10-KPeriod: FY2016

AFFILIATED MANAGERS GROUP, INC. Annual Report, Year Ended Dec 31, 2016

Filed February 24, 2017For Securities:AMGMGRBMGRMGRDMGRE

Summary

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 billion, 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 million, 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 million, 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.

Financial Highlights

43 data points
Beta

Revenue

$2.19B

Net Income

$472.80M

21.5% Net Margin

EPS (Diluted)

$8.57

Total Assets

$8.75B

Cash & Equivalents

$430.80M

Free Cash Flow

$1.03B

Financial Statements
Beta
Revenue$2.19B
SG&A Expenses$398.10M
Operating Expenses$1.60B
Operating Income$1.03B
Interest Expense$91.70M
Net Income$472.80M
EPS (Basic)$8.73
EPS (Diluted)$8.57
Shares Outstanding (Basic)54.20M
Shares Outstanding (Diluted)57.00M

Key Highlights

  • 1Assets under management (AUM) grew by 13% to $688.7 billion, driven by market appreciation and new investments.
  • 2Revenue 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.
  • 3Net income (controlling interest) decreased by 7% to $472.8 million, impacted by higher imputed interest expense and contingent payment arrangements.
  • 4Economic Net Income (a non-GAAP measure) increased by 2% to $703.6 million, reflecting underlying operational performance.
  • 5The company initiated a quarterly cash dividend program, with the first dividend declared in January 2017.
  • 6Significant investments were made in new equity method Affiliates, particularly in alternative strategies, driving a 24% increase in equity method AUM.
  • 7The company's debt-to-EBITDA ratio was 1.7x, and it remained in compliance with all credit facility covenants.

Frequently Asked Questions

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.

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.

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.

'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.