8-K: Artisan Partners Reports First Quarter 2024 Results, AUM Reaches $160.4 Billion

Artisan Partners Asset Management Inc. announced its first quarter 2024 results, highlighting growth in assets under management and strong performance in its credit strategies.

Summary

• Artisan Partners reported its financial results for the three months ended March 31, 2024, with assets under management (AUM) reaching $160.4 billion.
• The company's AUM increased by $10.2 billion, or 7%, compared to the end of 2023, driven by $10.8 billion in market appreciation, partially offset by $0.5 billion in net client cash outflows.
• Average AUM for the quarter was $154.2 billion, a 10% increase from the previous quarter.
• Revenues for the quarter were $264.4 million, a 6% increase from the previous quarter, primarily due to higher average AUM.
• Operating expenses increased by 8% to $186.7 million, mainly due to higher incentive compensation and seasonal compensation expenses.
• GAAP net income was $59.5 million, or $0.84 per share, compared to $64.8 million, or $0.92 per share, in the previous quarter.
• Adjusted net income was $61.6 million, or $0.76 per adjusted share, compared to $62.8 million, or $0.78 per adjusted share, in the previous quarter.
• The company declared a variable quarterly dividend of $0.61 per share.
• The Artisan High Income strategy has generated average annual returns of 6.18% since its inception in 2014, compared to 4.36% for the BofA US High Yield Index.
• The Artisan Credit Opportunities strategy has generated average annual returns of 10.24% since its inception in 2017.

Sentiment

Score: 6

Explanation: The document presents a mixed picture with strong AUM growth and credit strategy performance offset by a decrease in net income and increased operating expenses. The long-term outlook is positive, but the current results are slightly weaker than the previous quarter.

Positives

• AUM increased significantly to $160.4 billion, driven by market appreciation.
• Average AUM increased by 10% compared to the previous quarter.
• Revenues increased by 6% compared to the previous quarter due to higher average AUM.
• The Artisan High Income strategy has a strong track record of outperformance.
• The Artisan Credit Opportunities strategy has delivered impressive returns since inception.
• The company maintains a low debt leverage ratio of 0.5x.
• The company paid a variable quarterly dividend of $0.68 per share and a special dividend of $0.34 per share in the quarter.

Negatives

• Net client cash outflows were $0.5 billion for the quarter.
• GAAP net income decreased to $59.5 million, or $0.84 per share, compared to $64.8 million, or $0.92 per share, in the previous quarter.
• Adjusted net income decreased to $61.6 million, or $0.76 per adjusted share, compared to $62.8 million, or $0.78 per adjusted share, in the previous quarter.
• Operating expenses increased by 8% due to higher compensation costs.

Risks

• The company is subject to risks including the loss of key investment professionals, adverse market conditions, and poor performance of investment strategies.
• Changes in the legislative and regulatory environment could impact the company's operations.
• Operational or technical errors could damage the company's reputation.
• The company's forward-looking statements are subject to a number of risks and uncertainties.

Future Outlook

The company expects to pay a quarterly dividend of approximately 80% of the cash it generates each quarter, subject to board approval, and will consider a special dividend at the end of the year. The company also plans to continue building the Artisan Credit franchise, with a focus on alternative capabilities and business.

Management Comments

• Eric Colson, Chief Executive Officer, highlighted the 10-year anniversary of the Artisan High Income strategy and its outperformance.
• Eric Colson emphasized the company's methodical franchise development process and its focus on attracting and retaining great investment talent.
• Eric Colson stated that the Credit team is still early in its journey and that the company is excited to continue building the franchise.
• Eric Colson noted that many of the company's investment capabilities, teams, and strategies have come online in the last decade.
• Eric Colson stated that the company takes the time to do things right, minimize mistakes, and establish trust.

Industry Context

The announcement reflects the broader trend of asset management firms focusing on diverse investment strategies and building strong, long-term franchises. The emphasis on credit strategies and alternative investments aligns with the industry's move towards seeking alpha in various asset classes. The company's focus on long-term growth and methodical development is a common theme among successful asset managers.

Comparison to Industry Standards

• Artisan Partners' High Income strategy's 6.18% average annual return since inception outperforms the BofA US High Yield Index's 4.36%, demonstrating strong performance compared to industry benchmarks.
• The Artisan Credit Opportunities strategy's 10.24% average annual return since inception is also a strong result compared to typical credit fund performance.
• The company's AUM growth of 7% in the quarter is solid, but should be compared to peers such as T. Rowe Price, Franklin Resources, and BlackRock to assess relative performance.
• The company's operating margin of 29.4% is within the range of other asset managers, but further analysis of peer group margins is needed for a more detailed comparison.
• The company's focus on long-term franchise building is similar to strategies employed by firms like Capital Group and Wellington Management, which prioritize stability and long-term client relationships.

Stakeholder Impact

• Shareholders will receive a quarterly dividend of $0.61 per share.
• Clients benefit from the strong performance of the company's investment strategies, particularly in credit.
• Employees may see increased compensation due to higher revenues, but also increased expenses due to higher incentive compensation.
• The company's long-term focus on franchise building aims to provide stability and growth for all stakeholders.

Next Steps

• The company will host a conference call on April 24, 2024, to discuss the results.
• The company will pay a variable quarterly dividend on May 31, 2024.
• The board will consider a special dividend at the end of the year.

Key Dates

Keywords

Asset Management, AUM, Investment Strategies, Credit, High Income, Financial Results, Dividend, Net Income, Revenue, Operating Expenses