Artisan Partners Asset Management (APAM) 3 May 232023 Q1 Earnings call transcript

Hello, and thank you for standing by. My name is Roger and I will be your conference operator today. At this time all participants are in a listen-only mode. After the prepared remarks, management will come back the question-and-answer session and conference participants will be given instructions at that time.

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will call I Partners to time, Management. Asset this turn over the Artisan At ahead. go Please

and the to Earnings include Colson, call and Asset Call. will CFO. CEO, Eric from Welcome remarks Partners Today's Artisan Management Daley, C.J. Business Update

line Following questions. for these open we'll remarks, the

our in of latest Relations results on Investor presentation investor Our available are the section website.

uncertainties begin, made include including and call, questions may are on forward-looking to I These and responses in like subject filings. remind to the and would we in today's Before you comments are statement. earnings that presented detailed SEC to risks release our

are We these update revise statements any not of to required call. following the or

of non-GAAP remarks addition, will include our financial some measures. references to In today

in the release. find earning can of to reconciliation the measures You measures those most GAAP comparable

turn our I the Colson. to call Eric over CEO, will now

or in for you Partners talent a high all Thank designed thoughtful added the a to growth is joining for the Artisan firm investment value thrive transcript. reading call environment.

been we core Our added to our investing are firm founded XXXX. who has in was since

strategies managed peers. the and with to have potential always differentiated be indexes designed to outperform We investment

As added asset at we capital allocations Partners. we Artisan investing do the high have have evolved, expanded and value markets

added downstream business outcomes and high Our financial we clients. of the for outcomes are generate value

for management, shareholders. added revenues we are have for financial under margins, we follow. time. These And and we successful generate If profits, differentiated outcomes value people, we growing careers historically, returns will successful assets outcomes our compelling Compounding believe clients, patient. for as take and outcomes attractive and business our

a not our public anniversary or XXth of did business the investment March change model our IPO marked recently becoming activities. XXXX We philosophy, operating company

to validated business, true The we are. running value on long-term stayed high outcomes our have have investing. added who a to centered We approach

us. X we investors We distractions and investment a their needed the what minimize talent, investing create freedom from time give talent. great investment value give and it degrees outcomes We We between outlines maximize cycles through process differentiated growth. to program. takes differentiate autonomy, execute unique and and our economic identified resources time to that alignment the means execute spent investing. talent others. investment And high market recruit We and client business of exceptional added Slide and to

yields The these return results. meet returns value inputs added difficult of passive combination to goals. with plus indexes, over and time outperformance peers, a to Alpha high periods fee relative That that exposure over client to portfolios products. differentiated are replicate and extended

degrees focused over and attractive in together allocators elements launched generating We years. U.S. bringing global originally greater of style been income series into then XX results we and that have these in on almost non-U.S. emphasized freedom existing XX outside across and ago, box of We United Beginning States. for investment new and We XXXX value strategies and the intermediaries a were high added institutional strategies. fixed the attractive strategies beginning expanded the years to of

us gives overtime. As investing This approach we business, to that generations value diversified grow we added and demonstrated to and our our philosophy continue thoughtfully across and leverage asset our evolved, to have business works have expanded high classes.

corresponding of portfolio benchmarks. to XXXX, each invested launched the investment $X value a at hypothetical have That The over wealth. have and at million million the show would of outcome more than of on March client portfolio the the High million, added strategies history. Slide X, dates, after inception grown the a approximately XX On we of investing tremendous our the $XXX consisting impact consisting $XX can on each original of approximately we portfolios a of invested have same amount same or XX.X%, fees. and million is $XX XX, strategies

than We XX is of our those billion excess XX nine additional our On their of The XXX fulfill That achieve since of those more alpha fees. basis have performance for benchmark annual index after strategies the clients strategies have strategies is inception fees. track show years. average since generated since Slide $XX returns of after Nine that inception approximately of we their records X, estimate points clients. outperformed have resources missions that inception, $XX strategies to goals. their billion and of these with

clients, our are financial and long-term High repeat focused value results we on for clients business and added outcomes shareholders. long our that We constantly our for our our outcomes. people term drive

earlier, As our our it. period of our which initial assess I time is business of public sensible It to philosophy marked and anniversary this XXth mentioned over execution a the offering. quarter decade

$XXX Over share. in our for $XX.X a $XXX with X.XX the distributed approximately of XXXX annual S&P relative Generated maintained $XX.XX, dividends from total returns Dow Jones AUM XX.XX% in shareholder Russell $XX annualized excess per than clients last the operating XX billion, dividends generated million to from grown share to our owners X.XX% margins of to billion million, revenue Managers $XXX average for more the XX.X%, years, billion total X.XX% billion to per and nearly we price quarterly adjusted for XXX, IPO of $X grown Asset $XX have the return reinvested, for of index. resulting

secular investments. have value from allocations, five grown XXXX, we demand of added to While asset markets, generating Since firm those sources and have we to short to long asset our capital with financial class shifts from high public-private, multiple and credit, hybrid, evolved and investment including high a for teams and yield asset emerging outcomes, to market long macro. XX, XX equity, classes, strategies debt, XX global short align credit, investment single from

We and credit teams six income have oriented two strategies. no oriented to gone credit fixed from

sovereign expanded strategies. instruments. non-US our credit, corporate launching we teams Global loans, activities, private Small and opportunity credit, Developing equities and for international growth, a our expanded markets China investment host global oriented investment and the public from derivative significantly World, emerging have explorer include Discovery, Across have platform, China entire We international mid our set primarily the equity, to post-venture of

before. more embedded ever than have Today, potential growth we

XX high affords investing phase We foundational their growth tremendous years. addressable of opportunity. records in less added investment XX have than value with track market The total strategies for

ability in public the success other success and to alternatives, We have And equities. to have regions income such we expect the of across as extend and China. fixed similar our world duration

time but take horizons, approach consistently has attractive time, will over total client high It and appropriate our margins, growth, generated business returns. successful outcomes,

to I will CJ to now turn it financial results. recent our discuss more

Thanks, Eric.

up strong to market and quarter outperformance X% which our by Our billion returns drove and $XXX.X AUM March first XX. results reflect investment

compared flat the in improved revenues quarter remained to While the seasonal this first expenses XXXX as increased our profitability nicely quarter, December quarter.

the Global our fees, rose aggregate their XXX begins gross during of on in of Equity approximately markets basis quarter X. and I'll overview of respective results our strategies the above returns Slide points benchmarks. generated

billion quarter end the quarter, $XXX.X compared increased but AUM our result, last of down XX% from a to quarter. at X% XXXX the As March

offset net $XX.X increase, Investment billion which partially was cash billion by of $X.X to the outflows. client returns contributed

billion were AUM was weighted or the material management the to Average no quarter. changes AUM prior XX% March up in quarter, X% $XXX.X the for vehicles. There by sequentially, year down and compared average mix fee

our as execute this asset portion by a income as on mix, replaces provided Slide this the class, We of have our into we presentation is believe our a slide growth provides X long-term AUM our view generation AUM new larger alternative which fixed and strategy. AUM in better business presents we the products quarter, past. and our by become

Slide results Financial on presented X.

XX% the Our complete two the quarter adjusted Revenues Compared average our increased offset results days average and XXXX, in in to Performance X% quarter. GAAP lower fewer to revenues release. on quarter, negligible periods. first AUM. are by of earnings higher fee for were presented all in or compared quarter down the the were partially previous revenues AUM

sequentially impacted the XXXX In first an by than seasonality $X.X quarter. in related Just each seasonality. march in higher costs, also including higher compensation that expenses with expense are are highest certain million operating expenses revenues. Though, compensation in due increased the those increased year. last for the quarter impacted expenses seasonal Adjusted increase were always to by quarter of X% line quarter,

in compared capital and our declined mark basis, quarter Over the quarter, the market to to XX% term long franchised to key was granted XXXX shareholders. March adjusted capital compensation investment quarter. adjusted On last and our declined XXXX. in of compared XX% and the align eliminates During X% incentive expense quarter, and grants to first were professionals the million adjusted awards. clients continue quarter. to share stock net $XX.X of restricted the year's to when Likewise, of talent to or invest Adjusted awards, talent last awards XX% annual declined sequentially first operating which X% income franchise income through an we with compared

quarter's Full guidance year I the earnings provided expense last projections consistent remained on call. with

and needs remains cash payout strong continues and Our our balance support policy. to management capital dividend sheet

unused. Our $XXX credit revolving million remains facility

portfolio. Slide seed our XX highlights investment

team cash and investment of addition Capital, newest to the With has substantially. new strategies EMsights increased the of use see growth our future our

seed is Our million, which now of includes gains amounts invested investment on initially million book $XX $XXX

see products cash of Using new growth strategy. an important is to component our

particularly seed We invested the amount duration approach and investments, to are capital seed product. respect to our disciplined each in of of in

and patient recycling our needs and before future investment invest we seed vehicles. We may to are capital products allow cash continue in And as thoughtfully into growth. grow new to strategies grow

operational make growth our infrastructure. new P&L also talent by in by in in using further increasing investing products, but to We're seed capital not and our only investments

remain we to to While payments, basis short dividend quarterly the special capital committed dividend returns cash on policy, drag a margins, through our consistent year on end shareholders dividend. these investments a which and predictable in term and

of directors of quarter. the to share respect quarter, generated dividend Consistent the per policy, approximately a with in of represents our cash with quarterly March the $X.XX dividend our board XXXX declared XX% which

than prepared growth have ever more As we potential today Eric we in emphasized his embedded before. believe remarks,

in of continue dividends. growth, portion committed strategically generated cash or form will a remain support business returning to We to in further the to of shareholders substantial our our invest cash

back the concludes will I turn operator. That And remarks. prepared the call to my

Thank you.

now first will question-and-answer Instructions] [Operator Today's question begin the with ahead. from KBW. We Brown comes go Mike Please session.

taking and more my does you're have how a separate with here? the sales great, seeing conversations a pipeline side to was questions. the outflows that And to CJ, persist. color the on the evolved maybe on business clients of I continue Eric hoping the Hey, account you trends thank How where get little looks? bit for

really difficult quarter, it future. extrapolate thought hi, Mike. quarter, to the another It's Yeah, Yeah, noisy Eric. we this making was

in billion the As saw $X.X quarter. update, of had a the we NetFlow you for negative

that we broke with we down, three-year also billion performance this across different less then about $X.X clients a record had terminated seven had We eight when -- than we hired with us and when investment strategies. us

with coupled market we've that war, providing experienced The uncertainty short manager a in orientation over reasonable kind some timeframe. the caused as and more inflation those policies on in think to provides opportunity China, the of allocators periods. I differentiate havoc great Now, process the an decision everybody's Russia-Ukraine to active us volatility with term it's lately, time making reasonable

that we the hard most going it's that think So to noises looking continue just that forward. quarter at to recent predict

see With dialogue and outflows. some credit income in fixed XXXX very marketplace equity regards saw base categories know on in we're market we the are to activity interest to in emerging institutional intermediary and strong XX for from our income starting and and primarily and XX-XX a space. look on we're And forward, anywhere the is client institutional months. year debt portfolios the outflows that high fixed side clearly coming that the And off the debt gatekeepers most six yield the process of elevated a across back to even have saw

there. optimistic we're So

just Okay, And changes for about keep as at past? from to you When you impactful of last where question of color what do it's pose could longer at the horizon? guys next how as It's the my level kind first term look years, follow from years, going there. company. most forward high the your And implemented then XX And a great, most are company kind you're excited differ to And that you've look is at great years the look a evolution time? back what on as of up, kind public of XX you here. thanks achievement. you congrats you think for a XX a

sophisticated them And be that private predictability guess and due the would to be be those able and proud to stay area a ability I that clients company. as to extremely the that to I we are. public the resource the decisions. continue we're take go hours and of plus shareholders to most replicate class from true to proud continue creates what And that Mike. us to it Yeah, say is way, position consistency We're a that and attract honestly, XX that with look a got the Because, conduct successful, the I to public that's forward. of who consistency. at to most other of company to to that talent, for our I able world diligence first make think and hours enormous years

And and private the highly maintaining from look and I say, for enormous to and think will clients, that's public organization, predictable going for forward stability yes. Artisan's an and I that, these years XX achievement that our our replicated? shareholders a employees, consistency our can believe is be answer and

Thank my question. Okay, for taking said. well you

And comes from our go next you. Thank Evercore Please John today with ISI. ahead. question Dunn

flows the Well, sourced strategy you value a talk international can spurred about the you, Thank from? to and of quarter positive maybe it. what that flipped were where quite

some few our saw a over we've of few international and ticks clients and existing growth exchange reallocate certainly, category. had of to the to years value. international Yeah, We value last value want of the value the strategy, quite

putting of were into as bulk clients, rebalancing, and this some increasing the time those allocations, and values. strategy, international that in well flows existing quite some us that known So have for consultants as

flow favorable coupled and to relative in the into the strategy performance the number the first the index the created peers year rebalancing, with quarter. So last and continuing for extremely really results that

quarters? second on then, mindset bit intermediary happened just forward? you the quarter more the that the we the going broadly side about shift looking kind funds then side talk lot as What a And the quarter? got into a -- go of between over is Gotcha. Can quarter. fun better little And two

that Yeah, certainly, other think the the specifically you separate and I the and I category, account, had versus in down think when breakdown, flow this more dealer categories. mutual broker probably fund break and the highlighting you're positive

that's And in we base. value of income. have asset allocation strategy think two dealer saw of of clients reflective strong broker and I the their those and client high a base and the high flows

And do can for you demand continue think strategies? that those might

I to looking to changes using quarter-over-quarter, they happen future And hard through overnight. tends it but think fairly be it's consistent. the predict quarter-over-quarter changes, don't and

But on third into say first a lean that is that the So where second it, asset quarter probably positive have shifts, that allocation I there off strategies category. you're and well would some might as quarter that as those would going quarter. and coming both of dampen

you Makes sense. much. Thank very

Credit today And from you. Thank comes question go our Please ahead. next at Bill Katz Suisse.

anniversary Excellent, thank I indeed. sudden. Happy you much, of old very a feel all and

one So well. company, about recasting its they're as you just on ways of Slide X, it fixing and growing thank both small. the buckets, track for you think it this When the way. It's we all

how you ramp speak think organic And to potential. the both speak offer fact want approach opportunity I need Thank growth they just fewer of the the here, alternative through So GPs. with wondering product? to larger maybe or reached the LPs potential, size versus teams good opportunity more faster some managers, just a the team. consolidate, the or generally growth they pretty sort Do you up you. just given we do to pureplay side, acquisitive the that amplify of other Because to

for in the the Yeah, can team hoping marry TAM with We TAM question. in believe and something's for to identifying time. don't highlighted. success as and available organization. think there the time know, thanks, do do that in short you will at in that some to moment our be again, quite that available believe it's going Bill just category by you that fit you We history, And believe we and circuit the whatever's

We've both I always generated growth. as so of at and returns allocators absolute resource nurture three extraordinary settlement. driver that most time record, five these and look year it which an at compete early there's building you're acquiring or strategies relative seed looked protect a book, you that and has And if on we which whether we on think of it, what the that use, our we basis. is And

idea time convince the to acquire by people it year three two the approach We that get and fit and you versus one like the trying in taking three. to and year of over that

XX into the get by we want. You and $XX in million after I able have strong XX.X. on getting strategies, activity our Page three just potential. and dollars EMsights the the But we growth the think time was results. book, of to to that that to one returns bulk XX $XX bulk we're say is XX.X, in of capture we're that They're million year strategies. going year of you our look they're seed be [Indiscernible] very current that million number, And income TAM. fixed at the if in four $XX We've turned is And

alt money over unconstrained. well And and Likewise, XX%, again, bulk the and on is as have that strong have roughly indexes. alpha in space, XXX they performance their and we the as of million of XXX ops, of bps global credit $XX X% and

we're think at, that positioned willing our to fact equity income backup do to we're our that, the be we're of think, going a I And able fixed confidence timeframe assets of very ability signal look we're, strong breakdown to alternatives. we to I the and well in that grow. by is and

total for Only play to the a moment the picture devil's but advocate one stock you in presentation, more for Okay, return because the on just slide. slide return put a big you.

Your relative performance the a S&P is there's to push.

Is broadly? Thank you. and capital about any of any an that XX growth the areas they've secondly, to think to grow I policy? return organic return the letting think of thought conversation of sort from more And here capital bit is organically organically. headwinds just capital grow clients. a alteration with or is And there the you then sustainability little policy? desire years, policy, two the our As run been next so One is opportunity,

growth a going of capacity -- the the strategies to alpha is alpha. and the our organic I to always fallout think ability the be of generate

we of in exchange through kicks, we'd the rather drive alpha just than of over known As firm you've flows. the pure the would years, growth

ebb of no And there's and flows. sake of create naturally based set the off for that in. the teams that'll and just strategies So bring we flow to target flows

policy, are in and reinvesting even we that credit it's whether existing higher to into regards on opportunities available get our there'll a be the made that into demand do alternatives, With idiosyncratic through as or believe themselves, teams. opportunities, in strategies these unique capital the and I co-investing, are

policy require that into seed over investment. more evolution credit So build more think that go capital don't as alternatives? evolve into and going the we we will I change a It's and time in a forward, year-over-year. natural to be But would dramatic see

want you CJ, to add?

I we policy, said. increased to I payout obviously has it see years. past committed just It's these Eric capital the book very to been gone what to has XX% you the a can we're expect think our high. would over which point XXX%. Previously, But, significantly XX%, areas, as think, ratio into of our months, two remain our was past is we've seed XX of, proof

sheet demonstrated balance willingness future use growth. to So, our for we've the

Thank you.

Thank Sachs. you. And our from go next Goldman question today with Blostein ahead. Alex comes Please

behalf time guys, on Luke for the of question. the is Hey, this Appreciate Alex.

a right year macro a now? others? has driver noticed relative strong real Or influencing both bigger particularly driver performance of to quick been particular strategies start everything and And where So more Have there performance basis. are been conversations a year? this is has than you the the start on absolute

once about, Eric we've really settle option find their to Luke, of Yeah, for macro nature of And footing, just Clients to to get are us talked strong noise. they still an spot allocating. their growth get people in trying the term bit. we're allocators footing. clients waiting drivers And for short the I embedded the drivers, think macro the a the around it's the flows and results as

but We call. stayed a to nothing of stay forward, bit work see diligence due interest on quite and looking this tangible

focus any given? this additional slides to some on of income on separately. the longer more these have like Thanks. alternatives you presenting thinking the Thanks. a Based plans term? two it Are guess, how bit guys fixed segments? building big for have you there's That a longer makes you've I there of are term seems the sense. disclosures guys changes you quarter, and And little appreciate And, made picture. about out them

two trend the the that income and break main one the points running investment think through And to fact depth us teams organization. the confidence here degrees the fixed now, six That of and I in has the the firm is manner. this that has breadth out of freedom assets strategies. two given

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Thank sense. you. Make

our you. today RBC Please question [Indiscernible] comes from Thank Markets. Capital ahead. at And go next

for taking question. thanks my Hi,

on the further a expectation stuff terms follow to capital. remarks capital. upon in further seed Just the the within any there, And is growth And wondering outlook upon growth of the expand seed you any growth fixed there within seed potential could the you the and capital talk about be how term that just Thanks. more income next? would meaningful near sides. needs could over alternative And, up quantify

we comfortable deployed. the And have capital the seed amount currently, At stage, allocation how stage and our are we we assets. this very promising for future feel early current both think of the growth. don't seed any of We results seed additional need with its

is you book. And bring to the things the in distribution. investment market of seed that our to and in continue to is book. a XX operations strategies the talent current We emerging the have do the have reinvestment probably created in XX lot to in debt seed successful be And with

income going talented as interest alternative can and The firm. the greater managers strategies, demonstrate are get more can we strategies, alternative and to are fixed fixed outside grow, of income as we that greater well that

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you. Got one. quick And Very one just helpful there.

to I and ongoing fixed a back. the expand efforts the alternatives, think income the Regarding while

You had of in that made some investments terms platform analytics. the the investment

this Just point, there pretty this accommodate base point? wondering, a could the good with investments potentially new there at further on for technology is side at Thanks. needs to for overtime? be Or a the strategy platform side

ongoing, I'll That Ken one. reinvest that evergreen take continue process into back is business. Yeah, of sort will to the

we I last think so outlook. you're from you're expense answering likely XXXX. levels And expense to guidance that question for on we're committed the quarter asking an gave

So all expense -- to reinvest year that are in the there's are baked but change we and the outlook, no in what infrastructure this the we've plans have into guided.

Very you. Thanks helpful again. there. Got

all conference today's this Thank We and thank session And question-and-answer you today's today's attending concludes ladies and gentlemen, call. for you. presentation.

wonderful have and may now lines You your disconnect a day.