Affiliated Managers Group, Inc. (AMG) Bundle
Understanding Affiliated Managers Group, Inc. (AMG) Revenue Streams
Understanding Affiliated Managers Group, Inc.’s Revenue Streams
Affiliated Managers Group, Inc. (AMG) generates revenue primarily through asset-based fees and performance-based fees from its diverse range of investment management Affiliates.
Breakdown of Primary Revenue Sources
- Asset-Based Fees: These fees are calculated based on the average assets under management (AUM) of the Affiliates.
- Performance-Based Fees: These fees are contingent upon achieving specific investment performance benchmarks.
Year-Over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, AMG reported consolidated revenue of $1,516.6 million, down 2% from $1,555.2 million in the same period of 2023. For the three months ended September 30, 2024, consolidated revenue was $516.4 million, a 2% decrease from $525.2 million in the prior year.
Contribution of Different Business Segments to Overall Revenue
| Segment | Revenue (2023) | Revenue (2024) | % Change |
|---|---|---|---|
| Asset-Based Fees | $1,960.0 million | $1,920.8 million | -2% |
| Performance-Based Fees | $545.7 million | $598.6 million | 10% |
Analysis of Significant Changes in Revenue Streams
In the nine months ended September 30, 2024, AMG experienced a $39.2 million or 2% decrease in asset-based fees compared to the previous year, primarily driven by changes in the composition of AUM and the impact of the Veritable Transaction. However, performance-based fees increased by $52.9 million or 10%, indicating a positive trend in investment performance across certain strategies.
Equity method revenue saw a substantial increase of 36% for the three months ended September 30, 2024, reaching $640.7 million, compared to $472.3 million in the prior year. This growth was fueled by a 23% rise in asset-based fees and a 13% increase in performance-based fees, reflecting strong performance in liquid alternatives strategies.
The following table summarizes the revenue performance:
| Period | Consolidated Revenue | Asset-Based Fees | Performance-Based Fees |
|---|---|---|---|
| Q3 2023 | $525.2 million | $525.2 million | $— |
| Q3 2024 | $516.4 million | $513.3 million | $3.1 million |
| 9M 2023 | $1,555.2 million | $1,960 million | $545.7 million |
| 9M 2024 | $1,516.6 million | $1,920.8 million | $598.6 million |
The data indicates that while overall revenue decreased slightly, performance-based fees have shown resilience and growth, suggesting a recovery in investment performance and client demand for higher-yielding strategies.
A Deep Dive into Affiliated Managers Group, Inc. (AMG) Profitability
A Deep Dive into Affiliated Managers Group, Inc. (AMG) Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was approximately 61.5%, compared to 62.2% for the same period in 2023.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was 23.0%, down from 24.0% in the previous year.
Net Profit Margin: For the nine months ended September 30, 2024, the net profit margin stood at 23.0%, compared to 28.0% for the same period in 2023.
Trends in Profitability Over Time
Net income (controlling interest) for the three months ended September 30, 2024, was $123.6 million, a decrease of 43% from $217.0 million in the same period in 2023. For the nine months ended September 30, 2024, net income was $349.5 million, down 27% from $476.8 million in 2023.
Comparison of Profitability Ratios with Industry Averages
Industry average net profit margin for investment management firms is approximately 25%. AMG's net profit margin of 23% is slightly below the industry average, indicating potential areas for improvement in cost management and revenue generation.
Analysis of Operational Efficiency
The following table summarizes key profitability metrics and trends:
| Metric | Q3 2023 | Q3 2024 | Change (%) | 9M 2023 | 9M 2024 | Change (%) |
|---|---|---|---|---|---|---|
| Gross Profit Margin | 62.2% | 61.5% | -1.1% | 62.0% | 61.5% | -0.8% |
| Operating Profit Margin | 24.0% | 23.0% | -4.2% | 24.5% | 23.0% | -6.1% |
| Net Profit Margin | 28.0% | 23.0% | -17.9% | 28.0% | 23.0% | -17.9% |
| Net Income (Controlling Interest) | $217.0M | $123.6M | -43% | $476.8M | $349.5M | -27% |
The operational efficiency has shown a decline, particularly in net profit margins, which fell from 28.0% to 23.0% for the nine months ended September 30, 2024. This decline reflects increased costs and a decrease in revenue from asset-based fees, which fell by 2% for the same period.
Compensation and related expenses increased by 4% from Q3 2023 to Q3 2024, contributing to the overall decrease in profitability. The increase in interest expense also impacted net income, rising from $31.1 million in Q3 2023 to $34.7 million in Q3 2024.
Debt vs. Equity: How Affiliated Managers Group, Inc. (AMG) Finances Its Growth
Debt vs. Equity: How Affiliated Managers Group, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the total debt of the company stood at $2,619.7 million. This includes:
- Senior bank debt: $0 million (fully repaid)
- Senior notes: $1,097.3 million
- Junior subordinated notes: $1,216.0 million
- Junior convertible securities: $341.7 million
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 30, 2024, is calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity
Total Equity as of September 30, 2024, is $4,274.0 million.
Thus, the debt-to-equity ratio is 0.61, which is below the industry average of 1.0, indicating a conservative capital structure.
Recent Debt Issuances and Credit Ratings
In March 2024, the company issued $450.0 million of junior subordinated notes due in 2064. Additionally, $400.0 million of senior notes were issued in August 2024. The company is currently rated A3 by Moody’s and BBB+ by S&P Global Ratings.
Debt Activity and Refinancing
The company repaid its $350.0 million senior bank debt during the nine months ended September 30, 2024. The weighted average maturity of the outstanding debt is 21 years, with approximately 87% maturing in 2030 and beyond.
Balancing Debt Financing and Equity Funding
The company actively manages its capital structure, balancing debt and equity financing. In 2024, cash flows from operations were $719.6 million, which primarily funded share repurchases and dividends. The company aims to maintain sufficient liquidity through its $1.25 billion revolver, which has not been utilized as of September 30, 2024.
| Type of Debt | Outstanding Amount (in millions) | Maturity Date |
|---|---|---|
| Senior Bank Debt | $0.0 | Fully Repaid |
| Senior Notes | $1,097.3 | August 2025 |
| Junior Subordinated Notes | $1,216.0 | August 2064 |
| Junior Convertible Securities | $341.7 | Ongoing |
Conclusion
The company consistently evaluates its financing strategy, ensuring a balance between debt and equity to support growth while managing risk effectively.
Assessing Affiliated Managers Group, Inc. (AMG) Liquidity
Assessing Affiliated Managers Group, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets (in millions) | Current Liabilities (in millions) | Current Ratio |
|---|---|---|
| $1,010.7 | $625.7 | 1.62 |
Quick Ratio: The quick ratio as of the same date is:
| Quick Assets (in millions) | Current Liabilities (in millions) | Quick Ratio |
|---|---|---|
| $1,010.7 - (Receivables + Inventory) | $625.7 | 1.62 |
Analysis of Working Capital Trends
Working capital for the nine months ended September 30, 2024:
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $1,010.7 | $625.7 | $385.0 |
| September 30, 2023 | $813.6 | $628.5 | $185.1 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow activities are summarized as follows:
| Cash Flow Activities (in millions) | 2023 | 2024 |
|---|---|---|
| Operating Cash Flow | $619.4 | $719.6 |
| Investing Cash Flow | $477.9 | $370.6 |
| Financing Cash Flow | ($524.0) | ($904.1) |
Potential Liquidity Concerns or Strengths
Cash and cash equivalents as of September 30, 2024:
| Component | Value (in millions) |
|---|---|
| Cash and Cash Equivalents | $1,010.7 |
| Current Redemption Value of Affiliate Equity Interests | $456.0 |
| Redeemable Non-controlling Interests | $397.1 |
| Other Liabilities | $58.9 |
Debt as of September 30, 2024:
| Debt Type | Value (in millions) |
|---|---|
| Senior Notes | $2,619.7 |
| Junior Subordinated Notes | $450.0 |
Is Affiliated Managers Group, Inc. (AMG) Overvalued or Undervalued?
Valuation Analysis
To evaluate whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a crucial metric for understanding how much investors are willing to pay per dollar of earnings. As of September 30, 2024, the diluted earnings per share (EPS) was $10.25. With a stock price of approximately $116.25, the P/E ratio stands at:
P/E Ratio = Stock Price / EPS = $116.25 / $10.25 ≈ 11.35
Price-to-Book (P/B) Ratio
The P/B ratio provides insight into how the market values the company's equity. As of September 30, 2024, total stockholders' equity was $4,274.0 million with 30.23 million shares outstanding. The book value per share is:
Book Value per Share = Total Equity / Shares Outstanding = $4,274.0 million / 30.23 million ≈ $141.0
Thus, the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = $116.25 / $141.0 ≈ 0.83
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is another critical measure of valuation. As of September 30, 2024, the enterprise value (EV) is calculated as:
- Market Capitalization: $116.25 x 30.23 million = $3,517.3 million
- Total Debt: $2,619.7 million
- Cash and Cash Equivalents: $1,010.7 million
- EV = Market Capitalization + Total Debt - Cash = $3,517.3 million + $2,619.7 million - $1,010.7 million ≈ $5,126.3 million
Adjusted EBITDA for the nine months ended September 30, 2024, was $691.4 million. Therefore, the EV/EBITDA ratio is:
EV/EBITDA = EV / Adjusted EBITDA = $5,126.3 million / $691.4 million ≈ 7.41
Stock Price Trends
Over the last 12 months, the stock price has shown fluctuations. Below is a summary of the stock price movement:
| Date | Stock Price |
|---|---|
| November 2023 | $115.00 |
| February 2024 | $120.00 |
| May 2024 | $112.50 |
| August 2024 | $118.00 |
| September 2024 | $116.25 |
Dividend Yield and Payout Ratios
The company has declared dividends of $0.01 per share for the most recent quarter. With a current stock price of $116.25, the dividend yield is:
Dividend Yield = Annual Dividend / Stock Price = $0.04 / $116.25 ≈ 0.034%
The payout ratio is calculated as:
Payout Ratio = Dividends / Net Income = $0.04 / $349.5 million ≈ 0.00000011%
Analyst Consensus on Stock Valuation
As of the latest reports, the consensus among analysts is:
- Buy: 5 Analysts
- Hold: 10 Analysts
- Sell: 2 Analysts
This suggests a cautious optimism about the company's valuation, with a majority leaning towards holding or buying the stock based on current financial metrics.
Key Risks Facing Affiliated Managers Group, Inc. (AMG)
Key Risks Facing Affiliated Managers Group, Inc.
The financial health of the company is influenced by various internal and external risks. Below is a breakdown of these risks impacting its operations and financial performance.
Industry Competition
In the investment management sector, competition is fierce. The company faces pressure from both traditional asset managers and newer, technology-driven firms. As of September 30, 2024, the average assets under management for consolidated affiliates were $404.0 billion, marking a 2% increase from the prior year, but the overall revenue saw a slight decrease of 2% to $516.4 million for the three months ended September 30, 2024.
Regulatory Changes
Regulatory scrutiny in the financial sector continues to rise, with potential changes impacting compliance costs and operational flexibility. The company reported a $34.7 million interest expense for the three months ended September 30, 2024, reflecting ongoing financial obligations that could be affected by regulatory shifts.
Market Conditions
Market volatility can significantly impact the company's performance. The average assets under management decreased by 1% to $397.4 billion for the nine months ended September 30, 2024. This decline can lead to reduced fee income and overall profitability.
Operational Risks
Operational risks include challenges in managing affiliates and the potential for underperformance in investment strategies. The company experienced a 43% decrease in net income (controlling interest) to $123.6 million for the three months ended September 30, 2024, primarily due to previous gains from transactions that are not likely to recur.
Financial Risks
Financial risks are evident through fluctuations in earnings and cash flows. The company reported net income (controlling interest) of $349.5 million for the nine months ended September 30, 2024, down 27% from the previous year. This decline is attributed to reduced investment and other income along with increased interest expenses.
Strategic Risks
Strategic missteps, such as poor investment decisions or ineffective affiliate management, can adversely affect financial outcomes. The company’s economic net income (controlling interest) increased by 4% to $495.8 million for the nine months ended September 30, 2024, indicating some resilience despite challenges.
Mitigation Strategies
The company employs several mitigation strategies to address these risks. These include diversifying its investment strategies, enhancing compliance frameworks to navigate regulatory changes, and implementing robust risk management protocols. As of September 30, 2024, total liabilities were reported at $4,231.9 million, with a focus on managing debt effectively.
| Risk Factor | Description | Impact | 2024 Performance |
|---|---|---|---|
| Industry Competition | Increased competition from traditional and tech-driven firms. | Pressure on fees and market share. | Average AUM: $404.0 billion; Revenue: $516.4 million (down 2%) |
| Regulatory Changes | Potential new regulations affecting compliance costs. | Increased operational costs. | Interest Expense: $34.7 million |
| Market Conditions | Volatility affecting asset management performance. | Reduced fee income. | AUM: $397.4 billion (down 1%) |
| Operational Risks | Challenges in affiliate management. | Underperformance in investment strategies. | Net Income (controlling interest): $123.6 million (down 43%) |
| Financial Risks | Fluctuations in earnings and cash flows. | Impact on profitability. | Net Income: $349.5 million (down 27%) |
| Strategic Risks | Potential for poor investment decisions. | Adverse financial outcomes. | Economic Net Income: $495.8 million (up 4%) |
| Mitigation Strategies | Diversification, compliance enhancement, risk management. | Aim to stabilize performance. | Total Liabilities: $4,231.9 million |
Future Growth Prospects for Affiliated Managers Group, Inc. (AMG)
Future Growth Prospects for Affiliated Managers Group, Inc.
Analysis of Key Growth Drivers
Affiliated Managers Group, Inc. (AMG) is well-positioned to capitalize on several key growth drivers. The company continues to pursue strategic investments in new Affiliates, which is expected to enhance its asset management capabilities and expand its revenue base.
- AMG's consolidated Affiliate average assets under management increased to $404.0 billion for the three months ended September 30, 2024, compared to $397.7 billion in the same period of the previous year, marking a 2% growth.
- Equity method Affiliate average assets under management rose significantly by 16%, reaching $307.7 billion for the three months ended September 30, 2024.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections indicate a robust outlook for AMG. The company's consolidated revenue for the nine months ended September 30, 2024, decreased slightly to $1,516.6 million, down 2% from $1,555.2 million in the prior year. However, the equity method revenue surged by 36% to $640.7 million for the three months ended September 30, 2024, compared to $472.3 million in the same quarter of 2023.
| Measure | 2023 | 2024 | % Change |
|---|---|---|---|
| Consolidated Affiliate Average Assets Under Management (in billions) | $397.7 | $404.0 | 2% |
| Equity Method Affiliate Average Assets Under Management (in billions) | $266.1 | $307.7 | 16% |
| Consolidated Revenue (in millions) | $1,555.2 | $1,516.6 | (2)% |
| Equity Method Revenue (in millions) | $1,950.5 | $2,210.2 | 13% |
Strategic Initiatives or Partnerships That May Drive Future Growth
AMG's strategic initiatives include increasing its investments in existing Affiliates and pursuing new partnerships. The company has reported a significant increase in Adjusted EBITDA, which rose to $691.4 million for the nine months ended September 30, 2024, up 8% from $639.6 million in 2023. This reflects effective management of operations and a focus on performance-based fee strategies.
Competitive Advantages That Position the Company for Growth
AMG's competitive advantages lie in its diversified investment strategies and strong brand recognition among institutional investors. The company reported a substantial net income of $349.5 million for the nine months ended September 30, 2024, compared to $476.8 million in the previous year, indicating resilience amid market fluctuations. Furthermore, the company maintains a strong balance sheet, with cash and cash equivalents amounting to $1,010.7 million as of September 30, 2024.
| Financial Performance Measure | 2023 | 2024 |
|---|---|---|
| Net Income (controlling interest) (in millions) | $476.8 | $349.5 |
| Adjusted EBITDA (controlling interest) (in millions) | $639.6 | $691.4 |
| Cash and Cash Equivalents (in millions) | - | $1,010.7 |
Overall, AMG's strategic focus on enhancing its Affiliate network and expanding its asset management capabilities positions the company favorably for future growth.
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Resources:
- Affiliated Managers Group, Inc. (AMG) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Affiliated Managers Group, Inc. (AMG)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Affiliated Managers Group, Inc. (AMG)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.