What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-08 compared with 2023-05-08 · 283 added, 143 removed, 737 unchanged (37% of the section changed)

14 unchanged sentences

This section also provides a Summary Results of Operations and information regarding our Assets Under Management by strategy, client type and location, and net flows by segment, client type and client location.

GAAP Results of Operations for the Three Months Ended March 31, 2023 and 2022 includes an explanation of changes in our U.S.

GAAP revenue, expense and other items for the three months ended March 31, 2023 and 2022, as well as key U.S.

GAAP Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022 includes an explanation of changes in our U.S.

GAAP revenue, expense and other items for the three and six months ended June 30, 2023 and 2022, as well as key U.S.

GAAP operating metrics.

2 unchanged sentences

This section also provides a reconciliation between U.S.

GAAP net income attributable to controlling interests and ENI for the three months ended March 31, 2023 and 2022, as well as a reconciliation of key ENI operating items including ENI revenue and ENI operating expenses.

GAAP net income attributable to controlling interests and ENI for the three and six months ended June 30, 2023 and 2022, as well as a reconciliation of key ENI operating items including ENI revenue and ENI operating expenses.

This section also provides key non-GAAP operating metrics.

23 unchanged sentences

We earn management fees based on assets under management.

Approximately 80% of our management fees for the three months ended March 31, 2023 were calculated based on average AUM (calculated on either a daily or monthly basis) with the remainder of our management fees calculated based on period-end AUM.

Approximately 80% of our management fees for the three months ended June 30, 2023 were calculated based on average AUM (calculated on either a daily or monthly basis) with the remainder of our management fees calculated based on period-end AUM.

Changes in the levels of our AUM are driven by market investment performance and net client cash flows.

38 unchanged sentences

Summary Results of Operations

The following table summarizes our unaudited results of operations for the three months ended March 31, 2023 and 2022:

($ in millions, unless otherwise noted) Three Months Ended March 31,

The following table summarizes our unaudited results of operations for the three and six months ended June 30, 2023 and 2022:

($ in millions, unless otherwise noted) Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 vs.

2022 2023 2022 2023 vs.

Revenue $ 96.3 $ 95.5 $ 0.8 $ 188.1 $ 207.7 $ (19.6)

2 unchanged sentences

GAAP operating margin (1)

21.6 % 38.5 % (1693) bps

21.2 % 48.9 % (2772) bps 21.4 % 43.3 % (2191) bps

Earnings per share, basic ($) $ 0.27 $ 0.69 $ (0.42) $ 0.56 $ 1.23 $ (0.67)

10 unchanged sentences

ENI operating margin (6)

22.8 % 34.5 % (1166) bps

22.2 % 30.1 % (784) bps 22.5 % 32.5 % (994) bps

Economic net income (7)

12 unchanged sentences

GAAP financial information and a further discussion of economic net income refer to “—Non-GAAP Supplemental Performance Measure—Economic Net Income and Segment Analysis.”

(3) Excludes costs associated with the transfer of an insurance policy from our former Parent of $0.4 million for the three months ended March 31, 2023.

Excludes restructuring costs at Acadian of $0.1 million and costs associated with the transfer of an insurance policy from our former Parent of $0.3 million for the three months ended March 31, 2022.

(3) Excludes costs associated with the transfer of an insurance policy from our former parent of $0.2 million for the three months ended June 30, 2023.

Excludes restructuring costs associated with the transfer of an insurance policy from our former parent of $0.3 million for the three months ended June 30, 2022.

Excludes costs associated with the transfer of an insurance policy from our former Parent of $0.6 million for the six months ended June 30, 2023.

Excludes restructuring costs at Acadian of $0.1 million and costs associated with the transfer of an insurance policy from our former Parent of $0.6 million for the six months ended June 30, 2022.

(4) ENI revenue is the ENI measure which corresponds to U.S.

14 unchanged sentences

The following table presents our assets under management as of each of the dates indicated:

($ in billions) March 31, 2023 December 31, 2022

($ in billions) June 30, 2023 December 31, 2022

Acadian Asset Management $ 99.9 $ 93.6

3 unchanged sentences

The following table presents our assets under management by strategy as of each of the dates indicated:

($ in billions) March 31, 2023 December 31, 2022

($ in billions) June 30, 2023 December 31, 2022

Developed Markets $ 77.8 $ 73.2

2 unchanged sentences

The following table shows assets under management by client type as of each of the dates indicated:

($ in billions) March 31, 2023 December 31, 2022

($ in billions) June 30, 2023 December 31, 2022

AUM % of total AUM % of total

8 unchanged sentences

The following table shows assets under management by client location as of each of the dates indicated:

($ in billions) March 31, 2023 December 31, 2022

($ in billions) June 30, 2023 December 31, 2022

AUM % of total AUM % of total

18 unchanged sentences

The following table summarizes our asset flows and market appreciation (depreciation) by segment for each of the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in billions, unless otherwise noted) 2023 2022 2023 2022

22 unchanged sentences

The following table summarizes our asset flows by client type for each of the periods indicated:

($ in billions) Three Months Ended March 31,

($ in billions) Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Beginning balance $ 11.9 $ 13.7 $ 11.8 $ 14.1

31 unchanged sentences

The following table summarizes asset flows by client location for each of the periods indicated:

($ in billions) Three Months Ended March 31,

($ in billions) Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Beginning balance $ 65.0 $ 74.9 $ 62.7 $ 77.1

19 unchanged sentences

Ending balance $ 99.9 $ 90.5 $ 99.9 $ 90.5

At March 31, 2023, our total assets under management were $97.5 billion, an increase of $3.9 billion, or 4.2%, compared to $93.6 billion at December 31, 2022 and a decrease of $(12.7) billion, or (11.5)%, compared to $110.2 billion at March 31, 2022.

The decrease in assets under management compared to March 31, 2022 is a result of equity market and currency depreciation, and net outflows in the last twelve months.

The change in assets under management during the three months ended March 31, 2023 reflects net market appreciation of $3.8 billion.

At June 30, 2023, our total assets under management were $99.9 billion, an increase of $2.4 billion, or 2.5%, compared to $97.5 billion at March 31, 2023 and an increase of $9.4 billion, or 10.4%, compared to $90.5 billion at June 30, 2022.

The increase in assets under management compared to June 30, 2022 is a result of equity market appreciation in 2023.

The change in assets under management during the three months ended June 30, 2023 reflects net market appreciation of $2.3 billion, and net inflows of $0.1 billion.

The change in assets under management during the six months ended June 30, 2023 reflects net market appreciation of $6.1 billion and net inflows of $0.2 billion.

Market appreciation or depreciation reported in current and prior periods includes changes in equity prices, as well as the impact from exchange rate fluctuations on our foreign-denominated AUM.

1 unchanged sentence

dollar changes relative to other currencies.

For the three months ended March 31, 2023, our net flows were $0.1 billion compared to $(2.2) billion for the three months ended March 31, 2022.

The change in net flows during the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily driven by lower outflows in the three months ended March 31, 2023.

Reinvested income and distributions of $0.9 billion and $0.9 billion are reflected in the net flows for the three months ended March 31, 2023 and March 31, 2022, respectively.

For the three months ended March 31, 2023, the annualized revenue impact of the net flows was $1.0 million compared to $(1.1) million for the three months ended March 31, 2022.

Gross inflows of $2.2 billion in the three months ended March 31, 2023 yielded approximately 41 bps compared to $3.5 billion yielding approximately 50 bps in the year-ago period.

Gross outflows of $(3.0) billion yielded approximately 39 bps in the three months ended March 31, 2023 compared to $(6.6) billion yielding approximately 33 bps in the year-ago period.

GAAP Results of Operations for the Three Months Ended March 31, 2023 and 2022

GAAP results of operations were as follows for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

For the three months ended June 30, 2023, our net flows were $0.1 billion compared to $(2.8) billion for the three months ended June 30, 2022.

The change in net flows during the three months ended June 30, 2023 compared to the three months ended June 30, 2022 was primarily due to reduced sizable outflows in the three months ended June 30, 2023.

Reinvested income and distributions of $0.9 billion and $1.0 billion are reflected in the net flows for the three months ended June 30, 2023 and June 30, 2022, respectively.

For the three months ended June 30, 2023, the annualized revenue impact of the net flows was $0.9 million compared to $(7.4) million for the three months ended June 30, 2022.

Gross inflows of $2.0 billion in the three months ended June 30, 2023 yielded approximately 46 bps compared to $2.5 billion yielding approximately 51 bps in the year-ago period.

Gross outflows of $(2.8) billion yielded approximately 43 bps in the three months ended June 30, 2023 compared to $(6.3) billion yielding approximately 38 bps in the year-ago period.

For the six months ended June 30, 2023, our net flows were $0.2 billion compared to $(5.0) billion for the six months ended June 30, 2022.

The change in net flows during the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily driven by reduced sizable outflows in the six months ended June 30, 2023.

Reinvested income and distributions of $1.8 billion and $1.9 billion are reflected in the net flows for the six months ended June 30, 2023 and June 30, 2022, respectively.

For the six months ended June 30, 2023, the annualized revenue impact of the net flows was $1.9 million compared to $(8.5) million for the six months ended June 30, 2022.

Gross inflows of $4.2 billion in the six months ended June 30, 2023 yielded approximately 44 bps compared to $6.0 billion yielding approximately 51 bps in the year-ago period.

Gross outflows of $(5.8) billion yielded approximately 41 bps in the six months ended June 30, 2023 compared to $(12.9) billion yielding approximately 36 bps in the year-ago period.

GAAP Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022

GAAP results of operations were as follows for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30, Six Months Ended June 30,

($ in millions, unless otherwise noted) 2023 2022 Increase

(Decrease) 2023 2022 Increase

GAAP Statement of Operations

17 unchanged sentences

11.5 28.6 (17.1) 23.5 52.4 (28.9)

Net income (loss) attributable to non-controlling interests in consolidated Funds — — —

Net income attributable to non-controlling interests in consolidated Funds 0.1 — 0.1 0.1 — 0.1

Net income attributable to controlling interests

11 unchanged sentences

($ in millions) Three Months Ended

June 30, Six Months Ended

GAAP Statement of Operations 2023 2022 2023 2022

9 unchanged sentences

Our management fees are a function of the fee rates charged to our clients, which are typically expressed in basis points, and the levels of our assets under management.

Average basis points earned on average assets under management were 38.1 bps for the three months ended March 31, 2023, and 37.3 bps for the three months ended March 31, 2022, respectively.

The overall weighted average fee rate increase for the three months ended March 31, 2023 is the result of changes in the mix of assets under management caused by market movements and client flows.

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Management fees decreased $(11.6) million, or (11.4)%, from $102.2 million for the three months ended March 31, 2022 to $90.6 million for the three months ended March 31, 2023.

The decrease was primarily attributable to the equity market decline and net outflows over the past twelve months.

Average assets under management decreased (13)%, from $111.3 billion for the three months ended March 31, 2022 to $96.4 billion for the three months ended March 31, 2023, mainly due to the equity market decline and net outflows over the past twelve months.

Average basis points earned on average assets under management were 38.1 bps and 38.1 bps for the three and six months ended June 30, 2023, respectively, and 37.2 bps and 37.1 bps for the three and six months ended June 30, 2022, respectively.

The overall weighted average fee rate increase for the three and six months ended June 30, 2023 is the result of changes in the mix of assets under management caused by market movements and client flows.

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Management fees decreased $(0.7) million, or (0.7)%, from $93.5 million for the three months ended June 30, 2022 to $92.8 million for the three months ended June 30, 2023.

The decrease was due to lower levels of average assets under management.

Average assets under management decreased (2.9)%, from $100.8 billion for the three months ended June 30, 2022 to $97.9 billion for the three months ended June 30, 2023, mainly due to the equity market decline in 2022.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Management fees decreased $(12.3) million, or (6.3)%, from $195.7 million for the six months ended June 30, 2022 to $183.4 million for the six months ended June 30, 2023.

The decrease was due to lower levels of average assets under management.

Average assets under management decreased (8.0)%, from $105.5 billion for the six months ended June 30, 2022 to $97.1 billion for the six months ended June 30, 2023, mainly due to the equity market decline in 2022.

Performance Fees

1 unchanged sentence

Performance fees are typically shared with our Affiliate key employees through various contractual compensation and profit-sharing arrangements.

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Performance fees decreased $(9.5) million, from $10.0 million for the three months ended March 31, 2022 to $0.5 million for the three months ended March 31, 2023.

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Performance fees increased $0.2 million, from $2.0 million for the three months ended June 30, 2022 to $2.2 million for the three months ended June 30, 2023.

Performance fees can be variable and are contractually triggered based on investment performance results over agreed upon time periods.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Performance fees decreased $(9.3) million, from $12.0 million for the six months ended June 30, 2022 to $2.7 million for the six months ended June 30, 2023, primarily due to the decline in performance fee eligible assets in the first quarter of 2023.

Performance fees are variable and are contractually triggered based on investment performance results over agreed upon time periods.

8 unchanged sentences

The following table presents the components of U.S.

GAAP compensation expense for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

GAAP compensation expense for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

2 unchanged sentences

Sales-based compensation (2)

1.6 2.1 3.5 4.0

Variable compensation (3)

22.7 22.7 45.9 50.6

Affiliate key employee distributions (4)

1.2 0.5 2.4 2.4

Non-cash Affiliate key employee equity revaluations (5)

(0.7) (18.8) (1.3) (25.6)

GAAP compensation and benefits expense

1 unchanged sentence

(1) Fixed compensation and benefits includes base salaries, payroll taxes and the cost of benefit programs provided.

For the three months ended March 31, 2023 and 2022, $23.4 million and $21.9 million, respectively, of fixed compensation and benefits (of the $23.4 million and $21.9 million above) are included within economic net income.

(2) Sales-based compensation is paid to our Affiliate’s sales and distribution teams and represents compensation earned by our sales professionals, paid over a multi-year period, related to revenue earned on new sales.

7 unchanged sentences

Non-cash variable compensation awards typically vest over several years and are recognized as compensation expense over that service period.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

1 unchanged sentence

Non-cash equity-based award amortization 1.3 2.4 2.9 5.0

Total variable compensation (a)

$ 23.2 $ 27.9

(a) For the three months ended March 31, 2023, $23.2 million of variable compensation expense (of the $23.2 million above) is included within economic net income.

For the three months ended March 31, 2022, $27.9 million of variable compensation expense (of the $27.9 million above) is included within economic net income.

Total variable compensation $ 22.7 $ 22.7 $ 45.9 $ 50.6

(4) 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.

6 unchanged sentences

Fluctuations in compensation and benefits expense for the periods presented are discussed below.

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Compensation and benefits expense increased $2.3 million, or 4.9%, from $46.8 million for the three months ended March 31, 2022 to $49.1 million for the three months ended March 31, 2023.

Fixed compensation and benefits increased $1.5 million, or 6.8%, from $21.9 million for the three months ended March 31, 2022 to $23.4 million for the three months ended March 31, 2023, primarily reflecting cost of living increases and the cost of new hires supporting our growth initiatives.

Variable compensation decreased $(4.7) million, or (16.8)%, from $27.9 million for the three months ended March 31, 2022 to $23.2 million for the three months ended March 31, 2023.

The decrease was primarily attributable to lower pre-bonus profits in the current year.

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Compensation and benefits expense increased $21.5 million, or 79.6%, from $27.0 million for the three months ended June 30, 2022 to $48.5 million for the three months ended June 30, 2023.

Fixed compensation and benefits increased $3.2 million, or 15.6%, from $20.5 million for the three months ended June 30, 2022 to $23.7 million for the three months ended June 30, 2023, primarily reflecting cost of living increases and the cost of new hires supporting our growth initiatives.

Variable compensation remained at $22.7 million for the three months ended June 30, 2023 and 2022.

Sales-based compensation decreased $(0.5) million, or (23.8)%, from $2.1 million for the three months ended June 30, 2022 to $1.6 million for the three months ended June 30, 2023, as a result of the structure of sales-based compensation programs, driven by the timing of asset inflows which trigger sales-based compensation in both current and prior periods.

Affiliate key employee distributions increased $0.7 million, or 140.0%, from $0.5 million for the three months ended June 30, 2022 to $1.2 million for the three months ended June 30, 2023, as a result of changes in underlying operating earnings at our consolidated Affiliate and the leveraged nature of the distribution share.

Revaluations of Affiliate equity changed by $18.1 million, reflecting fluctuations in the value of key employee ownership interests at our consolidated Affiliate, as the value of Affiliate equity decreased $(18.8) million for the three months ended June 30, 2022 and decreased $(0.7) million for the three months ended June 30, 2023.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Compensation and benefits expense increased $23.8 million, or 32.2%, from $73.8 million for the six months ended June 30, 2022 to $97.6 million for the six months ended June 30, 2023.

Fixed compensation and benefits increased $4.7 million, or 11.1%, from $42.4 million for the six months ended June 30, 2022 to $47.1 million for the six months ended June 30, 2023, primarily reflecting cost of living increases and the cost of new hires supporting our growth initiatives.

Variable compensation decreased $(4.7) million, or (9.3)%, from $50.6 million for the six months ended June 30, 2022 to $45.9 million for the six months ended June 30, 2023.

The decrease was primarily attributable to lower pre-variable compensation earnings.

This decrease was partially offset by the inclusion of deferred compensation expense earned on prior year performance fee revenues, of which the Affiliate’s share is determined by a contractual split and recognized as compensation expense over a vesting period.

Sales-based compensation remained at $1.9 million for the three months ended March 31, 2023 and 2022.

Affiliate key employee distributions decreased $(0.7) million, or (36.8)%, from $1.9 million for the three months ended March 31, 2022 to $1.2 million for the three months ended March 31, 2023, primarily as a result of lower underlying operating earnings at the consolidated Affiliate.

Revaluations of Affiliate equity changed $6.2 million reflecting the change in value of key employee ownership interests at our consolidated Affiliate, as the value of Affiliate equity decreased $(6.8) million for the three months ended March 31, 2022 and decreased $(0.6) million for the three months ended March 31, 2023.

Sales-based compensation decreased $(0.5) million or (12.5)% from $4.0 million for the six months ended June 30, 2022 to $3.5 million for the six months ended June 30, 2023, as a result of the structure of sales-based compensation programs, driven by the timing of asset inflows which trigger sales-based compensation in both current and prior periods.

Affiliate key employee distributions remained unchanged at $2.4 million for each of the six months ended June 30, 2023 and 2022.

Revaluations of Affiliate equity changed $24.3 million, reflecting fluctuations in the value of key employee ownership interests at our consolidated Affiliate, as the value of Affiliate equity decreased $(25.6) million for the six months ended June 30, 2022 and decreased $(1.3) million for the six months ended June 30, 2023.

General and Administrative Expense

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

General and administrative expense increased $1.5 million, or 8.9%, from $16.9 million for the three months ended March 31, 2022 to $18.4 million for the three months ended March 31, 2023.

The increase was primarily due to an increase in travel and entertainment, consulting, and system costs in the current period.

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

General and administrative expense increased $5.3 million, or 32.1%, from $16.5 million for the three months ended June 30, 2022 to $21.8 million for the three months ended June 30, 2023.

The increase in general and administrative expenses primarily reflects an increase in inflation, the impact of foreign currency changes, and our investment in growth initiatives and capabilities.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

General and administrative expense increased $6.8 million, or 20.4%, from $33.4 million for the six months ended June 30, 2022 to $40.2 million for the six months ended June 30, 2023.

The increase in general and administrative expenses primarily reflects an increase in inflation, the impact of foreign currency changes, and our investment in growth initiatives and capabilities.

Depreciation and Amortization Expense

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Depreciation and amortization expense decreased $(1.5) million, or (28.3)%, from $5.3 million for the three months ended March 31, 2022 to $3.8 million for the three months ended March 31, 2023.

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Depreciation and amortization expense decreased $(0.9) million, or (17.0)%, from $5.3 million for the three months ended June 30, 2022 to $4.4 million for the three months ended June 30, 2023.

The decrease was primarily attributable to the effect of certain assets becoming fully depreciated.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Depreciation and amortization expense decreased $(2.4) million, or (22.6)%, from $10.6 million for the six months ended June 30, 2022 to $8.2 million for the six months ended June 30, 2023.

The decrease was primarily attributable to the effect of certain assets becoming fully depreciated.

GAAP Other Non-Operating Items of Income and Expense

1 unchanged sentence

investment income;

interest income;

interest expense;

1 unchanged sentence

Investment Income

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Investment income increased $0.4 million, from $(0.1) million for the three months ended March 31, 2022 to $0.3 million for the three months ended March 31, 2023.

The increase was driven primarily by higher returns on seed capital investments due to market appreciation in the three months ended March 31, 2023.

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Investment income increased $0.9 million, from $(0.7) million for the three months ended June 30, 2022 to $0.2 million for the three months ended June 30, 2023, reflecting an increase in returns generated by seed capital investments due to market appreciation.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Investment income increased $1.3 million, from $(0.8) million for the six months ended June 30, 2022 to $0.5 million for the six months ended June 30, 2023, reflecting an increase in returns generated by seed capital investments due to market appreciation.

Interest Income

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Interest income increased $1.1 million, from $0.0 million for the three months ended March 31, 2022 compared to $1.1 million for the three months ended March 31, 2023.

The increase was due to an increase in short-term investment returns.

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Interest income increased $1.4 million from $0.1 million for the three months ended June 30, 2022 compared to $1.5 million for the three months ended June 30, 2023.

The increase was due to higher average cash balances and increases in short-term investment returns in the three months ended June 30, 2023.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Interest income increased $2.5 million, from $0.1 million for the six months ended June 30, 2022 compared to $2.6 million for the six months ended June 30, 2023.

The increase was due to higher average cash balances and increases in short-term investment returns in the six months ended June 30, 2023.

Interest Expense

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Interest expense decreased $(1.6) million, or (24.6)%, from $6.5 million for the three months ended March 31, 2022 to $4.9 million for the three months ended March 31, 2023, primarily due to the $1.3 million of additional interest expense incurred for the three months ended March 31, 2022 related to the amortization of the cash flow hedge associated with the $125 million aggregate principal amount outstanding of our 5.125% Senior Notes due August 1, 2031 that we redeemed in January 2022.

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Interest expense increased $0.6 million, or 12.5%, from $4.8 million for the three months ended June 30, 2022 to $5.4 million for the three months ended June 30, 2023, reflecting an increase in interest rates on the revolving credit facility, slightly offset by a lower balance drawn on the revolving credit facility in 2023.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Interest expense decreased $(1.0) million, or (8.8)%, from $11.3 million for the six months ended June 30, 2022 to $10.3 million for the six months ended June 30, 2023, primarily due to the $1.3 million of additional interest expense incurred for the six months ended June 30, 2022 related to the amortization of the cash flow hedge associated with the $125 million aggregate principal amount outstanding of our 5.125% Senior Notes due August 1, 2031 that we redeemed in January 2022.

Loss on Extinguishment of Debt

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

There was $(3.2) million loss on extinguishment of debt in the three months ended March 31, 2022 as a result of the full redemption of the $125 million aggregate principal amount outstanding of our 5.125% Senior Notes due August 1, 2031 that we redeemed in January 2022.

There was no loss on extinguishment of debt incurred for the three months ended March 31, 2023.

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

There was no loss on extinguishment of debt in the three months ended June 30, 2022 or the three months ended June 30, 2023.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

There was $(3.2) million loss on extinguishment of debt in the six months ended June 30, 2022 as a result of the full redemption of the $125 million aggregate principal amount outstanding of our 5.125% Senior Notes due August 1, 2031 that we redeemed in January 2022.

There was no loss on extinguishment of debt incurred for the six months ended June 30, 2023.

GAAP Income Tax Expense (Benefit)

Our effective tax rate has been impacted by changes in liabilities for uncertain tax positions, tax effects of stock-based compensation, limitations on executive compensation, and the mix of income earned in the United States versus foreign jurisdictions.

Our effective tax rate has been impacted by state and local tax obligations, changes in liabilities for uncertain tax positions, tax effects of stock-based compensation, limitations on executive compensation, and the mix of income earned in the United States versus foreign jurisdictions.

Our effective tax rate could be impacted in the future by these items as well as further changes in tax laws and regulations in jurisdictions in which we operate.

Three months ended March 31, 2023 compared to three months ended March 31, 2022 :

Income tax expense decreased $(4.5) million, from $9.6 million for the three months ended March 31, 2022 to $5.1 million for the three months ended March 31, 2023.

The decrease in income tax expense primarily relates to a decrease in income before income taxes during the three months ended March 31, 2023.

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Income tax expense decreased $(7.2) million, from $12.7 million for the three months ended June 30, 2022 to $5.5 million for the three months ended June 30, 2023.

The decrease in income tax expense primarily relates to a decrease in income before income taxes in the three months ended June 30, 2023.

Six months ended June 30, 2023 compared to six months ended June 30, 2022 :

Income tax expense decreased $(11.7) million, from $22.3 million for the six months ended June 30, 2022 to $10.6 million for the six months ended June 30, 2023.

The decrease in income tax expense primarily relates to a decrease in income before income taxes during the six months ended June 30, 2023.

GAAP Consolidated Funds

The net income or loss of all consolidated Funds, excluding any income or loss attributable to seed capital or co-investments we make in the Funds, is included in non-controlling interests in our Consolidated Financial Statements and is not included in net income attributable to controlling interests or in management fees.

Three months ended March 31, 2023 compared to three months ended March 31, 2022 :

There were no consolidated Funds for the three months ended March 31, 2022.

Consolidated Funds’ revenue was $0.7 million for the three months ended March 31, 2023.

Consolidated Funds’ expense was $0.7 million for the three months ended March 31, 2023.

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

There were no consolidated Funds for the three months ended June 30, 2022.

Consolidated Funds’ revenue was $1.3 million for the three months ended June 30, 2023.

Consolidated Funds’ expense was $1.2 million for the three months ended June 30, 2023.

Six months ended June 30, 2023 compared to six months ended June 30, 2022 :

There were no consolidated Funds for the six months ended June 30, 2022.

Consolidated Funds’ revenue was $2.0 million for the six months ended June 30, 2023.

Consolidated Funds’ expense was $1.9 million for the six months ended June 30, 2023.

GAAP Operating Metrics

The following table shows our key U.S.

GAAP operating metrics for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,

GAAP operating metrics for the three and six months ended June 30, 2023 and 2022.

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

17 unchanged sentences

GAAP Affiliate key employee distributions ratio (3)

5.6 % 1.1 % 5.6 % 2.6 %

(1) Excluding the effect of Funds’ consolidation in the applicable periods, the U.S.

GAAP operating margin would be 21.7% for the three months ended March 31, 2023 and 38.5% for the three months ended March 31, 2022.

(2) Excludes consolidated Funds’ expense of $0.7 million for the three months ended March 31, 2023 and $0.0 million for the three months ended March 31, 2022.

(3) Excludes the effect of Funds consolidation for the three months ended March 31, 2023 and 2022.

(4) Excludes consolidated Funds’ revenue of $0.7 million for the three months ended March 31, 2023 and $0.0 million for the three months ended March 31, 2022.

GAAP operating margin is 21.4% for the three months ended June 30, 2023, 48.9% for the three months ended June 30, 2022, 21.5% for the six months ended June 30, 2023, and 43.3% for the six months ended June 30, 2022.

(2) Excludes consolidated Funds’ expense of $1.2 million and $1.9 million for the three and six months ended June 30, 2023, respectively.

We did not consolidate results from operations of any Funds in the three and six months ended June 30, 2022.

(3) Excludes the effect of Funds consolidation for the three and six months ended June 30, 2023.

We did not consolidate results from operations of any Funds in the three and six months ended June 30, 2022.

(4) Excludes consolidated Funds’ revenue of $1.3 million and $2.0 million for the three and six months ended June 30, 2023, respectively.

We did not consolidate results from operations of any Funds in the three and six months ended June 30, 2022.

(5) The following table identifies the components of operating income before variable compensation and Affiliate key employee distributions, as well as operating income before Affiliate key employee distributions:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

2 unchanged sentences

Affiliate key employee distributions

1.2 0.5 2.4 2.4

Operating (income) loss of consolidated Funds (0.1) — (0.1) —

Operating income before Affiliate key employee distributions

21.5 47.2 42.5 92.3

Variable compensation 22.7 22.7 45.9 50.6

9 unchanged sentences

ENI is an important measure to investors because it is used by us 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.

It is also an important measure because it assists management in evaluating our operating performance and is presented in a way that most closely reflects the key elements of our profit share operating model with our Affiliates.

For a further discussion of how we use ENI and why ENI is useful to investors, see “—Overview—How We Measure Performance.”

1 unchanged sentence

• We exclude the effect of Funds consolidation by removing the portion of Fund revenues, expenses and investment return which were not attributable to our stockholders.

• We include within management fee revenue any fees paid to Affiliates by consolidated Funds, which are viewed as investment income under U.S.

• We include within management fee revenue any fees paid to Affiliate by consolidated Funds, which are viewed as investment income under U.S.

• We include our share of earnings from our equity-accounted Affiliate within other income in ENI revenue, rather than investment income.

17 unchanged sentences

Reconciliation of U.S.

GAAP Net Income to Economic Net Income for the Three Months Ended March 31, 2023 and 2022

The following table reconciles net income attributable to controlling interests to economic net income for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

GAAP Net Income to Economic Net Income for the Three and Six Months Ended June 30, 2023 and 2022

The following table reconciles net income attributable to controlling interests to economic net income for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

4 unchanged sentences

Capital transaction costs

0.1 — 0.2 5.0

Seed/Co-investment (gains) losses and financings (1)

(0.1) 0.8 (0.9) 1.0

Tax benefit of goodwill and acquired intangibles deductions 0.3 0.4 0.7 0.7

Discontinued operations attributable to controlling interests and restructuring (2)

0.2 0.3 0.6 0.7

ENI tax normalization

0.6 1.1 0.7 1.3

Tax effect of above adjustments, as applicable (3)

0.2 4.9 0.4 5.2

Economic net income

$ 12.0 $ 17.3 $ 23.8 $ 40.7

(1) The net return on seed/co-investment (gains) losses and financings for the three months ended March 31, 2023 and 2022 is shown in the following table:

Three Months Ended March 31,

(1) The net return on seed/co-investment (gains) losses and financings for the three and six months ended June 30, 2023 and 2022 is shown in the following table:

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

6 unchanged sentences

* The blended rate is based on the weighted average rate of the long-term debt.

(2) The three months ended March 31, 2023 includes costs associated with the transfer of an insurance policy from our former parent of $0.4 million.

The three months ended March 31, 2022 includes restructuring costs at the Affiliate of $0.1 million and costs associated with the transfer of an insurance policy from our former parent of $0.3 million.

(2) The three months ended June 30, 2023 includes costs associated with the transfer of an insurance policy from our former parent of $0.2 million.

The three months ended June 30, 2022 includes costs associated with the transfer of an insurance policy from our former parent of $0.3 million.

The six months ended June 30, 2023 includes costs associated with the transfer of an insurance policy from our former parent of $0.6 million.

The six months ended June 30, 2022 includes restructuring costs at the Affiliate of $0.1 million and costs associated with the transfer of an insurance policy from our former parent of $0.6 million.

(3) Reflects the sum of lines (i), (ii), (iii), (iv) and the restructuring component of line (vi) multiplied by the 27.3% U.S.

7 unchanged sentences

The following table reconciles U.S.

GAAP revenue to ENI revenue for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

GAAP revenue to ENI revenue for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

1 unchanged sentence

Exclude revenue from consolidated Funds attributable to non-controlling interests

(1.3) — (2.0) —

ENI revenue $ 95.0 $ 95.5 $ 186.1 $ 207.7

The following table identifies the components of ENI revenue:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

2 unchanged sentences

Performance fees (2)

2.2 2.0 2.7 12.0

ENI revenue $ 95.0 $ 95.5 $ 186.1 $ 207.7

10 unchanged sentences

The following table reconciles U.S.

GAAP operating expense to ENI operating expense for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,

GAAP operating expense to ENI operating expense for the three and six months ended June 30, 2023 and 2022.

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

2 unchanged sentences

Non-cash key employee equity and profit interest revaluations

0.7 18.8 1.3 25.6

Restructuring costs (1)

(0.3) (0.3) (0.7) (0.7)

Funds’ operating expense (1.2) — (1.9) —

4 unchanged sentences

ENI operating expense $ 51.2 $ 44.1 $ 98.3 $ 89.7

(1) The three months ended March 31, 2023 includes $0.4 million of costs associated with the transfer of an insurance policy from our former parent.

The three months ended March 31, 2022 includes $0.1 million of restructuring costs at the Affiliate and $0.3 million costs associated with the transfer of an insurance policy from our former parent.

(1) The three months ended June 30, 2023 includes $0.2 million costs associated with the transfer of an insurance policy from our former parent.

The three months ended June 30, 2022 includes $0.3 million costs associated with the transfer of an insurance policy from our former parent.

The six months ended June 30, 2023 includes $0.6 million of costs associated with the transfer of an insurance policy from our former parent.

The six months ended June 30, 2022 includes $0.1 million of restructuring costs at the Affiliate and $0.6 million costs associated with the transfer of an insurance policy from our former parent.

The following table identifies the components of ENI operating expense:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

2 unchanged sentences

General and administrative expenses (2)

23.1 18.3 43.0 36.7

Depreciation and amortization 4.4 5.3 8.2 10.6

2 unchanged sentences

The following table reconciles U.S.

GAAP compensation and benefits expense for the three months ended March 31, 2023 and 2022 to ENI fixed compensation and benefits expense:

Three Months Ended March 31,

GAAP compensation and benefits expense for the three and six months ended June 30, 2023 and 2022 to ENI fixed compensation and benefits expense:

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

1 unchanged sentence

Non-cash key employee equity and profit interest revaluations excluded from ENI

0.7 18.8 1.3 25.6

Sales-based compensation reclassified to ENI general & administrative expenses

(1.6) (2.1) (3.5) (4.0)

Affiliate key employee distributions

(1.2) (0.5) (2.4) (2.4)

Variable compensation

3 unchanged sentences

GAAP general and administrative expense to ENI general and administrative expense:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

5 unchanged sentences

Key Non-GAAP Operating Metrics

The following table shows our key non-GAAP operating metrics for the three months ended March 31, 2023 and 2022.

The following table shows our key non-GAAP operating metrics for the three and six months ended June 30, 2023 and 2022.

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.

1 unchanged sentence

GAAP measure:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

17 unchanged sentences

Affiliate key employee distributions

$ 1.2 $ 0.5 $ 2.4 $ 2.4

ENI operating earnings (1)

1 unchanged sentence

ENI Affiliate key employee distributions ratio (7)

5.7 % 1.7 % 5.7 % 3.6 %

(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 unchanged sentences

GAAP operating income to ENI operating earnings:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

3 unchanged sentences

Restructuring costs (a)

0.3 0.3 0.7 0.7

Affiliate key employee distributions 1.2 0.5 2.4 2.4

Variable compensation 22.7 22.7 45.9 50.6

Funds’ operating (income) loss (0.1) — (0.1) —

ENI earnings before variable compensation 43.8 51.4 87.8 118.0

3 unchanged sentences

ENI earnings after Affiliate key employee distributions $ 19.9 $ 28.2 $ 39.5 $ 65.0

(a) The three months ended March 31, 2023 includes $0.4 million of costs associated with the transfer of an insurance policy from our former parent.

The three months ended March 31, 2022 includes $0.1 million of restructuring costs at our Affiliate and $0.3 million of costs associated with the transfer of an insurance policy from our former parent.

(a) The three months ended June 30, 2023 includes $0.2 million costs associated with the transfer of an insurance policy from our former parent.

The three months ended June 30, 2022 includes $0.3 million of costs associated with the transfer of an insurance policy from our former parent.

The six months ended June 30, 2023 includes $0.6 million of costs associated with the transfer of an insurance policy from our former parent.

The six months ended June 30, 2022 includes $0.1 million of restructuring costs at our Affiliate and $0.6 million of costs associated with the transfer of an insurance policy from our former parent.

(2) 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.

1 unchanged sentence

GAAP operating margin.

GAAP operating margin, excluding the effect of consolidated Funds, is 21.7% for the three months ended March 31, 2023, and 38.5% for the three months ended March 31, 2022.

GAAP operating margin, excluding the effect of consolidated Funds, is 21.4% for the three months ended June 30, 2023, 48.9% for the three months ended June 30, 2022, 21.5% for the six months ended June 30, 2023, and 43.3% for the six months ended June 30, 2022.

The ENI operating margin is important because it gives investors an understanding of the profitability of the total business relative to revenue, irrespective of the ownership position which we have in our Affiliate.

24 unchanged sentences

The following table reconciles the United States statutory tax to tax on economic net income:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

3 unchanged sentences

federal and state statutory rates (2)

(4.5) (6.4) (8.9) (15.2)

Other reconciling tax adjustments 0.1 0.1 0.1 0.1

Tax on economic net income (4.4) (6.3) (8.8) (15.1)

Economic net income $ 12.0 $ 17.3 $ 23.8 $ 40.7

2 unchanged sentences

(1) Includes interest income and third-party ENI interest expense, as shown in the following table:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

3 unchanged sentences

Other ENI interest expense exclusions (a)

0.4 0.1 0.8 2.0

ENI net interest expense (3.5) (4.6) (6.9) (9.2)

ENI earnings after Affiliate key employee distributions (b)

19.9 28.2 39.5 65.0

Pre-tax economic net income $ 16.4 $ 23.6 $ 32.6 $ 55.8

6 unchanged sentences

(3) The economic net income effective tax rate is calculated by dividing the tax on economic net income by pre-tax economic net income.

The value of our seed capital investments was $25.0 million as of June 30, 2023 and $22.9 million as of December 31, 2022, including direct investments in consolidated Funds.

Total seed capital investments represents our seed capital invested within our Affiliate’s investment products.

The following table reconciles the investments balance per our Condensed Consolidated Balance Sheets to the total value of our seed capital investments as of each of the dates indicated:

($ in millions) June 30,

2023 December 31,

Investments per Consolidated Balance Sheets $ 47.4 $ 48.4

Seed capital investment in consolidated Funds 20.6 14.5

Investments related to long-term incentive compensation plans (43.0) (40.0)

Total seed capital investments $ 25.0 $ 22.9

Segment Analysis

1 unchanged sentence

• Quant & Solutions —comprised of versatile, often highly-tailored strategies that leverage data and technology in a computational, factor-based investment process across a range of asset classes in developed and emerging markets, including global, non-U.S.

and small-cap equities, as well as managed volatility, ESG, multi-asset, equity alternatives, and long/short strategies.

and small-cap equities, as well as managed volatility, multi-asset, equity alternatives, and long/short strategies.

This segment is comprised of our interest in Acadian.

8 unchanged sentences

ENI revenue includes management fees, performance fees and other revenue under U.S.

GAAP, adjusted to include management fees paid to Affiliates by consolidated Funds and our share of earnings from our equity-accounted Affiliate.

GAAP, adjusted to include management fees paid to our Affiliate by consolidated Funds and our share of earnings from our equity-accounted Affiliate.

ENI operating expenses include compensation and benefits, general and administrative expense, and depreciation and amortization under U.S.

6 unchanged sentences

Segment ENI Revenue

The following table identifies the components of segment ENI revenue for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

The following table identifies the components of segment ENI revenue for the three months ended June 30, 2023 and 2022:

Three Months Ended June 30,

($ in millions) 2023 2022

3 unchanged sentences

2.2 2.2 2.0 2.0

Other income, including equity-accounted affiliate — — — —

ENI revenue $ 95.0 $ 95.0 $ 95.5 $ 95.5

The following table identifies the components of segment ENI revenue for the six months ended June 30, 2023 and 2022:

Six Months Ended June 30,

($ in millions) 2023 2022

Quant & Solutions Total Quant & Solutions Total

Management fees $ 183.4 $ 183.4 $ 195.7 $ 195.7

Performance fees

2.7 2.7 12.0 12.0

ENI revenue $ 186.1 $ 186.1 $ 207.7 $ 207.7

Quant & Solutions Segment ENI Revenue

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Quant & Solutions ENI revenue decreased $(21.1) million, or (18.8)%, from $112.2 million for the three months ended March 31, 2022 to $91.1 million for the three months ended March 31, 2023.

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Quant & Solutions ENI revenue decreased $(0.5) million, or (0.5)%, from $95.5 million for the three months ended June 30, 2022 to $95.0 million for the three months ended June 30, 2023.

The decrease was mainly attributable to (0.7)% lower management fees driven by lower average AUM resulting from equity market decline in 2022.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Quant & Solutions ENI revenue decreased $(21.6) million, or (10.4)%, from $207.7 million for the six months ended June 30, 2022 to $186.1 million for the six months ended June 30, 2023.

The decrease was attributable to (6.3)% lower management fees, driven by lower average AUM and lower performance fees that are variable and are contractually triggered based on investment performance results over agreed upon time periods.

Segment ENI Expense

The following table identifies the components of segment ENI expense for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

The following table identifies the components of segment ENI expense for the three months ended June 30, 2023 and 2022:

Three Months Ended June 30,

($ in millions) 2023 2022

6 unchanged sentences

Total ENI Operating Expenses

$ 47.3 $ 3.9 $ 51.2 $ 39.7 $ 4.4 $ 44.1

Variable compensation

3 unchanged sentences

Total Expenses $ 70.5 $ 4.6 $ 75.1 $ 61.9 $ 5.4 $ 67.3

The following table identifies the components of segment ENI expense for the six months ended June 30, 2023 and 2022:

Six Months Ended June 30,

($ in millions) 2023 2022

Quant & Solutions Other Total Quant & Solutions Other Total

Fixed compensation & benefits

$ 43.6 $ 3.5 $ 47.1 $ 38.4 $ 4.0 $ 42.4

General and administrative expense 39.1 3.9 43.0 32.0 4.7 36.7

Depreciation and amortization

8.2 — 8.2 10.4 0.2 10.6

Total ENI operating expenses $ 90.9 $ 7.4 $ 98.3 $ 80.8 $ 8.9 $ 89.7

Variable compensation

44.5 1.4 45.9 48.0 2.6 50.6

Affiliate key employee distributions

2.4 — 2.4 2.4 — 2.4

Total expenses $ 137.8 $ 8.8 $ 146.6 $ 131.2 $ 11.5 $ 142.7

Quant & Solutions Segment ENI Expense

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Quant & Solutions ENI operating expense increased $2.5 million, or 6.1%, from $41.1 million for the three months ended March 31, 2022 to $43.6 million for the three months ended March 31, 2023.

The increase was driven by 9.1% higher ENI fixed compensation and benefits expense resulting from cost of living increases and the cost of new hires supporting Acadian’s growth initiatives and 13.0% higher ENI general and administrative expense primarily due to higher travel and entertainment, consultant, and systems costs.

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Quant & Solutions ENI operating expense increased $7.6 million, or 19.1%, from $39.7 million for the three months ended June 30, 2022 to $47.3 million for the three months ended June 30, 2023.

The increase was driven by 31.4% higher ENI general and administrative expense resulting from increased consultant and portfolio costs driven by inflation, including the impact of changes in foreign currency.

Quant & Solutions ENI fixed compensation and benefits expense increased 18.3% due to higher salaries and new hires, and the investment in Acadian’s growth initiatives.

Quant & Solutions ENI variable compensation expense is based on contractual percentage of earnings before variable compensation, and also includes a formulaic split of performance fee revenue that gets deferred and recognized as variable compensation expense over a three-year vesting period.

Quant & Solutions ENI variable compensation expense decreased (14.4)% as a result of lower earnings before variable compensation in the current period, partially offset by the inclusion of deferred compensation expense earned on prior year performance fee revenues.

Affiliate key employee distributions attributable to Quant & Solutions decreased (36.8)%, impacted by lower ENI earnings after variable compensation, and the leveraged nature of the distribution share.

Quant & Solutions ENI variable compensation expense increased 1.4% as a result of the inclusion of deferred compensation expense earned on prior year performance fee revenues.

Affiliate key employee distributions attributable to Quant & Solutions increased 140.0%, impacted by the leveraged nature of the distribution share.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Quant & Solutions ENI operating expense increased $10.1 million, or 12.5%, from $80.8 million for the six months ended June 30, 2022 to $90.9 million for the six months ended June 30, 2023.

The increase was driven by 22.2% higher ENI general and administrative expense primarily due to higher systems, consultant and portfolio costs driven by inflation, including the impact of changes in foreign currency.

ENI fixed compensation and benefits expense increased 13.5%, driven by cost of living increases and the cost of new hires supporting Acadian’s growth initiatives.

Quant & Solutions ENI variable compensation expense decreased (7.3)% as a result of lower earnings before variable compensation, partially offset by the inclusion of deferred compensation expense earned on prior year performance fee revenues.

Affiliate key employee distributions attributable to Quant & Solutions remained unchanged at $2.4 million.

Other ENI Expense

Three months ended March 31, 2023 compared to three months ended March 31, 2022:

Other ENI operating expense decreased $(1.0) million, or (22.2)%, from $4.5 million for the three months ended March 31, 2022 to $3.5 million for the three months ended March 31, 2023.

Three months ended June 30, 2023 compared to three months ended June 30, 2022:

Other ENI operating expense decreased $(0.5) million, or (11.4)%, from $4.4 million for the three months ended June 30, 2022 to $3.9 million for the three months ended June 30, 2023.

The decrease was driven by (10.5)% lower fixed compensation and benefit expense, and (8.3)% lower general and administrative expense resulting from cost-saving initiatives.

Other ENI variable compensation expense decreased (30.0)% due to lower non-cash equity compensation amortization at the corporate head office.

Six months ended June 30, 2023 compared to six months ended June 30, 2022:

Other ENI operating expense decreased $(1.5) million, or (16.9)%, from $8.9 million for the six months ended June 30, 2022 to $7.4 million for the six months ended June 30, 2023.

The decrease was driven by (12.5)% lower fixed compensation and benefit expense due to lower payroll taxes and lower headcount at the corporate head office and (17.0)% lower general and administrative expense resulting from cost-saving initiatives.

3 unchanged sentences

All amounts presented exclude consolidated Funds:

Three Months Ended March 31,

Six Months Ended June 30,

($ in millions) 2023 2022

3 unchanged sentences

Financing activities 35.7 (183.4)

Comparison for the three months ended March 31, 2023 and 2022

Net cash from operating activities decreased $(19.9) million, from net cash used of $14.4 million for the three months ended March 31, 2022 to net cash used of $34.3 million for the three months ended March 31, 2023, driven by changes in net income offset by changes in operating assets and liabilities in the three months ended March 31, 2022.

In the three months ended March 31, 2023, net cash from investing activities decreased $(1.6) million, from $(4.0) million used in the three months ended March 31, 2022 to $(5.6) million used in the three months ended March 31, 2023, driven by higher net purchases of investment securities in the three months ended March 31, 2023.

Net cash from financing activities increased $230.4 million, from $(144.9) million used in the three months ended March 31, 2022 to $85.5 million provided in the three months ended March 31, 2023, primarily due to the repayment of third party borrowings and higher share repurchases in the three months ended March 31, 2022.

(1) Excludes consolidated Funds.

Comparison for the six months ended June 30, 2023 and 2022

Net cash from operating activities decreased $(22.6) million, from net cash provided of $29.9 million for the six months ended June 30, 2022 to net cash provided of $7.3 million for the six months ended June 30, 2023, driven by changes in net income offset by changes in operating assets and liabilities period-over-period.

In the six months ended June 30, 2023, net cash from investing activities decreased $(4.3) million, from $(6.4) million used in the six months ended June 30, 2022 to $(10.7) million used in the six months ended June 30, 2023, driven by higher net purchases of investment securities in the six months ended June 30, 2023.

Net cash from financing activities increased $219.1 million, from $(183.4) million used in the six months ended June 30, 2022 to $35.7 million provided in the six months ended June 30, 2023, primarily due to the repayment of third party borrowings and higher share repurchases in the six months ended June 30, 2022.

Supplemental Liquidity Measure — Adjusted EBITDA

4 unchanged sentences

The following table reconciles our U.S.

GAAP net income attributable to controlling interests to EBITDA to Adjusted EBITDA to economic net income for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,

GAAP net income attributable to controlling interests to EBITDA to Adjusted EBITDA to economic net income for the three and six months ended June 30, 2023 and 2022.

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2023 2022 2023 2022

5 unchanged sentences

Non-cash compensation costs, including revaluation of Affiliate key employee-owned equity and profit interests

(0.2) (18.3) (0.6) (24.2)

(Gain) loss on seed and co-investments (0.5) 0.7 (1.6) 0.8

Restructuring expenses (1)

0.2 0.4 0.6 0.7

Capital transaction costs — — — 3.2

3 unchanged sentences

Depreciation and amortization (2)

(4.8) (5.8) (8.8) (12.0)

Tax on economic net income (4.4) (6.3) (8.8) (15.1)

1 unchanged sentence

$ 12.0 $ 17.3 $ 23.8 $ 40.7

(1) The three months ended March 31, 2023 includes $0.4 million of costs associated with the transfer of an insurance policy from our former parent.

The three months ended March 31, 2022 includes $0.1 million of restructuring costs at our Affiliate and costs associated with the transfer of an insurance policy from our former parent of $0.3 million.

(1) The three months ended June 30, 2023 includes $0.2 million of costs associated with the transfer of an insurance policy from our former parent.

The three months ended June 30, 2022 includes $0.3 million of costs associated with the transfer of an insurance policy from our former parent.

The six months ended June 30, 2023 includes $0.6 million of costs associated with the transfer of an insurance policy from our former parent.

The six months ended June 30, 2022 includes $0.1 million of restructuring costs at our Affiliate and costs associated with the transfer of an insurance policy from our former parent of $0.6 million.

(2) Includes non-cash equity-based award amortization expense.

9 unchanged sentences

The following table summarizes our financing arrangements as of the dates indicated:

($ in millions) March 31,

($ in millions) June 30,

2023 December 31,

10 unchanged sentences

(1) On January 18, 2022, the Company completed the full redemption of the $125 million aggregate principal amount outstanding of its 5.125% Senior Notes due August 1, 2031.

As a result of this transaction, the Company recorded $3.2 million of loss on extinguishment of debt within the Condensed Consolidated Statements of Operations for the three months ended March 31, 2022.

As a result of this transaction, the Company recorded $3.2 million of loss on extinguishment of debt within the Condensed Consolidated Statements of Operations for the six months ended June 30, 2022.

Revolving Credit Facility

On March 7, 2022, we, Royal Bank of Canada, BMO Harris Bank, N.A., Goldman Sachs Bank USA, Morgan Stanley Bank, N.A., Bank of America N.A., the Bank of New York Mellon and Citibank, N.A., as an issuing bank and administrative agent (collectively, the “Lenders”), entered into a new revolving credit facility agreement (“Acadian Credit Agreement”), which replaced our revolving credit facility dated as of August 20, 2019 (as amended by an amendment dated September 3, 2020 and an assignment and assumption and amendment agreement dated February 23, 2021, the “Original Credit Agreement”).

On March 7, 2022, Acadian, Royal Bank of Canada, BMO Harris Bank, N.A., Goldman Sachs Bank USA, Morgan Stanley Bank, N.A., Bank of America N.A., the Bank of New York Mellon and Citibank, N.A., as an issuing bank and administrative agent (collectively, the “Lenders”), entered into a new revolving credit facility agreement (“Acadian Credit Agreement”), which replaced our revolving credit facility dated as of August 20, 2019 (as amended by an amendment dated September 3, 2020 and an assignment and assumption and amendment agreement dated February 23, 2021, the “Original Credit Agreement”).

The maturity date of the Original Credit Agreement was August 22, 2022, and the maturity date of the Acadian Credit Agreement is March 7, 2025.

2 unchanged sentences

Under the Acadian Credit Agreement, the ratio of Acadian’s third-party borrowings to Acadian’s trailing twelve months Adjusted EBITDA, as defined by the Acadian Credit Agreement (the “Leverage Ratio”), cannot exceed 2.5x and the ratio of Acadian’s trailing twelve months Adjusted EBITDA to Acadian’s interest expense (the “Interest Coverage Ratio”) must be not less than 4.0x.

At March 31, 2023, Acadian’s Leverage Ratio was 0.6x and Acadian’s Interest Coverage Ratio was 74.5x.

At June 30, 2023, Acadian’s Leverage Ratio was 0.3x and Acadian’s Interest Coverage Ratio was 53.0x.

Other Compensation Liabilities

Other compensation liabilities principally consist of cash-settled Affiliate equity and profit interests liabilities held by certain Affiliate key employees, and voluntary deferred compensation plans.

The following table summarizes our other long-term liabilities:

The following table summarizes our other long-term liabilities as of each of the dates indicated:

2023 December 31,

12 unchanged sentences

There is a voluntary deferral plan investment balance included in investments on the Condensed Consolidated Balance Sheets that corresponds to this deferral liability.

Additionally, we have recorded accrued incentive compensation of $24.0 million and $92.5 million on the Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, respectively.

Additionally, we have recorded accrued incentive compensation of $45.0 million and $92.5 million on the Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, respectively.

Included within the accrued incentive compensation balance is the vested portion of Acadian’s deferred compensation pool.

15 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis