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AP

Artisan Partners Asset Management Inc. (APAM)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 was solid: revenue rose to $282.8M (+2% q/q, +4% y/y) while adjusted EPS held at $0.83; GAAP EPS increased to $0.94 on sizable non‑operating investment gains .
  • Ending AUM reached a record $175.5B (+8% q/q), driven by $15.2B market appreciation; net client outflows moderated to $1.9B; average AUM was flat sequentially at $166.8B .
  • Versus estimates: revenue beat ($282.8M vs $274.9M*) and adjusted EPS was roughly in line/slight beat ($0.83 vs $0.823*); GAAP EPS benefited from investment gains excluded from adjusted metrics *.
  • Dividend raised 7% to $0.73 vs $0.68 in Q1; management highlighted lower Q3 OpEx (removal of ~$2.4M China Post‑Venture costs) and revenue tailwind from higher AUM as near‑term catalysts .
  • Strategic focus: expanding alternatives/private markets, credit “degrees of freedom,” and intermediated wealth; management tone confident amid cautious institutional risk appetite and tariff/macro headlines .

What Went Well and What Went Wrong

What Went Well

  • Record quarter-end AUM of $175.5B, up 8% q/q and 10% y/y, with strong market appreciation ($15.2B) offsetting weaker flows; average AUM +5% y/y .
  • Revenue growth and fee rate: revenues +4% y/y and +2% q/q; weighted average recurring fee rate ticked up to 68 bps, supporting monetization of AUM mix .
  • Credit franchise/EM momentum: 12th consecutive quarter of positive fixed-income flows; onboarding two institutional mandates; emerging markets strategies gaining interest with Developing World hitting 10-year milestone .
  • “We ended the second quarter of 2025 with our highest quarter-end AUM ever, $175.5 billion” — Executive Chair Eric Colson .
  • “We continue to prioritize business development for credit opportunities and floating rate strategies, and we are actively exploring ways to further expand the credit team's degrees of freedom and business” — CEO Jason Gottlieb .
  • Dividend increase to $0.73 and proactive liability management with $50M Series G notes at 5.43% to refinance maturing Series D .

What Went Wrong

  • Net outflows persisted: Q2 net client cash outflows of $1.86B, with muted gross inflows amid cautious institutional risk posture and tariff concerns .
  • Margin compression: GAAP operating margin fell to 28.2% (from 31.2% in Q1), driven by higher long-term incentive compensation (market valuation effects +$7.4M) and closure-related separation costs for China Post‑Venture .
  • Average AUM was flat q/q (166.8B vs 166.7B), limiting revenue growth despite strong ending AUM; revenue increase partly due to one extra calendar day .
  • Analysts may question sustainability of GAAP EPS lift given $26.1M share of investment gains in sponsored products (excluded from adjusted results), making adjusted EPS flat q/q .
  • Capacity constraints on some growth strategies and ongoing rebalancing by large institutional clients weigh on equity flows and near-term scalability .

Financial Results

Headline Financials vs Prior Periods and Consensus

MetricQ2 2024Q1 2025Q2 2025Q2 2025 Consensus*
Revenue ($USD Millions)270.8 277.1 282.8 274.9*
Diluted EPS (GAAP, $)0.80 0.82 0.94 N/A
Adjusted EPS (Non-GAAP, $)0.82 0.83 0.83 0.823*
GAAP Operating Margin (%)32.0% 31.2% 28.2% N/A
Adjusted Operating Margin (%)32.2% 32.1% 31.7% N/A

Values with asterisk (*) retrieved from S&P Global.

Revenue Breakdown

Revenue Component ($USD Millions)Q2 2024Q1 2025Q2 2025
Artisan Funds & Artisan Global Funds Mgmt Fees170.2 174.7 179.6
Separate Accounts and Other Mgmt Fees100.5 102.4 103.2
Performance Fees0.1 — —
Total Revenues270.8 277.1 282.8

KPIs

KPIQ2 2024Q1 2025Q2 2025
Ending AUM ($USD Billions)158.9 162.4 175.5
Average AUM ($USD Billions)158.6 166.7 166.8
Gross Inflows ($USD Millions)5,604 7,014 6,233
Gross Outflows ($USD Millions)(7,214) (9,854) (8,096)
Net Client Cash Flows ($USD Millions)(1,610) (2,840) (1,863)
Investment Returns & Other ($USD Millions)204 4,138 15,212
Weighted Avg Recurring Fee Rate (bps)N/AN/A68

Note: Earnings call references “ending AUM ~$176B,” which reflects rounding; reported quarter-end AUM was $175.5B .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ3 2025NoneRevenue should benefit from ~8% higher AUM exiting Q2Raised
Operating ExpensesQ3 2025NoneAbsence of ~$2.4M costs tied to China Post‑Venture (incl. $1.2M one-time charge)Lowered
Dividend (Variable)Q2 2025$0.68 (Q1)$0.73 (Q2)Raised
Dividend PolicyOngoing~80% of quarterly cash generationMaintain ~80% payout; potential year-end special from withheld 20%Maintained
Tax Rate (Adjusted)Ongoing24.7%24.7%Maintained
Debt/RefinancingAug 2025$60M Series D maturingIssue $50M Series G at 5.43% to repay Series DProactive refinancing

Earnings Call Themes & Trends

TopicQ4 2024 (Prev-2)Q1 2025 (Prev-1)Q2 2025 (Current)Trend
Alternatives/M&A pipelineExpanding platform across asset classes; strong credit/alt performance and fees Launched Franchise and Global Special Situations strategies Screening alts incl. real estate (value-add/opportunistic), PE secondaries, asset-based lending; talent-driven M&A focus Broadening degrees of freedom
Credit strategiesStrong 2024 inflows; high-quality performance across credit teams EMsights and credit net inflows; building commercial breadth 12th consecutive quarter of positive fixed-income flows; onboarding two mandates Durable momentum
Emerging markets demandEM strategies highlighted; mixed institutional flows Developing World nearing 10-year milestone; EM interest building Positive EM allocations across equity/fixed income; Developing World at 10-year with strong rankings Improving
Distribution focus (Wealth)Wealth channel highlighted in 2024 platform commentary Continued reorientation towards intermediated wealth Over half of AUM from intermediated wealth; consistency and capacity management emphasized Structural shift
Seed capitalNot detailedSeed book ~$140M; redeploy/redemptions expected over 12–18 months Well positioned; potential redeployment to seeds/M&A; limited new seeds planned near term Flexible
Macro/tariffs & institutional riskN/AN/AInstitutional clients cautious on risk amid tariffs; muted gross flows; equity rebalancing Risk-aware tone

Management Commentary

  • “We ended the second quarter of 2025 with our highest quarter-end AUM ever, $175.5 billion, managed across 11 investment teams and 26 investment strategies.” — Executive Chair Eric Colson .
  • “Several recent recognitions and milestones are representative of the quality, breadth, and consistency of the Artisan platform... we will remain patient in seeking exceptional talent and opportunities for our clients.” — CEO Jason Gottlieb and Executive Chair Eric Colson .
  • “We continue to prioritize business development for credit opportunities and floating rate strategies, and we are actively exploring ways to further expand the credit team's degrees of freedom.” — CEO Jason Gottlieb .
  • “We are firmly established in high value-added equities, fixed income, and alternatives... we will continue to identify, recruit, and onboard world class investment talent.” — 4Q24 release (platform strategy) .

Q&A Highlights

  • Alternatives/M&A focus: Management is evaluating real estate (value-add/opportunistic), PE secondaries, and private credit niches (not sponsor-driven) with a talent-driven filter; intermediated wealth distribution seen as complementary .
  • Capacity management: Ongoing capacity work across strategies; protecting investment outcomes while balancing re-openings; institutional rebalancing impacted equity flows .
  • Seed capital and payout: Seed capital book ~$140M; potential redemptions/redeploy over 12–18 months; comfortable capital position (unused $100M revolver); payout remains guided by policy .
  • Near-term OpEx outlook: No expense ramp to chase growth; fixed OpEx mid‑single-digit; variable 55% tied to revenue; Q3 relief from China Post‑Venture closure costs ($2.4M) .
  • Private markets expansion: Considering structures to access private markets via Credit team; potential institutional private fund for Global Unconstrained .

Estimates Context

  • Q2 2025 actuals vs S&P Global consensus: revenue beat ($282.8M vs $274.9M*), adjusted EPS slight beat ($0.83 vs $0.823*); GAAP EPS ($0.94) exceeded adjusted consensus due to non‑operating investment gains excluded from adjusted EPS *.
  • Sequentially, Q1 2025 was above consensus on adjusted EPS ($0.83 vs $0.753*) but slightly below on revenue ($277.1M vs $278.8M*) *.
  • Looking ahead, consensus for Q3 2025 implies higher revenue and EPS (est. revenue ~$304.4M*; EPS ~$0.97*), aligned with management’s commentary that revenue should benefit from higher AUM *.

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue quality: Underlying revenue growth (+2% q/q) was modest due to flat average AUM and calendar day effect; watch for Q3 uplift from higher ending AUM and fee rate stability (68 bps) .
  • Margin trajectory: GAAP margin compressed on higher LT incentive comp and closure costs; expect OpEx relief in Q3 (~$2.4M lower), supporting adjusted margins .
  • Flow dynamics: Equity flows remain challenged by institutional rebalancing and risk aversion (tariffs); fixed income flows remain positive, suggesting diversified inflow resilience .
  • Capital returns: Dividend increased to $0.73; policy (~80% of cash generation, potential year-end special) intact; a predictable return profile amid growth investments .
  • Strategic catalysts: Alternatives and private markets expansion (real estate value-add, PE secondaries, private credit niches) could enhance fee mix and AUM durability; near-term focus is credit platform and institutional private fund options .
  • Balance sheet flexibility: $50M Series G notes (5.43%) to refinance $60M maturity; leverage ~0.5x; $100M revolver unused — optionality for seeds/M&A without pressuring payouts .
  • Trading implications: Near-term positive bias from Q3 revenue tailwind and OpEx relief; monitor gross flow recovery and any alternative platform announcements as potential sentiment catalysts .