10-QPeriod: Q3 FY2012

AFFILIATED MANAGERS GROUP, INC. Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 6, 2012For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported solid revenue growth for the third quarter of 2012, driven by a significant increase in Assets Under Management (AUM) and new investments. Total revenue increased by 13% year-over-year to $467.3 million. This growth was largely fueled by a 36% surge in AUM to $416.1 billion, attributed to strong investment performance, organic growth from net client cash flows, and strategic acquisitions of Veritable and Yacktman. Despite revenue growth, net income attributable to controlling interests saw a year-over-year decline of 21% for the first nine months of 2012, primarily due to a significant impairment charge related to an indefinite-lived intangible asset. However, excluding this non-cash charge, adjusted net income would have shown improvement, indicating underlying operational strength. The company maintained a healthy liquidity position, with substantial capacity under its credit facility and adequate cash reserves. Management highlighted the company's diversified revenue streams across its Mutual Fund, Institutional, and High Net Worth distribution channels, as well as its commitment to a partnership approach with its Affiliates. Key financial metrics like Economic Net Income (a non-GAAP measure) showed positive growth, reflecting the company's operational performance before non-cash acquisition-related expenses.

Financial Highlights

45 data points
Beta

Net Income

$54.90M

EPS (Diluted)

$1.04

Total Assets

$6.03B

Cash & Equivalents

$372.60M

Free Cash Flow

$206.20M

Financial Statements
Beta
SG&A Expenses$93.90M
Operating Expenses$327.60M
Operating Income$139.70M
Interest Expense$21.80M
Net Income$54.90M
EPS (Basic)$1.06
EPS (Diluted)$1.04
Shares Outstanding (Basic)51.70M
Shares Outstanding (Diluted)53.00M

Key Highlights

  • 1Revenue increased by 13% to $467.3 million in Q3 2012 compared to Q3 2011.
  • 2Assets Under Management (AUM) grew by 36% to $416.1 billion as of September 30, 2012, driven by investment performance, organic growth, and new acquisitions.
  • 3Net income attributable to controlling interest decreased by 21% for the nine months ended September 30, 2012, largely due to a $102.2 million impairment charge on an indefinite-lived intangible asset.
  • 4The company made significant new investments in Veritable, LP and Yacktman Asset Management Co. during 2012.
  • 5Liquidity remains strong, with $630.0 million in remaining capacity under its credit facility.
  • 6The company is actively managing its capital structure, issuing new senior notes and repaying existing debt.
  • 7Economic Net Income, a non-GAAP measure used by management, increased by 5% for the nine months ended September 30, 2012, indicating positive operational performance before non-cash charges.

Frequently Asked Questions

Revenue growth was primarily driven by a significant increase in Assets Under Management (AUM) due to strong investment performance, organic growth from net client cash flows, and new investments in Veritable and Yacktman. The company's AUM increased by 36% year-over-year to $416.1 billion.

The decline in net income for the nine months ended September 30, 2012, was primarily due to a non-cash impairment charge of $102.2 million related to an indefinite-lived intangible asset. Management believes that excluding this charge, the underlying operational performance, as indicated by Economic Net Income (a non-GAAP measure), showed an increase, suggesting that the core business remains healthy.

AMG maintains a strong financial position. As of September 30, 2012, the company had $372.6 million in cash and cash equivalents and $630.0 million of remaining capacity under its credit facility. The company also successfully issued new senior notes and has met its debt service obligations, maintaining compliance with its credit facility covenants.

AMG operates across three principal distribution channels: Mutual Fund, Institutional, and High Net Worth. The company continues to grow through both internal expansion of existing Affiliates and strategic investments in new boutique investment management firms, such as Veritable and Yacktman. This diversified approach helps mitigate risks associated with any single market segment or asset class.