Virtus Investment Partners, Inc.

Good morning. My name is Crystal, and I'll be your conference operator today. I would like to welcome everyone to the Virtus Investment Partners quarterly conference call. The side presentation for this call is available in the investor relations section on the Virtus website, www.Virtus.com. This call is also being recorded and will be available for replay on the Virtus website. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer period, and instructions will follow at that time. I will now turn the conference over to your host, Sean Rourke.

Thank you, and good morning, everyone. On behalf of Virtus Investment Partners, I'd like to welcome you to the discussion of our operating and financial results for the first quarter of 2020. Our speakers today are George Aylward, President and CEO of Virtus, and Mike Angerthal, Chief Financial Officer. Following the prepared remarks, we will have a Q&A period. Before we begin, I direct your attention to the important disclosures on page two of the slide presentation that accompanies this webcast. Certain matters discussed on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and as such are subject to known and unknown risks and uncertainties, including but not limited to those factors set forth in today's news release and discussed in our SEC filings. These risks and uncertainties may cause factual results to differ materially from those discussed in these statements. In addition to results presented on a GAAP basis, we use certain non-GAAP measures to evaluate our financial results. Our non-GAAP financial measures are not substitutes for GAAP financial results and should be read in conjunction with the GAAP results. Reconciliations of these non-GAAP financial measures to the applicable GAAP measures are included in today's news release and financial supplement, which are available on our website. Now I'd like to turn the call over to George.

George? Thanks, Sean. Good morning, everyone. Thank you for joining us on our first quarter earnings conference call. As always, I appreciate your interest in Virtus, and in this uncertain time, I hope that you and those you care about are all healthy and safe. Despite the challenging markets that emerged late in the first quarter and the resulting impact on ending asset levels and net flows, we are pleased with the financial and operating performance of the business, which included our highest level of quarterly sales, with increases across nearly all product categories, positive net flows from retail separate accounts and structured products, as well as equity strategies in the aggregate, a higher operating margin and earnings per share compared with the prior year period, and continued return of capital and meaningfully higher debt reduction. Our managers also continue to generate outstanding investment performance, which I'll discuss in more detail in a moment. A market environment like the one we are experiencing provides a great opportunity for quality, active asset managers to demonstrate their value to clients. Turning over to the results, after reaching their highest level last quarter, long-term AUM declined by 18 billion, or 17%, in the first quarter, almost entirely due to the market decline in March. For the quarter, we had 1.3 billion in net outflows, which were primarily in mutual funds, particularly fixed income. Looking at the flows, it is useful to understand the trend during the quarter. In the first two months, total long-term net flows continued the positive trend from the fourth quarter, as we generated $1 billion of positive net flows with strong momentum across products and asset classes. However, the market shock in March led to elevated mutual fund redemptions as retail investors fled to cash perceived safety. The elevated level of fund redemptions abated by the end of March. One thing that remained consistent throughout the quarter was sales momentum, which continued despite the challenging environment. For the full quarter, sales were $7 billion, up 47% sequentially and 28% over the prior year, with increases in all products except ETFs. So for the quarter, by product, we had net outflows in mutual funds, ETFs, and institutional, while retail separate accounts and structured products generated positive net flows. Fund net outflows were $1.6 billion, primarily related to the more credit-sensitive fixed income and emerging market equity strategies. Domestic equity fund flows were breakeven, with areas of strength in domestic and SMICAP, as well as international developed markets, all of which generated positive flows. We also maintained our sales and flow momentum with retail separate accounts and generated continued positive flows in both the intermediary sold and private client channels. In terms of what we saw in April, there was a continuation of the sales momentum, as well as consistent positive flows. Mutual fund sales in April were at the highest level in six years, and net flows for the month were meaningfully positive. We also continue to see strong positive net flows in retail separate accounts. And in terms of institutional, we saw positive flows overall, including new mandates. While we do not know what the markets will bring over the next few months, this is certainly a strong start to the quarter in terms of flows. Our financial results reflected a partial impact from the challenging markets that began late in the quarter, as well as our normal seasonally higher employment expenses. The sequential decline in operating income and margin was primarily the result of those items. Looking at the more comparable year-over-year period, operating income as adjusted increased 20% and the margin increased by 170 basis points, reflecting revenue growth and the leverageability of the business. Earnings per share as adjusted increased 22% over the first quarter of 2019 to $3.32. The sequential decline in EPS was largely driven by the seasonal employment expenses. Turning now to capital, we continued our balanced and prudent approach to capital management. Our ability to maintain appropriate levels of working capital, reasonable levels of leverage, and access to sources of liquidity in this environment demonstrates the benefit of our consistent discipline in managing the balance sheet. This quarter, we continued our consistent pay down of the term loan by repaying $17.5 million and taking advantage of marked dislocations to retire an additional $10 million at a discount. We also repurchased 1.6% of our common shares outstanding, the highest level in the past four quarters. As a reminder, the conversion of our preferred stock during the quarter resulted in an increase in the market flow of our common stock and the elimination of the preferred dividend. Lastly, before we turn it over to Mike, let me comment on investment performance. The challenging markets we have been experiencing over the past few months are the type of environment when active managers, particularly those with distinctive investment strategies, can demonstrate their value. I am pleased that our managers have done that. In our equity strategies, several of our managers employ high-quality or high-conviction orientations that seek to deliver strong relative performance and provide a level of downside protection in difficult markets. In aggregate, our equity products meaningfully outperform the market in the first quarter, as they've done over longer periods of time. On the big-income side, our managers employ multiple strategies across the spectrum of credit quality. Performance in our fixed income products was consistent with expectations with higher credit quality strategies outperforming during the most stressed period and others outperforming through the upturn since the recent low in the market. We are pleased with the investment results and believe that the performance in this difficult market demonstrates the value of quality active management. With that, let me turn the call over to Mike to provide more detail on the results. Mike? Thank you, George.