• Revenue: Increased 6% compared to the September quarter and up 19% compared to the prior year fourth quarter.
• Adjusted Operating Income: Up 12% sequentially and 37% compared to the same quarter last year.
• Adjusted Operating Margin: Improved by 180 basis points.
• Assets Under Management (AUM): Ended the December quarter at $161 billion, down 4% from last quarter and up 7% from the end of 2023.
• Net Client Cash Outflows: Approximately $800 million for the December quarter; full year outflows improved slightly to $3.7 billion.
• Performance Fees: Approximately $17 million for the quarter, with $12 million earned in the fourth quarter.
• Weighted Average Recurring Fee Rate: 68 basis points, excluding performance fees; 72 basis points inclusive of performance fees.
• Adjusted Net Income Per Adjusted Share: Improved 14% compared to last quarter and 35% compared to December 2023 quarter.
• Dividends: Quarterly dividend of $0.84 per share and an additional $0.50 for the year-end special dividend; total dividends declared for 2024 were $3.48 per share, a 25% increase from 2023.
• Long-term Incentive Award for 2025: Approximately $66 million, with 85% awarded to investment talent.

• Warning! GuruFocus has detected 6 Warning Signs with APAM.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Artisan Partners Asset Management Inc (NYSE:APAM) celebrated its 30th anniversary, highlighting its long-term commitment to a high-value investment approach.
• The company has expanded its investment platform significantly, now managing 25 strategies across various asset classes, including equities, fixed income, and alternatives.
• In 2024, 13 out of 25 investment strategies achieved net inflows, with 10 strategies exceeding $100 million in net inflows.
• The Denver-based credit team and the Boston-based MSCIs Capital Group collectively raised $3.6 billion in 2024, showcasing strong growth in their credit-oriented franchises.
• The company reported a 6% increase in revenues and a 12% rise in adjusted operating income for the fourth quarter, reflecting a robust financial performance.

Negative Points

• Assets under management decreased by 4% from the previous quarter, ending at $161 billion.
• Net client cash outflows during the December quarter were approximately $800 million, including a significant outflow from a client rebalance.
• The weighted average recurring fee rate decreased to 68 basis points, reflecting a growing portion of assets in lower-fee fixed income strategies.
• Adjusted operating expenses increased by 11% compared to the same quarter last year, driven by higher incentive compensation expenses.
• The company anticipates a mid to low single-digit increase in fixed expenses for 2025, primarily due to merit increases and the full impact of new hires.

Q & A Highlights

Q: Can you discuss the interplay between the organic growth rate and the fee rate, particularly in relation to the fixed income platform and the International Value Fund? A: Eric Colson, CEO: The International Value strategy is at a point where capacity management is crucial to maintain performance. We focus on performance over asset gathering to ensure long-term success. Regarding organic growth and fee rate, foundational assets in emerging market debt and global unconstrained strategies have impacted the fee rate. The recent tick in the fee rate is due to these foundational assets rather than a significant increase in fixed income.

Q: The payout rate on the dividend was higher this year. Can you explain the factors behind this and the expectations for 2025? A: Charles Daley, CFO: The higher payout ratio was due to realized gains on seed capital investments. We expect more gains in 2025, particularly from private fund credit opportunities. Most seed capital is still in foundational phases, so harvesting will occur later. We anticipate maintaining a payout ratio in the mid-90% range, similar to previous years.

Q: How are global and international emerging markets equity strategies performing given the current market volatility and political uncertainty? A: Eric Colson, CEO: Clients are cautious due to macroeconomic factors, leading to strategic rather than tactical asset allocation changes. Jason Gottlieb, President: Despite uncertainty, our strategies have shown stability and strong alpha profiles. Volatility provides opportunities for active management, and our teams are well-positioned to capture this.

Q: Can you provide guidance on non-compensation expenses for 2025? A: Jason Gottlieb, President: Assuming flat markets, we expect expenses to rise by low single digits, with fixed controllable expenses increasing by mid-single digits. This includes long-term incentive compensation and salary increases. Other expense categories are projected to remain relatively flat.

Q: Are there any significant milestones for other strategies in 2025? A: Eric Colson, CEO: The International Explorer strategy will reach its three-year milestone in March, and the Developing World Fund will celebrate its 10th anniversary. Both have shown compelling performance, with the Developing World Fund generating significant interest in the emerging market space.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.