01—Abstract
Summary
Summary of the 10-K filed February 24, 2017. Cited figures are marked; the original filing is the authoritative source.
Affiliated Managers Group, Inc. (AMG) in their February 24, 2017, 10-K filing for the fiscal year ending December 31, 2016, highlights a period of significant growth in assets under management, reaching $688.7 billiona, a 13% increase year-over-year.
This growth was driven by strong market performance and strategic investments in new 'Affiliates,' primarily in alternative strategies. Despite an increase in overall assets, the company saw a 12% decrease in revenue from its consolidated Affiliates, largely due to a decline in assets under management within their mutual fund and institutional channels, as well as a reduction in renewal commissions due to regulatory changes in the UK. Net income (controlling interest) saw a 7% decrease to $472.8 millionb, primarily attributed to increased imputed interest expense and contingent payment arrangements.
However, 'Economic Net Income' (a non-GAAP measure) grew by 2% to $703.6 millionc, indicating underlying operational profitability. The company also initiated a quarterly cash dividend program, signaling a commitment to returning capital to shareholders. AMG's business model, which involves taking equity stakes in boutique investment management firms, remains central to its strategy, with a focus on active return-oriented strategies.
02—Key points
Key Highlights
- Assets under management (AUM) grew by 13% to $688.7 billion, driven by market appreciation and new investments.
- Revenue decreased by 12% to $2.2 billion, primarily due to a decline in AUM at consolidated Affiliates, particularly in the Mutual Fund and Institutional channels.
- Net income (controlling interest) decreased by 7% to $472.8 million, impacted by higher imputed interest expense and contingent payment arrangements.
- Economic Net Income (a non-GAAP measure) increased by 2% to $703.6 million, reflecting underlying operational performance.
- The company initiated a quarterly cash dividend program, with the first dividend declared in January 2017.
- Significant investments were made in new equity method Affiliates, particularly in alternative strategies, driving a 24% increase in equity method AUM.
- The company's debt-to-EBITDA ratio was 1.7x, and it remained in compliance with all credit facility covenants.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 24, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $2.19B— | — |
| SG&A Expenses | $398.10M$443.80M | −10.3% |
| Operating Expenses | $1.60B$1.65B | −3.3% |
| Operating Income | $1.03B$1.12B | −8.0% |
| Interest Expense | $91.70M$88.90M | +3.1% |
| Net Income | $472.80M$509.50M | −7.2% |
| EPS (Basic) | $8.73$9.37 | −6.8% |
| EPS (Diluted) | $8.57$9.17 | −6.5% |
| Shares Outstanding (Basic) | 54.20M54.30M | −0.2% |
| Shares Outstanding (Diluted) | 57.00M57.20M | −0.3% |
05—Questions
Frequently Asked Questions
What is AMG's core business strategy and how does it generate revenue?
AMG is a global asset management company that takes equity investments in leading boutique investment management firms, referred to as 'Affiliates.' Its strategy is to generate shareholder value through internal growth of existing Affiliates and investments in new Affiliates. Revenue is primarily generated from asset-based fees (a percentage of assets under management) and performance fees charged by its Affiliates.
What were the key drivers of revenue changes in 2016?
Revenue decreased by 12% in 2016. This was mainly due to a decrease in average assets under management at consolidated Affiliates, particularly in the Mutual Fund and Institutional distribution channels, which reduced asset-based fees. A regulatory change in the UK also led to a reduction in renewal commissions for one Affiliate.
How did the company's investments in new Affiliates impact its financial performance?
Investments in new Affiliates, especially those focused on alternative strategies, contributed significantly to the 13% increase in overall assets under management. Equity method Affiliates saw a 24% increase in average assets under management, and equity method revenue grew by 27%. While these new investments bolstered AUM, the shift towards equity method accounting for many new Affiliates means their financial results are reported differently than consolidated Affiliates, influencing net income components.
What is the significance of 'Economic Net Income' and how did it perform compared to GAAP Net Income?
'Economic Net Income' is a non-GAAP measure that AMG uses to represent its operating performance before certain non-cash expenses related to acquisitions. In 2016, Economic Net Income increased by 2% to $703.6 million, while GAAP Net Income (controlling interest) decreased by 7% to $472.8 million. This divergence was largely due to a $44.7 million gain on contingent payment obligations recognized in 2015 that did not recur to the same extent in 2016, as well as increased equity method intangible amortization impacting GAAP net income.
06—Continue