10-QPeriod: Q1 FY2019

AFFILIATED MANAGERS GROUP, INC. Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 9, 2019For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported a significant net loss of $200.8 million for the three months ended March 31, 2019, a stark contrast to the $153.0 million net income in the prior year's comparable period. This downturn was primarily driven by a substantial $415.0 million non-cash expense related to an impairment of an equity method investment in a U.S. credit alternative affiliate, reflecting underperformance of its flagship product and revised growth expectations. Consolidated revenue also declined by 11% to $543.1 million, impacted by decreased asset-based fees due to lower average assets under management and a reduced fee ratio. Despite the net loss, the company's operational performance metrics showed resilience in certain areas, with aggregate fees (including equity method affiliates) decreasing by 24% to $1.25 billion, driven by lower performance-based fees and asset-based fees. Management highlighted that equity method revenue saw a larger decline of 32% due to the specific revenue-sharing arrangements. The company maintained a strong liquidity position with $305.2 million in cash and cash equivalents, and has access to a $1.25 billion revolving credit facility, providing financial flexibility. Strategic initiatives include continued investment in existing affiliates and potential new investments, with a recent announcement of acquiring a minority interest in Garda Capital Partners LP.

Financial Highlights

40 data points
Beta

Revenue

$543.10M

Net Income

-$200.80M

-37.0% Net Margin

EPS (Diluted)

$-3.87

Total Assets

$7.68B

Cash & Equivalents

$305.20M

Free Cash Flow

-$20.90M

Financial Statements
Beta
Revenue$543.10M
SG&A Expenses$95.60M
Operating Expenses$387.80M
Interest Expense$18.20M
Net Income-$200.80M
EPS (Basic)$-3.87
EPS (Diluted)$-3.87
Shares Outstanding (Basic)51.90M
Shares Outstanding (Diluted)51.90M

Key Highlights

  • 1Reported a net loss of $200.8 million for Q1 2019, compared to a net income of $153.0 million in Q1 2018.
  • 2A significant $415.0 million impairment charge on an equity method investment in a U.S. credit alternative affiliate heavily impacted net income.
  • 3Consolidated revenue decreased by 11% to $543.1 million, primarily due to a decline in asset-based fees.
  • 4Aggregate fees (including equity method affiliates) decreased by 24% to $1.25 billion.
  • 5Assets Under Management (AUM) decreased by 7% to $774.2 billion as of March 31, 2019.
  • 6The company maintained healthy liquidity with $305.2 million in cash and cash equivalents.
  • 7Issued $300 million in junior subordinated notes in March 2019.

Frequently Asked Questions

The primary reason for the significant net loss of $200.8 million in the first quarter of 2019 was a $415.0 million non-cash expense recognized to reduce the carrying value to fair value of a U.S. credit alternative affiliate accounted for under the equity method. This impairment was triggered by the underperformance of the affiliate's flagship product and revised growth expectations.

Consolidated revenue decreased by 11% to $543.1 million for the three months ended March 31, 2019, compared to $612.4 million in the prior year's period. Assets under management also decreased by 7% to $774.2 billion as of March 31, 2019, from $830.9 billion in the prior year.

The company maintained a solid liquidity position with $305.2 million in cash and cash equivalents as of March 31, 2019. Additionally, it has access to a $1.25 billion senior unsecured revolving credit facility, providing significant financial flexibility.

During the quarter, the company issued $300 million of junior subordinated notes with a maturity date of March 30, 2059. A majority of the net proceeds were used to repay outstanding indebtedness under its revolving credit facility, with the remainder used for general corporate purposes.