Compensation and Benefits

3 Months Ended

Mar. 31, 2025

Share-Based Payment Arrangement [Abstract]

Note 10. Compensation and Benefits

Total compensation and benefits consist of the following:


	For the Three Months Ended March 31,
	2025		2024
Salaries, incentive compensation and benefits (1)	$	133,979	$	129,098
Long-term cash incentive compensation expense	13,727		12,503
Restricted share-based award compensation expense	7,455		8,279
Long-term incentive compensation expense	21,182		20,782
Total compensation and benefits	$	155,161	$	149,880
(1) Excluding long-term incentive compensation expense

Incentive compensation

Cash incentive compensation paid to members of Artisan’s investment teams and members of its distribution team is generally based on formulas that are tied directly to revenues. The majority of this incentive compensation is earned on a quarterly basis and paid in the quarter following the quarter in which it was earned with the exception of fourth quarter incentive compensation which is earned and paid in the fourth quarter of the year. Cash incentive compensation paid to most other employees is determined based on individual performance and Artisan’s overall results during the applicable year and is generally paid on an annual basis.

Long-term incentive compensation awards consist of both APAM restricted share-based awards and long-term cash awards, which are referred to as franchise capital awards. These awards are described in more detail below.

Restricted share-based awards

APAM has granted a combination of restricted stock awards, restricted stock units and performance share units (collectively referred to as “restricted share-based awards” or “awards”) of Class A common stock to employees.

Standard Restricted Shares. Standard restricted shares are generally subject to a pro rata five-year service vesting condition.

Career Shares. Career shares are generally subject to both (i) a pro rata five-year service vesting condition and (ii) a qualifying retirement (as defined in the award agreement) condition.

Franchise Shares. Like career shares, franchise shares are generally subject to both (i) a pro rata five-year service vesting condition and (ii) a qualifying retirement condition. In addition, franchise shares, which are only granted to investment team members, are subject to a Franchise Protection Clause, which provides that the number of shares that ultimately vest depends on whether certain conditions relating to client cash flows are met. If such conditions are not met, compensation cost related to unvested shares will be reversed.

Performance Share Units (PSUs). PSUs are generally subject to (i) a three-year service vesting condition, (ii) certain performance conditions related to the Company’s adjusted operating margin and total shareholder return compared to a peer group during a three-year performance period, and (iii) for one-half of the PSUs eligible to vest at the end of the performance period, a qualifying retirement condition. The number of shares of Class A common stock that are ultimately issued in connection with each PSU award will depend upon the outcome of the performance, market and qualified retirement conditions. For the portion of a PSU award with a “performance condition” under ASC 718, expense was recognized over the service period if it was probable that the performance condition would be achieved. All outstanding PSUs at March 31, 2025 had met required performance conditions, but remain outstanding subject to a qualifying retirement vesting condition.

For certain awards granted in 2024 and 2025, the pro rata five-year service vesting condition is not applicable if the grantee has a qualified retirement after meeting an age plus number of years of service with the Company condition.

Compensation expense is recognized based on the estimated grant date fair value on a straight-line basis over the requisite service period of the award. The initial requisite service period is generally five years for restricted stock awards and restricted stock units, and three years for PSUs. If an employee is eligible to fully vest in an award upon a qualified retirement, the requisite service period is equal to the employee’s required retirement notice period, which is generally 12 or 18 months. The fair value of each award is equal to the market price of the Company’s common stock on the grant date, except for PSUs with a “market condition” performance metric under ASC 718, which had a grant-date fair value based on a Monte Carlo valuation model.

Unvested restricted share-based awards are subject to forfeiture. Grantees are generally entitled to dividends or dividend equivalents on unvested and vested awards. 5,504,951 shares of Class A common stock were reserved and available for issuance under the Artisan Partners Asset Management Inc. 2023 Omnibus Incentive Compensation Plan (the “Plan”) at March 31, 2025.

During the three months ended March 31, 2025, Artisan granted 429,511 restricted stock awards and 1,204 restricted stock units.

The following tables summarize the restricted share-based award activity for the three months ended March 31, 2025:


	Weighted-Average Grant Date Fair Value		Restricted Stock Awards and Restricted Stock Units
Unvested at January 1, 2025	$	39.26	5,276,480
Granted	44.24		430,715
Forfeited	52.93		(1,505)
Vested	39.38		(503,757)
Unvested at March 31, 2025	$	39.66	5,201,933


	Weighted-Average Grant Date Fair Value		Performance Share Units
Unvested at January 1, 2025	$	37.86	176,192
Granted	—		—
Forfeited	—		—
Adjustment for performance results achieved (1)	29.40		47,970
Vested (1)	35.67		(71,955)
Unvested at March 31, 2025 (2)	$	38.90	152,207
(1) During the three months ended March 31, 2025, the 95,940 PSUs granted in 2022 met the requisite three-year performance conditions for the potential delivery of 143,910 shares (47,970 additional shares for results achieved). 71,955 shares of Class A common stock underlying one-half of the total PSUs were delivered in the three months ended March 31, 2025, while the remaining 71,955 units remain subject to the qualified retirement provision.
(2)At March 31, 2025, all 152,207 outstanding PSUs have met the required performance conditions for vesting, but remain outstanding subject to a qualifying retirement vesting condition.

The unrecognized compensation expense for the unvested restricted stock awards and restricted stock units as of March 31, 2025 was $63.8 million with a weighted average recognition period of 2.9 years remaining. The unrecognized compensation expense for the unvested PSUs as of March 31, 2025 was $0.9 million with a weighted average recognition period of 1.4 years remaining.

During the three months ended March 31, 2025, the Company withheld a total of 198,695 restricted shares and paid a total of $8.5 million as a result of net share settlements to satisfy employee tax withholding obligations. These net share settlements had the effect of shares repurchased and retired by the Company, as they reduced the number of shares outstanding.

Long-term cash awards (franchise capital awards)

During the three months ended March 31, 2025, Artisan granted $46.8 million of franchise capital awards to investment team members in lieu of certain additional restricted share-based awards. The franchise capital awards are subject to the same long-term vesting and forfeiture provisions as restricted share-based awards, as described above. Prior to vesting, franchise capital awards are generally allocated to one or more of the investment strategies managed by the award recipient’s investment team. During the vesting period, the value of the awards will increase or decrease based on the investment returns of the strategies to which the awards are allocated. Compensation expense, including the appreciation or depreciation related to investment returns, is recognized on a straight-line basis over the required service period, which is generally five years. If an employee is eligible to fully vest in an award upon a qualified retirement, the requisite service period for that award is equal to the employee’s required retirement notice period, which is generally 12 or 18 months. Because the awards will generally be paid out in cash upon vesting, the fair value of unvested awards is recorded as a liability based on the percentage of the service requirement that has been completed.

The Company hedges its economic exposure to the change in value of franchise capital awards due to market movements by investing the cash reserved for the awards in the underlying investments. The franchise capital award liability and the underlying investment holdings are marked to market each quarter. The change in value of the award liability is recognized as a compensation expense on a straight-line basis over the required service period. The change in value of the underlying investment holdings is recognized in non-operating income (expense) in the period of change. While there is a timing difference between the recognition of the compensation expense and the offsetting investment gain or loss, the compensation expense and investment income will net to zero at the end of the multi-year vesting period for all awards that ultimately vest.

The change in value of the investments had the following impact on the unaudited consolidated statements of operations:


		For the Three Months Ended March 31,
Statement of Operations Section	Statement of Operations Line Item	2025		2024
Operating expenses (benefit)	Compensation and benefits	$	2,512	$	3,925
Non-operating income (expense)	Net investment gain (loss) of nonconsolidated investment products	2,077		9,614
Non-operating income (expense)	Net investment gain (loss) of consolidated investment products	512		831

The unrecognized compensation expense for the unvested franchise capital awards as of March 31, 2025 was $126.7 million with a weighted average recognition period of 2.6 years remaining.