Acadian Asset Management Inc.

initial performance. Each forward-looking statement is subject to risks and certainties that could cause actual results to differ materially from those projected. Additional information regarding these risks and certainties appears in our FEC filing, including the form 8-K filed today containing the earnings review. our 2024 Form 10-K and our Form 10-Q for the first, second, and third quarters of 2025. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update them as a result of new information of future events. We may also reference certain non-GAAP financial measures. information about any non-GAAP measures referenced, including the reconciliation of those measures to GAAP measures, can be found on our website, along with the slide that we will use as part of today's discussion. Finally, nothing herein shall be deemed to be an offer or solicitation to buy any investment product. Kelly Yang, Our President and Chief Executive Officer will leave the call. And now, I'm pleased to turn the call over to Kelly.

Thanks, Melody. Good morning, everyone, and thanks for joining us today. I'm delighted to share our Q4 25 and full-year 2025 results with you. I'm pleased to highlight that we delivered breakout results across assets under management and profitability. We ended Q4 2025 on another high note. Our US GAAP net income attributable to controlling interests was down 18% and EPS was down 14% compared to the year prior due to increased non-cash expenses representing changes in the valuation of Acadian LLC equity and profits interest. Our ENI diluted EPS of $1.32 was up 2% driven by share repurchases the highest level of quarterly ENI EPS in the firm's history. Our adjusted EBITDA was up 1%. We realized $5.4 billion of positive net client cash flows in Q4-25, 3% of beginning period AUM, driven by enhanced extensions as well as emerging markets equity. And finally, AUM surged to $177.5 billion as of December 31st, 2025, making another record high for Acadian. Moving to slide three, full year 2025 strong outperformance. Our U.S. gap net income attributable to controlling interest was down 6%, and EPS down 0.5% compared to the prior year, driven by increased non-cash expenses, representing changes in the value of Acadian LLC equity and profits interests. We will discuss the four-year ENI EPS and net flows on the following slide. Our adjusted EBITDA was up 9% compared to 2024, driven by significant growth in reoccurring management fees. Focusing on slide four, this slide captures the exceptional and historic year 2025 was for Acadian. We generated $29 billion in net client cash flows. That organic growth, combined with robust equity markets, drove our AUM to an all-time high of nearly 178 billion as of December 31st, 2025. At the same time, our 2025 ENI total revenue grew to nearly 549 million, up 9% from 2024. We also expanded our ENI margin more than two percentage points to 35.5% and reduced our gross leverage to one times as of year-end 2025. down from 1.5 times at year-end 24. Finally, we delivered record annual 2025 ENI EPS of $3.25, up 18% year-over-year, supported by greater ENI earnings and the efficient return of capital to our shareholders in the form of share repurchases. These milestones and financial results reflect our team's discipline and dedication in executing the organic growth plan we articulated when I assumed the CEO role at the beginning of 2025. As we enter Acadian's 40th year in business, I believe we're better positioned than ever. We remain focused on delivering solutions and generating alpha for our clients, as well as expanding targeted product and distribution initiatives that promise to deliver long-term growth and value for our shareholders. Turning to slide five, Acadian's investment performance track record remains strong despite a challenging 2025. We have five major implementations which comprise the majority of our assets. As of December 31st, 2025, global equity, emerging markets equity, non-US equity, small cap equity, and enhanced equity have 100% of assets outperforming benchmarks, across three, five, and 10-year periods. Global equity markets delivered strong returns in Q4 2025 to close out 2025. However, crowding and lesser quality high beta stocks created a more challenging environment for the fundamentally driven signals, such as quality, that drive Acadian's approach, particularly in the second half of the year. Towards the end of the year, value and quality-orientated stocks performed better a welcome change after their struggles in Q3 and our performance improved in Q4-25. As we enter a new year, we remain confident in our disciplined, systematic approach and believe we're well positioned as markets begin to refocus on company fundamentals. Slide six details how our investment process has weathered various market cycles and generated meaningful long-term alpha for our clients. Our revenue-weighted five-year annualized return in excessive benchmark was 4.7% as of the end of the quarter on a consolidated firm-wide basis. Our asset-weighted five-year annualized return in excessive benchmark was 3.8% as of the end of the quarter. By revenue weight, 95% of Acadian strategies outperformed their respective benchmarks across three, five, and 10-year periods as of December 31, 2025. And by asset weight, 91% of Acadian strategies outperform their respective benchmarks across three, five, and 10-year periods. The next slide highlights our sustained momentum in net flows. We realized positive net flows of $5.4 billion in the fourth quarter, representing 3% of beginning period AUM. The quarter's net flows were again diverse across products and client types. Enhanced extension and emerging markets equities all generated strong net client cash flows. As I referenced earlier, for the full year of 2025, we generated net flows of $29 billion. And with positive flows of $2 billion in 2024, we've now generated eight consecutive quarters of positive net flows. Our current pipeline remains robust and active after the funding of a number of significant client wins in 2025. and we expect continued positive momentum in the year ahead. I'm now going to turn the call over to our CFO, Scott Hines, to provide you with more detail on our financial performance this quarter and an update on capital allocation.

Thanks, Kelly. Turning to slide nine, our key gap in E&I performance metrics are summarized here on both a quarterly and full-year basis. As previously noted, we manage the business using E&I metrics, which better reflect our underlying operating performance. We can find complete gap to E&I reconciliations in the appendix. Let me now turn to our core business results. Starting on slide 10, Q425 management fees of $146 million increased 32% from Q424, reflecting a 43% increase in average AUM, driven by strong positive net flows and market appreciation. Total E&I revenue of $170 million increased from Q424 by 2%. primarily due to recurring base management fee growth, partially offset by a decline in performance fees. We have now delivered nearly 8% or higher quarter-on-quarter management fee growth for three consecutive quarters. And with fourth quarter end of period AUM of $178 billion, we enter 226 with a significantly stronger recurring revenue base. This stronger entry point enhances our confidence in our ability to deliver earnings, generate free cash flow, self-fund organic investments, and return capital to shareholders. Moving to slide 11, Q4-25 E&I operating expenses increased 5%, primarily driven by higher sales-based compensation, as well as general and administrative costs, including continued investments in IT and infrastructure. Our E&I operating margin expanded 338 basis points to 45.7% from 42.3% in Q4-24, driven by increased E&I management fees, while our Q4-25 operating expense ratio fell 10 percentage points year-over-year to 40.9%, reflecting the impact of improved operating leverage. Q4-25 variable compensation decreased 18% year-on-year primarily driven by reduced performance fee-related compensation, as well as increased non-cash compensation. In Sympathy, our Q4-25 variable compensation ratio decreased to 29.4% in Q4-25 from 35.7% in Q4-24, while our full-year 2025 variable comp ratio decreased to 39.4% from 42.3% in 2024. Assuming revenue mix and levels similar to 2025, contractual allocations would imply a 2026 variable compensation ratio of approximately 40 to 43%. Turning to slide 12 on capital resources, as of December 31st, 2025, we had 101 million of cash and 97 million of seed investments on the balance sheet. With a $200 million balance on our new term loan credit facility, and zero balance on our revolving credit facility. We completed the previously announced refinancing of our 275 million senior notes in Q4-25, reducing our gross debt by 75 million and helping lower our gross leverage ratio from the prior year by half a turn to one times and our net leverage ratio to 0.5 times. This refinancing has left our balance sheet stronger and more durable, better positioning us to navigate various market environments and to continue to return excess capital going forward. As a reminder, Acadian's leverage typically peaks in the first quarter of each year as we draw down on our revolver to fund annual compensation, but then declines through the year as we generate cash and pay down the revolver. We expect this dynamic to continue in 2026. Moving to slide 13, we have a track record of creating significant value through share buybacks in recent years. Outstanding diluted shares have decreased 58% from 86 million in Q4-19 to 35.8 million shares in Q4-25. Over the same period, $1.4 billion in excess capital was returned to shareholders through share buybacks and dividends. Share repurchases were suspended in Q4-25, with balance sheet cash supported the previously discussed deleveraging. We repurchased 1.8 million shares of common stock in 2025, 5% reduction in our total shares outstanding from the end of 2024 for an aggregate total of $48 million. Acadian's board has declared an interim dividend of $0.10 per share, an increase from the prior penny per share level to be paid on March 27, 2026 to shareholders of record as of the close of business on March 13, 2026. This increased dividend level reflects the Board's confidence in our recurring revenue base and continued strong free cash flow generation. Going forward, we expect to continue generating strong free cash flow and returning excess capital to shareholders through dividends and share repurchases. I'll now turn the call back over to Kelly.

Before moving to Q&A, let me recap some key points on slide 14. Acadian is competitively positioned as the only pure play, publicly traded systematic manager with a 40-year track record and competitive edge in systematic investing. Our investment performance track record remained strong this quarter with more than 95% of strategies by revenue outperforming over three, five, and 10-year periods. Business momentum continued a pace in Q4 of 25 with net inflows of 5.4 billion for the quarter, and $29.4 billion for the year, the highest annual NCCF in the firm's history, and with record AUM of $177.5 billion. Q4 25 financial results included record management fees of $146 million, up 32% from Q4 24. Record ENI EPS of $1.32, up 2% from Q4 of 24. and operating margin expansion to 45.7%, up from 42.3% in Q4-24. Finally, capital management remained a focus in the quarter as we strengthened our balance sheet with the Senior Notes Redemption and Term Loan A refinancing, and announced an increase in our quarterly dividend to 10 cents per share. Acadian is well positioned to continue to drive growth and generate value for shareholders through targeted distribution initiatives, and strategic product offerings. Our talented and dedicated team is acutely focused on achieving these goals, and I look forward to building on the momentum we saw in 2025. This concludes my prepared remarks.

At this time, those with questions should lift their phone receiver and press star, followed by the number one on their telephone keypad. To cancel a question, please press star 1 again. Please hold for a brief moment while we compile the Q&A roster. Your first question comes from the line of John Dunn with Evercore. Please go ahead.

Thank you. I want to go back to the institutional pipeline. You said it remains robust. If you could just give a little flavor of the composition of it and maybe the cadence of timing you expect over the course of 2026.

Yeah, hi, John. Of course, thanks for the question. Yes, as I said, I think the pipeline remains very strong. And the pipeline looks exactly how we would want it to, so in terms of very diverse by product types, by geographies, and by vehicle. We continue to see a lot of interest in enhanced As you know, that was a theme that we saw a lot through 2025. That continues, I think, to resonate with clients looking for lower risk but consistent returns at a lower fee. And we continue to see that as a key feature in the pipeline. On the other end of the risk spectrum, our extension strategy, we've seen real interest there. I'd say particularly from North America, but increasingly across the globe. So those are two key features. And again, two of the key terms that we talked about in terms of our growth strategy last year. And then a real resurgence of interest in some of our core strategies, like areas like EM, which, you know, has been muted over the last few years. And that was a feature of cash flows in Q4. And we continue to see interest there, I think, as clients are looking for diversification, you know, away from the US and with a strong tailwind from dollar weakening. So, again, it looks very diverse, really is, I'd say that, you know, the features of enhanced core and extensions continue to hold as themes. And again, we're continuing to see that diversification and interest really across the globe, driven by, you know, not just our US clients, but internationally as well. So again, broad pipeline, a continuation of some of the themes that we saw in 25. But as I say, with areas like EM, that have historically perhaps been a little more used over the last couple of years, continuing now to sort of feature as a theme.

And John and Scott, I just add to what Kelly provided there that since I joined last spring, and we obviously stare at very granular pipeline data, the levels have been remarkably durable, even through, as you know, the digestion or the realization of some really large width. So again, we feel incredibly well-positioned. going into the year. And as Kelly suggested, again, from my chair, it should be remarkable the extent to which we've seen that pipeline refill.

Got it. And then maybe just a word on your current area's investment and looking over the course of the year, any changes we should be thinking about in the more like fixed expense line items?

Yeah, I'll start. I'll let Kelly add anything if she'd like. I mean, one, stepping back, I think we are very bullish in this regarding our ability to continue to generate positive operating leverage. We're focused on scaling the business. We're confident in our ability to do so. When we think about investment areas, you know, I think there are some key areas, some of which are related to certain of the positive initiatives that we've already announced in the last year. So you think about areas like systematic credit. I know Kelly has already talked to you and others about some of the continued investments we make there that takes the form usually at this point of people. So to make that more real, dedicated salespeople, for instance, in systematic credit. You know, when you think about technology, that's obviously a huge focus for us as part of the mode around the business. So we're seeing continued investments there, particularly around areas like data, how we work with data that does involve some ongoing AI investments just to allow our research team, for instance, to be more focused on strategies, achieving outcomes, and less on manipulating data, so to speak. So hopefully that gives you a bit of a flavor of where we're headed. But again, I think overall on our expenses, we made a lot ahead of them this year in terms of realizing margin improvements. And as Kelly said earlier, we remain really confident in our ability the way the business is behaving today to effectively self-fund the investments we see going forward. But there's certainly no step change. It's just ongoing investments in the areas where we see mental growth like this amount of credit.

Thanks very much.

Your next question comes from the line of Kenneth Lee with RBC Capital Markets. Please go ahead.

Hey, good morning, and thanks for taking my question. Just one on the outlook for capital returns and realize that you increased the quarterly common dividend there as well. How do you think about share repurchases in this context? Is there a certain level that you could be looking at or some kind of payout ratio, any kind of guardrails around that? Thanks.

Yeah, thanks, Dan. I appreciate the question. Look, I think we're, we feel really well positioned, right, in terms of capital return. You know, I know you, you know, and our investors know we completed a refinancing last year. We think that makes the balance sheet much, much more durable, provides a lot more flexibility here. The business is behaving really well, generating a lot of free cash flow. The dividend, I would add, up from a penny to 10 cents a quarter is a signal, as I suggested, earlier and Kelly underlined as well, a signal of confidence in the way the business is behaving and for that to be durable. I would add that when you set that aside, share of purchases, I would not want folks to misread that that's some sort of idle or conversation. more reflection that dividend increase of the business grow and scale in such a way in our level of free cash flows that we think that's durable, right? But that in no way is a binary either or conversation in the share of purchases. To be very direct on the levels, as I said, we want to be athletic. No, there's not a payout ratio per se that we're managing to. And stepping back in terms of balance sheet management over time, and this is over the long term, I do think it is our intention to march more toward a net cap position versus a net debt position. And the term loan we put on provides this flexibility in this regard. That was purposeful. But that's certainly not a rush. And we do think that share purchases will be a priority this year. Again, very healthy free cash flow. We did pause in the fourth quarter with that plan refinancing. That is over. That is done. And with more than $100 million our balance sheet as we printed at the end of the fourth queue. Let's put it this way. It wouldn't be our intention to just sit on that, right? We're going to be athletic. We're going to be active. It is an output balanced against the investments that Kelly and team would be looking at us for as the finance side. But again, we think no step changes there. We've already had the investments we need for announced product initiatives. Could there be incremental seed capital? Yes. But again, there's no huge step change. So we Again, that's a long way of saying that pause in your purchases is over, and we think, again, we're really well-positioned ahead of the end of this year, and the business is behaving well, and we're going to be active and athletic in this regard.

Gotcha. That's very helpful there. And one follow-up, if I may, I'm not sure whether I might have missed this early in the call, but... What was the composition of net flows in the quarter, in the fourth quarter? Were there any particular outsized mandates? Just what strategies were driving some of the flows there? Thanks.

Yeah, sure. Of course. Again, it was the sort of quarter that we really want to see from an NCCS standpoint. So no one big dominant mandate that's driving those numbers. Again, very diverse across, I'd say, everything from enhanced at the lower risk end through to extensions on the higher risk side. As I noted earlier, EM was an EM core strategy with a core feature of Q4 flows as well. And very much balanced, I'd say, between international and our US clients. So very diverse, not one large sort of theme there that's dominating on one particular mandate. Very diverse, as I say, by strategy groups, by by geography of client and then by vehicle type, some of those separate accounts, some of those coming into our existing funds. So broad and diverse and exactly what we really want to see in a quarter, you know, from an NCCS standpoint.

Great. Very helpful. Thanks again.

Thanks. Again, if you would like to ask a question, press star 1 on your telephone keypad. There are no further questions at this time. This concludes our question and answer session. I'd like to turn the conference call back over to Kelly Young.

In closing, I'd like to reiterate our excitement for the business. We were delighted by the 25% increase in net point cash flow in the period, the 52% increase in AUM, and the 32% growth in management fees. And we remain incredibly positive for the trajectory for Arcadian in 2026. as we continue strong growth ahead. Thank you everyone for joining us today.