BrightSphere Investment Group Inc.

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 risk and uncertainties that could cause actual results to differ materially from those projected. Additional information regarding this risk and uncertainties appears in our SEC filings, including the form AK filed today containing the earnings released Our 2023 Form 10-K and our Form 10-Q for the first quarter of 2024. Any forward-looking statements that we make on this call are based on the 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 gap measures, can be found on our website, along with the slide set we will use as part of today's discussion. Finally, nothing herein shall be deemed to be an offer, a solicitation to buy any investment products. Sir and Rana, our President and Chief Executive Officer will lead the call, and now I'm pleased to turn the call over to sir.

Thank you, Melody. Good morning, everyone, and thanks for joining us today. I'll cover some of the main highlights on slide five of the deck in my initial remarks, and then I can answer any questions. So, for the second quarter of 2024, we reported ENI per share of 45 cents compared to 28 cents in the second quarter of 2023, and 44 cents in the first quarter of 2024. The 61% increase in ENI per share compared to the year-ago quarter was primarily driven by increase in management fee revenue due to higher AUM from the market appreciation that we saw over the last 12 months. And secondly, it was also driven by our share repurchases over the last few quarters. Our average AUM increased approximately 13% compared to the second quarter of 2023, and management fee revenue increased 14% in line with the AUM increase. However, since we were able to keep our operating expenses generally flat year over year, our ENI increased 43% because of the 14% increase in revenue. This disproportionate increase in ENI versus revenue increase reflects our continued expense discipline and the embedded operating leverage in our business. We would expect to continue to benefit from this operating leverage as our revenue grows. Additionally, the increase in ENI per share versus a year ago was 61% compared to the 43% increase in ENI that I just went through. And that difference was driven by our share repurchases over the last year. Between December 2023 and June of 2024, we repurchased 4.7 million of our shares, or 11% of our total outstanding shares, for $100 million. As of June 30, 2024, 86%, 92%, and 93% of Acadian Strategies by Revenue outperformed their respective benchmarks across three, five, and 10-year periods. Turning to flows. Net client cash flows were incidentally flat for the second quarter. In the second quarter, we had select large and lumpy inflows. But we also had select large and lumpy outflows. And these lumpy flows basically offset each other. Our growth initiatives continue to progress. On our systematic credit initiative, Acadian's U.S. high-yield strategy that was seeded in November 2023 and the global high-yield strategy seeded more recently in April 2024, both continue to build good track records. Additionally, we just seeded a third credit strategy, U.S. investment rate strategy, in July 2024. And that strategy is also building a track record now. On our equity alternatives initiative, our multi-strategy fund, seated in Q4 of 22, continues to build a strong track record of our performance. Turning to capital management, as I mentioned earlier, we repurchased 11% of our outstanding shares since December of 2023 for $100 million. Specifically in Q2 of 24, we repurchased 0.9 million shares, or 2% of our total outstanding shares, or $21 million. At the end of second quarter, we had a cash balance of $72 million, and Acadian had an outstanding balance of $36 million on their revolving credit facility, which, similar to prior years, is expected to be repaid fully from cash from operations by year end. I'd like to close my initial remark by reiterating, as I usually do, that we remain focused on maximizing shareholder value and will continue using our free cash flow to support organic growth and to buy back our shares. I'll now turn the call back to the operator, and I'm happy to answer questions at this point. Thank you.

Thank you. And at this time, those with questions should lift their phone receiver and press star followed by the number one on their telephone keypad to enter into the Q&A queue. To cancel a question, again, remember, please press star followed by the number one again. Please hold for a brief moment while we compile the Q&A roster. Our first question for today comes from the line of Michael Cypress with Morgan Stanley. Your line is live.

Great. Thank you. Good morning. Maybe just starting out with the lumpy flows that you alluded to on both the gross sales and the redemption side, I was hoping you could unpack both of those, maybe talk about some of the types of strategies, customer channels, et cetera, where you're seeing some of the strains come in. And similarly, on the redemption side, what you're seeing there, and if you could also just touch upon the pipeline as it looks today, how is that shaping up versus, say, last quarter? Thank you.

Yeah, thanks, Michael. As we've touched on, ours is an institutional business, and so some of the numbers can be large, and they are episodic. So there weren't necessarily any patterns to unpack. It was just sort of coincidence, if you will, that we had these large numbers on both sides. On the inflows, it's really almost just really just three large clients that came in. There was a client that was more than a couple billion, another one for a billion, and another one close to a billion. So these really large numbers. And they were assorted strategies. I wouldn't say there were any patterns to unpack in terms of any particular strategy. It was just that the strategies that these clients came in, they came in large numbers. And it happened to be that these three large you know, inflows happen to be in the same quarter. On the outflow side, similar story that we had really a large client, you know, a large client close to a couple billion, another client more than a billion, another client sort of a similar number, different strategies, sort of a quite a bit of a coincidence that it just all happened in one quarter. But, yeah, it all sort of canceled each other out, so that's interesting. And we don't-going forward, if that's sort of, you know, another part of your question, as we've sort of guided in the past few quarters, we see more of a break even to flat cadence that we do have The pipeline remains healthy across stages. We have a good pipeline across different strategies and across different stages. And we still see some pressures from managed volatility strategies, among others. We see rebalancing going on by clients in these rising equity markets when they take some chips off the table. There are some clients that are moving to fixed income as a way to It managed their, you know, following the liability-driven investing. So, you know, all of those puts and takes, we think about a break-even kind of cadence for a few quarters here.

Great. Thanks. Just a follow-up question on capital allocation. Just curious how you're thinking about and planning to sort of approach that as we move it here into the second half and into 25 cash balance. $72 million, I think you mentioned. How should we think about that potentially drawing down, if at all? Just given I know in the past, I think you've mentioned you think about minimum cash level that you need to run the business is meaningfully lower than that. So what can we expect in terms of buybacks here as we roll forward? Thank you.

Yeah, thanks, Mike. Yeah, we think about minimum cash levels around $20 million or thereabouts. So you could say that maybe they're close to $50 is for other uses, and as we've said, really the two main uses remain the buybacks and seeding opportunities to accelerate our organic growth. So we remain mindful and opportunistic on both of those fronts. We seeded just in this quarter, as we mentioned in the release, we seeded our third credit strategy. which was the U.S. investment grade strategy. So we have a sizable seed pool now, so there might be some recycling that happens within the pool. But still, if we get opportunities to seed more and to see opportunities for organic growth, we might do that, and we'll also look at the buybacks as we go. So there isn't any particular formula we have. We'll remain opportunistic on both. We don't feel like we necessarily have to buy back our shares every quarter, particularly as I touched on with that $50 million kind of a number. It's not that much to put to work. So we'll just remain opportunistic here. Great. Thank you.

Thank you for your question. Our next question is from the line of Kenneth Lee with RBC Capital Markets. Your line is live.

Hey, good morning. Thanks for taking my question. Just one on the fee rate. There was, I think, a slight pickup in the fee rate in the quarter. Wondering whether it was just due to mixed shift, and if so, particularly

The first part of your guess, so clearly one of the factors was that the marketing markets and other And they have higher fees. Thanks. And just one question. One follow-up, if I may, just in terms of the share repurchases. Proceeding organic growth opportunities and buybacks, it's not necessarily super urgency on that.

But yeah, in due course, we would expect to get new authorization for buybacks.

Gotcha. Very helpful there. Thanks again. Thank you. Our next question is from the line of John Dunn with Evercore ISI. Your line is live.

Thank you. Question on the outlook for further expense control from here and your ability to keep expenses in check.

As we were really investing in our infrastructure, we invested in our trading infrastructure.

We added to our investor reporting capabilities. So we were really building in the sense of making our franchise more scalable because inflation was everywhere. So that's what it is. So it appears that now having built up a lot over the last couple of years and having what I touched on, that we do have the operating leverage as our revenue grows. We should be able to keep the operating expenses relatively at these levels, so we should have disproportionate benefit as the revenue increases. And could you give us a little color on the conversations you're having? Performance markets and emerging markets have been lagging for such a long time. clients so so where maybe some clients who are let's It's a strategy that we really have excellent, very, very strong top performance. So if somebody does want to allocate, we would do and have really one of the best chances. We will conclude our question and answer session for today. I would like to turn the conference call back over to Sarah and Rana. Thank you, Operator, and thank you, everyone, for joining us today.