-
U.S. GAAP earnings per share of $0.54 for the quarter, up 145.5%
from Q4 2018
-
ENI earnings per share of $0.40 for the quarter, a decrease of
(7.0)% from Q4 2018
-
AUM of $222.3 billion at March 31, 2019, up 7.8% from December 31,
2018
-
Net client cash flows (“NCCF”) for the quarter of $(1.8) billion
with an annualized revenue impact of $(5.9) million
LONDON--(BUSINESS WIRE)--
BrightSphere Investment Group plc (NYSE: BSIG) reports its results for
the first quarter ended March 31, 2019.
This press release features multimedia. View the full release here:
https://www.businesswire.com/news/home/20190502005271/en/
“Improving equity markets and net client cash flow trends produced solid
results for the quarter, including ENI per share of $0.40,” said Guang
Yang, BrightSphere’s President and Chief Executive Officer. “Our
long-term investment performance remains strong across our Affiliates,
particularly in our solutions and alternative product areas. As of March
31, assets representing 59%, 72% and 66% of revenue outperformed
benchmarks on a three-, five-, and ten-year basis, respectively. Our
Affiliates’ adherence to their rigorous investment disciplines has
produced excellent long-term results that continue to generate demand in
the institutional marketplace. Our gross sales increased in Q1'19
relative to Q4'18, and our outflows improved despite continued headwinds
in U.S. equity and domestic large-cap subadvisory strategies, resulting
in net AUM flows of $(1.8) billion for the quarter and an annualized
revenue impact of $(5.9) million.
“We took a number of steps during the quarter to streamline and simplify
our business and position BrightSphere for its next phase of growth. We
have rationalized our structure and functions at the Center to focus on
activities that can drive organic growth, and year-over-year, our total
costs declined by approximately $3 million. In addition, we have
initiated the process for our U.S. redomicile which is expected to be
completed in the third quarter of 2019. We see a range of excellent
growth opportunities ahead, and have begun to augment our distribution
and business development capabilities, including several excellent new
hires on our global team. Members of our Global Distribution Team joined
me in Asia and Europe recently, where we engaged in a wide range of
discussions with institutional investors in key markets who are seeking
the type of high quality investment management expertise our Affiliates
are known to provide to their clients.”
Mr. Yang concluded, “Finally, we were pleased this quarter to return
value to our shareholders with the repurchase of 13,498,078 ordinary
shares of BrightSphere at attractive levels. Going forward, our capital
management will focus on using our strong free cash flow from operations
to support our growth strategy.”
|
Table 1: Key Performance Metrics
|
($ in millions, unless otherwise noted)
|
|
Three Months Ended March 31,
|
|
Three Months Ended December 31,
|
U.S. GAAP Basis
|
|
2019
|
|
2018
|
|
Increase
(Decrease)
|
|
2018
|
|
Increase
(Decrease)
|
Revenue
|
|
$
|
207.2
|
|
|
$
|
249.7
|
|
|
(17.0
|
)
|
|
$
|
214.5
|
|
|
(3.4
|
)
|
Pre-tax income from cont. ops. attributable to controlling interests
|
|
74.3
|
|
|
86.0
|
|
|
(13.6
|
)
|
|
39.1
|
|
|
90.0
|
%
|
Net income attributable to controlling interests
|
|
52.7
|
|
|
57.3
|
|
|
(8.0
|
)
|
|
23.0
|
|
|
129.1
|
%
|
Diluted shares outstanding (in millions)
|
|
97.8
|
|
|
109.6
|
|
|
|
|
105.8
|
|
|
|
Diluted earnings per share, $
|
|
$
|
0.54
|
|
|
$
|
0.52
|
|
|
3.8
|
%
|
|
$
|
0.22
|
|
|
145.5
|
%
|
U.S. GAAP operating margin
|
|
32.8
|
%
|
|
10.3
|
%
|
|
2257 bps
|
|
14.0
|
%
|
|
1882 bps
|
|
|
|
|
|
|
|
|
|
|
|
Economic Net Income Basis (Non-GAAP
measure used by management)
|
|
|
|
|
|
|
|
|
|
|
ENI revenue
|
|
$
|
205.7
|
|
|
$
|
247.8
|
|
|
(17.0
|
)
|
|
$
|
212.0
|
|
|
(3.0
|
)
|
Pre-tax economic net income
|
|
51.6
|
|
|
71.4
|
|
|
(27.7
|
)
|
|
61.1
|
|
|
(15.5
|
)
|
Economic net income
|
|
39.2
|
|
|
54.9
|
|
|
(28.6
|
)
|
|
45.6
|
|
|
(14.0
|
)
|
ENI diluted earnings per share, $
|
|
$
|
0.40
|
|
|
$
|
0.50
|
|
|
(20.0
|
)
|
|
$
|
0.43
|
|
|
(7.0
|
)
|
Adjusted EBITDA
|
|
58.9
|
|
|
79.0
|
|
|
(25.4
|
)
|
|
67.8
|
|
|
(13.1
|
)
|
ENI operating margin
|
|
33.3
|
%
|
|
40.1
|
%
|
|
(677) bps
|
|
36.6
|
%
|
|
(330) bps
|
|
|
|
|
|
|
|
|
|
|
|
Other Operational Information
|
|
|
|
|
|
|
|
|
|
|
Assets under management at period end ($ in billions)
|
|
$
|
222.3
|
|
|
$
|
240.1
|
|
|
(7.4
|
)%
|
|
$
|
206.3
|
|
|
7.8
|
%
|
Net client cash flows ($ in billions)
|
|
(1.8
|
)
|
|
1.9
|
|
|
n/m
|
|
(5.7
|
)
|
|
68.4
|
%
|
Annualized revenue impact of net flows ($ in millions)
|
|
(5.9
|
)
|
|
19.0
|
|
|
n/m
|
|
(12.3
|
)
|
|
52.0
|
%
|
Please see “Definitions and Additional Notes.” Please see Table 7
for a reconciliation of U.S. GAAP net income attributable to
controlling interests to economic net income.
|
|
Assets Under Management and Flows
At March 31, 2019, BrightSphere’s total assets under management (“AUM”)
were $222.3 billion, up $16.0 billion, or 7.8%, compared to $206.3
billion at December 31, 2018. The increase in AUM during the three
months ended March 31, 2019 primarily reflects net market appreciation
of $17.8 billion and net outflows of $(1.8) billion, including hard
asset disposals of $(0.1) billion. NCCF improved from Q4 2018 driven by
higher gross sales and lower redemptions. For the three months ended
March 31, 2019, the annualized revenue impact of the net flows was
$(5.9) million with gross inflows of $6.9 billion during the period into
higher fee asset classes yielding approximately 34.7 bps, versus gross
outflows and hard asset disposals in the same period of $(8.7) billion
out of asset classes yielding approximately 34.3 bps. The narrower gap
between inflows and outflows bps was driven by a change in mix of flows.
|
Table 2: Assets Under Management Rollforward Summary
|
($ in billions, unless otherwise noted)
|
|
Three Months Ended
|
|
March 31, 2019
|
|
December 31, 2018
|
|
March 31, 2018
|
Beginning AUM
|
|
$
|
206.3
|
|
|
$
|
237.7
|
|
|
$
|
243.0
|
|
Gross inflows
|
|
6.9
|
|
|
4.3
|
|
|
10.3
|
|
Gross outflows
|
|
(8.6
|
)
|
|
(9.9
|
)
|
|
(8.3
|
)
|
Net flows before hard asset disposals
|
|
(1.7
|
)
|
|
(5.6
|
)
|
|
2.0
|
|
Hard asset disposals
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
(0.1
|
)
|
Net flows
|
|
(1.8
|
)
|
|
(5.7
|
)
|
|
1.9
|
|
Market appreciation (depreciation)
|
|
17.8
|
|
|
(25.6
|
)
|
|
(3.3
|
)
|
Other(1) |
|
—
|
|
|
(0.1
|
)
|
|
(1.5
|
)
|
Ending AUM
|
|
$
|
222.3
|
|
|
$
|
206.3
|
|
|
$
|
240.1
|
|
|
|
|
|
|
|
|
Basis points: inflows
|
|
34.7
|
|
|
45.9
|
|
|
48.9
|
|
Basis points: outflows
|
|
34.3
|
|
|
32.0
|
|
|
37.4
|
|
Annualized revenue impact of net flows ($ in millions)
|
|
$
|
(5.9
|
)
|
|
$
|
(12.3
|
)
|
|
$
|
19.0
|
|
Derived average weighted NCCF ($ in billions)
|
|
(1.5
|
)
|
|
(3.3
|
)
|
|
4.6
|
|
(1) “Other” in 2018 primarily relates to the decline in billable
AUM as a legacy alternative fund transitioned from billing based on
committed AUM to net asset value.
|
Please see “Definitions and Additional Notes”
|
|
Balance Sheet and Capital Management
Condensed Consolidated Balance Sheets as of March 31, 2019 and
December 31, 2018 are provided in Table 3 below. At March 31, 2019, the
Company had $393.4 million of long-term bonds ($400.0 million face
value, net of discount and fees), $235.0 million outstanding on its $350
million credit facility and $0.0 million drawn on a non-recourse seed
capital financing facility. Shareholders’ deficit (attributable to
controlling interests) amounted to $(29.4) million. The change in
Shareholders’ equity (deficit) was driven by the share repurchases
during the first quarter. As of March 31, 2019, the Company’s ratio of
debt(2) to trailing twelve months Adjusted EBITDA was 2.3x.
Of the Company’s cash and cash equivalents of $73.3 million at March 31,
2019, $48.8 million was held at Affiliates and $24.5 million was
available at the Center.
As of March 31, 2019, the Company had total seed and co-investment
holdings of $167.8 million. The Company has drawn $235.0 million on the
revolving credit facility, leaving $115.0 million available to be drawn
down as of March 31, 2019.
In the three months ended March 31, 2019, the Company purchased
13,498,078 ordinary shares at an average price of $13.28 per share, or
approximately $179.3 million in total.
|
|
|
|
|
Table 3: Condensed Consolidated Balance Sheets
|
|
|
|
|
($ in millions)
|
|
March 31, 2019
|
|
December 31, 2018
|
Assets
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
73.3
|
|
|
$
|
340.6
|
|
Investment advisory fees receivable
|
|
151.4
|
|
|
159.1
|
|
Investments
|
|
211.8
|
|
|
198.5
|
|
Other assets
|
|
757.0
|
|
|
710.9
|
|
Assets of consolidated Funds(1) |
|
162.4
|
|
|
144.6
|
|
Total assets
|
|
$
|
1,355.9
|
|
|
$
|
1,553.7
|
|
|
|
|
|
|
Liabilities and equity
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
93.6
|
|
|
$
|
225.3
|
|
Due to OM plc
|
|
30.4
|
|
|
33.0
|
|
Third party borrowings
|
|
628.4
|
|
|
393.3
|
|
Other liabilities
|
|
533.5
|
|
|
711.1
|
|
Liabilities of consolidated Funds(1) |
|
18.4
|
|
|
14.9
|
|
Total liabilities
|
|
1,304.3
|
|
|
1,377.6
|
|
|
|
|
|
|
Shareholders’ equity (deficit)
|
|
(29.4
|
)
|
|
103.3
|
|
Non-controlling interests, including NCI of consolidated Funds(1) |
|
81.0
|
|
|
72.8
|
|
Total equity
|
|
51.6
|
|
|
176.1
|
|
Total liabilities and equity
|
|
$
|
1,355.9
|
|
|
$
|
1,553.7
|
|
|
|
|
|
|
Debt / trailing twelve months Adjusted EBITDA(2) |
|
2.3
|
x
|
|
2.1
|
x
|
(1) Consolidated Funds represent certain seed and co-investments.
|
(2) Calculated per terms of the Company’s external revolver and
excludes non-recourse borrowings. As of December 31, 2018, the
calculation includes amounts owed under the previously agreed
acquisition agreement.
|
Please see “Definitions and Additional Notes”
|
|
Investment Performance
Table 4 below presents a summary of the Company’s investment performance
as of March 31, 2019, December 31, 2018 and March 31, 2018. Performance
is shown on a revenue-weighted basis, an equal-weighted basis and an
asset-weighted basis. Please see “Definitions and Additional Notes” for
further information on the calculation of performance.
|
Table 4: Investment Performance(1)
|
(% outperformance vs. benchmark)
|
Revenue-Weighted
|
|
March 31, 2019
|
|
December 31, 2018
|
|
March 31, 2018
|
3-Year
|
59%
|
|
68%
|
|
72%
|
5-Year
|
72%
|
|
75%
|
|
79%
|
10-Year
|
66%
|
|
76%
|
|
91%
|
|
|
|
|
|
|
|
Equal-Weighted
|
|
March 31, 2019
|
|
December 31, 2018
|
|
March 31, 2018
|
3-Year
|
53%
|
|
61%
|
|
72%
|
5-Year
|
66%
|
|
65%
|
|
75%
|
10-Year
|
76%
|
|
80%
|
|
88%
|
|
|
|
|
|
|
|
Asset-Weighted
|
|
March 31, 2019
|
|
December 31, 2018
|
|
March 31, 2018
|
3-Year
|
53%
|
|
65%
|
|
69%
|
5-Year
|
65%
|
|
70%
|
|
74%
|
10-Year
|
57%
|
|
70%
|
|
92%
|
Investment performance is calculated gross of fees.
|
|
|
|
|
|
Please see “Definitions and Additional Notes”
|
|
|
|
|
|
(1) As of March 31, 2019 assets representing 27% of revenue were
outperforming benchmarks on a 1- year basis, compared to 31% at
December 31, 2018 and 62% at March 31, 2018.
|
|
As of March 31, 2019, assets representing 59%, 72% and 66% of revenue
were outperforming benchmarks on a 3-, 5- and 10- year basis,
respectively, compared to 68%, 75% and 76% at December 31, 2018; and
72%, 79% and 91% at March 31, 2018.
Financial Results: U.S. GAAP
Table 5 below presents the Company’s U.S. GAAP Statement of Operations.
Diluted earnings per share increased 145.5% from $0.22 for the three
months ended December 31, 2018 to $0.54 for the three months ended
March 31, 2019. Earnings per share calculations are impacted by the
shares repurchased in 2018 and 2019 which contributed to a decrease in
average diluted shares outstanding of (8.0) million, or (7.6)% between
the three-month periods. U.S. GAAP revenue decreased $(7.3) million, or
(3.4)%, from $214.5 million for the three months ended December 31,
2018, to $207.2 million for the three months ended March 31, 2019,
primarily as a result of lower net performance fees in the three months
ended March 31, 2019. Operating expenses decreased $(45.7) million, or
(24.7)%, from $184.9 million for the three months ended December 31,
2018, to $139.2 million for the three months ended March 31, 2019,
primarily due to decreases in compensation and benefits expense, driven
by lower Affiliate equity revaluations and lower acquisition-related
consideration as the Landmark earnout was fully accrued as of Q4’18 and
settled this quarter. Income tax expense increased from $16.1 million
for the three months ended December 31, 2018, to $21.6 million for the
three months ended March 31, 2019 reflecting higher earnings in 2019.
|
|
|
|
|
|
|
|
|
|
Table 5: U.S. GAAP Statement of Operations
|
|
|
|
|
|
|
|
|
|
($ in millions, unless otherwise noted)
|
Three Months Ended March 31,
|
|
Three Months Ended December 31,
|
|
2019
|
|
2018
|
|
Increase
(Decrease)
|
|
2018
|
|
Increase
(Decrease)
|
Management fees
|
$
|
207.5
|
|
|
$
|
245.0
|
|
|
(15.3
|
)%
|
|
$
|
204.0
|
|
|
1.7
|
%
|
Performance fees
|
(2.8
|
)
|
|
2.0
|
|
|
n/m
|
|
6.9
|
|
|
n/m
|
Other revenue
|
1.4
|
|
|
2.5
|
|
|
(44.0
|
)%
|
|
2.4
|
|
|
(41.7
|
)%
|
Consolidated Funds’ revenue
|
1.1
|
|
|
0.2
|
|
|
n/m
|
|
1.2
|
|
|
(8.3
|
)%
|
Total revenue
|
207.2
|
|
|
249.7
|
|
|
(17.0
|
)%
|
|
214.5
|
|
|
(3.4
|
)%
|
Compensation and benefits (see Table 6)
|
101.1
|
|
|
189.2
|
|
|
(46.6
|
)%
|
|
143.6
|
|
|
(29.6
|
)%
|
General and administrative
|
32.5
|
|
|
29.5
|
|
|
10.2
|
%
|
|
35.7
|
|
|
(9.0
|
)%
|
Amortization of acquired intangibles
|
1.6
|
|
|
1.6
|
|
|
—
|
%
|
|
1.7
|
|
|
(5.9
|
)%
|
Depreciation and amortization
|
3.8
|
|
|
3.4
|
|
|
11.8
|
%
|
|
3.9
|
|
|
(2.6
|
)%
|
Consolidated Funds’ expense
|
0.2
|
|
|
0.4
|
|
|
(50.0
|
)%
|
|
—
|
|
|
n/m
|
Total operating expenses
|
139.2
|
|
|
224.1
|
|
|
(37.9
|
)%
|
|
184.9
|
|
|
(24.7
|
)%
|
Operating income
|
68.0
|
|
|
25.6
|
|
|
165.6
|
%
|
|
29.6
|
|
|
129.7
|
%
|
Investment income (loss)
|
7.0
|
|
|
66.1
|
|
|
(89.4
|
)%
|
|
(3.1
|
)
|
|
n/m
|
Interest income
|
1.1
|
|
|
0.5
|
|
|
120.0
|
%
|
|
1.2
|
|
|
(8.3
|
)%
|
Interest expense
|
(7.0
|
)
|
|
(6.3
|
)
|
|
11.1
|
%
|
|
(6.2
|
)
|
|
12.9
|
%
|
Revaluation of DTA deed
|
—
|
|
|
—
|
|
|
n/m
|
|
20.0
|
|
|
(100.0
|
)%
|
Net consolidated Funds’ investment gains (losses)
|
13.6
|
|
|
(2.4
|
)
|
|
n/m
|
|
(6.6
|
)
|
|
n/m
|
Income from continuing operations before taxes
|
82.7
|
|
|
83.5
|
|
|
(1.0
|
)%
|
|
34.9
|
|
|
137.0
|
%
|
Income tax expense (benefit)
|
21.6
|
|
|
28.7
|
|
|
(24.7
|
)%
|
|
16.1
|
|
|
34.2
|
%
|
Income from continuing operations
|
61.1
|
|
|
54.8
|
|
|
11.5
|
%
|
|
18.8
|
|
|
225.0
|
%
|
Gain (loss) on disposal of discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
n/m
|
|
—
|
|
|
n/m
|
Net income
|
61.1
|
|
|
54.8
|
|
|
11.5
|
%
|
|
18.8
|
|
|
225.0
|
%
|
Net income (loss) attributable to non-controlling interests
|
8.4
|
|
|
(2.5
|
)
|
|
n/m
|
|
(4.2
|
)
|
|
n/m
|
Net income attributable to controlling interests
|
$
|
52.7
|
|
|
$
|
57.3
|
|
|
(8.0
|
)%
|
|
$
|
23.0
|
|
|
129.1
|
%
|
Earnings per share, basic, $
|
$
|
0.54
|
|
|
$
|
0.52
|
|
|
3.8
|
%
|
|
$
|
0.22
|
|
|
145.5
|
%
|
Earnings per share, diluted, $
|
0.54
|
|
|
0.52
|
|
|
3.8
|
%
|
|
0.22
|
|
|
145.5
|
%
|
Basic shares outstanding (in millions)
|
97.6
|
|
|
109.4
|
|
|
|
|
105.6
|
|
|
|
Diluted shares outstanding (in millions)
|
97.8
|
|
|
109.6
|
|
|
|
|
105.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP operating margin
|
33
|
%
|
|
10
|
%
|
|
2257 bps
|
|
14
|
%
|
|
1882 bps
|
Pre-tax income from continuing operations attributable to
controlling interests
|
$
|
74.3
|
|
|
$
|
86.0
|
|
|
(13.6
|
)%
|
|
$
|
39.1
|
|
|
90.0
|
%
|
Net income from continuing operations attributable to controlling
interests
|
52.7
|
|
|
57.3
|
|
|
(8.0
|
)%
|
|
23.0
|
|
|
129.1
|
%
|
Please see “Definitions and Additional Notes”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 6: Components of U.S. GAAP Compensation and Benefits
Expense
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
Three Months Ended March 31,
|
|
Three Months Ended December 31,
|
|
2019
|
|
2018
|
|
Increase
(Decrease)
|
|
2018
|
|
Increase
(Decrease)
|
Fixed compensation and benefits(1) |
$
|
50.8
|
|
|
$
|
49.2
|
|
|
3.3
|
%
|
|
$
|
45.9
|
|
|
10.7
|
%
|
Sales-based compensation
|
2.7
|
|
|
4.9
|
|
|
(44.9
|
)%
|
|
4.1
|
|
|
(34.1
|
)%
|
Variable compensation(2) |
52.7
|
|
|
63.9
|
|
|
(17.5
|
)%
|
|
53.5
|
|
|
(1.5
|
)%
|
Affiliate key employee distributions
|
13.4
|
|
|
23.7
|
|
|
(43.5
|
)%
|
|
13.7
|
|
|
(2.2
|
)%
|
Non-cash key employee-owned equity revaluations
|
(20.1
|
)
|
|
29.9
|
|
|
n/m
|
|
8.7
|
|
|
n/m
|
Acquisition-related consideration and pre-acquisition employee
equity(3)
|
1.6
|
|
|
17.6
|
|
|
(90.9
|
)%
|
|
17.7
|
|
|
(91.0
|
)%
|
Total U.S. GAAP compensation and benefits expense
|
$
|
101.1
|
|
|
$
|
189.2
|
|
|
(46.6
|
)%
|
|
$
|
143.6
|
|
|
(29.6
|
)%
|
(1) For the three months ended March 31, 2019 and 2018, $49.7
million and $46.9 million of fixed compensation and benefits (of the
$50.8 million and $49.2 million above), respectively, is included
within economic net income, which excludes fixed compensation and
benefits paid by our Affiliates on behalf of their customers that is
subsequently reimbursed. For the three months ended December 31,
2018, $44.7 million of fixed compensation and benefits (of the $45.9
million above) is included within economic net income, which
excludes compensation and benefits associated with the 2018 CEO
transition and fixed compensation paid by our Affiliates on behalf
of their customers that is subsequently reimbursed.
|
(2) For the three months ended March 31, 2019, $48.7 million of
variable compensation (of the $52.7 million above) is included
within economic net income, which excludes variable compensation
costs associated with restructuring at the Center. For the three
months ended December 31, 2018, $48.3 million of variable
compensation (of the $53.5 million above) is included within
economic net income, which excludes variable compensation associated
with the 2018 CEO transition and variable compensation paid by our
Affiliates on behalf of their customers that is subsequently
reimbursed.
|
(3) Reflects amortization of contingent consideration and equity
owned by employees, both with a service requirement, associated with
the Landmark acquisition; revaluation of the Landmark interests is
included in “Non-cash key employee-owned equity revaluations” above.
|
Please see “Definitions and Additional Notes”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Results: Non-GAAP Economic Net Income
Diluted economic net income per share decreased (7.0)% from $0.43 for
the three months ended December 31, 2018 to $0.40 for the three months
ended March 31, 2019.
ENI revenue (see Table 8) decreased $(6.3) million or (3.0)%, from
$212.0 million to $205.7 million, driven primarily by a decrease in
performance fees from $6.9 million to $(2.8) million, principally
reflecting the variable nature of performance fees and the heavier Q4
performance period. Average AUM excluding equity-accounted Affiliates
(see Table 12) decreased (1.6)% from the three months ended December 31,
2018 to $215.9 billion, and the bps yield on these assets increased from
36.9 bps to 39.0 bps. Total ENI operating expenses (see Table 9) grew
2.8% to $88.5 million, from $86.1 million in the prior quarter as a
result of ongoing investments in the business offset by cost control
initiatives, and total ENI operating expenses as a percentage of
management fee revenue increased 44 bps from 42.2% to 42.7%. Total
variable compensation increased 0.8% from $48.3 million to $48.7 million
while the ENI variable compensation ratio (variable compensation as a
percentage of ENI earnings before variable compensation) increased from
38.4% to 41.6%. Affiliate key employee distributions decreased (2.2)%
quarter-over-quarter, from $13.7 million to $13.4 million, primarily due
to lower ENI operating earnings and the levered structure of
distributions at certain Affiliates. The ratio of Affiliate key employee
distributions over ENI operating earnings increased from 17.7% to 19.6%
due to lower ENI operating earnings. Tax on economic net income for the
three months ended March 31, 2019 and December 31, 2018 was $12.4
million and $15.5 million, respectively, a decrease of $(3.1) million,
or (20.0)%, primarily due to lower earnings.
For the three months ended March 31, 2019, Adjusted EBITDA was $58.9
million, a decrease of (13.1)% compared to $67.8 million for the three
months ended December 31, 2018. See Table 17 for a reconciliation of
U.S. GAAP net income attributable to controlling interests to EBITDA,
Adjusted EBITDA and ENI.
|
|
|
Table 7: Reconciliation of U.S. GAAP Net Income to Economic
Net Income
|
|
|
($ in millions)
|
|
Three Months Ended March 31,
|
|
Three Months Ended
December 31,
|
|
|
2019
|
|
2018
|
|
2018
|
U.S. GAAP net income attributable to controlling interests
|
|
$
|
52.7
|
|
|
$
|
57.3
|
|
|
$
|
23.0
|
|
Adjustments to reflect the economic earnings of the Company:
|
|
|
|
|
|
|
i.
|
Non-cash key employee-owned equity and profit interest revaluations
|
|
(20.1
|
)
|
|
29.9
|
|
|
8.7
|
|
ii.
|
Amortization of acquired intangible assets, acquisition-related
consideration and pre-acquisition employee equity
|
|
3.2
|
|
|
19.2
|
|
|
19.4
|
|
iii.
|
Capital transaction costs
|
|
—
|
|
|
—
|
|
|
1.5
|
|
iv.
|
Seed/Co-investment (gains) losses and financings
|
|
(10.2
|
)
|
|
1.8
|
|
|
7.2
|
|
v.
|
Tax benefit of goodwill and acquired intangibles deductions
|
|
2.3
|
|
|
1.5
|
|
|
1.3
|
|
vi.
|
Discontinued operations and restructuring(1) |
|
4.3
|
|
|
(65.6
|
)
|
|
(14.7
|
)
|
vii.
|
ENI tax normalization
|
|
0.8
|
|
|
6.8
|
|
|
5.3
|
|
Tax effect of above adjustments, as applicable(2) |
|
6.2
|
|
|
4.0
|
|
|
(6.1
|
)
|
Economic net income
|
|
$
|
39.2
|
|
|
$
|
54.9
|
|
|
$
|
45.6
|
|
(1) The three months ended March 31, 2019 includes restructuring
costs at the Center of $4.0 million and costs associated with the
planned redomicile to the U.S. of $0.3 million. The three months
ended March 31, 2018 includes the gain on sale of Heitman of $(65.7)
million. The three months ended December 31, 2018 include costs
associated with the planned redomicile to the U.S. of $1.6 million,
CEO transition costs of $4.8 million and a revaluation of the DTA
deed with OM plc of $(20.0) million.
|
(2) Reflects the sum of lines i., ii., iii., iv. and the
restructuring component of line vi. multiplied by the 27.3% U.S.
statutory tax rate (including state tax).
|
See Table 14 for a per-share presentation of the above
reconciliation.
|
|
|
Please see the definition of Economic Net Income within
“Definitions and Additional Notes”
|
|
|
|
|
|
The following table identifies the components of ENI revenue:
|
|
|
|
|
|
|
|
|
|
|
Table 8: Components of ENI Revenue
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
Three Months Ended March 31,
|
|
Three Months Ended December 31,
|
|
|
2019
|
|
2018
|
|
Increase
(Decrease)
|
|
2018
|
|
Increase
(Decrease)
|
Management fees
|
|
$
|
207.5
|
|
|
$
|
245.0
|
|
|
(15.3
|
)%
|
|
$
|
204.0
|
|
|
1.7
|
%
|
Performance fees
|
|
(2.8
|
)
|
|
2.0
|
|
|
n/m
|
|
6.9
|
|
|
n/m
|
Other income, including equity-accounted Affiliates
|
|
1.0
|
|
|
0.8
|
|
|
25.0
|
%
|
|
1.1
|
|
|
(9.1
|
)%
|
ENI revenue
|
|
$
|
205.7
|
|
|
$
|
247.8
|
|
|
(17.0
|
)%
|
|
$
|
212.0
|
|
|
(3.0
|
)%
|
See Table 15 for a reconciliation from U.S. GAAP revenue to ENI
revenue.
|
|
|
|
|
Please see “Definitions and Additional Notes”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table identifies the components of ENI operating expense:
|
|
|
|
|
|
|
|
|
|
|
Table 9: Components of ENI Operating Expense
|
|
|
|
|
|
|
($ in millions)
|
|
Three Months Ended March 31,
|
|
Three Months Ended December 31,
|
|
|
2019
|
|
2018
|
|
Increase
(Decrease)
|
|
2018
|
|
Increase
(Decrease)
|
Fixed compensation & benefits
|
|
$
|
49.7
|
|
|
$
|
46.9
|
|
|
6.0
|
%
|
|
$
|
44.7
|
|
|
11.2
|
%
|
General and administrative expenses
|
|
35.0
|
|
|
34.3
|
|
|
2.0
|
%
|
|
37.5
|
|
|
(6.7
|
)%
|
Depreciation and amortization
|
|
3.8
|
|
|
3.4
|
|
|
11.8
|
%
|
|
3.9
|
|
|
(2.6
|
)%
|
ENI operating expense
|
|
$
|
88.5
|
|
|
$
|
84.6
|
|
|
4.6
|
%
|
|
$
|
86.1
|
|
|
2.8
|
%
|
See Table 16 for a reconciliation from U.S. GAAP operating
expense to ENI operating expense.
|
|
|
|
|
Please see “Definitions and Additional Notes”
|
|
|
|
|
|
|
|
|
|
The following table shows our key non-GAAP operating metrics for the
three months ended March 31, 2019 and 2018, and December 31, 2018. We
present these metrics because they are the measures our management uses
to evaluate the profitability of our business and are useful to
investors because they represent the key drivers and measures of
economic performance within our business model. Please see “Definitions
and Additional Notes” for an explanation of each ratio and its
usefulness in measuring the economics and operating performance of our
business.
|
|
|
|
|
|
|
|
|
|
Table 10: Key ENI Operating Metrics
|
|
|
|
|
|
|
($ in millions)
|
Three Months Ended March 31,
|
|
Three Months Ended December 31,
|
|
2019
|
|
2018
|
|
Increase
(Decrease)
|
|
2018
|
|
Increase
(Decrease)
|
Numerator: ENI operating earnings(1) |
$
|
68.5
|
|
|
$
|
99.3
|
|
|
(31.0
|
)%
|
|
$
|
77.6
|
|
|
(11.7
|
)%
|
Denominator: ENI revenue
|
$
|
205.7
|
|
|
$
|
247.8
|
|
|
(17.0
|
)%
|
|
$
|
212.0
|
|
|
(3.0
|
)%
|
ENI operating margin
|
33.3
|
%
|
|
40.1
|
%
|
|
(677) bps
|
|
36.6
|
%
|
|
(330) bps
|
|
|
|
|
|
|
|
|
|
|
Numerator: ENI operating expense
|
$
|
88.5
|
|
|
$
|
84.6
|
|
|
4.6
|
%
|
|
$
|
86.1
|
|
|
2.8
|
%
|
Denominator: ENI management fee revenue
|
$
|
207.5
|
|
|
$
|
245.0
|
|
|
(15.3
|
)%
|
|
$
|
204.0
|
|
|
1.7
|
%
|
ENI operating expense ratio
|
42.7
|
%
|
|
34.5
|
%
|
|
812 bps
|
|
42.2
|
%
|
|
44 bps
|
|
|
|
|
|
|
|
|
|
|
Numerator: ENI variable compensation
|
$
|
48.7
|
|
|
$
|
63.9
|
|
|
(23.8
|
)%
|
|
$
|
48.3
|
|
|
0.8
|
%
|
Denominator: ENI earnings before variable compensation(2) |
$
|
117.2
|
|
|
$
|
163.2
|
|
|
(28.2
|
)%
|
|
$
|
125.9
|
|
|
(6.9
|
)%
|
ENI variable compensation ratio
|
41.6
|
%
|
|
39.2
|
%
|
|
240 bps
|
|
38.4
|
%
|
|
319 bps
|
|
|
|
|
|
|
|
|
|
|
Numerator: Affiliate key employee distributions
|
$
|
13.4
|
|
|
$
|
23.7
|
|
|
(43.5
|
)%
|
|
$
|
13.7
|
|
|
(2.2
|
)%
|
Denominator: ENI operating earnings(1) |
$
|
68.5
|
|
|
$
|
99.3
|
|
|
(31.0
|
)%
|
|
$
|
77.6
|
|
|
(11.7
|
)%
|
ENI Affiliate key employee distributions ratio
|
19.6
|
%
|
|
23.9
|
%
|
|
(431) bps
|
|
17.7
|
%
|
|
191 bps
|
|
|
|
|
|
|
|
|
|
|
Numerator: Tax on economic net income
|
$
|
12.4
|
|
|
$
|
16.5
|
|
|
(24.8
|
)%
|
|
$
|
15.5
|
|
|
(20.0
|
)%
|
Denominator: Pre-tax economic net income
|
$
|
51.6
|
|
|
$
|
71.4
|
|
|
(27.7
|
)%
|
|
$
|
61.1
|
|
|
(15.5
|
)%
|
Economic net income effective tax rate
|
24.0
|
%
|
|
23.1
|
%
|
|
92 bps
|
|
25.4
|
%
|
|
(134) bps
|
(1) ENI operating earnings represents ENI earnings before
Affiliate key employee distributions and is calculated as ENI
revenue, less ENI operating expense, less ENI variable compensation.
|
(2) ENI earnings before variable compensation is calculated as
ENI revenue, less ENI operating expense.
|
Please see “Definitions and Additional Notes”
|
Please refer to the Company’s Quarterly Report on Form 10-Q for
comparable U.S. GAAP metrics.
|
|
|
|
|
|
|
|
|
|
Dividend Declaration
The Company’s Board of Directors approved a quarterly interim dividend
of $0.10 per share payable on June 28, 2019 to shareholders of record as
of the close of business on June 14, 2019.
About BrightSphere
BrightSphere is a global, multi-boutique asset management company with
$222.3 billion of assets under management as of March 31, 2019. Its
diverse Affiliates offer leading, alpha generating investment products
to investors around the world. BrightSphere’s partnership approach,
which includes equity ownership at the Affiliate level and a profit
sharing relationship between BrightSphere and its Affiliates, aligns the
interests of the Company and its Affiliates to work collaboratively in
accelerating their growth. BrightSphere’s business model combines the
investment talent, entrepreneurialism, focus and creativity of leading
asset management boutiques with the resources and capabilities of a
larger firm. For more information about BrightSphere, please visit the
Company’s website at www.bsig.com.
Forward Looking Statements
This press release includes forward-looking statements, as that term is
used in the Private Securities Litigation Reform Act of 1995, including
information relating to anticipated growth in revenues, margins or
earnings, anticipated changes in the Company’s business, anticipated
future performance of the Company’s business, the impact of the Landmark
acquisition, anticipated future investment performance of the Company’s
Affiliates, the impact of the proposed redomestication to the United
States, expected future net cash flows, anticipated expense levels,
changes in expense, the expected effects of acquisitions and
expectations regarding market conditions. The words or phrases ‘‘will
likely result,’’ ‘‘are expected to,’’ ‘‘will continue,’’ ‘‘is
anticipated,’’ ‘‘can be,’’ ‘‘may be,’’ ‘‘aim to,’’ ‘‘may affect,’’ ‘‘may
depend,’’ ‘‘intends,’’ ‘‘expects,’’ ‘‘believes,’’ ‘‘estimate,’’
‘‘project,’’ and other similar expressions are intended to identify such
forward-looking statements. Such statements are subject to various known
and unknown risks and uncertainties and readers should be cautioned that
any forward-looking information provided by or on behalf of the Company
is not a guarantee of future performance.
Actual results may differ materially from those in forward-looking
information as a result of various factors, some of which are beyond the
Company’s control, including but not limited to those discussed above
and elsewhere in this press release and in the Company’s most recent
Annual Report on Form 10-K, filed with the Securities and Exchange
Commission on February 28, 2019. Due to such risks and uncertainties and
other factors, the Company cautions each person receiving such
forward-looking information not to place undue reliance on such
statements. Further, such forward-looking statements speak only as of
the date of this press release and the Company undertakes no obligations
to update any forward looking statement to reflect events or
circumstances after the date of this press release or to reflect the
occurrence of unanticipated events.
Conference Call Dial-in
The Company will hold a conference call and simultaneous webcast to
discuss the results at 11:00 a.m. Eastern Time on May 2, 2019. The
Company has also released an earnings presentation that will be
discussed during the conference call. Please go to https://ir.bsig.com
to download the presentation. To listen to the call or view the webcast,
participants should:
Dial-in
:
|
|
Toll Free Dial-in Number:
|
|
|
(844) 445-4807
|
|
|
International Dial-in Number:
|
|
|
(647) 253-8636
|
|
|
Conference ID:
|
|
|
5849807
|
Link to Webcast
:
http://event.on24.com/r.htm?e=1979016&s=1&k=CBC89A2D66498FB0969B9FC8D7A5A79D
Dial-in Replay
:
A replay of the call will be available beginning approximately one hour
after its conclusion either on BrightSphere’s website, at https://ir.bsig.com
or at:
|
|
Toll Free Dial-in Number:
|
|
|
(800) 585-8367
|
|
|
|
International Dial-in Number:
|
|
|
(416) 621-4642
|
|
|
|
Conference ID:
|
|
|
5849807
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 11: Assets Under Management Rollforward by Asset Class
|
|
|
($ in billions, unless otherwise noted)
|
|
Three Months Ended
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
September 30, 2018
|
|
June, 30, 2018
|
|
March 31, 2018
|
U.S. equity
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
62.6
|
|
|
$
|
76.0
|
|
|
$
|
74.8
|
|
|
$
|
76.6
|
|
|
$
|
81.2
|
|
Gross inflows
|
|
1.0
|
|
|
0.8
|
|
|
0.7
|
|
|
0.7
|
|
|
1.5
|
|
Gross outflows
|
|
(2.7
|
)
|
|
(4.1
|
)
|
|
(3.6
|
)
|
|
(4.6
|
)
|
|
(3.1
|
)
|
Net flows
|
|
(1.7
|
)
|
|
(3.3
|
)
|
|
(2.9
|
)
|
|
(3.9
|
)
|
|
(1.6
|
)
|
Market appreciation (depreciation)
|
|
6.9
|
|
|
(10.1
|
)
|
|
4.1
|
|
|
2.1
|
|
|
(3.0
|
)
|
Ending balance
|
|
$
|
67.8
|
|
|
$
|
62.6
|
|
|
$
|
76.0
|
|
|
$
|
74.8
|
|
|
$
|
76.6
|
|
Average AUM
|
|
$
|
66.5
|
|
|
$
|
69.7
|
|
|
$
|
76.2
|
|
|
$
|
76.1
|
|
|
$
|
80.2
|
|
Average AUM of consolidated Affiliates
|
|
$
|
64.5
|
|
|
$
|
67.7
|
|
|
$
|
73.9
|
|
|
$
|
74.0
|
|
|
$
|
78.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Global / non-U.S. equity
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
106.8
|
|
|
$
|
124.7
|
|
|
$
|
122.3
|
|
|
$
|
126.3
|
|
|
$
|
126.2
|
|
Gross inflows
|
|
5.1
|
|
|
2.9
|
|
|
3.8
|
|
|
4.4
|
|
|
4.8
|
|
Gross outflows
|
|
(4.5
|
)
|
|
(5.3
|
)
|
|
(3.1
|
)
|
|
(4.9
|
)
|
|
(4.7
|
)
|
Net flows
|
|
0.6
|
|
|
(2.4
|
)
|
|
0.7
|
|
|
(0.5
|
)
|
|
0.1
|
|
Market appreciation (depreciation)
|
|
10.2
|
|
|
(15.5
|
)
|
|
1.7
|
|
|
(3.5
|
)
|
|
—
|
|
Ending balance
|
|
$
|
117.6
|
|
|
$
|
106.8
|
|
|
$
|
124.7
|
|
|
$
|
122.3
|
|
|
$
|
126.3
|
|
Average AUM(1) |
|
$
|
114.5
|
|
|
$
|
114.8
|
|
|
$
|
124.4
|
|
|
$
|
125.1
|
|
|
$
|
128.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
13.1
|
|
|
$
|
13.2
|
|
|
$
|
13.8
|
|
|
$
|
13.9
|
|
|
$
|
13.5
|
|
Gross inflows
|
|
0.4
|
|
|
0.3
|
|
|
0.3
|
|
|
0.4
|
|
|
0.9
|
|
Gross outflows
|
|
(1.2
|
)
|
|
(0.4
|
)
|
|
(1.0
|
)
|
|
(0.3
|
)
|
|
(0.2
|
)
|
Net flows
|
|
(0.8
|
)
|
|
(0.1
|
)
|
|
(0.7
|
)
|
|
0.1
|
|
|
0.7
|
|
Market appreciation (depreciation)
|
|
0.6
|
|
|
—
|
|
|
0.1
|
|
|
(0.2
|
)
|
|
(0.3
|
)
|
Ending balance
|
|
$
|
12.9
|
|
|
$
|
13.1
|
|
|
$
|
13.2
|
|
|
$
|
13.8
|
|
|
$
|
13.9
|
|
Average AUM(1) |
|
$
|
13.0
|
|
|
$
|
13.1
|
|
|
$
|
13.6
|
|
|
$
|
13.9
|
|
|
$
|
13.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternatives
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
23.8
|
|
|
$
|
23.8
|
|
|
$
|
23.4
|
|
|
$
|
23.3
|
|
|
$
|
22.1
|
|
Gross inflows
|
|
0.4
|
|
|
0.3
|
|
|
2.1
|
|
|
0.6
|
|
|
3.1
|
|
Gross outflows
|
|
(0.2
|
)
|
|
(0.1
|
)
|
|
(0.2
|
)
|
|
(0.3
|
)
|
|
(0.3
|
)
|
Hard asset disposals
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
(1.6
|
)
|
|
(0.1
|
)
|
|
(0.1
|
)
|
Net flows
|
|
0.1
|
|
|
0.1
|
|
|
0.3
|
|
|
0.2
|
|
|
2.7
|
|
Market appreciation (depreciation)
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
(0.1
|
)
|
|
—
|
|
Other(2) |
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
(1.5
|
)
|
Ending balance
|
|
$
|
24.0
|
|
|
$
|
23.8
|
|
|
$
|
23.8
|
|
|
$
|
23.4
|
|
|
$
|
23.3
|
|
Average AUM(1) |
|
$
|
23.9
|
|
|
$
|
23.8
|
|
|
$
|
23.1
|
|
|
$
|
23.3
|
|
|
$
|
22.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
206.3
|
|
|
$
|
237.7
|
|
|
$
|
234.3
|
|
|
$
|
240.1
|
|
|
$
|
243.0
|
|
Gross inflows
|
|
6.9
|
|
|
4.3
|
|
|
6.9
|
|
|
6.1
|
|
|
10.3
|
|
Gross outflows
|
|
(8.6
|
)
|
|
(9.9
|
)
|
|
(7.9
|
)
|
|
(10.1
|
)
|
|
(8.3
|
)
|
Hard asset disposals
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
(1.6
|
)
|
|
(0.1
|
)
|
|
(0.1
|
)
|
Net flows
|
|
(1.8
|
)
|
|
(5.7
|
)
|
|
(2.6
|
)
|
|
(4.1
|
)
|
|
1.9
|
|
Market appreciation (depreciation)
|
|
17.8
|
|
|
(25.6
|
)
|
|
6.0
|
|
|
(1.7
|
)
|
|
(3.3
|
)
|
Other(2) |
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
(1.5
|
)
|
Ending balance
|
|
$
|
222.3
|
|
|
$
|
206.3
|
|
|
$
|
237.7
|
|
|
$
|
234.3
|
|
|
$
|
240.1
|
|
Average AUM
|
|
$
|
217.9
|
|
|
$
|
221.4
|
|
|
$
|
237.3
|
|
|
$
|
238.4
|
|
|
$
|
244.5
|
|
Average AUM of consolidated Affiliates
|
|
$
|
215.9
|
|
|
$
|
219.4
|
|
|
$
|
235.0
|
|
|
$
|
236.3
|
|
|
$
|
242.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis points: inflows
|
|
34.7
|
|
|
45.9
|
|
|
52.5
|
|
|
42.3
|
|
|
48.9
|
|
Basis points: outflows
|
|
34.3
|
|
|
32.0
|
|
|
33.2
|
|
|
40.2
|
|
|
37.4
|
|
Annualized revenue impact of net flows (in millions)
|
|
$
|
(5.9
|
)
|
|
$
|
(12.3
|
)
|
|
$
|
4.7
|
|
|
$
|
(15.2
|
)
|
|
$
|
19.0
|
|
Derived average weighted NCCF
|
|
(1.5
|
)
|
|
(3.3
|
)
|
|
1.2
|
|
|
(3.9
|
)
|
|
4.6
|
|
|
(1) Average AUM equals average AUM of consolidated Affiliates.
|
(2) “Other” in the three months ended March 31, 2018 primarily
relates to the decline in billable AUM as a legacy alternative fund
transitioned from billing based on committed AUM to net asset value.
|
Please see “Definitions and Additional Notes”
|
|
|
Table 12: Management Fee Revenue and Average Fee Rates on
Assets Under Management
|
($ in millions,
except AUM data in billions)
|
|
Three Months Ended
|
|
March 31, 2019
|
|
December 31, 2018
|
|
September 30, 2018
|
|
June, 30, 2018
|
|
March 31, 2018
|
|
|
Revenue
|
|
Basis Pts
|
|
Revenue
|
|
Basis Pts
|
|
Revenue
|
|
Basis Pts
|
|
Revenue
|
|
Basis Pts
|
|
Revenue
|
|
Basis Pts
|
U.S. equity
|
|
$
|
40.4
|
|
|
25
|
|
|
$
|
41.2
|
|
|
24
|
|
|
$
|
45.3
|
|
|
24
|
|
|
$
|
45.5
|
|
|
25
|
|
|
$
|
47.6
|
|
|
25
|
Global/non-U.S. equity
|
|
116.9
|
|
|
41
|
|
|
112.5
|
|
|
39
|
|
|
123.0
|
|
|
39
|
|
|
126.2
|
|
|
40
|
|
|
128.6
|
|
|
41
|
Fixed income
|
|
6.4
|
|
|
20
|
|
|
6.5
|
|
|
20
|
|
|
6.7
|
|
|
20
|
|
|
6.8
|
|
|
20
|
|
|
6.8
|
|
|
20
|
Alternatives
|
|
43.8
|
|
|
74
|
|
|
43.8
|
|
|
73
|
|
|
54.6
|
|
|
94
|
|
|
47.9
|
|
|
82
|
|
|
62.0
|
|
|
112
|
Management fee revenue
|
|
$
|
207.5
|
|
|
39.0
|
|
|
$
|
204.0
|
|
|
36.9
|
|
|
$
|
229.6
|
|
|
38.8
|
|
|
$
|
226.4
|
|
|
38.4
|
|
|
$
|
245.0
|
|
|
41.0
|
Average AUM excluding equity-accounted Affiliates
|
|
$
|
215.9
|
|
|
|
|
$
|
219.4
|
|
|
|
|
$
|
235.0
|
|
|
|
|
$
|
236.3
|
|
|
|
|
$
|
242.4
|
|
|
|
Average AUM including equity-accounted Affiliates and weighted
average fee rate
|
|
$
|
217.9
|
|
|
39.2
|
|
|
$
|
221.4
|
|
|
37.1
|
|
|
$
|
237.3
|
|
|
38.9
|
|
|
238.4
|
|
|
38.6
|
|
|
$
|
244.5
|
|
|
41.1
|
Amounts shown exclude equity-accounted Affiliates unless
otherwise noted.
|
Please see “Definitions and Additional Notes”
|
|
|
Table 13: Assets Under Management by Affiliate
|
($ in billions)
|
|
March 31, 2019
|
|
December 31, 2018
|
|
March 31, 2018
|
Acadian Asset Management
|
|
$
|
96.0
|
|
|
$
|
86.2
|
|
|
$
|
99.5
|
Barrow, Hanley, Mewhinney & Strauss
|
|
75.7
|
|
|
72.0
|
|
|
86.7
|
Campbell Global
|
|
4.8
|
|
|
4.6
|
|
|
5.2
|
Copper Rock Capital Partners
|
|
4.3
|
|
|
4.0
|
|
|
6.1
|
Investment Counselors of Maryland(1) |
|
2.1
|
|
|
1.8
|
|
|
2.0
|
Landmark Partners
|
|
18.0
|
|
|
17.8
|
|
|
16.2
|
Thompson, Siegel & Walmsley
|
|
21.4
|
|
|
19.9
|
|
|
24.4
|
Total assets under management
|
|
$
|
222.3
|
|
|
$
|
206.3
|
|
|
$
|
240.1
|
(1) Equity-accounted Affiliate.
|
Please see “Definitions and Additional Notes”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 14: Reconciliation of per-share U.S. GAAP Net Income
to Economic Net Income
|
|
|
($)
|
|
Three Months Ended March 31,
|
|
Three Months Ended
December 31,
|
|
|
2019
|
|
2018
|
|
2018
|
U.S. GAAP net income per share
|
|
$
|
0.54
|
|
|
$
|
0.52
|
|
|
$
|
0.22
|
|
Adjustments to reflect the economic earnings of the Company:
|
|
|
|
|
|
|
i.
|
Non-cash key employee-owned equity and profit interest revaluations
|
|
(0.20
|
)
|
|
0.27
|
|
|
0.08
|
|
ii.
|
Amortization of acquired intangible assets, acquisition-related
consideration and pre-acquisition employee equity
|
|
0.03
|
|
|
0.18
|
|
|
0.18
|
|
iii.
|
Capital transaction costs
|
|
—
|
|
|
—
|
|
|
0.02
|
|
iv.
|
Seed/Co-investment (gains) losses and financing
|
|
(0.10
|
)
|
|
0.02
|
|
|
0.07
|
|
v.
|
Tax benefit of goodwill and acquired intangibles deductions
|
|
0.02
|
|
|
0.01
|
|
|
0.01
|
|
vi.
|
Discontinued operations and restructuring
|
|
0.04
|
|
|
(0.60
|
)
|
|
(0.14
|
)
|
vii.
|
ENI tax normalization
|
|
0.01
|
|
|
0.06
|
|
|
0.05
|
|
Tax effect of above adjustments, as applicable
|
|
0.06
|
|
|
0.04
|
|
|
(0.06
|
)
|
Economic net income per share
|
|
$
|
0.40
|
|
|
$
|
0.50
|
|
|
$
|
0.43
|
|
Please see “Definitions and Additional Notes”
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 15: Reconciliation of U.S. GAAP Revenue to ENI Revenue
|
|
|
($ in millions)
|
|
Three Months Ended March 31,
|
|
Three Months
Ended December 31,
|
|
|
2019
|
|
2018
|
|
2018
|
U.S. GAAP revenue
|
|
$
|
207.2
|
|
|
$
|
249.7
|
|
|
$
|
214.5
|
|
Include investment return on equity-accounted Affiliates
|
|
0.6
|
|
|
0.6
|
|
|
0.6
|
|
Exclude revenue from consolidated Funds
|
|
(1.1
|
)
|
|
(0.2
|
)
|
|
(1.2
|
)
|
Exclude fixed compensation reimbursed by customers
|
|
(1.0
|
)
|
|
(2.3
|
)
|
|
(1.9
|
)
|
ENI revenue
|
|
$
|
205.7
|
|
|
$
|
247.8
|
|
|
$
|
212.0
|
|
Please see “Definitions and Additional Notes”
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 16: Reconciliation of U.S. GAAP Operating Expense to
ENI Operating Expense
|
($ in millions)
|
|
Three Months Ended March 31,
|
|
Three Months Ended
December 31,
|
|
|
2019
|
|
2018
|
|
2018
|
U.S. GAAP operating expense
|
|
$
|
139.2
|
|
|
$
|
224.1
|
|
|
$
|
184.9
|
|
Less: items excluded from ENI
|
|
|
|
|
|
|
Acquisition-related consideration and pre-acquisition employee equity(1) |
|
(1.6
|
)
|
|
(17.6
|
)
|
|
(17.7
|
)
|
Non-cash key employee-owned equity and profit interest revaluations
|
|
20.1
|
|
|
(29.9
|
)
|
|
(8.7
|
)
|
Amortization of acquired intangible assets
|
|
(1.6
|
)
|
|
(1.6
|
)
|
|
(1.7
|
)
|
Capital transaction costs
|
|
—
|
|
|
—
|
|
|
(1.5
|
)
|
Restructuring costs(2) |
|
(4.3
|
)
|
|
(0.1
|
)
|
|
(5.3
|
)
|
Compensation reimbursed by customers
|
|
(1.0
|
)
|
|
(2.3
|
)
|
|
(1.9
|
)
|
Funds’ operating expense
|
|
(0.2
|
)
|
|
(0.4
|
)
|
|
—
|
|
Less: items segregated out of U.S. GAAP operating expense
|
|
|
|
|
|
|
Variable compensation
|
|
(48.7
|
)
|
|
(63.9
|
)
|
|
(48.3
|
)
|
Affiliate key employee distributions
|
|
(13.4
|
)
|
|
(23.7
|
)
|
|
(13.7
|
)
|
ENI operating expense
|
|
$
|
88.5
|
|
|
$
|
84.6
|
|
|
$
|
86.1
|
|
(1) Reflects amortization of contingent consideration and equity
owned by employees, both with a service requirement, associated with
the Landmark acquisition; contingent consideration was fully
amortized as of December 31, 2018. Revaluation of the Landmark
interests is included in “Non-cash key employee-owned equity and
profit interest revaluations” above.
|
(2) The three months ended March 31, 2019 includes restructuring
costs at the Center and costs associated with the planned redomicile
to the U.S. The three months ended March 31, 2018 and December 31,
2018 includes CEO transition costs and costs associated with the
planned redomicile to the U.S.
|
Please see “Definitions and Additional Notes”
|
|
|
|
|
|
Table 17: Reconciliation of Net Income to EBITDA, Adjusted
EBITDA and Economic Net Income
|
($ in millions)
|
|
Three Months Ended March 31,
|
|
Three Months Ended
December 31,
|
|
|
2019
|
|
2018
|
|
2018
|
Net income attributable to controlling interests
|
|
$
|
52.7
|
|
|
$
|
57.3
|
|
|
$
|
23.0
|
|
Net interest expense
|
|
5.9
|
|
|
5.8
|
|
|
5.0
|
|
Income tax expense (benefit) (including tax expenses related to
discontinued operations)
|
|
21.6
|
|
|
28.7
|
|
|
16.0
|
|
Depreciation and amortization (including intangible assets)
|
|
5.4
|
|
|
5.0
|
|
|
5.6
|
|
EBITDA
|
|
$
|
85.6
|
|
|
$
|
96.8
|
|
|
$
|
49.6
|
|
Non-cash compensation costs associated with revaluation of Affiliate
key employee-owned equity and profit-sharing interests
|
|
(20.1
|
)
|
|
29.9
|
|
|
8.7
|
|
Amortization of acquisition-related consideration and
pre-acquisition employee equity
|
|
1.6
|
|
|
17.6
|
|
|
17.7
|
|
EBITDA of discontinued operations
|
|
—
|
|
|
—
|
|
|
0.1
|
|
Deferred tax asset deed revaluation
|
|
—
|
|
|
—
|
|
|
(20.0
|
)
|
(Gain) loss on seed and co-investments
|
|
(12.5
|
)
|
|
0.2
|
|
|
5.0
|
|
Restructuring(1) |
|
4.3
|
|
|
(65.6
|
)
|
|
5.2
|
|
Capital transaction costs
|
|
—
|
|
|
—
|
|
|
1.5
|
|
Other
|
|
—
|
|
|
0.1
|
|
|
—
|
|
Adjusted EBITDA
|
|
$
|
58.9
|
|
|
$
|
79.0
|
|
|
$
|
67.8
|
|
ENI net interest expense to third parties
|
|
(3.5
|
)
|
|
(4.2
|
)
|
|
(2.8
|
)
|
Depreciation and amortization
|
|
(3.8
|
)
|
|
(3.4
|
)
|
|
(3.9
|
)
|
Tax on economic net income
|
|
(12.4
|
)
|
|
(16.5
|
)
|
|
(15.5
|
)
|
Economic net income
|
|
$
|
39.2
|
|
|
$
|
54.9
|
|
|
$
|
45.6
|
|
(1) The three months ended March 31, 2019 includes
restructuring costs at the Center and costs associated with the
planned redomicile to the U.S. The three months ended March 31,
2018 includes the gain on sale of Heitman. The three months ended
December 31, 2018 includes CEO transition costs and costs related
to the Company's planned redomicile to the U.S.
|
Please see “Definitions and Additional Notes”
|
|
|
Definitions and Additional Notes
References to “BrightSphere” “BSIG” or the “Company” refer to
BrightSphere Investment Group plc; references to “OM plc” refer to Old
Mutual plc, the Company’s former parent; references to “BSUS” or the
“Center” refer to the holding company excluding the Affiliates;
references to "Landmark" refer to Landmark Partners, LLC, acquired by
the Company in August 2016.
BrightSphere operates its business
through seven boutique asset management firms (the “Affiliates”).
BrightSphere’s
distribution activities are conducted in various jurisdictions through
affiliated companies in accordance with local regulatory requirements.
Given that EBITDA, Adjusted EBITDA and ENI are measures not deemed to
be in accordance with U.S. GAAP and are susceptible to varying
calculations, our EBITDA, Adjusted EBITDA and ENI may not be comparable
to similarly titled measures of other companies, including companies in
our industry, because other companies may calculate EBITDA, Adjusted
EBITDA and ENI in a different manner than we calculate the measures.
Economic net income
The Company uses a non-GAAP performance measure referred to as economic
net income (“ENI”) to represent its view of the underlying economic
earnings of the business. ENI is used to make resource allocation
decisions, determine appropriate levels of investment or dividend
payout, manage balance sheet leverage, determine Affiliate variable
compensation and equity distributions, and incentivize management. The
Company’s ENI adjustments to U.S. GAAP include both reclassifications of
U.S. GAAP revenue and expense items, as well as adjustments to U.S. GAAP
results, primarily to exclude non-cash, non-economic expenses, or to
reflect cash benefits not recognized under U.S. GAAP.
The Company re-categorizes certain line items on the income statement to:
-
exclude the effect of Fund consolidation by removing the portion of
Fund revenues, expenses and investment return which is not
attributable to its shareholders;
-
include within management fee revenue any fees paid to Affiliates by
consolidated Funds, which are viewed as investment income under U.S.
GAAP;
-
include the Company’s share of earnings from equity-accounted
Affiliates within other income, rather than investment income;
-
treat sales-based compensation as a general and administrative
expense, rather than part of fixed compensation and benefits;
-
identify separately from operating expenses, variable compensation and
Affiliate key employee distributions, which represent Affiliate
earnings shared with Affiliate key employees; and
-
net the separate revenues and expenses recorded under U.S. GAAP for
certain Fund expenses initially paid by its Affiliates on the Fund’s
behalf and subsequently reimbursed, to better reflect the actual
economics of the Company’s business.
The Company also makes the following adjustments to U.S. GAAP results to
more closely reflect its economic results by:
|
|
i.
|
excluding non-cash expenses representing changes in the value of
Affiliate equity and profit interests held by Affiliate key
employees. These ownership interests may in certain circumstances be
repurchased by BrightSphere at a value based on a pre-determined
fixed multiple of trailing earnings and as such this value is
carried on the Company’s balance sheet as a liability. Non-cash
movements in the value of this liability are treated as compensation
expense under U.S. GAAP. However, any equity or profit interests
repurchased by BrightSphere can be used to fund a portion of future
variable compensation awards, resulting in savings in cash variable
compensation that offset the negative cash effect of repurchasing
the equity.
|
ii.
|
excluding non-cash amortization or impairment expenses related to
acquired goodwill and other intangibles as these are non-cash
charges that do not result in an outflow of tangible economic
benefits from the business. It also excludes the amortization of
acquisition-related contingent consideration, as well as the value
of employee equity owned pre-acquisition, as occurred as a result of
the Landmark transaction, where such items have been included in
compensation expense as a result of ongoing service requirements for
certain employees. Please note that the revaluations related to
these acquisition-related items are included in (i) above.
|
iii.
|
excluding capital transaction costs, including the costs of raising
debt or equity, gains or losses realized as a result of redeeming
debt or equity and direct incremental costs associated with
acquisitions of businesses or assets.
|
iv.
|
excluding seed capital and co-investment gains, losses and related
financing costs. The net returns on these investments are considered
and presented separately from ENI because ENI is primarily a measure
of the Company’s earnings from managing client assets, which
therefore differs from earnings generated by its investments in
Affiliate products, which can be variable from period to period.
|
v.
|
including cash tax benefits associated with deductions allowed for
acquired intangibles and goodwill that may not be recognized or have
timing differences compared to U.S. GAAP.
|
vi.
|
excluding the results of discontinued operations attributable to
controlling interests since they are not part of the Company’s
ongoing business, and restructuring costs incurred in continuing
operations.
|
vii.
|
excluding deferred tax resulting from changes in tax law and
expiration of statutes, adjustments for uncertain tax positions,
deferred tax attributable to intangible assets and other unusual
items not related to current operating results to reflect ENI tax
normalization.
|
|
|
The Company adjusts its income tax expense to reflect any tax impact of
its ENI adjustments. Please see Table 7 for a reconciliation of U.S.
GAAP net income attributable to controlling interests to economic net
income.
Adjusted EBITDA
Adjusted EBITDA is defined as economic net income before interest,
income taxes, depreciation and amortization. The Company notes that its
calculation of Adjusted EBITDA may not be consistent with Adjusted
EBITDA as calculated by other companies. The Company believes Adjusted
EBITDA is a useful liquidity metric because it indicates the Company’s
ability to make further investments in its business, service debt and
meet working capital requirements. Please see Table 17 for a
reconciliation of U.S. GAAP net income attributable to controlling
interests to EBITDA, Adjusted EBITDA and ENI.
Methodologies for calculating investment
performance
(1)
:
Revenue-weighted investment performance
measures the percentage of management fee revenue generated by Affiliate
strategies which are beating benchmarks. It calculates each strategy’s
percentage weight by taking its estimated composite revenue over total
composite revenues in each period, then sums the total percentage of
revenue for strategies outperforming.
Equal-weighted investment performance
measures the percentage of Affiliates’ scale strategies (defined as
strategies with greater than $100 million of AUM) beating benchmarks.
Each outperforming strategy over $100 million has the same weight; the
calculation sums the number of strategies outperforming relative to the
total number of composites over $100 million.
Asset-weighted investment performance
measures the percentage of AUM in strategies beating benchmarks. It
calculates each strategy’s percentage weight by taking its composite AUM
over total composite AUM in each period, then sums the total percentage
of AUM for strategies outperforming.
______________________
(1) Barrow Hanley’s Windsor II Large Cap Value account AUM and return
are separated from Barrow Hanley’s Large Cap Value composite in
revenue-weighted, equal-weighted and asset-weighted outperformance
percentage calculations.
ENI operating earnings
ENI operating earnings represents ENI earnings before Affiliate key
employee distributions and is calculated as ENI revenue, less ENI
operating expense, less ENI variable compensation. It differs from
economic net income because it does not include the effects of Affiliate
key employee distributions, net interest expense or income tax expense.
ENI operating margin
The ENI operating margin, which is calculated before Affiliate key
employee distributions, is used by management and is useful to investors
to evaluate the overall operating margin of the business without regard
to our various ownership levels at each of the Affiliates. ENI operating
margin is a non-GAAP efficiency measure, calculated based on ENI
operating earnings divided by ENI revenue. The ENI operating margin is
most comparable to our U.S. GAAP operating margin.
ENI management fee revenue
ENI Management fee revenue corresponds to U.S. GAAP management fee
revenue.
Net catch-up fees
Net catch-up fees represent payment of fund management fees back to the
initial closing date for certain products with multiple closings, less
placement fees paid to third parties related to these funds.
ENI operating expense ratio
The ENI operating expense ratio is used by management and is useful to
investors to evaluate the level of operating expense as measured against
our recurring management fee revenue. We have provided this ratio since
many operating expenses, including fixed compensation & benefits and
general and administrative expense, are generally linked to the overall
size of the business. We track this ratio as a key measure of scale
economies at BrightSphere because in our profit sharing economic model,
scale benefits both the Affiliate employees and BrightSphere
shareholders.
ENI earnings before variable compensation
ENI earnings before variable compensation is calculated as ENI revenue,
less ENI operating expense.
ENI variable compensation ratio
The ENI variable compensation ratio is calculated as variable
compensation divided by ENI earnings before variable compensation. It is
used by management and is useful to investors to evaluate consolidated
variable compensation as measured against our ENI earnings before
variable compensation. Variable compensation is usually awarded based on
a contractual percentage of each Affiliate’s ENI earnings before
variable compensation and may be paid in the form of cash or non-cash
Affiliate equity or profit interests. Center variable compensation
includes cash and BrightSphere equity. Non-cash variable compensation
awards typically vest over several years and are recognized as
compensation expense over that service period. The variable compensation
ratio at each Affiliate will typically be between 25% and 35%.
ENI Affiliate key employee distribution ratio
The Affiliate key employee distribution ratio is calculated as Affiliate
key employee distributions divided by ENI operating earnings. The ENI
Affiliate key employee distribution ratio is used by management and is
useful to investors to evaluate Affiliate key employee distributions as
measured against our ENI operating earnings. Affiliate key employee
distributions represent the share of Affiliate profits after variable
compensation that is attributable to Affiliate key employee equity and
profit interests holders, according to their ownership interests. At
certain Affiliates, BSUS is entitled to an initial preference over
profits after variable compensation, structured such that before a
preference threshold is reached, there would be no required key employee
distributions, whereas for profits above the threshold the key employee
distribution amount would be calculated based on the key employee
economic percentages, which range from approximately 20% to 40% at our
consolidated Affiliates.
U.S. GAAP operating margin
U.S. GAAP operating margin equals operating income from continuing
operations divided by total revenue.
Consolidated Funds
Financial information presented in accordance with U.S. GAAP may include
the results of consolidated pooled investment vehicles, or Funds,
managed by our Affiliates, where it has been determined that these
entities are controlled by the Company. Financial results which are
“attributable to controlling interests” exclude the impact of Funds to
the extent it is not attributable to our shareholders.
Annualized revenue impact of net flows (“NCCF”)
Annualized revenue impact of net flows represents the difference between
annualized management fees expected to be earned on new accounts and net
assets contributed to existing accounts, less the annualized management
fees lost on terminated accounts or net assets withdrawn from existing
accounts, including equity-accounted Affiliates. Annualized revenue is
calculated by multiplying the annual gross fee rate for the relevant
account by the net assets gained in the account in the event of a
positive flow or the net assets lost in the account in the event of an
outflow and is designed to provide investors with a better indication of
the potential financial impact of net client cash flows.
Hard asset disposals
Net flows in Table 1, Table 2 and Table 11 include hard asset disposals
and fund distributions made by BrightSphere’s Affiliates. This category
is made up of investment-driven asset dispositions by Landmark,
investing in real estate funds and secondary private equity; or
Campbell, a timber manager.
Derived average weighted NCCF
Derived average weighted NCCF reflects the implied NCCF if annualized
revenue impact of net flows represents asset flows at the weighted fee
rate for BrightSphere overall (i.e. 39.2 bps in Q1'19). For example,
NCCF annualized revenue impact of $(5.9) million divided by the average
weighted fee rate of BrightSphere’s overall AUM of 39.2 bps equals the
derived average weighted NCCF of $(1.5) billion.
n/m
“Not meaningful.”
View source version on businesswire.com:
https://www.businesswire.com/news/home/20190502005271/en/
Brett Perryman
ir@bsig.com
(617)
369-7300
Source: BrightSphere Investment Group plc