10-QPeriod: Q1 FY2011

AFFILIATED MANAGERS GROUP, INC. Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 10, 2011For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported a strong first quarter for 2011, with significant year-over-year increases in key financial metrics. Total revenue surged by 70% to $426.3 million, and Net Income attributable to controlling interests more than doubled, rising 123% to $39.1 million. Diluted Earnings Per Share (EPS) also saw a substantial increase of 95% to $0.74. This robust performance was driven by a 46% growth in Assets Under Management (AUM) to $339.8 billion, fueled by new Affiliate investments, positive investment performance, and organic growth. The company's operational expenses also increased, with Compensation and related expenses up 51% and Selling, general and administrative expenses up 93%, largely due to new Affiliate investments and increased business activity. Despite these increased costs, AMG demonstrated effective cost management and operational leverage, leading to substantial earnings growth. The company's liquidity remains strong, with significant cash and cash equivalents and available capacity under its credit facility, positioning it well for future growth and strategic initiatives.

Financial Highlights

44 data points
Beta

Net Income

$39.10M

EPS (Diluted)

$0.74

Total Assets

$5.26B

Cash & Equivalents

$252.80M

Free Cash Flow

$126.60M

Financial Statements
Beta
SG&A Expenses$87.50M
Operating Expenses$301.40M
Operating Income$124.90M
Interest Expense$19.40M
Net Income$39.10M
EPS (Basic)$0.76
EPS (Diluted)$0.74
Shares Outstanding (Basic)51.80M
Shares Outstanding (Diluted)53.10M

Key Highlights

  • 1Revenue increased by 70% to $426.3 million for the three months ended March 31, 2011, compared to $251.0 million in the prior year period.
  • 2Net Income (controlling interest) grew by 123% to $39.1 million for the three months ended March 31, 2011, compared to $17.5 million in the prior year period.
  • 3Diluted Earnings Per Share (EPS) rose by 95% to $0.74 for the three months ended March 31, 2011, up from $0.38 in the prior year period.
  • 4Assets Under Management (AUM) increased by 46% to $339.8 billion as of March 31, 2011, compared to $232.1 billion as of March 31, 2010.
  • 5Operating expenses increased, with Compensation and related expenses up 51% and Selling, general and administrative expenses up 93%, largely due to new Affiliate investments and growth.
  • 6The company reported strong operating cash flow of $130.2 million for the three months ended March 31, 2011, a significant increase from $68.0 million in the prior year period.

Frequently Asked Questions

The substantial growth in revenue and net income was primarily driven by a significant increase in Assets Under Management (AUM). AUM grew by 46% to $339.8 billion, fueled by successful new Affiliate investments, strong investment performance across various asset classes, and organic growth from net client cash flows. This growth in AUM directly translated into higher advisory fees, which are the primary revenue source for AMG.

While operating expenses did increase, AMG demonstrated effective cost management relative to revenue growth. Compensation and related expenses rose 51%, and Selling, general and administrative expenses increased by 93%. These increases were largely attributed to new Affiliate investments and expanded business activities. However, the revenue growth of 70% outpaced the increase in operating expenses, leading to improved profitability and higher net income. The company also benefited from the operational structure with its Affiliates, where revenue sharing arrangements are in place.

AMG maintains a strong financial position. The company reported robust operating cash flow of $130.2 million for the quarter. As of March 31, 2011, AMG had $252.8 million in cash and cash equivalents and $410 million in remaining capacity under its $750 million credit facility. The company expects its operating cash flows and available credit to be sufficient to meet its future cash needs, which include investments in new and existing Affiliates, debt repayments, and working capital requirements.

The filing indicates that performance fees were not a significant component of consolidated revenue in either the three months ended March 31, 2011, or the prior year period. However, there was a $4.1 million 'Investment income from investments in partnerships' in Q1 2010 which was zero in Q1 2011 due to the deconsolidation of certain investment partnerships in the third quarter of 2010. Other significant factors influencing the results were the new Affiliate investments and changes in interest expenses related to convertible securities and contingent payment arrangements.