Artisan Partners Asset Management Inc. (APAM)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview and Recent Highlights

We are a global multi-asset investment platform focused on providing a broad range of high-value added investment strategies in growing asset classes to sophisticated clients around the world. As of June 30, 2026, our 12 autonomous investment teams managed a total of 27 investment strategies across multiple asset classes and investment styles.

We focus on attracting, retaining and developing talented investment professionals and creating an environment in which each investment team is provided ample resources and support, transparent and direct financial incentives, a high degree of investment autonomy, and a long-term time horizon. We create new investment strategies when we identify opportunities to add value for clients, oftentimes through the use of a broad array of securities, instruments and techniques (which we call degrees of freedom) to differentiate returns and manage risk.

We offer our investment management capabilities primarily to sophisticated investors that operate with institutional decision-making processes and longer-term investment horizons. We employ knowledgeable and investment focused relationship managers who are directly aligned with our investment teams, and we pair them with regional and distribution channel experts. We provide access to many of our investment strategies through multiple investment vehicles, including separate accounts and different types of pooled vehicles. As of June 30, 2026, approximately 73% of our assets under management (AUM) were managed for clients and investors domiciled in the U.S. and 27% of our AUM were managed for clients and investors domiciled outside of the U.S.

As a high-value added investment manager we expect that long-term investment performance will be the primary driver of our long-term business and financial results. If we maintain and evolve existing investment strategies and launch new investment strategies that meet the needs of and generate attractive outcomes for sophisticated asset allocators, we believe that we will continue to generate strong business and financial results.

Over shorter time periods, changes in our business and financial results are largely driven by market conditions and fluctuations in our AUM that may not necessarily be the result of our long-term investment performance or the long-term demand for our strategies. For this reason, we expect that our business and financial results will fluctuate over time.

We strive to maintain a financial model that is transparent and predictable. We derive nearly all of our revenues from investment management fees, most of which are based on a specified percentage of clients’ AUM. A majority of our expenses, including most of our compensation expense, vary directly with changes in our revenues.

We invest thoughtfully to support our investment teams and future growth, while also paying out to stockholders and partners a majority of the cash that we generate from operations through dividends and distributions. We expect to continue to invest in the growth of the business, with a focus on adding new investment capabilities and more degrees of freedom in areas where both opportunity and client demand exist, and in which we can differentiate our active management and add value for clients.

Financial highlights for the quarter included the following:

•During the three months ended June 30, 2026, our AUM increased to $183.4 billion, an increase of $10.4 billion, or 6%, compared to $173.0 billion at March 31, 2026, primarily due to $21.2 billion of market appreciation, partially offset by $10.5 billion of net client cash outflows.

•Average AUM for the three months ended June 30, 2026 was $181.9 billion, a decrease of 0.3% from the average of $182.4 billion for the three months ended March 31, 2026, and an increase of 9% from the average of $166.8 billion for the three months ended June 30, 2025.

•We earned $307.9 million in revenue for the three months ended June 30, 2026, an increase of 9% from revenues of $282.8 million for the three months ended June 30, 2025.

•Our GAAP operating margin was 27.5% for the three months ended June 30, 2026, compared to 28.2% for the three months ended June 30, 2025. Adjusted operating margin was 32.9% for the three months ended June 30, 2026, compared to 31.7% for the three months ended June 30, 2025.

•We generated $1.11 of earnings per basic and diluted share and $0.94 of adjusted EPS.

•We declared and distributed dividends of $0.77 per share of Class A common stock during the three months ended June 30, 2026.

•We declared, effective July 28, 2026, a quarterly dividend with respect to the three months ended June 30, 2026, of $0.80 per share of Class A common stock.

•Following the loss of two large institutional mandates in the U.S. Value team’s strategies and a comprehensive review of the long term prospects of the franchise, we determined the prudent decision was to wind down the team's business, which we expect to complete during the quarter ending September 30, 2026.

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Organizational Structure

Organizational Structure

Our operations are conducted through Artisan Partners Holdings LP (“Holdings”) and its subsidiaries. On March 12, 2013, Artisan Partners Asset Management Inc. (“APAM”) and Holdings completed a series of transactions (the “IPO Reorganization”) to reorganize their capital structures in connection with the initial public offering (“IPO”) of APAM’s Class A common stock. The IPO Reorganization and IPO were completed on March 12, 2013.

Limited partners of Holdings, some of whom are employees, held approximately 12% of the equity interests in Holdings as of June 30, 2026, which is reflected as noncontrolling interest.

We operate our business in a single segment.

Holdings Unit Exchanges

During the six months ended June 30, 2026, certain limited partners of Holdings exchanged 167,614 common units (along with a corresponding number of shares of Class B or Class C common stock of APAM, as applicable) for 167,614 shares of Class A common stock. In connection with the exchanges, APAM received 167,614 GP units of Holdings increasing its ownership interest in Holdings.

APAM’s equity ownership interest in Holdings was 88% and 87% at June 30, 2026 and December 31, 2025, respectively.

Financial Overview

Economic Environment

Global market conditions can materially impact our financial performance. Because the revenue we earn is based on the value of our AUM, fluctuations in our AUM due to changes in the economic environment and financial markets will result in fluctuations in our revenue and earnings.

The following table presents the total returns of relevant market indices for the three and six months ended June 30, 2026 and 2025:

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Key Performance Indicators

When we review our business and financial performance we consider, among other things, the following:

AUM and Investment Performance

Changes to our operating results from one period to another are primarily caused by changes in the amount of our AUM. A key driver of changes in our AUM over time is the long-term investment performance of our investment strategies. Changes in the relative composition of our AUM among our investment strategies and vehicles and the effective fee rates on our products also impact our operating results.

The amount and composition of our AUM are, and will continue to be, influenced by a variety of factors including, among others:

•investment performance, including fluctuations in both the financial markets and foreign currency exchange rates and the quality of our investment decisions as assessed relative to applicable third-party benchmarks and peer groups, as appropriate;

•flows of client assets into and out of our various strategies and investment vehicles;

•our decision to close strategies or limit the growth of assets in a strategy or a vehicle when we believe it is in the best interest of our clients, as well as our decision to re-open strategies, in part or entirely;

•our ability to attract and retain qualified investment, management, and marketing and client service professionals;

•industry trends towards products, strategies, vehicles or services that we do not offer;

•competitive conditions in the investment management and broader financial services sectors; and

•investor sentiment and confidence.

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The table below sets forth changes in our total AUM:

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the results of operations and financial condition of the Company should be read in conjunction with the “Forward-Looking Statements” disclosure preceding Part I and the “Risk Factors” set forth in Item 1A of Part I of this Annual Report on Form 10‑K, each of which describe our risks, uncertainties and other important factors in more detail.

Overview and Recent Highlights

We are a global multi-asset investment platform focused on providing a broad range of high-value added investment strategies in growing asset classes to sophisticated clients around the world. As of December 31, 2025, our 11 autonomous investment teams managed a total of 26 investment strategies across multiple asset classes and investment styles.

We focus on attracting, retaining and developing talented investment professionals and creating an environment in which each investment team is provided ample resources and support, transparent and direct financial incentives, a high degree of investment autonomy, and a long-term time horizon. We create new investment strategies when we identify opportunities to add value for clients, oftentimes through the use of a broad array of securities, instruments, and techniques (which we call degrees of freedom) to differentiate returns and manage risk.

We offer our investment management capabilities primarily to sophisticated investors that operate with institutional decision-making processes and longer-term investment horizons. We employ knowledgeable and investment focused relationship managers who are directly aligned with our investment teams, and we pair them with regional and distribution channel experts. We provide access to our investment strategies through multiple investment vehicles, including separate accounts and different types of pooled vehicles. As of December 31, 2025, approximately 74% of our AUM were managed for clients and investors domiciled in the U.S. and 26% of our AUM were managed for clients and investors domiciled outside of the U.S.

As a high value-added investment manager we expect that long-term investment performance will be the primary driver of our long-term business and financial results. If we maintain and evolve existing investment strategies and launch new investment strategies that meet the needs of and generate attractive outcomes for sophisticated asset allocators, we believe that we will continue to generate strong business and financial results.

Over shorter time periods, changes in our business and financial results are largely driven by market conditions and fluctuations in our AUM that may not necessarily be the result of our long-term investment performance or the long-term demand for our strategies. For this reason, we expect that our business and financial results will be lumpy over time.

We strive to maintain a financial model that is transparent and predictable. We derive nearly all of our revenues from investment management fees, most of which are based on a specified percentage of clients’ average AUM. A majority of our expenses, including most of our compensation expense, vary directly with changes in our revenues.

We invest thoughtfully to support our investment teams and future growth, while also paying out to stockholders and partners a majority of the cash that we generate from operations through dividends and distributions. We expect to continue to invest in the growth of the business, with a focus on adding new investment capabilities and more degrees of freedom in areas where both opportunity and client demand exist, and in which we can differentiate our active management and add value for clients.

Financial highlights for 2025 included the following:

•During the year ended December 31, 2025, our AUM increased to $179.9 billion, an increase of $18.7 billion, or 12%, compared to $161.2 billion at December 31, 2024, as a result of $33.4 billion of market appreciation, partially offset by $12.7 billion of net client cash outflows, and $2.0 billion of Artisan Funds’ distributions that were not reinvested by fund shareholders.

•Average AUM for the year ended December 31, 2025 was $173.0 billion, an increase of 8.0% from the average of $160.2 billion for the year ended December 31, 2024.

•We earned $1,196.7 million in revenue for the year ended December 31, 2025, a 7.6% increase from revenues of $1,111.8 million for the year ended December 31, 2024.

•Our GAAP operating margin was 33.4% in 2025, compared to 33.0% in 2024. Adjusted operating margin was 35.3% in 2025, compared to 33.8% in 2024.

•We generated $4.05 of earnings per basic and diluted share and $3.93 of adjusted EPS.

•We declared and distributed dividends of $3.63 per share of Class A common stock during 2025.

•We declared, effective February 3, 2026, a quarterly dividend of $1.01 per share of Class A common stock with respect to the December 2025 quarter and a special annual dividend of $0.57 per share, for a total of $3.87 of dividends per share with respect to 2025.

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Organizational Structure

Organizational Structure

Our operations are conducted through Artisan Partners Holdings LP (“Holdings”) and its subsidiaries. On March 12, 2013, Artisan Partners Asset Management Inc. (“APAM”) and Holdings completed a series of transactions (the “IPO Reorganization”) to reorganize their capital structures in connection with the initial public offering (“IPO”) of APAM’s Class A common stock. The IPO Reorganization and IPO were completed on March 12, 2013.

Limited partners of Holdings, some of whom are employees, held approximately 13% of the equity interests in Holdings as of December 31, 2025. Our results reflect that significant noncontrolling interest.

We operate our business in a single segment.

Holdings Unit Exchanges

During the year ended December 31, 2025, certain limited partners of Holdings exchanged 71,500 common units (along with a corresponding number of shares of Class B or Class C common stock of APAM, as applicable) for 71,500 shares of Class A common stock. In connection with the exchanges, APAM received 71,500 GP units of Holdings.

APAM’s equity ownership interest in Holdings was 87% at December 31, 2024 and December 31, 2025.

Financial Overview

Economic Environment

Global market conditions can materially impact our financial performance. Because the revenue we earn is based on the value of our AUM, fluctuations in our AUM due to changes in the economic environment and financial markets will result in corresponding fluctuations in our revenues and earnings.

The following table presents the total returns of relevant market indices for the years ended December 31, 2025, 2024 and 2023:

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Key Performance Indicators

When we review our business and financial performance we consider, among other things, the following:

Assets Under Management and Investment Performance

Changes to our operating results from one period to another are primarily caused by changes in the amount of our AUM. A key driver of changes in our AUM over time is the long-term investment performance of our investment strategies. Changes in the relative composition of our AUM among our investment strategies and vehicles and the effective fee rates on our investment products also impact our operating results.

The amount and composition of our AUM are, and will continue to be, influenced by a variety of factors including, among others:

•investment performance, including fluctuations in financial markets and foreign currency exchange rates and the quality of our investment decisions, as assessed relative to applicable third-party benchmarks and peer groups, as appropriate;

•flows of client assets into and out of our various strategies and investment vehicles;

•our decision to close strategies or limit the growth of assets in a strategy or a vehicle when we believe it is in the best interest of our clients, as well as our decision to re-open strategies, in part or entirely;

•our ability to attract and retain qualified investment, management, and marketing and client service professionals;

•industry trends towards products, strategies, vehicles or services that we do not offer;

•competitive conditions in the investment management and broader financial services sectors; and

•investor sentiment and confidence.

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The table below sets forth changes in our total AUM:

Our equity strategies experienced net outflows of $15.6 billion in 2025, driven primarily by th

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]