Business context and reporting period
This is BrightSphere Investment Group Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2022. The filing identifies Acadian Asset Management LLC as its sole operating affiliate, in the Quant & Solutions segment. The registrant is BrightSphere, not Acadian Asset Management Inc.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | First half 2022 | First half 2021 |
|---|---|---|---|---|
| Revenue | $95.5 million | $133.3 million | $207.7 million | $243.0 million |
| Operating income | $46.7 million | $36.1 million | $89.9 million | $68.6 million |
| Continuing-operations income attributable to controlling interests | $28.6 million | $24.7 million | $52.4 million | $43.2 million |
| Economic net income (non-GAAP) | $17.3 million | $32.9 million | $40.7 million | $55.4 million |
| Adjusted EBITDA (non-GAAP) | $34.0 million | $56.3 million | $77.0 million | $98.4 million |
- Q2 diluted EPS was $0.67, versus $6.42 in 2021; first-half diluted EPS was $1.19, versus $6.77. The prior-year comparison includes Landmark sale gains and discontinued operations; 2022 reported net income was $28.6 million for Q2 and $52.4 million for the half-year, compared with $587.3 million and $627.7 million in 2021.
- Q2 GAAP operating margin rose to 48.9% from 27.1%, while ENI operating margin fell to 30.1% from 39.9%. The GAAP improvement chiefly reflects a favorable non-cash revaluation of employee affiliate interests; ENI excludes that item.
- Management fees declined 16.2% in Q2 and 9.1% for the first half. Performance fees fell to $2.0 million in Q2 from $20.4 million, partly because Campbell Global contributed $15.3 million in Q2 2021 and was subsequently sold.
- AUM was $90.5 billion at June 30, down 17.9% from March 31 and 28.7% from June 30, 2021. Q2 included $16.9 billion of market depreciation and $2.8 billion of net outflows; first-half net outflows were $5.0 billion.
- For the six months, operating cash flow was $29.9 million, investing cash outflow $6.4 million, and financing cash outflow $183.4 million. Cash declined by $159.9 million to $92.2 million.
- At June 30, cash was $92.2 million; debt carrying value was $323.3 million, comprising $273.3 million of senior notes and $50.0 million drawn on the revolver. Total liabilities exceeded total assets, leaving stockholders’ equity negative $71.0 million.
Changes, outlook and risks
BrightSphere redeemed $125 million principal amount of its 5.125% notes in January 2022, recording a $3.2 million extinguishment loss. It entered a new $125 million revolving facility maturing March 2025; $50 million was drawn at quarter-end. Acadian reported covenant ratios of 0.2x leverage against a 2.5x maximum and 220.5x interest coverage against a 4.0x minimum. The company repurchased 4.15 million shares for approximately $100 million, including commissions, during the first half; none were repurchased in Q2.
Management stated that available cash, operating cash generation and financing, if needed, should fund operations and capital requirements for at least the next 12 months. No specific earnings or revenue guidance was provided. Management cited market depreciation, foreign-exchange effects and client rebalancing as pressures on AUM and fees. It also discussed uncertainty from COVID-19 and the Russia-Ukraine conflict. The company does not hedge corporate exposure to market movements; a 10% AUM change was estimated to affect post-tax ENI by approximately $15 million annually under its stated assumptions. Management reported effective disclosure controls and no material change in internal control or risk factors from the prior annual filing.
Investor verification priorities
- Confirm the correct issuer and entity scope: this filing is for BrightSphere Investment Group Inc., whose operating affiliate is Acadian Asset Management LLC.
- Assess the durability of AUM and fee revenue amid market losses and net outflows, including whether flows improved after quarter-end.
- Separate recurring earnings from non-cash revaluations, variable performance fees, divestiture effects and other non-GAAP adjustments.
- Review cash needs, share repurchases, debt repayment plans, variable-rate revolver exposure and covenant headroom.
- Evaluate how ongoing market, currency, inflation and geopolitical risks could affect AUM, client flows and fee income.