Affiliated Managers Group, Inc. (NYSE: AMG) today reported its
financial and operating results for the first quarter of 2022.
Jay C. Horgen, President and Chief
Executive Officer of AMG, said:“AMG reported strong
results in the first quarter of 2022, with growth of 9% in Economic
Earnings per Share relative to the year-ago quarter, driven by new
investments, strong Affiliate performance, and share repurchases.
Net client cash flows reflected ongoing strength in alternative and
ESG strategies, and excluding certain quantitative strategies, were
again positive for the quarter. Clients recognize that high-quality
active managers are able to navigate volatile markets to deliver
superior outcomes; our Affiliates are positioned to benefit in this
environment, further increasing our business momentum.
“The recently announced strategic combination of BPEA with EQT
marks a successful culmination of AMG's partnership with BPEA, and
we are pleased that our strategic engagement enhanced the firm's
ability to accomplish an outcome that will benefit all
stakeholders. At the closing of the transaction, AMG will receive
cash and stock valued at approximately $1 billion,* further
enhancing our financial flexibility and ability to invest in
secular growth areas. Earlier in the quarter, in line with our
focus on growth areas, we made an additional investment in
Systematica Investments, a leading liquid alternatives firm
well-positioned to deliver portfolio diversification and
uncorrelated investment outcomes to clients across market
cycles.
“Looking ahead, the current environment presents unique
opportunities for continued growth given the diversity of AMG's
business, the quality of our Affiliates, and our strong and
flexible capital position. As AMG's partnership approach continues
to resonate strongly with the highest-quality partner-owned
investment firms, we are confident in our ability to generate
additional shareholder value over time through the disciplined
execution of our strategy—including through investments in new and
existing Affiliates, as well as our value-added strategic
capabilities."
FINANCIAL
HIGHLIGHTS |
|
|
Three Months Ended |
|
(in millions, except as noted
and per share data) |
|
|
3/31/2021 |
|
3/31/2022 |
|
Operating Performance
Measures |
|
|
|
|
|
|
AUM (at period end, in billions) |
|
|
$ |
738.0 |
|
|
$ |
776.7 |
|
|
Average AUM (in billions) |
|
|
|
733.6 |
|
|
|
787.3 |
|
|
Net client cash flows (in billions) |
|
|
|
(7.5 |
) |
|
|
(2.2 |
) |
|
Aggregate fees |
|
|
|
1,414.4 |
|
|
|
1,330.5 |
|
|
Financial Performance
Measures |
|
|
|
|
|
|
Net income (controlling interest) |
|
|
$ |
149.9 |
|
|
$ |
146.0 |
|
|
Earnings per share (diluted) (1) |
|
|
|
3.41 |
|
|
|
3.44 |
|
|
Supplemental
Performance Measures (2) |
|
|
|
|
|
|
Adjusted EBITDA (controlling interest) |
|
|
$ |
246.8 |
|
|
$ |
255.3 |
|
|
Economic net income (controlling interest) |
|
|
|
184.8 |
|
|
|
190.0 |
|
|
Economic earnings per share |
|
|
|
4.28 |
|
|
|
4.65 |
|
|
For additional information on our Supplemental Performance
Measures, including reconciliations to GAAP, see the Financial
Tables and Notes.
__________________________
* Based on the EQT closing share price on April 29, 2022.
Capital Management During the first quarter of
2022, the Company repurchased approximately $185 million in common
stock and announced a first-quarter cash dividend of $0.01 per
share of common stock, payable May 26, 2022 to stockholders of
record as of the close of business on May 12, 2022.
About AMGAMG is a leading partner to
independent active investment management firms globally. AMG’s
strategy is to generate long‐term value by investing in a diverse
array of high-quality independent partner-owned firms, through a
proven partnership approach, and allocating resources across AMG's
unique opportunity set to the areas of highest growth and return.
AMG’s innovative partnership approach enables each Affiliate’s
management team to own significant equity in their firm while
maintaining operational and investment autonomy. In addition, AMG
offers its Affiliates growth capital, global distribution, and
other strategic value-added capabilities, which enhance the
long-term growth of these independent businesses, and enable them
to align equity incentives across generations of principals to
build enduring franchises. As of March 31, 2022, AMG’s
aggregate assets under management were approximately $777 billion
across a broad range of return-oriented strategies. For more
information, please visit the Company’s website at www.amg.com.
Conference Call, Replay and Presentation
InformationA conference call will be held with AMG’s
management at 8:30 a.m. Eastern time today. Parties interested in
listening to the conference call should dial 1-877-407-8291 (U.S.
calls) or 1-201-689-8345 (non-U.S. calls) shortly before the call
begins.
The conference call will also be available for replay beginning
approximately one hour after the conclusion of the call. To hear a
replay of the call, please dial 1-877-660-6853 (U.S. calls) or
1-201-612-7415 (non-U.S. calls) and provide conference ID 13729438.
The live call and replay of the session and a presentation
highlighting the Company's performance can also be accessed via
AMG’s website at https://ir.amg.com/.
Investor Relations:Anjali Aggarwal
Media Relations:
Ann Imes
+1 (617) 747-3300ir@amg.compr@amg.com
Financial Tables Follow
ASSETS
UNDER MANAGEMENT - STATEMENT OF CHANGES (in
billions) |
|
BY STRATEGY - QUARTER
TO DATE |
|
Alternatives |
|
|
Global Equities |
|
|
U.S. Equities |
|
|
Multi-Asset & Fixed
Income |
|
|
Total |
|
AUM, December 31, 2021 |
$ |
238.2 |
|
$ |
277.5 |
|
$ |
170.7 |
|
$ |
127.4 |
|
$ |
813.8 |
|
Client cash inflows and commitments |
|
10.6 |
|
|
6.7 |
|
|
8.5 |
|
|
5.2 |
|
|
31.0 |
|
Client cash outflows |
|
(4.5 |
) |
|
(13.0 |
) |
|
(10.4 |
) |
|
(5.3 |
) |
|
(33.2 |
) |
Net client cash
flows |
|
6.1 |
|
|
(6.3 |
) |
|
(1.9 |
) |
|
(0.1 |
) |
|
(2.2 |
) |
Market changes |
|
4.0 |
|
|
(19.7 |
) |
|
(9.7 |
) |
|
(5.8 |
) |
|
(31.2 |
) |
Foreign exchange |
|
(1.0 |
) |
|
(1.1 |
) |
|
(0.1 |
) |
|
0.2 |
|
|
(2.0 |
) |
Realizations and distributions (net) |
|
(1.3 |
) |
|
— |
|
|
— |
|
|
(0.1 |
) |
|
(1.4 |
) |
Other |
|
0.1 |
|
|
(0.2 |
) |
|
— |
|
|
(0.2 |
) |
|
(0.3 |
) |
AUM, March 31,
2022 |
$ |
246.1 |
|
$ |
250.2 |
|
$ |
159.0 |
|
$ |
121.4 |
|
$ |
776.7 |
|
BY CLIENT TYPE - QUARTER TO DATE |
|
Institutional |
|
|
Retail |
|
|
High Net Worth |
|
|
Total |
|
AUM, December 31,
2021 |
$ |
413.8 |
|
$ |
252.5 |
|
$ |
147.5 |
|
$ |
813.8 |
|
Client cash inflows and commitments |
|
12.1 |
|
|
12.9 |
|
|
6.0 |
|
|
31.0 |
|
Client cash outflows |
|
(12.1 |
) |
|
(15.6 |
) |
|
(5.5 |
) |
|
(33.2 |
) |
Net client cash
flows |
|
0.0 |
|
|
(2.7 |
) |
|
0.5 |
|
|
(2.2 |
) |
Market changes |
|
(8.3 |
) |
|
(15.4 |
) |
|
(7.5 |
) |
|
(31.2 |
) |
Foreign exchange |
|
(0.9 |
) |
|
(1.2 |
) |
|
0.1 |
|
|
(2.0 |
) |
Realizations and distributions (net) |
|
(1.0 |
) |
|
— |
|
|
(0.4 |
) |
|
(1.4 |
) |
Other |
|
1.3 |
|
|
(2.6 |
) |
|
1.0 |
|
|
(0.3 |
) |
AUM, March 31,
2022 |
$ |
404.9 |
|
$ |
230.6 |
|
$ |
141.2 |
|
$ |
776.7 |
|
CONSOLIDATED STATEMENTS OF INCOME |
|
|
|
Three Months Ended |
(in millions, except per share
data) |
|
3/31/2021 |
|
3/31/2022 |
|
|
|
|
|
Consolidated revenue |
|
$ |
559.1 |
|
|
$ |
607.3 |
|
|
|
|
|
|
Consolidated
expenses: |
|
|
|
|
Compensation and related expenses |
|
|
246.9 |
|
|
|
255.0 |
|
Selling, general and administrative |
|
|
78.8 |
|
|
|
89.4 |
|
Intangible amortization and impairments |
|
|
7.5 |
|
|
|
12.6 |
|
Interest expense |
|
|
27.5 |
|
|
|
29.1 |
|
Depreciation and other amortization |
|
|
4.3 |
|
|
|
3.4 |
|
Other expenses (net) |
|
|
13.5 |
|
|
|
5.6 |
|
Total consolidated
expenses |
|
|
378.5 |
|
|
|
395.1 |
|
|
|
|
|
|
Equity method income
(net)(3) |
|
|
51.7 |
|
|
|
48.6 |
|
|
|
|
|
|
Investment and other
income |
|
|
32.3 |
|
|
|
13.6 |
|
Income before income
taxes |
|
|
264.6 |
|
|
|
274.4 |
|
|
|
|
|
|
Income tax expense |
|
|
50.5 |
|
|
|
55.7 |
|
Net
income |
|
|
214.1 |
|
|
|
218.7 |
|
|
|
|
|
|
Net income (non-controlling
interests) |
|
|
(64.2 |
) |
|
|
(72.7 |
) |
Net income
(controlling interest) |
|
$ |
149.9 |
|
|
$ |
146.0 |
|
|
|
|
|
|
Average shares outstanding
(basic) |
|
|
42.6 |
|
|
|
39.7 |
|
Average shares outstanding
(diluted) |
|
|
45.4 |
|
|
|
46.9 |
|
|
|
|
|
|
Earnings per share
(basic) |
|
$ |
3.52 |
|
|
$ |
3.68 |
|
Earnings per share
(diluted)(1) |
|
$ |
3.41 |
|
|
$ |
3.44 |
|
RECONCILIATIONS OF SUPPLEMENTAL PERFORMANCE
MEASURES(2) |
|
|
|
Three Months Ended |
(in millions, except per share
data) |
|
3/31/2021 |
|
3/31/2022 |
|
|
|
|
|
Net income (controlling interest) |
|
$ |
149.9 |
|
|
$ |
146.0 |
|
Intangible amortization and impairments |
|
|
40.6 |
|
|
|
31.9 |
|
Intangible-related deferred taxes |
|
|
8.9 |
|
|
|
15.7 |
|
Other economic items |
|
|
(14.6 |
) |
|
|
(3.6 |
) |
Economic net income
(controlling interest) |
|
$ |
184.8 |
|
|
$ |
190.0 |
|
|
|
|
|
|
Average shares outstanding
(adjusted diluted) |
|
|
43.2 |
|
|
|
40.9 |
|
Economic earnings per
share |
|
$ |
4.28 |
|
|
$ |
4.65 |
|
|
|
|
|
|
Net income
(controlling interest) |
|
$ |
149.9 |
|
|
$ |
146.0 |
|
Interest expense |
|
|
27.5 |
|
|
|
29.1 |
|
Income taxes |
|
|
48.4 |
|
|
|
50.5 |
|
Intangible amortization and impairments |
|
|
40.6 |
|
|
|
31.9 |
|
Other items |
|
|
(19.6 |
) |
|
|
(2.2 |
) |
Adjusted EBITDA
(controlling interest) |
|
$ |
246.8 |
|
|
$ |
255.3 |
|
See Notes for additional information.
CONSOLIDATED BALANCE SHEET |
|
|
|
Period Ended |
(in millions) |
|
12/31/2021 |
|
3/31/2022 |
|
|
|
|
|
Assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
908.5 |
|
|
$ |
501.0 |
|
Receivables |
|
|
419.2 |
|
|
|
465.8 |
|
Investments in marketable securities |
|
|
78.5 |
|
|
|
81.1 |
|
Goodwill |
|
|
2,689.2 |
|
|
|
2,683.7 |
|
Acquired client relationships (net) |
|
|
1,966.4 |
|
|
|
1,943.3 |
|
Equity method investments in Affiliates (net) |
|
|
2,134.4 |
|
|
|
2,195.2 |
|
Fixed assets (net) |
|
|
73.9 |
|
|
|
73.9 |
|
Other investments |
|
|
375.2 |
|
|
|
394.1 |
|
Other assets |
|
|
231.1 |
|
|
|
232.7 |
|
Total assets |
|
$ |
8,876.4 |
|
|
$ |
8,570.8 |
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
Payables and accrued liabilities |
|
$ |
789.1 |
|
|
$ |
551.6 |
|
Debt(4) |
|
|
2,490.4 |
|
|
|
2,577.9 |
|
Deferred income tax liability (net) |
|
|
503.2 |
|
|
|
485.7 |
|
Other liabilities |
|
|
709.2 |
|
|
|
723.6 |
|
Total liabilities |
|
|
4,491.9 |
|
|
|
4,338.8 |
|
|
|
|
|
|
Redeemable non-controlling
interests |
|
|
673.9 |
|
|
|
638.8 |
|
Equity: |
|
|
|
|
Common stock |
|
|
0.6 |
|
|
|
0.6 |
|
Additional paid-in capital |
|
|
651.6 |
|
|
|
557.4 |
|
Accumulated other comprehensive loss |
|
|
(87.9 |
) |
|
|
(93.2 |
) |
Retained earnings |
|
|
4,569.5 |
|
|
|
4,719.4 |
|
|
|
|
5,133.8 |
|
|
|
5,184.2 |
|
Less:
treasury stock, at cost |
|
|
(2,347.4 |
) |
|
|
(2,515.4 |
) |
Total stockholders’ equity |
|
|
2,786.4 |
|
|
|
2,668.8 |
|
Non-controlling interests |
|
|
924.2 |
|
|
|
924.4 |
|
Total equity |
|
|
3,710.6 |
|
|
|
3,593.2 |
|
Total liabilities and equity |
|
$ |
8,876.4 |
|
|
$ |
8,570.8 |
|
See Notes for additional information.
Notes |
|
|
|
|
|
|
(1) |
|
Earnings per share
(diluted) adjusts for the dilutive effect of the potential issuance
of incremental shares of our common stock. |
|
|
|
|
|
|
|
|
Prior to 2022, we
excluded any potential dilutive effect from possible share
settlements of Redeemable non-controlling interests as we intend to
settle in cash. Upon adoption of Accounting Standard Update
2020-06, Debt with Conversion and Other Options and Derivatives and
Hedging - Contracts in Entity’s Own Equity ("ASU 2020-06"), we must
assume the settlement of all of our Redeemable non-controlling
interests using the maximum number of shares permitted under our
arrangements. The issuance of shares and the related income
acquired are excluded from the calculation if an assumed purchase
of Redeemable non-controlling interests would be anti-dilutive to
diluted earnings per share. |
|
|
|
|
|
|
|
|
We had junior
convertible securities outstanding during the periods presented and
are required to apply the if-converted method to these securities
in our calculation of Earnings per share (diluted). Under the
if-converted method, shares that are issuable upon conversion are
deemed outstanding, regardless of whether the securities are
contractually convertible into our common stock at that time. For
this calculation, the interest expense (net of tax) attributable to
these dilutive securities is added back to Net income (controlling
interest), reflecting the assumption that the securities have been
converted. Issuable shares for these securities and related
interest expense are excluded from the calculation if an assumed
conversion would be anti-dilutive to diluted earnings per
share. |
|
|
|
|
|
|
|
|
The following
table provides a reconciliation of the numerator and denominator
used in the calculation of basic and diluted earnings per
share: |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
(in millions) |
|
3/31/2021 |
|
3/31/2022 |
|
|
|
Numerator |
|
|
|
|
|
|
|
Net income (controlling interest) |
|
$ |
149.9 |
|
$ |
146.0 |
|
|
|
Income from hypothetical
settlement of Redeemable non-controlling interests, net of
taxes |
|
|
— |
|
|
11.7 |
|
|
|
Interest expense on junior
convertible securities, net of taxes |
|
|
4.7 |
|
|
3.8 |
|
|
|
Net income (controlling
interest), as adjusted |
|
$ |
154.6 |
|
$ |
161.5 |
|
|
|
Denominator |
|
|
|
|
|
|
|
Average shares outstanding
(basic) |
|
|
42.6 |
|
|
39.7 |
|
|
|
Effect of dilutive
instruments: |
|
|
|
|
|
|
|
Stock options and restricted stock units |
|
|
0.6 |
|
|
1.2 |
|
|
|
Hypothetical issuance of shares to settle Redeemable
non-controlling interests |
|
|
— |
|
|
4.0 |
|
|
|
Junior convertible securities |
|
|
2.2 |
|
|
2.0 |
|
|
|
Average shares outstanding
(diluted) |
|
|
45.4 |
|
|
46.9 |
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
As supplemental
information, we provide non-GAAP performance measures of Adjusted
EBITDA (controlling interest), Economic net income (controlling
interest), and Economic earnings per share. Management utilizes
these non-GAAP performance measures to assess our performance
before our share of certain non-cash expenses and to improve
comparability between periods. |
|
|
|
|
|
Adjusted EBITDA
(controlling interest) represents our performance before our share
of interest expense, income taxes, depreciation, amortization,
impairments, certain Affiliate equity expenses, certain gains and
losses, including on general partner and seed capital investments,
certain non-income based taxes, and adjustments to our contingent
payment obligations. We believe that many investors use this
non-GAAP measure when assessing the financial performance of
companies in the investment management industry. |
|
|
|
|
|
Under our Economic
net income (controlling interest) definition, we add to Net income
(controlling interest) our share of pre-tax intangible amortization
and impairments (including the portion attributable to equity
method investments in Affiliates), deferred taxes related to
intangible assets, and other economic items which include non-cash
imputed interest (principally related to the accounting for
convertible securities and contingent payment obligations), certain
Affiliate equity expenses, and certain gains and losses, including
on general partner and seed capital investments. Economic net
income (controlling interest) is used by management and our Board
of Directors as our principal performance benchmark, including as
one of the measures for aligning executive compensation with
stockholder value. |
|
|
|
|
|
Economic earnings
per share represents Economic net income (controlling interest)
divided by the Average shares outstanding (adjusted diluted). In
this calculation, we exclude the potential shares issued upon
settlement of Redeemable non-controlling interests from Average
shares outstanding (adjusted diluted) because we intend to settle
those obligations without issuing shares, consistent with all prior
Affiliate equity purchase transactions. The potential share
issuance in connection with our junior convertible securities is
measured using a “treasury stock” method. Under this method, only
the net number of shares of common stock equal to the value of the
junior convertible securities in excess of par, if any, are deemed
to be outstanding. We believe the inclusion of net shares under a
treasury stock method best reflects the benefit of the increase in
available capital resources (which could be used to repurchase
shares of common stock) that occurs when these securities are
converted and we are relieved of our debt obligation. |
|
|
The following
table provides a reconciliation of Average shares outstanding
(adjusted diluted): |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
(in millions) |
|
3/31/2021 |
|
3/31/2022 |
|
|
|
Average shares outstanding (diluted) |
|
|
45.4 |
|
|
|
46.9 |
|
|
|
|
Hypothetical issuance of shares to settle Redeemable
non-controlling interests |
|
|
— |
|
|
|
(4.0 |
) |
|
|
|
Junior convertible securities |
|
|
(2.2 |
) |
|
|
(2.0 |
) |
|
|
|
Average shares outstanding
(adjusted diluted) |
|
|
43.2 |
|
|
|
40.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These non-GAAP
performance measures are provided in addition to, but not as a
substitute for, Net income (controlling interest), Earnings per
share, or other GAAP performance measures. For additional
information on our non-GAAP measures, see our Annual and Quarterly
Reports on Form 10-K and 10-Q, respectively, which are accessible
on the SEC’s website at www.sec.gov. |
|
|
|
(3) |
|
The following table
presents equity method earnings and equity method intangible
amortization and impairments, which in aggregate form Equity method
income (net): |
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
(in millions) |
|
3/31/2021 |
|
|
3/31/2022 |
|
|
|
Equity method earnings |
|
$ |
86.9 |
|
|
$ |
71.9 |
|
|
|
|
Equity method intangible
amortization |
|
|
(35.2 |
) |
|
|
(23.3 |
) |
|
|
|
Equity method intangible
impairments |
|
|
— |
|
|
|
— |
|
|
|
|
Equity method income (net) |
|
$ |
51.7 |
|
|
$ |
48.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4) |
|
Effective January 1, 2022, the Company adopted ASU
2020-06, which impacted the treatment of our junior convertible
securities. The adoption resulted in increases in Debt and
beginning Retained earnings of $101.5 million and $4.5 million,
respectively, and decreases in Additional paid-in-capital and
Deferred income tax liability (net) of $80.6 million and $25.4
million, respectively. |
Forward-Looking Statements and Other
Matters
Certain matters discussed in this press release may constitute
forward-looking statements within the meaning of the federal
securities laws. These statements include, but are not limited to,
statements related to our expectations regarding the performance of
our business, our financial results, our liquidity and capital
resources, and other non-historical statements. You can identify
these forward-looking statements by the use of words such as
“outlook,” “guidance,” “believes,” “expects,” “potential,”
"preliminary," “continues,” “may,” “will,” “should,” “seeks,”
“approximately,” “predicts,” “projects,” “positioned,” “prospects,”
“intends,” “plans,” “estimates,” “pending investments,”
“anticipates,” or the negative version of these words or other
comparable words. Actual results and the timing of certain events
could differ materially from those projected in or contemplated by
the forward-looking statements due to a number of factors,
including changes in the securities or financial markets or in
general economic conditions, pandemics and related changes in the
global economy, capital markets and the asset management industry,
the availability of equity and debt financing, competition for
acquisitions of interests in investment management firms,
uncertainties relating to closing of pending investments or
transactions and potential changes in the anticipated benefits
thereof, the investment performance and growth rates of our
Affiliates and their ability to effectively market their investment
strategies, the mix of Affiliate contributions to our earnings, and
other risks, uncertainties, and assumptions, including those
described under the section entitled “Risk Factors” in our most
recent Annual Report on Form 10-K and Quarterly Reports on Form
10-Q. Such factors may be updated from time to time in our periodic
filings with the SEC. These factors should not be construed as
exhaustive and should be read in conjunction with the other
cautionary statements that are included in this release and in our
filings with the SEC. We undertake no obligation to publicly update
or review any forward-looking statements, whether as a result of
new information, future developments, or otherwise, except as
required by applicable law.
From time to time, AMG may use its website as a distribution
channel of material Company information. AMG routinely posts
financial and other important information regarding the Company in
the Investor Relations section of its website at www.amg.com and
encourages investors to consult that section regularly.
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