9 $ 75.1 $
85.4 $ 85.5 $ 87.3 Gross inflows 3.1 1.1 1.3 2.3 0.9 Gross outflows
(2.4 ) (3.0 ) (4.9 ) (3.2 ) (3.4 ) Net flows 0.7 (1.9 ) (3.6 ) (0.9
) (2.5 ) Market appreciation (depreciation) 0.5 3.7 (6.7 ) 0.8 0.7
Other 0.5 — — — —
Ending
balance $ 78.6 $ 76.9
$ 75.1 $ 85.4 $
85.5 Average AUM $ 75.7 $ 77.9 $ 80.8 $ 86.0 $ 86.0
Global / non-U.S. equity Beginning balance $ 84.8 $
82.4 $ 90.7 $ 88.1 $ 84.0 Gross inflows 4.2 3.3 3.3 3.2 4.4 Gross
outflows (2.4 ) (3.9 ) (2.0 ) (2.3 ) (2.6 ) Net flows 1.8 (0.6 )
1.3 0.9 1.8 Market appreciation (depreciation) 1.3 3.0 (9.6 ) 1.1
2.3 Other 0.4 — — 0.6 —
Ending balance $ 88.3 $
84.8 $ 82.4 $ 90.7
$ 88.1 Average AUM $ 83.5 $ 85.7 $ 86.9
$ 90.8 $ 86.1
Fixed income Beginning balance $ 13.8 $
14.7 $ 14.8 $ 15.3 $ 15.2 Gross inflows 0.2 0.2 0.3 0.5 0.4 Gross
outflows (0.6 ) (0.7 ) (0.5 ) (0.4 ) (0.6 ) Net flows (0.4 ) (0.5 )
(0.2 ) 0.1 (0.2 ) Market appreciation (depreciation) 0.7 (0.1 ) 0.1
(0.6 ) 0.3 Other — (0.3 ) — — —
Ending balance $ 14.1 $
13.8 $ 14.7 $ 14.8
$ 15.3 Average AUM $ 13.9 $ 14.3 $ 14.8
$ 15.2 $ 15.4
Alternative, real estate & timber
Beginning balance $ 36.9 $ 36.5 $ 35.7 $ 35.1 $ 34.3 Gross inflows
1.9 1.3 1.3 1.5 1.3 Gross outflows (0.3 ) (0.5 ) (0.4 ) (0.6 ) (0.3
) Hard asset disposals (1.3 ) (1.0 ) (0.9 ) (0.2 ) (0.3 ) Net flows
0.3 (0.2 ) — 0.7 0.7 Market appreciation (depreciation) 0.6 0.6 0.8
(0.2 ) 0.1 Other (0.8 ) — — 0.1 —
Ending balance $ 37.0 $
36.9 $ 36.5 $ 35.7
$ 35.1 Average AUM $ 37.4 $ 36.7 $ 36.1
$ 35.2 $ 34.8
Total Beginning balance $ 212.4 $ 208.7
$ 226.6 $ 224.0 $ 220.8 Gross inflows 9.4 5.9 6.2 7.5 7.0 Gross
outflows (5.7 ) (8.1 ) (7.8 ) (6.5 ) (6.9 ) Hard asset disposals
(1.3 ) (1.0 ) (0.9 ) (0.2 ) (0.3 ) Net flows 2.4 (3.2 ) (2.5 ) 0.8
(0.2 ) Market appreciation (depreciation) 3.1 7.2 (15.4 ) 1.1 3.4
Other 0.1 (0.3 ) — 0.7 —
Ending
balance $ 218.0 $ 212.4
$ 208.7 $ 226.6
$ 224.0 Average AUM $ 210.5 $ 214.6 $ 218.6 $
227.2 $ 222.3 Basis points: inflows 37.7 45.4 45.6 46.1 46.6
Basis points: outflows 40.0 36.7 31.6 31.4 29.5
Annualized
revenue impact of net flows (in millions) $ 7.3
$ (6.6 ) $ 0.7 $
13.5 $ 11.3 Derived average weighted NCCF 2.1
(1.9 ) 0.2 3.9 3.3
Please see “Definitions and Additional Notes”
Table 12: Management Fee Revenue and Average Fee Rates on
Assets Under Management ($ in millions, except AUM
data in billions) Three Months
Ended March 31, 2016 December 31,
2015 September 30, 2015
June 30, 2015 March 31, 2015
Revenue Basis Pts Revenue
Basis Pts Revenue Basis
Pts Revenue Basis Pts
Revenue Basis Pts U.S. equity $ 47.4 25
$ 48.5 25 $ 52.9 26 $ 52.2 24 $ 51.8 24 Global / non-U.S. equity
87.6 42 91.3 42 89.5 41 96.1 42 89.3 42 Fixed income 7.2 21 7.1 20
7.7 21 8.3 22 8.2 22 Alternative, real estate & timber 39.3
42 40.8 44 39.9 44 37.9
43 37.1 43
Weighted average fee rate on
average AUM $ 181.5 34.7 $
187.7 34.7 $ 190.0 34.5 $
194.5 34.3 $ 186.4 34.0 Less:
Revenue from equity-accounted Affiliates (31.9 ) (30.7 ) (31.6 )
(29.6 ) (29.5 )
Management fee revenue $ 149.6
33.7 $ 157.0 33.8
$ 158.4 33.3 $ 164.9
33.5 $ 156.9 33.0 Average
AUM 210.5 214.6 218.6 227.2 222.3 Average AUM excluding
equity-accounted Affiliates 178.8 184.1 188.5 197.5 193.0
Please see “Definitions and Additional Notes”
Table 13: Assets Under Management by Strategy
($ in billions) March 31, 2016
December 31, 2015 March 31,
2015 U.S. equity, small/smid cap $ 7.0 $ 6.9 $ 8.1 U.S. equity,
mid cap value 10.1 9.5 9.9 U.S. equity, large cap value 58.4 57.4
62.8 U.S. equity, core/blend 3.1 3.1 4.7
Total
U.S. equity 78.6 76.9 85.5
Global equity 30.2 29.4 30.3 International equity 38.0 37.0 34.7
Emerging markets equity 20.1 18.4 23.1
Total
global/non-U.S. equity 88.3 84.8
88.1 Fixed income 14.1 13.8 15.3 Alternative, real estate
& timber 37.0 36.9 35.1
Total assets under
management $ 218.0 $ 212.4
$ 224.0
Please see “Definitions and Additional Notes”
Table 14: Assets Under Management by Affiliate
($ in billions) March 31, 2016
December 31, 2015 March 31,
2015 Acadian Asset Management $ 69.6 $ 66.8 $ 73.0 Barrow,
Hanley, Mewhinney & Strauss 90.3 89.2 97.6 Campbell Global 4.9
6.3 6.8 Copper Rock Capital Partners 4.9 4.7 3.7 Heitman* 30.6 29.1
27.4 Investment Counselors of Maryland* 1.8 1.8 2.2 Thompson,
Siegel & Walmsley 15.9 14.5 13.3
Total assets
under management $ 218.0 $
212.4 $ 224.0
*Equity-accounted AffiliatesPlease see “Definitions and
Additional Notes”
Table 15: Assets Under Management by Client Type
($ in billions) March 31,
2016 December 31, 2015
March 31, 2015 AUM % of total
AUM % of total AUM
% of total Sub-advisory $ 71.6 32.8 % $ 69.0 32.5 % $ 73.7
32.9 % Corporate / Union 43.7 20.0 % 42.9 20.2 % 44.1 19.7 % Public
/ Government 69.7 32.0 % 68.9 32.4 % 74.0 33.0 % Endowment /
Foundation 4.5 2.1 % 4.4 2.1 % 4.1 1.8 % Old Mutual Group 3.6 1.7 %
3.6 1.7 % 4.1 1.8 % Commingled Trust/UCITS 14.9 6.8 % 14.0 6.6 %
14.3 6.4 % Mutual Fund 2.3 1.1 % 2.5 1.2 % 3.0 1.4 % Other 7.7
3.5 % 7.1 3.3 % 6.7 3.0 %
Total Assets
Under Management $ 218.0 $
212.4 $ 224.0
Please see “Definitions and Additional Notes”
Table 16: AUM by Client Location ($ in
billions) March 31, 2016
December 31, 2015 March 31, 2015
AUM % of total AUM
% of total AUM % of total U.S. $
175.1 80.3 % $ 171.8 80.9 % $ 179.1 80.0 % Europe 14.1 6.5 % 14.1
6.6 % 15.9 7.1 % Asia 12.1 5.6 % 11.8 5.6 % 11.9 5.3 % Middle East
0.3 0.1 % 0.3 0.1 % 4.1 1.8 % Australia 6.6 3.0 % 6.1 2.9 % 4.9 2.2
% Other 9.8 4.5 % 8.3 3.9 % 8.1 3.6 %
Total
Assets Under Management $ 218.0 $
212.4 $ 224.0
Please see “Definitions and Additional Notes”
Table 17: AUM NCCF, Annualized Revenue Impact of NCCF,
Fee Rates and Derived Average Weighted NCCF
AUM NCCF
($ billions)
Annualized Revenue
Impact of NCCF
($ millions)
Weighted Average Fee Rate on
Total Average AUM (bps)
Derived AverageWeighted
NCCF
($ billions)
2013 Q1 $ 3.0 $ 11.6 34.6 $ 3.4
Q2 3.2 8.6
33.4 2.6
Q3 1.0 5.8 33.4 1.7
Q4 3.3 16.5 33.5 4.9
2014 Q1 (1.0 ) (3.0 ) 33.7 (0.9 )
Q2 3.6 18.4
33.5 5.5
Q3 3.1 19.1 33.1 5.8
Q4 3.8 20.0 32.9 6.1
2015 Q1 (0.2 ) 11.3 34.0 3.3
Q2 0.8 13.5 34.3
3.9
Q3 (2.5 ) 0.7 34.5 0.2
Q4 (3.2 ) (6.6 ) 34.7 (1.9
)
2016 Q1 2.4 7.3 34.7 2.1
Please see “Definitions and Additional Notes”
Table 18: Reconciliation of per-share U.S. GAAP Net
Income to Economic Net Income ($ in millions)
Three Months Ended March 31,
2016 2015 U.S. GAAP net income per
share $ 0.26 $ 0.28 Adjustments to
reflect the economic earnings of the Company: i. Non-cash
key employee-owned equity and profit interest revaluations (0.01 )
0.04 ii. Amortization and impairment of goodwill and acquired
intangible assets — — iii. Capital transaction costs — — iv.
Discontinued operations and
restructuring
— — v. ENI tax normalization 0.02 — Tax effect of above
adjustments, as applicable — (0.01 )
Economic net income
per share $ 0.27 $ 0.31
Please see “Definitions and Additional Notes”
Table 19: Reconciliation of U.S. GAAP revenue to ENI
revenue ($ in
millions) Three Months Ended March 31, 2016
2015 U.S. GAAP revenue $ 149.6 $ 160.6 Include investment
return on equity-accounted Affiliates 3.3 2.7
ENI
revenue $ 152.9 $ 163.3
Please see “Definitions and Additional Notes”
Table 20: Reconciliation of U.S. GAAP operating expense
to ENI operating expense
($ in millions) Three Months Ended March 31,
2016 2015 U.S. GAAP operating expense $ 108.6 $ 116.2
Less: items excluded from economic net income Affiliate key
employee equity revaluations 1.3 (4.8 )
Amortization of acquired intangible
assets
(0.1
)
—
Capital Transaction Costs
(0.1 )
—
Less: items segregated out of U.S. GAAP operating expense Variable
compensation (37.4 ) (43.4 ) Affiliate key employee distributions
(8.3 ) (8.5 )
ENI operating expense $
64.0
$ 59.5
Please see “Definitions and Additional Notes”
Table 21: Reconciliation of Net Income to EBITDA, Adjusted
EBITDA and Economic Net Income ($ in millions)
Three Months Ended March 31,
2016 2015 Net income $
30.8 $ 34.2 Net interest expense 0.5 0.9
Income tax expense (including tax expenses related to discontinued
operations) 13.5 12.2 Depreciation and amortization (including
discontinued operations) 2.1 1.6
EBITDA
$ 46.9 $ 48.9
Non-cash compensation costs associated
with revaluation of Affiliate key employee-ownedequity and
profit-sharing interests
(1.3 ) 4.8
EBITDA of discontinued operations
(0.3 ) (0.2 )
Investment gains
(0.1 ) — Capital transaction costs 0.1 —
Adjusted
EBITDA $ 45.3 $ 53.5 Net interest
expense to third parties (0.3 ) (0.9 ) Depreciation and
amortization (2.1 ) (1.6 ) Tax on economic net income (10.9 ) (13.7
)
Economic net income $ 32.0 $
37.3
Please see “Definitions and Additional Notes”
Table 22: Calculation of ENI Effective
Tax Rate
($ in millions) Three
Months Ended March 31, 2016 2015 Pre-tax economic
net income(1) $ 42.9 $ 51.0 Intercompany interest expense
deductible for U.S. tax purposes (17.7 ) (17.5 )
Taxable
economic net income 25.2 33.5 Taxes
at the U.S. federal and statutory rates(2) (10.1 ) (13.5 ) Other
reconciling tax adjustments (0.8 ) (0.2 )
Tax on economic net
income (10.9 ) (13.7 ) Add back
intercompany interest expense previously excluded 17.7 17.5
Economic net income $ 32.0
$ 37.3 Economic net income effective tax
rate(3) 25.4 % 26.9 %
(1) Pre-tax economic net income is shown before intercompany
interest and tax expenses(2) Taxed at U.S. Federal and Statutory
rate of 40.2%(3) The economic net income effective tax rate is
calculated by dividing the tax on economic net income by pre-tax
economic net income.
Please see “Definitions and Additional Notes”
Definitions and Additional
Notes
References to “OMAM” or the “Company” refer to OM Asset
Management plc; references to the “Parent” or “Old Mutual” refer to
Old Mutual plc. OMAM operates its business through seven boutique
asset management firms (the “Affiliates”). OMAM’s distribution
activities are conducted in various jurisdictions through
affiliated companies in accordance with local regulatory
requirements.
Economic Net Income
The Company uses a non-GAAP performance measure referred to as
economic net income (“ENI”) to represent its view of the underlying
economic earnings of the business. ENI is used to make resource
allocation decisions, determine appropriate levels of investment or
dividend payout, manage balance sheet leverage, determine Affiliate
variable compensation and equity distributions, and incentivize
management. The Company’s ENI adjustments to U.S. GAAP include both
reclassifications of U.S. GAAP revenue and expense items, as
well as adjustments to U.S. GAAP results, primarily to exclude
non-cash, non-economic expenses, or to reflect cash benefits not
recognized under U.S. GAAP.
The Company re-categorizes certain line items on the income
statement to:
- include the Company’s share of earnings
from equity-accounted Affiliates within other income, rather than
investment income;
- treat sales-based compensation as a
general and administrative expense, rather than part of fixed
compensation and benefits;
- identify separately from operating
expenses, variable compensation and Affiliate key employee
distributions, which represent Affiliate earnings shared with
Affiliate key employees.
The Company also makes the following adjustments to
U.S. GAAP results to more closely reflect its economic results
by excluding:
i. non-cash expenses representing changes in the value of
Affiliate equity and profit interests held by Affiliate key
employees. These ownerships interests may in certain circumstances
be repurchased by OMAM at a value based on a pre-determined fixed
multiple of trailing earnings and as such this value is carried on
the Company’s balance sheet as a liability. Non-cash movements in
the value of this liability are treated as compensation expense
under U.S. GAAP. However, any equity or profit interests
repurchased by OMAM can be used to fund a portion of future
variable compensation awards, resulting in savings in cash variable
compensation that offset the negative cash effect of repurchasing
the equity.
ii. non-cash amortization or impairment expenses related to
acquired goodwill and other intangibles as these are non-cash
charges that do not result in an outflow of tangible economic
benefits from the business.
iii. capital transaction costs, including the costs of raising
debt or equity, gains or losses realized as a result of redeeming
debt or equity and direct incremental costs associated with
acquisitions of businesses or assets.
iv. the results of discontinued operations since they are not
part of the Company’s ongoing business, and restructuring costs
incurred in continuing operations which represent an exit from a
distinct product or line of business.
v. deferred tax resulting from changes in tax law and expiration
of statutes, adjustments for uncertain tax positions, deferred tax
attributable to intangible assets and other unusual items not
related to current operating results to reflect ENI tax
normalization.
The Company adjusts its income tax expense to reflect any tax
impact of its ENI adjustments. Please see Table 7 for a
reconciliation of U.S. GAAP net income to economic net income.
Adjusted EBITDA
Adjusted EBITDA is defined as economic net income before
interest, income taxes, depreciation and amortization. The Company
notes that its calculation of Adjusted EBITDA may not be consistent
with Adjusted EBITDA as calculated by other companies. The Company
believes Adjusted EBITDA is a useful liquidity metric because it
indicates the Company’s ability to make further investments in its
business, service debt and meet working capital requirements.
Please see Table 21 for a reconciliation of U.S. GAAP net income to
EBITDA, Adjusted EBITDA and ENI.
Methodologies for calculating investment
performance(1):
Revenue-weighted investment
performance measures the percentage of management fee revenue
generated by Affiliate strategies which are beating benchmarks. It
calculates each strategy’s percentage weight by taking its
estimated composite revenue over total composite revenues in each
period, then sums the total percentage of revenue for strategies
outperforming.
Equal-weighted investment
performance measures the percentage of Affiliates’ scale strategies
(defined as strategies with greater than $100 million of AUM)
beating benchmarks. Each outperforming strategy over $100 million
has the same weight; the calculation sums the number of strategies
outperforming relative to the total number of composites over $100
million.
Asset-weighted investment
performance measures the percentage of AUM in strategies beating
benchmarks. It calculates each strategy’s percentage weight by
taking its composite AUM over total composite AUM in each period,
then sums the total percentage of AUM for strategies
outperforming.
______________________
(1) Barrow Hanley’s Windsor II Large Cap Value account AUM and
return are separated from Barrow Hanley’s Large Cap Value composite
in revenue-weighted, equal-weighted and asset-weighted
outperformance percentage calculations.
ENI Operating Earnings
ENI operating earnings represents ENI earnings before Affiliate
key employee distributions and is calculated as ENI revenue, less
ENI operating expense, less ENI variable compensation. It differs
from economic net income because it does not include the effects of
Affiliate key employee distributions, net interest expense or
income tax expense.
ENI Operating Margin
The ENI operating margin, which is calculated before Affiliate
key employee distributions, is used by management and is useful to
investors to evaluate the overall operating margin of the business
without regard to our various ownership levels at each of the
Affiliates. ENI operating margin is a non-GAAP efficiency measure,
calculated based on ENI operating earnings divided by ENI revenue.
The ENI operating margin is most comparable to our U.S. GAAP
operating margin.
ENI management fee revenue
ENI Management fee revenue corresponds to U.S. GAAP management
fee revenue.
ENI operating expense ratio
The ENI operating expense ratio is used by management and is
useful to investors to evaluate the level of operating expense as
measured against our recurring management fee revenue. We have
provided this ratio since many operating expenses, including fixed
compensation & benefits and general and administrative expense,
are generally linked to the overall size of the business. We track
this ratio as a key measure of scale economies at OMAM because in
our profit sharing economic model, scale benefits both the
Affiliate employees and OMAM shareholders.
ENI earnings before variable
compensation
ENI earnings before variable compensation is calculated as ENI
revenue, less ENI operating expense.
ENI variable compensation ratio
The ENI variable compensation ratio is calculated as variable
compensation divided by ENI earnings before variable compensation.
It is used by management and is useful to investors to evaluate
consolidated variable compensation as measured against our ENI
earnings before variable compensation. Variable compensation is
usually awarded based on a contractual percentage of each
Affiliate’s ENI earnings before variable compensation and may be
paid in the form of cash or non-cash Affiliate equity or profit
interests. Center variable compensation includes cash and OMAM
equity. Non-cash variable compensation awards typically vest over
several years and are recognized as compensation expense over that
service period. The variable compensation ratio at each Affiliate
will typically be between 25% and 30%.
ENI Affiliate key employee distribution
ratio
The Affiliate key employee distribution ratio is calculated as
Affiliate key employee distributions divided by ENI operating
earnings. The ENI Affiliate key employee distribution ratio is used
by management and is useful to investors to evaluate Affiliate key
employee distributions as measured against our ENI operating
earnings. Affiliate key employee distributions represent the share
of Affiliate profits after variable compensation that is
attributable to Affiliate key employee equity and profit interests
holders, according to their ownership interests. At certain
Affiliates, OMUS is entitled to an initial preference over profits
after variable compensation, structured such that before a
preference threshold is reached, there would be no required key
employee distributions, whereas for profits above the threshold the
key employee distribution amount would be calculated based on the
key employee ownership percentages, which range from approximately
15% to 35% at our consolidated Affiliates.
U.S. GAAP operating margin
U.S. GAAP operating margin equals operating income from
continuing operations divided by total revenue.
Annualized Revenue Impact of Net Flows
(“NCCF”)
Annualized revenue impact of net flows represents the difference
between annualized management fees expected to be earned on new
accounts and net assets contributed to existing accounts, less the
annualized management fees lost on terminated accounts or net
assets withdrawn from existing accounts, including equity-accounted
Affiliates. Annualized revenue is calculated by multiplying the
annual gross fee rate for the relevant account by the net assets
gained in the account in the event of a positive flow or the net
assets lost in the account in the event of an outflow.
Hard asset disposals
Net flows in Table 1, Table 2 and Table 11 include hard asset
disposals made by OMAM’s Affiliates. This category is made up of
investment-driven asset dispositions made by Heitman, a real estate
manager, or Campbell, a timber manager.
Derived average weighted NCCF
Derived average weighted NCCF reflects the implied NCCF if
annualized revenue impact of net flows represents asset flows at
the weighted fee rate for OMAM overall (i.e. 34.7 bps in Q1 ‘16).
For example, NCCF annualized revenue impact of $7.3 million divided
by the average weighted fee rate of OMAM’s overall AUM of 34.7 bps
equals the derived average weighted NCCF of $2.1 billion.
n/m
“Not meaningful.”
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160505005825/en/
OMAMBrett Perryman, 617-369-7300ir@omam.com
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