APAM - Earnings call transcript Q1 2022 | Artisan Partners Asset Management Inc.

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Operator

Hello, and thank you for standing by. My name is Rocco, 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 conduct a question-and-answer session, and conference participants will be given instructions at that time.

As a reminder, this conference call is being recorded. would Director, turn Partners Investor I to call Asset time, Taphorn, Makela Relations this like the to over Management. At for Artisan ahead. go Please

Makela Taphorn

Thank Eric Colson, Business and Asset C.J. Today's you. Artisan CEO; will and CFO. call from earnings call. Welcome Management remarks include Daley the to update Partners

are and line we Investor will up on the Relations following section latest results available And remarks, Our of questions. these for investor presentation the our website. open

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

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

of will In our financial measures. today remarks non-GAAP made reference addition, some

measures over find our in turn release. GAAP can of You Eric reconciliations to the Colson. the most comparable I'll measures to With now call that, earnings those

Eric Colson

Thank transcript. we joining you Partners high Makela, and designed who or value-added thoughtful time. to in constantly growth investment know appreciate ourselves for is remind a taking We reading We environment. Artisan a thrive firm and for others. the call the talent you investment are thank and you everyone the

Mike our over XXXX, our opportunity alpha our in entrepreneurial careers and disciplined we what and and generate and do expanding X, the launched Artisan we strategies. have work Emerging our ability and launches and investment We capabilities. Global Markets business for return that Sarah our generate support investment but of remained ability have the the same degrees shareholders. O'Brien model, and of build team autonomy we We value have for they platform all These repeatability four The have and team talent how execute have business can exemplify significantly multi-channel time, recently inside generate investment grown we Today, investment Since of and steadily philosophy to Boston to opportunities located while operational global who walls We since to our On their offered see clients, built with joined built debt the the also expanded we investment successful long-term consistency we in September, we own and freedom, Artisan you wanted offer to they Slide behind distribution. Cirami, people, we professionals. a ability team have are diverse for business of them last Mike XX Unconstrained and value. Orvin. be. where

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and across market process classes cycles. We time and have successfully through executed this asset

and compounds Slide the franchise disintermediated if have stated for many for EMsights time. Group know what are, passed At diluted the value. Today, talent, as we autonomous management consolidation On AUM we set have Industry those a potential does. do, to solutions us. recent firm each patient process insulate of and creating that We mindset. remain and on creative own a increasingly foundational surrounded with build all platforms. can investment business records by who building opportunity track well on the homes to maintain seek through investment we've opportunity development resource our achieving short-term to of and from achieve compelling Creative investment emphasizing investment the disciplined and are and culture. It focus passed and firm you time team creation, we've Artisan control diversifies on investment milestones talent on early execute not we is from outcome an We true we see characteristics value. X, and On Partners, teams. focused our economic and entire sets takes long-term AUM business resources but business Capital emerging alignment. maintain noise. launches. yield milestones, distractions. across a maintaining is bring which We things While see outcome also pressures scale, and long-term investment-first support can distribution follow. value value we and clients. a lot the and investors we we leadership have the additional investment more to in characteristics to time, the its franchise We around path, established cultures, team have on of we firm. tremendous we expect end are is We risk-managed, across broader bear Underlying if the ultimately We process we we times patient focused talent. are great before. economic business We we The investing outcomes the we staying investment and view successful outcome in takes our have team investment will risk X, minimize our past, Slide we to expanded know This broad

the Expanding the instruments investment more we XX of have of we greater nearly our built than have teams. our number earlier, XX new have business process made our On strategies over asset summarized sixfold. doubled By following the distribution have out top and have added across we $XXX And markets classes capabilities geographies we our part investment multiple available increasing and last XX. and client non-US relationships relationships and described tripling investors from to I million from of the channels increased than years. repeatable page, investment teams freedom, and doubled significantly to and investment five investments XX the we degrees to in

compounding brand reputation has forward. going disciplined future of growth, of probability and and successful Similar increases Our outcomes the our repeatable successful compounding business effect approach, strengthens success, power franchise process to on value. a our revenue and proven development

resources Orvin built in have in XXXX, launch Bryan be They last with For home fixed We debt we a important point into Mike our and right fixed Artisan for to an joined year. support example, firm were we emerging income, favor. decided when successful income income. lean could to Krug when fixed data join support in What development a new saw our Cirami, franchise that talent a unproven identifying for Bryan to put O'Brien Sarah operations team. to odds and credit build us the Mike by team, Artisan differentiated the was market stacking and

odds for In with time to we long They differs Our we from and firms manufacturing all products stakeholders. differently. horizon risk as approach refer believe or distribution. outcomes growth the sustainable that play for mass engineering produce the lower that investments run,

I off time investments as and business how in almost on seek to and business we driving to and calls forums, build recent value, numbers. my can spent the reading over control focus what We these On all opposed of are we value other on long-term.

periods, are do business But value. So trying terribly quarterly economic relevant expect growth over the do annually, economic our business. not we to or of even reflect outcomes the are outcomes longer in we what managing to to

dividend $XXX more began Over team since operating billion; to XXXX. the focusing million last from XX margin of $XX.XX range inclusive credit the annual in have $XX the than our than billion from adjusted billion, time our to in of more our the $XXX in $X.X we XX% freedom, AUM revenue launched approximately more share upcoming and earnest than per $XX our doubled and distributed price doubled on our degrees shareholders, IPO to per years, share we an maintained of

opportunity to value, our other new digital accessing income, new with China and operating investing wealth and marketing, markets, new investing franchises, platform talent Greater large sets capabilities. investing launching channel will we Looking our launching and fixed distribution further on broad in focus forward, continue building strategies existing private expanding recruiting in business global franchises, and in addressable in the

results. grow can we business turn eventually, have discuss past. I we value value now to C.J. in will we value And more to recent creation. to are as We expect over business reflect confident the economic our it

C.J. Daley

Thank you, Eric.

commentary Following XXXX. quarter Eric's results, results some for provide comments financial our first on on our long-term I'll the of

and and includes the on in earnings continued to After XXXX, My primarily advancing XXXX, due markets results. first results. war the of the Our cloud quarter global in considerably of uncertainty will of fell pandemic. comments most financial release adjusted Ukraine, rising broad rates interest the regarding inflation, GAAP adjusted focus both

by to XXXX client revenues lower markets, launched EMsights at quarter our compared flows net strategy, and launched rate. to representing at quarter: the the billion of new as $XXX strategy quarter. Global team declined XXXX. strategy two AUM end and million, Value AUM March negative the X%, Unconstrained markets, managed Group. X% growth the the annualized prior value Capital the were U.S. AUM the first was compared or well. strategies declined cash The We first the Despite billion, a by for $XXX.X the positive X% down of income organic $XX.X during the quarter Given

fewer to annual performance with expenses, two talent-driven operating The Adjusted in team, million, and variable experienced of X%, from addition the lower on with Adjusted XX AUM fees declined with expenses an one net a quarter inflows from by due the firm's the higher contributor higher Generation AUM, as mix current by with Percentage quarter. quarter seasonal largely The the compensation line and value merit quarter expense. offset was year-over-year, full-time diverse generation the other and quarter. declines. Xth. decline absence in managed X% the revenues strategy first Emerging strategy of net a during of inflows to was the AUM largest increases first in reflecting model. reflects in and flows operating Markets principally employees on result declined quarter client the Quarterly XXXX. launched generations incentive to expenses the quarter the cash declined rates annual incentive inflows quarterly opportunities merit prior had compared for results increased the EMsights by is quarter. net million, clients. the are quarter. million X. All of second compensation $X.X inflows market operating the on the of of debt of first metrics compared the international slide. overall strategies long-term by unchanged quarter. decline cash fourth primarily our in sequentially expenses, in next partially April of team, $X.X increases to the in Year-over-year Revenues our AUM, set along the XXXX operating $XX XX% The client net average days number increased drove fee generation investment business the expenses declined consistent in slide remain

result strategy due to $XXX the of We Adjusted of as share the for talent shareholders market million our to income and our breadth operating align for XXXX was management operating quarter talent support XX.X%. awards new also with was and clients The stock and revenues March expansion seasonal quarter. a continue operating and margin through, lower distribution data to and the invest active March in from income was higher $X.XX grants our margin technology principally which of to XXXX an annual is XXXX quarter Adjusted and franchise the of within key in expenses. decline of declines the adjusted December through our capabilities capital operating teams per restricted net in and launches.

sheet remain committed borrowings by we supported modest balance of as generation. we year. to our the cash healthy, strong And generate Our majority every history we the have as are remains cash throughout distributing

back This of And model to call continues of will last per have and Directors us March. variability to $X.XX weather dividend our serve expenses, quarter at the share. predictability this price That a over for XX my the turn global our of of yield conditions. of dividends we remarks. quarterly closing, financial now our months XX% our dividend particular of a In using ever-changing market to the and end the the Q&A. in in XX% sustainability declared Board and operator resulting dividend approximately declared I $X.XX Including share well provides concludes

Operator

you. Thank

[Operator now will Dan at comes question-and-answer the Jefferies go Please Company. Today's begin Fannon from We question session. first ahead. & Instructions]

Dan Fannon

Thanks. Good morning.

talk EMsights I grown guess channels might are it make just scale anything targeting the that if you for Is thinking the faster? strategies there thinking which where that unrest and structurally about given initially will as versus opportunity, strategy? kind could about So, high there AUM also you be different you then other strategy something is just the you've this of this well? about that's out and then -- think about for this that also And is all launched and you global maybe the is the where demand from opportunity there

Eric Colson

Dan hi speed know scale. Yes, to Eric. how can or fast the we it's Yes, don't I much can I how talk

to As getting a market created duration my trying just done in In engineering high-quality as opposed to we've mind, to has really sake that's circuit franchises way them said that have that we've it it been to timing timing, it. for these hit the short don't and call. just which think of to talent we've building been at good the finding those but of around the is at really we and very The resources uncertainty team great discussed I a on think sizable. right opportunity we've the and I it

If at XX% to trillion just $XX you've of you market look bit of $X approximately of out which there. markets all Since about XXXX, about $XX local, fixed that, from income, global XX% the opportunity. gone emerging in it's the the up roughly emerging trillion there fixed income, a makes trillion Within is quite inefficiency.

better believe, tends So, active passive. The thrive substitutes, much weak passive management fairly to are costly. than we and

by yield. US to strategies Then it's look for great end high-yield and XXX marketplace of high-yield saw management securities roughly XXX high debt, firms. corporate active the very in market there's of sovereign we debt in emerging backed from you managing So, to range emerging think growing market, blend in about the do $XX -- emerging high billion. billion have yield fewer and strategies, little market that top billion than XXX to billion bit high the translate in have all and of less in $XXX-plus market also debt firms, And $XX so you five to have a both opportunity yield it's In traditional loans. we out we a the similar but what universe the five market. there The at $XX market, you top the a you

a you you opportunity you haul may think over for Then the environment. fees. this look the market getting in to good how at spent easiest we look the clearly not is for to We is bring This very long that into on top on some at class. especially active we agree asset allocation. run. strategy. an So, current And about then which think ability market And the long uncertainty traditional fits total look layer importantly sizable team, asset operational to the the underrepresented management, And at into the the entrepreneurial this opportunity you get the with more barriers is strategy growing. over I the yield on an time

out to there and very opportunities crop there's for a think up. this few team I go

is So be to that quality we I this highest the it. shows Clearly we scalable the and us. it not five, have in the will do duration manner we're but think for opportunity quite top direction of trying the the so to with go scale

Dan Fannon

progression Thank you. year funds the the rest That's follow-up a expense just about we associated has any helpful. launches of things as look the some team's you some the levels some had the chatted should there think of kind in if would that the started that And as fixed new But fund onetime was helpful. been with just then about how and be through quarter other about just on C.J. for team on we thinking expenses normalization time. this the or of of been of costs those XQ

C.J. Daley

Dan. Hi,

target the last in you on So think And I new gave on guidance the last of quarter. brought year. we we're September team we with

there run expense built fair in quarter. a So was amount rate of last

quarter-over-quarter a will They moving into some rate. So in space at think Boston permanent pretty we're run good I be eventually.

in. see you'll slight bit, up tick rest really but should the just So fully the of occupancy expenses be baked a

Dan Fannon

Great. Thank you.

Operator

ladies question Katz from then at ahead. and comes Please Citigroup. gentlemen go And today Bill next our

Bill Katz

this much Okay. for taking so the and Thank -- you morning. the update this questions afternoon

head So were just associated where just be you that head the of Can Where us sort talking a XX% expenses count of across with that? line in I concomitant what of, are you increase that on build? picking then, terms for board up a of sort count. and in about roughly in are might increase overall sort in last quarter last of reframe that you think sort questioning. you the of

C.J. Daley

in robust this last target. year. into Bill. We're on We've had year Yes, recruiting pretty

head guidance in of both on So those fixed on terms and the target count I we're costs. gave compensation expense .

Bill Katz

volatility having it then Thank Eric the, market actually than refine that. Thank sort growth? good credit any is or you. you that. backdrop the you are in bit just about build and side for little a of is effect Is -- the A you to of activity out it mentioned of sort terms I'll here of the kind of, the continuing rest other then And areas the Could collective or more business Okay. other? platform, incremental teams. little it's one of the speak a way a that? where for And of recent that

Eric Colson

Yes. of the We've In of seen have quite a these bit quite view many become space. in platforms activity alternative hedge our sizable. fund

think to can gone bulk look we the few I the back the hedge years. of over last fund platforms. have assets And

past our quite as been has finding So from Artisan interested is other in yielded And strategies of credit gamut activity franchises outcome in that becoming we've activity see model alt range teams of our home. model. scalable some for there's those active. type has that that entrepreneurial liquid in And the fit reside teams that may the a we seen and or the favorable M&A also an to available

of there are inception active mix of the So the we've think the around credit areas market as are in Many through since of today product a alternative those more China Asia public-private Bill. seeing brand to out is we've listed build all interest teams and in the teams in around of still and the areas with the the hybrid have continue very and are same we we've the space. teams those marketplace uncertainty teams about have the and us for catalysts through themes past had those great some and and we specifically to continue dialogue launching that a out sticking the our teams growing. And history said

Bill Katz

Eric. Thank C.J. you, you, Thank

Operator

our today Alex with And ladies gentlemen, Goldman Blostein question Sachs. comes ahead. and next Please go from

Alex Blostein

afternoon. good C.J. Thanks, Hey, and Eric as well.

lineup on Just that point the last Bill question to building from guys you made.

adding be sort side. Eric are is internally place around of bringing the of the you better resources of in guys let's it a just over infrastructure we've have that seen therefore – teams the fact thinking largely up. sounds alt these given capabilities sort to teams last, are teams? on margins support and say sounded, we should about you've and, like yield guess the But should than more on mostly the I you couple question as on more capabilities And to So, new built already been in newer out incremental teams results and picking support more the given what launches so conversations those

Eric Colson

Markets have Yeah. Certainly, made we Emerging a debt. in sizable investment

cost We that asset that teams first sunk in when back of that, on-boarding which business also and credit credit the expand, we we And teams the made we space, as over the launched you add will in there calls. capabilities stated classes have quite I and lower in while you much sizable the is the we a growth is the leverage new into credit, franchise Bryan have with and team active a growth, call, will investment built two have XXXX. we've of a in given on be new team a highlighted think new alt that lot lot we past cost really incremental Krug as of your existing of today. the activity in

now brought in core while delivering new that through. we our high seeing on is looking So is what at and on focus activity talent, right

fairly are expectations on my low So teams. new

at looking what highest quarters at and the is quality. our next these quarters, the focus year of on Looking next broadening quarters we be will and network, brought few the business in deliver these the really on to

two opportunity courtship don't It So, teams. takes yield bringing walk to of is an in is broaden away outcome. a the call business in the medium-term. I that out that people short-term a year broad to to activity The want have this typically to from over going networking

teams is the on now activity current but mindset the my high on remains right So, networking.

Alex Blostein

between of value that guys business there is second and the and return is the mentioned seeing. around economic you some call guess quite And capital of substantial still the on I helpful. a Eric, that's this sort My Great, dynamics. it. Got value are the well prior as that disconnect of question on you calls

any and more mind So, in around thoughts a with pivoting buyback? capital to that return introduce sizable updated strategy

C.J. Daley

that Alex. one, take I'll

does model since cash the sell Our to generated healthy well we've a buyback dividend close we before, mentioned to paid not we've of us really IPO mentioned pretty Eric with as out the very XXX% and yield. led

limited We for available in value, the we business buybacks. through generates policy prefer the So reason predictability do to continue of over economic cash capital products, that launching invest have to see seed we and change really but which and no the new time dividend at this point.

Alex Blostein

sense, All checking. just right. Makes Thanks.

Operator

our ladies Please and KBW. And comes from gentlemen, go next Lee, question ahead. Robert today

Robert Lee

Great. of are environment, you Makela. C.J. little I prepared of some remarks, afternoon, down strategies? Thanks. to lot Good a Eric, COVID about as in more the flow a Eric, in the being sharp markets a active about kind you If but the in talk apologize. morning, current such back and of had strategies more bit traditional and have your But good we you initial immediate and that it talk the looking And saw surge may this did some two sell-off. EMSights. attractive you obviously, can demand subsequent of the you think for covered years quarters of

to general? look in at equities or we've of call it, your a year-to-date starting long-term starting you? similar do or Are allocating lot equities to more towards time liquid, clients not and had to take active to long-term your you rethink to opportunities So, strategies create so see start types for weakness see of maybe something you

Eric Colson

of saw and a there. And come is where behaving for drive crisis, seen period is the down similar a more behaving pandemic health done everybody obviously of in crisis landed you're The that occurs conflict, coming there seen off really of still And utility, growth have forward. management obviously, closer better And correlations many some thrive now saw that what you it. with, we've to pushing as starts you we're settling Russia the started another that everything in initial that XXXX and care industrial, coming We've people XXXX, after where the Yeah. the differently. we of pandemic Ukraine managers But you've a obviously, off think in near home and with fashion. when itself aren't it anywhere or period, out Rob and same. active that I again of operating rotation as caused value one and occur at clearly like work go heavily March that saying Russia-Ukraine the the technology many energy,

You traditional and say in there. you cases, generations about most just look it see the people these at thriving our generation a strategies, with in and many acutely team, some generation And value three. see strategy. international first-generation do And one attrition our it's all

But asset to period the And see franchise some you you back, be. XXXX it the XXXX. both to And these management, we've in numbers, of the continue does shine our I the great provide things franchises value very now value of traditional enormous built and it's it an have with of saw and of now it to a growth normalize starting of for that time of continuing Artisan to the asset amount to think, franchises power international bring you're with And periods. diversification think strong I franchise. and in three power that new across some will with we're of as a the and and build strategies. mix five-year through other styles some which but our are see in traditional are shining

Robert Lee

most is a it's some was five feel my decade. of RIA, can that. strength if opportunity you some relationships of like, how mean, I the do I'm institutional, handout, or different your I the momentum if you the for wondering where your maybe maybe you're the we on maybe follow-up today, I page in If provide DC, and have if it currently look bit Also, where like Great. most or of take you curious, hard to maybe, look additional distribution answer. the distribution of seeing penetration Thanks and distribution little kind for underexposed. question. of mean, on I where color order, past kind think there's channels, of whether a slice footprint greater you that you're various just kind to at developed wirehouses, way rank over

Eric Colson

Yes. On those a are institutional go-forward the and And basis, the subset channel. intermediary of converging.

with family clients broadening us. that financial to endowment basis on active as very push dedicated have see non-US together, as sticky, the out the been we institutional put group a office of space. and client more foundation take that a well in adviser using traditional and you The coupled financial our has focus the base if efforts Let's for our digital resources RIA, institutional. strong grouping more that the foundation a adviser RIA been franchises has endowment been future But on family office, distribution within

Robert Lee

taking Thanks Great. for Appreciate question. it. my

Operator

and next John our gentlemen, Evercore in Dunn ISI. ahead. today comes Please go from question Ladies

John Dunn

was you I the about can far may market picture. changed of have moved kind wondering, this the maybe year talk so much closing fund how

Eric Colson

play the certainly. at to total Clearly, the of look into portfolios. capacity managing It's think regards capacity. overall Yes, -- comes obviously, when about liquidity with we a of we factors the variety

assets. us signals look a from narrow running velocity in We do give and And ebb the at concentrated little and volume of of at provides asset a opportunity. Markets certainly base, need also we to capacity. or bit it's all is pullback the look flow. these then, of something If very the manage of that coming coming way. And dollars mix we one also the if dollars

clients. take there We've soft allowed we've or capacity. So we've and talked working markets And capacity manage we're up and availability. us room XX% to run of us markets seen run to to cautious. and bit to clients for as XX% existing more down given has always some And left these it with manage closings little a trying seen

our that soft in So done international for strategies capacity. certainly of closing, we'll value our sure. to we've rebalance with And some with existing other manage clients work and with

go very recover and to position a way line. So clients pick the we're you're over difficult and markets it that the does and a leeway, And consultants of you it's more other running strategy of but always then cautious wanes the where bit give us on up little if that. in integrity

it more. on So give short a us answer, bit to does room take

John Dunn

probably a once we then go. put you just now? get talk we playing fast medium-term about we you are where the than Got to better Post-Venture about over China how think on place how that maybe are can you. out effort pause the maybe more a XXXX in And Could

Eric Colson

it. the I of for you as underweighted been can there's of engineered private breadth funds markets don't most We pause for China. whole second Yes, the economy. And point active opportunity remains bit that And wide very a little the really us. that to as challenged the to by we manufacture and ability look in try period The in think see say securities time the why China We at mid-term it's medium volatility in we then the the China that that manage to there remain and quite next because and well. clearly easy and of it's run, very think, some privates are And get long-term we largest the unwind products for is that for it's to attractive opportunity in run. too the a short long disheartened dampen management. that short of the term still the with

John Dunn

very Thanks much.

Operator

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

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

Artisan Partners Asset Management (APAM) 27 Apr 222022 Q1 Earnings call transcript