Company reports EPS of $3.25, Economic EPS of $4.45 in the second quarter of 2023
- Announced partnership with Forbion, a leading European life sciences venture capital and growth equity firm
- Net Income (controlling interest) of $125 million, Economic Net Income of $167 million
- Economic Earnings per share of $4.45 increased 10% year-over-year
- Completed $225 million accelerated share repurchase program and repurchased an additional $44 million of common stock
- Gross proceeds of approximately $294 million will be received upon the closing of the Veritable transaction
WEST PALM BEACH, Fla., July 26, 2023 (GLOBE NEWSWIRE) -- Affiliated Managers Group, Inc. (: AMG) today reported its financial and operating results for the second quarter and six months ended June 30, 2023.
Jay C. Horgen, President and Chief Executive Officer of AMG, said:
“In the second quarter, AMG reported an increase of 10% in Economic Earnings per share relative to the year-ago quarter, reflecting the disciplined execution of our capital allocation strategy across both growth investments and share repurchases. AMG’s focus on investing in areas of secular demand continues to diversify and enhance the long-term growth prospects of our business.
“Recently, we announced our partnership with Forbion, a leading European venture capital and growth equity firm, broadening our participation in both private markets and life sciences, a fast-growing sector with increasing client allocations. AMG’s unique approach continues to resonate with the highest quality independent firms as they seek a strategic, engaged partner that can enhance their long-term growth potential. Given the increasing demand for our solution set in a favorable transaction environment, we see a significant opportunity to establish new partnerships.
“Our excellent capital position — which will be further enhanced by the proceeds from the recently announced Veritable transaction — and distinct competitive advantages, honed over 30 years, continue to differentiate AMG. We remain confident in our ability to generate significant additional shareholder value over time, as we invest in new and existing Affiliates while also returning excess capital to shareholders within our disciplined capital allocation framework.”
| FINANCIAL HIGHLIGHTS | Three Months Ended | Six Months Ended | ||||||||||||||
| (in millions, except as noted and per share data) | 6/30/2022 | 6/30/2023 | 6/30/2022 | 6/30/2023 | ||||||||||||
| Operating Performance Measures | ||||||||||||||||
| AUM (at period end, in billions) | $ | 690.9 | $ | 673.9 | $ | 690.9 | $ | 673.9 | ||||||||
| Average AUM (in billions) | 728.1 | 668.9 | 757.7 | 664.7 | ||||||||||||
| Net client cash flows (in billions) | (11.4 | ) | (10.5 | ) | (13.6 | ) | (13.7 | ) | ||||||||
| Aggregate fees | 1,179.6 | 1,003.1 | 2,510.0 | 2,508.2 | ||||||||||||
| Financial Performance Measures | ||||||||||||||||
| Net income (controlling interest) | $ | 109.4 | $ | 125.3 | $ | 255.4 | $ | 259.8 | ||||||||
| Earnings per share (diluted)(1) | 2.68 | 3.25 | 6.10 | 6.74 | ||||||||||||
| Supplemental Performance Measures(2) | ||||||||||||||||
| Adjusted EBITDA (controlling interest) | $ | 214.9 | $ | 214.3 | $ | 454.9 | $ | 431.1 | ||||||||
| Economic net income (controlling interest) | 161.6 | 167.3 | 340.1 | 325.4 | ||||||||||||
| Economic earnings per share | 4.06 | 4.45 | 8.41 | 8.63 | ||||||||||||
For additional information on our Supplemental Performance Measures, including the impact of a definition change on Adjusted EBITDA (controlling interest), Economic net income (controlling interest), and Economic earnings per share and reconciliations to GAAP, see the Financial Tables and Notes.
Capital Management
During the second quarter of 2023, the Company completed the execution of the $225 million accelerated share repurchase program (the “ASR”) entered into at year-end 2022, and repurchased an additional $44 million in common stock, bringing total year-to-date share repurchases, inclusive of the ASR, to approximately $269 million. The Company also announced a second-quarter cash dividend of $0.01 per share of common stock, payable August 21, 2023 to stockholders of record as of the close of business on August 7, 2023.
About AMG
AMG is a leading partner to independent 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, 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 June 30, 2023, AMG’s aggregate assets under management were approximately $674 billion across a broad range of differentiated investment strategies. For more information, please visit the Company’s website at www.amg.com.
Conference Call, Replay and Presentation Information
A 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 13739862. 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/.
Financial Tables Follow
ASSETS UNDER MANAGEMENT – STATEMENT OF CHANGES (in billions)
BY STRATEGY – QUARTER TO DATE AlternativesGlobal EquitiesU.S. EquitiesMulti-Asset &Fixed IncomeTotalAUM, March 31, 2023 $223.7 $192.6 $137.0 $114.7 $668.0 Client cash inflows and commitments 5.6 4.5 4.8 4.7 19.6 Client cash outflows (5.3) (12.2) (7.9) (4.7) (30.1)Net client cash flows 0.3 (7.7) (3.1) (0.0) (10.5)Market changes 1.7 4.4 6.5 2.2 14.8 Foreign exchange 1.1 1.6 0.4 0.2 3.3 Realizations and distributions (net) (1.2) (0.1) (0.0) (0.1) (1.4)Other 0.1 (0.3) (0.1) 0.0 (0.3)AUM, June 30, 2023 $225.7 $190.5 $140.7 $117.0 $673.9
Fixed IncomeTotalAUM, December 31, 2022 $220.9 $186.1 $133.3 $110.5 $650.8 Client cash inflows and commitments 15.7 9.3 9.8 9.7 44.5 Client cash outflows (11.6) (22.1) (15.2) (9.3) (58.2)Net client cash flows 4.1 (12.8) (5.4) 0.4 (13.7)Market changes 1.7 15.2 12.3 5.8 35.0 Foreign exchange 1.9 2.4 0.5 0.2 5.0 Realizations and distributions (net) (2.7) (0.1) (0.0) (0.1) (2.9)Other (0.2) (0.3) (0.0) 0.2 (0.3)AUM, June 30, 2023 $225.7 $190.5 $140.7 $117.0 $673.9
WorthTotalAUM, March 31, 2023 $337.9 $196.6 $133.5 $668.0 Client cash inflows and commitments 7.4 7.3 4.9 19.6 Client cash outflows (13.5) (10.8) (5.8) (30.1)Net client cash flows (6.1) (3.5) (0.9) (10.5)Market changes 6.1 5.9 2.8 14.8 Foreign exchange 1.9 1.1 0.3 3.3 Realizations and distributions (net) (0.8) (0.6) (0.0) (1.4)Other 0.2 (0.3) (0.2) (0.3)AUM, June 30, 2023 $339.2 $199.2 $135.5 $673.9
WorthTotalAUM, December 31, 2022 $333.5 $188.9 $128.4 $650.8 Client cash inflows and commitments 16.8 17.5 10.2 44.5 Client cash outflows (25.2) (22.4) (10.6) (58.2)Net client cash flows (8.4) (4.9) (0.4) (13.7)Market changes 13.4 14.0 7.6 35.0 Foreign exchange 2.8 1.9 0.3 5.0 Realizations and distributions (net) (2.1) (0.7) (0.1) (2.9)Other (0.0) 0.0 (0.3) (0.3)AUM, June 30, 2023 $339.2 $199.2 $135.5 $673.9
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended(in millions, except per share data) 6/30/2022 6/30/2023 Consolidated revenue $604.1 $512.5 Consolidated expenses: Compensation and related expenses 268.2 228.9 Selling, general and administrative 93.1 85.2 Intangible amortization and impairments 12.5 12.5 Interest expense 27.3 30.9 Depreciation and other amortization 4.7 3.3 Other expenses (net) (5.2) 13.8 Total consolidated expenses 400.6 374.6 Equity method income (net)(3) 30.5 55.8 Investment and other income (expense) (22.0) 26.5 Income before income taxes 212.0 220.2 Income tax expense 38.0 32.8 Net income 174.0 187.4 Net income (non-controlling interests) (64.6) (62.1)Net income (controlling interest) $109.4 $125.3 Average shares outstanding (basic) 38.7 35.9 Average shares outstanding (diluted) 44.5 42.1 Earnings per share (basic) $2.83 $3.49 Earnings per share (diluted)(1) $2.68 $3.25
RECONCILIATIONS OF SUPPLEMENTAL PERFORMANCE MEASURES
(2) | Three Months Ended | ||||||||
| (in millions, except per share data) | 6/30/2022 | 6/30/2023 | ||||||
| Net income (controlling interest) | $ | 109.4 | $ | 125.3 | ||||
| Intangible amortization and impairments | 43.1 | 29.4 | ||||||
| Intangible-related deferred taxes | 12.8 | 15.0 | ||||||
| BPEA Transaction(4) | — | (1.1 | ) | |||||
| Other economic items | (3.7 | ) | (1.3 | ) | ||||
| Economic net income (controlling interest) | $ | 161.6 | $ | 167.3 | ||||
| Average shares outstanding (adjusted diluted) | 39.9 | 37.6 | ||||||
| Economic earnings per share | $ | 4.06 | $ | 4.45 | ||||
| Net income (controlling interest) | $ | 109.4 | $ | 125.3 | ||||
| Interest expense | 27.3 | 30.9 | ||||||
| Income taxes | 35.9 | 31.6 | ||||||
| Intangible amortization and impairments | 43.1 | 29.4 | ||||||
| BPEA Transaction(4) | — | (1.4 | ) | |||||
| Other items | (0.8 | ) | (1.5 | ) | ||||
| Adjusted EBITDA (controlling interest) | $ | 214.9 | $ | 214.3 | ||||
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended(in millions, except per share data) 6/30/2022 6/30/2023 Consolidated revenue $1,211.4 $1,029.9 Consolidated expenses: Compensation and related expenses 523.2 451.2 Selling, general and administrative 182.6 182.3 Intangible amortization and impairments 25.0 25.0 Interest expense 56.4 61.3 Depreciation and other amortization 8.1 7.0 Other expenses (net) 0.4 28.3 Total consolidated expenses 795.7 755.1 Equity method income (net)(3) 79.1 114.5 Investment and other income (expense) (8.4) 64.3 Income before income taxes 486.4 453.6 Income tax expense 93.8 77.7 Net income 392.6 375.9 Net income (non-controlling interests) (137.2) (116.1)Net income (controlling interest) $255.4 $259.8 Average shares outstanding (basic) 39.2 35.9 Average shares outstanding (diluted) 48.1 40.2 Earnings per share (basic) $6.52 $7.23 Earnings per share (diluted)(1) $6.10 $6.74
RECONCILIATIONS OF SUPPLEMENTAL PERFORMANCE MEASURES
(2) | Six Months Ended | ||||||||
| (in millions, except per share data) | 6/30/2022 | 6/30/2023 | ||||||
| Net income (controlling interest) | $ | 255.4 | $ | 259.8 | ||||
| Intangible amortization and impairments | 75.0 | 58.8 | ||||||
| Intangible-related deferred taxes | 28.5 | 29.8 | ||||||
| BPEA Transaction(4) | — | (17.4 | ) | |||||
| Other economic items | (18.8 | ) | (5.6 | ) | ||||
| Economic net income (controlling interest) | $ | 340.1 | $ | 325.4 | ||||
| Average shares outstanding (adjusted diluted) | 40.5 | 37.7 | ||||||
| Economic earnings per share | $ | 8.41 | $ | 8.63 | ||||
| Net income (controlling interest) | $ | 255.4 | $ | 259.8 | ||||
| Interest expense | 56.4 | 61.4 | ||||||
| Income taxes | 86.4 | 74.1 | ||||||
| Intangible amortization and impairments | 75.0 | 58.8 | ||||||
| BPEA Transaction(4) | — | (23.0 | ) | |||||
| Other items | (18.3 | ) | 0.0 | |||||
| Adjusted EBITDA (controlling interest) | $ | 454.9 | $ | 431.1 | ||||
See Notes for additional information.
CONSOLIDATED BALANCE SHEET
Period Ended(in millions) 12/31/2022 6/30/2023 Assets Cash and cash equivalents $429.2 $785.5 Receivables 316.0 487.1 Investments in marketable securities 716.9 444.2 Goodwill 2,648.7 2,659.6 Acquired client relationships (net) 1,876.0 1,863.1 Equity method investments in Affiliates (net) 2,139.5 1,943.8 Fixed assets (net) 68.5 66.3 Other investments 421.6 457.0 Other assets 264.6 259.5 Total assets $8,881.0 $8,966.1 Liabilities and Equity Payables and accrued liabilities $778.3 $602.5 Debt 2,535.3 2,536.4 Deferred income tax liability (net) 464.7 487.6 Other liabilities 461.7 470.3 Total liabilities 4,240.0 4,096.8 Redeemable non-controlling interests 465.4 500.9 Equity: Common stock 0.6 0.6 Additional paid-in capital 695.5 651.9 Accumulated other comprehensive loss (203.4) (161.2)Retained earnings 5,718.2 5,977.2 6,210.9 6,468.5 Less: treasury stock, at cost (2,980.6) (3,070.5)Total stockholders’ equity 3,230.3 3,398.0 Non-controlling interests 945.3 970.4 Total equity 4,175.6 4,368.4 Total liabilities and equity $8,881.0 $8,966.1Notes
(1)Earnings per share (diluted) adjusts for the dilutive effect of the potential issuance of incremental shares of our common stock. We 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 are required to apply the if-converted method to our outstanding junior convertible securities when calculating 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:Under our Economic net income (controlling interest) definition, we adjust Net income (controlling interest) for 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, gains and losses related to the BPEA Transaction, net of tax, and other economic items which include gains and losses related to contingent payment obligations, tax windfalls and shortfalls from share-based compensation, certain Affiliate equity activity, unrealized gains and losses on seed capital, general partner commitments, and other strategic investments, and realized economic gains and losses related to these seed capital, general partner commitments, and other strategic 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 our 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):
