10-QPeriod: Q1 FY2018

AFFILIATED MANAGERS GROUP, INC. Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 4, 2018For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported strong financial performance for the first quarter of 2018, with net income attributable to controlling interest increasing by 25% to $153.0 million compared to the same period in 2017. This growth was driven by a significant increase in consolidated revenue, up 13%, and a robust 21% rise in aggregate fees. The company's assets under management also saw healthy growth, increasing by 10% to $830.9 billion. Key drivers for this performance include strong demand for alternative and global equity strategies, contributing to higher asset-based and performance fees. The company also benefited from a lower effective tax rate following the recent U.S. tax law changes, which helped boost net income despite an increase in intangible amortization expenses.

Financial Highlights

41 data points
Beta

Revenue

$612.50M

Net Income

$153.00M

25.0% Net Margin

EPS (Diluted)

$2.77

Total Assets

$8.58B

Cash & Equivalents

$334.20M

Free Cash Flow

$199.50M

Financial Statements
Beta
Revenue$612.50M
SG&A Expenses$106.40M
Operating Expenses$435.40M
Interest Expense$21.60M
Net Income$153.00M
EPS (Basic)$2.80
EPS (Diluted)$2.77
Shares Outstanding (Basic)54.60M
Shares Outstanding (Diluted)57.00M

Key Highlights

  • 1Net income attributable to controlling interest increased by 25% year-over-year to $153.0 million.
  • 2Consolidated revenue grew by 13% to $612.4 million, supported by a 12% increase in consolidated Affiliate average assets under management.
  • 3Aggregate fees rose by 21% to $1,648.7 million, driven by both higher asset-based fees and a significant increase in performance fees.
  • 4Assets under management (AUM) increased by 10% to $830.9 billion, with strong demand in alternative and global equity strategies.
  • 5The effective tax rate for the controlling interest decreased to 28.4% from 32.1% in the prior year, primarily due to the impact of U.S. tax law changes.
  • 6The company repurchased $173.1 million of its common stock during the quarter, indicating confidence in its valuation.
  • 7Adjusted EBITDA (controlling interest) increased by 18% to $286.5 million, reflecting operational performance before certain non-cash and financing items.

Frequently Asked Questions

Revenue growth was primarily driven by a 12% increase in consolidated Affiliate average assets under management, leading to higher asset-based revenue. Additionally, performance fees saw a significant increase of $180.5 million, contributing substantially to the overall revenue growth.

The Tax Cuts and Jobs Act of 2017 resulted in a lower effective tax rate for AMG. While the company recorded a provisional one-time benefit in 2017, the lower rate in 2018 helped to boost net income by offsetting increases in expenses like intangible amortization. The effective tax rate for the controlling interest decreased from 32.1% in Q1 2017 to 28.4% in Q1 2018.

AMG's strategy is to generate shareholder value through the growth of its existing Affiliates and investments in new ones. The strong performance in Q1 2018, particularly the growth in AUM and aggregate fees, reflects demand for active return-oriented strategies like alternatives and global equities, which AMG offers. The company is well-positioned to benefit from these trends by continuing to support its Affiliates and selectively acquiring new ones.

During the first quarter of 2018, AMG met its cash requirements primarily through operating activities. The company repurchased $173.1 million of its common stock and paid $16.4 million in dividends. Financing activities also included net borrowings of $5.0 million in senior debt. AMG maintains a strong liquidity position with approximately $1 billion in remaining capacity under its revolving credit facility.