Why did Economic EPS grow much faster than GAAP net income?

Economic EPS divides Economic net income by adjusted diluted shares, which fell from 37.9 million to 34.8 million, a drop of about 8%. Economic net income also rose about 18%, from $158.1 million to $186.7 million, because it excludes intangible amortization and impairments (down from $29.4 million to $25.6 million) and other items. Combining the higher earnings with the smaller share count produces the 28% increase in Economic EPS.

What drove the increase in GAAP earnings despite lower revenue?

The main driver was equity method income, which rose to $117.5 million from $58.6 million as equity method earnings grew to $138.3 million from $79.5 million. Compensation expense rose to $240.4 million from $222.3 million and investment income fell to $18.0 million from $38.0 million, which partly offset the gain.

Is AMG's client demand weakening?

The quarter showed net client outflows of $3.7 billion, slightly worse than the $3.2 billion in the year-ago quarter. Outflows were concentrated in Global Equities and U.S. Equities, while Alternatives had net inflows of $4.7 billion. Aggregate fees fell about 2% year-over-year, so investors may want to monitor flows and fee trends in future quarters.

What does the $450 million junior hybrid debt issuance mean for shareholders?

The 40-year junior hybrid debt was issued on March 20, 2024 and was used to extend the company's debt maturity profile beyond 20 years, improving financial flexibility. Management said the company's balance sheet is well positioned, and total debt was roughly unchanged at $2.52 billion at quarter end. Investors should note that the junior convertible securities are included in diluted share calculations under the if-converted method.

What is the dividend and when will it be paid?

The Board declared a quarterly dividend of $0.01 per share on common stock, payable May 30, 2024 to stockholders of record as of the close of business on May 16, 2024. The dividend is modest relative to the company's $5.37 Economic EPS for the quarter, indicating that capital return is mainly through share repurchases, which totaled about $150 million in the period.

AFFILIATED MANAGERS GROUP, INC. 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed May 6, 2024. Cited figures are marked; the original filing is the authoritative source.

AMG reported first-quarter 2024 results that showed strong earnings growth on a per-share basis, driven by lower share count and higher equity method income, even as top-line metrics were mixed.

Economic earnings per share (the company's principal performance benchmark) rose 28% year-over-year to $5.37^a from $4.18, while GAAP diluted EPS increased to $4.14 from $3.47. Net income attributable to the controlling interest grew about 11% to $149.8 million, and Economic net income rose to $186.7 million from $158.1 million. Equity method income nearly doubled to $117.5 million, offsetting a 3% decline in consolidated revenue to $499.9 million and a drop in investment income.

Operating metrics were modestly positive. Ending assets under management rose about 5% to $699.4 billion^b, though average AUM grew only about 3% and the company recorded net client outflows of $3.7 billion in the quarter, compared with $3.2 billion a year earlier. Aggregate fees declined about 2% to $1.47 billion.

Adjusted EBITDA (controlling interest) increased about 20% to $259.8 million^c. Capital allocation was a key focus. AMG repurchased roughly $150 million of common stock and issued $450 million of 40-year junior hybrid debt in March 2024, which management says extended debt duration beyond 20 years.

Total debt was roughly flat at $2.52 billion^d. The Board declared a quarterly dividend of $0.01 per share, payable May 30, 2024 to holders of record on May 16, 2024. The filing also notes management changes, including Tom Wojcik becoming Chief Operating Officer and Dava Ritchea joining as Chief Financial Officer.

02—Key points

Key Highlights

Economic EPS of $5.37 rose 28% year-over-year from $4.18; GAAP diluted EPS rose to $4.14 from $3.47.
Net income (controlling interest) increased about 11% to $149.8 million; Economic net income increased about 18% to $186.7 million.
Equity method income (net) nearly doubled to $117.5 million from $58.6 million, while consolidated revenue fell about 3% to $499.9 million.
Ending AUM reached $699.4 billion (up from $668.0 billion), but the quarter saw net client outflows of $3.7 billion.
Repurchased approximately $150 million of common stock and issued $450 million of 40-year junior hybrid debt, extending debt duration beyond 20 years.
Board declared a $0.01 per share quarterly dividend, payable May 30, 2024 to stockholders of record as of May 16, 2024.
Average diluted share count fell to 40.1 million on a GAAP basis, and average adjusted diluted shares fell to 34.8 million from 37.9 million, reflecting buybacks and settlement assumptions.

03—Questions

Frequently Asked Questions

Why did Economic EPS grow much faster than GAAP net income?
Economic EPS divides Economic net income by adjusted diluted shares, which fell from 37.9 million to 34.8 million, a drop of about 8%. Economic net income also rose about 18%, from $158.1 million to $186.7 million, because it excludes intangible amortization and impairments (down from $29.4 million to $25.6 million) and other items. Combining the higher earnings with the smaller share count produces the 28% increase in Economic EPS.
What drove the increase in GAAP earnings despite lower revenue?
The main driver was equity method income, which rose to $117.5 million from $58.6 million as equity method earnings grew to $138.3 million from $79.5 million. Compensation expense rose to $240.4 million from $222.3 million and investment income fell to $18.0 million from $38.0 million, which partly offset the gain.
Is AMG's client demand weakening?
The quarter showed net client outflows of $3.7 billion, slightly worse than the $3.2 billion in the year-ago quarter. Outflows were concentrated in Global Equities and U.S. Equities, while Alternatives had net inflows of $4.7 billion. Aggregate fees fell about 2% year-over-year, so investors may want to monitor flows and fee trends in future quarters.
What does the $450 million junior hybrid debt issuance mean for shareholders?
The 40-year junior hybrid debt was issued on March 20, 2024 and was used to extend the company's debt maturity profile beyond 20 years, improving financial flexibility. Management said the company's balance sheet is well positioned, and total debt was roughly unchanged at $2.52 billion at quarter end. Investors should note that the junior convertible securities are included in diluted share calculations under the if-converted method.
What is the dividend and when will it be paid?
The Board declared a quarterly dividend of $0.01 per share on common stock, payable May 30, 2024 to stockholders of record as of the close of business on May 16, 2024. The dividend is modest relative to the company's $5.37 Economic EPS for the quarter, indicating that capital return is mainly through share repurchases, which totaled about $150 million in the period.

04—Continue

← View all 8-K filings