Acadian Asset Management Inc. · NYSE:AAMI
Acadian Asset Management — OM Asset Management — Q4 2017 Earnings Presentation
26 slides from Acadian Asset Management's earnings presentation, Feb 1, 2018
Slide 1: Q4 2017 Earnings Presentation
Q4 2017 EARNINGS PRESENTATION February 1, 2018
Slide 2: Disclaimer
Disclaimer Forward Looking Statements This presentation may contain forward looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are identified by words such as “expect,” “anticipate,” “may,” “intends,
Slide 3: Overview and Highlights
Overview and Highlights • Steve Belgrad appointed President and CEO of OMAM effective March 2, 2018 • Q4'17 U.S. GAAP EPS of $(0.45) down from $0.21 in Q4'16, and 2017 U.S. GAAP EPS of $0.04 down from $1.05 in 2016, primarily due to negative impact of U.S. Tax Act in Q4'17 and compensation expense r
Slide 4: Growth Strategy
Growth Strategy OMAM's multi-boutique model is well positioned for growth, with four key areas of focus... Four Key Multi-Boutique Value Proposition Drives Growth Areas New Incremental Growth Opportunities Partnerships Global Distribution Collaborative Organic Growth (Growth and Seed / Co-Investment
Slide 5: AUM Progression and Mix
AUM Progression and Mix AUM Progression (Annual) AUM Mix (12/31/17) AUM 1% $B % Change: 1. AUM by Affiliate $B %Total $280 $ 97.7 40% $260 $(32.4) $41.0 91.7 38% $240 (13.5)% 5.3 2% $220 $(6.0) 17.1% $240.4 $243.0 (2.5)% 6.4 3% $200 2.1 1% $180 Net flows Market and Removal of 2016 other Heitman 2017
Slide 6: Net Client Cash Flows and Revenue Impact
Net Client Cash Flows and Revenue Impact AUM Net Client Cash Flows (“NCCF”) Revenue Impact of NCCF(1) $B $M $4 $20 $14.6 $2.4 $15 $13.5 $13.1 $12.2 $2 $11.3 $1.5 $10 $0.8 $7.3 $0.5 $6.8 $0 $5 $(0.2) $(0.3) $0.7 $0.8 $0 -$2 -$5 $(3.4) $(2.5) $(2.6) $(2.5) $(2.9) $(3.2) $(6.6) $(7.5) -$4 $(3.7) -$10 Q
Slide 7: Net Client Cash Flows Breakdown
Net Client Cash Flows Breakdown AUM Net Client Cash Flows (“NCCF”) - by Asset Class Revenue Impact of NCCF - by Asset Class $B $M $4 $24 $3 $20 $2.6 $1.9 $2 $2.1 $16 $12.7 $0.1 $15.6 $13.1 $1 $1.0 $1.6 $12 $1.2 $1.0 $1.3 98 $0.4 $0 $8 $0.2 $14.9 -$1 $(1.7) $(2.4) $9.4 $(2.9) $(2.8) $4 $8.1 $6.7 $(3.
Slide 8: Strong Investment Performance
Strong Investment Performance Products representing ≥ 65% of revenue outperforming on a 1-, 3- and 5-year basis Commentary • OMAM uses revenue-weighted performance as its primary investment metric ◦ Ties investment performance to business performance ◦ Reflects percent of management fee revenue in p
Slide 9: Contribution of Growth Strategies to Flows: 2013 - 2017
Contribution of Growth Strategies to Flows: 2013 - 2017 Commentary • Successful seeding program is contributing meaningfully to sales • Global Distribution contributed $2.3 billion of funded assets in 2017 • Investment in new product initiatives at early stage, but already generating results Source
Slide 10: Financial Highlights – Q4 2017 v. Q4 2016
Financial Highlights – Q4 2017 v. Q4 2016 • Q4'17 economic net income up 25.2% to $48.7 million ($0.44 per share) from $38.9 million ($0.33 per share) in Q4'16 ◦ EPS growth of 33.3% benefited from buyback of 6.0 million shares in December 2016 and 5.0 million shares in May 2017 • ENI Revenue increas
Slide 11: Continued Positive Markets and Fee Mix Benefit Q4'17 Results
Continued Positive Markets and Fee Mix Benefit Q4'17 Results $252 $199 Average AUM(1) ENI Revenue(2) Pre-tax ENI Equity-accounted Performance Performance % Change Q4'16 to Q4'17: 1.6% % Change Q4'16 to Q4'17: 32.9% % Change Q4'16 to Q4'17: 42.0% Affiliates Fees Fees % Change, consolidated Affiliates
Slide 12: A Solid Record of Growth
A Solid Record of Growth Average AUM(1) ENI Revenue(2)(6) Pre-tax ENI(6) Equity-accounted Performance Performance CAGR ('13-'17): 8.0% Affiliates CAGR ('13-'17): 14.3% CAGR ('13-'17): 13.2% Fees Fees CAGR, consolidated Affiliates: 10.0% CAGR, ex. perf. fees: 14.4% $901 $275 CAGR, ex. perf. fees: 13.
Slide 13: Management Fee Growth Driven By Increased Average Assets at Consolidated Affiliates and Landmark
Management Fee Growth Driven By Increased Average Assets at Consolidated Affiliates and Landmark Average AUM and Fee Rate by Asset Class(1)(2) Gross Management Fee Revenue by Asset Class(1)(2) Avg. AUM $B ge: 16.8% % Change $M % Chan % Change : 28.9% $236.8 39.2 % Change $240 $250 98 32% $233.9 $21.
Slide 14: OMAM Benefited From Scale Efficiencies
OMAM Benefited From Scale Efficiencies Commentary • Total ENI operating expenses reflect Affiliate operating expenses, Center expenses and key initiatives, including Global Distribution (excluding variable compensation) • Q4'17 Operating Expense Ratio(1) decreased to 36.3% for the period, reflecting
Slide 15: Variable Compensation in Line with Business Profitability
Variable Compensation in Line with Business Profitability Commentary • Variable compensation typically awarded based on contractual percentage (e.g., ~25 – 35%) of each Affiliate’s ENI earnings before variable compensation, plus Center bonuses; also includes contractual split of certain performance
Slide 16: Distribution Ratio Increased Due to Continued Growth and Leveraged Employee Equity Structure
Distribution Ratio Increased Due to Continued Growth and Leveraged Employee Equity Structure Commentary • Represents employees’ share of profit from their respective Affiliates, in some cases following an initial preference to OMAM(1) • Q4'17 Key Employee Distributions increased due to higher ENI op
Slide 17: Balance Sheet Management Provides Ongoing Opportunities to Increase Shareholder Value
Balance Sheet Management Provides Ongoing Opportunities to Increase Shareholder Value Balance Sheet Capital ($M) December 31, December 31, • December 31 leverage ratio (Debt / Adj. EBITDA) of 2017 2016 Assets 1.4x below target range of 1.75x - 2.25x Cash and cash equivalents $ 186.3 $ 101.9 • Cash o
Slide 18: Appendix
Appendix OMAM 1:8
Slide 19: Reconciliation: GAAP to ENI and Adjusted EBITDA
Reconciliation: GAAP to ENI and Adjusted EBITDA Three Months Ended Years Ended December 31, December 31, ENI Adjustments $m 2017 2016 2017 2016 i.1 Exclude non-cash expenses representing U.S. GAAP net income (loss) attributable to controlling interests $ (48.8) $ 25.3 $ 4.2 $ 126.4 changes in the va
Slide 20: Reconciliation: GAAP to ENI and Components of ENI
Reconciliation: GAAP to ENI and Components of ENI Components of ENI revenue ($ in millions) Three Months Ended December 31, Twelve Months Ended December 31, 2017 2016 2017 2016 (1) Management fees $ 233.9 $ 181.4 $ 858.0 $ 659.9 Performance fees 14.4 4.5 26.5 2.6 Other income, including equity-accou
Slide 21: Reconciliation: GAAP to ENI
Reconciliation: GAAP to ENI U.S. GAAP operating expense to ENI operating expense ($ in millions) Three Months Ended December 31, Twelve Months Ended December 31, 2017 2016 2017 2016 U.S. GAAP operating expense $ 222.9 $ 156.2 $ 816.4 $ 507.9 Less: items excluded from economic net income Acquisition-
Slide 22: Reconciliation: GAAP to ENI
Reconciliation: GAAP to ENI U.S. GAAP general and administrative expense to ENI general and administrative expense ($ in millions) Three Months Ended December 31, Twelve Months Ended December 31, 2017 2016 2017 2016 U.S. GAAP general and administrative expense $ 32.0 $ 26.6 $ 112.9 $ 98.3 Sales-base
Slide 23: Calculation of ENI Effective Tax Rate
Calculation of ENI Effective Tax Rate Calculation of ENI Effective Tax Rate ($ in millions) Three Months Ended December 31, Twelve Months Ended December 31, 2017 2016 2017 2016 Pre-tax economic net income(1) $ 71.7 $ 50.5 $ 251.3 $ 190.7 Intercompany interest expense deductible for U.S. tax purposes
Slide 24: 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 La
Slide 25: Definitions and Additional Notes
Definitions and Additional Notes The Company adjusts its income tax expense to reflect any tax impact of its ENI adjustments. Please see Slide 19 for a reconciliation of U.S. GAAP net income attributable to controlling interests to economic net income. Adjusted EBITDA Adjusted EBITDA is defined as e
Slide 26: Definitions and Additional Notes
Definitions and Additional Notes 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 ear