Fiscal First Quarter 2021 Results
Executive Earnings Commentary
July 27, 2020
Important Disclosures
Forward-Looking Statements
This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are not statements of facts or guarantees of future performance, and are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those discussed in the statements.
For a discussion of these risks and uncertainties, please see "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in
the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2020 and in
the Company's quarterly reports on Form 10-Q.
Non-GAAP Financial Measures
This presentation includes non-GAAP financial information. This non-GAAP information is in addition to, not a substitute for or superior to, measures of financial performance or liquidity determined in accordance with GAAP.
The Company undertakes no obligation to update the information contained in this presentation to reflect subsequently occurring events or circumstances.
Page 1
Table of Contents
Contents | Page(s) | |
Highlights | 3 | |
Affiliate Flows and Unfunded Wins/Committed Uncalled Capital | 4 - 5 | |
Global Distribution | 6 | |
Financial Results and AUM | 7 - 8 | |
Operating Expenses | 9 | - 10 |
Adj. Operating Margin and EPS Roll Forward | 11 | - 12 |
Appendix | 13 | - 23 |
Page 2
Highlights
Financial Results1
Strategic
Restructuring
Assets Under
Management/
Flows
Global Distribution
Investment
Performance2
Other
- Net Income of $49.4M, or $0.54 per diluted share
- Includes strategic restructuring and merger related charges of $30.9M, or $0.24 per diluted share
- Adjusted Net Income1 of $65.4M, or $0.71 per diluted share
- Strategic Restructuring
- Achieved annualized run-rate savings of $104.5M
- Costs to achieve of $88.4M, $8.0M incurred in current quarter
- Total AUM of $783.4B
- Long-termnet outflows of $4.6B
- Fixed Income outflows of $3.1B
- Equity outflows of $2.0B
- Alternative inflows of $0.5B
• Quarterly gross sales of $26.7B
- Quarterly net sales of $2.2B
- 68% (3yr) and 67% (5yr) of strategy AUM beat benchmarks
- 63% (3yr) and 74% (5yr) of long-term US fund assets beat Lipper category averages
- On May 28, 2020, ClearBridge launched Legg Mason's first exchange-traded fund (ETF) using the semi-transparent technology of Precidian Investments LLC, ActiveShares®. The ClearBridge Focus Value ETF (CFCV) is a series of Legg Mason's ActiveShares® ETF Trust.
- On July 17, 2020, Franklin Templeton and Legg Mason announced that all conditions to the closing of its merger with Franklin Resources, Inc. have been satisfied and is scheduled to close on July 31, 2020.
Our strategic restructuring efforts reached 104% of our targeted annualized run-rate savings.
- Cumulative realized savings of $84 million.
- Total costs to achieve of $88 million significantly below our prior forecasted range.
Page 3
- See appendix for GAAP reconciliation.
- See appendix for details regarding strategy performance. Includes open-end,closed-end, and variable annuity funds. Source: Lipper Inc. Past performance is no guarantee of future results. The information shown above does not reflect the performance of any specific fund. Individual fund performance will differ.
Affiliate Flows and Unfunded Wins/Committed Uncalled Capital
Entity
W
C
C
B
R 2
E
M
R
Q
Ending AUM | Qtr/Qtr % Change |
783.4 | 7% |
464.1 | 5% |
144.7 | 20% |
56.2 | -1% |
63.5 | 5% |
11.1 | 23% |
13.3 | -4% |
13.8 | 15% |
4.3 | 13% |
10.8 | 10% |
1 | ||
Net LT Flows | / | |
Realizations | 1 | |
(4.6) / (0.2) | ||
(0.3) | ||
(1.2) | ||
0.5 / 0.0 | ||
(2.9) | ||
(0.1) | ||
0.0 / (0.2) | ||
(0.6) | ||
0.0 | ||
(0.1) |
Unfunded Wins/
Committed
Uncalled Capital
8.6 / 1.8 6.5 0.5
0.0 / 0.6 0.7 0.0
0.7 / 1.2 0.2 0.0 0.0
- The pipeline of new opportunities remains healthy across asset classes and strategies.
- Unfunded wins and committed uncalled capital of $10.4 billion.
1 | Realizations represent investment manager-driven distributions primarily related to the sale of assets. Realizations are specific to our alternative | |
managers and do not include client-driven distributions (e.g. client requested redemptions, liquidations or asset transfers). | ||
2 | EnTrust Global reports total assets of $18.2B, which includes ending AUM, ending AUA, committed uncalled capital, and unfunded wins. | |
Page 4 | Affiliates ordered by contribution to annual pre-tax earnings less noncontrolling interest. | |
Legg Mason ending AUM includes other entities not shown with ending AUM of $1.6B and LT Flows of $0.1B. |
Drivers of Quarterly Long-Term Flows
Equity | Fixed Income | Alternative |
Inflow | Drivers |
Outflow | Drivers |
Unfunded Wins/ Committed | Uncalled Capital |
AUM | Flows | AUM | Flows | AUM | Flows | ||||
($B) | ($B) | ($B) | ($B) | ($B) | ($B) | ||||
Large Cap | 82.7 | 0.7 | Core Plus | 106.0 | 1.9 | Real Estate | 56.2 | 0.5 | |
Enhanced Liquidity | 7.7 | 0.5 | Real Assets | 0.7 | 0.1 | ||||
CLO | 5.8 | 0.5 | |||||||
Mid Cap | 2.8 | (1.3) | Global Opportunistic | 30.0 | (1.6) | Hedge Funds | 10.1 | (0.1) | |
All Cap | 24.8 | (1.2) | Long Duration | 48.2 | (1.5) | ||||
TIPS | 6.7 | (1.0) | |||||||
Global Income | 19.5 | (0.7) | |||||||
Macro Opportunities | 13.2 | (0.5) | |||||||
Short Duration | 8.7 | (0.5) | |||||||
Unfunded Wins ($B) | Unfunded Wins ($B) | Unfunded Wins ($B) | |||||||
Large Cap | 0.2 | Core Bond | 2.4 | Alternative Solutions | 1 | 0.7 | |||
Emerging Markets | 0.2 | Corporate | 2.3 | ||||||
Equity International | 0.1 | Multi-Sector | 0.6 | Committed Uncalled Capital ($B) | |||||
Global Opportunistic | 0.5 | Alternative Solutions | 1 | 1.2 | |||||
Emerging Markets | 0.4 | Real Estate | 0.6 | ||||||
Mortgage-Backed Securities | 0.3 | Total Committed Uncalled | 1.8 | ||||||
Intermediate | 0.2 | Capital | |||||||
Total Equity | 0.8 | Total Fixed Income | 7.1 | Total Alternative | 2.5 | ||||
% of Total Unfunded Wins and | 8% | % of Total Unfunded Wins and | 68% | % of Total Unfunded Wins and | 24% | ||||
Committed Uncalled Capital | Committed Uncalled Capital | Committed Uncalled Capital | |||||||
- Unfunded wins and committed uncalled capital asset class mix of 68% from fixed income, 24% from alternatives, and 8% from equities.
Page 5
1 Alternative Solutions include strategic partnerships and commingled funds.
Global Distribution Update1
Distribution Highlights
- Gross sales of $26.7B for F1Q21
- Down $1.0B or 4% from F4Q20
- Net Sales of $2.2B for F1Q21
- Up $7.9B from F4Q20
- Quarterly global redemption rate of 29%
- Record gross sales for first half of calendar year
($ Billions) | 1 | F1Q21 | F4Q20 | F1Q20 |
: | ||||
Gross Sales | ||||
US | $22.8 | $23.2 | $17.4 | |
Int'l | 3.9 | 4.5 | 5.0 | |
Total | $26.7 | $27.7 | $22.4 | |
1 | : | |||
Net Sales | ||||
US | $2.7 | ($4.1) | $2.8 | |
Int'l | (0.5) | (1.6) | 1.2 | |
Total | $2.2 | ($5.7) | $4.0 |
Quarterly Gross and Net Sales Trends ($B) | Total Long-Term Assets by Vehicle ($B) |
$35 | US Gross Sales | Int. Gross Sales | Net Sales | |||||||
$30 | 27.7 | 26.7 | ||||||||
$25 | 18.9 | 21.4 | 22.4 | 22.4 | 21.6 | 4.5 | 3.9 | |||
$20 | 17.4 | 17.6 | 4.0 | 5.0 | 4.3 | |||||
5.1 | ||||||||||
$15 | 5.6 | 4.1 | 4.0 | |||||||
$10 | 18.1 | 23.2 | 22.8 | ||||
17.4 | 17.4 | 16.5 | |||||
13.3 | 13.3 | ||||||
$5 | 13.6 | ||||||
$0 | 2.5 | 4.0 | 2.6 | 1.6 | 2.2 | ||
-$5 | 0.1 | (1.4) | |||||
-$10 | (6.5) | (5.7) |
-$15
Jun 18 Sep 18 Dec 18 Mar 19 Jun 19 Sep 19 Dec 19 Mar 20 Jun 20
$400 | % Mix | $334 | $362 | % Mix | |||
$339 | 6/20 | ||||||
$302 | 3/17 | $10 | $9 | $318 | $13 | 4% | |
$11 | |||||||
$300 | $8 | $44 | $43 | 12% | |||
3% | $44 | ||||||
$43 | $37 | $35 | 10% | ||||
14% | $28 | $33 | |||||
$32 | |||||||
$25 | 8% | ||||||
$91 | 25% | ||||||
$200 | $78 | $83 | |||||
$66 | $80 | ||||||
22% | |||||||
$34 | 9% | ||||||
$36 | $41 | $36 | $30 | ||||
12% | |||||||
$100 | $146 | 40% | |||||
$124 | 41% | $133 | $134 | $128 | |||
$0
3/17 | 3/18 | 3/19 | 3/20 | 6/20 |
US Funds | Int'l Funds | US Retail SMA | Int'l SMA | Sub-Advised Other |
- F1Q21 gross sales of $26.7 billion compared to $27.7 billion in F4Q20.
- Quarterly net sales of $2.2 billion compared to net redemptions of $5.7 billion in F4Q20.
- Redemption rate of 29% reflected challenging market conditions.
- Long-termassets increased to $362 billion, largely driven by market appreciation.
1 Assets Under Advisement are included in long-term assets, gross sales and net sales. Net sales equals gross sales Page 6 less redemptions. As of June 30, 2020 the impact of AUA was immaterial.
Financial Highlights First Quarter
Quarters Ended | ||||||||||||
Financial Results | Jun | Mar | Jun | |||||||||
(Amounts in millions, except per share amounts) | 2020 | 2020 | 2019 | |||||||||
Operating Revenues | $ | 666.2 | $ | 719.6 | $ | 705.4 | ||||||
Operating Expenses | 598.5 | 553.3 | 621.4 | |||||||||
Operating Income | 67.7 | 166.3 | 83.9 | |||||||||
Operating margin | 10.2% | 23.1% | 11.9% | |||||||||
Adjusted operating margin2 | 22.1% | 25.8% | 21.6% | |||||||||
Net Income1 | $ | 49.4 | $ | 64.2 | $ | 45.4 | ||||||
Net Income Per Share - Diluted1 | 0.54 | 0.70 | 0.51 | |||||||||
Adjusted Net Income2 | 65.4 | 93.2 | 67.0 | |||||||||
Adjusted Earnings Per Share - Diluted2 | 0.71 | 1.02 | 0.75 | |||||||||
- Operating revenues decreased $53 million, or 7% quarter-over-quarter, driven by a decrease in average long-term AUM and lower performance fees.
- Non-passthrough performance fees of $4.6 million were above forecast.
- Performance fee-eligible portfolio remains well diversified.
- Quarterly GAAP and cash tax rates of 20% and 6%, respectively, for the quarter.
- At June 30, 2020, cash position was $932 million and seed investments totaled $211 million.
- On July 21, 2020, repaid the outstanding balance on the credit facility of $250 million.
Page 7
- Net Income Attributable to Legg Mason, Inc.
- See appendix for GAAP reconciliation.
Assets Under Management by Asset Class
$800 | 9% | 42 | ||||||||||
9% | 9% | |||||||||||
9% | ||||||||||||
10% | ||||||||||||
$600 | 28% | 26% | 25% | 39 | (bps) | |||||||
39 bps | 27% | 22% | ||||||||||
38 bps | ||||||||||||
Yield | ||||||||||||
($B) | ||||||||||||
37 bps | 37 bps | 37 bps | ||||||||||
Ending AUM | 36 bps | 36 bps | 36 bps | Oeprating Revenue | ||||||||
$400 | 36 | |||||||||||
34 bps | ||||||||||||
55% | 56% | |||||||||||
$200 | 33 | |||||||||||
58% | 57% | |||||||||||
56% | ||||||||||||
$0 | 8% | 9% | 8% | 10% | 9% | 30 | ||||||
Jun 18 | Sep 18 | Dec 18 | Mar 19 | Jun 19 | Sep 19 | Dec 19 | Mar 20 | Jun 20 |
Ending AUM | Liquidity | Fixed Income | Equity | Alternative | Operating Revenue Yield 1 | |||||
Long-term | $685 | $693 | $654 | $690 | $714 | $719 | $740 | $656 | $713 | |
Total | $745 | $755 | $727 | $758 | $780 | $782 | $804 | $731 | $783 |
- AUM increased $52.6 billion, or 7%, from the prior quarter due to market appreciation and FX, partially offset by outflows in liquidity and long-term AUM.
- Operating revenue yield declined reflecting the mix shift from average long-term AUM to liquidity AUM.
- Average AUM decreased 2% from the prior quarter driven by a decline in equity of 6%, fixed income of 3% and alternatives of 2%, partially offset by an increase in liquidity of 13%.
Page 8
1 Operating revenue yield equals total operating revenues less performance fees divided by average AUM. See appendix for supporting detail by asset class.
Operating Expenses
$ in Millions
$640 $620 $600 $580 $560 $540 $520
$53 | ($8) |
($14) $598
$14
$553
Mar Qtr | Restructuring Costs¹ | MTM on Deferred | D&S Expense | Other | Jun Qtr |
Comp and Seed Inv |
- Operating expenses increased $45 million on a sequential basis, driven by a $52 million increase in compensation & benefits largely due to gains on investments in deferred compensation plans during the current quarter (compared to losses in the prior quarter).
- D&S expense declined $8 million largely due to lower average AUM.
- Other expenses decreased largely due to lower "business as usual" spend related to T&E, advertising, and conferences.
Page 9
1 Restructuring costs includes strategic restructuring costs of $8.0M and merger related costs of $22.9M in the current quarter and strategic restructuring costs of $3.7M and merger related costs of $13.3M in the prior quarter.
Compensation and Benefits
% of | 1 | % of | 1 | $ | |||||||
Jun Qtr | Net Rev. | Mar Qtr | Net Rev. | Change | |||||||
Salary, incentives and benefits | $ | 324.5 | 57% | $ | 323.9 | 53% | $ | 0.6 | |||
Restructuring Costs | 2 | 1.9 | 0% | 4.6 | 0% | (2.7) | |||||
MTM on deferred comp and seed inv | 20.0 | 4% | (32.5) | (5%) | 52.5 | ||||||
Comp and benefits (ex pass through fees) | 346.4 | 61% | 296.0 | 48% | 50.4 | ||||||
Clarion pass through performance fees | 6.8 | 8.3 | (1.5) | ||||||||
Total Compensation and Benefits | $ | 353.2 | $ | 304.3 | $ | 48.9 |
- Salary, incentives, and benefits increased from the prior quarter largely due to seasonal accelerated deferred compensation and the compensation impact of lower non-compensation expenses at revenue-share affiliates, partially offset by the compensation impact of lower net revenue.
- Quarterly compensation ratio of 57%, up from the prior quarter.
Page 10
- Net Revenue is equal to Adjusted Operating Revenues. See appendix for GAAP reconciliation.
- Includes strategic restructuring costs, merger related costs, and affiliate charges.
Adjusted Operating Margin
$800 | 35% | |||||||
30% | Op Margin | |||||||
AUM ($B) | $700 | 26.5% | 25% | |||||
24.5% | 25.0% | 25.8% | ||||||
23.0% | ||||||||
22.1% | 21.6% | 22.1% | 20% | |||||
$600 | 20.4% | |||||||
Average | 15% | Adjusted | ||||||
$500 | 10% | |||||||
5% | ||||||||
$400 | 0% |
Jun 18 Sep 18 Dec 18 Mar 19 | Jun 19 Sep 19 Dec 19 Mar 20 Jun 20 | |
Avg AUM | Adjusted Operating Margin | |
- Adjusted operating margin for the quarter decreased 3.7% primarily due to lower net revenue, driven by lower long-term average AUM and non-pass through performance fees, and higher seasonal compensation, partially offset by lower "business as usual" spend including T&E, advertising and conferences.
Page 11 | See appendix for GAAP reconciliation. |
First Quarter
Adjusted Earnings Per Share Roll Forward
GAAP
EPS $0.70
GAAP
EPS $0.54
EPS
$1.10 | $1.02 | $0.22 | |
$1.00 | |||
$0.90 | |||
$0.80 | |||
$0.70 | |||
$0.60 | |||
$0.50 | |||
$0.10 | |
$0.07 | $0.03 |
$0.03 $0.71
Mar Qtr | Lower Net | Seasonal Comp | BAU Spend | Interest | Tax | Jun Qtr |
Adj EPS | Revenue | Adj EPS |
- GAAP EPS decreased $0.16 to $0.54 largely due to lower net revenue, higher strategic restructuring and merger related charges, and seasonal compensation, partially offset by gains on investments not offset by compensation and hedges (compared to losses in the prior quarter), lower GAAP tax rate, and lower
"business as usual" spend. - Adjusted EPS declined $0.31 from lower net revenue, seasonal compensation, higher net interest expenses, and a higher adjusted tax rate, partially offset by lower "business as usual" spend.
Page 12 | See appendix for GAAP reconciliation. |
Appendix
Appendix - Asset & Revenue Diversification
Fixed | Equity | Alternative | Liquidity | Total AUM | Operating | ||||
Income | Revenue | ||||||||
AUM by | |||||||||
Domicile: | |||||||||
US | 67% | 89% | 86% | 52% | 73% | 78% | |||
Non US | 33% | 11% | 14% | 48% | 27% | 22% | |||
Total AUM | 57% | 25% | 9% | 9% | 100% | ||
Operating | 42% | 38% | 16% | 4% | 100% | ||
Revenue | |||||||
Asset data as of June 30, 2020 and operating revenue data for the quarter ended June 30, 2020.
Page 14
Appendix - Operating Revenue Yield by Asset Class1
Yield (bps) | |||||||||
Jun 18 | Sep 18 | Dec 18 | Mar 19 | Jun 19 | Sep 19 | Dec 19 | Mar 20 | Jun 20 | |
Alternative | 63 | 61 | 59 | 60 | 60 | 58 | 58 | 58 | 56 |
Equity | 61 | 60 | 59 | 58 | 58 | 57 | 56 | 58 | 55 |
Fixed Income | 28 | 27 | 27 | 27 | 26 | 26 | 26 | 26 | 25 |
Liquidity | 13 | 14 | 13 | 14 | 14 | 14 | 14 | 14 | 15 |
1 Operating revenue yield equals total operating revenues less performance fees divided by average AUM.
Page 15
Appendix - First Quarter Adjusted EBITDA1 Roll Forward
Cash Provided
By (Used In)
Operating
Activities,
GAAP
Mar 20 Qtr
$183.5
Jun 20 Qtr
($211.5)
$ in Millions
$250 | $16.0 | $115.3 | ||
$207.5 | ||||
$200 | ||||
$150 | ||||
($29.4) | ||||
$100 | $78.8 | |||
$50 | ||||
$0 | ||||
Mar 20 Qtr | Q4 Items | Net Change in Adjusted EBITDA | Q1 Items | Jun 20 Qtr |
- Adjusted EBITDA decreased primarily due to realized losses on investments in the current period as compared to realized gains on investments in the prior period and lower net revenue, partially offset by lower "business as usual" spend.
- F4Q20 and F1Q21 items include strategic restructuring costs, merger related costs and affiliate charges ultimately settled in cash.
Page 16
1 See page 22 for GAAP reconciliation.
Appendix - Investment Performance
% of Strategy AUM beating Benchmark1
87%
10 Yr88%
85%
84% | ||||||||||||||
5 Yr | 71% | |||||||||||||
67% | ||||||||||||||
83% | ||||||||||||||
3 Yr | 34% | |||||||||||||
68% | ||||||||||||||
75% | ||||||||||||||
1 Yr | 33% | |||||||||||||
57% | ||||||||||||||
0% | 10% | 20% | 30% | 40% | 50% | 60% | 70% | 80% | 90% | 100% | ||||
Jun 19 | Mar 20 | Jun 20 | ||||||||||||
- Yr
- Yr
- Yr
- Yr
- of Long-Term U.S. Fund Assets beating Lipper Category Average2
68%
71%
69%
72%
73%
74%
66%
61%
63%
72%
60%
59%
0% | 10% | 20% | 30% | 40% | 50% | 60% | 70% | 80% | 90% | 100% | |
Jun 19 | Mar 20 | Jun 20 | |||||||||
1 | See last page for details regarding strategy performance. | |
2 | Includes open-end,closed-end, and variable annuity funds. Source: Lipper Inc. | |
Page 17 | Past performance is no guarantee of future results. The information shown above does not reflect the performance of | |
any specific fund. Individual fund performance will differ. |
Appendix - Additional Investment Performance Detail
% of Strategy AUM Beating Benchmark1
June 30, 2020 | March 31, 2020 | June 30, 2019 | ||||||||
1-Year | 3-Year | 5-Year | 1-Year | 3-Year | 5-Year | 1-Year | 3-Year | 5-Year | ||
Total (includes liquidity) | 57% | 68% | 67% | 33% | 34% | 71% | 75% | 83% | 84% | |
Equity: | ||||||||||
Large cap | 17% | 24% | 13% | 21% | 21% | 56% | 60% | 49% | 65% | |
Small cap | 67% | 73% | 80% | 77% | 64% | 69% | 74% | 68% | 40% | |
Total Equity (includes other equity) | 62% | 62% | 70% | 68% | 58% | 65% | 61% | 56% | 48% | |
Fixed Income: | ||||||||||
US taxable | 74% | 99% | 95% | 6% | 9% | 90% | 97% | 99% | 95% | |
US tax-exempt | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 100% | 100% | |
Global taxable | 45% | 35% | 50% | 30% | 33% | 35% | 45% | 92% | 86% | |
Total Fixed Income | 62% | 76% | 78% | 13% | 15% | 69% | 77% | 97% | 92% | |
Total Alternative2 | 78% | 90% | 79% | 93% | 93% | 90% | 98% | 84% | 98% |
- See last page for details regarding strategy performance. Past performance is no guarantee of future results. The information shown above does not reflect the performance of any specific fund. Individual fund performance will differ.
- Alternative assets include AUM managed by Clarion Partners and RARE Infrastructure totaling three funds.
Page 18
Appendix - Additional Investment Performance Detail
% of Long-Term U.S. Fund Assets beating Lipper Category Average1
June 30, 2020 | March 31, 2020 | June 30, 2019 | ||||||||
1-Year3-Year | 5-Year | 1-Year | 3-Year | 5-Year | 1-Year | 3-Year | 5-Year | |||
Total (excludes liquidity) | 59% | 63% | 74% | 60% | 61% | 73% | 72% | 66% | 72% | |
Equity: | ||||||||||
Large cap | 27% | 39% | 70% | 40% | 41% | 75% | 70% | 42% | 70% | |
Small cap | 79% | 73% | 80% | 70% | 65% | 71% | 75% | 76% | 76% | |
Total Equity (includes other equity) | 41% | 48% | 72% | 47% | 47% | 72% | 72% | 51% | 72% | |
Fixed Income: | ||||||||||
US taxable | 88% | 92% | 92% | 86% | 88% | 92% | 93% | 95% | 91% | |
US tax-exempt | 16% | 8% | 6% | 10% | 6% | 5% | 10% | 28% | 24% | |
Global taxable | 53% | 48% | 43% | 45% | 42% | 38% | 41% | 76% | 32% | |
Total Fixed Income | 75% | 76% | 76% | 70% | 71% | 73% | 73% | 81% | 73% | |
Total Alternative2 | 77% | 77% | N/A | 58% | 100% | N/A | 18% | 24% | 0% |
1 | Includes open-end,closed-end, and variable annuity funds. Source: Lipper Inc. Past performance is no guarantee of | |
future results. The information shown above does not reflect the performance of any specific fund. Individual fund | ||
performance will differ. | ||
Page 19 | 2 | Alternative assets include AUM managed by Clarion Partners and RARE Infrastructure totaling three funds. |
Appendix - GAAP Reconciliation
Adjusted income1
Quarters Ended | |||||||||
June | March | June | |||||||
($ millions) | 2019 | 2020 | 2020 | ||||||
Net Income (Loss) Attributable to Legg Mason, Inc. | $ | 45.4 | $ | 64.2 | $ | 49.4 | |||
Plus (less): | |||||||||
Restructuring costs: | |||||||||
Strategic restructuring and merger related charges | 32.9 | 17.0 | 31.0 | ||||||
Affiliate charges | 1.2 | 0.7 | 0.5 | ||||||
Amortization of intangible assets | 5.4 | 5.6 | 5.5 | ||||||
Gains and losses on seed and other investments | |||||||||
not offset by compensation or hedges | (6.4) | 12.6 | (8.1) | ||||||
Acquisition and transition-related costs | - | - | 0.6 | ||||||
Contingent consideration fair value adjustments | (1.2) | 0.3 | - | ||||||
2 | : | ||||||||
Income tax adjustments | |||||||||
Impacts of non-GAAP adjustments | (8.6) | (9.7) | (8.3) | ||||||
Other tax items | (1.7) | 2.5 | (5.2) | ||||||
Adjusted Net Income | $ | 67.0 | $ | 93.2 | $ | 65.4 | |||
Net Income (Loss) Per Diluted Share Attributable to | |||||||||
Legg Mason, Inc. Shareholders | $ | 0.51 | $ | 0.70 | $ | 0.54 | |||
Plus (less), net of tax impacts: | |||||||||
Restructuring costs: | |||||||||
Strategic restructuring and merger related charges | 0.27 | 0.14 | 0.24 | ||||||
Affiliate charges | 0.01 | - | - | ||||||
Amortization of intangible assets | 0.04 | 0.05 | 0.04 | ||||||
Gains and losses on seed and other investments | |||||||||
not offset by compensation or hedges | (0.05) | 0.10 | (0.06) | ||||||
Acquisition and transition-related costs | - | - | 0.01 | ||||||
Contingent consideration fair value adjustments | (0.01) | - | - | ||||||
Other tax items | (0.02) | 0.03 | (0.06) | ||||||
Adjusted Earnings per Diluted Share | $ | 0.75 | $ | 1.02 | $ | 0.71 | |||
1 See explanations for Use of Supplemental Data as Non-GAAP Financials information in earnings release. | |||||||||
Page 20 | 2 | The non-GAAP effective tax rates for the quarters ended June 30,2019, March 31, 2020 and June 30, 2020 were | |||||||
27.0%, 24.6% and 28.0%, respectively. | |||||||||
Appendix - GAAP Reconciliation
Adjusted Operating Margin1
($ millions) | Jun 18 | Sep 18 | Dec 18 | Mar 19 | Jun 19 | Sep 19 | Dec 19 | Mar 20 | Jun 20 | |||||||||
Operating Revenues, GAAP basis | $ | 747.9 | $ | 758.4 | $ | 704.3 | $ | 692.6 | $ | 705.4 | $ | 743.3 | $ | 753.9 | $ | 719.6 | $ | 666.2 |
Plus (less): | ||||||||||||||||||
Pass through performance fees | (12.6) | (24.0) | (7.4) | (5.0) | (1.0) | (21.9) | (10.7) | (8.3) | (6.8) | |||||||||
Operating revenues eliminated upon | ||||||||||||||||||
consolidation of investment vehicles | 0.2 | 0.1 | 0.2 | 0.2 | 0.1 | 0.1 | 0.1 | - | 0.1 | |||||||||
Distribution and servicing fees | (79.2) | (79.1) | (72.2) | (72.5) | (69.9) | (67.1) | (67.6) | (65.8) | (59.9) | |||||||||
Investment advisory fees | (37.4) | (35.4) | (36.6) | (26.8) | (34.0) | (37.1) | (36.7) | (34.0) | (31.6) | |||||||||
Adjusted Operating Revenues | $ | 618.9 | $ | 620.0 | $ | 588.3 | $ | 588.5 | $ | 600.6 | $ | 617.3 | $ | 639.0 | $ | 611.5 | $ | 568.0 |
Operating Income (Loss), GAAP basis | $ | 125.7 | $ | 135.7 | $ | (236.4) | $ | 78.1 | $ | 83.9 | $ | 125.0 | $ | 130.0 | $ | 166.3 | $ | 67.7 |
Plus (less): | ||||||||||||||||||
Restructuring costs: | ||||||||||||||||||
Strategic restructuring and | ||||||||||||||||||
merger related charges | 2.8 | 5.6 | 5.9 | 9.4 | 32.9 | 19.7 | 20.9 | 17.0 | 30.9 | |||||||||
Affiliate charges | - | - | - | 9.3 | 1.2 | 0.2 | 0.2 | 0.7 | 0.6 | |||||||||
Amortization of intangible assets | 6.2 | 6.1 | 6.1 | 6.0 | 5.5 | 5.4 | 6.0 | 5.6 | 5.5 | |||||||||
Gains (losses) on deferred compensation | ||||||||||||||||||
and seed investments, net | 1.3 | 4.0 | (10.8) | 16.0 | 7.0 | 2.9 | 12.0 | (32.5) | 20.0 | |||||||||
Acquisition and transition-related costs | 1.4 | - | - | 1.2 | - | - | - | - | 0.6 | |||||||||
Impairment of intangible assets | - | - | 365.2 | - | - | - | - | - | - | |||||||||
Contingent consideration fair value adjustments | 0.4 | 0.1 | - | - | (1.2) | - | - | 0.2 | - | |||||||||
Charges related to significant | ||||||||||||||||||
regulatory matters | 4.0 | 0.2 | - | - | - | - | - | - | - | |||||||||
Operating income (loss) of consolidated investment | ||||||||||||||||||
vehicles, net | 0.6 | 0.4 | 0.3 | 0.3 | 0.3 | 1.3 | 0.2 | 0.2 | - | |||||||||
Adjusted Operating Income | $ | 142.4 | $ | 152.1 | $ | 130.3 | $ | 120.3 | $ | 129.6 | $ | 154.5 | $ | 169.3 | $ | 157.5 | $ | 125.3 |
Operating Margin, GAAP basis | 16.8% | 17.9% | (33.6%) | 11.3% | 11.9% | 16.8% | 17.2% | 23.1% | 10.2% | |||||||||
Adjusted Operating Margin | 23.0% | 24.5% | 22.1% | 20.4% | 21.6% | 25.0% | 26.5% | 25.8% | 22.1% |
Page 21 | 1 | See explanations for Use of Supplemental Data as Non-GAAP Financials information in earnings release. |
Appendix - GAAP Reconciliation
Adjusted EBITDA1
Quarters Ended | ||||||
June | March | June | ||||
2019 | 2020 | 2020 | ||||
($ millions) | ||||||
Cash provided by (used in) operating activities, GAAP basis | $ | (187.6) | $ | 183.5 | $ | (211.5) |
Plus (less): | ||||||
Interest expense, net of accretion and amortization | ||||||
of debt discounts and premiums | $ | 28.3 | $ | 26.6 | $ | 28.2 |
Current tax expense (benefit) | $ | (4.2) | $ | 0.2 | $ | 4.9 |
Net change in assets and liabilities | $ | 303.1 | $ | (43.4) | $ | 378.2 |
Net change in assets and liabilities | ||||||
of consolidated investment vehicles | $ | (13.0) | $ | 31.1 | $ | (101.3) |
Net income attributable to noncontrolling interests | $ | (16.2) | $ | (11.2) | $ | (5.7) |
Net gains (losses) and earnings on investments | $ | 6.7 | $ | 19.5 | $ | (11.8) |
Net gains (losses) on consolidated investment vehicles | $ | 9.6 | $ | 1.3 | $ | (2.2) |
Other | $ | (0.3) | $ | (0.1) | $ | - |
Adjusted EBITDA | $ | 126.4 | $ | 207.5 | $ | 78.8 |
Page 22 | 1 | See explanations for Use of Supplemental Data as Non-GAAP Financials information in earnings release. |
Appendix - Strategy Performance
For purposes of investment performance comparisons, strategies are an aggregation of discretionary portfolios (separate accounts, investment funds, and other products) into a single group that represents a particular investment objective. In the case of separate accounts, the investment performance of the account is based upon the performance of the strategy to which the account has been assigned. Each of our asset managers has its own specific guidelines for including portfolios in their strategies. For those managers which manage both separate accounts and investment funds in the same strategy, the performance comparison for all of the assets is based upon the performance of the separate account.
Approximately 88% of total AUM is included in strategy AUM as of June 30, 2020, although not all strategies have three, five, and ten year histories. Total strategy AUM includes liquidity assets. Certain assets are not included in reported performance comparisons. These include: accounts that are not managed in accordance with the guidelines outlined above; accounts in strategies not marketed to potential clients; accounts that have not yet been assigned to a strategy; and certain smaller products at some of our affiliates.
Past performance is not indicative of future results. For AUM included in institutional and retail separate accounts and investment funds managed in the same strategy as separate accounts, performance comparisons are based on gross-of-fee performance. For investment funds which are not managed in a separate account format, performance comparisons are based on net-of-fee performance. Funds-of-hedge funds generally do not have specified benchmarks. For purposes of this comparison, performance of those products is net-of-fees, and is compared to the relevant HFRX index. These performance comparisons do not reflect the actual performance of any specific separate account or investment fund; individual separate account and investment fund performance may differ. The information in this presentation is provided solely for use in connection with this presentation, and is not directed toward existing or potential clients of Legg Mason.
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Legg Mason Inc. published this content on 27 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 July 2020 12:15:04 UTC