Release Date: April 30, 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) has expanded from 5 investment teams to 11 since 2013, demonstrating growth and diversification.
• The company has increased its investment strategies from 12 to 27, evolving into a multi-asset class investment platform.
• APAM's business model allows for automatic adjustment of expenses with changes in AUM, providing stability.
• The firm has a strong presence in the intermediated wealth channel, accounting for 60% of total AUM.
• APAM's strategies have shown strong performance, with several achieving significant milestones and outperforming benchmarks.

Negative Points

• First quarter results showed a 7% decline in revenues due to the absence of $17 million in performance fees from the previous quarter.
• Net client cash outflows during the March quarter were approximately $2.8 billion.
• The company experienced a 19% decrease in adjusted operating income and a 470 basis points drop in adjusted operating margin from the previous quarter.
• Equity outflows were partially offset by positive flows into fixed income and alternative businesses, indicating challenges in maintaining equity investments.
• The dividend for the March 2025 quarter declined due to lower cash generation from the absence of performance fees.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with APAM.

Q: Could you expand on the opportunities you see in fixed income and alternatives, specifically in the retail or insurance channel? A: Jason Gottlieb, President: We see significant opportunities in expanding our existing investment franchises, particularly with our high-income and insights teams. Our Global Unconstrained strategy is a key franchise that fits well in the high net worth space, offering flexibility as a fixed income or cash surrogate. We also see potential for growth through team lift-outs or M&A, focusing on strong alignment with investment capabilities.

Q: How should we think about normalized expenses from here, and what levers can you use to maintain margins if uncertainty continues? A: CJ Daley, CFO: Our full-year guidance remains unchanged. We had some FX gains this quarter, and travel expenses typically slow down in Q1. Variable expenses fluctuate with revenues, and long-term incentive compensation guidance remains consistent. We expect expenses to pick up in the coming quarters.

Q: Are there any areas where you are capacity constrained or have a lot of capacity? A: Jason Gottlieb, President: We are in constant communication with teams about capacity management. Some strategies have been in soft close mode for years, but there may be opportunities for capacity shifts. This depends on market dislocation or team comfort with additional capacity.

Q: What are your thoughts on team lift-outs or small deals in private markets, given market volatility? A: Jason Gottlieb, President: We see many opportunities in the market and remain active in evaluating them. We focus on investment acumen and asset allocation trends. We are judicious in adding capabilities, considering lift-outs or M&A, and view market volatility as an opportunity.

Q: Can you unpack the commentary on the 172 relationships and 117 with more than three strategies? How do you see the institutional business backdrop? A: Eric Coulson, CEO: We highlighted our progress in the intermediated wealth space, focusing on investment performance and operational quality. The number of relationships has grown, providing leverage. The institutional space remains strong, with some rebalancing towards credit and alternatives.

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