- Management and Advisory Fee Revenue: Increased by 22% for fiscal year 2024.
- Fee-Related Earnings: Grew by 22% versus the prior year.
- GAAP EPS: $3.69 based on $141 million of GAAP net income.
- Non-GAAP EPS: $3.92 based on $212 million of adjusted net income.
- Annual Dividend: Increased by 10% to $1.96 per share.
- Total Asset Footprint: $921 billion, a 7% increase year-over-year.
- Assets Under Management (AUM): $124 billion, grew by $13 billion or 11%.
- Assets Under Advisement (AUA): $51 billion, a 7% increase year-over-year.
- Fee-Earning AUM: $65.7 billion, grew by $8.4 billion or 15%.
- Blended Fee Rate: Increased to 63 basis points from 57 basis points in 2017.
- Specialized Funds Revenue: Increased by $64.7 million or 33% compared to the prior year.
- Retro Fees: $19.6 million from secondary fund, compared to $2.4 million from direct equity fund in the prior year.
- Customized Separate Accounts Revenue: Increased by $11.1 million or 9% compared to the prior year.
- Incentive Fees: $101.9 million for fiscal 2024, down 35% relative to the prior year.
- Unrealized Carry Balance: Up 19% from the prior year, now over $1.2 billion.
- Total Expenses: Increased by $19.3 million compared to the prior year.
- Total Compensation and Benefits: Increased by $5.6 million.
- General and Administrative (G&A) Expenses: Increased by $13.7 million.
- Fee-Related Earnings Margin: 42.8% for fiscal year 2024.
Release Date: May 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Management and advisory fee revenue grew by 22% for fiscal year 2024.
- Fee-related earnings also grew by 22% versus the prior year.
- Board approved a 10% increase to the annual fiscal dividend, marking the seventh consecutive annual increase.
- Total asset footprint increased by 7% year-over-year, with AUM growing by 11%.
- Strong growth in fee-earning AUM, which stood at $65.7 billion, up 15% from the prior year.
Negative Points
- Incentive fees down 35% relative to the prior year.
- Total expenses for fiscal 2024 increased by $19.3 million compared to the prior year.
- Revenue from advisory reporting and other offerings decreased slightly due to the sale of 361 Capital assets.
- Higher travel and conference costs due to increased activity and inflation.
- Upfront fees paid to wirehouses for onboarding costs are a headwind.
Q & A Highlights
Q: Our first question is on the retail channel. I appreciate some of the color you gave on the flows that's coming in strong. Maybe you can double-click into that where a momentum is building? And then maybe going forward, as you look ahead, what's the scope for incremental rollouts of the existing funds and what might be on the road map for new product launches? Thank you.
A: Good morning, Stephanie. It's Erik. I'll take that. So I think we break those two pieces. On the existing side, I think what you're seeing is a couple of factors. One, we continue to expand our own sales resources and those sales resources are getting better. They're building deeper relationships. They're getting deeper relationships, new relationships, expanding the existing relationships. So all of that is working and so we continue to add new partners. We continue to add new channels. And part of this is an education factor. You're still -- you're introducing something that is for most people fundamentally new. And so that process, that education is something that our team is doing a fantastic job on and is very focused on. In terms of what might come in the future. I think we said in prior calls, and we'll continue to say, expect to see that the current three offerings that we have today becomes more than that. We're looking -- there's a variety of strategies that we think will be well received. And for us, again, I've used the analogy of this is a marathon, not a sprint. We want to just make sure we roll those out properly to make sure that the investor experience remains excellent. Building the brand and deepening those relationships is really our main priority. We want that investor experience and the returns to be outstanding. And so, we want to make sure that we're managing flows, managing new products, but absolutely expect three to become more than three in the future.
Q: Can you just remind us again what funds are in the market today, where those funds stand, and then what might make sense to come back into the market sooner as we look out over the next 12 months?
A: Sure. So I think in the prior calls, we've talked about impact, some infrastructure. I mentioned today this new venture product. The other thing that we have talked about is that our next in our direct equity series is also in market credit perpetually in market, as I noted. So we've got a pretty full slate of things that we're working on. And of course, on top of that, the Evergreen.
Q: Talking about expenses what expense growth are you targeting as we think about this coming fiscal year? And what is the margins that we should expect given the investment plan that you guys have in place?
A: Thanks, Ken. Erik, I'll stick with this. So I'll pat ourselves in the back and say I think we've actually done a great job managing the margin. So if you think about what's -- what are headwinds right now, costs, inflation. So our team is traveling a lot. Travel costs are up. Conferences are back. Those are more expensive. We have a bigger team today than we had yesterday or certainly a year ago. And so more people, more offices, more activity. So that's a headwind. I think what's also been a headwind is, as you know, as we're onboarding onto these Evergreen and the flows are great and all that's terrific. You're obviously paying to the wirehouses an onboarding cost in that first year. So that's a headwind. So I think despite that and the fact that margins are coming in this year at 43%, obviously a little higher this quarter given some of the retro fee nature that we had talked about last quarter, I think we're doing a great job of managing the business. The tailwinds are that mix shift into this higher margin business. So the specialized funds across the board is helping that. I think when I talk to our shareholders, I say that the management team arrives to work every day thinking about how to maintain this strong double-digit growth. We are not arriving at work every day thinking about how we can tweak that margin a little higher. I think that will come over time as we get the benefit of scale and operating efficiencies, et cetera, et cetera, et cetera. But I think that what we're delivering in the current market with what we're dealing with, I think, has been noteworthy.
Q: Is it fair to say, the growth of investments that are gross of expenses that we've seen over the last 12 months that pacing continues for the next?
A: My answer is I hope it does because I think that's going to indicate that we're continuing to grow. But certainly, you hope that the fees and commissions can continue on the wirehouses and also on just on our distribution costs because, again, all that's indicating strong fundraising. And so, I hope all of that continues.
Q: Just on SMAs, talk to us about the pipeline where it stands, say today versus where it stood 6 or 12 months ago? And where in SMAs you're seeing the greatest interest from your clients?
A: Good question, and it's Erik. I'll stay on this. Pipeline continues to be robust. I mean, our growth rate on the SMA side has continued to be high-single digit. And I think given the breadth of the installed base, I think that's a continued good number for us to shoot for. We gave the two examples in the script today. And I think that speaks to the opportunity set. I mean, you think about those organizations as diametrically different from each other. One, literally entering the asset class for the very first time. No exposure, no relationships are just now saying that they're going to enter the asset class. And on the other end of the spectrum, someone who has been with us for over 20 years and has all the endless tranches that I spoke about and the fact that we're able to be appealing and attractive to both of those in two different geographies, two different-size organizations, different objectives with what they're trying to achieve in the asset class, I think says to you that the SMA business today is really set up to address whatever needs the customer has. We talk about meeting the customer where they are, and that's what the SMA business is all about. So interest is varied. People are looking for venture and other people are looking for infrastructure and someone else wants a credit overlay. And that's the beauty of the SMA business is that we can do all of those for all those customers.
Q: You mentioned distribution fees and some of what you pay into the wealth management channel for distribution and suggested that some of that was upfront. Just wanted to get your thoughts and commentary on the mix of those upfront fees versus ongoing revenue share arrangements and how that might be changing in the near term?
A: Sure. Adam, it's Erik. So for us, if you think about the fees, I'd put them in macro, I'll put them in two buckets. One is fundraising commissions
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
