Artisan Partners Asset Management Inc

Previous wording

We offer our investment management capabilities primarily to sophisticated investors that operate with institutional decision-making processes and longer-term investment horizons. We employ knowledgeable and investment focused relationship managers who are directly aligned with our investment teams, and we pair them with regional and distribution channel experts. We provide access to our investment strategies through multiple investment vehicles, including separate accounts and different types of pooled vehicles. As of June 30, 2024, approximately 75% of our assets under management were managed for clients and investors domiciled in the U.S. and 25% of our assets under management were managed for clients and investors domiciled outside of the U.S.

Current wording

We offer our investment management capabilities primarily to sophisticated investors that operate with institutional decision-making processes and longer-term investment horizons. We employ knowledgeable and investment focused relationship managers who are directly aligned with our investment teams, and we pair them with regional and distribution channel experts. We provide access to our investment strategies through multiple investment vehicles, including separate accounts and different types of pooled vehicles. As of September 30, 2024, approximately 74% of our assets under management were managed for clients and investors domiciled in the U.S. and 26% of our assets under management were managed for clients and investors domiciled outside of the U.S.

Previous wording

•During the three months ended June 30, 2024, our assets under management declined to $158.9 billion, a decrease of $1.5 billion, or 1%, compared to $160.4 billion at March 31, 2024, primarily due to $1.6 billion of net client cash outflows, partially offset by market appreciation.

Current wording

•During the three months ended September 30, 2024, our assets under management increased to $167.8 billion, an increase of $8.9 billion, or 6%, compared to $158.9 billion at June 30, 2024, primarily due to $9.9 billion of market appreciation, partially offset by $0.8 billion of net client cash outflows and $0.2 billion of Artisan Funds' distributions not reinvested.

Previous wording

•Average assets under management for the three months ended June 30, 2024 increased 3% from the average of $154.2 billion for the three months ended March 31, 2024 and 14% from the average of $139.3 billion for the three months ended June 30, 2023.

Current wording

•Average assets under management for the three months ended September 30, 2024 were $162.8 billion, an increase of 3% from the average of $158.6 billion for the three months ended June 30, 2024 and 14% from the average of $142.2 billion for the three months ended September 30, 2023.

Previous wording

•We earned $270.8 million in revenue for the three months ended June 30, 2024, an increase of 11% from revenues of $242.9 million for the three months ended June 30, 2023. Performance fees of less than $0.1 million were recognized in each of the respective periods.

Current wording

•We earned $279.6 million in revenue for the three months ended September 30, 2024, an increase of 12% from revenues of $248.7 million for the three months ended September 30, 2023. Performance fees of less than $0.1 million were recognized in each of the respective periods.

Previous wording

•Our GAAP operating margin was 32.0% for the three months ended June 30, 2024, compared to 31.6% for the three months ended June 30, 2023. Adjusted operating margin was 32.2% for the three months ended June 30, 2024, compared to 31.9% for the three months ended June 30, 2023.

Current wording

•Our GAAP operating margin was 33.3% for the three months ended September 30, 2024, compared to 33.0% for the three months ended September 30, 2023. Adjusted operating margin was 35.0% for the three months ended September 30, 2024, compared to 32.5% for the three months ended September 30, 2023.

Previous wording

•We generated $0.80 of earnings per basic and diluted share and $0.82 of adjusted EPS.

Current wording

•We generated $1.03 of earnings per basic and diluted share and $0.92 of adjusted EPS.

Previous wording

•We declared and distributed dividends of $0.61 per share of Class A common stock during the three months ended June 30, 2024.

Current wording

•We declared and distributed dividends of $0.71 per share of Class A common stock during the three months ended September 30, 2024.

Previous wording

•We declared, effective July 23, 2024, a quarterly dividend with respect to the three months ended June 30, 2024, of $0.71 per share of Class A common stock.

Current wording

•We declared, effective October 29, 2024, a quarterly dividend with respect to the three months ended September 30, 2024, of $0.82 per share of Class A common stock.

Previous wording

During the six months ended June 30, 2024, certain limited partners of Holdings exchanged 992,454 common units (along with a corresponding number of shares of Class B or Class C common stock of APAM, as applicable) for 992,454 shares of Class A common stock. In connection with the exchanges, APAM received 992,454 GP units of Holdings.

Current wording

During the nine months ended September 30, 2024, certain limited partners of Holdings exchanged 1,168,667 common units (along with a corresponding number of shares of Class B or Class C common stock of APAM, as applicable) for 1,168,667 shares of Class A common stock. In connection with the exchanges, APAM received 1,168,667 GP units of Holdings.

Previous wording

Volatility and uncertainty in global financial markets impact the value of our assets under management. Because the revenue we earn is based on the value of our assets under management (AUM), fluctuations in our AUM will result in corresponding fluctuations in our revenues and earnings. Current market conditions that could materially impact our financial performance include elevated inflation levels, uncertainty around the timing and extent of changes in interest rates in an already heightened rate environment, effects of geopolitical tensions, and conflicts and wars, among other factors.

Current wording

Volatility and uncertainty in global financial markets impact the value of our assets under management. Because the revenue we earn is based on the value of our assets under management (AUM), fluctuations in our AUM will result in corresponding fluctuations in our revenues and earnings. Current conditions that could materially impact our financial performance include elevated inflation levels, uncertainty around the timing and extent of changes in interest rates, effects of political tensions, and conflicts and wars, among other factors.

Previous wording

The following table presents the total returns of relevant market indices for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table presents the total returns of relevant market indices for the three and nine months ended September 30, 2024 and 2023:

Previous wording

During the quarter, our AUM declined by $1.5 billion, primarily due to $1.6 billion of net client cash outflows, partially offset by $0.2 billion of market appreciation. For the quarter, 15 of our 25 investment strategies had net outflows totaling $3.1 billion, which were partially offset by $1.5 billion of net inflows across the remaining 10 strategies.

Current wording

During the quarter, our AUM increased by $8.9 billion, primarily due to $9.9 billion of market appreciation, partially offset by $0.8 billion of net client cash outflows and $0.2 billion of Artisan Funds' distributions not reinvested. For the quarter, 13 of our 25 investment strategies had net outflows totaling $2.1 billion, which were partially offset by $1.3 billion of net inflows from the remaining strategies.

Previous wording

We measure investment performance based upon the results of our “composites”, which represent the aggregate performance of all discretionary client accounts, including pooled investment vehicles, invested in the same strategy except those accounts with respect to which we believe client-imposed investment restrictions may have a material impact on portfolio construction and those accounts managed in a currency other than U.S. dollars. The results of these excluded accounts, which represented approximately 15% of our assets under management at June 30, 2024, are maintained in separate composites the results of which are not included below.

Current wording

We measure investment performance based upon the results of our “composites”, which represent the aggregate performance of all discretionary client accounts, including pooled investment vehicles, invested in the same strategy except those accounts with respect to which we believe client-imposed investment restrictions may have a material impact on portfolio construction and those accounts managed in a currency other than U.S. dollars. The results of these excluded accounts, which represented approximately 16% of our assets under management at September 30, 2024, are maintained in separate composites the results of which are not included below.

Previous wording

Our institutional channel includes assets under management sourced from defined contribution plan clients, which made up approximately 9% of our total assets under management as of June 30, 2024.

Current wording

Our institutional channel includes assets under management sourced from defined contribution plan clients, which made up approximately 8% of our total assets under management as of September 30, 2024.

Previous wording

Certain separate account clients pay us fees based on the performance of their accounts relative to agreed-upon benchmarks, which typically results in a lower base fee but allows us to earn higher fees if the performance we achieve for that client is superior to the performance of the agreed-upon benchmark. We may also receive performance fees or incentive allocations from Artisan Private Funds. Approximately 2% of our $158.9 billion of assets under management as of June 30, 2024 have performance fee billing arrangements. Performance fees of less than $0.1 million were recognized in each of the three-month periods ended June 30, 2024 and June 30, 2023.

Current wording

Certain separate account clients pay us fees based on the performance of their accounts relative to agreed-upon benchmarks, which typically results in a lower base fee but allows us to earn higher fees if the performance we achieve for that client is superior to the performance of the agreed-upon benchmark. We may also receive performance fees or incentive allocations from Artisan Private Funds. Approximately 3% of our $167.8 billion of assets under management as of September 30, 2024 have performance fee billing arrangements.

Previous wording

The increase in revenues of $27.9 million, or 11%, for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, was driven primarily by a $19.3 billion, or 14% increase in our average assets under management. The weighted average investment management fee, which excludes performance fees, was 68.8 basis points for the three months ended June 30, 2024, compared to 70.1 basis points for the three months ended June 30, 2023. The decrease in the weighted average investment management fee was predominantly due to changes in strategy mix.

Current wording

The increase in revenues of $30.9 million, or 12%, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, was driven primarily by a $20.6 billion, or 14% increase in our average assets under management. The weighted average investment management fee, which excludes performance fees, was 68.5 basis points for the three months ended September 30, 2024, compared to 69.5 basis points for the three months ended September 30, 2023. The decrease in the weighted average investment management fee was predominantly due to changes in strategy mix.

Previous wording

Operating expenses increased $18.0 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, as a result of a $16.4 million increase in compensation and benefits and a $1.6 million increase in other operating expenses.

Current wording

Operating expenses increased $19.9 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, as a result of a $18.3 million increase in compensation and benefits and a $1.6 million increase in other operating expenses.

Previous wording

The increase in salaries, incentive compensation and benefits is primarily due to a $10.9 million increase in incentive compensation driven by higher revenues in the three months ended June 30, 2024. Long-term incentive compensation costs also increased $3.3 million, which includes $1.9 million of additional expense resulting from the retirement acceleration feature on 2024 grants.

Current wording

The increase in salaries, incentive compensation and benefits is primarily due to an $8.4 million increase in incentive compensation driven by higher revenues in the three months ended September 30, 2024. Long-term incentive compensation costs also increased $8.0 million, which includes $5.8 million of additional expense from market valuation changes and $1.2 million of additional expense resulting from the retirement acceleration feature on 2024 grants.

Previous wording

Total compensation and benefits was 54% of our revenues for the three months ended June 30, 2024 and 2023.

Current wording

Total compensation and benefits was 53% of our revenues for the three months ended September 30, 2024 and 2023.

Previous wording

Other operating expenses increased $1.6 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to an increase in travel expense as well as an increase in third-party distribution expense as a result of an increase in AUM subject to those fees.

Current wording

Other operating expenses increased $1.6 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to an increase in occupancy related charges.

Previous wording

Net investment gain (loss) of consolidated investment products, net investment gain (loss) on nonconsolidated seed investments, and net investment gain (loss) on franchise capital investments decreased $13.0 million in the aggregate for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, predominately due to market conditions. In addition, the increase in interest income on cash and cash equivalents and other increased $0.9 million due to higher yields.

Current wording

Net investment gain (loss) of consolidated investment products, net investment gain (loss) on nonconsolidated seed investments, and net investment gain (loss) on franchise capital investments increased $30.0 million in the aggregate for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, predominately due to market conditions. In addition, the increase in interest income on cash and cash equivalents and other increased $0.6 million due to higher cash balances.

Previous wording

The provision for income taxes primarily represents APAM’s U.S. federal, state and local income taxes on its allocable portion of Holdings’ income, as well as foreign income taxes payable by Holdings’ subsidiaries. APAM’s effective income tax rate for the three months ended June 30, 2024 and 2023 was 20.8% and 20.0%, respectively. Several factors contribute to the effective tax rate, including a rate benefit attributable to the fact that approximately 14% and 16% of Holdings’ full year projected taxable earnings were not subject to corporate-level taxes for the three months ended June 30, 2024 and 2023, respectively. Thus, income before income taxes includes amounts that are attributable to noncontrolling interests and not taxable to APAM and its subsidiaries, which reduces the effective tax rate. As APAM’s equity ownership in Holdings increases, the effective tax rate will likewise increase as more income will be subject to corporate-level taxes. The effective tax rate was favorably impacted in both periods due to tax deductible dividends paid on unvested restricted share-based awards.

Current wording

The provision for income taxes primarily represents APAM’s U.S. federal, state and local income taxes on its allocable portion of Holdings’ income, as well as foreign income taxes payable by Holdings’ subsidiaries. APAM’s effective income tax rate for the three months ended September 30, 2024 and 2023 was 19.1% and 16.6%, respectively. Several factors contribute to the effective tax rate, including a rate benefit attributable to the fact that approximately 14% and 16% of Holdings’ full year projected taxable earnings were not subject to corporate-level taxes for the three months ended September 30, 2024 and 2023, respectively. Thus, income before income taxes includes amounts that are attributable to noncontrolling interests and not taxable to APAM and its subsidiaries, which reduces the effective tax rate. As APAM’s equity ownership in Holdings increases, the effective tax rate will likewise increase as more income will be subject to corporate-level taxes. The effective tax rate was favorably impacted in both periods due to tax deductible dividends paid on unvested restricted share-based awards.

Previous wording

The increase in revenues of $57.8 million, or 12%, for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was driven primarily by an $18.9 billion, or 14%, increase in our average assets under management. The weighted average management fee, which excludes performance fees, was 69.0 basis points for the six months ended June 30, 2024, compared to 70.2 basis points for the six months ended June 30, 2023. The decrease in the weighted average investment management fee was predominantly due to changes in strategy mix. Additionally, performance fees of $0.1 million were recognized in each of the six months ended June 30, 2024 and 2023.

Current wording

The increase in revenues of $88.7 million, or 12%, for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, was driven primarily by a $19.5 billion, or 14%, increase in our average assets under management. The weighted average management fee, which excludes performance fees, was 68.8 basis points for the nine months ended September 30, 2024, compared to 70.0 basis points for the nine months ended September 30, 2023. The decrease in the weighted average investment management fee was predominantly due to changes in strategy mix.

Previous wording

Operating expenses increased $38.5 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, due to a $34.8 million increase in total compensation and benefits and a $3.7 million increase in other operating expenses.

Current wording

Operating expenses increased $58.4 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, due to a $53.1 million increase in total compensation and benefits and a $5.3 million increase in other operating expenses.

Previous wording

The increase in salaries, incentive compensation and benefits was primarily due to a $21.4 million increase in incentive compensation driven by higher revenues, combined with an $8.1 million increase in long-term incentive compensation costs, which includes $4.0 million of additional expense from the retirement acceleration feature on 2024 grants.

Current wording

The increase in salaries, incentive compensation and benefits was primarily due to a $29.9 million increase in incentive compensation driven by higher revenues as well as a $7.0 million increase in salaries and benefits as a result of increases in the number of full-time associates and salary increases. Long-term incentive compensation costs increased $16.1 million, which includes an $8.0 million increase from market valuation changes and $5.2 million of additional expense from the retirement acceleration feature on 2024 grants.

Previous wording

During the first quarter of 2024, the Company’s board of directors approved the grant of long-term incentive awards with a grant date fair value of $59.2 million consisting of $20.8 million of restricted share-based awards and $38.4 million of franchise capital awards, to certain employees pursuant to the Company’s 2023 Omnibus Incentive Compensation Plan. Long-term incentive compensation award expense for all awards is expected to be approximately $16 million for the remaining quarters in fiscal 2024, exclusive of the impact of investment returns on franchise capital awards.

Current wording

During the first quarter of 2024, the Company’s board of directors approved the grant of long-term incentive awards with a grant date fair value of $59.2 million consisting of $20.8 million of restricted share-based awards and $38.4 million of franchise capital awards, to certain employees pursuant to the Company’s 2023 Omnibus Incentive Compensation Plan. Long-term incentive compensation award expense for all awards is expected to be approximately $16 million for the remaining quarter in fiscal 2024, exclusive of the impact of investment returns on franchise capital awards.

Previous wording

Total compensation and benefits was 55% of our revenues for the six months ended June 30, 2024, and 2023.

Current wording

Total compensation and benefits was 55% and 54% of our revenues for the nine months ended September 30, 2024, and 2023, respectively.

Previous wording

Other operating expenses increased $3.7 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to an increase in travel expense, an increase in information technology costs, as well as an increase in third-party distribution expense as a result of an increase in AUM subject to those fees.

Current wording

Other operating expenses increased $5.3 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to an increase in travel expense, an increase in third-party distribution expense as a result of an increase in AUM subject to those fees, an increase in occupancy related charges, as well as an increase in information technology costs.

Previous wording

Net investment gain (loss) of consolidated investment products, net investment gain (loss) on nonconsolidated seed investments, and net investment gain (loss) on franchise capital investments decreased $5.4 million in the aggregate for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, predominately due to market conditions. The increase in interest income on cash and cash equivalents and other increased $2.2 million for the six months ended June 30, 2024, as a result of higher yields.

Current wording

Net investment gain (loss) of consolidated investment products, net investment gain (loss) on nonconsolidated seed investments, and net investment gain (loss) on franchise capital investments increased $24.6 million in the aggregate for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, predominately due to market conditions. The increase in interest income on cash and cash equivalents and other increased $2.8 million for the nine months ended September 30, 2024, as a result of higher yields and cash balances.

Previous wording

The provision for income taxes primarily represents APAM’s U.S. federal, state and local income taxes on its allocable portion of Holdings’ income, as well as foreign income taxes payable by Holdings’ subsidiaries. APAM’s effective income tax rate was 20.5% and 20.3% for the six months ended June 30, 2024 and 2023, respectively.

Current wording

The provision for income taxes primarily represents APAM’s U.S. federal, state and local income taxes on its allocable portion of Holdings’ income, as well as foreign income taxes payable by Holdings’ subsidiaries. APAM’s effective income tax rate was 19.9% and 19.1% for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Several factors contribute to the effective tax rate, including a rate benefit attributable to the fact that approximately 14% and 16% of Holdings’ full year projected taxable earnings were not subject to corporate-level taxes for the six months ended June 30, 2024 and 2023, respectively. Thus, income before income taxes includes amounts that are attributable to noncontrolling interests and not taxable to APAM and its subsidiaries, which reduces the effective tax rate. As APAM’s equity ownership in Holdings increases, the effective tax rate will likewise increase as more income will be subject to corporate-level taxes. The effective tax rate was favorably impacted in both periods due to tax deductible dividends paid on unvested restricted share-based awards.

Current wording

Several factors contribute to the effective tax rate, including a rate benefit attributable to the fact that approximately 14% and 16% of Holdings’ full year projected taxable earnings were not subject to corporate-level taxes for the nine months ended September 30, 2024 and 2023, respectively. Thus, income before income taxes includes amounts that are attributable to noncontrolling interests and not taxable to APAM and its subsidiaries, which reduces the effective tax rate. As APAM’s equity ownership in Holdings increases, the effective tax rate will likewise increase as more income will be subject to corporate-level taxes. The effective tax rate was favorably impacted in both periods due to tax deductible dividends paid on unvested restricted share-based awards.

Previous wording

Weighted average basic and diluted shares of Class A common stock outstanding were higher for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, as a result of Holdings’ unit exchanges and equity award grants. See Note 12, “Earnings Per Share” in the Notes to the unaudited consolidated financial statements for further discussion of earnings per share.

Current wording

Weighted average basic and diluted shares of Class A common stock outstanding were higher for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, as a result of Holdings’ unit exchanges and equity award grants. See Note 12, “Earnings Per Share” in the Notes to the unaudited consolidated financial statements for further discussion of earnings per share.

Previous wording

We manage our cash balances in order to fund our day-to-day operations. We mitigate concentration risk through the diversification of financial institutions holding daily operating cash balances and by investing excess operating cash in various money market funds. $176.6 million of our cash and cash equivalents balance was invested in money market funds as of June 30, 2024.

Current wording

We manage our cash balances in order to fund our day-to-day operations. We mitigate concentration risk through the diversification of financial institutions holding daily operating cash balances and by investing excess operating cash in various money market funds. $230.9 million of our cash and cash equivalents balance was invested in money market funds as of September 30, 2024.

Previous wording

We utilize cash to make seed investments in Artisan-sponsored investment products to support the development of new investment strategies and vehicles. As of June 30, 2024, the balance of all seed investments, including investments in consolidated investment products, was $154.0 million. Subject to certain restrictions on the timing of redemptions, the seed investments are generally redeemable at our discretion. We monitor for opportunities to redeem existing seed investments as sufficient scale in those strategies and vehicles is achieved.

Current wording

We utilize cash to make seed investments in Artisan-sponsored investment products to support the development of new investment strategies and vehicles. As of September 30, 2024, the balance of all seed investments, including investments in consolidated investment products, was $157.9 million. Subject to certain restrictions on the timing of redemptions, the seed investments are generally redeemable at our discretion. We monitor for opportunities to redeem existing seed investments as sufficient scale in those strategies and vehicles is achieved.

Previous wording

During the six months ended June 30, 2024, we also made investments of $38.4 million related to funded long-term incentive compensation plans. As of June 30, 2024, the value of investments held in connection with funded long-term incentive compensation plans was $145.9 million.

Current wording

During the nine months ended September 30, 2024, we also made investments of $38.4 million related to funded long-term incentive compensation plans. As of September 30, 2024, the value of investments held in connection with funded long-term incentive compensation plans was $153.7 million.

Previous wording

We have $200 million in unsecured notes outstanding and a $100 million revolving credit facility with a five-year term ending in August 2027. The notes are comprised of three series, Series D, Series E and Series F, each with a balloon payment at maturity. The $100 million revolving credit facility was unused as of and for the six months ended June 30, 2024.

Current wording

We have $200 million in unsecured notes outstanding and a $100 million revolving credit facility with a five-year term ending in August 2027. The notes are comprised of three series, Series D, Series E and Series F, each with a balloon payment at maturity. The $100 million revolving credit facility was unused as of and for the nine months ended September 30, 2024.

Previous wording

Artisan Partners Holdings’ distributions, including distributions to APAM for the three and six months ended June 30, 2024 and 2023, were as follows:

Current wording

Artisan Partners Holdings’ distributions, including distributions to APAM for the three and nine months ended September 30, 2024 and 2023, were as follows:

Previous wording

On July 23, 2024, we, acting as the general partner of Artisan Partners Holdings, declared a distribution of $38.6 million, payable by Artisan Partners Holdings to holders of its partnership units, including APAM.

Current wording

On October 29, 2024, we, acting as the general partner of Artisan Partners Holdings, declared a distribution of $24.6 million, payable by Artisan Partners Holdings to holders of its partnership units, including APAM.

Previous wording

APAM declared and paid the following dividends per share during the three and six months ended June 30, 2024 and 2023:

Current wording

APAM declared and paid the following dividends per share during the three and nine months ended September 30, 2024 and 2023:

Previous wording

Our board of directors declared, effective July 23, 2024, a variable quarterly dividend of $0.71 per share of Class A common stock with respect to the June quarter of 2024, payable on August 30, 2024 to stockholders of record as of the close of business on August 16, 2024. The variable quarterly dividend represents approximately 80% of the cash generated in the June quarter of 2024 and a pro-rata portion of 2024 tax savings related to our tax receivable agreements.

Current wording

Our board of directors declared, effective October 29, 2024, a variable quarterly dividend of $0.82 per share of Class A common stock with respect to the September quarter of 2024, payable on November 29, 2024 to stockholders of record as of the close of business on November 15, 2024. The variable quarterly dividend represents approximately 80% of the cash generated in the September quarter of 2024 and a pro-rata portion of 2024 tax savings related to our tax receivable agreements.