BrightSphere Investment Group Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the BrightSphere Investment Group Earnings Conference Call and webcast for the second quarter 2021. During the call, our participants will be in a listen-only mode. After the presentation, we will conduct a question and answer session. To be added to the queue, please press star followed by the number one at any time during the call. If you need to reach an operator, please press star followed by zero. Please note that this call is being recorded today, Thursday, July 29th, 2021 at 11 a.m. Eastern time. I would now like to turn the meeting over to Ellie Sugarman, Head of Corporate Development and Investor Relations. Please go ahead, Ellie.

Good morning and welcome to Brightstrips conference call to discuss our results for the second quarter ended June 30th, 2021. Before we get started, please note that we may make forward-looking statements about our business and financial performance. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected. Additional information regarding these risks and uncertainties appears in our SEC filings, including the Form 8-K file today containing the earnings release, our 2020 Form 10-K, and our Form 10-Q for the first quarter of 2021. 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 or future events. We may also reference certain non-GAAP financial measures. Information about any non-GAAP measure referenced, including a reconciliation of those measures to GAAP measures, can be found on our website along with the slides that we will use as part of today's discussion. Nothing herein shall be deemed to be an offer or solicitation to buy any investment products. Surin Rana, our President and Chief Executive Officer, will lead the call. And now I'm pleased to turn the call over to Surin. Surin?

Thank you, Ali. Good morning, everyone, and thanks for joining us today. I'll start with slide five of the presentation deck as usual. And let me begin with a summary of a few recent developments. that collectively mark an important shift in our business model. We closed on the divestiture transaction of Landmark Partners in May. And as we announced in the press release last week, earlier this month, we also closed on the divestiture transactions of two other affiliates, TSW and ICM. And we still expect the closing of the announced transaction for sale of another affiliate, Campbell Global, in the third quarter of this year. After that sale is completed, our sole business will be Acadian, a market-leading quant manager with a great track record of outperformance. So at that point, we will have completed a full transition from what's referred to as a multi-boutique or multi-manager business model to a single, focused investment manager model, providing our investors pure play exposure to Acadian's highly differentiated business. Now, moving to our financial results for the quarter, we reported ENI per share of 40 cents for the second quarter of this year, compared to 24 cents for the second quarter of last year. ENI for both these periods excludes Landmark and TSW, since they have been moved into discontinued operations. But these numbers still do include ICM and Campbell, just given how the accounting guidelines work. It seems several analysts may have included TSW in their earnings estimates since the TSW sale closed in July after the end of the second quarter. So to make it easier to compare, I want to point out that if TSW was included in our results, it would have added another six cents to the EPS for 2Q21, which would make the second quarter EPS 46 cents. As I mentioned, ICM and Campbell are still included in these results, but since ICM's sale is now closed and Campbell's sale is expected to close in the third quarter, we're now really focused on our sole go-forward business, Acadian. So let's now turn to slide eight to zero in on Acadian. As you can see in the first column relating to 2Q21, with an AUM of $118 billion, Acadian has significant scale, particularly for a very focused, differentiated business. The business generated 53 million of EBITDA in the second quarter of 21 compared to 33 million in the second quarter of 2020 and 46 million in the first quarter of 2021. The biggest driver for the increase in EBITDA relative to both the year-ago quarter and the prior sequential quarter was higher revenues. driven in turn by the increase in our AUM from market appreciation. Acadian's net flows in the quarter were negative $1.3 billion, primarily driven by reallocations from select strategies, such as low volatility strategies, given the generally rising markets we have had. Looking at investment performance, you can see on the chart on the lower left-hand side that Acadian's investment performance strengthened further in this quarter with 82%, 85%, and 88% of strategies by revenue beating their respective benchmarks over the prior three, five, and 10-year periods. We're optimistic that this strong long-term track record will help generate robust net flows and organic growth over time. Turning to our balance sheet and capital management on slide 14, our cash balance as of June 30, 21, was $1,175 million. We expect this balance to grow to more than $1.3 billion over the next few months when we include the after-tax proceeds from TSW, ICM, Campbell sales, and pay the taxes on gain on sale of Landmark, which hadn't been paid since they weren't due just yet. We expect to deploy this cash balance to pay down debt and return capital to our shareholders. As of June 30, 2021, we had outstanding notes of $400 million. So our cash balance net of this debt would be $900 million. So basically you can think of the company currently as two distinct parts. Our operating business generating 53 million of quarterly EBITDA and our cash balance net of debt of more than $900 million. Now, let me turn the call back to the operator, happy to answer questions at this point.