What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-07 compared with 2023-05-08 · 169 added, 110 removed, 308 unchanged (48% of the section changed)

15 unchanged sentences

In addition, we offer our Affiliates growth capital, distribution, and other strategic value-added capabilities, which enhance the long-term growth of these independent businesses, and enable them to align equity incentives across generations of principals to build enduring franchises.

As of March 31, 2023, our aggregate assets under management were approximately $668 billion across a broad range of differentiated investment strategies.

As of June 30, 2023, our aggregate assets under management were approximately $674 billion across a broad range of differentiated investment strategies.

In June 2023, we entered into an agreement to acquire a minority equity interest in Forbion Group Holding B.V.

(“Forbion”), a pan-European venture capital and growth equity firm focused on investing in high-quality life sciences companies.

Following the close of the transaction, Forbion partners will continue to hold a significant majority of the equity of the business and direct its day-to-day operations.

The transaction is expected to close during the second half of 2023, and is subject to customary closing conditions.

In July 2023, we entered into an agreement with a third party and one of our consolidated Affiliates, under which the third party will acquire 100% of the outstanding equity interests in the Affiliate.

Pursuant to the terms of the agreement, we will receive gross cash proceeds of approximately $ 294 million.

The Affiliate will continue to be included in our results until closing of the transaction, which is expected to occur in the second half of 2023, and is subject to customary closing conditions.

Operating Performance Measures

5 unchanged sentences

The following table presents our key aggregate operating performance measures:

As of and for the Three Months Ended March 31,

(in billions, except as noted) 2022 2023 % Change

As of and for the Three Months Ended June 30, As of and for the Six Months Ended June 30,

(in billions, except as noted) 2022 2023 % Change 2022 2023 % Change

Assets under management $ 690.9 $ 673.9 (2) % $ 690.9 $ 673.9 (2) %

10 unchanged sentences

Our Affiliates provide a diverse range of differentiated return streams through their specialized investment processes.

We continue to see demand for alternative strategies, as evidenced by our net inflows in this category for the quarter ended March 31, 2023.

At the same time, we experienced outflows in equity strategies particularly in global equities, in line with de-risking trends across the industry.

We continue to invest in areas of long-term client demand — including private markets, liquid alternatives, sustainable strategies, wealth management, and Asia — through new and existing Affiliates, to better position AMG to benefit from industry growth trends.

We continue to see client demand for alternative strategies, as evidenced by our net inflows in this category for the three and six months ended June 30, 2023.

At the same time, our equity strategies saw outflows, particularly in global equities, in line with client cash flow trends across the industry.

We continue to invest in areas of long-term client demand — including private markets, liquid alternatives, sustainable investment strategies, wealth management, and Asia — through new and existing Affiliates, to better position AMG to benefit from industry growth trends.

We also anticipate that independent investment firms will continue to seek access to an evolving range of partnership solutions, and that we have a significant opportunity to invest in additional high-quality firms across the global investment management industry.

The following charts present information regarding the composition of our assets under management by strategy and client type as of March 31, 2023:

The following charts present information regarding the composition of our assets under management by strategy and client type as of June 30, 2023:

Assets Under Management

___________________________

(1) Alternatives include private markets strategies, which accounted for 15% of our assets under management as of March 31, 2023.

The following tables present changes in our assets under management by strategy and client type for the three months ended March 31, 2023:

(1) Alternatives include private markets strategies, which accounted for 15% of our assets under management as of June 30, 2023.

The following tables present changes in our assets under management by strategy and client type for the three and six months ended June 30, 2023:

By Strategy - Quarter to Date

1 unchanged sentence

Equities Multi-Asset & Fixed Income Total

December 31, 2022 $ 220.9 $ 186.1 $ 133.3 $ 110.5 $ 650.8

March 31, 2023 $ 223.7 $ 192.6 $ 137.0 $ 114.7 $ 668.0

Client cash inflows and commitments 5.6 4.5 4.8 4.7 19.6

6 unchanged sentences

0.1 (0.3) (0.1) 0.0 (0.3)

March 31, 2023 $ 223.7 $ 192.6 $ 137.0 $ 114.7 $ 668.0

June 30, 2023 $ 225.7 $ 190.5 $ 140.7 $ 117.0 $ 673.9

By Client Type - Quarter to Date

(in billions) Institutional Retail High Net Worth Total

March 31, 2023 $ 337.9 $ 196.6 $ 133.5 $ 668.0

Client cash inflows and commitments 7.4 7.3 4.9 19.6

Client cash outflows (13.5) (10.8) (5.8) (30.1)

Net client cash flows (6.1) (3.5) (0.9) (10.5)

Market changes 6.1 5.9 2.8 14.8

Foreign exchange (1)

1.9 1.1 0.3 3.3

Realizations and distributions (net) (0.8) (0.6) (0.0 ) (1.4)

0.2 (0.3) (0.2) (0.3)

June 30, 2023 $ 339.2 $ 199.2 $ 135.5 $ 673.9

By Strategy - Year to Date

Alternatives Global Equities U.S.

Equities Multi-Asset & Fixed Income Total

December 31, 2022 $ 220.9 $ 186.1 $ 133.3 $ 110.5 $ 650.8

7 unchanged sentences

(0.2) (0.3) (0.0 ) 0.2 (0.3)

March 31, 2023 $ 337.9 $ 196.6 $ 133.5 $ 668.0

June 30, 2023 $ 225.7 $ 190.5 $ 140.7 $ 117.0 $ 673.9

By Client Type - Year to Date

Institutional Retail High Net Worth Total

December 31, 2022 $ 333.5 $ 188.9 $ 128.4 $ 650.8

Client cash inflows and commitments 16.8 17.5 10.2 44.5

Client cash outflows (25.2) (22.4) (10.6) (58.2)

Net client cash flows (8.4) (4.9) (0.4) (13.7)

Market changes 13.4 14.0 7.6 35.0

Foreign exchange (1)

2.8 1.9 0.3 5.0

Realizations and distributions (net) (2.1) (0.7) (0.1) (2.9)

(0.0 ) 0.0 (0.3) (0.3)

June 30, 2023 $ 339.2 $ 199.2 $ 135.5 $ 673.9

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(1) Foreign exchange reflects the impact of translating into U.S.

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(1) Past performance is not indicative of future results.

Performance and AUM information is as of March 31, 2023 and is based on data available at the time of calculation.

Performance and AUM information is as of June 30, 2023 and is based on data available at the time of calculation.

Product returns are sourced from Affiliates while benchmark returns are generally sourced via third-party subscriptions.

1 unchanged sentence

equity products, performance is reported as the percentage of assets that have outperformed benchmarks across the indicated periods, and excludes market-hedging products.

For purposes of investment performance comparisons, products are an aggregation of portfolios (separate accounts, investment funds, and other

products) that each represent a particular investment objective, using the most representative portfolio for the performance comparison.

For purposes of investment performance comparisons, products are an aggregation of portfolios (separate accounts, investment funds, and other products) that each represent a particular investment objective, using the most representative portfolio for the performance comparison.

Performance is presented for products with a three-, five-, and/or ten-year track record and is measured on a consistent basis relative to the most appropriate benchmarks.

6 unchanged sentences

Benchmarks utilized include a combination of public market equivalents, peer medians, and absolute returns where benchmarks are not available.

For purposes of investment performance comparisons, the latest vintage comparison includes the most recent vehicles and strategies (traditional long-duration investment funds, customized vehicles, and other evergreen vehicles and product structures) where meaningful performance is available and calculable.

In order to illustrate the performance of our private markets product category over a longer period of history, the last three vintages comparison incorporates the latest vintage vehicles and the prior two vintages for traditional long-duration investment funds, as well as additional vehicles and strategies launched during the equivalent time period as the last three vintages of traditional long-duration investment funds.

8 unchanged sentences

Performance-based fees are generally billed less frequently than asset-based fees and will vary from period to period because they inherently depend on investment performance.

As of March 31, 2023, approximately 26% of our total assets under management could potentially earn performance-based fees.

As of June 30, 2023, approximately 26% of our total assets under management could potentially earn performance-based fees.

These percentages were approximately 12% and 47% of our assets under management for our consolidated Affiliates and Affiliates accounted for under the equity method, respectively.

We anticipate performance-based fees will be a recurring component of our aggregate fees;

however, we do not anticipate these fees to be a significant component of our Consolidated revenue as these fees are predominantly earned by our Affiliates accounted for under the equity method.

Aggregate fees were $1,505.1 million for the three months ended March 31, 2023, an increase of $174.6 million or 13% as compared to the three months ended March 31, 2022.

The increase in our aggregate fees was principally due to a $362.5 million or 27% increase from performance-based fees, primarily in our liquid alternative strategies, offset by a $187.9 million or 14% decrease in asset-based fees.

The decrease in asset-based fees was principally due to a decrease in our average assets under management, primarily in our U.S.

and global equity strategies, and the impact of the BPEA Transaction (as defined in “Supplemental Financial Performance Measures”).

however we do not anticipate these fees to be a significant component of our Consolidated revenue as these fees are predominately earned by our Affiliates accounted for under the equity method.

Aggregate fees were $1,003.1 million for the three months ended June 30, 2023, a decrease of $176.5 million or 15% as compared to the three months ended June 30, 2022.

The decrease in our aggregate fees was due to a $128.3 million or 11% decrease from asset-based fees and a $48.2 million or 4% decrease from performance-based fees, primarily in our liquid alternative and private markets strategies.

The decrease in asset-based fees was principally due to a decrease in our average assets under management, primarily in our global equity strategies, and the impact of the BPEA Transaction (as defined in “Supplemental Financial Performance Measures”).

Aggregate fees were $2,508.2 million for the six months ended June 30, 2023, a decrease of $1.8 million as compared to the six months ended June 30, 2022.

The decrease in our aggregate fees was due to a $316.1 million or 13% decrease from asset-based fees, offset by a $314.3 million or 13% increase from performance-based fees, primarily in our liquid alternative strategies.

The decrease in asset-based fees was principally due to a decrease in our average assets under management, primarily in our global equity strategies, and the impact of the BPEA Transaction.

Financial and Supplemental Financial Performance Measures

The following table presents our key financial and supplemental financial performance measures:

For the Three Months Ended March 31,

(in millions) 2022 2023 % Change

For the Three Months Ended June 30, For the Six Months Ended June 30,

(in millions) 2022 2023 % Change 2022 2023 % Change

Net income (controlling interest) $ 109.4 $ 125.3 15 % $ 255.4 $ 259.8 2 %

6 unchanged sentences

Adjusted EBITDA (controlling interest) is an important supplemental financial performance measure for management as it provides a comprehensive view of our share of the financial performance of our business.

While aggregate fees increased $174.6 million or 13% in the three months ended March 31, 2023, our Adjusted EBITDA (controlling interest) decreased $23.2 million or 10%, primarily due to the recognition of performance fees at Affiliates in which we hold less of an economic interest.

For the three months ended March 31, 2023, our Net income (controlling interest) decreased $11.5 million or 8%.

The decrease in Net income (controlling interest) was primarily due to an $89.9 million or 15% decrease in Consolidated revenue and an increase in Other expenses (net) attributable to the controlling interest, primarily related to the increase in the values of contingent payment and Affiliate equity purchase obligations.

The impact of these items was partially offset by a $10.0 million increase in Equity method income (net) and an $8.0 million decrease in Income tax expense attributable to the controlling interest.

Our Adjusted EBITDA (controlling interest) decreased $0.6 million in the three months ended June 30, 2023 primarily due to a $176.5 million or 15% decrease in aggregate fees.

Adjusted EBITDA decreased less than aggregate fees on a percentage basis primarily due to the recognition of performance-based fees earned by Affiliates in which we hold a greater economic interest.

For the six months ended June 30, 2023, our Adjusted EBITDA (controlling interest) decreased $23.8 million or 5%, primarily due to the recognition of performance-based fees in the three months ended March 31, 2023 earned by Affiliates in which we hold less of an economic interest, and the impact of the BPEA Transaction.

For the three months ended June 30, 2023, our Net income (controlling interest) increased $15.9 million or 15%.

This increase was primarily due to a $29.7 million increase in Investment and other income attributable to the controlling interest and a $25.3 million increase in Equity method income (net).

These increases were partially offset by a $91.6 million, or 15% decrease in Consolidated revenue and an increase in Other expenses (net) attributable to the controlling interest, primarily due to a $17.7 million increase in expenses related to changes in the values of contingent payment obligations.

For the six months ended June 30, 2023, our Net income (controlling interest) increased $4.4 million or 2%.

This increase was primarily due to a $43.2 million increase in Investment and other income attributable to the controlling interest and a $35.4 million increase in Equity method income (net).

These increases were partially offset by a $181.5 million, or 15%, decrease in Consolidated revenue and an increase in Other expenses (net) attributable to the controlling interest, primarily due to a $28.5 million increase in expenses related to changes in the values of contingent payment obligations.

We believe Economic net income (controlling interest) is an important supplemental financial performance measure because it represents our performance before non-cash expenses relating to the acquisition of interests in Affiliates and improves comparability of performance between periods.

For the three months ended March 31, 2023, our Economic net income (controlling interest) decreased $20.4 million or 11%, primarily due to a $23.2 million decrease in Adjusted EBITDA (controlling interest), partially offset by an $8.0 million decrease in Income tax expense attributable to the controlling interest.

For the three months ended June 30, 2023, our Economic net income (controlling interest) increased $5.7 million or 4%, primarily due to a $6.5 million decrease in current and other deferred taxes.

For the six months ended June 30, 2023, our Economic net income (controlling interest) decreased $14.7 million or 4%, primarily due to a $23.8 million decrease in Adjusted EBITDA (controlling interest), partially offset by a $13.6 million decrease in current and other deferred taxes.

Results of Operations

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The following table presents our consolidated Affiliate average assets under management and Consolidated revenue:

For the Three Months Ended March 31,

(in millions, expect as noted) 2022 2023 % Change

For the Three Months Ended June 30, For the Six Months Ended June 30,

(in millions, except as noted) 2022 2023 % Change 2022 2023 % Change

Consolidated Affiliate average assets under management (in billions) $ 430.2 $ 402.4 (6) % $ 452.2 $ 400.7 (11) %

Consolidated revenue $ 604.1 $ 512.5 (15) % $ 1,211.4 $ 1,029.9 (15) %

Our Consolidated revenue decreased $89.9 million or 15% for the three months ended March 31, 2023, primarily due to a $90.7 million or 15% decrease in asset-based fees.

The decrease in asset-based fees was principally due to a decrease in consolidated Affiliate average assets under management primarily in our U.S.

and global equity strategies.

Our Consolidated revenue decreased $91.6 million or 15% for the three months ended June 30, 2023, due to a $47.1 million or 8% decrease from performance-based fees, primarily in our private markets strategies, and a $44.5 million or 7% decrease from asset-based fees.

The decrease in asset-based fees was principally due to a decrease in consolidated Affiliate average assets under management, primarily in our global equity strategies.

Our Consolidated revenue decreased $181.5 million or 15% for the six months ended June 30, 2023, due to a $135.3 million or 11% decrease from asset-based fees and a $46.2 million or 4% decrease from performance-based fees, primarily in our private markets strategies.

The decrease in asset-based fees was due to a decrease in consolidated Affiliate average assets under management, primarily in our global equity strategies.

Consolidated Expenses

1 unchanged sentence

The following table presents our Consolidated expenses:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

% Change % Change

(in millions) 2022 2023 2022 2023

5 unchanged sentences

Other expenses (net) (5.2) 13.8 N.M .

0.4 28.3 N.M.

Total consolidated expenses $ 400.6 $ 374.6 (6) % $ 795.7 $ 755.1 (5) %

1 unchanged sentence

(1) Percentage change is not meaningful.

Compensation and related expenses decreased $32.7 million or 13% for the three months ended March 31, 2023, primarily due to a $27.1 million decrease in compensation correlated to the decrease in Consolidated revenue and a $5.6 million decrease in Affiliate equity compensation expense.

Selling, general and administrative expenses increased $7.7 million or 9% for the three months ended March 31, 2023, primarily due to a $7.0 million increase in professional fees.

There were no significant changes in Intangible amortization and impairments for the three months ended March 31, 2023.

Interest expense increased $1.4 million or 5% for the three months ended March 31, 2023, primarily due to a $3.9 million increase resulting from higher interest rates on our senior unsecured term loan facility (the “term loan”).

This increase was partially offset by a $2.6 million decrease resulting from repurchases of our junior convertible securities in the first quarter of 2022.

There were no significant changes in Depreciation and other amortization for the three months ended March 31, 2023.

Other expenses (net) increased $8.8 million for the three months ended March 31, 2023, primarily due to an $11.0 million increase in expenses related to the increase in the values of contingent payment obligations and Affiliate equity purchase obligations.

Compensation and related expenses decreased $39.3 million or 15% for the three months ended June 30, 2023, primarily due to a $45.2 million decrease in compensation correlated to the decrease in Consolidated revenue, partially offset by a $6.7 million increase in Affiliate equity compensation expense.

Compensation and related expenses decreased $72.0 million or 14% for the six months ended June 30, 2023, primarily due to a $72.1 million decrease in compensation correlated to the decrease in Consolidated revenue.

Selling, general and administrative expenses decreased $7.9 million or 8% for the three months ended June 30, 2023, primarily due to a $5.6 million decrease in distribution and investment-related expenses principally as a result of a decrease in average assets under management on which these expenses are incurred and a $3.0 million decrease in professional fees.

Selling, general and administrative expenses decreased $0.3 million for the six months ended June 30, 2023, primarily due to a $7.4 million decrease in distribution and investment-related expenses principally as a result of a decrease in average assets under management on which these expenses are incurred.

This decrease was partially offset by a $4.1 million increase in professional fees and a $3.1 million increase in travel-related expenses.

There were no significant changes in Intangible amortization and impairments for the three and six months ended June 30, 2023.

Interest expense increased $3.6 million or 13% for the three months ended June 30, 2023, primarily due to a $3.8 million increase resulting from higher interest rates on our term loan.

Interest expense increased $4.9 million or 9% for the six months ended June 30, 2023, primarily due to a $7.7 million increase resulting from higher interest rates on our term loan.

This increase was partially offset by a $2.9 million decrease resulting from repurchases of our junior convertible securities in the first half of 2022.

There were no significant changes in Depreciation and other amortization for the three and six months ended June 30, 2023.

Other expenses (net) increased $19.0 million for the three months ended June 30, 2023, primarily due to a $17.7 million increase in expenses related to changes in the values of contingent payment obligations.

Other expenses (net) increased $27.9 million for the six months ended June 30, 2023, primarily due to a $28.5 million increase in expenses related to changes in the values of contingent payment obligations.

Equity Method Income (Net)

2 unchanged sentences

The following table presents equity method Affiliate average assets under management and equity method revenue, as well as equity method earnings, equity method intangible amortization, and equity method intangible impairments, if any, which in aggregate form Equity method income (net):

For the Three Months Ended March 31,

(in millions, except as noted) 2022 2023 % Change

For the Three Months Ended June 30, For the Six Months Ended June 30,

(in millions, except as noted) 2022 2023 % Change 2022 2023 % Change

Operating Performance Measures

5 unchanged sentences

Equity method income (net) $ 30.5 $ 55.8 83 % $ 79.1 $ 114.5 45 %

Our equity method revenue increased $264.5 million or 37% for the three months ended March 31, 2023, principally due to a $361.7 million or 50% increase in performance-based fees, primarily in our liquid alternative strategies, offset by a $97.2 million or 13% decrease in asset-based fees.

The decrease in asset-based fees was primarily due to the impact of the BPEA Transaction.

For the three months ended March 31, 2023, equity method earnings increased $7.6 million or 11%, primarily due to a $264.5 million or 37% increase in equity method revenue.

Equity method earnings increased less than equity method revenue on a percentage basis, primarily due to the increase in performance-based fees at Affiliates in which we hold less of an economic interest.

Equity method intangible amortization decreased $2.4 million or 10% for the three months ended March 31, 2023, primarily due to a $2.7 million decrease in amortization expense related to certain definite-lived assets being fully amortized and a $1.3 million decrease due to a decline in actual and expected client attrition for certain definite-lived acquired client relationships.

Our equity method revenue decreased $84.9 million or 15% for the three months ended June 30, 2023, due to an $83.8 million or 15% decrease from asset-based fees.

The decrease in asset-based fees was primarily due to the impact of the BPEA Transaction, partially offset by changes in the composition of our assets under management.

While equity method revenue decreased $84.9 million or 15% for the three months ended June 30, 2023, equity method earnings increased $11.6 million or 18%.

Equity method earnings increased primarily due to the recognition of performance-based fees at Affiliates in which we hold more of an economic interest.

Equity method intangible amortization decreased $13.7 million or 40% for the three months ended June 30, 2023, primarily due to a $12.6 million decrease due to a decline in actual and expected client attrition for certain definite-lived acquired client relationships and a $2.7 million decrease in amortization expense related to certain definite-lived assets being fully amortized.

These decreases were partially offset by a $1.6 million increase in amortization expense due to an investment in a new Affiliate.

Investment and Other Income

The following table presents our Investment and other income:

For the Three Months Ended March 31,

(in millions) 2022 2023 % Change

Investment and other income $ 13.6 $ 38.0 N.M.

Our equity method revenue increased $179.7 million or 14% for the six months ended June 30, 2023, principally due to a $360.5 million or 27% increase from performance-based fees, primarily in our liquid alternative strategies, partially offset by a $180.8 million or 13% decrease from asset-based fees.

The decrease in asset-based fees was primarily due to the impact of the BPEA Transaction, partially offset by changes in the composition of our assets under management.

For the six months ended June 30, 2023, equity method earnings increased $19.3 million or 14%, primarily due to a $179.7 million or 14% increase in equity method revenue.

Equity method intangible amortization decreased $16.1 million or 28% for the six months ended June 30, 2023, primarily due to a $13.9 million decrease due to a decline in actual and expected client attrition for certain definite-lived acquired client relationships and a $5.4 million decrease in amortization expense related to certain definite-lived assets being fully amortized.

These decreases were partially offset by a $3.2 million increase in amortization expense due to an investment in a new Affiliate.

Investment and Other Income (Expense)

The following table presents our Investment and other income (expense):

For the Three Months Ended June 30, For the Six Months Ended June 30,

(in millions) 2022 2023 % Change 2022 2023 % Change

Investment and other income (expense) $ (22.0) $ 26.5 N.M .

$ (8.4) $ 64.3 N.M.

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(1) Percentage change is not meaningful.

Investment and other income increased $24.4 million for the three months ended March 31, 2023, primarily due to a $31.4 million increase in net realized and unrealized gains on Investments in marketable securities, partially offset by a $9.8 million decrease in net realized and unrealized gains on Other investments.

Investment and other income increased $48.5 million for the three months ended June 30, 2023, primarily due to increases in net realized and unrealized gains on Other investments and Investments in marketable securities of $23.6 million and $19.3 million, respectively.

Investment and other income increased $72.7 million for the six months ended June 30, 2023, primarily due to increases in net realized and unrealized gains on Investments in marketable securities and Other investments of $50.8 million and $13.7 million, respectively, and an $11.1 million increase in Interest income.

Income Tax Expense

The following table presents our Income tax expense:

For the Three Months Ended March 31,

(in millions) 2022 2023 % Change

For the Three Months Ended June 30, For the Six Months Ended June 30,

(in millions) 2022 2023 % Change 2022 2023 % Change

Income tax expense $ 38.0 $ 32.8 (14) % $ 93.8 $ 77.7 (17) %

Income tax expense decreased $10.7 million or 19% for the three months ended March 31, 2023, primarily due to a $4.7 million decrease in taxes resulting from the $19.5 million decrease in income before income taxes attributable to the controlling interest, a $2.7 million increase in tax windfalls related to share-based compensation, and a $2.7 million decrease in income tax attributable to the non-controlling interest.

Income tax expense decreased $5.2 million or 14% for the three months ended June 30, 2023, primarily due to an $11.1 million tax benefit resulting from a decrease in our 2022 estimated foreign tax expense, partially offset by $2.2 million of tax benefits from the release of certain valuation allowances on foreign net operating losses and $1.1 million of other tax benefits in the three months ended June 30, 2022, neither of which reoccurred, and a $1.9 million increase in taxes resulting from an increase in Income before income taxes attributable to the controlling interest.

Income tax expense decreased $16.1 million or 17% for the six months ended June 30, 2023, primarily due to an $11.1 million tax benefit resulting from a decrease in our 2022 estimated foreign tax expense, a $2.8 million decrease in taxes resulting from a decrease in Income before income taxes attributable to the controlling interest, and a $2.5 million income tax expense attributable to the non-controlling interest in the six months ended June 30, 2022 which did not reoccur.

The following table presents Net income, Net income (non-controlling interests), and Net income (controlling interest):

For the Three Months Ended March 31,

(in millions) 2022 2023 % Change

For the Three Months Ended June 30, For the Six Months Ended June 30,

(in millions) 2022 2023 % Change 2022 2023 % Change

Net income $ 174.0 $ 187.4 8 % $ 392.6 $ 375.9 (4) %

1 unchanged sentence

Net income (controlling interest) 109.4 125.3 15 % 255.4 259.8 2 %

Net income (controlling interest) decreased $11.5 million or 8% for the three months ended March 31, 2023, primarily due to a decrease in Consolidated revenue and an increase in Other expenses (net) attributable to the controlling interest.

These changes were partially offset by an increase in Equity method income (net) and a decrease in Income tax expense attributable to the controlling interest.

Net income (controlling interest) increased $15.9 million or 15% for the three months ended June 30, 2023, primarily due to increases in Investment and other income attributable to the controlling interest and Equity method income (net), partially offset by a decrease in Consolidated revenue and an increase in Other expenses (net) attributable to the controlling interest, primarily related to changes in the values of contingent payment obligations.

Net income (controlling interest) increased $4.4 million or 2% for the six months ended June 30, 2023, primarily due to increases in Investment and other income attributable to the controlling interest and Equity method income (net), partially offset by a decrease in Consolidated revenue and an increase in Other expenses (net) attributable to the controlling interest, primarily related to changes in the values of contingent payment obligations.

Supplemental Financial Performance Measures

5 unchanged sentences

We have retroactively applied this definition change to prior periods.

The table below shows the impact on the years ended December 31, 2020, 2021, and 2022, as well as the three months ended March 31, 2022.

Periods prior to 2020 were also affected by this definition change, none of which were material in any calendar year.

Year Ended December 31, Three Months Ended March 31,

The following table

presents the impact on the three and six months ended June 30, 2022:

For the Three Months Ended June 30, For the Six Months Ended June 30,

(in millions) 2022 2022

Adjusted EBITDA (controlling interest)–As reported $ 214.9 $ 454.9

$ 795.3 $ 1,045.6 $ 1,053.8 $ 240.0

Adjusted EBITDA (controlling interest)–Prior definition 213.4 468.7

Change (attributable to other items) $ (3.5) $ (13.0) $ (6.5) $ (15.3)

Change $ 1.5 $ (13.8)

% Change 0.7 % (2.9) %

Economic net income (controlling interest)–As reported $ 161.6 $ 340.1

$ 621.7 $ 770.0 $ 797.2 $ 178.5

Economic net income (controlling interest)–Prior definition 160.5 350.5

Change (attributable to other economic items) $ (2.7) $ (9.8) $ (4.9) $ (11.5)

Change $ 1.1 $ (10.4)

% Change 0.7 % (3.0) %

Economic earnings per share–As reported $ 4.06 $ 8.41

$ 13.30 $ 18.05 $ 20.02 $ 4.36

Economic earnings per share–Prior definition 4.03 8.67

Change (attributable to other economic items) $ (0.06) $ (0.23) $ (0.12) $ (0.29)

Change $ 0.03 $ (0.26)

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(1) For reconciliations of Net income (controlling interest) to Adjusted EBITDA (controlling interest), Economic net income (controlling interest), and Economic earnings per share under the prior definitions for the each of the years ended December 31, 2020, 2021, and 2022, please see our Annual Reports on Form 10-K for each such fiscal year as filed with the SEC (the “Prior Reconciliations”).

The as reported figures above for such periods under the updated definitions can be reconciled to GAAP by applying the amounts of the respective changes reflected above to (i) other items under the applicable Prior Reconciliations for Adjusted EBITDA (controlling interest) and (ii) other economic items under the applicable Prior Reconciliations for Economic net income (controlling interest) and Economic earnings per share.

% Change 0.7 % (3.0) %

Adjusted EBITDA (controlling interest)

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The following table presents a reconciliation of Net income (controlling interest) to Adjusted EBITDA (controlling interest):

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

(in millions) 2022 2023 2022 2023

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Intangible amortization and impairments (1)

43.1 29.4 75.0 58.8

BPEA Transaction (2)

— (1.4) — (23.0)

Other items (3)

(0.8) (1.5) (18.3) 0.0

Adjusted EBITDA (controlling interest) $ 214.9 $ 214.3 $ 454.9 $ 431.1

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Our share of these Affiliates’ amortization and impairments is reported in Equity method income (net).

The following table presents the Intangible amortization and impairments shown above:

For the Three Months Ended March 31,

The following table presents the

Intangible amortization and impairments shown above:

For the Three Months Ended June 30, For the Six Months Ended June 30,

(in millions) 2022 2023 2022 2023

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The following table presents a reconciliation of Net income (controlling interest) to Economic net income (controlling interest) and Economic earnings per share:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

(in millions, except per share data) 2022 2023 2022 2023

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Intangible amortization and impairments (1)

43.1 29.4 75.0 58.8

Intangible-related deferred taxes 12.8 15.0 28.5 29.8

BPEA Transaction (2)

— (1.1) — (17.4)

Other economic items (3)

(3.7) (1.3) (18.8) (5.6)

Economic net income (controlling interest) $ 161.6 $ 167.3 $ 340.1 $ 325.4

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(1) See note (1) to the table in “Adjusted EBITDA (controlling interest).”

(2) Includes gains on EQT shares, net of $5.3 million of income tax expense.

(2) Includes gains on EQT shares, net of $0.4 million and $5.6 million of income tax expense for the three and six months ended June 30, 2023, respectively.

(3) Other economic items include gains and losses related to contingent payment obligations, tax windfalls and shortfalls from share-based compensation, certain Affiliate equity activity, unrealized gains and losses on seed capital, general partner commitments, and other strategic investments, and realized economic gains and losses related to these seed capital, general partner commitments, and other strategic investments.

For the three months ended March 31, 2022 and 2023, other economic items were net of income tax benefit of $1.6 million and income tax expense of $1.8 million, respectively.

Other economic items were net of income tax (benefit) expense of $(5.4) million and $(7.0) million for the three and six months ended June 30, 2022, respectively, and $2.6 million and $4.4 million for the three and six months ended June 30, 2023, respectively.

Liquidity and Capital Resources

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We continue to manage our capital structure consistent with an investment grade company and are currently rated A3 by Moody’s Investor Services and BBB+ by S&P Global Ratings.

Cash and cash equivalents were $832.8 million as of March 31, 2023 and were attributable to both our controlling and the non-controlling interests.

In the three months ended March 31, 2023, we met our cash requirements primarily through cash generated by operating activities.

Our principal uses of cash in the three months ended March 31, 2023 were for purchases of investment securities and distributions to Affiliate equity holders.

Cash and cash equivalents were $785.5 million as of June 30, 2023 and were attributable to both our controlling and the non-controlling interests.

In the six months ended June 30, 2023, we met our cash requirements primarily through cash generated by operating activities.

Our principal uses of cash in the six months ended June 30, 2023 were for purchases of investment securities, distributions to Affiliate equity holders, and the return of excess capital through share repurchases.

We expect investments in new Affiliates, investments in existing Affiliates, primarily through purchases of Affiliate equity interests and general partner and seed capital investments, the return of capital through share repurchases and the payment of cash dividends on our common stock, repayment of debt, distributions to Affiliate equity holders, payment of income taxes, and general working capital to be the primary uses of cash on a consolidated basis for the foreseeable future.

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In addition, we may draw funding from the debt and equity capital markets, and our credit ratings, among other factors, allow us to access these sources of funding on favorable terms.

Pursuant to the terms of the agreement with a third party and one of our consolidated Affiliates regarding the third party’s acquisition of outstanding equity interests in such Affiliate, we will receive gross cash proceeds of approximately $294 million.

The transaction is expected to close in the second half of 2023, and is subject to customary closing conditions.

See Note 9 of our Consolidated Financial Statements.

Following the closing, we expect to use the proceeds to repay debt, pay taxes, fund future growth initiatives, and repurchase shares of our common stock.

The following table presents operating, investing, and financing cash flow activities:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(in millions) 2022 2023

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Operating cash flows are calculated by adjusting Net income for other significant sources and uses of cash, significant non-cash items, and timing differences in the cash settlement of assets and liabilities.

For the three months ended March 31, 2023, Cash flows from operating activities were $234.8 million, primarily from Net income of $188.5 million adjusted for distributions of earnings received from equity method investments of $305.5 million and for non-cash items of $30.7 million.

For the six months ended June 30, 2023, Cash flows from operating activities were $325.5 million, primarily from Net income of $375.9 million adjusted for distributions of earnings received for equity method investments of $350.9 million and for non-cash items of $49.2 million.

These items were partially offset by timing differences in the cash settlement of receivables, other assets, and payables, accrued liabilities, and other liabilities of $355.3 million.

For the three months ended March 31, 2023, operating cash flows were primarily attributable to the controlling interest.

For the six months ended June 30, 2023, operating cash flows were primarily attributable to the controlling interest.

Investing Cash Flow

For the three months ended March 31, 2023, Cash flows from investing activities were $288.0 million, primarily due to net sales and maturities of investment securities.

For the three months ended March 31, 2023, investing cash flows were primarily attributable to the controlling interest.

For the six months ended June 30, 2023, Cash flows from investing activities were $291.1 million, primarily due to net maturities and sales of investment securities.

For the six months ended June 30, 2023, investing cash flows were primarily attributable to the controlling interest.

Financing Cash Flow

For the three months ended March 31, 2023, Cash flows used in financing activities were $116.9 million, primarily due to $79.5 million of distributions to non-controlling interests and $41.6 million of other financing items.

Cash flows used in financing activities were partially offset by $7.3 million of proceeds from Affiliate equity issuances, net of purchases.

For the six months ended June 30, 2023, Cash flows used in financing activities were $265.2 million, primarily due to $156.4 million of distributions to non-controlling interests, $50.0 million of other financing items, and $44.3 million of repurchases of common stock (net).

Affiliate Equity

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Affiliate equity holders are also permitted to sell their equity interests to other individuals or entities in certain cases, subject to our approval or other restrictions.

As of March 31, 2023, the current redemption value of Affiliate equity interests was $594.1 million, of which $533.2 million was presented as Redeemable non-controlling interests (including $18.5 million of consolidated Affiliate sponsored investment products primarily attributable to third-party investors), and $60.9 million was presented as Other liabilities.

Although the timing and amounts of these purchases are difficult to predict, we received $12.3 million for Affiliate equity issuances and paid $5.0 million for Affiliate equity purchases during the three months ended March 31, 2023, and we expect net purchases of approximately $120 million of Affiliate equity during the remainder of 2023.

As of June 30, 2023, the current redemption value of Affiliate equity interests was $569.3 million, of which $500.9 million was presented as Redeemable non-controlling interests (including $16.0 million of consolidated Affiliate sponsored investment products primarily attributable to third-party investors), and $68.4 million was presented as Other liabilities.

Although the timing and amounts of these purchases are difficult to predict, we paid $21.8 million for Affiliate equity purchases and received $13.4 million for Affiliate equity issuances during the six months ended June 30, 2023, and we expect net purchases of approximately $100 million of Affiliate equity during the remainder of 2023.

In the event of a purchase, we become the owner of the cash flow associated with the purchased equity.

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Purchases may be made from time to time, at management’s discretion, in the open market or in privately negotiated transactions, including through the use of trading plans, as well as pursuant to accelerated share repurchase programs or other share repurchase strategies that may include derivative financial instruments.

During the three months ended March 31, 2023, we did not repurchase any shares of our common stock.

As of March 31, 2023, there were a total of 3.9 million shares available for repurchase under our October 2022 and January 2022 share repurchase programs.

During the three and six months ended June 30, 2023, we repurchased 0.7 million shares of our common stock at an average price per share of $125.13.

As of June 30, 2023, there were a total of 3.2 million shares available for repurchase under our October 2022 and January 2022 share repurchase programs.

In December 2022, we entered into an accelerated share repurchase agreement to repurchase shares of our common stock in exchange for an upfront payment of $225.0 million.

We received an initial share delivery of 1.1 million shares in December 2022, which represents 80% of the upfront payment based on the closing price of our common stock on the agreement date.

The total number of shares to be repurchased will be based on volume-weighted average prices of our common stock during the term of the agreement less a discount and subject to adjustments pursuant to the terms and conditions of such agreement.

The final settlement of this transaction is expected to be completed in the second or third quarter of 2023.

We received an initial share delivery of 1.1 million shares in December

2022, which represented 80% of the upfront payment based on the closing price of our common stock on the agreement date.

In June 2023, we received a final share delivery of 0.4 million shares.

Under this agreement we repurchased a total of 1.5 million shares at an average price of $147.29 per share.

In August 2022, the Inflation Reduction Act was enacted into law and included a 1% excise tax on stock repurchases after December 31, 2022.

We do not currently expect the excise tax to have a material impact on our financial position or cash flows.

We currently do not expect the excise tax to have a material impact on our financial position or cash flows.

The following table presents the carrying value of our outstanding indebtedness.

See Note 7 of our Consolidated Financial Statements.

(in millions) December 31, 2022 March 31, 2023

(in millions) December 31, 2022 June 30, 2023

Senior bank debt $ 350.0 $ 350.0

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Subject to certain conditions, we may increase the commitments under the revolver by up to an additional $500.0 million and may borrow up to an additional $75.0 million under the term loan.

As of March 31, 2023, we had no outstanding borrowings under the revolver, and could borrow all capacity and remain in compliance with our credit facilities.

As of March 31, 2023, we had senior notes outstanding, the respective principal terms of which are presented below:

As of June 30, 2023, we had no outstanding borrowings under the revolver, and could borrow all capacity and remain in compliance with our credit facilities.

As of June 30, 2023, we had senior notes outstanding, the respective principal terms of which are presented below:

Senior Notes 2025

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Junior Subordinated Notes

As of March 31, 2023, we had junior subordinated notes outstanding, the respective principal terms of which are presented below:

As of June 30, 2023, we had junior subordinated notes outstanding, the respective principal terms of which are presented below:

Junior Subordinated Notes 2060

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Junior Convertible Securities

As of March 31, 2023, we had $341.7 million of principal outstanding in our 5.15% junior convertible trust preferred securities (the “junior convertible securities”), maturing in 2037.

As of June 30, 2023, we had $341.7 million of principal outstanding in our 5.15% junior convertible trust preferred securities (the “junior convertible securities”), maturing in 2037.

The junior convertible securities were issued by AMG Capital Trust II, a Delaware statutory trust, in October 2007.

Each of the junior convertible securities represents an undivided

beneficial interest in the assets of the trust.

Each of the junior convertible securities represents an undivided beneficial interest in the assets of the trust.

The trust’s only assets are junior subordinated convertible debentures issued to it by us, and have substantially the same payment terms as the junior convertible securities.

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We may redeem the junior convertible securities, subject to our stock trading at or above certain specified levels over specified periods, and may also repurchase junior convertible securities in the open market or in privately negotiated transactions from time to time at management’s discretion.

During the three months ended March 31, 2022, we repurchased a portion of our junior convertible securities for a purchase price of $16.5 million and as a result of these repurchases, we reduced our Deferred income tax liability (net) by $2.7 million.

We did not repurchase any of our junior convertible securities during the three months ended March 31, 2023.

During the six months ended June 30, 2022, we repurchased a portion of our junior convertible securities for a purchase price of $60.9 million and as a result of these repurchases, we reduced our Deferred income tax liability (net) by $11.7 million.

We did not repurchase any of our junior convertible securities during the six months ended June 30, 2023.

Equity Distribution Program

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This equity distribution program superseded and replaced our prior equity distribution program.

As of March 31, 2023, no sales had occurred under the equity distribution program.

As of June 30, 2023, no sales had occurred under the equity distribution program.

See Note 8 of our Consolidated Financial Statements.

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See Notes 5 and 8 of our Consolidated Financial Statements.

As of March 31, 2023, our lease obligations were $30.8 million for the remainder of 2023, $73.3 million from 2024 through 2025, $45.1 million from 2026 through 2027, and $87.5 million thereafter.

As of June 30, 2023, our lease obligations were $20.2 million for the remainder of 2023, $75.1 million from 2024 through 2025, $48.4 million from 2026 through 2027, and $92.6 million thereafter.

The portion of these lease obligations attributable to the controlling interest were $5.7 million for the remainder of 2023, $20.3 million from 2024 through 2025, $6.5 million from 2026 through 2027, and $10.0 million thereafter.

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Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our Quantitative and Qualitative Disclosures About Market Risk for the three months ended March 31, 2023.

There have been no material changes to our Quantitative and Qualitative Disclosures About Market Risk for the three months ended June 30, 2023.

Please refer to Item 7A of our 2022 Annual Report on Form 10-K.

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