AFFILIATED MANAGERS GROUP, INC. Q4 FY2024 earnings call

• AMG delivered record economic earnings per share in 2024 with full year earnings up 10% year-over-year, driven by strategic evolution towards alternatives.
• Private markets Affiliates raised $24 billion in 2024, with $6 billion in Q4, driven by a broad base of Affiliates and reflecting investors' conviction in their strategies.
• Liquid alternatives had net inflows of $2 billion in Q4, second consecutive quarter of positive flows, with Affiliates' value proposition gaining momentum.
• Announced a minority investment in NorthBridge Partners, a private markets manager specializing in industrial logistics real estate, aligning with strategy of investing in secular growth areas.
• Strengthened balance sheet in 2024 by issuing long-duration debt, paying down short-term debt, and extending revolver, with strong capital flexibility.

In 2024, AMG delivered record economic earnings per share. Private markets Affiliates raised $24 billion in 2024, with $6 billion in the fourth quarter, representing annualized organic growth of approximately 20%. Liquid alternatives had net inflows of $2 billion in the fourth quarter, marking the second consecutive quarter of positive flows. Equities saw net outflows of approximately $16 billion in the fourth quarter. Multi asset and fixed income had modest inflows, with $3 billion for the full year. Revenue contribution percentages weren't explicitly stated in absolute terms but the focus on alternatives was highlighted as a key area of growth.

• Expect Q1 adjusted EBITDA to be in the range of $220 million to $230 million, including net performance fees of $10 million to $20 million.
• Performance fees expected to be $150 million annually on average, with Q1 performance fee earnings expected to be $20 million to $30 million below year-ago period.
• Expect Q1 economic earnings per share to be between $5.02 and $5.26, assuming adjusted weighted average share count of 30.7 million shares.
• Aim 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 is strong, with NorthBridge being one prospect. The pipeline is predominantly in alternatives, especially private markets and liquid alternatives. AMG's attractiveness is high as it offers strategic resources while preserving independence. Regarding administration change, he thinks it could favor more new investments as potential for lower regulation and more business development.

Q: As you think about the pipeline from here, 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's a mix of transactions in the pipeline, including relatively small and larger deals, all in the category of enterprise value between $250 million to $750 million, typically buying minority or bare majority stakes while leaving the business alone. Larger transactions 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 been ramping up product development, launched three new products in US wealth space in 2024 and filed for two more, now having six continuously offered products. On active ETFs, there's been innovation, with Affiliates launching some, and AMG spending time with Affiliates to enter the market, seeing it as an exciting opportunity combining investment expertise and client demand.