It has been about a month since the last earnings report for Affiliated Managers Group (AMG). Shares have added about 4.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Affiliated Managers due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Affiliated Managers' Q3 Earnings Top, Revenues & AUM Down

Affiliated Managers’ third-quarter 2023 economic earnings of $4.08 per share handily outpaced the Zacks Consensus Estimate of $3.78. The bottom line, however, declined 3.5% from the prior-year number.

Results were aided by lower expenses, partially offset by a decline in revenues and assets under management (AUM) balance. Further, the company had a robust liquidity position.

Economic net income was $149.5 million, down 10.5% year over year. Our estimate for this metric was $140.4 million.

Revenues & Expenses Decline, AUM Falls

Total revenues declined 9.2% year over year to $525.2 million. However, the top line beat the Zacks Consensus Estimate of $514.74 million.

Adjusted EBITDA was $208.4 million, down 5.8% from the year-ago quarter. We projected the metric to be $195.2 million.

Total consolidated expenses decreased 16% to $357.4 million year over year. Lower compensation and related expenses and selling, general and administrative charges largely led to the fall. We had projected total expenses of $407.1 million. However, the higher-than-expected decline in compensation expenses led the company to post lower total costs.

As of Sep 30, 2023, total AUM was $635.8 billion, which declined 1.4%. Net client cash outflows in the quarter were $9.4 billion. Our estimate for AUM was $674.6 billion.

Capital & Liquidity Position Decent

As of Sep 30, 2023, Affiliated Managers had $999.2 million in cash and cash equivalents compared with $429.2 million as of Dec 31, 2022. The company had $2.54 billion of debt, relatively stable with the December 2022-end level.

Shareholders’ equity as of Sep 30, 2023, was $3.5 billion compared with $3.23 billion as of Dec 31, 2022.

Share Repurchase Update

During the third quarter, Affiliated Managers repurchased shares worth $172 million.

Fourth-Quarter 2023 Outlook

Management expects adjusted EBITDA to be in the $260-$285 million range based on the current AUM levels, net performance fee earnings of up to $75-$100 million and the partial quarter contribution from Forbion. This doesn’t include Veritable and Ara Partners’ contributions.

Ara Partners, which will be reported on one quarter lag, will start contributing from the first quarter of 2024.

Interest expenses are expected to be $31 million, around the same level as the third quarter of 2023. Controlling interest depreciation is likely to be $2 million.

Net income (controlling interest) is expected to be between $145 million and $163 million. The company’s share of reported amortization and impairments is estimated to be $30 million.

Intangible-related deferred taxes are projected to be $15 million. Other economic items, which now include realized gains, are anticipated to be roughly $2 million.

Economic net income (controlling interest) is projected to be in the range of $191-$210 million. Economic EPS is expected to be between $5.43 and $5.96.

The adjusted weighted average share count is estimated to be $35.2 million.