Affiliated Managers Group, Inc. Q4 FY2024 earnings call

Jay Horgen's remarks

• AMG delivered record economic earnings per share in 2024 with full year earnings up 10% year-over-year. Continued to strategically evolve towards alternatives, with private market affiliates raising $24 billion in 2024. Announced a minority investment in NorthBridge Partners, a private markets manager specializing in industrial logistics real estate. New investment pipeline remains strong with several late-stage opportunities.

Tom Wojcik's remarks

• 2024 results reflect business evolution towards long-term secular growth areas. Private markets affiliates fundraising strong with $24 billion full year, annualized organic growth ~20%. Liquid alternatives had second consecutive quarter of positive flows. Equities had net outflows, but long-term organic growth profile improved. Significant investment in capital formation capabilities paying off with alternatives AUM on U.S. wealth platform growing more than tenfold in five years and launching new products.

Dava Ritchea's remarks

• 2024 results contributed by strategic evolution to alternatives. Fourth quarter adjusted EBITDA $282 million, full year $973 million. First quarter adjusted EBITDA expected in range of $220 million to $230 million. Performance fee earnings expectations discussed. Balance sheet strengthened in 2024 with debt actions, and capital allocation focused on disciplined approach with plan to repurchase at least $400 million in shares in 2025.

In 2024, AMG's private market affiliates raised approximately $24 billion during the year. In the fourth quarter, private markets affiliates raised $6 billion, bringing full year fundraising to $24 billion and representing annualized organic growth of approximately 20%. Liquid alternatives had a second consecutive quarter of positive flows with $2 billion of net inflows. In equities, there were net outflows of approximately $16 billion in the quarter. Multi asset and fixed income had modest inflows in the quarter with approximately $3 billion of inflows for the full year. For the fourth quarter, adjusted EBITDA was $282 million, down 5% year-over-year. On a full year basis, adjusted EBITDA was $973 million, up 4% versus 2023. Economic earnings per share were $6.53 for the fourth quarter and $21.36 for the full year 2024, with full year economic earnings per share growing 10%.

First quarter guidance

• Expect adjusted EBITDA to be in the range of $220 million and $230 million, based on current AUM levels, includes net performance fees of $10 million to $20 million, and no earning contribution from NorthBridge investment which starts in Q2 and will be modestly positive in 2025.
• Expect first quarter economic earnings per share to be between $5.02 and $5.26, assuming an adjusted weighted average share count of 30.7 million shares for the quarter.
• Expect to repurchase at least $400 million in shares in 2025, subject to market conditions and new investment activity.

Q: Can you discuss in more detail the pipeline for new investments, and how that compares to this time a year ago? Also, did the change in administration have any impacts on conversations or dialogue with prospective affiliates?

A: Jay Horgen said the pipeline has been strong. NorthBridge was one prospect in the pipeline. Our attractiveness in the market is better as we offer strategic resources to independent firms while preserving their independence. The administration change probably does favor more new investments for us as there's potential for lower regulation and more business development.

Q: As you think about the pipeline from here Jay is the go-forward the NorthBridge kind of model where you have a minority stake and a smaller franchise that you can then sort of lever through your more advanced global distribution platform? Or could there be some larger deals that might move the flow and/or strategic needle a little bit more quickly at the end of the day?

A: Jay Horgen said there is a mix of all of the above. There are mid-sized firms we think can grow significantly with our resources, and there are also larger new investment opportunities in our pipeline. Our opportunity set is typically enterprise value between $250 million to $750 million where we buy minority or bare majority stakes, and larger investments are not off the table but the bar is high.

Q: The last few quarters you've provided a really helpful detail into your retail alts product pipeline. I was hoping you could give us an update on the trends you are seeing evolve from both a client demand perspective and distribution fee arrangements. And how active are you guys currently in developing active ETFs for your Affiliates?

A: Tom Wojcik said AMG has pivoted to support Affiliates and attract new investment prospects through capabilities in the US wealth channel. In 2024, they aggressively launched new products into the US wealth space, with six continuously offered products now available. On active ETFs, there's been innovation, they have Affiliates launching some, and they are spending time with Affiliates to consider entering the market as it's an exciting opportunity to combine investment expertise with client demand.