Artisan Partners heads into its September-quarter report with a split personality. Its margins, investment performance and capital return have been improving, but the business suffered its worst flow quarter in recent memory as it shut down a U.S. Value franchise that had operated for roughly three decades. The stock has fallen about 23% since the last report while the S&P 500 rose about 3%. That tells you which half of the story the market chose to believe. This report is the first full quarter after the wind-down, and it should show whether the outflows were a one-time reset or the start of a longer slide.

Wall Street expects earnings of $0.98 per share, up from $0.94 last quarter but about 3.9% below the $1.02 earned a year ago. That mild decline is not alarming on its face. Management warned that the U.S. Value exit would cost roughly $0.03 a share in the September quarter, and it reaffirmed its fixed-expense outlook rather than raising it. The consensus appears to have absorbed that drag. If Artisan earns close to $0.98 despite the hit, it would suggest record asset levels and operating leverage are doing their job. A result closer to $0.94 would imply that lost fee revenue is hurting more than the guidance suggested.

The operating picture last quarter was better than the headline flow number. Quarter-end assets reached a record $183 billion. The adjusted operating margin widened 180 basis points to 32.9%. The share of assets beating benchmarks over three years jumped to 86% from 74%. Departing U.S. Value money also nudged the average fee rate up to 68 basis points, because the lost sub-advisory mandates carried lower fees. A steady or rising fee rate this quarter would support the view that Artisan lost assets that were large but not very profitable. Any slippage in margin, however, would undercut that comfort.

The bigger question is whether outflows return to something closer to the $3.1 billion seen in the first quarter, after the $10.5 billion exodus in the second. About $2.8 billion of last quarter's losses came from the growth team, even as it won a $1 billion Global Discovery mandate. Management also described broad rebalancing among its largest institutional clients. Better short-term performance should eventually help flows, but that usually takes time. Persistent growth-team redemptions would weaken the case that the damage was confined to U.S. Value. Credit, meanwhile, has been the steadiest source of growth, with 16 straight quarters of inflows. Yet credit inflows slowed to about $700 million, and relative performance softened because the portfolios held little energy. A further slowdown there would leave Artisan with few organic growth engines.

The catalyst list from last quarter also faces its first checkpoint. Grandview Fund 4 was expected to launch around late summer or early fall, with management guiding to a fund several times the size of the $150 million Fund 3 and an anchor investor in advanced talks. Confirmation of that anchor, along with progress on the planned ETF and USIT launches, would give investors tangible evidence that the newer businesses can offset the decline in equities.

Sentiment has improved somewhat, from 25% bearish heading into the last report to about 13.9% bearish now. The stock, however, tells a gloomier story. At $32.29, it sits well below its 200-day moving average of $38.74 and only modestly above its post-report low of $30.86. Those are depressed expectations, and decent margins plus a reliable dividend could ease some of the pessimism. Even so, the report will be judged on one question: did the September quarter show outflows moderating and new products gaining traction, or is Artisan's record asset base being held up mainly by rising markets?