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01/10 16:41
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presented mixed signals: while there were positives such as share repurchases and a reduction in net outflows, there were also negatives including decreased operating margin and net debt position. The Q&A revealed some lack of clarity in management's responses, particularly around fee rates and tax assets. The market cap suggests moderate volatility. Overall, the financial performance and cautious market sentiment balance out, leading to a neutral stock price prediction.
Total Assets Under Management $167.5 billion, down from previous quarter due to market performance and net outflows.
Total Sales $6.2 billion, down from $6.4 billion in the fourth quarter, stable across products despite market disruption.
Total Net Outflows $3 billion, improved from $4.8 billion in the prior quarter, due to a large partial redemption in the previous quarter.
Earnings Per Share (as adjusted) $5.73, declined from $7.50 in the fourth quarter due to $1.01 per share of seasonal employment expenses, but increased 6% year-over-year.
Operating Income (as adjusted) $54.6 million, down from $74.5 million sequentially due to seasonal employment expenses, and down 3% year-over-year.
Operating Margin (as adjusted) 27.6%, compared to 35.1% in the fourth quarter; excluding seasonal expenses, it was 32.7%.
Investment Management Fees (as adjusted) $178.5 million, decreased 7% due to lower average assets under management and higher performance fees in the prior quarter.
Employment Expenses (as adjusted) $109.4 million, increased 5% sequentially due to $10 million of seasonal employment expenses; excluding seasonal items, decreased by 5%.
Cash and Equivalents $135.4 million at March 31.
Net Debt $100 million, or 0.3 times EBITDA.
Share Repurchases $26 million used to repurchase or net settle approximately 146,000 shares, reducing shares outstanding by 3% on a net basis.
Revenue Participation Payment $23 million, reducing contingent liability to $40 million.
New Product Development: We remain very active in expanding offerings in our key focus areas, including ETFs, global funds and retail separate accounts. We have several strategies under development and products and filings that we expect to launch over the next few quarters, including our first interval fund.
Market Positioning: Despite market performance volatility leading to lower assets under management, we delivered solid financial and operating results, with positive net flows in ETFs and strong relative investment performance.
Operational Efficiency: We have reduced our office space in several locations and expect to generate savings of approximately $1 million per quarter from those activities starting in the third quarter of this year.
Strategic Shifts: We continue to take a balanced approach to our capital management by investing in our growth, returning capital to shareholders and maintaining appropriate levels of leverage.
Market Performance Volatility: The company faced challenges in the first quarter due to market performance volatility, leading to lower assets under management and net outflows.
Net Outflows: Total net outflows were $3 billion, although this improved from $4.8 billion in the previous quarter.
Institutional Net Outflows: Institutional net outflows of $1.2 billion were primarily due to domestic and global large cap equity strategies.
Retail Separate Accounts: Net outflows in retail separate accounts were largely due to the soft closing of the SMID-Cap Core equity model offering.
Economic Uncertainty: Investors remain cautious with their investment decisions due to ongoing market volatility and uncertainty.
Employment Expenses: Seasonally higher employment expenses impacted operating income, with total employment expenses increasing by 5% sequentially.
Operating Margin: The operating margin decreased to 27.6% compared to 35.1% in the previous quarter, primarily due to seasonal employment expenses.
Debt Position: The company ended the quarter with a modest net debt position, which may limit financial flexibility.
Product Development: We remain very active in expanding offerings in our key focus areas, including ETFs, global funds, and retail separate accounts. We have several strategies under development and products and filings that we expect to launch over the next few quarters, including our first interval fund.
Wealth Management Expansion: We are expanding resources to support our $8.5 billion wealth management business.
Share Repurchases: During the quarter, we used $26 million to repurchase or net settle approximately 146,000 shares, reducing shares outstanding by 3% on a net basis.
Earnings Per Share Guidance: Earnings per share, as adjusted, of $5.73 declined from the fourth quarter due in part to $1.01 per share of seasonal employment expenses.
Operating Margin Outlook: Excluding seasonal items, the operating margin was 32.7%. If markets remain at current levels, it is reasonable to anticipate employment expenses as a percentage of revenues would be at the higher end of our outlook range of 49% to 51%.
Average Fee Rate Guidance: We continue to believe an average fee rate in the range of 41 to 42 basis points is reasonable for modeling purposes, with performance fees of $3 million to $5 million per year, incremental to that range.
Capital Management: We continue to take a balanced approach to our capital management by investing in our growth, returning capital to shareholders, and maintaining appropriate levels of leverage.
Revenue Participation Payment: $23 million revenue participation payment made, reducing contingent liability to $40 million.
Share Repurchase: $26 million used to repurchase or net settle approximately 146,000 shares during the quarter.
Shares Outstanding Reduction: Repurchases have reduced shares outstanding by 3% on a net basis over the past year.
First Quarter Share Repurchase: 111,200 shares of common stock repurchased for $20 million and net settled 35,178 shares for $6.1 million.
Despite some challenges like net outflows and a year-over-year EPS decline, the company shows strong financial performance with increased sales, operating margin, and dividends. Positive signs include growth in ETFs, fixed income, and alternative strategies, along with enhanced financial flexibility from debt refinancing. The Q&A reveals optimism in expanding ETF distribution and active evaluation of growth opportunities. The market cap suggests moderate sensitivity to news, supporting a positive outlook.
The earnings call presents a mixed picture: strong shareholder returns via share repurchases and financial flexibility are positives, but declining investment management fees and lack of clarity in management's responses are concerning. The Q&A section highlights optimism in fixed income and ETFs but reveals uncertainty in private market strategies. Given the company's market cap of $1.57 billion, the stock is likely to have moderate fluctuations, resulting in a neutral prediction of -2% to 2% over the next two weeks.
The earnings call highlighted several challenges, including market volatility, net outflows, and decreased operating margin. Despite a slight improvement in net outflows and EPS growth, the reduction in assets under management and unclear guidance on key issues like the deferred tax asset and soft-closed vehicle impact cast a shadow. The Q&A session revealed management's lack of clarity on important matters, which could unsettle investors. Given the company's small-cap status, these issues are likely to result in a negative stock price reaction within the -2% to -8% range over the next two weeks.
The earnings call presented mixed signals: while there were positives such as share repurchases and a reduction in net outflows, there were also negatives including decreased operating margin and net debt position. The Q&A revealed some lack of clarity in management's responses, particularly around fee rates and tax assets. The market cap suggests moderate volatility. Overall, the financial performance and cautious market sentiment balance out, leading to a neutral stock price prediction.
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