10-Q 1 bsig-20240331.htm 10-Q bsig-20240331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q 
(Mark One)
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2024
OR
         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to
Commission File Number: 001-38979
 
brightsphere-sphere_logoa06.jpg
BrightSphere
Investment Group Inc.
(Exact name of registrant as specified in its charter) 
Delaware47-1121020
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
  
200 State Street, 13th Floor02109
Boston, Massachusetts
(Address of principal executive offices)(Zip Code)
(617)-369-7300
(Registrant’s telephone number, including area code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTicker SymbolName of each exchange on which registered
Common stock, par value $0.001 per shareBSIGNew York Stock Exchange
4.800% Notes due 2026BSIG 26New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filerAccelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No ý 
The number of shares of the registrant’s common stock, $0.001 per share, outstanding as of May 6, 2024 was 37,763,692.


TABLE OF CONTENTS
  Page
Part I
   
Item 1.
   
 
   
 
   
 
   
 
   
 
   
 
   
Item 2.
   
Item 3.
   
Item 4.
   
Part II
   
Item 1.
   
Item 1A.
   
Item 2.
Item 5.
Item 6.


2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

BrightSphere Investment Group Inc.
Condensed Consolidated Balance Sheets
(in millions, except for share and per share data, unaudited)
March 31,
2024
December 31,
2023
Assets  
Cash and cash equivalents$102.2 $146.8 
Investment advisory fees receivable119.0 143.4 
Income taxes receivable 2.7 
Fixed assets, net42.0 44.2 
Right of use assets55.6 57.2 
Investments67.0 64.7 
Goodwill20.3 20.3 
Other assets27.2 27.2 
Deferred tax assets72.2 69.7 
Assets of consolidated Funds:
Cash and cash equivalents, restricted0.8 0.8 
Investments 37.6 33.9 
Other assets1.0 0.5 
Total assets$544.9 $611.4 
Liabilities and stockholders’ equity  
Accounts payable and accrued expenses$21.6 $39.1 
Accrued incentive compensation30.2 101.3 
Other compensation liabilities72.7 67.5 
Accrued income taxes7.2 2.6 
Operating lease liabilities70.6 72.4 
Other liabilities0.5 0.8 
Revolving credit facility73.0  
Third party borrowings274.0 273.9 
Liabilities of consolidated Funds:
Accounts payable and accrued expenses1.0 0.2 
Derivative liabilities
0.1 0.1 
Securities sold short
4.2 4.0 
Total liabilities555.1 561.9 
Commitments and contingencies
Redeemable non-controlling interests in consolidated Funds11.5 9.3 
Equity: 
Common stock (par value $0.001; 37,965,341 and 41,372,291 shares, respectively, issued)
  
Additional paid-in capital  
Retained earnings (deficit)(15.5)46.9 
Accumulated other comprehensive loss(6.2)(6.7)
Total equity (deficit) and redeemable non-controlling interests in consolidated Funds(10.2)49.5 
Total liabilities and equity$544.9 $611.4 
See Notes to Condensed Consolidated Financial Statements

3

BrightSphere Investment Group Inc.
Condensed Consolidated Statements of Operations
(in millions except for per share data, unaudited)
 
Three Months Ended
March 31,
 20242023
Revenue:  
Management fees$102.2 $90.6 
Performance fees3.1 0.5 
Consolidated Funds’ revenue0.4 0.7 
Total revenue105.7 91.8 
Operating expenses:  
Compensation and benefits58.1 49.1 
General and administrative expense20.0 18.4 
Depreciation and amortization4.6 3.8 
Consolidated Funds’ expense0.1 0.7 
Total operating expenses82.8 72.0 
Operating income22.9 19.8 
Non-operating income and (expense):  
Investment income0.9 0.3 
Interest income1.3 1.1 
Interest expense(5.0)(4.9)
Net consolidated Funds’ investment gains1.7 0.8 
Total non-operating loss(1.1)(2.7)
Income before income taxes21.8 17.1 
Income tax expense6.1 5.1 
Net income15.7 12.0 
Net income attributable to non-controlling interests in consolidated Funds1.1  
Net income attributable to controlling interests$14.6 $12.0 
Earnings per share (basic) attributable to controlling interests$0.37 $0.29 
Earnings per share (diluted) attributable to controlling interests0.37 0.28 
Weighted average common stock outstanding39.1 41.4 
Weighted average diluted common stock outstanding39.7 42.7 
See Notes to Condensed Consolidated Financial Statements

4

BrightSphere Investment Group Inc.
Condensed Consolidated Statements of Comprehensive Income
(in millions, unaudited)
 
Three Months Ended
March 31,
 20242023
Net income$15.7 $12.0 
Other comprehensive income:
Amortization related to derivative securities, net of tax
0.7 0.6 
Foreign currency translation adjustment, net of tax
(0.2)0.7 
Total other comprehensive income0.5 1.3 
Comprehensive income attributable to non-controlling interests in consolidated Funds1.1  
Total comprehensive income attributable to controlling interests$15.1 $13.3 

See Notes to Condensed Consolidated Financial Statements

5

BrightSphere Investment Group Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the three months ended March 31, 2024 and 2023
($ in millions except share data, unaudited)
 Common stock
(millions)
Common stock, 
par
value
Additional paid-in capitalRetained earnings (deficit)Accumulated
other
comprehensive
income (loss)
Total
stockholders’
equity (deficit)
Redeemable non-controlling interests in consolidated 
Funds
Total equity (deficit) and
redeemable
non-controlling
interests in
consolidated
Funds
December 31, 202241.4 $ $1.5 $(12.5)$(10.6)$(21.6)$ $(21.6)
Issuance of common stock0.1 — — — — — — — 
Capital contributions— — — — — — 0.4 0.4 
Equity-based compensation— — 0.2 — — 0.2 — 0.2 
Foreign currency translation adjustment
— — — — 0.7 0.7 — 0.7 
Amortization related to derivatives securities, net of tax
— — — — 0.6 0.6 — 0.6 
Withholding tax related to stock option exercise and restricted stock vesting
(0.3)— — (0.3)(0.3)
Dividends ($0.01 per share)
— — — (0.3)— (0.3)— (0.3)
Net income — — — 12.0 — 12.0 — 12.0 
March 31, 202341.5 $ $1.4 $(0.8)$(9.3)$(8.7)$0.4 $(8.3)
December 31, 202341.4 $ $ $46.9 $(6.7)$40.2 $9.3 $49.5 
Issuance of common stock0.1 — — — — — — — 
Repurchases of common stock including excise taxes
(3.5)— (0.2)(74.8)— (75.0)— (75.0)
Capital contributions— — — — — — 1.1 1.1 
Equity-based compensation— — 0.2 — — 0.2 — 0.2 
Foreign currency translation adjustment, net of tax
— — — — (0.2)(0.2)— (0.2)
Amortization related to derivative securities, net of tax
— — — — 0.7 0.7 — 0.7 
Withholding tax related to stock option exercise and restricted stock vesting— — — (1.8)— (1.8)— (1.8)
Dividends ($0.01 per share)
— — — (0.4)— (0.4)— (0.4)
Net income— — — 14.6 — 14.6 1.1 15.7 
March 31, 202438.0 $ $ $(15.5)$(6.2)$(21.7)$11.5 $(10.2)
See Notes to Condensed Consolidated Financial Statements

6

BrightSphere Investment Group Inc.
Condensed Consolidated Statements of Cash Flows
(in millions, unaudited) 
Three Months Ended
March 31,
 20242023
Cash flows from operating activities:  
Net income15.7 12.0 
Less: Net (income) loss attributable to redeemable non-controlling interests in consolidated Funds(1.1) 
Adjustments to reconcile net income to net cash flows from operating activities:  
Depreciation and other amortization4.6 3.8 
Amortization of debt-related costs1.1 1.0 
Amortization and revaluation of non-cash compensation awards6.2 1.2 
Deferred income taxes(2.7)(1.0)
(Gains) on other investments(4.4)(1.1)
Changes in operating assets and liabilities:  
Decrease in investment advisory fees receivable24.4 22.6 
Decrease in other receivables, prepayments, deposits and other assets2.6 0.8 
Decrease in accrued incentive compensation, operating lease liabilities and other liabilities(72.1)(68.8)
Decrease in accounts payable, accrued expenses and accrued income taxes(13.6)(4.8)
Net cash flows from operating activities, excluding consolidated Funds(39.3)(34.3)
Net income attributable to redeemable non-controlling interests in consolidated Funds1.1  
Adjustments to reconcile net income (loss) attributable to redeemable non-controlling interests of consolidated Funds to net cash flows from operating activities of consolidated Funds:
(Gains) on other investments(0.8) 
Purchase of investments(18.8)(0.1)
Sale of investments17.0 0.4 
Increase in receivables and other assets(0.4)(1.0)
Increase in accounts payable and other liabilities0.8 0.1 
Net cash flows from operating activities of consolidated Funds(1.1)(0.6)
Net cash flows from operating activities(40.4)(34.9)
Cash flows from investing activities:  
Additions of fixed assets(2.4)(4.5)
Purchase of investment securities(2.3)(2.6)
Sale of investment securities3.3 1.5 
Net cash flows from investing activities(1.4)(5.6)
See Notes to Condensed Consolidated Financial Statements

7

BrightSphere Investment Group Inc.
Condensed Consolidated Statements of Cash Flows
(in millions, unaudited) 
Three Months Ended
March 31,
 20242023
Cash flows from financing activities:  
Proceeds from revolving credit facility101.0 100.0 
Repayment of revolving credit facility
(28.0)(13.0)
Payment to OM plc for co-investment redemptions(0.2)(0.4)
Dividends paid to stockholders(0.3)(0.5)
Dividends paid to related parties(0.1)(0.3)
Repurchases of common stock(74.3) 
Withholding tax payments related to stock option exercise and restricted stock vesting(1.8)(0.3)
Cash flows from financing activities of consolidated Funds:
      Redeemable non-controlling interest capital raised1.1 0.4 
Net cash flows from financing activities(2.6)85.9 
Effect of foreign exchange rate changes on cash and cash equivalents(0.2)0.1 
Net increase (decrease) in cash and cash equivalents(44.6)45.5 
Cash and cash equivalents at beginning of period$147.6 $121.2 
Cash and cash equivalents at end of period (including cash at consolidated Funds classified as restricted)$103.0 $166.7 
Supplemental disclosure of cash flow information:  
Interest paid (excluding consolidated Funds)$7.2 $7.1 
Income taxes paid$1.4 $0.8 
Supplemental disclosure of non-cash investing and financing transactions:
Excise tax on repurchases of common stock
$0.7 $ 
Payable for securities purchased by a consolidated Fund$0.9 $ 







See Notes to Condensed Consolidated Financial Statements

8


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

1) Organization and Description of the Business
BrightSphere Investment Group Inc. (“BrightSphere”, “BSIG” or the “Company”) is a global, diversified asset management company. The Company provides investment management services globally to predominantly institutional investors. The Company operates a differentiated investment management business through its majority owned subsidiary, Acadian Asset Management LLC (“Acadian” or the “Affiliate”), a leading systematic manager of active global, international equity and alternative strategies. Acadian comprises the Company’s Quant & Solutions reportable segment:
Quant & Solutions—comprised of versatile, often highly-tailored strategies that leverage data and technology in a computational, factor-based investment process across a range of asset classes in developed and emerging markets, including global, non-U.S. and small-cap equities, as well as managed volatility, equity alternatives including macro, and credit strategies.
Acadian is organized as a limited liability company. Fees for services are largely asset-based and, as a result, revenues fluctuate based on the performance of financial markets and investors’ asset flows in and out of Acadian’s products. The Company utilizes a profit-sharing model in structuring its compensation and ownership arrangements with Acadian. Variable compensation is based on the firm’s profitability. BSIG and Acadian key employees share in profits after variable compensation according to their respective ownership interests. The profit-sharing model results in the alignment of BSIG and Acadian key employee economic interests, which is critical to the Company’s talent management strategy and long-term growth of the business. The corporate head office is included within the Other category.
Prior to 2014, the Company was a wholly-owned subsidiary of Old Mutual plc (“OM plc”), an international long-term savings, protection, and investment group, listed on the London Stock Exchange. On October 15, 2014, the Company completed the initial public offering (the “Offering”) by OM plc pursuant to the Securities Act of 1933, as amended. As of March 31, 2024, Paulson & Co. Inc. (“Paulson”) held approximately 23.6% of the common stock of the Company.

For the three months ended March 31, 2024, the Company repurchased 3,530,908 shares of common stock at an average price of $21.04 per share, or approximately $74.4 million in total, including commissions. For the three months ended March 31, 2023, the Company did not repurchase any shares of common stock.
All shares of common stock repurchased by the Company were retired.

9


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

2) Basis of Presentation and Significant Accounting Policies

The Company’s significant accounting policies are as follows:
Basis of presentation
These unaudited Condensed Consolidated Financial Statements reflect the historical balance sheets, statements of operations, statements of comprehensive income, statements of changes in stockholders’ equity and statements of cash flows of the Company. Within these Condensed Consolidated Financial Statements, Paulson and its related entities, as defined above, are referred to as “related parties.”
The Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of the Company’s Condensed Consolidated Financial Statements have been included. All dollar amounts, except per-share data in the text and tables herein, are stated in millions unless otherwise indicated. Transactions between the Company and its related parties are included in the Condensed Consolidated Financial Statements; however, material intercompany balances and transactions among the Company, its consolidated Affiliate and consolidated Funds are eliminated in consolidation.
Certain disclosures included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (annual report on Form 10-K) are not required to be included on an interim basis in the Company’s quarterly reports on Form 10-Q. The Company has condensed or omitted these disclosures. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on February 28, 2024. The Company’s significant accounting policies, which have been consistently applied, are summarized in those financial statements.
Use of estimates
The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from such estimates, and the differences may be material to the Condensed Consolidated Financial Statements.
New accounting standards not yet adopted

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07 - Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The amendment requires annual and interim disclosures of significant segment expenses that are regularly provided to the chief operating decision maker by reportable segment and clarifies that single reportable segment entities are required to apply all existing segment disclosures in the guidance. The amendment is effective for annual periods beginning after December 15, 2023 and for interim periods beginning after December 15, 2024. We are currently evaluating the impact of adopting this standard, but we expect the standard to result in additional segment footnote disclosures.


10


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

2) Basis of Presentation and Significant Accounting Policies (cont.)
In December 2023, the FASB issued Accounting Standards Update No. 2023-09 - Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. This amendment is effective for annual periods beginning after December 15, 2024. We are currently evaluating the impact of adopting this standard and have not yet determined our transition approach.

The Company has considered all other newly issued accounting guidance that is applicable to the Company’s operations and the preparation of the unaudited Condensed Consolidated Financial Statements, including those that have not yet been adopted. The Company does not believe that any such guidance has or will have a material effect on its Condensed Consolidated Financial Statements and related disclosures.
3) Investments
Investments are comprised of the following as of the dates indicated (in millions):
 March 31,
2024
December 31,
2023
Investments of consolidated Funds held at fair value
$37.6 $33.9 
Other investments20.8 20.0 
Investments related to long-term incentive compensation plans 46.2 44.7 
Total investments per Condensed Consolidated Balance Sheets$104.6 $98.6 



11


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

4) Fair Value Measurements

The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2024 (in millions):
 Quoted prices
in active
markets
(Level I)
Significant
other
observable
inputs
(Level II)
Significant
unobservable
inputs
(Level III)
Uncategorized
Total value, March 31,
2024
Assets of BSIG and consolidated Funds(1)
 
Common and preferred stock
$22.3 $ $ $— $22.3 
Corporate bonds
 15.1  — 15.1 
Derivatives 0.2  — 0.2 
Consolidated Funds total22.3 15.3   37.6 
Investments in separate accounts(2)
2.3   — 2.3 
Investments related to long-term incentive compensation plans(3)
46.2   — 46.2 
Investments in unconsolidated Funds(4)
   18.5 18.5 
BSIG total48.5   18.5 67.0 
Total fair value assets$70.8 $15.3 $ $18.5 $104.6 
Liabilities of consolidated Funds(1)
Securities sold short
$(4.2)$ $ $— $(4.2)
Derivatives
 (0.1) — (0.1)
Consolidated Funds total(4.2)(0.1)  (4.3)
Total fair value liabilities$(4.2)$(0.1)$ $ $(4.3)

12


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

4) Fair Value Measurements (cont.)

The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2023 (in millions):
 Quoted prices
in active
markets
(Level I)
Significant
other
observable
inputs
(Level II)
Significant
unobservable
inputs
(Level III)
Uncategorized
Total value December 31, 2023
Assets of BSIG and consolidated Funds(1)
    
Common and preferred stock$19.0 $ $ $— $19.0 
Corporate bonds
 14.8  — 14.8 
Derivatives 0.1  — 0.1 
Consolidated Funds total19.0 14.9   33.9 
Investments in separate accounts(2)
2.1   — 2.1 
Investments related to long-term incentive compensation plans(3)
44.7   — 44.7 
Investments in unconsolidated Funds(4)
   17.9 17.9 
BSIG total46.8   17.9 64.7 
Total fair value assets$65.8 $14.9 $ $17.9 $98.6 
Liabilities of consolidated Funds(1)
Securities sold short
$(4.0)$ $ $— $(4.0)
Derivatives (0.1) — (0.1)
Consolidated Funds total(4.0)(0.1)  (4.1)
Total fair value liabilities$(4.0)$(0.1)$ $ $(4.1)
(1)Assets and liabilities measured at fair value are comprised of financial investments managed by the Company's Affiliate.
Equity securities and derivatives which are traded on a national securities exchange are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level I. The securities that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs obtained by the Company from independent pricing services are classified as Level II.
The Company obtains prices from independent pricing services that may utilize broker quotes, but generally the independent pricing services will use various other pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data. The Company has not made adjustments to the prices provided.

13


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

4) Fair Value Measurements (cont.)

If the pricing services are only able to (a) obtain a single broker quote or (b) utilize a pricing model with unobservable inputs, such securities are classified as Level III. If the pricing services are unable to provide prices, the Company attempts to obtain one or more broker quotes directly from a dealer or values such securities at the last bid price obtained. In either case, such securities are classified as Level III. The Company performs due diligence procedures over third party pricing vendors to understand their methodology and controls to support their use in the valuation process to ensure compliance with required accounting disclosures.
(2)Investments in separate accounts of $2.3 million at March 31, 2024 consisted of approximately 100% equity securities. Investments in separate accounts of $2.1 million at December 31, 2023 were composed of approximately 1cash equivalents and 99% equity securities. The Company values these using the published price of the underlying securities (classified as Level I) or quoted price supported by observable inputs as of the measurement date (classified as Level II).
(3)Investments related to long-term incentive compensation plans of $46.2 million and $44.7 million at March 31, 2024 and December 31, 2023, respectively, were investments in publicly registered daily redeemable funds (some managed by Acadian), which the Company has classified as trading securities and valued using the published price as of the measurement dates. Accordingly, the Company has classified these investments as Level I.
(4)The uncategorized amounts of $18.5 million and $17.9 million at March 31, 2024 and December 31, 2023, respectively, relate to investments in unconsolidated Funds which consist primarily of investments in Funds and are valued using NAV which the Company relies on to determine their fair value as a practical expedient and has therefore not classified these investments in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to amounts presented in the Condensed Consolidated Balance Sheets. These unconsolidated Funds consist primarily of real estate investment Funds and other investment vehicles. The NAVs that have been provided by investees have been derived from the fair values of the underlying investments as of the measurement dates. Other investment vehicles are not subject to redemption restrictions.
The real estate investment Funds of $3.3 million and $3.6 million at March 31, 2024 and December 31, 2023, respectively, were subject to longer than monthly or quarterly redemption restrictions, and due to their nature, distributions are received only as cash flows are generated from underlying assets over the life of the Funds. The range of time over which the underlying assets are expected to be liquidated by the investees is approximately one year from March 31, 2024. The valuation process for the underlying real estate investments held by the real estate investment Funds begins with each property or loan being valued by the investment teams. The valuations are then reviewed and approved by the valuation committee, which consists of senior members of the portfolio management, finance, and research teams. For certain properties and loans, the valuation process may also include a valuation by independent appraisers. In connection with this process, changes in fair value measurements from period to period are evaluated for reasonableness, considering items such as market rents, capitalization and discount rates, and general economic and market conditions.
There were no significant transfers of financial assets or liabilities between Levels II or III during the three months ended March 31, 2024 and 2023.

14


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

5) Variable Interest Entities


The Company, through its Affiliate, sponsors the formation of various entities considered to be variable interest entities (“VIEs”). These VIEs are primarily Funds managed by the Company’s Affiliate, and other partnership interests typically owned entirely by third-party investors. Certain Funds may be capitalized with seed capital investments from the Company and may be owned partially by Affiliate key employees and/or individuals that have ownership interests in the Affiliate.
The Company’s determination of whether it is the primary beneficiary of a Fund that is a VIE is based in part on an assessment of whether or not the Company and its related parties are exposed to absorb more than an insignificant amount of the risks and rewards of the entity. Typically, the Fund’s investors are entitled to substantially all of the economics of these VIEs with the exception of the management fees and performance fees, if any, earned by the Company or any investment the Company has made into the Funds. The Company generally is not the primary beneficiary of Fund VIEs created to manage assets for clients unless the Company’s ownership interest, including interests of related parties, is substantial.
The following table presents the assets and liabilities of Funds that are VIEs and consolidated by the Company (in millions):
 March 31,
2024
December 31,
2023
Assets
Investments
$37.6 $33.9 
Other assets of consolidated Funds1.8 $1.3 
Total Assets$39.4 $35.2 
Liabilities
Liabilities of consolidated Funds$5.3 $4.3 
Total Liabilities$5.3 $4.3 
“Investments” consist of investments in equity securities, corporate bonds and derivative securities. To the extent the Company also has consolidated Funds that are not VIEs, the assets and liabilities of those Funds are not included in the table above.
The assets of consolidated VIEs presented in the table above belong to the investors in those Funds, are available for use only by the Fund to which they belong, and are not available for use by the Company to the extent they are held by non-controlling interests. Any debt or liabilities held by consolidated Funds have no recourse to the Company’s general credit.
The Company’s involvement with Funds that are VIEs and not consolidated by the Company is generally limited to that of an investment manager and its investment in the unconsolidated VIE, if any. The Company’s investment in any unconsolidated VIE generally represents an insignificant interest of the Fund’s net assets and assets under management, such that the majority of the VIE’s results are attributable to third parties. The Company’s exposure to risk in these entities is generally limited to any capital contribution it has made or is required to make and any earned but uncollected management fees. The Company has not issued any investment performance guarantees to these VIEs or their investors.

15


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

5) Variable Interest Entities (cont.)

The following information pertains to unconsolidated VIEs for which the Company holds a variable interest (in millions):
March 31,
2024
December 31,
2023
Unconsolidated VIE assets$628.4 $669.1 
Unconsolidated VIE liabilities$304.8 $316.5 
Equity interests on the Condensed Consolidated Balance Sheets$3.3 $3.6 
Maximum risk of loss(1)
$3.3 $3.6 
(1)Includes equity investments the Company has made.

6) Borrowings and Debt
The Company’s borrowings and long-term debt were comprised of the following as of the dates indicated (in millions):

March 31, 2024December 31, 2023
(in millions)Carrying ValueFair ValueFair Value LevelCarrying ValueFair ValueFair Value Level
Revolving credit facility:
$125 million revolving credit facility expiring March 7, 2025(1)
$73.0 $73.0 2$ $ 
Total revolving credit facility$73.0 $73.0 $ $ 
Third party borrowings:
$275 million 4.80% Senior Notes Due
July 27, 2026
(2)
$274.0 $266.9 2$273.9 $263.1 2
Total third party borrowings$274.0 $266.9 $273.9 $263.1 
(1)Fair value approximates carrying value because the credit facility has variable interest rates based on selected short term market rates.
(2)The difference between the principal amounts and the carrying values of the senior notes in the table above reflects the unamortized debt issuance costs and discounts.


16


BrightSphere Investment Group Inc.
Notes to Consolidated Financial Statements
(unaudited)

6) Borrowings and Debt (cont.)

Revolving Credit Facility
On March 7, 2022, Acadian, Royal Bank of Canada, BMO Harris Bank, N.A., Goldman Sachs Bank USA, Morgan Stanley Bank, N.A., Bank of America N.A., the Bank of New York Mellon and Citibank, N.A., as an issuing bank and administrative agent (collectively, the “Lenders”), entered into a new revolving credit facility agreement (the “Acadian Credit Agreement”), which replaced the Company’s revolving credit facility dated as of August 20, 2019 (as amended by an amendment dated September 3, 2020 and an assignment and assumption and amendment agreement dated February 23, 2021, the “Original Credit Agreement”). The maturity date of this Original Credit Agreement was August 22, 2022, and the maturity date of the Acadian Credit Agreement is March 7, 2025.
Borrowings under the Acadian Credit Agreement bear interest, at Acadian’s option, at the per annum rate equal to either (a) the greatest of (i) the prime rate, (ii) the federal funds effective rate plus 0.5% and (iii) the secured overnight financing rate for a one month period plus a credit spread adjustment of 0.10% (“Adjusted Term SOFR”) plus 1%, plus, in each case, an additional amount ranging from 0.5% to 1.0%, with such additional amount based on Acadian’s Leverage Ratio (as defined below) or (b) Adjusted Term SOFR plus an additional amount ranging from 1.5% to 2.0%, with such additional amount based on Acadian’s Leverage Ratio. In addition, Acadian is charged a commitment fee based on the average daily unused portion of the revolving credit facility under the Acadian Credit Agreement at a per annum rate ranging from 0.25% to 0.375%, with such amount based on Acadian’s Leverage Ratio.
Under the Acadian Credit Agreement, the ratio of Acadian’s third-party borrowings to Acadian’s trailing twelve months Adjusted EBITDA, as defined by the Acadian Credit Agreement (the “Leverage Ratio”), cannot exceed 2.5x and the Acadian interest coverage ratio must not be less than 4.0x.

7) Leases
The Company has operating leases for corporate offices, data centers and certain equipment. The operating leases have remaining lease terms of less than 1 year to 10 years, some of which include options to extend the leases for up to 5 years.
The following table summarizes information about the Company’s operating leases for the three months ended March 31, 2024 and 2023 (in millions):
Three Months Ended March 31,
20242023
Operating lease cost$2.2 $2.1 
Variable lease cost  
Total operating lease expense$2.2 $2.1 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$2.4 $2.3 
Right of use assets obtained in exchange for new operating lease liabilities 2.8 

17


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

7) Leases (cont.)
In determining the incremental borrowing rate, the Company considered the interest rate yield for the specific interest rate environment and the Company’s credit spread at the inception of the lease. For the three months ended March 31, 2024 and 2023, the weighted average remaining lease term was 9.3 and 10.2 years, respectively, and the weighted average discount rate was 3.52% and 3.54%, respectively.
Maturities of operating lease liabilities were as follows (in millions):
Operating Leases
Year Ending December 31,
2024 (excluding the three months ended March 31, 2024)
$6.9 
20258.9 
20268.8 
20278.4 
20288.5 
Thereafter41.1 
Total lease payments$82.6 
   Less imputed interest(12.0)
Total$70.6 
8) Commitments and Contingencies
Operational commitments
A number of our subsidiaries operate under regulatory authorities that require that they maintain minimum financial or capital requirements. Management is not aware of any violations of such financial requirements occurring during the period.
Guaranty
The Company entered into a guaranty for an office space security deposit on behalf of Acadian in the amount of $2.5 million in January 2020. This represents the maximum potential amount of future (undiscounted) payments that the Company could be required to make under the guaranty in the event of default by the guaranteed parties. This guaranty expires in 2033. There are no liabilities recorded on the Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 related to this guaranty.
Litigation
The Company is subject to claims, legal proceedings, and other contingencies in the ordinary course of its business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved in a manner unfavorable to the Company. The Company establishes accruals for matters for which the outcome is probable and can be reasonably estimated. As of March 31, 2024, there were no material accruals for claims and the Company does not believe any outstanding matters will have a material adverse effect on the Company.

18


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

8) Commitments and Contingencies (cont.)

Indemnifications
In the normal course of business, such as through agreements to enter into business combinations and divestitures of Affiliates, the Company has entered into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred.
Foreign tax contingency
The Company has clients in non-U.S. jurisdictions which require entities that are conducting certain business activities in such jurisdictions to collect and remit tax assessed on certain fees paid for goods and services provided. The Company does not believe this requirement is applicable based on its limited business activities in these jurisdictions. However, given the fact that uncertainty exists around the requirement, the Company has chosen to evaluate its potential exposure related to non-collection and remittance of these taxes. At March 31, 2024, management of the Company has estimated the potential maximum exposure and concluded that it is not material. No accrual for the potential exposure has been recorded as the probability of incurring any potential liability relating to this exposure is not probable at March 31, 2024.
Considerations of credit risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents, restricted cash and investments. The Company maintains cash and cash equivalents and short term investments with various financial institutions. These financial institutions are typically located in cities in which the Company and its Affiliate operate. For the Company and its Affiliate, cash deposits at a financial institution may exceed Federal Deposit Insurance Corporation insurance limits. Additionally, the Company holds insurance policies which cover historical tax benefits relating to certain of its deferred tax assets. The insurers of the policies are considered a significant counterparty to the Company.


19


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

9) Earnings Per Share
Basic earnings per share is calculated by dividing net income attributable to controlling interests by the weighted-average number of shares of common stock outstanding. Diluted earnings per share is similar to basic earnings per share, but is adjusted for the effect of potentially issuable common stock, except when inclusion is antidilutive.
The calculation of basic and diluted earnings per share of common stock is as follows (dollars in millions, except per share data):
 Three Months Ended March 31,
 20242023
Numerator:  
Net income attributable to controlling interests$14.6 $12.0 
Denominator:  
Weighted-average shares of common stock outstanding—basic39,063,522 41,444,200 
Potential shares of common stock:
Restricted stock units17,348 7,539 
Employee stock options650,570 1,258,838 
Weighted-average shares of common stock outstanding—diluted39,731,440 42,710,577 
Earnings per share of common stock attributable to controlling interests:  
Basic$0.37 $0.29 
Diluted$0.37 $0.28 

10) Revenue
Management fees
The Company’s management fees are a function of the fee rates the Affiliate charges to its clients, which are typically expressed in basis points, and the levels of the Company’s assets under management. The most significant driver of increases or decreases in this average fee rate is changes in the mix of the Company’s assets under management caused by net inflows or outflows in certain asset classes or disproportionate market movements.
Performance fees
The Company’s products subject to performance fees earn these fees upon exceeding high-water mark performance thresholds or outperforming a hurdle rate. Performance fees are recorded in revenues when the contractual performance criteria have been met and when it is probable that a significant reversal of revenue recognized will not occur in future reporting periods.

20


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

10) Revenue (cont.)

Disaggregation of management fee revenue
The geographic disaggregation of management fee revenue for the three months ended March 31, 2024 and 2023 are as follows (in millions):
Three Months Ended March 31,
20242023
Quant & Solutions
U.S.$77.3 $67.9 
Non-U.S.24.9 22.7 
Management fee revenue $102.2 $90.6 

11) Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss), net of tax, for the three months ended March 31, 2024 and 2023 are as follows (in millions):
Foreign currency translation adjustmentValuation and amortization of derivative securitiesTotal
Balance, as of December 31, 2023
$3.1 $(9.8)$(6.7)
Foreign currency translation adjustment before tax
(0.3) (0.3)
Amortization related to derivatives securities before tax
 0.9 0.9 
Tax impact0.1 (0.2)(0.1)
Other comprehensive income (loss)(0.2)0.7 0.5 
Balance, as of March 31, 2024
$2.9 $(9.1)$(6.2)
Foreign currency translation adjustmentValuation and amortization of derivative securitiesTotal
Balance, as of December 31, 2022
$1.7 $(12.3)$(10.6)
Foreign currency translation adjustment before tax
0.7  0.7 
Amortization related to derivatives securities before tax
 0.8 0.8 
Tax impact (0.2)(0.2)
Other comprehensive income0.7 0.6 1.3 
Balance, as of March 31, 2023
$2.4 $(11.7)$(9.3)



21


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

12) Derivatives and Hedging

Cash flow hedge
In July 2015, the Company entered into a series of $300.0 million notional Treasury rate lock contracts which were designated and qualified as cash flow hedges. The Company documented its hedging strategy and risk management objective for this contract in anticipation of a future debt issuance. The Treasury rate lock contract eliminated the impact of fluctuations in the underlying benchmark interest rate for future forecasted debt issuances. The Company assessed the effectiveness of the hedging contract at inception and on a quarterly basis thereafter. The forecasted debt issuances occurred in July 2016 and the Treasury rate lock, which had an accumulated fair value of $(34.4) million, was settled.
As of March 31, 2024, the balance recorded in accumulated other comprehensive income (loss) was $(9.1) million, net of tax. This balance will be reclassified to earnings through interest expense over the life of the issued debt. The Company reclassified $0.9 million and $0.8 million for the three months ended March 31, 2024 and 2023, respectively. During the next twelve months the Company expects to reclassify approximately $3.7 million to interest expense.

13) Segments
The Company has the following reportable segment:
Quant & Solutions—comprised of versatile, often highly-tailored strategies that leverage data and technology in a computational, factor-based investment process across a range of asset classes in developed and emerging markets, including global, non-U.S. and small-cap equities, as well as managed volatility, equity alternatives including macro, and credit strategies. This segment is comprised of the Company’s interest in Acadian.

The corporate head office is included within the Other category. The corporate head office expenses are not allocated to the Company’s business segment, but the Chief Operating Decision Maker (“CODM”) does consider the cost structure of the corporate head office when evaluating the financial performance of the segment.
Performance Measure
The primary measure used by the CODM in measuring performance and allocating resources to the segments is Economic Net Income (“ENI”). The Company defines ENI for the segments as ENI revenue less (i) ENI operating expenses, (ii) variable compensation and (iii) key employee distributions. The 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. This measure supplements and should be considered in addition to, and not in lieu of, the Condensed Consolidated Statements of Operations prepared in accordance with U.S. GAAP. The Company does not disclose total asset information for its reportable segment as the information is not reviewed by the CODM.
ENI revenue includes management fees, performance fees and other revenue under U.S. GAAP, adjusted to include management fees paid to the Company’s Affiliate by consolidated Funds.

22


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

13) Segments (cont.)
ENI operating expenses include compensation and benefits, general and administrative expense, and depreciation and amortization under U.S. GAAP, adjusted to exclude non-cash expenses representing changes in the value of Affiliate equity and profit interests held by Affiliate key employees, capital transaction costs, and restructuring costs. Additionally, variable compensation and Affiliate key employee distributions are segregated from ENI operating expenses.
ENI segment results are also adjusted to exclude the portion of consolidated Fund revenues, expenses and investment return recorded under U.S. GAAP.
Segment Presentation
The following tables set forth summarized operating results for the Company’s segment and related adjustments necessary to reconcile the segment economic net income to arrive at the Company’s consolidated U.S. GAAP net income (loss).
The following table presents the financial data for the Company’s segment for the three months ended March 31, 2024 (in millions):
Three Months Ended March 31, 2024
Quant & SolutionsOtherReconciling Adjustments
Total U.S. GAAP(1)
ENI revenue$105.3 $ $0.4 (a)$105.7 
ENI operating expenses45.7 3.8 4.7 
(b)
54.2 
Earnings before variable compensation59.6 (3.8)(4.3)51.5 
Variable compensation26.0 0.6 (0.2)
(c)
26.4 
ENI operating earnings (after variable comp)33.6 (4.4)(4.1)25.1 
Affiliate key employee distributions2.2   2.2 
Earnings after Affiliate key employee distributions31.4 (4.4)(4.1)22.9 
Net interest expense (3.0)(0.7)
(d)
(3.7)
Net investment income  2.6 
(e)
2.6 
Net income attributable to non-controlling interests in consolidated Funds  (1.1)
(e)
(1.1)
Income tax (expense) benefit (6.6)0.5 
(f)
(6.1)
Economic net income $31.4 $(14.0)$(2.8)$14.6 

23


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

13) Segments (cont.)
The following table presents the financial data for the Company’s segment for the three months ended March 31, 2023 (in millions):
Three Months Ended March 31, 2023
Quant & SolutionsOtherReconciling Adjustments
Total U.S. GAAP(1)
ENI revenue$91.1 $ $0.7 (a)$91.8 
ENI operating expenses43.6 3.5 0.5 
(b)
47.6 
Earnings before variable compensation47.5 (3.5)0.2 44.2 
Variable compensation22.5 0.7  23.2 
ENI operating earnings (after variable comp)25.0 (4.2)0.2 21.0 
Affiliate key employee distributions1.2   1.2 
Earnings after Affiliate key employee distributions23.8 (4.2)0.2 19.8 
Net interest expense (3.4)(0.4)
(d)
(3.8)
Net investment income  1.1 
(e)
1.1 
Income tax expense (4.4)(0.7)
(f)
(5.1)
Economic net income$23.8 $(12.0)$0.2 $12.0 
(1)The most directly comparable U.S. GAAP measure of ENI revenue is U.S. GAAP revenue. The most directly comparable U.S. GAAP measure of ENI operating expenses is U.S. GAAP operating expenses, which is comprised of ENI operating expenses, variable compensation, and Affiliate key employee distributions above. The most directly comparable U.S. GAAP measure of earnings after Affiliate key employee distributions is U.S. GAAP operating income. The most directly comparable U.S. GAAP measure of ENI is U.S. GAAP net income attributable to controlling interests.
Reconciling Adjustments:
a.Adjusted to include consolidated Funds revenues which are included in U.S. GAAP revenue.
b.Adjusted to include non-cash expenses for key employee equity and profit interest revaluations, restructuring costs, and consolidated Funds’ operating expenses, each of which are included in U.S. GAAP operating expenses.
c.Adjusted to include restructuring costs which are included in U.S. GAAP compensation expense.
d.Adjusted to include the cost of seed financing and amortization of debt issuance costs, which is included in U.S. GAAP interest expense.
e.Adjusted to include net investment income (loss), and net income attributable to non-controlling interests in consolidated Funds, all of which are included in U.S. GAAP net income attributable to controlling interests.
f.Adjusted to include the impact of deferred tax attributable to the amortization of goodwill and acquired intangibles. Adjusted to include the tax impact of certain ENI adjustments; exclude the tax expense or benefits relating to uncertain tax positions, and exclude the tax impact of other unusual items that are not related to current operating results for ENI purposes.

24


BrightSphere Investment Group Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

14) Subsequent Events

During the period from April 1, 2024 through May 7, 2024, the Company repurchased 269,361 shares of common stock at a weighted average price of $22.49 per share, or approximately $6 million in total, including commissions.
The Company seeded Acadian’s Global High Yield Strategy with $15 million of seed capital in April 2024.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Unless we state otherwise or the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company”, “BrightSphere” or “BSIG” refer to BrightSphere Investment Group Inc., and references to “we,” “our” and “us” refer to BSIG and its consolidated subsidiaries, excluding discontinued operations. References to the holding company or “Center” excluding the Affiliates refer to BrightSphere Inc., or “BSUS,” a Delaware corporation and wholly owned subsidiary of BSIG. Unless we state otherwise or the context otherwise requires, references in this Quarterly Report on Form 10-Q to “Affiliates” or an “Affiliate” refer to the asset management firms in which we have or previously had an ownership interest. References in this Quarterly Report on Form 10-Q to “OM plc” refer to Old Mutual plc, our former parent. None of the information in this Quarterly Report on Form 10-Q constitutes either an offer or a solicitation to buy or sell Acadian’s products or services, nor is any such information a recommendation for Acadian’s products or services.
The following discussion of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and related notes which appear in this Quarterly Report on Form 10-Q in Item 1, Financial Statements.
This discussion contains forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements” at the end of this Item 2 for more information. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.
Our MD&A is presented in five sections:
Overview provides a brief description of our business. It includes information on our reporting segment and underlying Affiliate, a summary of The Economics of Our Business and an explanation of How We Measure Performance using a non-GAAP measure which we refer to as economic net income, or ENI. This section also provides a Summary Results of Operations and information regarding our Assets Under Management by strategy, client type and client location, and net flows by segment, client type and client location.
U.S. GAAP Results of Operations for the Three Months Ended March 31, 2024 and 2023 includes an explanation of changes in our U.S. GAAP revenue, expense and other items for the three months ended March 31, 2024 and 2023, as well as key U.S. GAAP operating metrics.
Non-GAAP Supplemental Performance Measure — Economic Net Income and Segment Analysis includes an explanation of the key differences between U.S. GAAP net income and ENI, the key measure management uses to evaluate our performance. This section also provides a reconciliation between U.S. GAAP net income attributable to controlling interests and ENI for the three months ended March 31, 2024 and 2023, as well as a reconciliation of key ENI operating items including ENI revenue and ENI operating expenses. This section also provides key non-GAAP operating metrics. In addition, this section provides segment analysis for our business segment.
Capital Resources and Liquidity discusses our key balance sheet data. This section discusses Cash Flows from the business; Adjusted EBITDA; Future Capital Needs; Borrowings and Long-Term Debt. The discussion of Adjusted EBITDA includes an explanation of how we calculate Adjusted EBITDA and a reconciliation of U.S. GAAP net income attributable to controlling interests to Adjusted EBITDA.
Critical Accounting Policies and Estimates provides a discussion of the key accounting policies and estimates that we believe are the most critical to an understanding of our results of operations and financial condition. These accounting policies and estimates require complex management judgment regarding matters that are highly uncertain at the time the policies were applied and estimates were made.

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Overview
We are a global asset management holding company headquartered in Boston, Massachusetts. We operate a differentiated investment management business through our majority owned subsidiary, Acadian Asset Management LLC (“Acadian” or the “Affiliate”), a leading systematic manager of active global, international equity and alternative strategies. Acadian comprises our Quant & Solutions reportable segment:
Quant & Solutions—comprised of versatile, often highly-tailored strategies that leverage data and technology in a computational, factor-based investment process across a range of asset classes in developed and emerging markets, including global, non-U.S. and small-cap equities, as well as managed volatility, equity alternatives including macro, and credit strategies. This segment is comprised of our interest in our sole Affiliate, Acadian.
Through Acadian, we offer a diverse range of actively-managed investment strategies and products to institutional investors around the globe.
The corporate head office is included within the Other category. The corporate head office expenses are not allocated to the Company’s business segment, but the Chief Operating Decision Maker (“CODM”) does consider the cost structure of the corporate head office when evaluating the financial performance of our segment.
Under U.S. GAAP, Acadian is consolidated into our financial statements. We may also be required to consolidate Acadian’s sponsored investment entities, or Funds, due to the nature of our decision-making rights, our economic interests in these Funds or the rights of third party clients in those Funds.
    The Economics of Our Business
Our profitability is affected by a variety of factors including the level and composition of our average assets under management, or AUM, fee rates charged on AUM and our expense structure. We earn management fees based on assets under management. Approximately 80% of our management fees for the three months ended March 31, 2024 were calculated based on average AUM (calculated on either a daily or monthly basis) with the remainder of our management fees calculated based on period-end AUM. Changes in the levels of our AUM are driven by market investment performance and net client cash flows. We may also earn performance fees when certain accounts differ in relation to relevant benchmarks or exceed or fail to exceed required returns. Approximately $15 billion, or 14%, of our AUM are in accounts with incentive fee features in which we participate in the performance fee. The majority of these performance fees are calculated based on value added over the relevant benchmarks on a rolling one-year basis.
Our largest expense item is compensation and benefits paid to our employees, which consists of both fixed and variable components. Fixed compensation and benefits represents base salaries and wages, payroll taxes and the costs of our employee benefit programs. Variable compensation, calculated as described below, may be awarded in cash, equity, or profit interests.
The arrangement in place with Acadian results in the sharing of economics between BSUS and Acadian’s key management personnel using a profit-sharing model. Profit sharing affects two elements within our earnings: (i) the calculation of variable compensation and (ii) the level of Acadian’s equity or profit interests distribution to its employees.
Variable compensation is the portion of earnings that is contractually allocated to Acadian employees as a bonus pool, typically representing a percentage of earnings before variable compensation, which is measured as revenues less fixed compensation and benefits and other operating and administrative expenses. Profits after variable compensation are shared between us and Acadian key employee equity holders according to our respective equity or profit interests ownership. The sharing of profits in this manner ensures that the economic interests of Acadian key employees and those of BSUS are aligned, both in terms of generating strong annual earnings as well as investing those earnings back into the business in order to generate growth over the long term. We view profit sharing as an

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attractive operating model, as it allows us to share in the benefits of operating leverage as the business grows, and ensures all equity and profit interests holders are incentivized to achieve that growth.
Equity or profit interests owned by Acadian key employees are awarded as part of their variable compensation arrangement. Over time, Acadian key employee-owned equity or profit interests are recycled from one generation of employee-owners to the next, either by the next generation purchasing equity or profit interests directly from retiring principals, or by Acadian key employees forgoing cash bonuses in exchange for the equivalent value in Acadian equity or profit interests. The recycling of equity or profit interests is often facilitated by BSUS; see “—U.S. GAAP Results of Operations—U.S. GAAP Expenses—Compensation and Benefits Expense” for a further discussion.
How We Measure Performance
We manage our business based on one segment, reflecting how our management assesses the performance of our business.
In measuring and monitoring the key components of our earnings, our management uses a non-GAAP financial measure, ENI, to evaluate the financial performance of, and to make operational decisions for, our business. We also use ENI to make resource allocation decisions, determine appropriate levels of investment or dividend payout, manage balance sheet leverage, determine variable compensation and Affiliate equity distributions, and incentivize management. It is an important measure in evaluating our financial performance because we believe it most accurately represents our operating performance and cash generation capability.
ENI differs from net income determined in accordance with U.S. GAAP as a result of both the reclassification of certain income statement items and the exclusion of certain non-cash or non-recurring income statement items. In particular, ENI excludes non-cash charges representing the changes in the value of Affiliate equity and profit interests held by Affiliate key employees, the results of discontinued operations which are no longer part of our business, restructuring costs, capital transaction costs, seed capital and co-investment gains, losses and related financing costs and that portion of consolidated Funds which are not attributable to our stockholders.
ENI revenue is primarily comprised of the fee revenues paid to us by our clients for our advisory services. Revenue included within ENI differs from U.S. GAAP revenue in that it excludes amounts from consolidated Funds which are not attributable to our stockholders.
ENI expenses are calculated to reflect all usual expenses from ongoing continuing operations attributable to our stockholders. Expenses included within ENI differ from U.S. GAAP expenses in that they exclude amounts from consolidated Funds which are not attributable to our stockholders, revaluations of Affiliate key employee owned equity and profit interests, amortization and impairment of acquired intangibles and other acquisition-related items, and certain other non-cash expenses.
“Non-controlling interests” is a concept under U.S. GAAP that identifies net components of revenues and expenses that are not attributable to our stockholders. For example, the portion of the net income (loss) of any consolidated Fund that is attributable to the outside investors or clients of the consolidated Fund is included in “Non-controlling interests” in our Condensed Consolidated Financial Statements. Conversely, “controlling interests” is the portion of revenue or expense that is attributable to our stockholders.
For a more detailed discussion of the differences between U.S. GAAP net income and economic net income, see “—Non-GAAP Supplemental Performance Measure — Economic Net Income and Segment Analysis.”

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Summary Results of Operations
The following table summarizes our unaudited results of operations for the three months ended March 31, 2024 and 2023: 
($ in millions, unless otherwise noted)Three Months Ended March 31,
202420232024 vs. 2023
U.S. GAAP Basis   
Revenue$105.7 $91.8 $13.9 
Pre-tax income attributable to controlling interests20.7 17.1 3.6 
Net income attributable to controlling interests14.6 12.0 2.6 
U.S. GAAP operating margin(1)
21.7 %21.6 %10 bps
Earnings per share, basic ($)$0.37 $0.29 $0.08 
Earnings per share, diluted ($)$0.37 $0.28 $0.09 
Basic shares outstanding (in millions) 39.1 41.4 (2.3)
Diluted shares outstanding (in millions)39.7 42.7 (3.0)
Economic Net Income Basis(2)(3)
   
(Non-GAAP measure used by management)   
ENI revenue(4)
$105.3 $91.1 $14.2 
Pre-tax economic net income(5)
24.0 16.2 7.8 
Adjusted EBITDA31.9 23.6 8.3 
ENI operating margin(6)
27.7 %22.8 %490 bps
Economic net income(7)
17.4 11.8 5.6 
ENI diluted EPS ($)
$0.44 $0.28 $0.16 
Other Operational Information   
Assets under management (AUM) at period end (in billions)
$110.4 $97.5 $12.9 
Net client cash flows (in billions)0.4 0.1 0.3 
Annualized revenue impact of net flows(8)
(0.2)1.0 (1.2)
(1)U.S. GAAP operating margin equals operating income divided by total revenue.
(2)Economic net income is a non-GAAP measure we use to evaluate the performance of our business. For a reconciliation to U.S. GAAP financial information and a further discussion of economic net income refer to “—Non-GAAP Supplemental Performance Measure—Economic Net Income and Segment Analysis.”
(3)Excludes severance-related items at Acadian of $(0.2) million and costs associated with the transfer of an insurance policy from our former parent of $0.2 million for the three months ended March 31, 2024. Excludes costs associated with the transfer of an insurance policy from our former parent of $0.4 million for the three months ended March 31, 2023.
(4)ENI revenue is the ENI measure which corresponds to U.S. GAAP revenue.
(5)Pre-tax economic net income is the ENI measure which corresponds to U.S. GAAP pre-tax income attributable to controlling interests.
(6)ENI operating margin is a non-GAAP efficiency measure, calculated based on ENI operating earnings divided by ENI revenue. ENI operating earnings is calculated as ENI revenue, less ENI operating expense, less ENI variable compensation. The ENI operating margin is most directly comparable to our U.S. GAAP operating margin (excluding the effect of consolidated Funds).
(7)Economic net income is the non-GAAP measure which is most directly comparable to U.S. GAAP net income attributable to controlling interests.

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(8)Annualized revenue impact of net flows represents 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, plus revenue impact from reinvested income and distributions. The annualized management fees are 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, excluding any current or future market appreciation or depreciation, or the net assets lost in the account in the event of an outflow, excluding any current or future market appreciation or depreciation. In addition, reinvested income and distributions are multiplied by the average fee rate to compute the revenue impact. For a further discussion of the uses and limitations of the annualized revenue impact of net flows, see “Assets Under Management” herein.
Assets Under Management
The following table presents our assets under management as of each of the dates indicated: 
($ in billions)March 31, 2024December 31, 2023
Acadian Asset Management$110.4 $103.7 
Our strategies include:
i.Developed Markets equity, which includes Quant & Solutions U.S., global and international equities; and
ii.Emerging Markets equity, which includes Quant & Solutions equity investments in the emerging and frontier markets.
The following table presents our assets under management by strategy as of each of the dates indicated: 
($ in billions)March 31, 2024December 31, 2023
Developed Markets$87.2 $80.7 
Emerging Markets23.2 23.0 
Total assets under management$110.4 $103.7 

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The following table shows assets under management by client type as of each of the dates indicated:
($ in billions)March 31, 2024December 31, 2023
AUM% of totalAUM% of total
Public/Government$47.0 42.6 %$43.7 42.1 %
Commingled Trust/UCITS27.1 24.5 %25.2 24.3 %
Corporate/Union13.2 12.0 %12.0 11.6 %
Sub-advisory13.0 11.8 %12.8 12.3 %
Endowment/Foundation3.3 3.0 %3.4 3.3 %
Mutual Fund0.7 0.6 %0.7 0.7 %
Other6.1 5.5 %5.9 5.7 %
Total assets under management$110.4 $103.7 

The following table shows assets under management by client location as of each of the dates indicated:
($ in billions)March 31, 2024December 31, 2023
AUM% of totalAUM% of total
U.S.$73.0 66.1 %$69.9 67.4 %
Europe18.0 16.3 %16.6 16.0 %
Asia5.4 4.9 %4.4 4.2 %
Australia7.2 6.5 %6.5