Artisan Partners(APAM) - 2024 Q1 - Quarterly Report

Assets Under Management (AUM) - Assets under management increased to $160.4 billion, up$ 10.2 billion (7%) from $150.2 billion at December 31, 2023, driven by$ 10.8 billion of market appreciation, partially offset by net client cash outflows of $0.5 billion[84] - Average assets under management for Q1 2024 were$ 154.2 billion, a 14% increase from $135.4 billion in Q1 2023 and a 10% increase from$ 140.3 billion in Q4 2023[84] - Total assets under management increased to $160.384 billion as of March 31, 2024, up from$ 138.498 billion in the same period last year[97][98] - Total assets under management increased to $160.4 billion as of March 31, 2024, up from$ 150.2 billion at the beginning of the quarter, driven by investment returns and net client cash flows[102] - Artisan Funds & Artisan Global Funds AUM increased to $77.414 billion, up from$ 66.979 billion in Q1 2023[100] - Separate Accounts and Other AUM grew to $82.970 billion, up from$ 71.519 billion in Q1 2023[100] - Global Equity team's AUM increased to $14.259 billion, up from$ 13.725 billion at the start of Q1 2024[97] - Developing World Peak team's AUM grew to $3.837 billion, up from$ 3.453 billion at the start of Q1 2024[97] - Total Assets Under Management across all strategies is $160.384 billion[95] Revenue and Earnings - Revenue for Q1 2024 was$ 264.4 million, a 13% increase from $234.5 million in Q1 2023[84] - Revenues increased 13% to$ 264.4 million for Q1 2024 compared to $234.5 million in Q1 2023, primarily due to a 14% increase in average assets under management[104] - Earnings per share were$ 0.84 (basic and diluted) and $0.76 (adjusted) for Q1 2024[84] - Net income attributable to Artisan Partners Asset Management Inc. increased 17% to$ 59.5 million in Q1 2024 compared to $50.8 million in Q1 2023[104] - Adjusted net income increased by$ 9.8 million (19%) to $61.6 million for Q1 2024[117] Operating Margin and Expenses - GAAP operating margin was 29.4% for Q1 2024, compared to 29.1% in Q1 2023, while adjusted operating margin was 30.9% in Q1 2024 versus 29.9% in Q1 2023[84] - Adjusted operating margin improved to 30.9% for Q1 2024 from 29.9% in Q1 2023[117] - Compensation and benefits expenses increased 14% to$ 149.9 million, driven by higher incentive compensation and a 4% increase in full-time associates[109] - Other operating expenses increased 6% to $36.8 million, primarily due to higher distribution costs and increased travel expenses[109] Client Cash Flows and Investment Strategies - Net client cash flows were -$ 523 million in Q1 2024, an improvement from - $1,231 million in Q1 2023[89] - Net client cash flows were negative at -$ 523 million for Q1 2024, compared to - $1.231 billion in Q1 2023[97] - Net client cash flows were negative at$ 523 million for the quarter, with equity strategies experiencing outflows of $1.592 billion, partially offset by inflows in fixed income and alternative strategies[102] - 11 of 25 investment strategies had net outflows totaling$ 2.3 billion in Q1 2024, partially offset by $1.8 billion of net inflows across the remaining 14 strategies[92] - Artisan High Income Fund, Artisan International Value Fund, and Artisan International Small-Mid Fund are closed to most new investors as of the filing date[92] - Approximately 15% of assets under management at March 31, 2024 were excluded from performance composites due to client-imposed restrictions or non-USD currency management[92] Investment Performance - Global Opportunities Strategy has$ 22.599 billion in AUM with a 1-year return of 26.43% and a 5-year average annual return of 13.23%[94] - U.S. Mid-Cap Growth Strategy shows $13.771 billion in AUM with a 1-year return of 23.21% and a 5-year average annual return of 12.64%[94] - Non-U.S. Growth Strategy has$ 13.722 billion in AUM with a 1-year return of 17.22% and a 5-year average annual return of 7.92%[94] - International Value Strategy reports $42.956 billion in AUM with a 1-year return of 18.02% and a 5-year average annual return of 12.50%[94] - Global Value Strategy has$ 27.298 billion in AUM with a 1-year return of 25.29% and a 5-year average annual return of 11.21%[94] - Antero Peak Strategy shows $2.039 billion in AUM with a 1-year return of 30.78% and a 5-year average annual return of 14.46%[95] - Non-U.S. Small-Mid Growth Strategy has$ 7.390 billion in AUM with a 1-year return of 8.65% and a 5-year average annual return of 8.94%[95] - Global Unconstrained Strategy reports $596 million in AUM with a 1-year return of 11.74%[95] - Emerging Markets Debt Opportunities Strategy has$ 110 million in AUM with a 1-year return of 15.16%[95] Institutional and Retail Channels - Institutional channel assets under management grew to $101.028 billion, representing 63.0% of total AUM, up from$ 88.204 billion (63.7%) in 2023[98] - Retail channel AUM decreased to $5.562 billion (3.5% of total), down from$ 5.948 billion (4.3%) in Q1 2023[98] - Defined contribution plan clients accounted for approximately 9% of total AUM as of March 31, 2024[98] Management Fees and Performance Fees - Weighted average management fee decreased to 69.1 basis points in Q1 2024 from 70.4 basis points in Q1 2023[89] - Weighted average investment management fee decreased to 69.1 basis points in Q1 2024 from 70.4 basis points in Q1 2023, due to mix and tiered billing structures[107] - Approximately 3% of the $160.4 billion in assets under management as of March 31, 2024 have performance fee billing arrangements[105] - Artisan Funds and Artisan Global Funds accounted for 48% of ending assets under management as of March 31, 2024, with a weighted average management fee of 89.1 basis points[108] Compensation and Incentives - Long-term incentive compensation awards granted in Q1 2024 had a total grant date fair value of$ 59.2 million, consisting of $20.8 million in restricted share-based awards and$ 38.4 million in franchise capital awards[109] - Seed investments totaled $155.5 million as of March 31, 2024, with$ 152.5 million related to long-term incentive compensation plans[119][120] Cash Flow and Financial Position - Net cash provided by operating activities increased to $147.0 million in Q1 2024, up from$ 120.9 million in Q1 2023, driven by higher operating income and changes in working capital[127] - Cash, cash equivalents, and restricted cash increased to $228.6 million as of March 31, 2024, compared to$ 173.1 million as of March 31, 2023[127] - Net cash used in investing activities decreased to $29.1 million in Q1 2024, down from$ 36.2 million in Q1 2023, primarily due to reduced purchases of investment securities and lower capital expenditures[127] - Net cash used in financing activities increased to $63.8 million in Q1 2024, up from$ 54.9 million in Q1 2023, mainly due to higher dividend payments[127] - The deconsolidation of an investment product resulted in a $4.0 million decrease in cash, cash equivalents, and restricted cash in Q1 2024[127] - Cash and cash equivalents increased by$ 43.2 million to $184.2 million as of March 31, 2024[120] - Company has$ 200 million in unsecured notes and $100 million unused revolving credit facility[120] Dividends and Distributions - APAM declared a quarterly dividend of$ 0.68 per share for Class A Common stock in Q1 2024, compared to $0.55 per share in Q1 2023, representing a 23.6% increase[124] - The company expects to pay a quarterly dividend of approximately 80% of the cash generated each quarter, with a variable quarterly dividend of$ 0.61 per share declared for Q1 2024[124] - Total Holdings Partnership Distributions increased to $30.2 million in Q1 2024, up from$ 23.0 million in Q1 2023, reflecting growth in distributions to both limited partners and APAM[123] Tax and Liability - Effective income tax rate decreased slightly to 20.2% for Q1 2024 from 20.6% in Q1 2023[112] - The TRA liability increased to $375.6 million as of March 31, 2024, up from$ 364.0 million at December 31, 2023, with expected payments of $37.2 million in fiscal 2024, of which$ 27.9 million was paid in April 2024[126][128] Non-Operating Income and Investments - Interest income on cash and cash equivalents increased by $1.3 million (260%) to$ 1.8 million for Q1 2024 compared to Q1 2023[111] - Net investment gain of consolidated investment products increased by $4.3 million (29%) to$ 19.2 million for Q1 2024[111] - Total non-operating income increased by $8.9 million (40%) to$ 31.0 million for Q1 2024[111] Accounting and Risk Disclosures - No material changes were reported in the company's critical accounting policies or market risk disclosures compared to the previous year[129][131]