Company Appoints Stephen H. Belgrad as
President and Chief Executive Officer
- U.S. GAAP net loss of $(48.8) million
($(0.45) per share) for the quarter, compared to net income of
$25.3 million ($0.21 per share) for the 2016 period, and net income
of $4.2 million ($0.04 per share) for the year compared to $126.4
million ($1.05 per share) for full-year 2016
- Economic net income of $48.7 million
($0.44 per share) for the quarter, up 25.2% compared to the
2016 period, and $180.9 million ($1.62 per share) for the year, up
24.7% compared to the 2016 period
- AUM of $243.0 billion at
December 31, 2017 (reflecting the removal of $32.4 billion of
Heitman assets in Q3'17) up 1.1% from December 31, 2016
- Net client cash flows ("NCCF") for the
quarter of $(3.7) billion with an annualized revenue impact of $6.8
million; full year NCCF of $(6.0) billion with an annualized
revenue impact of $32.9 million
OM Asset Management plc (NYSE: OMAM) today reports its results
for the quarter and full year ended December 31, 2017.
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“OMAM had a strong finish to the year, posting year-over-year
growth in ENI per share of 33% for the quarter and 34% for the
year, while our U.S. GAAP earnings were impacted by tax reform in
the U.S.” said James J. Ritchie, OMAM’s chairman and interim CEO.
“Our Affiliates continue to build on their long-term track records
of outperformance, with assets representing 65%, 72% and 83% of
revenue finishing the year ahead of benchmarks on a one-, three-
and five-year basis, respectively. Although the fourth quarter was
challenging from an AUM flow perspective, with net flows of $(3.7)
billion, an average fee rate of 57 basis points on gross sales
compared to 32 basis points on redemptions drove a positive
annualized revenue impact of $6.8 million, continuing a trend which
led to an annualized revenue impact of $32.9 million on net flows
of $(6.0) billion for the year. While we remained committed to
investment spending through collaborative organic growth
initiatives, prudent expense management and scale have generated
meaningful operating leverage, as our ENI operating margin
increased 261 bps, to 38%, in 2017.
“We are also pleased with our progress executing on our growth
strategy in 2017. We saw meaningful inflows in multiple Affiliate
products that were seeded as part of OMAM’s growth initiatives,
including a large ACWI ex-US mandate sourced by our Global
Distribution team. In addition, we benefited from our late-2016
acquisition of Landmark Partners, which diversified our business
and meaningfully contributed to our earnings growth and margin
expansion. We are committed to making additional, accretive
investments in high quality boutique asset management firms, and
are actively cultivating relationships with a wide range of
entrepreneurial firms.
"Finally, we are very pleased to announce the appointment of
Steve Belgrad as our President and Chief Executive Officer,
effective March 2, 2018. OMAM’s Board of Directors considered a
number of highly qualified candidates, and there was unanimous
support for Steve. With Steve's appointment, following the
completion of Old Mutual's sell-down in the fourth quarter, the
Company has stability of ownership, governance, and management, and
moves forward into 2018 focused on the continued execution of our
growth strategy. In addition, I want to give my sincere thanks to
John Rogers, who will be stepping down from the Board after
successfully completing the CEO selection process as chair of the
Nominating and Governance Committee. John will be replaced on the
Board by Barbara Trebbi, a former portfolio manager and co-managing
partner at Mercator Asset Management.”
Table 1: Key Performance Metrics
(unaudited) ($ in millions, unless otherwise
noted) Three Months Ended December 31,
Twelve Months Ended December 31,
U.S. GAAP
Basis
2017 2016
Increase
(Decrease)
2017 2016
Increase
(Decrease)
Revenue $ 249.2 $ 186.6 33.5 % $ 887.4 $ 663.5 33.7 % Pre-tax
income from continuing operations attributable to controlling
interests 82.5 27.3 202.2 % 137.1 161.0 (14.8 )% Net income (loss)
attributable to controlling interests (48.8 ) 25.3 n/m 4.2 126.4
(96.7 )% Diluted earnings per share $ $ (0.45 ) $ 0.21 n/m $ 0.04 $
1.05 (96.2 )% U.S. GAAP operating margin 11 % 16 % (574) bps 8 % 23
% (1545) bps
Economic Net
Income Basis (Non-GAAP measure used by
management)(1)
ENI revenue $ 252.3 $ 189.8 32.9 % $ 900.7 $ 678.5 32.7 % Pre-tax
economic net income 71.7 50.5 42.0 % 251.3 190.7 31.8 % Economic
net income 48.7 38.9 25.2 % 180.9 145.1 24.7 % ENI diluted earnings
per share, $ $ 0.44 $ 0.33 33.3 % $ 1.62 $ 1.21 33.9 % Adjusted
EBITDA 79.4 57.5 38.1 % 281.9 208.5 35.2 % ENI operating margin 39
% 36 % 303 bps 38 % 35 % 261 bps
Other Operational
Information(2)
Assets under management at period end ($ in billions) $ 243.0 $
240.4 1.1 % $ 243.0 $ 240.4 1.1 % Net client cash flows ($ in
billions) (3.7 ) 1.5 n/m (6.0 ) (1.6 ) n/m Annualized revenue
impact of net flows ($ in millions) 6.8 14.6 (53.4 )% 32.9 11.0
199.1 %
(1) Excludes restructuring charges associated with the CEO
transition and the Heitman transaction amounting to $0.8 million
for the three months ended December 31, 2017 and $6.3 million for
the twelve months ended December 31, 2017, in each case net of
taxes. As previously noted, the difference between U.S. GAAP
results and ENI increased between 2016 and 2017, primarily as a
result of the treatment of the Landmark transaction. Please see
Table 7 for additional details.
(2) As previously disclosed, in August OMAM executed a
non-binding term sheet to sell its stake in Heitman LLC to
Heitman’s management in a transaction that closed on January 5,
2018. Operational information (including AUM and flow data)
excludes Heitman for the third and fourth quarters of 2017 (Heitman
remains in operational information for the first half of 2017).
Actual U.S. GAAP and ENI financial results continue to include
Heitman through November 30, 2017.
Please see "Definitions and Additional Notes." Please see Table
7 for a reconciliation of U.S. GAAP net income attributable to
controlling interests to economic net income.
Assets Under Management and Flows
In August 2017, the Company agreed in principal to sell its
stake in Heitman LLC to Heitman’s management. Pursuant to this term
sheet, OMAM entered into a redemption agreement on November 17,
2017. Heitman continued to contribute to the Company’s financial
results through November 30, 2017 and the transaction closed on
January 5, 2018. The Company has broken the Heitman assets under
management ("AUM") and flows out of its AUM reporting as of July 1,
2017, in order to give the reader a better perspective of the
ongoing business following the closing of this transaction. Unless
specifically noted, flow information in this release includes flows
from Heitman for the first half of 2017, but excludes it
thereafter, and AUM data at September 30, 2017 and December 31,
2017 excludes the Heitman AUM. For a summary of the Company’s AUM
roll-forward, please see Table 2 below.
At December 31, 2017, OMAM’s total AUM, reflecting the
removal of $32.4 billion of Heitman AUM as of July 1, 2017, were
$243.0 billion, up $7.1 billion, or 3.0%, compared to $235.9
billion at September 30, 2017, and up $2.6 billion, or 1.1%,
compared to $240.4 billion at December 31, 2016. The increase
in AUM during the three months ended December 31, 2017
reflects net market appreciation of $10.8 billion offset by net
outflows of $(3.7) billion.
For the three months ended December 31, 2017, OMAM’s net
flows were $(3.7) billion compared to $0.5 billion for the three
months ended September 30, 2017 and $1.5 billion for the three
months ended December 31, 2016. Hard asset disposals of $(0.1)
billion, $(0.4) billion, and $(0.6) billion are reflected in the
net flows for the three months ended December 31, 2017,
September 30, 2017 and December 31, 2016, respectively.
The net flows in the three months ended December 31, 2017 were
impacted primarily by lumpy outflows in sub-advisory funds and the
redemption of certain OM plc-related assets following the sale of
Old Mutual's equity stake in the business. As of December 31, 2017,
OM plc-related assets of $2.6 billion, with a weighted-average fee
rate of 26 bps remain in the business. For the three months ended
December 31, 2017, the annualized revenue impact of the net
flows was $6.8 million, with gross inflows of $7.4 billion during
the period into higher fee asset classes yielding approximately 57
bps, versus gross outflows and hard asset disposals in the same
period of $(11.1) billion out of asset classes yielding
approximately 32 bps. This compares to annualized revenue impact of
net flows of $12.2 million for the three months ended
September 30, 2017 and $14.6 million for the three months
ended December 31, 2016 (see "Definitions and Additional
Notes").
For the twelve months ended December 31, 2017, OMAM’s net
flows were $(6.0) billion compared to $(1.6) billion for the twelve
months ended December 31, 2016. Net client cash flows before
hard asset disposals were $(5.2) billion, compared to $2.3 billion
in the prior year. For the twelve months ended December 31,
2017, the annualized revenue impact of the net flows was $32.9
million compared to $11.0 million for the twelve months ended
December 31, 2016. Gross inflows of $31.0 billion in the
twelve months ended December 31, 2017 yielded an average of
approximately 51 bps compared to approximately 42 bps in the
year-ago period while gross outflows and hard asset disposals of
$(37.0) billion yielded approximately 34 bps in the twelve months
ended December 31, 2017 compared to approximately 36 bps in
the year-ago period.
Table 2: Assets Under Management Rollforward Summary
($ in billions,
unless otherwise noted)
Three Months Ended, Twelve Months
Ended,
December 31, 2017
September 30, 2017
December 31, 2016
December 31, 2017
December 31, 2016
Beginning AUM $ 235.9 $ 258.8 $ 234.2 $ 240.4 $ 212.4 Acquisition
(removal) of Affiliates* — (32.4 ) — (32.4 ) 8.8 Gross inflows 7.4
7.3 9.9 31.0 29.9 Gross outflows (11.0 ) (6.4 ) (7.8 ) (36.2 )
(27.6 )
Net flows before hard asset disposals (3.6
) 0.9 2.1 (5.2 ) 2.3 Hard
asset disposals (0.1 ) (0.4 ) (0.6 ) (0.8 ) (3.9 )
Net flows
(3.7 ) 0.5 1.5 (6.0 )
(1.6 ) Market appreciation 10.8 9.0 4.7 41.0 20.7
Other** — — — — 0.1
Ending
AUM $ 243.0 $ 235.9
$ 240.4 $ 243.0 $
240.4 Basis points: inflows 56.8 54.2 44.3
51.3 41.9 Basis points: outflows 31.7 40.2 34.8 34.1 36.3
Difference between inflows and outflows 25.1 14.0 9.5 17.2 5.6
Annualized revenue impact of net flows ($ in millions)
$ 6.8 $ 12.2 $ 14.6
$ 32.9 $ 11.0 Derived average weighted
NCCF ($ in billions) 1.7 3.2 4.0 8.5 3.0
* The Company has removed Heitman from its AUM and cash flow
metrics as of the beginning of the third quarter, 2017. Heitman
stopped contributing to the Company's financial results as of
November 30, 2017, therefore Heitman's December 31, 2017 AUM is not
reflected in the table above. Heitman's AUM at November 30, 2017
was $33.3 billion. For the twelve months ended December 31, 2016,
$8.8 billion of acquisitions represents the investment in Landmark
Partners.
** “Other” in 2016 reflects the standardization of AUM
definitions across Affiliates and mandates and the revaluation of
certain hard assets. These changes align the definition of AUM with
management fees charged to clients.
Please see "Definitions and Additional Notes"
Balance Sheet and Capital Management
Condensed Consolidated Balance Sheets as of December 31,
2017 and December 31, 2016 are provided in Table 3 below. As
of December 31, 2017, the Company had $392.8 million of
long-term bonds ($400.0 million face value, net of discount and
fees), $0.0 million outstanding on its $350 million credit facility
and $33.5 million drawn on a non-recourse seed capital financing
facility (see below). Shareholders' equity (attributable to
controlling interests) amounted to $75.4 million, which was
negatively impacted in the fourth quarter by the Tax Cuts and Jobs
Act (the "Tax Act"), which was signed into law on December 22,
2017. See below and "Financial Results - U.S. GAAP" for more
details on the financial impact of the Tax Act.
As a result of the enactment of the Tax Act, which reduced the
federal corporate tax rate from 35% to 21% effective January 2018,
the Company revalued its deferred tax assets and related
liabilities as required under U.S. GAAP. Based on currently
available information, the Company has reduced its deferred tax
assets as of the enactment date of December 22, 2017, resulting in
a one-time tax charge of approximately $121 million recorded in the
three and twelve months ended December 31, 2017. The reduction
in value of the Company’s deferred tax assets is a non-cash charge
required by U.S. GAAP and does not impact ENI. In addition, the
Company recognized a one-time charge of $1.5 million in December
2017 related to the deemed repatriation of unremitted earnings of
foreign subsidiaries. The reduction of the corporate tax rate and
other provisions of the Tax Act resulted in a decrease to the
Deferred Tax Asset Deed amounts owed by the Company to OM plc. As a
result, a reduction of approximately $52 million was recorded to
the Deferred Tax Asset Deed at December 31, 2017, however there
remains a possibility for further reductions pending the continued
evaluation of the Tax Act's impact on the value of the DTA Deed.
The Company entered into the Deferred Tax Asset Deed with OM plc in
October 2014 and amended the agreement in June 2016. Under the
amended agreement, the Company agreed to make a payment of the net
present value of its future tax benefits to OM plc valued as of
December 31, 2016. This payment, originally valued at $142.6
million was to be made over three installments on each of June 30,
2017, December 31, 2017 and June 30, 2018. The initial payment of
$45.5 million was paid on June 30, 2017; however as a result of the
Tax Act, no additional payments have been made pending the
continued evaluation of the impact of the Tax Act on the value of
the Deferred Tax Asset Deed. The continuation of certain
protections provided by OM plc related to the realized tax benefit
resulting from the Company's use of deferred tax assets remains
unaffected. Additional information on the amended Deferred Tax
Asset Deed can be found in the Company’s Current Report on Form
8-K, filed on June 14, 2016.
The impact of the Tax Act on the Company may differ materially
from the estimates included herein and may be subject to further
adjustments due to clarifications or guidance regarding the Tax Act
and actions the Company may take in the future. As such, the
Company will continue to evaluate the Tax Act to determine its
impact on the Company and whether any further adjustments are
warranted.
As of December 31, 2017, the Company’s ratio of third party
borrowings to trailing twelve months Adjusted EBITDA was 1.4x,
below the Company’s debt to trailing twelve months Adjusted EBITDA
target range of 1.75-2.25x. Of the Company's cash and cash
equivalents of $186.3 million at December 31, 2017, $114.6
million was held at Affiliates and $71.7 million was available at
the Center. Following the closing of the sale of the Company's
share of Heitman on January 5, 2018, the Company received $100
million in cash.
Increases in other liabilities at December 31, 2017 reflect
revaluation of the fair value of acquisition-related consideration
and pre-acquisition employee equity related to Landmark.
On July 17, 2017, the Company entered into a non-recourse seed
capital facility collateralized entirely by its seed capital
holdings and may borrow up to $65 million, so long as the borrowing
does not represent more than 50% of the value of the eligible seed
capital collateral. Since this facility is non-recourse to OMAM
beyond the seed investments themselves, drawdowns under this
facility are excluded from the Company’s third party debt levels
for purposes of calculating the Company’s credit ratio covenants
under its revolving credit facility. As of December 31, 2017,
the Company has total seed holdings of $101.9 million.
Table 3: Condensed Consolidated Balance Sheets
($ in millions) December 31, 2017 December 31,
2016 Assets Cash and cash equivalents $ 186.3 $ 101.9
Investment advisory fees receivable 208.3 163.7 Investments(1)
244.4 233.3 Other assets 698.8 759.1 Assets of consolidated
Funds(2) 153.9 36.3
Total assets
$ 1,491.7 $ 1,294.3
Liabilities and equity Accounts payable and accrued
expenses $ 241.0 $ 178.1 Due to OM plc 59.1 156.3 Non-recourse
borrowings 33.5
-
Third party borrowings 392.8 392.3 Other liabilities 583.5 391.3
Liabilities of consolidated Funds(2) 10.5 5.8
Total liabilities
$
1,320.4
$
1,123.8
Shareholders’ equity 75.4 164.0 Non-controlling interests,
including NCI of consolidated Funds(2) 95.9
6.5
Total equity 171.3
170.5 Total liabilities and equity $
1,491.7 $ 1,294.3 Third
party borrowings / trailing twelve months Adjusted EBITDA(3) 1.4 x
1.9 x (1) Includes investment in Heitman of $53.8 million and $53.6
million at December 31, 2017 and December 31, 2016, respectively.
(2) Consolidated Funds represent certain seed investments and
investments purchased from Old Mutual plc. (3) Excludes
non-recourse borrowings. Please see “Definitions and Additional
Notes”
(1) Includes investment in Heitman of $53.8 million and $53.6
million at December 31, 2017 and December 31, 2016,
respectively.
(2) Consolidated Funds represent certain seed investments and
investments purchased from Old Mutual plc.
(3) Excludes non-recourse borrowings.
Please see “Definitions and Additional Notes”
Investment Performance
Table 4 below presents a summary of the Company’s investment
performance as of December 31, 2017, September 30, 2017,
and December 31, 2016. Performance is shown on a
revenue-weighted basis, an equal-weighted basis and an
asset-weighted basis. Please see “Definitions and Additional Notes”
for further information on the calculation of performance.
Table 4: Investment Performance (%
outperformance vs. benchmark)
Revenue-Weighted December 31, 2017
September 30, 2017 December
31, 2016 1-Year 65 % 69 % 49 % 3-Year 72 % 67 % 55 % 5-Year 83
% 81 % 73 %
Equal-Weighted December 31, 2017
September 30, 2017 December 31, 2016 1-Year 59 % 62 %
53 % 3-Year 69 % 69 % 65 % 5-Year 82 % 77 % 76 %
Asset-Weighted December 31, 2017 September 30,
2017 December 31, 2016 1-Year 61 % 64 % 42 % 3-Year 71 %
62 % 45 % 5-Year 74 % 73 % 61 %
Please see “Definitions and Additional Notes”
As of December 31, 2017, assets representing 65%, 72% and
83% of revenue were outperforming benchmarks on a 1-, 3- and 5-
year basis, respectively, compared to 69%, 67% and 81% at
September 30, 2017; and 49%, 55% and 73% at December 31,
2016. Favorable active management results in 2017 continued to help
boost performance significantly compared to the previous year
period. The one-year results declined from the previous quarter due
to several international strategies rolling off strong performance;
however, the three-year period increased due to the strong returns
of a domestic large cap value strategy, and the five-year period
benefited from a managed volatility strategy rolling off negative
returns.
Financial Results: U.S. GAAP
Table 5 below presents the Company’s U.S. GAAP Statement of
Operations. The Company's U.S. GAAP results for the three and
twelve months ended December 31, 2017 have been negatively impacted
by the Tax Act, as the Company had to write down the value of its
deferred tax assets, which resulted in additional income tax
expense. This write-down is somewhat offset by a reduction in
amounts owed to OM plc under the Deferred Tax Asset Deed which
resulted in increased income from continuing operations before
taxes. The Company's net income tax expense was $131.3 million for
the three months, and $132.8 million for the twelve months, ended
December 31, 2017.
For the three months ended December 31, 2017 and 2016,
diluted earnings (loss) per share were $(0.45) and $0.21,
respectively and net income (loss) attributable to controlling
interests was $(48.8) million and $25.3 million, respectively, a
decrease of $(74.1) million. U.S. GAAP revenue increased $62.6
million, or 33.5%, from $186.6 million for the three months ended
December 31, 2016, to $249.2 million for the three months
ended December 31, 2017, primarily reflecting higher bps on
higher levels of average assets under management driven by rising
markets and sales of alternative products. Operating expenses
increased $66.7 million, or 42.7%, from $156.2 million for the
three months ended December 31, 2016, to $222.9 million for
the three months ended December 31, 2017, primarily due to
increases in variable compensation, the revaluation of Affiliate
equity and profits interests and higher Affiliate key employee
distributions. As it relates to the Landmark transaction, under
U.S. GAAP the fair value of both the contingent consideration and
the portion of equity not acquired by the Company is recorded as
compensation expense over the applicable term because service
requirements exist for holders of these units. These units are also
revalued each quarter, with any change recorded in that period as
an adjustment to compensation expense.
For the twelve months ended December 31, 2017 and 2016,
diluted earnings per share were $0.04 and $1.05, respectively, a
decrease of (96.2)%, and net income attributable to controlling
interests was $4.2 million and $126.4 million, respectively, a
decrease of $(122.2) million, or (96.7)%. U.S. GAAP revenue
increased $223.9 million, or 33.7%, from $663.5 million for the
twelve months ended December 31, 2016, to $887.4 million for
the twelve months ended December 31, 2017, primarily as a
result of increases in management fees as a result of market
appreciation and shifts into higher fee rate products, the Landmark
acquisition and higher performance fees. Operating expenses
increased $308.5 million, or 60.7%, from $507.9 million for the
twelve months ended December 31, 2016, to $816.4 million for
the twelve months ended December 31, 2017, primarily as a
result of higher compensation (see Table 6). The increase in
compensation and benefits is predominantly due to increases in
variable compensation, the revaluation of Affiliate equity and
profit interests, and amortization of acquisition-related
consideration and pre-acquisition employee equity associated with
the Landmark acquisition. The effective tax rate increased to 96.8%
for the twelve months ended December 31, 2017 from 25.3% for
the twelve months ended December 31, 2016 due to the
write-down of the value of the Company's deferred tax asset
following passage of the Tax Act.
Table 5: U.S. GAAP Statement of Operations
($ in
millions) Three Months Ended December 31, Twelve
Months Ended December 31, 2017 2016 Increase
(decrease) 2017 2016 Increase (decrease)
Management fees $ 233.9 $ 181.4 28.9 % $ 858.0 $ 659.9 30.0 %
Performance fees 14.4 4.5 220.0 % 26.5 2.6 919.2 % Other revenue
0.6 0.6 — % 1.2 0.9 33.3 % Consolidated Funds’ revenue 0.3
0.1 200.0 % 1.7 0.1 n/m
Total revenue
249.2 186.6 33.5 %
887.4 663.5 33.7 %
Compensation and benefits (see Table 6) 184.4 125.3 47.2 % 682.8
397.4 71.8 % General and administrative 32.0 26.6 20.3 % 112.9 98.3
14.9 % Amortization of acquired intangibles 1.7 1.6 6.3 % 6.6 2.6
153.8 % Depreciation and amortization 3.2 2.5 28.0 % 11.7 9.4 24.5
% Consolidated Funds’ expense 1.6 0.2 n/m 2.4
0.2 n/m
Total operating expenses 222.9
156.2 42.7 % 816.4
507.9 60.7 % Operating income
26.3 30.4 (13.5 )% 71.0
155.6 (54.4 )% Investment income 6.9 3.6 91.7
% 27.4 17.2 59.3 % Interest income 0.3 0.1 200.0 % 0.8 0.4 100.0 %
Interest expense (6.3 ) (5.9 ) 6.8 % (24.5 ) (11.3 ) 116.8 %
Revaluation of DTA deed 51.8 — n/m 51.8 — n/m Net consolidated
Funds’ investment gains (losses) 5.6 (1.1 ) n/m 15.5
(1.1 ) n/m
Income from continuing operations before taxes
84.6 27.1 212.2 % 142.0
160.8 (11.7 )% Income tax expense 131.3
7.0 n/m 132.8 40.8 225.5 %
Income (loss)
from continuing operations (46.7 ) 20.1
n/m 9.2 120.0 (92.3 )% Gain
(loss) on disposal of discontinued operations, net of tax —
5.0 (100.0 )% (0.1 ) 6.2 n/m
Net income (loss)
(46.7 ) 25.1 n/m 9.1
126.2 (92.8 )% Net income (loss) attributable
to non-controlling interests 2.1 (0.2 ) n/m 4.9 (0.2
) n/m
Net income (loss) attributable to controlling
interests $ (48.8 ) $ 25.3
n/m $ 4.2 $ 126.4
(96.7 )% Earnings per share, basic $ $ (0.45 )
$ 0.21 n/m $ 0.04 $ 1.05 (96.2 )% Earnings per share, diluted $
(0.45 ) 0.21 n/m 0.04 1.05 (96.2 )% Basic shares outstanding (in
millions) 109.0 118.2 110.7 119.2 Diluted shares outstanding (in
millions)(1) 109.0 118.8 111.4 119.5 U.S. GAAP operating
margin 11 % 16 % (574) bps 8 % 23 % (1545) bps Pre-tax income from
continuing operations attributable to controlling interests 82.5
27.3 202.2 % 137.1 161.0 (14.8 )% Net income from continuing
operations attributable to controlling interests (48.8 ) 20.3 n/m
4.3 120.2 (96.4 )%
(1) During periods of net loss diluted shares are the same as
basic shares.
Please see "Definitions and Additional Notes"
Table 6: Components of U.S. GAAP Compensation Expense
($ in millions) Three Months Ended December 31,
Twelve Months Ended December 31, 2017 2016
Increase (Decrease)
2017 2016
Increase (Decrease)
Fixed compensation and benefits(1) $ 45.8 $ 40.7 12.5 % $ 172.9 $
146.4 18.1 % Sales-based compensation 5.1 3.7 37.8 % 18.6 17.2 8.1
% Variable compensation(2) 69.6 48.6 43.2 % 252.2 172.7 46.0 %
Affiliate key employee distributions 21.8 12.9 69.0 % 73.1 41.7
75.3 % Non-cash key employee-owned equity revaluations 24.4 1.7 n/m
95.4 (7.1 ) n/m Acquisition-related consideration and
pre-acquisition employee equity(3) 17.7 17.7 — % 70.6
26.5 166.4 %
Total U.S. GAAP compensation
expense $ 184.4 $ 125.3
47.2 % $ 682.8 $
397.4 71.8 %
(1) For the twelve months ended December 31, 2017, $172.4
million of fixed compensation and benefits (of the $172.9 million
above) is included within economic net income, which excludes the
compensation and benefits associated with the CEO transition
costs.
(2) For the twelve months ended December 31, 2017, $243.4
million of variable compensation expense (of the $252.2 million
above) is included within economic net income, which excludes the
variable compensation associated with the CEO transition costs.
(3) Reflects amortization of contingent consideration and equity
owned by employees, both with a service requirement, associated
with the Landmark acquisition; revaluation of the Landmark
interests is included in “Non-cash key employee-owned equity
revaluations” above.
Please see “Definitions and Additional Notes”
Financial Results: Non-GAAP Economic Net Income
For the three months ended December 31, 2017 and 2016,
diluted economic net income per share was $0.44 and $0.33,
respectively, an increase of 33.3%. For the three months ended
December 31, 2017 and 2016, economic net income was $48.7
million and $38.9 million, respectively, an increase of $9.8
million, or 25.2%.
Table 7 reconciles U.S. GAAP to economic net income for the
three and twelve months ended December 31, 2017 and 2016. As
was expected, the difference between U.S. GAAP net income
attributable to controlling interests and economic net income
increased between 2016 and 2017. This change was primarily related
to the accounting treatment of the service component of the
contingent consideration and employee equity in the Landmark
transaction, as well as the level of non-cash key employee-owned
equity revaluations, as the Affiliates grew their income and the
corresponding value of employee equity.
For the three months ended December 31, 2017, compared to
the three months ended December 31, 2016, ENI Revenue (see
Table 8) increased $62.5 million, or 32.9%, from $189.8 million to
$252.3 million, including an increase in management fees from
$181.4 million to $233.9 million driven by positive markets and a
continued shift into higher fee products. Average assets under
management excluding equity accounted Affiliates in those
respective periods (see Table 12) increased $34.0 billion, or
16.8%, to $236.8 billion, while the bps yield on these assets rose
from 35.6 bps to 39.2 bps due to positive mix shifts related to
markets and flows including the impact of higher yielding
alternative assets. Performance fee revenue was $14.4 million for
the current quarter, compared to $4.5 million in the year-ago
quarter. The current quarter performance fees were principally
attributable to strong performance from global/non-U.S. equity
products. Other income, including equity-accounted Affiliates,
includes $2.7 million for Heitman in each of the three months ended
December 31, 2017 and 2016, respectively, representing 3.3%
and 4.2% of economic net income on an after-tax basis in each
respective period. Total ENI operating expenses (see Table 9)
increased 15.7% to $84.8 million, from $73.3 million in the
prior-year quarter primarily as a result of ongoing investments in
the business, however total ENI operating expenses as a percentage
of management fee revenue decreased (415) bps from 40.4% to 36.3%
as a result of increased scale in the business. Of the $11.5
million increase in operating expense between the three months
ended December 31, 2017 and 2016, $5.1 million was due to
higher fixed compensation and benefits as a result of new hires,
CEO succession and annual cost of living increases and $5.6 million
was attributable to increases in general and administrative
expense, which rose 18.6% over the 2016 period, reflecting
continued investment in the business. Total variable compensation
increased 43.2% quarter-over-quarter to $69.6 million, reflecting
higher earnings before variable compensation, while the ENI
variable compensation ratio (variable compensation as a percentage
of ENI earnings before variable compensation) was stable at 41.6%.
The sum of operating expense and variable compensation increased
$32.5 million, or 26.7% period-over-period, while revenue increased
32.9% over this period, resulting in an increase in OMAM’s ENI
operating margin to 38.8% from 35.8%. Included in operating expense
and variable compensation in 2017 was $4.6 million related to
severance for our former Head of Global Distribution. Affiliate key
employee distributions increased 69.0% from the year-ago quarter
from $12.9 million to $21.8 million, primarily due to higher ENI
operating earnings and the levered structure of distributions at
certain Affiliates. The ratio of Affiliate key employee
distributions over ENI operating earnings increased from 19.0% to
22.3% due to higher earnings before Affiliate key employee
distributions at Affiliates with higher employee ownership and
leveraged equity plans which align incentives for growth. Net
interest expense was $4.4 million for the three months ended
December 31, 2017, compared to net interest expense of $4.5
million in the prior-year period. The difference in net interest
expense between U.S. GAAP and economic net income primarily relates
to the financing costs of seed capital and co-investments held for
the Company's benefit (see Table 21). Tax on economic net income
for the three months ended December 31, 2017 and 2016 was
$23.0 million and $11.6 million, respectively, an increase of $11.4
million or 98.3%, primarily reflecting higher pre-tax economic net
income along with incremental U.K. taxes due to new U.K. tax
legislation enacted in the fourth quarter. The Company's effective
tax rate was 32.1% in the fourth quarter of 2017 compared to 23.0%
in the fourth quarter of 2016 (see Table 23).
For the three months ended December 31, 2017, Adjusted
EBITDA was $79.4 million, an increase of 38.1% compared to $57.5
million for the same period in 2016. See Table 22 for a
reconciliation of U.S. GAAP net income attributable to controlling
interests to EBITDA, Adjusted EBITDA and economic net income.
For the twelve months ended December 31, 2017 and 2016,
diluted economic net income per share, was $1.62 and $1.21,
respectively, an increase of 33.9%. For the twelve months ended
December 31, 2017 and 2016, economic net income was $180.9
million and $145.1 million, respectively, an increase of $35.8
million, or 24.7%. Results for 2016 reflect the inclusion of
Landmark from August 18, while 2017 results reflect ownership of
Landmark for the full year.
For the twelve months ended December 31, 2017, compared to
the twelve months ended December 31, 2016, ENI Revenue
increased $222.2 million or 32.7%, from $678.5 million to $900.7
million, driven by a $198.1 million, or 30.0%, increase in
management fees from $659.9 million to $858.0 million.
Approximately half of this growth was related to the acquisition of
Landmark, which increased both average assets under management and
our weighted-average fee rate, with the remainder of the increase
attributable to positive markets and asset mix. Average AUM
excluding equity-accounted Affiliates increased 17.8% from the
twelve months ended December 31, 2016 to $224.8 billion, and
the bps yield on these assets rose from 34.6 bps to 38.2 bps
primarily due to a greater proportion of AUM coming from
global/non-U.S. and alternative products (see Table 12). Landmark
contributed approximately 3 bps of this increase, with the
remainder occurring as a result of a positive mix shift toward
higher fee global/non-U.S. and alternative products due to flow
trends and market movements. Performance fee revenue was $26.5
million for the current period, compared to $2.6 million in the
year-ago period, reflecting a performance fee earned on an
alternative product in the second quarter and strong performance
from global/non-U.S. equity in the fourth quarter of 2017. Other
income, including equity-accounted Affiliates, includes $12.0
million and $12.6 million for Heitman in the twelve months ended
December 31, 2017 and 2016, respectively, representing 4.0%
and 5.2% of economic net income on an after-tax basis in each
respective period. Total ENI operating expenses (see Table 9) grew
18.5% to $314.1 million, from $265.0 million for the twelve months
ended December 31, 2016. Total operating expenses as a
percentage of management fee revenue decreased to 36.6% from 40.2%
for the twelve months ended December 31, 2016, as management
fee growth of 30.0% outpaced the 18.5% increase in operating
expenses, partially reflecting efficiencies of scale following the
Landmark transaction. Of the $49.1 million increase in operating
expense between the twelve months ended December 31, 2016 and 2015,
$26.0 million was due to higher fixed compensation and benefits as
a result of the Landmark acquisition, new hires, CEO succession and
annual cost of living increases. While total variable compensation
increased $70.7 million, or 40.9%, period-over-period to $243.4
million, the ENI variable compensation ratio (variable compensation
as a percentage of ENI earnings before variable compensation)
decreased slightly to 41.5% for the twelve months ended
December 31, 2017 compared to 41.8% for the twelve months
ended December 31, 2016. The sum of operating expense and
variable compensation increased $119.8 million, or 27.4%
period-over-period, while revenue increased 32.7% over this period,
resulting in an increase in OMAM’s ENI operating margin to 38.1%
from 35.5%. Affiliate key employee distributions increased 75.3%
period-over-period from $41.7 million to $73.1 million, primarily
due to the investment in Landmark, the levered structure of
distributions at certain Affiliates and higher ENI operating
earnings. The ratio of Affiliate key employee distributions over
ENI operating earnings increased from 17.3% to 21.3% due to the
effect of the Landmark transaction and the leveraged structure of
certain equity plans in a rising profit environment. Net interest
expense was $18.8 million for the twelve months ended
December 31, 2017, compared to net interest expense of $8.4
million in the prior-year period, with the increase reflecting the
July 2016 issuance of $400 million of senior notes. The effective
tax rate of 28.0% for the period was higher than the prior year
period of 23.9% primarily due to higher pre-tax profits in the U.S.
and the change in U.K. tax law enacted in the fourth quarter.
For the twelve months ended December 31, 2017, Adjusted
EBITDA was $281.9 million, up 35.2% compared to $208.5 million in
2016. See Table 22 for a reconciliation of U.S. GAAP net income
attributable to controlling interests to EBITDA, Adjusted EBITDA
and ENI.
Finally, as a result of the enactment of the Tax Act, the
Company expects its effective ENI tax rate to decrease from
approximately 32% in 2018 to between 23% and 24% and its U.S.
aggregate marginal tax rate to decrease from 39% to 26%.
Table 7: Reconciliation of U.S. GAAP Net
Income to Economic Net Income ($ in millions)
Three Months Ended December 31,
Twelve Months Ended December 31, 2017
2016 2017 2016
U.S. GAAP net income attributable to controlling interests
$ (48.8 ) $ 25.3 $
4.2 $ 126.4 Adjustments to reflect the
economic earnings of the Company: i. Non-cash key employee-owned
equity and profit interest revaluations 24.4 1.7 95.4 (7.1 ) ii.
Amortization of acquired intangible assets, acquisition-related
consideration and pre-acquisition employee equity 19.4 19.3 77.2
29.1 iii. Capital transaction costs — 0.3 — 6.4 iv.
Seed/Co-investment (gains) losses and financings(1) (3.9 ) 1.9
(17.3 ) 1.4 v. Tax benefit of goodwill and acquired intangibles
deductions 2.0 2.0 8.7 5.0 vi. Discontinued operations and
restructuring(2) 1.3 (5.0 ) 11.0 (6.2 ) vii. ENI tax
normalization(3) 70.9 2.8 68.6 2.1 Tax effect of above adjustments,
as applicable(4) (16.6 ) (9.4 ) (66.9 ) (12.0 )
Economic net
income $ 48.7 $ 38.9
$ 180.9 $ 145.1
(1) See Table 21 for the components of seed capital and
co-investment gains and losses, and financing costs.
(2) Included in restructuring in the three months ended December
31, 2017 is $1.0 million related to the Heitman transaction and
$0.3 million for CEO recruiting costs. Included in restructuring
for the twelve months ended December 31, 2017 is $1.0 million
related to the Heitman transaction and $9.8 million related to CEO
transition costs, comprised of $0.5 million of fixed compensation
and benefits, $8.8 million of variable compensation and $0.5
million of recruiting costs.
(3) Includes $51.8 million in the three and twelve months ended
December 31, 2017 related to the revaluation of the deferred tax
asset deed with OM plc, offset by the $122.7 million impact of the
Tax Act.
(4) Reflects the sum of lines i., ii., iii. and iv. and the
restructuring part of vi. multiplied by the 40.2% U.S. statutory
tax rate (including state tax).
See Table 18 for a per-share presentation of the above
reconciliation
Please see the definition of Economic Net Income within
“Definitions and Additional Notes”
The following table identifies the components of ENI
revenue:
Table 8: Components of ENI revenue
($ in
millions) Three Months Ended December 31, Twelve
Months Ended December 31, 2017 2016
Increase (Decrease)
2017 2016
Increase (Decrease)
Management fees $ 233.9 $ 181.4 28.9 % $ 858.0 $ 659.9 30.0 %
Performance fees 14.4 4.5 220.0 % 26.5 2.6 919.2 % Other income,
including equity-accounted Affiliates(1) 4.0 3.9 2.6
% 16.2 16.0 1.3 %
ENI revenue $
252.3 $ 189.8 32.9
% $ 900.7 $ 678.5
32.7 %
See Table 19 for a reconciliation from U.S. GAAP revenue to ENI
revenue
(1) Heitman represents $2.7 million and $2.7 million for the
three months ended December 31, 2017 and 2016, respectively, and
$12.0 million and $12.6 million for the twelve months ended
December 31, 2017 and 2016, respectively.
Please see “Definitions and Additional Notes”
The following table identifies the components of ENI operating
expense:
Table 9: Components of ENI operating expense
($ in
millions) Three Months Ended December 31,
Twelve Months Ended December 31, 2017
2016
Increase (Decrease)
2017 2016
Increase (Decrease)
Fixed compensation & benefits $ 45.8 $ 40.7 12.5 % $ 172.4 $
146.4 17.8 % General and administrative expenses 35.7 30.1 18.6 %
129.9 109.2 19.0 % Depreciation and amortization 3.3 2.5
32.0 % 11.8 9.4 25.5 %
ENI operating
expense $ 84.8 $ 73.3
15.7 % $ 314.1 $
265.0 18.5 %
See Table 20 for a reconciliation from U.S. GAAP operating
expense to ENI operating expense
Please see “Definitions and Additional Notes”
The following table shows our key non-GAAP operating metrics for
the three and twelve months ended December 31, 2017 and 2016.
We present these metrics because they are the measures our
management uses to evaluate the profitability of our business and
are useful to investors because they represent the key drivers and
measures of economic performance within our business model. Please
see “Definitions and Additional Notes” for an explanation of each
ratio and its usefulness in measuring the economics and operating
performance of our business.
Table 10: Key ENI operating metrics
($ in
millions) Three Months Ended December 31, Twelve
Months Ended December 31, 2017 2016
Increase (Decrease)
2017 2016
Increase (Decrease)
Numerator: ENI operating earnings(1) $ 97.9 $ 67.9 44.2 % $ 343.2 $
240.8 42.5 % Denominator: ENI revenue $ 252.3 $ 189.8 32.9 % $
900.7 $ 678.5 32.7 %
ENI operating margin 38.8
% 35.8 % 303 bps 38.1 %
35.5 % 261 bps Numerator: ENI operating
expense $ 84.8 $ 73.3 15.7 % $ 314.1 $ 265.0 18.5 % Denominator:
ENI management fee revenue $ 233.9 $ 181.4 28.9 % $ 858.0 $ 659.9
30.0 %
ENI operating expense ratio 36.3 %
40.4 % (415) bps 36.6 %
40.2 % (355) bps Numerator: ENI
variable compensation $ 69.6 $ 48.6 43.2 % $ 243.4 $ 172.7 40.9 %
Denominator: ENI earnings before variable compensation(2) $ 167.5 $
116.5 43.8 % $ 586.6 $ 413.5 41.9 %
ENI variable compensation
ratio 41.6 % 41.7 % (16) bps
41.5 % 41.8 % (27) bps
Numerator: ENI Affiliate key employee distributions $ 21.8 $ 12.9
69.0 % $ 73.1 $ 41.7 75.3 % Denominator: ENI operating earnings(1)
$ 97.9 $ 67.9 44.2 % $ 343.2 $ 240.8 42.5 %
ENI Affiliate key
employee distributions ratio 22.3 % 19.0
% 327 bps 21.3 % 17.3 %
398 bps Numerator: Tax on economic net income $ 23.0
$ 11.6 98.3 % $ 70.4 $ 45.6 54.4 % Denominator: Pre-tax economic
net income $ 71.7 $ 50.5 42.0 % $ 251.3 $ 190.7 31.8 %
Economic
net income effective tax rate 32.1 % 23.0
% 911 bps 28.0 % 23.9 %
410 bps
(1) ENI operating earnings represents ENI earnings before
Affiliate key employee distributions and is calculated as ENI
revenue, less ENI operating expense, less ENI variable
compensation.
(2) ENI earnings before variable compensation is calculated as
ENI revenue, less ENI operating expense.
Please see “Definitions and Additional Notes”
Please refer to the Company’s Annual Report on Form 10-K for
comparable U.S. GAAP metrics.
Recent Events
On January 30, 2018, the Board of Directors of the Company
appointed Stephen H. Belgrad as the Company’s President and Chief
Executive Officer, effective as of March 2, 2018 and as a Director
of the Company, effective as of January 30, 2018. Before being
appointed as the Company’s President, Chief Executive Officer and a
Director of the Company, Mr. Belgrad was Executive Vice President,
Chief Financial Officer and a member of the Executive Management
Team of the Company. Mr. Belgrad has held these positions
since the Company’s initial public offering and has held comparable
positions with OMAM Inc., where he also acts as director,
since 2011. As Chief Financial Officer, Mr. Belgrad was
responsible for the Company’s finance, investor relations, legal
and IT/operations functions and jointly responsible for corporate
development. From 2008 to May 2011, Mr. Belgrad was chief
financial officer of HarbourVest Global Private Equity Limited
(HVPE), a publicly-traded closed-end investment company.
Mr. Belgrad previously was a vice president in the new
investments group at Affiliated Managers Group, Inc., a
publicly traded global asset management company, and, prior to
that, senior vice president and treasurer at Janus Capital
Group Inc., a publicly traded investment management firm. He
began his career at Morgan Stanley & Co., a
global financial services firm, where, over the course of
15 years, he held various positions in investment banking,
corporate strategy and Morgan Stanley’s asset management division.
Mr. Belgrad received a B.A. in economics from Princeton
University and an M.B.A. from Harvard Business School.
On January 30, 2018, John Rogers resigned as a director of the
Company effective January 31, 2018 for personal reasons and to
pursue other endeavors. Mr. Rogers shall continue to provide
assistance to the Board of Directors as a consultant pursuant to
terms and conditions as agreed between Mr. Rogers and the Board of
Directors.
In connection with Mr. Rogers' resignation, on January 30, 2018,
the Board elected Barbara Trebbi, CFA, as a Director of the
Company, effective as of January 30, 2018. Ms. Trebbi was a
General Partner and co-managing partner at Mercator Asset
Management, L.P. (“Mercator”) until 2017. At Mercator, which she
joined in 2000, she was a senior member of the investment team,
with a focus on international equities, in particular, continental
European investments, as well as Asia and other emerging markets.
Her clients included a wide range of institutional investors and
sub-advisory accounts. Ms. Trebbi started her career in 1988 as an
international equity research analyst at Mackenzie Investment
Management Inc., and progressed over 12 years to become head of
international equities. She has over 30 years of international
investment experience. Ms. Trebbi is a Chartered Financial Analyst
and a member of the CFA Institute, the Investment Counsel
Association of America, and also is a member of the CFA Society of
South Florida, where she served as President from 1994 to 1995. She
also serves on a number of non-profit boards related to primary,
secondary and higher education. She has a Graduate Diploma from the
London School of Economics and Political Science and a B.S. degree
from the University of Florida.
On January 5, 2018, Heitman LLC completed the previously
announced purchase of OMAM’s equity interest in the firm for $110
million in cash ($100 million received upon closing). On an after
tax basis, OMAM expects to receive approximately $85.7 million.
2018 Annual General Meeting
The Company will hold its 2018 annual general meeting of
shareholders on Tuesday, June 19, 2018 at 101 Park Avenue, New
York, NY 10178. To be considered for inclusion in the proxy
statement relating to the Company’s 2018 annual general meeting,
the Company must receive shareholder proposals no later than
February 15, 2018. All shareholder proposals should be marked for
the attention of the Secretary, OM Asset Management plc, Ground
Floor, Millennium Bridge House, 2 Lambeth Hill, London EC4V 4GG,
United Kingdom.
Dividend Declaration
The Company's Board of Directors approved a quarterly interim
dividend of $0.09 per share payable on March 30, 2018 to
shareholders of record as of the close of business on March 16,
2018.
About OMAM
OMAM is a global, multi-boutique asset management company with
$243.0 billion of assets under management as of December 31,
2017. Its diverse Affiliates offer leading, alpha generating
investment products to investors around the world. OMAM’s
partnership approach, which includes equity ownership at the
Affiliate level and a profit sharing relationship between OMAM and
its Affiliates, aligns the interests of the Company and its
Affiliates to work collaboratively in accelerating their growth.
OMAM’s business model combines the investment talent,
entrepreneurialism, focus and creativity of leading asset
management boutiques with the resources and capabilities of a
larger firm. For more information about OMAM, please visit the
Company’s website at www.omam.com.
Forward Looking Statements
This press release includes forward-looking statements, as that
term is used in the Private Securities Litigation Reform Act of
1995, including information relating to anticipated growth in
revenues, margins or earnings, anticipated changes in the Company’s
business, anticipated future performance of the Company’s business,
the impact of the Landmark acquisition, the anticipated impact of
the Tax Cuts and Jobs Act, anticipated future investment
performance of the Company’s Affiliates, expected future net cash
flows, anticipated expense levels, changes in expense, the expected
effects of acquisitions and expectations regarding market
conditions. The words or phrases ‘‘will likely result,’’ ‘‘are
expected to,’’ ‘‘will continue,’’ ‘‘is anticipated,’’ ‘‘can be,’’
‘‘may be,’’ ‘‘aim to,’’ ‘‘may affect,’’ ‘‘may depend,’’
‘‘intends,’’ ‘‘expects,’’ ‘‘believes,’’ ‘‘estimate,’’ ‘‘project,’’
and other similar expressions are intended to identify such
forward-looking statements. Such statements are subject to various
known and unknown risks and uncertainties and readers should be
cautioned that any forward-looking information provided by or on
behalf of the Company is not a guarantee of future performance.
Actual results may differ materially from those in
forward-looking information as a result of various factors, some of
which are beyond the Company’s control, including but not limited
to those discussed above and elsewhere in this press release and in
the Company’s most recent Annual Report on Form 10-K, filed with
the Securities and Exchange Commission on February 22, 2017, our
Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 15, 2017, our Quarterly Report on Form 10-Q filed
with the Securities and Exchange commission on August 10, 2017 and
our Current Report on Form 8-K filed with the Securities and
Exchange Commission on November 13, 2017. Due to such risks and
uncertainties and other factors, the Company cautions each person
receiving such forward-looking information not to place undue
reliance on such statements. Further, such forward-looking
statements speak only as of the date of this press release and the
Company undertakes no obligations to update any forward looking
statement to reflect events or circumstances after the date of this
press release or to reflect the occurrence of unanticipated
events.
Conference Call Dial-in
The Company will hold a conference call and simultaneous webcast
to discuss the results at 10:00 a.m. Eastern Time on February
1, 2018. The Company has also released an earnings presentation
that will be discussed during the conference call. Please go to
http://ir.omam.com to download the presentation. To listen to the
call or view the webcast, participants should:
Dial-in:
Toll Free Dial-in Number: (844) 579-6824 International Dial-in
Number: (763) 488-9145 Conference ID: 9999507
Link to Webcast:
http://event.on24.com/r.htm?e=1564440&s=1&k=0F0827F70DC6BF5AE643617037379C20
Dial-in Replay:
A replay of the call will be available
beginning approximately one hour after its conclusion either on
OMAM’s website, at http://ir.omam.com or at:
Toll Free Dial-in Number: (855) 859-2056 International Dial-in
Number: (404) 537-3406 Conference ID: 9999507
Table 11: Assets Under Management Rollforward by Asset Class
($ in billions, unless
otherwise noted) Three Months Ended Twelve Months
Ended December 31, 2017 September 30, 2017
December 31, 2016 December 31, 2017 December 31,
2016 U.S. equity Beginning balance $ 80.5 $ 81.3 $ 78.5
$ 82.0 $ 76.9 Gross inflows 1.5 0.9 2.5 4.9 7.9 Gross outflows (4.9
) (3.3 ) (4.2 ) (16.4 ) (14.3 ) Net flows (3.4 ) (2.4 ) (1.7 )
(11.5 ) (6.4 ) Market appreciation 4.1 1.6 5.2 10.7 11.0 Other —
— — — 0.5
Ending balance
$ 81.2 $ 80.5 $
82.0 $ 81.2 $ 82.0
Average AUM $ 80.5 $ 80.3 $ 79.4 $ 81.1 $ 78.3 Average AUM
of consolidated Affiliates $ 78.4 $ 78.4 $ 77.6 $ 79.1 $ 76.5
Global / non-U.S. equity Beginning balance $ 121.3 $
112.9 $ 95.5 $ 96.4 $ 84.8 Gross inflows 3.8 4.1 3.9 17.0 14.1
Gross outflows (5.5 ) (2.8 ) (2.7 ) (16.0 ) (9.6 ) Net flows (1.7 )
1.3 1.2 1.0 4.5 Market appreciation (depreciation) 6.6 7.1 (0.3 )
28.8 6.7 Other — — — — 0.4
Ending balance $ 126.2 $
121.3 $ 96.4 $
126.2 $ 96.4 Average AUM(1) $
123.7 $ 117.8 $ 95.1 $ 113.1 $ 90.0
Fixed income
Beginning balance $ 13.4 $ 13.2 $ 14.4 $ 13.9 $ 13.8 Gross inflows
0.3 0.3 0.3 1.4 1.2 Gross outflows (0.4 ) (0.2 ) (0.3 ) (2.7 ) (2.1
) Net flows (0.1 ) 0.1 — (1.3 ) (0.9 ) Market appreciation
(depreciation) 0.2 0.1 (0.5 ) 0.9 1.0
Ending balance $ 13.5 $
13.4 $ 13.9 $ 13.5
$ 13.9 Average AUM(1) $ 13.4 $ 13.3 $
14.0 $ 13.4 $ 14.1
Alternatives(2) Beginning
balance $ 20.7 $ 51.4 $ 45.8 $ 48.1 $ 36.9 Acquisition (removal) of
Affiliates — (32.4 ) — (32.4 ) 8.8 Gross inflows 1.8 2.0 3.2 7.7
6.7 Gross outflows (0.2 ) (0.1 ) (0.6 ) (1.1 ) (1.6 ) Hard asset
disposals (0.1 ) (0.4 ) (0.6 ) (0.8 ) (3.9 ) Net flows 1.5 1.5 2.0
5.8 1.2 Market appreciation (depreciation) (0.1 ) 0.2 0.3 0.6 2.0
Other — — — — (0.8 )
Ending
balance $ 22.1 $ 20.7
$ 48.1 $ 22.1 $
48.1 Average AUM $ 21.3 $ 19.6 $ 46.7 $ 33.7 $ 40.7
Average AUM of consolidated Affiliates $ 21.3 $ 19.6 $ 16.1 $ 19.2
$ 10.2
Total(2) Beginning balance $ 235.9 $
258.8 $ 234.2 $ 240.4 $ 212.4 Acquisition (removal) of Affiliates —
(32.4 ) — (32.4 ) 8.8 Gross inflows 7.4 7.3 9.9 31.0 29.9 Gross
outflows (11.0 ) (6.4 ) (7.8 ) (36.2 ) (27.6 ) Hard asset disposals
(0.1 ) (0.4 ) (0.6 ) (0.8 ) (3.9 ) Net flows (3.7 ) 0.5 1.5 (6.0 )
(1.6 ) Market appreciation 10.8 9.0 4.7 41.0 20.7 Other — —
— — 0.1
Ending balance $
243.0 $ 235.9 $
240.4 $ 243.0 $
240.4 Average AUM $ 238.9 $ 231.0 $ 235.2 $ 241.3 $
223.1 Average AUM of consolidated Affiliates $ 236.8 $ 229.1 $
202.8 $ 224.8 $ 190.8 Basis points: inflows(2) 56.8 54.2
44.3 51.3 41.9 Basis points: outflows(2) 31.7 40.2 34.8 34.1 36.3
Annualized revenue impact of net flows (in millions)
$ 6.8 $ 12.2 $ 14.6
$ 32.9 $ 11.0 Derived average weighted
NCCF 1.7 3.2 4.0 8.5 3.0
(1) Average AUM equals average AUM of consolidated
Affiliates.
(2) Reflects removal of Heitman in Q3’17.
Please see "Definitions and Additional Notes"
Table 12: Management Fee Revenue and Average Fee Rates on
Assets Under Management
($ in millions,
except AUM data in billions)
Three Months Ended
Twelve Months Ended December 31, 2017
September 30, 2017 December
31, 2016 December 31, 2017 December 31, 2016
Revenue Basis Pts Revenue
Basis Pts Revenue
Basis Pts Revenue Basis Pts
Revenue Basis Pts U.S. equity $ 48.0 24 $ 47.2 24 $
48.0 25 $ 192.9 24 $ 187.7 25 Global / non-U.S. equity 126.3 41
121.5 41 97.1 41 465.6 41 374.1 42 Fixed income 7.0 21 6.9 21 7.2
20 27.8 21 29.1 21 Alternatives 52.6 98 46.1
93 29.1 72 171.7 89 69.0
67
Management fee revenue $ 233.9 39.2
$ 221.7 38.4 $ 181.4 35.6
$ 858.0 38.2 $ 659.9 34.6
Average AUM excluding equity- accounted Affiliates $ 236.8 $ 229.1
$ 202.8 $ 224.8 $ 190.8 Average AUM including equity-accounted
Affiliates and weighted average fee rate(1) $ 238.9 39.3 $ 231.0
38.6 $ 235.2 36.1 $ 241.3 38.2 $ 223.1 35.4
(1) Excludes Heitman as of the beginning of the third quarter,
2017.
Amounts shown exclude equity-accounted Affiliates unless
otherwise noted.
Please see "Definitions and Additional Notes"
Table 13: Assets Under Management by Strategy
($ in billions) December 31,
2017 September 30, 2017
December 31, 2016 U.S. equity, small/smid cap
value $ 7.6 $ 7.6 $ 7.9 U.S. equity, mid cap value 13.0 12.7 11.3
U.S. equity, large cap value 57.8 57.0 59.2 U.S. equity, core/blend
2.8 3.2 3.6
Total U.S. equity 81.2
80.5 82.0 Global equity 40.3 38.7 32.3
International equity 55.5 54.6 42.5 Emerging markets equity 30.4
28.0 21.6
Total global/non-U.S. equity
126.2 121.3 96.4 Fixed income
13.5 13.4 13.9 Alternatives(1) 22.1 20.7 48.1
Total assets under management $ 243.0
$ 235.9 $ 240.4
(1) Reported AUM as of September 30, 2017 and December 31, 2017
which removes Heitman. Heitman stopped contributing to the
Company's financial results as of November 30, 2017, therefore
Heitman's December 31, 2017 AUM is not reflected in the table
above. Heitman's AUM at November 30, 2017 was $33.3 billion.
Please see "Definitions and Additional Notes"
Table 14: Assets Under Management by Affiliate
($ in billions) December 31,
2017 September 30, 2017
December 31, 2016 Acadian Asset Management $
97.7 $ 92.8 $ 75.0 Barrow, Hanley, Mewhinney & Strauss 91.7
92.4 92.3 Campbell Global 5.3 5.2 5.2 Copper Rock Capital Partners
6.4 6.0 5.1 Investment Counselors of Maryland(1) 2.1 2.0 2.0
Landmark Partners 14.8 13.4 9.7 Thompson, Siegel & Walmsley
25.0 24.1 19.9
Total assets under management
excluding Heitman(2) 243.0 235.9
209.2 Heitman(1) — 32.3 31.2
Total assets
under management $ 243.0 $
268.2 $ 240.4
(1) Equity-accounted Affiliates. The Company has removed Heitman
from its AUM and cash flow metrics as of the beginning of the third
quarter, 2017.
(2) Reported AUM as of September 30, 2017 and December 31, 2017
which removes Heitman. Heitman stopped contributing to the
Company's financial results as of November 30, 2017, therefore
Heitman's December 31, 2017 AUM is not reflected in the table
above. Heitman's AUM at November 30, 2017 was $33.3 billion.
Please see “Definitions and Additional Notes”
Table 15: Assets Under Management by Client Type
($ in billions) December 31,
2017 September 30, 2017
December 31, 2016 AUM
% of total AUM % of
total AUM % of total
Sub-advisory $ 80.1 33.0 % $ 79.4 33.7 % $ 75.9 31.6 % Corporate /
Union 45.1 18.5 % 44.0 18.7 % 48.2 20.0 % Public / Government 70.2
28.9 % 66.9 28.4 % 78.8 32.8 % Endowment / Foundation 4.9 2.0 % 4.8
2.0 % 4.8 2.0 % Old Mutual Group 2.6 1.1 % 3.6 1.5 % 3.5 1.5 %
Commingled Trust/UCITS 29.1 12.0 % 26.4 11.2 % 18.8 7.8 % Mutual
Fund 2.0 0.8 % 2.0 0.8 % 1.8 0.7 % Other 9.0 3.7 % 8.8
3.7 % 8.6 3.6 %
Total assets under management
$ 243.0 $ 235.9 $
240.4
Please see "Definitions and Additional Notes"
Table 16: AUM by Client Location ($ in
billions) December 31, 2017
September 30, 2017
December 31, 2016 AUM % of
total AUM % of total
AUM % of total U.S. $ 190.1 78.2
% $ 185.7 78.7 % $ 191.6 79.7 % Europe 19.5 8.0 % 18.7 7.9 % 16.8
7.0 % Asia 10.4 4.3 % 9.9 4.2 % 12.5 5.2 % Middle East 0.2 0.1 %
0.2 0.1 % 0.1 — % Australia 8.8 3.6 % 8.2 3.5 % 7.8 3.3 % Other
14.0 5.8 % 13.2 5.6 % 11.6 4.8 %
Total
assets under management $ 243.0 $
235.9 $ 240.4
Please see "Definitions and Additional Notes"
Table 17: AUM NCCF, Annualized Revenue
Impact of NCCF, Fee Rates and Derived Average Weighted NCCF
AUM NCCF
($ billions)
Annualized Revenue
Impact of NCCF
($ millions)
Weighted Average Fee Rate on
Total Average AUM (bps)
Derived Average Weighted
NCCF
($ billions)
2015 Q1 (0.2 ) 11.3 34.0 3.3
Q2 0.8 13.5 34.3
3.9
Q3 (2.5 ) 0.7 34.5 0.2
Q4 (3.2 ) (6.6 ) 34.7 (1.9
)
2016 Q1 2.4 7.3 34.7 2.1
Q2 (2.9 ) (3.4 )
35.0 (1 )
Q3 (2.6 ) (7.5 ) 35.7 (2.1 )
Q4 1.5 14.6
36.1 4.0
2017 Q1 (2.5 ) 0.8 37.7 0.2
Q2 (0.3 )
13.1 38.1 3.4
Q3
(1)
0.5 12.2 38.6 3.2
Q4
(1)
(3.7 ) 6.8 39.3 1.7
(1) Reflects removal of Heitman.
Please see "Definitions and Additional Notes"
Table 18: Reconciliation of per-share U.S. GAAP Net
Income to Economic Net Income ($ in millions)
Three Months Ended December 31,
Twelve Months Ended December 31, 2017
2016 2017
2016 U.S. GAAP net income per share $
(0.45 ) $ 0.21 $ 0.04
$ 1.05 Adjustments to reflect the economic earnings
of the Company: i. Non-cash key employee-owned equity and profit
interest revaluations 0.22 0.01 0.86 (0.06 ) ii. Amortization of
acquired intangible assets, acquisition-related consideration and
pre-acquisition employee equity 0.18 0.17 0.69 0.25 iii. Capital
transaction costs — — — 0.05 iv. Seed/Co-investment (gains) losses
and financing (0.04 ) 0.02 (0.16 ) 0.01 v. Tax benefit of goodwill
and acquired intangibles deductions 0.02 0.02 0.08 0.04 vi.
Discontinued operations and restructuring 0.01 (0.04 ) 0.10 (0.05 )
vii. ENI tax normalization 0.65 0.02 0.61 0.02 Tax effect of above
adjustments, as applicable (0.15 ) (0.08 ) (0.60 ) (0.10 )
Economic net income per share $ 0.44
$ 0.33 $ 1.62 $
1.21 U.S. GAAP diluted shares outstanding(1) 109.0
118.8 111.4 119.5 ENI diluted shares outstanding(2) 109.9 118.8
111.4 119.5
(1) During periods of net loss diluted shares are the same as
basic shares.
(2) In calculating economic net income diluted shares
outstanding in periods with a U.S. GAAP net loss, we included the
weighted-average of participating ordinary shares, consisting of
restricted stock units.
Please see “Definitions and Additional Notes”
Table 19: Reconciliation of U.S. GAAP revenue to ENI
revenue
($ in millions) Three Months
Ended December 31, Twelve Months Ended December 31,
2017 2016 2017 2016 U.S. GAAP revenue $
249.2 $ 186.6 $ 887.4 $ 663.5 Include investment return on
equity-accounted Affiliates(1) 3.3 3.3 14.5 15.1 Exclude revenue
from consolidated Funds (0.3 ) (0.1 ) (1.7 ) (0.1 ) Other 0.1
— 0.5 —
ENI revenue $
252.3 $ 189.8 $
900.7 $ 678.5
(1) Includes $2.7 million and $12.0 million related to Heitman
for the three and twelve months ended December 31, 2017,
respectively, and $2.7 million and $12.6 million for the three and
twelve months ended December 31, 2016, respectively.
Please see “Definitions and Additional Notes”
Table 20: Reconciliation of U.S. GAAP operating expense
to ENI operating expense
($ 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 ENI Acquisition-related
consideration and pre-acquisition employee equity(1) (17.7 ) (17.7
) (70.6 ) (26.5 ) Non-cash Affiliate key employee equity and profit
interest revaluations (24.4 ) (1.7 ) (95.4 ) 7.1 Amortization of
acquired intangible assets (1.7 ) (1.6 ) (6.6 ) (2.6 ) Capital
transaction costs — (0.3 ) — (6.4 ) Restructuring costs(2) (1.3 ) —
(10.8 ) — Other items excluded from ENI(2) — 0.1 — 0.1 Funds'
operating expenses (1.6 ) (0.2 ) (2.4 ) (0.2 ) Less: items
segregated out of U.S. GAAP operating expense Variable
compensation(3) (69.6 ) (48.6 ) (243.4 ) (172.7 ) Affiliate key
employee distributions (21.8 ) (12.9 ) (73.1 ) (41.7 )
ENI
operating expense $ 84.8 $
73.3 $ 314.1 $
265.0
(1) Reflects amortization of contingent consideration and equity
owned by employees, both with a service requirement, associated
with the Landmark acquisition; revaluation of the Landmark
interests is included in “Non-cash key employee-owned equity and
profit interest revaluations” above.
(2) Included in restructuring in the three months ended December
31, 2017 is $1.0 million related to the Heitman transaction and
$0.3 million for CEO recruiting costs. Included in restructuring
for the twelve months ended December 31, 2017 is $1.0 million
related to the Heitman transaction and $9.8 million related to CEO
transition costs, comprised of $0.5 million of fixed compensation
and benefits, $8.8 million of variable compensation and $0.5
million of recruiting costs.
Please see “Definitions and Additional Notes”
Table 21: Components of seed/co-investment (gains) losses
and financing
($ in millions) Three
Months Ended December 31, Twelve Months Ended December
31, 2017 2016 2017 2016
Seed/Co-investment gains (losses) $ 5.6 $ (0.7 ) $ 22.2
$ 1.1
Financing costs: Seed/Co-investment
average balance 116.0 91.2 88.9 64.4 Blended interest rate(1)
5.5
% 6.2 % 5.5 % 3.9 % Financing costs (1.7 ) (1.2 ) (4.9 ) (2.5 )
Net seed/co-investment gains (losses) and financing $
3.9 $ (1.9 ) $
17.3 $ (1.4 )
(1) Prior to the July 2016 bond issuances, the blended interest
rate was based on the Company’s interest rate on its revolving
credit facility. Subsequent to the 2016 bond issuance and the
establishment of OMAM’s non-recourse seed capital facility in July
2017, the blended rate is based first on the interest rate paid on
the Company’s non-recourse seed capital facility up to the average
amount drawn, and thereafter on the weighted average rate of the
long-term debt.
Please see “Definitions and Additional Notes”
Table 22: Reconciliation of Net Income to EBITDA,
Adjusted EBITDA and Economic Net Income ($ in
millions)
Three Months Ended December
31,
Twelve Months Ended December
31,
2017 2016 2017
2016 Net income attributable to controlling
interests $ (48.8 ) $ 25.3
$ 4.2 $ 126.4 Net interest expense 6.0
5.7 23.7 10.8 Income tax expense (including tax expenses related to
the non-recurring performance fee and discontinued operations)
131.2 9.3 132.7 44.8 Depreciation and amortization (including
intangible assets) 4.9 4.1 18.3 12.0
EBITDA $ 93.3 $ 44.4 $
178.9 $ 194.0 Non-cash compensation costs
associated with revaluation of Affiliate key employee-owned equity
and profit-sharing interests 24.4 1.7 95.4 (7.1 ) Amortization of
acquisition-related consideration and pre-acquisition employee
equity 17.7 17.7 70.6 26.5 EBITDA of discontinued operations — (7.3
) 0.2 (10.2 ) (Gain) loss on seed and co-investments (5.6 ) 0.7
(22.2 ) (1.1 ) Deferred tax asset deed revaluation (51.8 ) — (51.8
) — Restructuring costs 1.3 — 10.8 — Capital transaction costs —
0.3 — 6.4 Other 0.1 — — —
Adjusted
EBITDA $ 79.4 $ 57.5 $
281.9 $ 208.5 Net interest expense to third
parties (4.4 ) (4.5 ) (18.8 ) (8.4 ) Depreciation and amortization
(3.3 ) (2.5 ) (11.8 ) (9.4 ) Tax on economic net income (23.0 )
(11.6 ) (70.4 ) (45.6 )
Economic net income $
48.7 $ 38.9 $
180.9 $ 145.1
Please see “Definitions and Additional Notes”
Table 23: 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 (19.8 ) (19.7 ) (78.4 )
(74.0 )
Taxable economic net income 51.9
30.8 172.9 116.7 Taxes at
the U.S. federal and state statutory rates(2) (20.9 ) (12.4 ) (69.5
) (46.9 ) Other reconciling tax adjustments(3) (2.1 ) 0.8
(0.9 ) 1.3
Tax on economic net income (23.0
) (11.6 ) (70.4 ) (45.6
) Add back intercompany interest expense previously excluded
19.8 19.7 78.4 74.0
Economic net
income $ 48.7 $ 38.9
$ 180.9 $ 145.1 Economic
net income effective tax rate(4) 32.1 % 23.0 % 28.0 % 23.9 %
(1) Pre-tax economic net income is shown before intercompany
interest and tax expenses.
(2) Taxed at U.S. Federal and State statutory rate of 40.2%.
(3) For the three months ended December 31, 2017, the tax
adjustment includes approximately $3 million related to newly
enacted U.K. Taxes.
(4) The economic net income effective tax rate is calculated by
dividing the tax on economic net income by pre-tax economic net
income.
Please see “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 Landmark Partners, LLC, acquired by the Company in August
2016. OMAM operates its business through seven boutique asset
management firms (the “Affiliates”). OMAM's distribution activities
are conducted in various jurisdictions through affiliated companies
in accordance with local regulatory requirements.
Economic Net Income
The Company uses a non-GAAP performance measure referred to as
economic net income (“ENI”) to represent its view of the underlying
economic earnings of the business. ENI is used to make resource
allocation decisions, determine appropriate levels of investment or
dividend payout, manage balance sheet leverage, determine Affiliate
variable compensation and equity distributions, and incentivize
management. The Company’s ENI adjustments to U.S. GAAP include both
reclassifications of U.S. GAAP revenue and expense items, as
well as adjustments to U.S. GAAP results, primarily to exclude
non-cash, non-economic expenses, or to reflect cash benefits not
recognized under U.S. GAAP.
The Company re-categorizes certain line items on the income
statement to:
- exclude the effect of Fund
consolidation by removing the portion of Fund revenues, expenses
and investment return which is not attributable to its
shareholders;
- include within management fee revenue
any fees paid to Affiliates by Consolidated Funds, which are viewed
as investment income under U.S. GAAP;
- include the Company’s share of earnings
from equity-accounted Affiliates within other income, rather than
investment income;
- treat sales-based compensation as a
general and administrative expense, rather than part of fixed
compensation and benefits;
- identify separately from operating
expenses, variable compensation and Affiliate key employee
distributions, which represent Affiliate earnings shared with
Affiliate key employees.
The Company also makes the following adjustments to
U.S. GAAP results to more closely reflect its economic results
by:
i. excluding non-cash expenses representing
changes in the value of Affiliate equity and profit interests held
by Affiliate key employees. These ownership interests may in
certain circumstances be repurchased by OMAM at a value based on a
pre-determined fixed multiple of trailing earnings and as such this
value is carried on the Company’s balance sheet as a liability.
Non-cash movements in the value of this liability are treated as
compensation expense under U.S. GAAP. However, any equity or
profit interests repurchased by OMAM can be used to fund a portion
of future variable compensation awards, resulting in savings in
cash variable compensation that offset the negative cash effect of
repurchasing the equity.
ii. excluding non-cash amortization or
impairment expenses related to acquired goodwill and other
intangibles as these are non-cash charges that do not result in an
outflow of tangible economic benefits from the business. It also
excludes the amortization of acquisition-related contingent
consideration, as well as the value of employee equity owned
pre-acquisition, as occurred as a result of the Landmark
transaction, where such items have been included in compensation
expense as a result of ongoing service requirements for certain
employees. Please note that the revaluations related to these
acquisition-related items are included in (i) above.
iii. excluding capital transaction costs,
including the costs of raising debt or equity, gains or losses
realized as a result of redeeming debt or equity and direct
incremental costs associated with acquisitions of businesses or
assets.
iv. excluding seed capital and co-investment
gains, losses and related financing costs. The net returns on these
investments are considered and presented separately from ENI
because ENI is primarily a measure of the Company's earnings from
managing client assets, which therefore differs from earnings
generated by its investments in Affiliate products, which can be
variable from period to period.
v. including cash tax benefits associated
with deductions allowed for acquired intangibles and goodwill that
may not be recognized or have timing differences compared to U.S.
GAAP.
vi. excluding the results of discontinued
operations attributable to controlling interests since they are not
part of the Company’s ongoing business, and restructuring costs
incurred in continuing operations which represent an exit from a
distinct product or line of business.
vii. excluding deferred tax resulting from
changes in tax law and expiration of statutes, adjustments for
uncertain tax positions, deferred tax attributable to intangible
assets and other unusual items not related to current operating
results to reflect ENI tax normalization.
The Company adjusts its income tax expense to reflect any tax
impact of its ENI adjustments. Please see Table 7 for a
reconciliation of net income attributable to controlling interests
to economic net income.
Adjusted EBITDA
Adjusted EBITDA is defined as economic net income before
interest, income taxes, depreciation and amortization. The Company
notes that its calculation of Adjusted EBITDA may not be consistent
with Adjusted EBITDA as calculated by other companies. The Company
believes Adjusted EBITDA is a useful liquidity metric because it
indicates the Company’s ability to make further investments in its
business, service debt and meet working capital requirements.
Please see Table 22 for a reconciliation of economic net income to
Adjusted EBITDA.
Methodologies for calculating investment
performance(1):
Revenue-weighted
investment performance measures the percentage of management fee
revenue generated by Affiliate strategies which are beating
benchmarks. It calculates each strategy’s percentage weight by
taking its estimated composite revenue over total composite
revenues in each period, then sums the total percentage of revenue
for strategies outperforming.
Equal-weighted
investment performance measures the percentage of Affiliates’ scale
strategies (defined as strategies with greater than $100 million of
AUM) beating benchmarks. Each outperforming strategy over $100
million has the same weight; the calculation sums the number of
strategies outperforming relative to the total number of composites
over $100 million.
Asset-weighted
investment performance measures the percentage of AUM in strategies
beating benchmarks. It calculates each strategy’s percentage weight
by taking its composite AUM over total composite AUM in each
period, then sums the total percentage of AUM for strategies
outperforming.
______________________
(1) Barrow Hanley’s Windsor II Large Cap Value account AUM and
return are separated from Barrow Hanley’s Large Cap Value composite
in revenue-weighted, equal-weighted and asset-weighted
outperformance percentage calculations.
ENI Operating Earnings
ENI operating earnings represents ENI earnings before Affiliate
key employee distributions and is calculated as ENI revenue, less
ENI operating expense, less ENI variable compensation. It differs
from economic net income because it does not include the effects of
Affiliate key employee distributions, net interest expense or
income tax expense.
ENI Operating Margin
The ENI operating margin, which is calculated before Affiliate
key employee distributions, is used by management and is useful to
investors to evaluate the overall operating margin of the business
without regard to our various ownership levels at each of the
Affiliates. ENI operating margin is a non-GAAP efficiency measure,
calculated based on ENI operating earnings divided by ENI revenue.
The ENI operating margin is most comparable to our U.S. GAAP
operating margin.
ENI management fee revenue
ENI Management fee revenue corresponds to U.S. GAAP management
fee revenue.
ENI operating expense ratio
The ENI operating expense ratio is used by management and is
useful to investors to evaluate the level of operating expense as
measured against our recurring management fee revenue. We have
provided this ratio since many operating expenses, including fixed
compensation & benefits and general and administrative expense,
are generally linked to the overall size of the business. We track
this ratio as a key measure of scale economies at OMAM because in
our profit sharing economic model, scale benefits both the
Affiliate employees and OMAM shareholders.
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 earnings before variable compensation.
It is used by management and is useful to investors to evaluate
consolidated variable compensation as measured against our ENI
earnings before variable compensation. Variable compensation is
usually awarded based on a contractual percentage of each
Affiliate’s ENI earnings before variable compensation and may be
paid in the form of cash or non-cash Affiliate equity or profit
interests. Center variable compensation includes cash and OMAM
equity. Non-cash variable compensation awards typically vest over
several years and are recognized as compensation expense over that
service period. The variable compensation ratio at each Affiliate
will typically be between 25% and 35%.
ENI Affiliate key employee distribution
ratio
The Affiliate key employee distribution ratio is calculated as
Affiliate key employee distributions divided by ENI operating
earnings. The ENI Affiliate key employee distribution ratio is used
by management and is useful to investors to evaluate Affiliate key
employee distributions as measured against our ENI operating
earnings. Affiliate key employee distributions represent the share
of Affiliate profits after variable compensation that is
attributable to Affiliate key employee equity and profit interests
holders, according to their ownership interests. At certain
Affiliates, OMUS is entitled to an initial preference over profits
after variable compensation, structured such that before a
preference threshold is reached, there would be no required key
employee distributions, whereas for profits above the threshold the
key employee distribution amount would be calculated based on the
key employee ownership percentages, which range from approximately
20% to 40% at our consolidated Affiliates.
U.S. GAAP operating margin
U.S. GAAP operating margin equals operating income (loss) from
continuing operations divided by total revenue.
Consolidated Funds
Financial information presented in accordance with U.S. GAAP may
include the results of consolidated pooled investment vehicles, or
Funds, managed by our Affiliates, where it has been determined that
these entities are controlled by the Company. Financial results
which are “attributable to controlling interests” exclude the
impact of Funds to the extent it is not attributable to our
shareholders.
Annualized Revenue Impact of Net Flows
(NCCF)
Annualized revenue impact of net flows represents the difference
between annualized management fees expected to be earned on new
accounts and net assets contributed to existing accounts, less the
annualized management fees lost on terminated accounts or net
assets withdrawn from existing accounts, including equity-accounted
Affiliates. Annualized revenue is calculated by multiplying the
annual gross fee rate for the relevant account by the net assets
gained in the account in the event of a positive flow or the net
assets lost in the account in the event of an outflow and is
designed to provide investors with a better indication of the
potential financial impact of net client cash flows.
Hard asset disposals
Net flows in Table 1, Table 2 and Table 11 include hard asset
disposals made by OMAM’s Affiliates. This category is made up of
investment-driven asset dispositions made by Landmark, investing in
real estate funds and secondary private equity; Heitman, a real
estate manager; or Campbell, a timber manager.
Derived average weighted NCCF
Derived average weighted NCCF reflects the implied NCCF if
annualized revenue represents asset flows at the weighted fee rate
for OMAM overall (i.e. 39.3 bps in Q4 '17). For example, NCCF
annualized revenue impact of $6.8 million divided by the average
weighted fee rate of OMAM's overall AUM of 39.3 bps equals the
derived average weighted NCCF of $1.7 billion.
n/m
"Not meaningful."
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180201005650/en/
OMAMBrett Perryman, 617-369-7300ir@omam.com
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