Artisan Partners Asset Management Inc. (APAM) Q4 2025 Earnings Call Transcript
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Overview
The company demonstrated strong financial performance with increased revenues, operating income, and AUM. Dividend growth and a high payout ratio are positive indicators for shareholders. Despite some outflows, the focus on emerging markets and new investment capabilities suggests growth potential. The Q&A highlighted strong demand for non-U.S. strategies and emerging markets, although management's vague responses on M&A specifics and AUM expectations could raise minor concerns. Overall, the positive financial metrics and strategic initiatives outweigh these uncertainties, predicting a positive stock price movement.
Key Financial Performance
Firm-wide asset-weighted investment returns Exceeded 20% net of fees in 2025, generating over $33 billion in returns for clients.
Revenue Grew by 8% year-over-year in 2025 compared to 2024, driven by higher average AUM.
Operating Income Increased by 9% year-over-year in 2025 compared to 2024, attributed to higher revenues and effective cost management.
Adjusted Operating Income Increased by 12% year-over-year in 2025 compared to 2024, reflecting strong investment performance and revenue growth.
Assets Under Management (AUM) Increased by nearly 12% year-over-year to $180 billion at the end of 2025, driven by $33 billion in investment gains.
Credit Platform AUM Grew by 29% year-over-year to $17.9 billion in 2025, with net inflows of $2.8 billion and organic growth exceeding 20% for the third consecutive year.
Alternatives Platform AUM Grew by 20% year-over-year to $4 billion in 2025, supported by strong organic growth in global unconstrained strategies.
Equity Platform Outflows Experienced $15.6 billion in outflows in 2025, driven by challenging short-term performance, changing asset allocation preferences, and profit-taking.
Fourth Quarter 2025 Revenue Reached $336 million, up 13% year-over-year and 11% quarter-over-quarter, driven by $29 million in performance fees from six strategies.
Adjusted Operating Expenses Increased by 7% year-over-year in Q4 2025 compared to Q4 2024, primarily due to higher variable incentive compensation expenses.
Adjusted Operating Income (Q4 2025) Increased by 23% year-over-year and quarter-over-quarter, with an adjusted operating margin of 40.2%, up 400 basis points from the prior quarter.
Adjusted Net Income Per Share (Q4 2025) Increased by 20% year-over-year and 24% quarter-over-quarter, consistent with operating income growth.
Dividends Declared for 2025 Totaled $3.87 per share, up 11% year-over-year, with a 98% payout ratio relative to adjusted earnings.
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Operating Highlights
Grandview Property Partners acquisition: Artisan Partners acquired Grandview Property Partners, a real estate private equity firm specializing in middle market properties. This acquisition expands Artisan's platform into private real estate and alternative investments.
Assets under management (AUM) growth: Firm-wide AUM reached $180 billion, a 12% increase from 2024, driven by $33 billion in investment gains. Credit platform AUM grew by 29% to $17.9 billion, and alternatives platform AUM grew by 20% to $4 billion.
Revenue and income growth: Revenue grew by 8% in 2025 compared to 2024. Operating income and adjusted operating income increased by 9% and 12%, respectively. Adjusted operating margin improved to 40.2% in Q4 2025.
Performance fees: Performance fees for Q4 2025 reached $29 million, driven by strong investment performance across six strategies.
Expansion into alternative investments: The acquisition of Grandview Property Partners aligns with Artisan's strategy to expand into alternative investments, particularly private real estate. This move is expected to create new growth pathways and leverage existing institutional relationships.
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Risk or Challenges
Equity Platform Outflows: The equity platform experienced higher-than-expected outflows of $15.6 billion, primarily in global opportunities, U.S. mid-cap growth, and non-U.S. small-mid growth strategies. This was driven by challenging short-term performance, changing asset allocation preferences, and profit-taking after strong long-term performance.
Short-Term Underperformance: Trailing 1-year performance was negatively impacted by underperformance in two of the largest equity strategies, International Value and Global Opportunities, despite their strong long-term track records.
Fixed Expenses Increase: Fixed expenses are expected to increase in 2026 due to merit-based salary increases, inflationary market data, and technology costs, as well as the addition of Grandview expenses.
Dependence on Performance Fees: Approximately 3% of AUM is subject to performance fee arrangements, which introduces variability in revenue depending on investment performance.
Operational Costs: Higher variable incentive compensation expenses were reported due to increased revenues, and fixed compensation costs are expected to rise modestly in 2026.
Grandview Acquisition Risks: The acquisition of Grandview Property Partners, while strategically aligned, introduces integration risks and may have an immaterial impact on 2026 earnings.
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Guidance & Outlook
2026 Long-Term Incentive Award: The Board approved the 2026 Annual Long-Term Incentive Award of approximately $72 million, consisting of $51 million of cash-based franchise capital awards and $21 million of restricted stock awards. This is aimed at retaining investment talent, with the majority awarded to investment professionals.
Grandview Acquisition Impact: The acquisition of Grandview closed on January 2, 2026, and is expected to have an immaterial impact on 2026 earnings. It is anticipated to be mildly accretive to earnings per share after the final closing of Grandview's next flagship closed-end drawdown fund.
Fixed Expenses in 2026: Fixed expenses are expected to increase in the low single digits in 2026, primarily due to merit-based salary increases, inflationary market data, and technology costs. Fixed compensation and benefits expenses will be approximately $6 million higher in Q1 2026 compared to Q4 2025.
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Shareholder Return Plan
Quarterly Dividend: The Board declared a quarterly dividend of $1.01 per share with respect to the December 2025 quarter.
Year-End Special Dividend: A $0.57 year-end special dividend was declared, bringing total dividends declared with respect to 2025 cash generation to $3.87 per share.
Dividend Payout Ratio: The total dividends declared represent a 98% payout ratio relative to adjusted earnings.
Dividend Growth: Dividends declared with respect to 2025 cash generation increased by 11% compared to 2024, and the year-end special dividend was 14% higher than the prior year.
Dividend Yield: Based on the stock price on December 31, the dividend yield equates to 9.5%.
Share Repurchase: No share repurchase program was mentioned or discussed in the transcript.
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Key Q&A
Q:Why was the AUM lower than expected, and what is the timeline for the next flagship fund?
A:The AUM was lower due to realizations on properties in the Grandview Fund I, which is in the harvesting phase, leading to realized gains and distributions to LPs. Fund III raised about $150 million and is nearing the end of its investment period. Fund IV is being launched and is expected to have a first close in early to mid-summer, with expectations to be significantly larger than Fund III.
Q:Can you expand on the M&A opportunities and the bid-ask spread on purchase price expectations?
A:The company is focusing on talent-driven outcomes and opportunities in private credit, private equity secondaries, and broadening the credit platform. Most transactions are off-market, which aligns with their investment-focused approach. The Grandview team is already a fully functioning investment platform, requiring less effort to integrate compared to lift-outs.
Q:What is driving the recent weakness in the international value strategy despite industry rotation into value?
A:The elevated outflows are attributed to institutional reductions due to equities outperforming, leading to rebalanced flows. There is no underlying issue or concern, and the team continues to deliver strong absolute returns despite slight relative headwinds.
Q:What is the interest and demand for non-U.S. strategies?
A:The AUM is approximately 70% ex-U.S. Emerging markets allocations are reemerging, with over $1 billion raised in five months through a focused campaign. Global and international strategies, including global value and equity, are performing well. Credit and alternatives, such as emerging market debt and unconstrained strategies, are also seeing strong demand.
Q:What are the regional trends and challenges for institutional flows?
A:Europe faces challenges due to regulatory changes and short-term performance issues, particularly in global growth strategies. The U.S. institutional market shows better opportunities, especially in emerging markets and credit franchises.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the bid-ask spread for M&A purchase price expectations, using general language about focusing on off-market transactions and investment-driven approaches. Additionally, while they mentioned expectations for Fund IV to be larger than Fund III, no specific target size or detailed timeline was provided.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AUM equity
AUM inflow
AUM outperforming
Artisan Partners
Artisan investment
Asset Update
Asset addition
DPI realization
Equity Emerging
Equity Global
Equity Strategies
Firm asset
Global Equity
Global Opportunities
Global Value
Markets Global
Mid Non
Non Global
Opportunities term
Outflows opportunity
Partners Asset
Select Equity
Value Select
acquisition
approach
benchmark inception
credit alternative
equity credit
equity strategy
estate
fee strategy
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inception net
investing talent
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platform AUM
point net
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value investing
APAM Transcript
Artisan Partners Asset Management Inc. (APAM) Q4 2025 Earnings Call Transcript
Positive2-4
The company demonstrated strong financial performance with increased revenues, operating income, and AUM. Dividend growth and a high payout ratio are positive indicators for shareholders. Despite some outflows, the focus on emerging markets and new investment capabilities suggests growth potential. The Q&A highlighted strong demand for non-U.S. strategies and emerging markets, although management's vague responses on M&A specifics and AUM expectations could raise minor concerns. Overall, the positive financial metrics and strategic initiatives outweigh these uncertainties, predicting a positive stock price movement.
Artisan Partners Asset Management Inc. (APAM) Q3 2025 Earnings Call Transcript
Positive10-29
The earnings call presents strong financial performance with record high AUM, revenue growth, and increased dividends. The Q&A highlighted growth in demand for emerging markets and non-U.S. strategies, with positive sentiment towards the company's approach to M&A and efforts to improve gross flows. Although some uncertainties exist in M&A specifics, the overall sentiment is positive, supported by expanded margins and cash reserves. Given the market cap of $2.8 billion, the stock is likely to experience a positive movement of 2% to 8% over the next two weeks.
Artisan Partners Asset Management Inc. (APAM) Q2 2025 Earnings Call Transcript
Unknown7-30
The earnings call reveals mixed signals: positive revenue growth, increased dividends, and strategic focus on private wealth and M&A opportunities. However, the absence of performance fees, slight net client outflows, and lack of specific guidance raise concerns. The Q&A highlights cautious market sentiment, with muted gross flows and unclear management responses. Considering the market cap, the stock is likely to have a neutral reaction over the next two weeks, with movements within the -2% to 2% range.
Artisan Partners Asset Management Inc. (APAM) Q1 2025 Earnings Call Transcript
Unknown4-30
The earnings call reflects mixed signals: while there are positive aspects such as increased AUM and a strong focus on emerging markets and wealth clients, the financial performance shows declines in revenue and margins due to the absence of performance fees. The Q&A reveals management's focus on potential growth areas but also highlights uncertainties and lack of clarity in strategy execution. The dividend cut also weighs negatively. Given the market cap, the stock price is likely to remain stable, resulting in a neutral prediction for the next two weeks.
APAM Slides
APAM Report
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