10-QPeriod: Q1 FY2020

AFFILIATED MANAGERS GROUP, INC. Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 4, 2020For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported a significant swing in profitability for the first quarter of 2020 compared to the same period in 2019. The company transitioned from a net loss of $200.8 million (loss per share of $3.87) in Q1 2019 to a net loss of $15.6 million (loss per share of $0.33) in Q1 2020, indicating a substantial improvement in financial performance despite the ongoing economic uncertainties related to the COVID-19 pandemic. Despite a decline in Assets Under Management (AUM) by 23% to $599.9 billion as of March 31, 2020, due to market volatility, aggregate fees remained relatively stable, increasing slightly by 0.1% to $1,253.1 million. This stability was driven by a significant increase in performance-based fees, which offset a decrease in asset-based fees resulting from the lower AUM. The company's operating expenses also saw a reduction, contributing to the improved net loss.

Financial Highlights

40 data points
Beta

Revenue

$507.30M

Net Income

-$15.60M

-3.1% Net Margin

EPS (Diluted)

$-0.33

Total Assets

$7.48B

Cash & Equivalents

$592.20M

Free Cash Flow

$83.00M

Financial Statements
Beta
Revenue$507.30M
SG&A Expenses$90.30M
Operating Expenses$354.30M
Interest Expense$19.50M
Net Income-$15.60M
EPS (Basic)$-0.33
EPS (Diluted)$-0.33
Shares Outstanding (Basic)47.80M
Shares Outstanding (Diluted)47.80M

Key Highlights

  • 1Shifted from a significant net loss of $200.8 million in Q1 2019 to a reduced net loss of $15.6 million in Q1 2020.
  • 2Assets Under Management (AUM) decreased by 23% to $599.9 billion as of March 31, 2020, primarily due to market volatility from COVID-19.
  • 3Aggregate fees remained stable, increasing slightly by 0.1% to $1,253.1 million, driven by a substantial rise in performance-based fees.
  • 4Total consolidated expenses decreased by 9% to $354.3 million, attributed to lower compensation, SG&A, and intangible amortization costs.
  • 5Equity method loss (net) significantly decreased by 68% to $113.2 million, largely due to a reduction in equity method intangible amortization and impairments.
  • 6Cash flow from operating activities turned positive, increasing to $85.6 million from a negative $17.9 million in the prior year period.
  • 7Debt increased to $2,044.9 million as of March 31, 2020, primarily due to borrowings under the senior bank debt facility.

Frequently Asked Questions

The primary driver for the improved net loss was a significant reduction in 'Equity method loss (net)', which decreased by 68% to $113.2 million. This was largely due to a substantial decrease in equity method intangible amortization and impairments by 59% to $179.3 million. Additionally, total consolidated expenses decreased by 9%.

The COVID-19 pandemic led to significant market volatility, causing a 23% decline in Affiliated Managers Group's total AUM, which stood at $599.9 billion as of March 31, 2020, compared to $722.5 billion at the end of 2019. This decline was primarily driven by market changes and foreign exchange impacts.

As of March 31, 2020, the company had $592.2 million in cash and cash equivalents. Management expects that cash flows from operations, combined with borrowings under its revolving credit facility, will be sufficient to meet its cash requirements. Principal uses of cash include investments in Affiliates, share repurchases, dividends, and debt repayment.

Total debt increased from $1,793.8 million at the end of 2019 to $2,044.9 million as of March 31, 2020. This increase was mainly due to borrowings of $250.0 million under the senior unsecured multicurrency revolving credit facility, while debt repayments were minimal during the quarter.