Executive Summary

Q3 revenue rose 7% q/q and 8% y/y to $301.3M, while adjusted operating margin expanded 450 bps q/q to 36.2% on lower fixed expenses; GAAP operating margin was 33.8% vs 28.2% in Q2 .
Adjusted EPS beat consensus ($1.02 vs $0.97*) despite a slight revenue miss ($301.3M vs $304.4M*), driven by margin expansion; GAAP diluted EPS was $0.93, impacted by a non‑cash $10.7M tax charge from new legislation (OBBBA) .
AUM reached a record $181.3B (avg AUM $177.4B), with net outflows of $2.3B this quarter; management cited rebalancing in wealth programs and ongoing outflows in a few large equity strategies, partly offset by strength in EM and Credit .
Dividend was raised to $0.88 (+21% q/q) and management flagged typical Q4 seasonality: ~~$900M of mutual fund distributions not expected to be reinvested and potential performance fees similar to 2024 (~~$17M) as year‑end measurement approaches .

What Went Well and What Went Wrong

What Went Well

Margin execution: Adjusted operating margin expanded to 36.2% (31.7% in Q2) as fixed expenses declined and revenues rose; CFO: “Revenue growth… and lower fixed expenses led to margin expansion of 450 bps and a 23% increase in earnings vs Q2” .
Record scale and diversification: AUM hit $181.3B with strong strategy performance breadth; CEO highlighted platform diversity (equities, credit, alternatives) and multiple strategies with >20% YTD returns and positive relative performance .
Capital return and balance sheet: Variable dividend increased to $0.88; cash was $300.2M, leverage ratio 0.4x; $50M Series G notes issued at 5.43% to refinance maturing notes, preserving flexibility .

What Went Wrong

Organic pressure: Net outflows of $2.3B this quarter (vs $(1.9)B in Q2), with three sizable rebalances in intermediated wealth affecting International Value and International Small‑Mid; trailing 1‑yr underperformance in some large equity strategies weighed sentiment .
Slight top‑line miss vs consensus and no performance fees in Q3; performance fees typically accrue in Q4 (only ~3% of AUM has fee components) .
Regulatory/tax headwind: Enactment of OBBBA caused a non‑cash $10.7M tax charge in Q3 and is expected to lift GAAP/adjusted effective tax rates by 1%–3% starting in 2027 .

Financial Results

Metric	Q3 2024	Q2 2025	Q3 2025 Actual	Q3 2025 Consensus
Revenue ($M)	$279.6	$282.8	$301.3	$304.4*
GAAP Diluted EPS	$1.03	$0.94	$0.93	—
Adjusted EPS (per adjusted share)	$0.92	$0.83	$1.02	$0.97*
Operating Margin (GAAP)	33.3%	28.2%	33.8%	—
Adjusted Operating Margin	35.0%	31.7%	36.2%	—

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

Segment/Vehicle AUM and Flows

Metric	Q3 2024	Q2 2025	Q3 2025
Ending AUM – Funds/Global Funds ($B)	$81.1	$85.6	$88.0
Ending AUM – Separate Accts & Other ($B)	$86.8	$89.9	$93.3
Total Ending AUM ($B)	$167.8	$175.5	$181.3
Average AUM ($B)	$162.8	$166.8	$177.4
Gross Inflows ($B)	$6.21	$6.23	$6.08
Gross Outflows ($B)	$(6.95)	$(8.10)	$(8.41)
Net Client Cash Flows ($B)	$(0.74)	$(1.86)	$(2.33)

KPIs and Other Financials

KPI	Q3 2024	Q2 2025	Q3 2025
Operating Income (GAAP, $M)	$93.2	$79.8	$101.8
Adjusted EBITDA ($M)	$103.6	$94.2	$114.4
Cash & Equivalents ($M)	$201.2 (FY end)	$244.9	$300.2
Total Borrowings ($M)	$200.0 (FY end)	$199.5	$190.0
Debt Leverage Ratio	—	0.5x	0.4x
Variable Dividend/Share	—	$0.73	$0.88
Performance Fees ($M)	—	— (Q2 had none disclosed)	N/A in Q3 table; Q4 is key

Non-GAAP notes: Adjusted measures exclude (among other items) market valuation changes in comp plans, investment product gains/losses, non-recurring expenses, and the OBBBA deferred tax adjustment; reconciliations provided by the company .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance/Commentary	Change
Fixed expense growth	FY2025	Mid-single digits (reaffirmed from earlier 2025 commentary)	Tracking at or slightly better than mid-single digits; 2026 budget in process	Maintained
Mutual fund distributions not reinvested	Q4 2025	—	~$(0.9)B expected not to be reinvested in Q4	New color
Performance fees (total)	FY2025	2024 actual ~$17M (4Q seasonal)	Projecting 2025 total “similar to 2024,” subject to year-end markets; ~3% of AUM has PFs	Maintained (qualitative)
Dividend policy	Ongoing	~80% of quarterly cash generation; year-end special considered	Reiterated; declared $0.88 for Q3 2025 (≈80% of cash)	Maintained (q/q up)
Effective tax rate impact	From 2027	—	OBBBA to raise GAAP/adjusted ETR by 1%–3% from 2027	New structural headwind
Capital/financing	2025	Plan to refinance Aug-2025 notes	Issued $50M 5.43% Series G notes (Aug 15) and repaid $60M Series D maturity (Aug 16)	Executed

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2025, Q2 2025)	Current Period (Q3 2025)	Trend
Intermediated wealth build-out	Pivot to “sold” model; headcount increases; ~60% AUM from wealth; >170 large relationships	Reoriented comp to sales, doubled field force, targeting UK wealth and Middle East; early “green shoots”	Improving execution
Product “vehicle” modernization	Discussed evolving wrappers for wealth appeal	Expanding into models, SMAs, ETFs, semi-liquid and private funds	Accelerating
Alternatives/private markets	Evaluating structures (private credit, alt wrappers)	Active pipeline in real estate, private credit, secondaries; near‑term focus on real estate; sizes modest, multiple financing options	Building pipeline
EM and non‑U.S. demand	EMsights and EM equities building track records and flows	Renewed demand in EM and non‑U.S.; multiple EM strategies positive flows YTD; growing global mandates interest	Strengthening
Expense discipline	Fixed expense growth mid-single digits; margin sensitivity to PF seasonality	Fixed expenses slightly down q/q; Q4 seasonal items noted; guidance unchanged	Stable
Rebalancing headwinds	Large DC rebalance (Q1)	Three sizable wealth rebalances (Intl Value, Intl Small‑Mid) in Q3; one small Australia termination	Persistent in up markets
Performance fees seasonality	Q4 as key period	Expect PFs similar to 2024; year-end measurement 12/31	Seasonal tailwind ahead

Management Commentary

CEO: “Revenues increased 7% from last quarter… Our operating margin… improving meaningfully to 34% or 36% on an adjusted basis… quarter end AUM of $181.3 billion, our highest ever quarter-end AUM” .
CEO on flows and strategy: “While we experienced $2.3 billion of net outflows in the quarter, business-development momentum is improving… We are capitalizing on the resurgence of interest in emerging markets… renewed and growing interest in [Global Equity/Value]… growing and diversifying the Credit team’s business” .
CFO: “Revenue growth… and lower fixed expenses led to margin expansion of 450 basis points and a 23% increase in earnings compared to [Q2]… Adjusted net income per adjusted share was up 23% q/q and 11% y/y” .
CFO on Q4 setup: “We anticipate approximately $900 million of… distributions will not be reinvested… We are currently projecting total performance fees similar to… 2024… [~3% of AUM has performance fees]” .

Q&A Highlights

Non‑U.S./EM demand: Broadening interest across global mandates and EM (equity and credit) with positive flows and strong relative results; some peers’ PM changes create “money in motion” .
Distribution reorientation: Sales‑oriented comp, doubled field team, UK wealth/Middle East expansion, and dedicated capital formation initiatives; vehicle modernization (models/SMAs/ETFs/semi‑liquid/private) underway .
M&A/lift‑outs: Active in real estate, private credit, secondaries; deals not transformative; flexible consideration (cash, stock, leverage) with preference for cash given deal sizes .
Outflows/rebalancing: Three large rebalances in intermediated wealth (Intl Value, Intl Small‑Mid); one small Australia termination given local regulatory shifts toward passive/in‑house .
Expense outlook: 2025 fixed expense growth tracking mid‑single digits, possibly slightly better; 2026 budget ongoing .

Estimates Context

Q3 2025 results vs S&P Global consensus: revenue $301.3M vs $304.4M* (slight miss); adjusted EPS $1.02 vs $0.97* (beat). Beat driven by q/q revenue growth and expense control (fixed expenses down slightly q/q), expanding adjusted margin to 36.2% .
Implication: Models likely need higher margins and adjusted EPS, but modestly lower near‑term net flows and slightly lower revenue trajectory vs prior consensus until flow momentum improves; Q4 seasonality (distributions not reinvested, performance fees) adds volatility to top/bottom line .
Values marked with asterisks (*) retrieved from S&P Global.

Key Takeaways for Investors

Margin leverage is working: Adjusted operating margin expanded to 36.2% on modest top‑line growth, supporting the EPS beat despite slight revenue miss .
Scale and diversification provide resilience: Record AUM ($181.3B) and breadth in equities/credit/alternatives help offset rebalancing/outflow pockets .
Wealth channel execution is the swing factor: Expanded sales footprint, vehicle modernization, and targeted campaigns (e.g., EM) are beginning to gain traction—watch gross sales inflection over coming quarters .
Near‑term noise in Q4: Expect ~$900M of fund distributions not reinvested and variable performance fees (likely similar to 2024) to shape 4Q reported metrics .
Dividend remains attractive and variable: $0.88 declared (~80% of cash generation), with potential year‑end special from retained cash and seed gains .
Tax headwind from 2027: OBBBA lifts effective tax rate by 1%–3%—incorporate into LT EPS valuation frameworks .
Strategic optionality: Real estate/private credit/secondaries opportunities are pipeline catalysts; management intends disciplined, non‑transformative bolt‑ons .

Artisan Partners Asset Management Inc. (APAM)·Q3 2025 Earnings Summary