AMG Reports Financial and Operating Results for the First Quarter of 2020
April 27 2020 - 7:03AM
Affiliated Managers Group, Inc. (NYSE: AMG) today reported its
financial and operating results for the first quarter of 2020.
Jay C. Horgen, President and Chief
Executive Officer of AMG, said:“Our most critical focus is
addressing the ongoing impact of the COVID-19 pandemic on our
community and across all aspects of our business — above all, its
effects on the individuals and families at AMG and our Affiliates.
Amid unprecedented market uncertainty and volatility, our business
and Affiliates remain resilient. AMG reported Economic earnings per
share of $3.16 and net client cash flows of $(13.8) billion, driven
by certain quantitative strategies across liquid alternatives and
long-only equities. During the quarter, we continued to execute on
our long-term strategy, and completed an investment in Comvest
Capital Partners, a leading middle-market private equity and
private credit firm, and announced a strategic relationship with
iCapital, a technology-enabled platform delivering alternative
investments to high net worth clients.
“Given the diversity of our independent boutique Affiliates, the
alignment of our Affiliate partners, and our unique partnership
structure, AMG is positioned to not only weather the most
challenging times, but to excel in those periods. As owners of
their businesses, independent active managers are directly aligned
with their clients, and have proven over the long term to
outperform both passive indexing and captive peers, particularly in
periods of market volatility. AMG's business model provides
financial stability amid market and industry headwinds, and with
our strong and flexible balance sheet, we are well-positioned to
invest in attractive growth opportunities to create long-term
shareholder value.”
FINANCIAL
HIGHLIGHTS |
|
Three Months Ended |
(in millions, except as noted
and per share data) |
|
3/31/2019 |
|
3/31/2020 |
Operating Performance
Measures |
|
|
|
|
AUM (at period end, in billions) |
|
$ |
774.2 |
|
|
$ |
599.9 |
|
Average AUM (in billions) |
|
772.6 |
|
|
663.0 |
|
Net client cash flows (in billions) |
|
(7.4 |
) |
|
(13.8 |
) |
Aggregate fees |
|
1,252.0 |
|
|
1,253.1 |
|
Financial Performance
Measures |
|
|
|
|
Net loss (controlling interest) |
|
$ |
(200.8 |
) |
|
$ |
(15.6 |
) |
Loss per share (diluted) |
|
(3.87 |
) |
|
(0.33 |
) |
Supplemental
Performance Measures (1) |
|
|
|
|
Adjusted EBITDA (controlling interest) |
|
$ |
215.6 |
|
|
$ |
200.4 |
|
Economic net income (controlling interest) |
|
169.0 |
|
|
151.3 |
|
Economic earnings per share |
|
3.26 |
|
|
3.16 |
|
For additional information on our Supplemental
Performance Measures, including reconciliations to GAAP, see the
Financial Tables and Notes.
Capital ManagementThe Company announced a
second-quarter cash dividend of $0.01 per common share, payable May
21, 2020 to common stockholders of record as of the close of
business on May 7, 2020. During the first quarter of 2020, the
Company repurchased $70 million in common stock and plans to
reallocate $50 million of capital toward share repurchases, in lieu
of dividend payments, over the balance of 2020.
About AMGAMG is a global asset management
company with equity investments in leading boutique investment
management firms. AMG’s strategy is to generate long‐term value by
investing in leading independent active investment managers,
through a proven partnership approach, and allocating resources
across the Company's unique opportunity set to the areas of highest
growth and return. AMG’s innovative partnership approach allows
each Affiliate’s management team to own significant equity in their
firm while maintaining operational autonomy. In addition, AMG
provides centralized assistance to its Affiliates on strategy,
marketing, distribution, and product development. As of
March 31, 2020, AMG’s aggregate assets under management were
approximately $600 billion, across a broad range of active,
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 13700585.
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: |
Jonathan Freedman |
|
+1 (617) 747-3300 |
|
ir@amg.com |
|
pr@amg.com |
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, 2019 |
$ |
241.2 |
|
|
$ |
274.9 |
|
|
$ |
100.0 |
|
|
$ |
106.4 |
|
|
$ |
722.5 |
|
Client cash inflows and commitments |
8.7 |
|
|
|
8.4 |
|
|
3.4 |
|
|
5.6 |
|
|
26.1 |
|
Client cash outflows |
(11.2 |
) |
|
|
(15.2 |
) |
|
(7.7 |
) |
|
(5.8 |
) |
|
(39.9 |
) |
Net client cash
flows |
(2.5 |
) |
|
|
(6.8 |
) |
|
(4.3 |
) |
|
(0.2 |
) |
|
(13.8 |
) |
New investments |
3.7 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
3.7 |
|
Market changes |
(13.1 |
) |
|
|
(57.9 |
) |
|
(22.5 |
) |
|
(7.4 |
) |
|
(100.9 |
) |
Foreign exchange |
(3.0 |
) |
|
|
(5.8 |
) |
|
(0.7 |
) |
|
(1.7 |
) |
|
(11.2 |
) |
Realizations and distributions (net) |
(0.2 |
) |
|
|
— |
|
|
— |
|
|
(0.1 |
) |
|
(0.3 |
) |
Other |
— |
|
|
|
(0.1 |
) |
|
— |
|
|
— |
|
|
(0.1 |
) |
AUM, March 31,
2020 |
$ |
226.1 |
|
|
$ |
204.3 |
|
|
$ |
72.5 |
|
|
$ |
97.0 |
|
|
$ |
599.9 |
|
BY CLIENT TYPE -
QUARTER TO DATE |
Institutional |
|
|
Retail |
|
|
High NetWorth |
|
|
Total |
|
AUM, December 31, 2019 |
$ |
407.2 |
|
|
$ |
198.1 |
|
|
$ |
117.2 |
|
|
$ |
722.5 |
|
Client cash inflows and commitments |
10.7 |
|
|
10.7 |
|
|
4.7 |
|
|
26.1 |
|
Client cash outflows |
(16.3 |
) |
|
(18.1 |
) |
|
(5.5 |
) |
|
(39.9 |
) |
Net client cash
flows |
(5.6 |
) |
|
(7.4 |
) |
|
(0.8 |
) |
|
(13.8 |
) |
New investments |
3.7 |
|
|
— |
|
|
— |
|
|
3.7 |
|
Market changes |
(51.3 |
) |
|
(36.2 |
) |
|
(13.4 |
) |
|
(100.9 |
) |
Foreign exchange |
(5.9 |
) |
|
(4.5 |
) |
|
(0.8 |
) |
|
(11.2 |
) |
Realizations and distributions (net) |
(0.2 |
) |
|
(0.1 |
) |
|
— |
|
|
(0.3 |
) |
Other |
(0.1 |
) |
|
— |
|
|
— |
|
|
(0.1 |
) |
AUM, March 31,
2020 |
$ |
347.8 |
|
|
$ |
149.9 |
|
|
$ |
102.2 |
|
|
$ |
599.9 |
|
CONSOLIDATED
STATEMENTS OF INCOME |
|
|
|
|
Three Months Ended |
(in millions, except per share
data) |
|
3/31/2019 |
|
3/31/2020 |
|
|
|
|
|
Consolidated revenue |
|
$ |
543.1 |
|
|
$ |
507.3 |
|
|
|
|
|
|
Consolidated
expenses: |
|
|
|
|
Compensation and related expenses |
|
228.2 |
|
|
207.8 |
|
Selling, general and administrative |
|
95.6 |
|
|
90.3 |
|
Intangible amortization and impairments |
|
29.6 |
|
|
20.6 |
|
Interest expense |
|
18.2 |
|
|
19.5 |
|
Depreciation and other amortization |
|
5.2 |
|
|
5.1 |
|
Other expenses (net) |
|
11.0 |
|
|
11.0 |
|
Total consolidated
expenses |
|
387.8 |
|
|
354.3 |
|
|
|
|
|
|
Equity method loss
(net) (2) |
|
(358.1 |
) |
|
(113.2 |
) |
|
|
|
|
|
Investment and other
income |
|
8.0 |
|
|
2.4 |
|
Income (loss) before income
taxes |
|
(194.8 |
) |
|
42.2 |
|
|
|
|
|
|
Income tax expense
(benefit) |
|
(61.8 |
) |
|
2.2 |
|
Net income
(loss) |
|
(133.0 |
) |
|
40.0 |
|
|
|
|
|
|
Net income (non-controlling
interests) |
|
(67.8 |
) |
|
(55.6 |
) |
Net loss (controlling
interest) |
|
$ |
(200.8 |
) |
|
$ |
(15.6 |
) |
|
|
|
|
|
Average shares outstanding
(basic) |
|
51.9 |
|
|
47.8 |
|
Average shares outstanding
(diluted) |
|
51.9 |
|
|
47.8 |
|
|
|
|
|
|
Loss per share
(basic) |
|
$ |
(3.87 |
) |
|
$ |
(0.33 |
) |
Loss per share
(diluted) |
|
$ |
(3.87 |
) |
|
$ |
(0.33 |
) |
RECONCILIATIONS OF
SUPPLEMENTAL PERFORMANCE MEASURES (1) |
|
|
|
|
Three Months Ended |
(in millions, except per share
data) |
|
3/31/2019 |
|
3/31/2020 |
|
|
|
|
|
Net loss (controlling interest) |
|
$ |
(200.8 |
) |
|
$ |
(15.6 |
) |
Intangible amortization and impairments |
|
459.8 |
|
|
195.7 |
|
Intangible-related deferred taxes |
|
(93.8 |
) |
|
(31.0 |
) |
Other economic items |
|
3.8 |
|
|
2.2 |
|
Economic net income
(controlling interest) |
|
$ |
169.0 |
|
|
$ |
151.3 |
|
|
|
|
|
|
Average shares outstanding
(adjusted diluted) |
|
51.9 |
|
|
47.8 |
|
Economic earnings per
share |
|
$ |
3.26 |
|
|
$ |
3.16 |
|
|
|
|
|
|
Net loss (controlling
interest) |
|
$ |
(200.8 |
) |
|
$ |
(15.6 |
) |
Interest expense |
|
18.2 |
|
|
19.5 |
|
Income taxes |
|
(64.8 |
) |
|
0.2 |
|
Intangible amortization and impairments |
|
459.8 |
|
|
195.7 |
|
Other items |
|
3.2 |
|
|
0.6 |
|
Adjusted EBITDA
(controlling interest) |
|
$ |
215.6 |
|
|
$ |
200.4 |
|
See Notes for additional information.
CONSOLIDATED BALANCE
SHEET |
|
|
|
|
Period Ended |
(in millions) |
|
12/31/2019 |
|
3/31/2020 |
|
|
|
|
|
Assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
539.6 |
|
|
$ |
592.2 |
|
Receivables |
|
417.1 |
|
|
437.3 |
|
Investments in marketable securities |
|
59.4 |
|
|
54.6 |
|
Goodwill |
|
2,651.7 |
|
|
2,621.8 |
|
Acquired client relationships (net) |
|
1,182.0 |
|
|
1,133.8 |
|
Equity method investments in Affiliates (net) |
|
2,195.6 |
|
|
2,054.5 |
|
Fixed assets (net) |
|
92.3 |
|
|
88.9 |
|
Other investments |
|
211.8 |
|
|
222.9 |
|
Other assets |
|
304.0 |
|
|
292.1 |
|
Total
assets |
|
$ |
7,653.5 |
|
|
$ |
7,498.1 |
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
Payables and accrued liabilities |
|
$ |
634.6 |
|
|
$ |
414.0 |
|
Debt |
|
1,793.8 |
|
|
2,044.9 |
|
Deferred income tax liability (net) |
|
450.2 |
|
|
393.4 |
|
Other liabilities |
|
359.1 |
|
|
555.1 |
|
Total
liabilities |
|
3,237.7 |
|
|
3,407.4 |
|
|
|
|
|
|
Redeemable non-controlling
interests |
|
916.7 |
|
|
581.8 |
|
Equity: |
|
|
|
|
Common stock |
|
0.6 |
|
|
0.6 |
|
Additional paid-in capital |
|
707.2 |
|
|
860.7 |
|
Accumulated other comprehensive loss |
|
(108.8 |
) |
|
(146.5 |
) |
Retained earnings |
|
3,819.8 |
|
|
3,789.1 |
|
|
|
4,418.8 |
|
|
4,503.9 |
|
Less: treasury stock, at
cost |
|
(1,481.3 |
) |
|
(1,523.9 |
) |
Total stockholders’
equity |
|
2,937.5 |
|
|
2,980.0 |
|
Non-controlling interests |
|
561.6 |
|
|
528.9 |
|
Total
equity |
|
3,499.1 |
|
|
3,508.9 |
|
Total liabilities and
equity |
|
$ |
7,653.5 |
|
|
$ |
7,498.1 |
|
Notes
(1) |
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, gains
and losses on general partner and seed capital investments, and
adjustments to our contingent payment arrangements. 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 (loss) (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
arrangements), certain Affiliate equity expenses, and gains and
losses 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, 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) |
|
3/31/2019 |
|
|
3/31/2020 |
|
Average shares outstanding (diluted) |
|
51.9 |
|
|
|
47.8 |
|
|
Stock options and restricted stock units |
|
0.0 |
|
|
|
0.0 |
|
|
Average shares outstanding
(adjusted diluted) |
|
51.9 |
|
|
|
47.8 |
|
|
|
|
These non-GAAP
performance measures are provided in addition to, but not as a
substitute for, Net income (loss) (controlling interest),
Earnings per share (controlling interest) 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. |
(2) |
The following table presents equity method earnings and equity
method intangible amortization and impairments, which in aggregate
form Equity method loss (net): |
|
|
|
|
|
Three Months Ended |
|
(in millions) |
|
3/31/2019 |
|
3/31/2020 |
|
Equity method earnings |
|
$ |
80.1 |
|
|
$ |
66.1 |
|
|
Equity method intangible
amortization and impairments |
|
(438.2 |
) |
|
(179.3 |
) |
|
Equity method loss (net) |
|
$ |
(358.1 |
) |
|
$ |
(113.2 |
) |
|
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 (including COVID-19) 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, the ability to close pending investments, 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. 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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