Artisan Partners Asset Management Inc. (APAM) Bundle
Understanding Artisan Partners Asset Management Inc. (APAM) Revenue Streams
Understanding Artisan Partners Asset Management Inc.’s Revenue Streams
Artisan Partners Asset Management Inc. primarily generates revenue through investment management fees. These fees are based on a percentage of clients' average assets under management (AUM). As of September 30, 2024, the company reported total revenues of $279.6 million for the third quarter, marking a 12% increase from $248.7 million in the same period in 2023.
Revenue Growth Rate
The year-over-year revenue growth has shown a consistent upward trend. For the three months ended September 30, 2024, the revenue increased by $30.9 million compared to the previous year. For the nine months ended September 30, 2024, the revenue growth was $88.7 million, reflecting a 12% increase compared to the same nine-month period in 2023.
Contribution of Business Segments
The company's revenue is derived from various segments, primarily categorized into Artisan Funds, Artisan Global Funds, and separate accounts. The following table details the investment advisory fees and weighted average management fees for these segments:
| Segment | Investment Advisory Fees (Q3 2024, in millions) | Weighted Average Management Fee (bps) |
|---|---|---|
| Separate Accounts and Other | $104.9 | 49.5 |
| Artisan Funds | $174.7 | 88.4 |
In total, the investment advisory fees for the three months ended September 30, 2024, amounted to $279.6 million, with the majority coming from Artisan Funds, which represents 62% of total revenues.
Significant Changes in Revenue Streams
Notably, there has been a shift in the weighted average management fee, which decreased from 69.5 basis points in Q3 2023 to 68.5 basis points in Q3 2024. This change is attributed to a shift in the strategy mix and reflects the competitive environment in the asset management industry.
Historical Trends
The average assets under management for the three months ended September 30, 2024, was reported at $162.8 billion, a growth of 14% from $142.2 billion in the same period last year. This increase directly influences revenue, demonstrating the correlation between AUM and revenue growth.
Overall, the revenue analysis indicates robust growth fueled by increasing AUM and strategic adjustments in fee structures. The company's ability to adapt to market conditions while maintaining a diverse revenue base positions it well for continued success.
A Deep Dive into Artisan Partners Asset Management Inc. (APAM) Profitability
A Deep Dive into Artisan Partners Asset Management Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was reported at 33.3%, slightly up from 33.0% for the same period in 2023. The operating profit margin was 35.0% for Q3 2024, compared to 32.5% in Q3 2023.
Operating Profit: The total operating income for the three months ended September 30, 2024, was $93.2 million, an increase from $82.2 million in the same quarter of 2023. For the nine months ended September 30, 2024, the operating income reached $257.5 million, up from $227.2 million in the corresponding nine months of 2023.
Net Profit Margin: The net income attributable to the company for the three months ended September 30, 2024, was $72.9 million, translating to a net profit margin of 26.1%. This is an increase from $53.1 million or a net margin of 21.4% in Q3 2023. For the nine months ended September 30, 2024, net income was $190.0 million, compared to $157.5 million in the same period in 2023.
Trends in Profitability Over Time
The following table illustrates the trends in profitability metrics over the last two years:
| Metric | Q3 2024 | Q3 2023 | Change | YTD 2024 | YTD 2023 | Change |
|---|---|---|---|---|---|---|
| Gross Profit Margin | 33.3% | 33.0% | +0.3% | 31.6% | 31.3% | +0.3% |
| Operating Profit Margin | 35.0% | 32.5% | +2.5% | 32.7% | 31.5% | +1.2% |
| Net Profit Margin | 26.1% | 21.4% | +4.7% | 22.0% | 19.3% | +2.7% |
Comparison of Profitability Ratios with Industry Averages
The industry average gross profit margin for asset management firms is around 30%–35%. Artisan Partners stands within this range, indicating strong operational efficiency. The operating profit margins are also favorable, with industry averages typically between 25% and 30%, positioning Artisan Partners above average at 35.0%.
Analysis of Operational Efficiency
The total operating expenses for the three months ended September 30, 2024, were $557.3 million, reflecting a 12% increase from $498.9 million in Q3 2023. However, the increase in revenues, which was $279.6 million for Q3 2024, signifies effective cost management and operational efficiency.
The following table details the operating income and expenses for the last two years:
| Period | Total Operating Income (in millions) | Total Operating Expenses (in millions) | Operating Income Margin |
|---|---|---|---|
| Q3 2024 | $93.2 | $557.3 | 16.7% |
| Q3 2023 | $82.2 | $498.9 | 16.5% |
| YTD 2024 | $257.5 | $1,503.0 | 17.1% |
| YTD 2023 | $227.2 | $1,400.0 | 16.2% |
Debt vs. Equity: How Artisan Partners Asset Management Inc. (APAM) Finances Its Growth
Debt vs. Equity: How Artisan Partners Asset Management Inc. Finances Its Growth
As of September 30, 2024, Artisan Partners Asset Management Inc. reported total liabilities of $1,610.6 million and total stockholders' equity of $405.0 million, reflecting a substantial equity base compared to its liabilities.
Overview of the Company's Debt Levels
The company's debt structure consists of $200 million in unsecured notes and a $100 million revolving credit facility, which was unused as of September 30, 2024.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Artisan Partners is calculated as follows:
| Total Debt | Total Equity | Debt-to-Equity Ratio |
|---|---|---|
| $200 million | $405 million | 0.49 |
This ratio of 0.49 indicates a conservative approach to leverage compared to the industry average, which typically ranges between 0.5 to 1.0, suggesting that the company is less reliant on debt financing than many of its peers.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
As of September 30, 2024, the company maintains its unsecured notes with a fixed interest rate that becomes subject to a 100 basis point increase if it receives a below-investment-grade rating. The company was in compliance with all debt covenants as of the reporting date.
Balancing Between Debt Financing and Equity Funding
Artisan Partners has strategically maintained a balance between debt financing and equity funding by utilizing its operational cash flows to support working capital needs and manage growth. The company generated $279.6 million in revenue for the three months ended September 30, 2024, illustrating robust operational performance.
Furthermore, the company declared dividends of $0.71 per share of Class A common stock during the same period, reflecting its commitment to returning capital to shareholders while managing its debt levels effectively.
| Financial Metrics | Q3 2024 | Q3 2023 |
|---|---|---|
| Revenue | $279.6 million | $248.7 million |
| Operating Margin | 33.3% | 33.0% |
| Earnings Per Share (Diluted) | $1.03 | $0.76 |
| Dividends Declared Per Share | $0.71 | $0.61 |
This financial performance demonstrates the company's ability to generate sufficient earnings to support both its debt obligations and shareholder returns.
Assessing Artisan Partners Asset Management Inc. (APAM) Liquidity
Assessing Artisan Partners Asset Management Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was calculated at 2.31. This is derived from current assets of $363.8 million and current liabilities of $157.0 million.
Quick Ratio: The quick ratio for the same period was 2.18, indicating a strong liquidity position when excluding inventory from current assets.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, stood at $206.8 million, which reflects an increase of 21% from December 31, 2023, where it was $171.0 million. The increase is attributed to higher cash reserves and receivables.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $363.8 | $157.0 | $206.8 |
| December 31, 2023 | $305.0 | $134.0 | $171.0 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flows from operating activities totaled $335.7 million, an increase from $262.8 million in the prior year. This increase is primarily driven by higher net income and improved working capital management.
Investing activities reported a cash outflow of $24.5 million for the same period, compared to $36.5 million in 2023, reflecting reduced capital expenditures.
Financing activities showed cash outflows of $205.9 million, up from $134.3 million in 2023, mainly due to increased dividend payments and distributions to noncontrolling interests.
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $335.7 | $262.8 |
| Investing Activities | $(24.5) | $(36.5) |
| Financing Activities | $(205.9) | $(134.3) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents totaled $253.9 million, significantly higher than $141.0 million at the end of 2023. Accounts receivable also increased to $110.0 million from $101.2 million, indicating a healthy collection process. The company maintains an undrawn commitment on its revolving credit facility of $100.0 million, further enhancing its liquidity position.
Overall, the liquidity analysis reveals a robust financial standing, with solid ratios and positive cash flow trends supporting operational needs and strategic investments moving forward.
Is Artisan Partners Asset Management Inc. (APAM) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key valuation metrics, stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 22.5, based on a trailing twelve months (TTM) earnings per share (EPS) of $2.68.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated at 3.1, reflecting a book value per share of $8.63.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 15.8, with an enterprise value of $2.76 billion and EBITDA of $174 million.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between a low of $35 and a high of $48, currently priced at $45.
Dividend Yield and Payout Ratios
The annual dividend yield is 4.0% based on the latest quarterly dividend of $0.82 per share.
The dividend payout ratio is approximately 75%, indicating a significant portion of earnings is returned to shareholders.
Analyst Consensus
The consensus among analysts rates the stock as a hold, with a target price of $48, suggesting limited upside potential from the current price.
| Metric | Value |
|---|---|
| P/E Ratio | 22.5 |
| P/B Ratio | 3.1 |
| EV/EBITDA Ratio | 15.8 |
| Stock Price (Current) | $45 |
| 52-Week Low | $35 |
| 52-Week High | $48 |
| Dividend Yield | 4.0% |
| Dividend Payout Ratio | 75% |
| Analyst Consensus | Hold |
| Target Price | $48 |
Key Risks Facing Artisan Partners Asset Management Inc. (APAM)
Key Risks Facing Artisan Partners Asset Management Inc.
Internal and External Risks
Artisan Partners Asset Management Inc. faces various internal and external risks that could impact its financial health. Key risks include:
- Volatility in global financial markets, which affects the value of assets under management (AUM).
- Competition within the investment management sector, which can lead to pricing pressures and reduced market share.
- Regulatory changes that may impose additional compliance costs or limit operational flexibility.
- Market conditions including elevated inflation and interest rate fluctuations affecting investor sentiment.
Operational, Financial, and Strategic Risks
The company’s recent earnings reports highlighted several significant risks:
- For the three months ended September 30, 2024, the average AUM was reported at $162.8 billion, reflecting a 3% increase from the previous quarter but still subject to market volatility.
- Client cash flows showed gross inflows of $6.2 billion against outflows of $6.95 billion, resulting in net client cash flows of $(743) million.
- Operational expenses increased by 12% to $557.3 million for the nine months ended September 30, 2024.
- The effective tax rate for the company was 19.9% for the nine months ended September 30, 2024, compared to 19.1% in 2023.
Mitigation Strategies
Artisan Partners has implemented several strategies to mitigate these risks:
- Management of investment capacity to ensure successful asset management, which includes closing certain strategies to new investors when necessary.
- Maintaining compliance with all debt covenants, ensuring financial stability with no defaults reported as of September 30, 2024.
- Focus on diversifying investment strategies to reduce dependency on any single strategy or market condition.
| Risk Factor | Description | Impact on Financials |
|---|---|---|
| Market Volatility | Fluctuations in AUM due to market conditions. | Revenue fluctuations directly tied to AUM value. |
| Client Cash Flows | Net outflows impacting overall AUM growth. | Negative cash flow of $(743) million for Q3 2024. |
| Operational Costs | Increased operational expenses affecting margins. | Operating expenses at $557.3 million for 9M 2024. |
| Regulatory Compliance | Potential costs associated with changes in regulations. | Uncertain impact on operational flexibility and costs. |
Future Growth Prospects for Artisan Partners Asset Management Inc. (APAM)
Future Growth Prospects for Artisan Partners Asset Management Inc.
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers, including:
- Product Innovations: The introduction of new investment strategies and enhancements to existing funds.
- Market Expansions: Efforts to penetrate untapped markets and regions, particularly in Asia and Europe.
- Acquisitions: Strategic acquisitions aimed at increasing market share and expanding service offerings.
Future Revenue Growth Projections and Earnings Estimates
For the three months ended September 30, 2024, the company reported:
- Revenue: $279.6 million, a 12% increase from $248.7 million in the same period of 2023.
- Earnings Per Share (EPS): $1.03, compared to $0.76 in the prior year, reflecting a 35% growth.
For the nine months ended September 30, 2024:
- Total Revenues: $814.8 million, up from $726.1 million, representing a 12% increase.
- Net Income: $190 million, a 21% increase from $157.5 million in 2023.
Strategic Initiatives or Partnerships
The company has undertaken several strategic initiatives to drive future growth:
- Investment in Technology: Enhancing analytics and trading platforms to improve investment performance.
- Partnerships: Collaborations with fintech firms to leverage technology for better client engagement.
Competitive Advantages
The company maintains several competitive advantages that position it for growth:
- Strong Brand Reputation: Recognized for high-quality investment management services.
- Diverse Investment Strategies: A wide array of funds catering to different client needs.
- Experienced Management Team: A seasoned leadership team with extensive industry experience.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Revenue | $279.6 million | $248.7 million | 12% |
| Earnings Per Share | $1.03 | $0.76 | 35% |
| Net Income | $190 million | $157.5 million | 21% |
| Average Assets Under Management | $162.8 billion | $142.2 billion | 14% |
As of September 30, 2024, the company reported:
- Ending Assets Under Management: $167.8 billion, an increase of $31.3 billion or 23% from $136.5 billion in 2023.
- Gross Client Cash Inflows: $18.0 billion for the nine months ended September 30, 2024.
- Gross Client Cash Outflows: $20.9 billion for the same period, resulting in net client cash flows of -$2.9 billion.
With a focus on innovation, strategic partnerships, and market expansion, the company is well-positioned to capture future growth opportunities in the investment management sector.
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Article updated on 8 Nov 2024
Resources:
- Artisan Partners Asset Management Inc. (APAM) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Artisan Partners Asset Management Inc. (APAM)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Artisan Partners Asset Management Inc. (APAM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.