- U.S. GAAP EPS of $0.11 per share, down
(63.3)% from Q2 2016; U.S. GAAP earnings of $12.9 million, down
(64.5)%
- Economic net income EPS of $0.42 per
share, an increase of 40.0% from Q2 2016
- Economic net income of $46.6 million,
an increase of 28.7% from the comparative quarter in 2016
- AUM of $258.8 billion at June 30,
2017, an increase of 3.6% from March 31, 2017 and 18.3% from
June 30, 2016
- Net client cash flows (“NCCF”) for the
quarter of $(0.3) billion yielding an annualized revenue impact of
$13.1 million
- Agreement in principle reached to sell
OMAM’s stake in Heitman to its management for $110 million
OM Asset Management plc (NYSE: OMAM) reports its results for the
second quarter ended June 30, 2017.
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“OMAM’s results for the second quarter reflect an enhanced
operating and market environment as well as the successful
execution of our growth strategy,” said James J. Ritchie, OMAM’s
chairman and interim CEO. “Affiliate investment performance
continued to improve, with assets representing 74%, 73% and 78% of
revenue outperforming benchmarks on a one-, three- and five-year
basis, respectively. While NCCF for the quarter was generally flat
at $(0.3) billion on an AUM basis, average fees of 53 bps on
inflows of $8.1 billion into products such as global/non U.S.
equities and alternatives offset average fees of 35 bps on outflows
of $(8.4) billion. This fee differential on flows continued to
drive fee rate expansion and produced annualized revenue impact
from flows of $13.1 million, or 1.5% of beginning of period
management fees. Our ENI operating margin increased by 233 bps, to
38%, compared to Q2 ‘16, and our ENI per share of $0.42 represents
a year-over-year increase of 40%, driven by strong performance at
our existing Affiliates, share buybacks, and accretion generated by
our Landmark investment.
“Our results reflect the strength and quality of our Affiliate
group, and also highlight the benefits of the aligned, profit
sharing model that serves as the foundation for our business
strategy. Our differentiated approach to working with our
Affiliates, including our ability to help them diversify and
enhance their businesses, continues to position us as a compelling
partner for entrepreneurial boutique asset management firms.”
Mr. Ritchie concluded, “Finally, Old Mutual plc made substantial
progress in its managed separation process during the quarter, as
it completed the sale of 9.95% of OMAM shares to HNA Capital and
sold 19.895 million shares in an underwritten public offering and
an additional five million shares to OMAM through a repurchase
agreement. In connection with Old Mutual’s managed separation
process, OMAM provided an entity comprised of senior professionals
of Heitman LLC with a “right of first offer” to buy OMAM's interest
in the firm pursuant to the Heitman operating agreement. As a
result of this process, yesterday the Company executed a
non-binding term sheet reflecting an agreement to sell our interest
in Heitman LLC for $110 million in cash. Heitman represents 12% of
OMAM’s AUM at June 30 and contributed 3% of ENI in the first half
of 2017.”
Table 1: Key Performance
Metrics
($ in millions, unless otherwise noted) Three Months
Ended June 30, Six Months Ended June 30,
U.S. GAAP
Basis
2017 2016
Increase(Decrease)
2017 2016
Increase(Decrease)
Revenue $ 218.8 $ 156.5 39.8 % $ 415.0 $ 306.1 35.6 % Pre-tax
income from cont. ops. attributable to controlling interests 13.9
48.0 (71.0 )% 41.0 92.0 (55.4 )% Net income attributable to
controlling interests (Table 5) 12.9 36.3 (64.5 )% 34.3 67.1 (48.9
)% U.S. GAAP operating margin 6 % 28 % (2222) bps 9 % 28 % (1900)
bps Diluted shares outstanding (in millions) 111.8 119.6 113.1
119.8 Diluted earnings per share, $ $ 0.11 $ 0.30 (63.3 )% $ 0.30 $
0.56 (46.4 )%
Economic Net
Income Basis (Non-GAAP measure used by
management)(1)
ENI revenue $ 221.4 $ 160.0 38.4 % $ 420.2 $ 312.9 34.3 % Pre-tax
economic net income 63.0 47.9 31.5 % 115.4 90.8 27.1 % Economic net
income 46.6 36.2 28.7 % 85.5 68.2 25.4 % ENI diluted earnings per
share, $ $ 0.42 $ 0.30 40.0 % $ 0.76 $ 0.57 33.3 % Adjusted EBITDA
70.6 50.3 40.4 % 130.5 95.6 36.5 % ENI operating margin 38.1 % 35.8
% 233 bps 37.3 % 34.7 % 253 bps
Other Operational
Information
Assets under management at period end ($ in billions) $ 258.8 $
218.8 18.3 % $ 258.8 $ 218.8 18.3 % Net client cash flows ($ in
billions) (0.3 ) (2.9 ) 89.7 % (2.8 ) (0.5 ) (460.0 )% Annualized
revenue impact of net flows ($ in millions) 13.1 (3.4 ) n/m 13.9
3.9 256.4 %
(1) Excludes restructuring charges
associated with the CEO transition amounting to $5.4 million, net
of taxes.
Please see “Definitions and Additional
Notes.” Please see Table 7 for a reconciliation of U.S. GAAP net
income to economic net income.
Assets Under Management and Flows
At June 30, 2017, OMAM’s total assets under management
(“AUM”) were $258.8 billion, up $9.1 billion, or 3.6%, compared to
$249.7 billion at March 31, 2017, and up $40.0 billion, or
18.3%, compared to $218.8 billion at June 30, 2016. The
increase in AUM during the three months ended June 30, 2017
reflects net market appreciation of $9.4 billion, offset by net
outflows of $(0.3) billion.
For the three months ended June 30, 2017, OMAM’s net flows
were $(0.3) billion compared to $(2.5) billion for the three months
ended March 31, 2017 and $(2.9) billion for the three months
ended June 30, 2016. Gross inflows in the three months ended
June 30, 2017 were $8.1 billion (compared to $8.2 billion in
the first quarter of 2017 and $4.1 billion in the second quarter of
2016) and gross outflows and hard asset disposals were $(8.4)
billion (compared to $(10.7) billion in the first quarter of 2017
and $(7.0) billion in the second quarter of 2016). Hard asset
disposals of $(0.2) billion, $(0.1) billion, and $(1.0) billion are
reflected in the net flows for the three months ended June 30,
2017, March 31, 2017 and June 30, 2016, respectively. For
the three months ended June 30, 2017, the annualized revenue
impact of the net flows was $13.1 million, which compares to $0.8
million for the three months ended March 31, 2017 and $(3.4)
million for the three months ended June 30, 2016 (see
“Definitions and Additional Notes”). Gross inflows of $8.1 billion
yielded approximately 53 bps, while gross outflows and hard asset
disposals of $(8.4) billion in the same period yielded
approximately 35 bps. Strong inflows in alternatives and
Global/non-U.S. products have increased the positive spread between
inflows and outflows.
For the six months ended June 30, 2017, OMAM’s net flows
were $(2.8) billion compared to $(0.5) billion for the six months
ended June 30, 2016. Net client cash flows before hard asset
disposals were $(2.5) billion, compared to $1.8 billion in the
prior year. For the six months ended June 30, 2017, the
annualized revenue impact of the net flows was $13.9 million
compared to $3.9 million for the six months ended June 30,
2016 which reflects increased sales in higher fee strategies. Gross
inflows of $16.3 billion in the six months ended June 30, 2017
yielded an average of 48 bps compared to 40 bps in the year-ago
period while gross outflows and hard asset disposals of $(19.1)
billion yielded 33 bps in the six months ended June 30, 2017
compared to 36 bps in the year-ago period.
Table 2: Assets Under Management
Rollforward Summary
($ in billions, unless otherwise
noted) Three Months Ended Six
Months Ended
June 30,2017
March 31,2017
June 30, 2016
June 30,2017
June 30,2016
Beginning AUM $ 249.7 $ 240.4 $ 218.0 $ 240.4 $ 212.4 Gross inflows
8.1 8.2 4.1 16.3 13.5 Gross outflows (8.2 ) (10.6 ) (6.0 ) (18.8 )
(11.7 )
Net flows before hard asset disposals (0.1
) (2.4 ) (1.9 ) (2.5
) 1.8 Hard asset disposals (0.2 ) (0.1 ) (1.0 ) (0.3
) (2.3 )
Net flows (0.3 ) (2.5 )
(2.9 ) (2.8 ) (0.5 )
Market appreciation 9.4 11.8 3.7 21.2 6.8 Other* — —
— — 0.1
Ending AUM $
258.8 $ 249.7 $
218.8 $ 258.8 $
218.8 Basis points: inflows 52.8 42.6 46.4
47.7 40.3 Basis points: outflows 35.3 31.9 32.1 33.4 36.1
Annualized revenue impact of net flows ($ in millions)
$ 13.1 $ 0.8 $ (3.4
) $ 13.9 $ 3.9 Derived average
weighted NCCF ($ in billions) 3.4 0.2 (1.0 ) 3.6 1.1
* “Other” in 2016 reflects the
standardization of AUM definitions across Affiliates and mandates
and the revaluation of certain hard assets. These changes align the
definition of AUM with management fees charged to clients.
Please see “Definitions and Additional
Notes”
Balance Sheet and Capital Management
Condensed Consolidated Balance Sheets as of June 30, 2017
and December 31, 2016 are provided in Table 3 below. At
June 30, 2017, $15.0 million was outstanding on the Company’s
$350 million credit facility and the Company had total third party
borrowings of $407.5 million including $392.5 million of long-term
bonds ($400.0 million face value, net of discount and fees).
Shareholders’ equity (attributable to controlling interests)
amounted to $118.3 million. The Company’s ratio of third party
borrowings to trailing twelve months Adjusted EBITDA was 1.67x,
just below the Company’s target debt to trailing twelve months
Adjusted EBITDA range of 1.75-2.25x. Of the Company’s cash and cash
equivalents of $83.3 million at June 30, 2017, $65.0 million
was held at Affiliates and $18.3 million was available at the
Center.
In May 2017, in connection with the secondary public offering of
the Company’s ordinary shares by OM plc, the Company purchased and
retired five million of its outstanding ordinary shares at a price
of $14.55 per share, or $72.75 million in aggregate.
During 2014, the Company entered into a Deferred Tax Asset Deed
with OM plc, which was amended in June 2016. Under the terms of the
Deferred Tax Asset Deed, as amended, the Company agreed to make a
payment equal to the net present value of the future payments due
to OM plc valued as of December 31, 2016. This payment of $142.6
million is being made over three installments, the first of which
amounted to $45.5 million and was paid on June 30, 2017, with the
remaining two installments to be paid on December 31, 2017 and June
30, 2018. The continuation of certain protections provided by OM
plc related to the realized tax benefit resulting from the
Company’s use of deferred tax assets remains unaffected. Additional
information on the amended Deferred Tax Asset Deed can be found in
the Company’s Current Report on Form 8-K, filed on June 14,
2016.
In September 2016, the Company purchased $39.6 million of seed
investments from OM plc under the terms of the Seed Capital
Agreement, as amended. In July 2017, the Company purchased all
remaining seed capital investments covered by the Seed Capital
Agreement for $63.4 million (see Recent Events). Including both
seed capital on its balance sheet as of June 30, 2017 ($44.6
million) and the investments purchased in July 2017, the Company
has total seed holdings of $108.0 million based on a June 30, 2017
valuation date.
Table 3: Condensed Consolidated Balance
Sheets
($ in millions) June
30, 2017 December 31, 2016 Assets Cash and cash
equivalents $ 83.3 $ 101.9 Investment advisory fees receivable
187.5 163.7 Investments 193.5 233.3 Other assets 767.3 759.1 Assets
of consolidated Funds 47.6 36.3
Total assets
$ 1,279.2 $ 1,294.3
Liabilities and equity Accounts payable and accrued
expenses $ 161.7 $ 178.1 Due to related parties 106.7 156.3 Third
party borrowings 407.5 392.3 Other liabilities 466.4 391.3
Liabilities of consolidated Funds 6.5 5.8
Total
liabilities 1,148.8 1,123.8 Shareholders’
equity 118.3 164.0 Non-controlling interests, including NCI of
consolidated Funds 12.1 6.5
Total equity
130.4 170.5 Total liabilities and
equity $ 1,279.2 $ 1,294.3
Third party borrowings / trailing twelve months
Adjusted EBITDA 1.67 x 1.88 x Consolidated Funds represent certain
seed investments purchased from Old Mutual plc. Please see
“Definitions and Additional Notes”
Investment Performance
The Company’s investment results improved in the second quarter
of 2017. Table 4 below presents a summary of the Company’s
investment performance as of June 30, 2017, March 31,
2017, December 31, 2016 and June 30, 2016. Performance is
shown on a revenue-weighted basis, an equal-weighted basis and an
asset-weighted basis. Please see “Definitions and Additional Notes”
for further information on the calculation of performance.
Table 4: Investment Performance
(% outperformance vs. benchmark)
Revenue-Weighted June 30, 2017 March
31, 2017 December 31, 2016
June 30, 2016 1-Year 74% 46% 49% 36% 3-Year 73% 59% 55% 63%
5-Year 78% 75% 73% 72%
Equal-Weighted June 30,
2017 March 31, 2017 December 31, 2016 June 30,
2016 1-Year 63% 49% 53% 50% 3-Year 73% 66% 65% 75% 5-Year 77%
78% 76% 80%
Asset-Weighted June 30, 2017
March 31, 2017 December 31, 2016 June 30, 2016
1-Year 70% 37% 42% 33% 3-Year 68% 49% 45% 51% 5-Year 66% 63% 61%
60% Please see “Definitions and Additional Notes”
As of June 30, 2017, assets representing 74%, 73% and 78%
of revenue were outperforming benchmarks on a 1-, 3- and 5- year
basis, respectively, compared to 46%, 59% and 75% at March 31,
2017; 49%, 55% and 73% at December 31, 2016; and 36%, 63% and
72% at June 30, 2016. Favorable active management results in
the second quarter along with outperformance by two of our three
largest liquid strategies helped boost performance significantly.
One-year results also benefited from the rolling off of the impact
of the 2016 Brexit vote and related under-performance in the
year-ago quarter.
Financial Results: U.S. GAAP
Table 5 below presents the Company’s U.S. GAAP Statement of
Operations. For the three months ended June 30, 2017 and 2016,
diluted earnings per share was $0.11 and $0.30, respectively, a
decrease of (63.3)%, and net income attributable to controlling
interests was $12.9 million and $36.3 million, respectively, a
decrease of $(23.4) million, or (64.5)%. Earnings per share
calculations are impacted by the eleven million shares repurchased
between June 30, 2016 and June 30, 2017 which contributed
to a decrease in average diluted shares outstanding of (7.8)
million, or (6.5)% for the three-month period and (6.7) million, or
(5.6)%, for the six-month period. For the three months ended
June 30, 2017, compared to the three months ended
June 30, 2016, U.S. GAAP revenue increased $62.3 million, or
39.8%, from $156.5 million to $218.8 million, as a result of market
appreciation, the impact of the Landmark acquisition in August
2016, higher performance fees and a continued shift to higher fee
rate products. Expenses increased $93.4 million, or 83.0%, from
$112.5 million for the three months ended June 30, 2016, to
$205.9 million for the three months ended June 30, 2017,
primarily due to profit-driven increases in variable compensation
and revaluation of Affiliate equity and profit interests, along
with increases from the CEO transition costs. Compensation also
increased due to the Landmark transaction, where amortization of
the contingent consideration and the portion of equity not acquired
by the Company is recorded as compensation expense over the
applicable term because service requirements exist for holders of
these units.
For the six months ended June 30, 2017 and 2016, diluted
earnings per share was $0.30 and $0.56, respectively, a decrease of
(46.4)% and net income attributable to controlling interests was
$34.3 million and $67.1 million, respectively, a decrease of
$(32.8) million, or (48.9)%. U.S. GAAP revenue increased $108.9
million, or 35.6%, from $306.1 million for the six months ended
June 30, 2016, to $415.0 million for the six months ended
June 30, 2017, due to higher management fees as a result of
market appreciation, the Landmark acquisition and higher
performance fees. Operating expenses increased $157.5 million, or
71.2%, from $221.1 million for the six months ended June 30,
2016, to $378.6 million for the six months ended June 30,
2017, primarily as a result of higher compensation and benefits
(see Table 6). The increase in compensation and benefits is
predominantly due to increases in variable compensation including
the CEO transition costs, the revaluation of Affiliate equity and
profit interests, and amortization of acquisition-related
consideration and pre-acquisition employee equity associated with
the Landmark acquisition.
Table 5: U.S. GAAP Statement of
Operations
($ in millions, unless
otherwise noted) Three Months Ended June 30, Six
Months Ended June 30, 2017 2016
Increase(Decrease)
2017 2016
Increase(Decrease)
Management fees $ 206.7 $ 157.1 31.6 % $ 402.4 $ 306.7 31.2 %
Performance fees 11.2 (0.8 ) n/m 11.4 (0.8 ) n/m Other revenue 0.4
0.2 100.0 % 0.5 0.2 150.0 % Consolidated Funds’ revenue 0.5
— n/m 0.7 — n/m
Total revenue 218.8 156.5
39.8 % 415.0 306.1
35.6 % Compensation and benefits (see Table 6) 173.4
87.5 98.2 % 316.2 172.1 83.7 % General and administrative 27.7 22.7
22.0 % 53.3 44.5 19.8 % Amortization of acquired intangibles 1.7
0.1 n/m 3.3 0.1 n/m Depreciation and amortization 2.8 2.2 27.3 %
5.3 4.4 20.5 % Consolidated Funds’ expense 0.3
— n/m 0.5 — n/m
Total
operating expenses 205.9
112.5 83.0 % 378.6
221.1 71.2 % Operating income
12.9 44.0 (70.7 )% 36.4
85.0 (57.2 )% Investment income 5.0 4.5 11.1 %
11.1 8.0 38.8 % Interest income 0.3 — n/m 0.4 — n/m Interest
expense (5.9 ) (0.5 ) n/m (11.8 ) (1.0 ) n/m Net consolidated
Funds’ investment gains 2.3 — n/m
6.5 — n/m
Income from continuing
operations before taxes 14.6 48.0 (69.6
)% 42.6 92.0 (53.7 )% Income tax
expense 1.0 13.1 (92.4 )% 6.6
26.5 (75.1 )%
Income from continuing operations
13.6 34.9 (61.0 )% 36.0
65.5 (45.0 )% Gain (loss) on disposal of
discontinued operations, net of tax — 1.4
(100.0 )% (0.1 ) 1.6 n/m
Net income
13.6 36.3 (62.5 )% 35.9
67.1 (46.5 )% Net income attributable to
non-controlling interests 0.7 — n/m
1.6 — n/m
Net income attributable to
controlling interests $ 12.9 $
36.3 (64.5 )% $ 34.3
$ 67.1 (48.9 )% Earnings
per share, basic, $ $ 0.12 $ 0.30 (60.0 )% $ 0.30 $ 0.56 (46.4 )%
Earnings per share, diluted, $ 0.11 0.30 (63.3 )% 0.30 0.56 (46.4
)% Basic shares outstanding (in millions) 111.3 119.4 112.4 119.7
Diluted shares outstanding (in millions) 111.8 119.6 113.1 119.8
U.S. GAAP operating margin 6 % 28 % (2222) bps 9 % 28 %
(1900) bps Pre-tax income from continuing operations attributable
to controlling interests
$
13.9
$
48.0
(71.0 )% $ 41.0 $ 92.0 (55.4 )% Net income from continuing
operations attributable to controlling interests 12.9 34.9 (63.0 )%
34.4 65.5 (47.5 )% Please see “Definitions and Additional Notes”
Table 6: Components of U.S. GAAP
Compensation Expense
($ in millions) Three
Months Ended June 30, Six Months Ended June 30,
2017 2016
Increase(Decrease)
2017 2016
Increase(Decrease)
Fixed compensation and benefits(1) $ 41.5 $ 34.0 22.1 % $ 84.3 $
69.4 21.5 % Sales-based compensation 4.5 4.4 2.3 % 8.9 9.2 (3.3 )%
Variable compensation(2) 69.9 41.0 70.5 % 121.1 78.4 54.5 %
Affiliate key employee distributions 16.5 9.2 79.3 % 31.4 17.5 79.4
% Non-cash key employee-owned equity revaluations 23.3 (1.1 ) n/m
35.2 (2.4 ) n/m Acquisition-related consideration and
pre-acquisition employee equity(3) 17.7 — n/m 35.3
— n/m
Total U.S. GAAP compensation expense
$ 173.4 $ 87.5
98.2 % $ 316.2 $
172.1 83.7 % (1) For the three and six
months ended June 30, 2017, $41.0 million and $83.8 million,
respectively, of fixed compensation and benefits (of the $41.5
million and $84.3 million above) is included within economic net
income, which excludes the compensation and benefits associated
with the CEO transition costs. (2) For the three and six months
ended June 30, 2017, $61.1 million and $112.3 million,
respectively, of variable compensation expense (of the $69.9
million and $121.1 million above) is included within economic net
income, which excludes the variable compensation associated with
the CEO transition costs. (3) Reflects amortization of contingent
consideration and equity owned by employees, both with a service
requirement, associated with the Landmark acquisition. Please see
“Definitions and Additional Notes”
Financial Results: Non-GAAP Economic Net Income
For the three months ended June 30, 2017 and 2016, diluted
economic net income per share was $0.42 and $0.30, respectively, up
$0.12, or 40.0%, on economic net income of $46.6 million and $36.2
million, respectively, an increase of $10.4 million, or 28.7%.
Per-share amounts are impacted by eleven million shares repurchased
between June 30, 2016 and June 30, 2017 which contributed
to a decrease in weighted average diluted shares outstanding of
(7.8) million, or (6.5)% for the three-month period and (6.7)
million, or (5.6)%, for the six-month period.
Table 7 reconciles U.S. GAAP to economic net income for the
three and six months ended June 30, 2017 and June 30,
2016. As was expected, the difference between U.S. GAAP and
economic net income increased between 2016 and 2017. This change
was primarily related to the accounting treatment of the service
component of the contingent consideration and employee equity in
the Landmark transaction, as well as the level of non-cash key
employee-owned equity revaluations, as the Affiliates grew their
income and the corresponding value of employee equity. Included in
“Discontinued operations and restructuring” in Table 7 are CEO
transition costs, which reflect amounts accrued during the second
quarter related to the departure of OMAM’s former President and
CEO, Peter L. Bain, on June 30, 2017. These incremental amounts,
totaling $0.5 million of fixed compensation and payroll taxes and
$8.8 million of variable compensation, reflect compensation due to
Mr. Bain under his contract which had not been accrued in the
ordinary course prior to June 30, 2017. ENI compensation and
variable compensation expenses for the period through June 30, 2017
include ordinary course accruals for Mr. Bain’s salary and expected
2017 bonus.
For the three months ended June 30, 2017 and 2016, ENI
revenue (see Table 8) increased $61.4 million or 38.4%, from $160.0
million to $221.4 million, including a 31.6% increase in management
fees from $157.1 million to $206.7 million, driven by positive
markets and incremental revenue from the Landmark acquisition,
along with higher performance fees. Average assets under management
in those respective periods, excluding equity-accounted Affiliates
(see Table 12), increased 18.2% to $220.8 billion, while the bps
yield on these assets increased from 33.8 bps to 37.5 bps, due to
the impact of the higher yield on alternative assets acquired in
the Landmark transaction as well as positive mix shifts related to
markets and flows. Performance fee revenue was $11.2 million for
the current quarter, compared to $(0.8) million in the year-ago
quarter, principally reflecting a performance fee earned on an
alternative product. Total ENI operating expenses (see Table 9)
grew 23.0%, to $76.0 million, from $61.8 million in the prior-year
quarter, primarily as a result of the Landmark transaction. Total
operating expenses as a percentage of management fee revenue
decreased (257) bps from 39.3% to 36.8% as a result of increased
scale in the business. Of the $14.2 million increase in operating
expense between the three months ended June 30, 2017 and 2016,
$7.0 million was due to higher fixed compensation and benefits as a
result of the Landmark acquisition as well as new hires and annual
cost of living increases and $6.7 million was attributable to
increases in general and administrative expense, which rose 26.3%
over the 2016 period, primarily reflecting the impact of Landmark.
Total variable compensation increased 49.0% quarter-over-quarter
from $41.0 million to $61.1 million, while the ENI variable
compensation ratio (variable compensation as a percentage of ENI
earnings before variable compensation) remained generally
consistent at 42.0% compared to 41.8% in the prior period. The sum
of operating expense and variable compensation increased $34.3
million, or 33.4% period-over-period, while revenue increased 38.4%
over this period, resulting in an increase in OMAM’s ENI operating
margin to 38.1% from 35.8%. Affiliate key employee distributions
increased 79.3% quarter-over-quarter, from $9.2 million to $16.5
million, due to higher ENI operating earnings and the impact of the
Landmark acquisition. The ratio of Affiliate key employee
distributions over ENI operating earnings was 19.6%, compared to
16.1% in the year-ago quarter, as Landmark employees’ continued
ownership of 40% of their business increased the Company’s overall
distribution ratio. Net interest expense was $4.8 million for the
three months ended June 30, 2017, compared to net interest
expense of $0.1 million in the prior-year period, reflecting the
July 2016 issuance of $400 million of senior notes. Tax on economic
net income for the three months ended June 30, 2017 and 2016
was $16.4 million and $11.7 million, respectively, an increase of
$4.7 million or 40.2%, reflecting an increase in pre-tax profits
which contributed to an increase in the effective tax rate to 26.0%
from 24.4% in the prior-year period.
For the six months ended June 30, 2017 and 2016, diluted
economic net income per share was $0.76 and $0.57, respectively, up
$0.19, or 33.3%, on economic net income of $85.5 million and $68.2
million, respectively, an increase of $17.3 million, or 25.4%.
For the six months ended June 30, 2017 and 2016, ENI
revenue (see Table 8) increased $107.3 million or 34.3%, from
$312.9 million to $420.2 million, driven primarily by a 31.2%
increase in management fees from $306.7 million to $402.4 million.
Approximately half of this growth was related to the acquisition of
Landmark, which increased both average assets under management and
our weighted-average fee rate, with the remainder of the increase
attributable to positive markets and asset mix. Excluding
equity-accounted Affiliates (see Table 12), average AUM increased
18.8% from the first half of 2016 to $216.7 billion, and the bps
yield on these assets rose from 33.8 bps to 37.5 bps. Landmark
contributed approximately 3 bps of this increase, with the
remainder occurring as a result of a positive mix shift toward
higher fee global/non-US and alternative products due to flow
trends and market movements. Performance fee revenue was $11.4
million for the current period, compared to $(0.8) million in the
year-ago period, principally reflecting a performance fee earned on
an alternative product. Total ENI operating expenses (see Table 9)
grew 20.3% to $151.3 million, from $125.8 million in the prior-year
period. Total operating expenses as a percentage of management fee
revenue decreased to 37.6% for the six months ended June 30,
2017 from 41.0% in the prior year period, as management fee growth
of 31.2% outpaced the 20.3% increase in operating expenses,
partially reflecting efficiencies of scale following the Landmark
transaction. Of the $25.5 million increase in operating expenses
between the six months ended June 30, 2017 and 2016, $14.4
million was due to higher fixed compensation and benefits primarily
as a result of the Landmark acquisition and annual cost of living
increases. Total variable compensation increased 43.2%
period-over-period from $78.4 million to $112.3 million and the ENI
variable compensation ratio (variable compensation as a percentage
of ENI earnings before variable compensation) was effectively flat
at 41.8% compared to 41.9% in the prior year period. The sum of
operating expense and variable compensation increased $59.4
million, or 29.1% period-over-period, while revenue increased 34.3%
over this period, resulting in an increase in OMAM’s ENI operating
margin to 37.3% from 34.7%. Affiliate key employee distributions
increased 79.4% period-over-period, from $17.5 million to $31.4
million, primarily due to the investment in Landmark and higher ENI
operating earnings. The ratio of Affiliate key employee
distributions over ENI operating earnings was 20.1%, compared to
16.1% in the year-ago period, primarily due to the impact of
Landmark’s employees retaining 40% of their firm. Net interest
expense was $9.8 million for the six months ended June 30,
2017, compared to net interest expense of $0.4 million in the
prior-year period, reflecting the July 2016 issuance of $400
million of senior notes. The effective tax rate of 25.9% for the
period was higher than the prior year period of 24.9% primarily due
to higher pre-tax profits.
For the three months ended June 30, 2017, Adjusted EBITDA
was $70.6 million, up 40.4% compared to $50.3 million for the same
period of 2016.
For the six months ended June 30, 2017, Adjusted EBITDA was
$130.5 million, up 36.5% compared to $95.6 million for the same
period of 2016. See Table 22 for a reconciliation of U.S. GAAP net
income attributable to controlling interests to EBITDA, Adjusted
EBITDA and ENI.
Table 7: Reconciliation of U.S. GAAP Net Income to
Economic Net Income ($ in millions)
Three Months Ended June 30,
Six Months Ended June 30, 2017
2016 2017 2016 U.S. GAAP net
income attributable to controlling interests $
12.9 $ 36.3 $ 34.3 $
67.1 Adjustments to reflect the economic earnings of the
Company: i. Non-cash key employee-owned equity and profit
interest revaluations 23.3 (1.1 ) 35.2 (2.4 ) ii. Amortization of
acquired intangible assets, acquisition-related consideration and
pre-acquisition employee equity 19.4 — 38.6 0.1 iii. Capital
transaction costs — 1.6 — 1.7 iv. Seed/Co-investment (gains) losses
and financings(1) (2.9 ) (0.7 ) (8.7 ) (0.7 ) v. Tax benefit of
goodwill and acquired intangibles deductions 2.3 0.7 4.5 1.3 vi.
Discontinued operations and restructuring(2) 9.3 (1.4 ) 9.4 (1.6 )
vii. ENI tax normalization 2.1 0.8 2.2 2.2 Tax effect of above
adjustments, as applicable(3) (19.8 ) — (30.0 ) 0.5
Economic net income $ 46.6 $
36.2 $ 85.5 $ 68.2
(1) See Table 21 for the components of seed capital and
co-investment gains and losses, and financing costs. (2) Included
in restructuring is $9.3 million related to CEO transition costs,
comprised of $0.5 million of fixed compensation and benefits and
$8.8 million of variable compensation. (3) Reflects the sum of
lines i., ii., iii., iv. and the restructuring component of line
vi. multiplied by the 40.2% U.S. statutory tax rate (including
state tax). See Table 18 for a per-share presentation of the above
reconciliation. Please see the definition of Economic Net Income
within “Definitions and Additional Notes”
The following table identifies the components of ENI
revenue:
Table 8: Components of ENI Revenue
($ in millions) Three Months Ended
June 30, Six Months Ended June 30, 2017
2016
Increase(Decrease)
2017 2016
Increase(Decrease)
Management fees $ 206.7 $ 157.1 31.6 % $ 402.4 $ 306.7 31.2 %
Performance fees 11.2 (0.8 ) n/m 11.4 (0.8 ) n/m Other income,
including equity-accounted Affiliates 3.5 3.7 (5.4 )%
6.4 7.0 (8.6 )%
ENI revenue $ 221.4
$ 160.0 38.4 % $
420.2 $ 312.9 34.3 % See
Table 19 for a reconciliation from U.S. GAAP revenue to ENI
revenue. Please see “Definitions and Additional Notes”
The following table identifies the components of ENI operating
expense:
Table 9: Components of ENI Operating Expense
($ in millions) Three Months Ended
June 30, Six Months Ended June 30, 2017
2016
Increase(Decrease)
2017 2016
Increase(Decrease)
Fixed compensation & benefits $ 41.0 $ 34.0 20.6 % $ 83.8 $
69.4 20.7 % General and administrative expenses 32.2 25.5 26.3 %
62.2 52.0 19.6 % Depreciation and amortization 2.8 2.3
21.7 % 5.3 4.4 20.5 %
ENI operating
expense $ 76.0 $ 61.8
23.0 % $ 151.3 $
125.8 20.3 % See Table 20 for a
reconciliation from U.S. GAAP operating expense to ENI operating
expense. Please see “Definitions and Additional Notes”
The following table shows our key non-GAAP operating metrics for
the three and six months ended June 30, 2017 and 2016. We
present these metrics because they are the measures our management
uses to evaluate the profitability of our business and are useful
to investors because they represent the key drivers and measures of
economic performance within our business model. Please see
“Definitions and Additional Notes” for an explanation of each ratio
and its usefulness in measuring the economics and operating
performance of our business.
Table 10: Key ENI operating metrics
($ in millions) Three Months Ended
June 30, Six Months Ended June 30, 2017
2016
Increase(Decrease)
2017 2016
Increase(Decrease)
Numerator: ENI operating earnings(1) $ 84.3 $ 57.2 47.4 % $ 156.6 $
108.7 44.1 % Denominator: ENI revenue $ 221.4 $ 160.0 38.4 % $
420.2 $ 312.9 34.3 %
ENI operating margin 38.1
% 35.8 % 233 bps 37.3 %
34.7 % 253 bps Numerator: ENI operating
expense $ 76.0 $ 61.8 23.0 % $ 151.3 $ 125.8 20.3 % Denominator:
ENI management fee revenue $ 206.7 $ 157.1 31.6 % $ 402.4 $ 306.7
31.2 %
ENI operating expense ratio 36.8 %
39.3 % (257) bps 37.6 %
41.0 % (342) bps Numerator: ENI
variable compensation $ 61.1 $ 41.0 49.0 % $ 112.3 $ 78.4 43.2 %
Denominator: ENI earnings before variable compensation(2) $ 145.4 $
98.2 48.1 % $ 268.9 $ 187.1 43.7 %
ENI variable compensation
ratio 42.0 % 41.8 % 27 bps
41.8 % 41.9 % (14) bps
Numerator: Affiliate key employee distributions $ 16.5 $ 9.2 79.3 %
$ 31.4 $ 17.5 79.4 % Denominator: ENI operating earnings(1) $ 84.3
$ 57.2 47.4 % $ 156.6 $ 108.7 44.1 %
ENI Affiliate key employee
distributions ratio 19.6 % 16.1 %
349 bps 20.1 % 16.1 % 395
bps Numerator: Tax on economic net income $ 16.4 $ 11.7
40.2 % $ 29.9 $ 22.6 32.3 % Denominator: Pre-tax economic net
income $ 63.0 $ 47.9 31.5 % $ 115.4 $ 90.8 27.1 %
Economic net
income effective tax rate 26.0 % 24.4
% 161 bps 25.9 % 24.9 %
102 bps (1) ENI operating earnings represents ENI earnings
before Affiliate key employee distributions and is calculated as
ENI revenue, less ENI operating expense, less ENI variable
compensation. (2) ENI earnings before variable compensation is
calculated as ENI revenue, less ENI operating expense. Please see
“Definitions and Additional Notes” Please refer to the Company’s
Quarterly Report on Form 10-Q for comparable U.S. GAAP metrics.
Recent Events
In July 2017, the Company purchased all remaining seed capital
investments covered by the Seed Capital Agreement from OM plc for
$63.4 million. OMAM financed this purchase in part through
borrowings under a non-recourse seed capital facility
collateralized entirely by its seed capital holdings. The Company
entered into this facility as of July 19, 2017, and may borrow up
to $65 million, so long as the borrowing does not represent more
than 50% of the value of the seed capital collateral. Since this
facility is non-recourse to OMAM beyond the seed investments
themselves, drawdowns under this facility are excluded from the
Company’s third party debt levels for purposes of calculating the
Company’s credit ratio covenants under its revolving credit
facility. As of July 31, $33.5 million was drawn under this seed
capital facility.
On July 13, 2017, (the “Effective Date”) the UK published
revised draft legislation to be included in the U.K. Finance Bill
(No. 2) 2017 (the “Finance Bill”) that would impact the Company’s
tax position as of the Effective Date. The legislation is expected
to receive Royal Assent later in the year and there is still scope
for changes to be made as the Finance Bill is finalized. If this
legislation is enacted as proposed, the Company’s UK tax liability
would increase by approximately $10 million annually. While the
Company continues to explore alternatives that might mitigate the
impact of this tax increase in the future, given the Effective
Date, the Company expects to record the incremental U.K. tax as of
that date. In the event that the proposed legislation is enacted as
proposed, the impact to the Company’s 2017 GAAP and ENI EPS would
be approximately $(0.02) and $(0.03) per share, respectively.
As previously indicated, following the closing of the first
tranche of the sale transaction to HNA Capital, OMAM provided an
entity owned by senior professionals of Heitman LLC a right of
first offer to buy OMAM’s interest in Heitman LLC at a price the
Company determined to be its “good faith estimate of the reasonable
value” of such interest. Yesterday, the Company executed a
non-binding term sheet to sell its stake in Heitman LLC for cash
consideration totaling $110 million. The transaction is expected to
close around year-end. OMAM will retain its co-investment interests
in Heitman-managed funds as well as any carried interest associated
with these investments. Heitman represented approximately 5% of the
ENI earnings of OMAM for 2016 and approximately 3% of the ENI
earnings for the first six months of 2017, and 12.5% of AUM at June
30, 2017. Following reinvestment of the net sale proceeds and
related capital, OMAM expects the financial impact of this
transaction to be immaterial. The Company expects to receive a
fairness opinion related to this transaction at the time definitive
documentation is signed.
Dividend Declaration
The Company’s Board of Directors approved a quarterly interim
dividend of $0.09 per share payable on September 29, 2017 to
shareholders of record as of the close of business on September 15,
2017.
About OMAM
OMAM is a global, multi-boutique asset management company with
$258.8 billion of assets under management as of June 30, 2017.
Its diverse Affiliates offer leading, alpha generating investment
products to investors around the world. OMAM’s partnership
approach, which includes equity ownership at the Affiliate level
and a profit sharing relationship between OMAM and its Affiliates,
aligns the interests of the Company and its Affiliates to work
collaboratively in accelerating their growth. OMAM’s business model
combines the investment talent, entrepreneurialism, focus and
creativity of leading asset management boutiques with the resources
and capabilities of a larger firm. For more information about OMAM,
please visit the Company’s website at www.omam.com.
Forward Looking Statements
This press release includes forward-looking statements, as that
term is used in the Private Securities Litigation Reform Act of
1995, including information relating to anticipated growth in
revenues, margins or earnings, anticipated changes in the Company’s
business, anticipated future performance of the Company’s business,
the impact of the Landmark acquisition, anticipated future
investment performance of the Company’s Affiliates, expected future
net cash flows, anticipated expense levels, changes in expense, the
expected effects of acquisitions and expectations regarding market
conditions. The words or phrases ‘‘will likely result,’’ ‘‘are
expected to,’’ ‘‘will continue,’’ ‘‘is anticipated,’’ ‘‘can be,’’
‘‘may be,’’ ‘‘aim to,’’ ‘‘may affect,’’ ‘‘may depend,’’
‘‘intends,’’ ‘‘expects,’’ ‘‘believes,’’ ‘‘estimate,’’ ‘‘project,’’
and other similar expressions are intended to identify such
forward-looking statements. Such statements are subject to various
known and unknown risks and uncertainties and readers should be
cautioned that any forward-looking information provided by or on
behalf of the Company is not a guarantee of future performance.
Actual results may differ materially from those in
forward-looking information as a result of various factors, some of
which are beyond the Company’s control, including but not limited
to those discussed above and elsewhere in this press release and in
the Company’s most recent Annual Report on Form 10-K, filed with
the Securities and Exchange Commission on February 22, 2017 and our
Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 15, 2017. Due to such risks and uncertainties and
other factors, the Company cautions each person receiving such
forward-looking information not to place undue reliance on such
statements. Further, such forward-looking statements speak only as
of the date of this press release and the Company undertakes no
obligations to update any forward looking statement to reflect
events or circumstances after the date of this press release or to
reflect the occurrence of unanticipated events.
Conference Call Dial-in
The Company will hold a conference call and simultaneous webcast
to discuss the results at 10:00 a.m. Eastern Time on August 3,
2017. The Company has also released an earnings presentation that
will be discussed during the conference call. Please go to
http://ir.omam.com to download the presentation. To listen to the
call or view the webcast, participants should:
Dial-in:
Toll Free Dial-in Number: (844) 445-4807 International Dial-in
Number: (647) 253-8636 Conference ID: 35768455
Link to Webcast:
http://event.on24.com/r.htm?e=1443293&s=1&k=81C674E8009E63C0610BD0DFF59CCD53
Dial-in Replay:
A replay of the call will be available
beginning approximately one hour after its conclusion either on
OMAM’s website, at http://ir.omam.com or at:
Toll Free Dial-in Number: (800) 585-8367 International Dial-in
Number: (416) 621-4642 Conference ID: 35768455
Financial Tables
Table 11: Assets Under Management Rollforward by Asset Class
($ in billions, unless otherwise noted)
Three Months Ended Six Months Ended June 30,
2017 March 31, 2017 June 30, 2016 June 30,
2017 June 30, 2016 U.S. equity Beginning balance
$ 82.1 $ 82.0 $ 78.6 $ 82.0 $ 76.9 Gross inflows 0.8 1.7 1.0 2.5
4.1 Gross outflows (3.6 ) (4.6 ) (3.5 ) (8.2 ) (5.9 ) Net flows
(2.8 ) (2.9 ) (2.5 ) (5.7 ) (1.8 ) Market appreciation 2.0 3.0 2.5
5.0 3.0 Other — — — — 0.5
Ending balance $ 81.3 $
82.1 $ 78.6 $ 81.3
$ 78.6 Average AUM $ 81.1 $ 82.5 $ 79.1
$ 81.8 $ 77.3
Global / non-U.S. equity Beginning
balance $ 105.2 $ 96.4 $ 88.3 $ 96.4 $ 84.8 Gross inflows 4.6 4.5
2.2 9.1 6.4 Gross outflows (3.6 ) (4.1 ) (1.5 ) (7.7 ) (3.9 ) Net
flows 1.0 0.4 0.7 1.4 2.5 Market appreciation 6.7 8.4 — 15.1 1.3
Other — — — — 0.4
Ending
balance $ 112.9 $ 105.2
$ 89.0 $ 112.9
$ 89.0 Average AUM $ 109.8 $ 101.1 $ 88.9 $
105.5 $ 85.9
Fixed income Beginning balance $ 13.2 $
13.9 $ 14.1 $ 13.9 $ 13.8 Gross inflows 0.2 0.6 0.3 0.8 0.5 Gross
outflows (0.6 ) (1.5 ) (0.6 ) (2.1 ) (1.2 ) Net flows (0.4 ) (0.9 )
(0.3 ) (1.3 ) (0.7 ) Market appreciation 0.4 0.2 0.5
0.6 1.2
Ending balance $
13.2 $ 13.2 $ 14.3
$ 13.2 $ 14.3
Average AUM $ 13.3 $ 13.5 $ 14.2 $ 13.4 $ 14.0
Alternatives Beginning balance $ 49.2 $ 48.1 $ 37.0 $ 48.1 $
36.9 Gross inflows 2.5 1.4 0.6 3.9 2.5 Gross outflows (0.4 ) (0.4 )
(0.4 ) (0.8 ) (0.7 ) Hard asset disposals (0.2 ) (0.1 ) (1.0 ) (0.3
) (2.3 ) Net flows 1.9 0.9 (0.8 ) 2.8 (0.5 ) Market appreciation
0.3 0.2 0.7 0.5 1.3 Other — — — — (0.8
)
Ending balance $ 51.4 $
49.2 $ 36.9 $ 51.4
$ 36.9 Average AUM $ 50.5 $ 48.6 $ 37.0
$ 49.6 $ 37.2
Total Beginning balance $ 249.7 $ 240.4
$ 218.0 $ 240.4 $ 212.4 Gross inflows 8.1 8.2 4.1 16.3 13.5 Gross
outflows (8.2 ) (10.6 ) (6.0 ) (18.8 ) (11.7 ) Hard asset disposals
(0.2 ) (0.1 ) (1.0 ) (0.3 ) (2.3 ) Net flows (0.3 ) (2.5 ) (2.9 )
(2.8 ) (0.5 ) Market appreciation 9.4 11.8 3.7 21.2 6.8 Other —
— — — 0.1
Ending balance
$ 258.8 $ 249.7 $
218.8 $ 258.8 $
218.8 Average AUM $ 254.7 $ 245.7 $ 219.2 $ 250.3 $
214.4 Basis points: inflows 52.8 42.6 46.4 47.7 40.3 Basis
points: outflows 35.3 31.9 32.1 33.4 36.1
Annualized revenue
impact of net flows (in millions) $ 13.1 $
0.8 $ (3.4 ) $ 13.9
$ 3.9 Derived average weighted NCCF 3.4 0.2 (1.0 )
3.6 1.1 Please see “Definitions and Additional Notes”
Table 12: Management Fee Revenue and Average Fee Rates on Assets
Under Management
($ in millions,
except AUM data in billions)
Three Months Ended Six Months
Ended June 30, 2017 March 31, 2017
June 30, 2016 June 30, 2017 June 30,
2016 Revenue Basis Pts
Revenue Basis Pts Revenue
Basis Pts Revenue Basis Pts
Revenue Basis Pts U.S. equity $ 50.9 25 $ 52.4 26 $
50.0 25 $ 103.3 25 $ 97.4 25 Global/non-U.S. equity 114.1 42 103.7
42 92.8 42 217.8 42 180.4 42 Fixed income 6.8 21 7.1 21 7.2 20 13.9
21 14.4 21 Alternatives 70.3 56 65.0 54
40.5 44 135.3 55 79.8 43
Weighted average fee rate on average AUM $
242.1 38.1 $ 228.2 37.7 $
190.5 35.0 $ 470.3 37.9 $
372.0 34.9 Less: Revenue from equity-accounted
Affiliates (35.4 ) (32.5 ) (33.4 ) (67.9 ) (65.3 )
Management
fee revenue $ 206.7 37.5 $
195.7 37.4 $ 157.1
33.8 $ 402.4 37.5 $
306.7 33.8 Average AUM $ 254.7 $ 245.7 $ 219.2
$ 250.3 $ 214.4 Average AUM excluding equity-accounted Affiliates
220.8 212.4 186.8 216.7 182.4 Please see “Definitions and
Additional Notes”
Table 13: Assets Under Management by
Strategy ($ in billions)
June 30, 2017 March 31, 2017
December 31, 2016 June 30, 2016
U.S. equity, small/smid cap $ 7.4 $ 7.9 $ 7.9 $ 7.1 U.S. equity,
mid cap value 12.5 12.5 11.3 9.6 U.S. equity, large cap value 57.9
58.3 59.2 58.8 U.S. equity, core/blend 3.5 3.4 3.6
3.1
Total U.S. equity 81.3 82.1
82.0 78.6 Global equity 36.4 34.2 32.3
30.8 International equity 50.7 46.6 42.5 37.8 Emerging markets
equity 25.8 24.4 21.6 20.4
Total
global/non-U.S. equity 112.9 105.2
96.4 89.0 Fixed income 13.2 13.2 13.9 14.3
Alternatives 51.4 49.2 48.1 36.9
Total
assets under management $ 258.8 $
249.7 $ 240.4 $
218.8 Please see “Definitions and Additional Notes”
Table 14: Assets Under Management by Affiliate ($
in billions) June 30, 2017
March 31, 2017 December 31, 2016
June 30, 2016 Acadian Asset Management $ 87.5
$ 82.1 $ 75.0 $ 70.5 Barrow, Hanley, Mewhinney & Strauss 91.7
91.2 92.3 90.2 Campbell Global 5.2 5.2 5.2 4.9 Copper Rock Capital
Partners 5.7 5.5 5.1 4.9 Heitman* 32.4 31.4 31.2 30.3 Investment
Counselors of Maryland* 2.0 2.0 2.0 1.9 Landmark Partners 11.6 10.4
9.7 n/a Thompson, Siegel & Walmsley 22.7 21.9
19.9 16.1
Total assets under management $
258.8 $ 249.7 $
240.4 $ 218.8 *Equity-accounted
Affiliates n/a - not an Affiliate of our Company as of the date
indicated Please see “Definitions and Additional Notes”
Table
15: Assets Under Management by Client Type ($ in
billions) June 30, 2017
March 31, 2017 December 31, 2016
June 30, 2016 AUM % of
total AUM % of total AUM
% of total AUM % of
total Sub-advisory $ 80.7 31.2 % $ 78.8 31.6 % $ 75.9 31.6 % $
71.5 32.7 % Corporate / Union 47.6 18.4 % 48.3 19.3 % 48.2 20.0 %
43.8 20.0 % Public / Government 87.2 33.7 % 82.5 33.0 % 78.8 32.8 %
69.6 31.8 % Endowment / Foundation 5.0 1.9 % 4.7 1.9 % 4.8 2.0 %
4.6 2.1 % Old Mutual Group 3.5 1.4 % 3.7 1.5 % 3.5 1.5 % 3.6 1.6 %
Commingled Trust/UCITS 23.8 9.2 % 21.1 8.5 % 18.8 7.8 % 15.7 7.2 %
Mutual Fund 1.9 0.7 % 1.8 0.7 % 1.8 0.7 % 2.3 1.1 % Other 9.1
3.5 % 8.8 3.5 % 8.6 3.6 % 7.7 3.5 %
Total assets under management $ 258.8
$ 249.7 $ 240.4 $
218.8 Please see “Definitions and Additional Notes”
Table 16: AUM by Client Location ($ in
billions) June 30, 2017
March 31, 2017 December 31, 2016
June 30, 2016 AUM % of
total AUM % of total AUM
% of total AUM % of
total U.S. $ 205.2 79.3 % $ 198.4 79.5 % $ 191.6 79.7 % $ 175.0
80.0 % Europe 18.8 7.3 % 17.9 7.2 % 16.8 7.0 % 14.6 6.7 % Asia 13.5
5.2 % 13.0 5.2 % 12.5 5.2 % 12.1 5.5 % Middle East 0.2 0.1 % 0.1 —
% 0.1 — % 0.3 0.1 % Australia 8.8 3.4 % 8.5 3.4 % 7.8 3.3 % 6.8 3.1
% Other 12.3 4.7 % 11.8 4.7 % 11.6 4.8 % 10.0
4.6 %
Total assets under management $
258.8 $ 249.7 $
240.4 $ 218.8 Please see
“Definitions and Additional Notes”
Table 17: AUM
NCCF, Annualized Revenue Impact of NCCF, Fee Rates and Derived
Average Weighted NCCF
AUM NCCF($ billions)
Annualized RevenueImpact of
NCCF($ millions)
Weighted AverageFee Rate on
TotalAverage AUM (bps)
Derived AverageWeighted
NCCF($ billions)
2014 Q1 $ (1.0 ) $ (3.0 ) 33.7 $ (0.9 )
Q2 3.6
18.4 33.5 5.5
Q3 3.1 19.1 33.1 5.8
Q4 3.8 20.0 32.9
6.1
2015 Q1 (0.2 ) 11.3 34.0 3.3
Q2 0.8 13.5
34.3 3.9
Q3 (2.5 ) 0.7 34.5 0.2
Q4 (3.2 ) (6.6 ) 34.7
(1.9 )
2016 Q1 2.4 7.3 34.7 2.1
Q2 (2.9 ) (3.4
) 35.0 (1.0 )
Q3 (2.6 ) (7.5 ) 35.7 (2.1 )
Q4 1.5
14.6 36.1 4.0
2017 Q1 (2.5 ) 0.8 37.7 0.2
Q2
(0.3 ) 13.1 38.1 3.4 Please see “Definitions and Additional Notes”
Table 18: Reconciliation of Per-share U.S. GAAP
Net Income to Economic Net Income ($ in millions)
Three Months Ended June 30,
Six Months Ended June 30, 2017
2016 2017 2016 U.S.
GAAP net income per share $ 0.11 $
0.30 $ 0.30 $ 0.56 Adjustments
to reflect the economic earnings of the Company: i. Non-cash
key employee-owned equity and profit interest revaluations 0.21
(0.01 ) 0.31 (0.02 ) ii. Amortization of acquired intangible
assets, acquisition-related consideration and pre-acquisition
employee equity 0.17 — 0.34 — iii. Capital transaction costs — 0.01
— 0.01 iv. Seed/Co-investment (gains) losses and financing (0.02 )
— (0.07 ) (0.01 ) v. Tax benefit of goodwill and acquired
intangibles deductions 0.02 — 0.04 0.01 vi. Discontinued operations
and restructuring 0.08 (0.01 ) 0.08 (0.01 ) vii. ENI tax
normalization 0.02 0.01 0.02 0.03 Tax effect of above adjustments,
as applicable (0.17 ) — (0.26 ) —
Economic net
income per share $ 0.42 $
0.30 $ 0.76 $ 0.57
Please see “Definitions and Additional Notes”
Table 19: Reconciliation of U.S. GAAP Revenue to ENI Revenue
($ in millions) Three Months Ended June 30,
Six Months Ended June 30, 2017 2016
2017 2016 U.S. GAAP revenue $ 218.8 $ 156.5 $ 415.0 $
306.1 Include investment return on equity-accounted Affiliates 3.1
3.5 5.5 6.8 Exclude revenue from consolidated Funds attributable to
non-controlling interests (0.5 ) — (0.7 ) — Other — —
0.4 —
ENI revenue $ 221.4
$ 160.0 $ 420.2 $
312.9 Please see “Definitions and Additional Notes”
Table 20: Reconciliation of U.S. GAAP Operating Expense
to ENI Operating Expense
($ in millions) Three Months
Ended June 30, Six Months Ended June 30, 2017
2016 2017 2016 U.S. GAAP operating expense $
205.9 $ 112.5 $ 378.6 $ 221.1 Less: items excluded from ENI
Acquisition-related consideration and pre-acquisition employee
equity(1) (17.7 ) — (35.3 ) — Non-cash key employee-owned equity
and profit interest revaluations (23.3 ) 1.1 (35.2 ) 2.4
Amortization of acquired intangible assets (1.7 ) — (3.3 ) (0.1 )
Capital transaction costs — (1.6 ) — (1.7 ) Restructuring costs(2)
(9.3 ) — (9.3 ) — Funds’ operating expense (0.3 ) — (0.5 ) — Other
items excluded from ENI — — — — Less: items segregated out of U.S.
GAAP operating expense Variable compensation (61.1 ) (41.0 ) (112.3
) (78.4 ) Affiliate key employee distributions (16.5 ) (9.2 ) (31.4
) (17.5 )
ENI operating expense $ 76.0
$ 61.8 $ 151.3 $
125.8 (1) Reflects amortization of contingent
consideration and equity owned by employees, both with a service
requirement, associated with the Landmark acquisition. (2)
Restructuring costs in the three and six months ended June 30, 2017
are comprised of $0.5 million of fixed compensation and benefits
and $8.8 million of variable compensation associated with the CEO
transition. Please see “Definitions and Additional Notes”
Table 21: Components of Seed/Co-investment Gains (Losses)
and Financing
($ in millions) Three Months Ended June
30, Six Months Ended June 30, 2017 2016
2017 2016 Seed/Co-investment gains (losses) $
3.6 $ 1.0 $ 10.3 $ 1.2
Financing
costs: Seed/Co-investment average balance 51.0 61.1 56.1 59.0
Blended interest rate* 6.2 % 1.5 % 6.2 % 1.5 % Financing costs (0.7
) (0.3 ) (1.6 ) (0.5 )
Net seed/co-investment gains (losses) and
financing $ 2.9 $ 0.7
$ 8.7 $ 0.7 * Prior to
the July 2016 bond issuances, the blended interest rate was based
on the Company’s interest rate on its revolving credit facility.
Subsequent to the 2016 bond issuance, and going forward, the
blended rate is based on the weighted average rate of the long-term
debt, unless there is alternative funding directly allocated to the
seed capital. Please see “Definitions and Additional Notes”
Table 22: Reconciliation of Net Income to EBITDA,
Adjusted EBITDA and Economic Net Income ($ in
millions)
Three Months Ended June 30,
Six Months Ended June 30, 2017
2016 2017 2016
Net income attributable to controlling interests $
12.9 $ 36.3 $ 34.3 $
67.1 Net interest expense 5.6 0.5 11.4 1.0 Income tax
expense (including tax expenses related to discontinued operations)
1.0 13.6 6.6 27.1 Depreciation and amortization (including
intangible assets) 4.4 2.4 8.6 4.5
EBITDA $ 23.9 $ 52.8 $
60.9 $ 99.7 Non-cash key employee-owned equity
and profit interest revaluations 23.3 (1.1 ) 35.2 (2.4 )
Amortization of acquisition-related consideration and
pre-acquisition employee equity 17.7 — 35.3 — EBITDA of
discontinued operations — (1.9 ) 0.1 (2.2 ) (Gain) loss on seed and
co-investments (3.6 ) (1.0 ) (10.3 ) (1.2 ) Restructuring costs 9.3
— 9.3 — Capital transaction costs — 1.6 — 1.7 Other — (0.1 )
— —
Adjusted EBITDA $ 70.6
$ 50.3 $ 130.5 $ 95.6 Net
interest expense to third parties (4.8 ) (0.1 ) (9.8 ) (0.4 )
Depreciation and amortization (2.8 ) (2.3 ) (5.3 ) (4.4 ) Tax on
economic net income (16.4 ) (11.7 ) (29.9 ) (22.6 )
Economic net
income $ 46.6 $ 36.2
$ 85.5 $ 68.2 Please see
“Definitions and Additional Notes”
Table 23: Calculation
of ENI Effective Tax Rate
($ in millions) Three
Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016 Pre-tax economic
net income(1) $ 63.0 $ 47.9 $ 115.4 $ 90.8 Intercompany interest
expense deductible for U.S. tax purposes (19.6 ) (17.7 ) (38.9 )
(35.4 )
Taxable economic net income 43.4
30.2 76.5 55.4 Taxes at
the U.S. federal and state statutory rates(2) (17.5 ) (12.2 ) (30.8
) (22.3 ) Other reconciling tax adjustments 1.1 0.5
0.9 (0.3 )
Tax on economic net income (16.4
) (11.7 ) (29.9 ) (22.6
) Add back intercompany interest expense previously excluded
19.6 17.7 38.9 35.4
Economic net
income $ 46.6 $ 36.2
$ 85.5 $ 68.2 Economic
net income effective tax rate(3) 26.0 % 24.4 % 25.9 % 24.9 % (1)
Pre-tax economic net income is shown before intercompany interest
and tax expenses. (2) Taxed at U.S. Federal and State statutory
rate of 40.2% (3) The economic net income effective tax rate is
calculated by dividing the tax on economic net income by pre-tax
economic net income. Please see “Definitions and Additional Notes”
Definitions and
Additional Notes
References to “OMAM” or the “Company” refer to OM Asset
Management plc; references to “OM plc” refer to Old Mutual plc, the
Company’s former parent; references to the “Center” refer to the
holding company excluding the Affiliates; references to "Landmark"
refer to Landmark Partners, LLC, acquired by the Company in August
2016. OMAM operates its business through eight boutique asset
management firms (the “Affiliates”). OMAM’s distribution activities
are conducted in various jurisdictions through affiliated companies
in accordance with local regulatory requirements.
Economic net income
The Company uses a non-GAAP performance measure referred to as
economic net income (“ENI”) to represent its view of the underlying
economic earnings of the business. ENI is used to make resource
allocation decisions, determine appropriate levels of investment or
dividend payout, manage balance sheet leverage, determine Affiliate
variable compensation and equity distributions, and incentivize
management. The Company’s ENI adjustments to U.S. GAAP include both
reclassifications of U.S. GAAP revenue and expense items, as
well as adjustments to U.S. GAAP results, primarily to exclude
non-cash, non-economic expenses, or to reflect cash benefits not
recognized under U.S. GAAP.
The Company re-categorizes certain line items on the income
statement to:
- exclude the effect of Fund
consolidation by removing the portion of Fund revenues, expenses
and investment return which is not attributable to its
shareholders;
- include within management fee revenue
any fees paid to Affiliates by consolidated Funds, which are viewed
as investment income under U.S. GAAP;
- include the Company’s share of earnings
from equity-accounted Affiliates within other income, rather than
investment income;
- treat sales-based compensation as a
general and administrative expense, rather than part of fixed
compensation and benefits;
- identify separately from operating
expenses, variable compensation and Affiliate key employee
distributions, which represent Affiliate earnings shared with
Affiliate key employees.
The Company also makes the following adjustments to
U.S. GAAP results to more closely reflect its economic results
by:
i. excluding non-cash expenses representing changes in the value
of Affiliate equity and profit interests held by Affiliate key
employees. These ownerships interests may in certain circumstances
be repurchased by OMAM at a value based on a pre-determined fixed
multiple of trailing earnings and as such this value is carried on
the Company’s balance sheet as a liability. Non-cash movements in
the value of this liability are treated as compensation expense
under U.S. GAAP. However, any equity or profit interests
repurchased by OMAM can be used to fund a portion of future
variable compensation awards, resulting in savings in cash variable
compensation that offset the negative cash effect of repurchasing
the equity.
ii. excluding non-cash amortization or impairment expenses
related to acquired goodwill and other intangibles as these are
non-cash charges that do not result in an outflow of tangible
economic benefits from the business. It also excludes the
amortization of acquisition-related contingent consideration, as
well as the value of employee equity owned pre-acquisition, as
occurred as a result of the Landmark transaction, where such items
have been included in compensation expense as a result of ongoing
service requirements for certain employees.
iii. excluding capital transaction costs, including the costs of
raising debt or equity, gains or losses realized as a result of
redeeming debt or equity and direct incremental costs associated
with acquisitions of businesses or assets.
iv. excluding seed capital and co-investment gains, losses and
related financing costs. The net returns on these investments are
considered and presented separately from ENI because ENI is
primarily a measure of the Company’s earnings from managing client
assets, which therefore differs from earnings generated by its
investments in Affiliate products, which can be variable from
period to period.
v. including cash tax benefits associated with deductions
allowed for acquired intangibles and goodwill that may not be
recognized or have timing differences compared to U.S. GAAP.
vi. excluding the results of discontinued operations
attributable to controlling interests since they are not part of
the Company’s ongoing business, and restructuring costs incurred in
continuing operations which represent an exit from a distinct
product or line of business.
vii. excluding deferred tax resulting from changes in tax law
and expiration of statutes, adjustments for uncertain tax
positions, deferred tax attributable to intangible assets and other
unusual items not related to current operating results to reflect
ENI tax normalization.
The Company adjusts its income tax expense to reflect any tax
impact of its ENI adjustments. Please see Table 7 for a
reconciliation of U.S. GAAP net income attributable to controlling
interests to economic net income.
Adjusted EBITDA
Adjusted EBITDA is defined as economic net income before
interest, income taxes, depreciation and amortization. The Company
notes that its calculation of Adjusted EBITDA may not be consistent
with Adjusted EBITDA as calculated by other companies. The Company
believes Adjusted EBITDA is a useful liquidity metric because it
indicates the Company’s ability to make further investments in its
business, service debt and meet working capital requirements.
Please see Table 22 for a reconciliation of U.S. GAAP net income
attributable to controlling interests to EBITDA, Adjusted EBITDA
and ENI.
Methodologies for calculating investment
performance(1):
Revenue-weighted
investment performance measures the percentage of management fee
revenue generated by Affiliate strategies which are beating
benchmarks. It calculates each strategy’s percentage weight by
taking its estimated composite revenue over total composite
revenues in each period, then sums the total percentage of revenue
for strategies outperforming.
Equal-weighted
investment performance measures the percentage of Affiliates’ scale
strategies (defined as strategies with greater than $100 million of
AUM) beating benchmarks. Each outperforming strategy over $100
million has the same weight; the calculation sums the number of
strategies outperforming relative to the total number of composites
over $100 million.
Asset-weighted
investment performance measures the percentage of AUM in strategies
beating benchmarks. It calculates each strategy’s percentage weight
by taking its composite AUM over total composite AUM in each
period, then sums the total percentage of AUM for strategies
outperforming.
______________________
(1) Barrow Hanley’s Windsor II Large Cap Value account AUM and
return are separated from Barrow Hanley’s Large Cap Value composite
in revenue-weighted, equal-weighted and asset-weighted
outperformance percentage calculations.
ENI operating earnings
ENI operating earnings represents ENI earnings before Affiliate
key employee distributions and is calculated as ENI revenue, less
ENI operating expense, less ENI variable compensation. It differs
from economic net income because it does not include the effects of
Affiliate key employee distributions, net interest expense or
income tax expense.
ENI operating margin
The ENI operating margin, which is calculated before Affiliate
key employee distributions, is used by management and is useful to
investors to evaluate the overall operating margin of the business
without regard to our various ownership levels at each of the
Affiliates. ENI operating margin is a non-GAAP efficiency measure,
calculated based on ENI operating earnings divided by ENI revenue.
The ENI operating margin is most comparable to our U.S. GAAP
operating margin.
ENI management fee revenue
ENI Management fee revenue corresponds to U.S. GAAP management
fee revenue.
ENI operating expense ratio
The ENI operating expense ratio is used by management and is
useful to investors to evaluate the level of operating expense as
measured against our recurring management fee revenue. We have
provided this ratio since many operating expenses, including fixed
compensation & benefits and general and administrative expense,
are generally linked to the overall size of the business. We track
this ratio as a key measure of scale economies at OMAM because in
our profit sharing economic model, scale benefits both the
Affiliate employees and OMAM shareholders.
ENI earnings before variable
compensation
ENI earnings before variable compensation is calculated as ENI
revenue, less ENI operating expense.
ENI variable compensation ratio
The ENI variable compensation ratio is calculated as variable
compensation divided by ENI earnings before variable compensation.
It is used by management and is useful to investors to evaluate
consolidated variable compensation as measured against our ENI
earnings before variable compensation. Variable compensation is
usually awarded based on a contractual percentage of each
Affiliate’s ENI earnings before variable compensation and may be
paid in the form of cash or non-cash Affiliate equity or profit
interests. Center variable compensation includes cash and OMAM
equity. Non-cash variable compensation awards typically vest over
several years and are recognized as compensation expense over that
service period. The variable compensation ratio at each Affiliate
will typically be between 25% and 35%.
ENI Affiliate key employee distribution
ratio
The Affiliate key employee distribution ratio is calculated as
Affiliate key employee distributions divided by ENI operating
earnings. The ENI Affiliate key employee distribution ratio is used
by management and is useful to investors to evaluate Affiliate key
employee distributions as measured against our ENI operating
earnings. Affiliate key employee distributions represent the share
of Affiliate profits after variable compensation that is
attributable to Affiliate key employee equity and profit interests
holders, according to their ownership interests. At certain
Affiliates, OMUS is entitled to an initial preference over profits
after variable compensation, structured such that before a
preference threshold is reached, there would be no required key
employee distributions, whereas for profits above the threshold the
key employee distribution amount would be calculated based on the
key employee ownership percentages, which range from approximately
15% to 40% at our consolidated Affiliates.
U.S. GAAP operating margin
U.S. GAAP operating margin equals operating income from
continuing operations divided by total revenue.
Consolidated Funds
Financial information presented in accordance with U.S. GAAP may
include the results of consolidated pooled investment vehicles, or
Funds, managed by our Affiliates, where it has been determined that
these entities are controlled by the Company. Financial results
which are “attributable to controlling interests” exclude the
impact of Funds to the extent it is not attributable to our
shareholders.
Annualized revenue impact of net flows
(“NCCF”)
Annualized revenue impact of net flows represents the difference
between annualized management fees expected to be earned on new
accounts and net assets contributed to existing accounts, less the
annualized management fees lost on terminated accounts or net
assets withdrawn from existing accounts, including equity-accounted
Affiliates. Annualized revenue is calculated by multiplying the
annual gross fee rate for the relevant account by the net assets
gained in the account in the event of a positive flow or the net
assets lost in the account in the event of an outflow and is
designed to provide investors with a better indication of the
potential financial impact of net client cash flows.
Hard asset disposals
Net flows in Table 1, Table 2 and Table 11 include hard asset
disposals made by OMAM’s Affiliates. This category is made up of
investment-driven asset dispositions made by Heitman, a real estate
manager, or Campbell, a timber manager.
Derived average weighted NCCF
Derived average weighted NCCF reflects the implied NCCF if
annualized revenue impact of net flows represents asset flows at
the weighted fee rate for OMAM overall (i.e. 38.1 bps in Q2'17).
For example, NCCF annualized revenue impact of $13.1 million
divided by the average weighted fee rate of OMAM’s overall AUM of
38.1 bps equals the derived average weighted NCCF of $3.4
billion.
n/m
“Not meaningful.”
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170803005614/en/
OMAMBrett Perryman, 617-369-7300ir@omam.com
Grafico Azioni OM ASSET MANAGEMENT PLC (NYSE:OMAM)
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Da Mag 2024 a Giu 2024
Grafico Azioni OM ASSET MANAGEMENT PLC (NYSE:OMAM)
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Da Giu 2023 a Giu 2024