Virtus Investment Partners, Inc.

Good morning. My name is Tawanda and I will be your conference operator today. I would like to welcome everyone to the Virtus Investment Partners quarterly conference call. The slide presentation for this call is available in the investor relations section of 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 to your host, Sean Vork. You may begin.

Thank you, and good morning, everyone. On behalf of Virtus Investment Partners, I would like to welcome you to the discussion of our operating and financial results for the second quarter of 2021. Our speakers today are George Elward, President and CEO of Virtus, and Mike Engerthal, 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 actual results to differ materially from those discussed in the 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 would like to turn the call over to George. George?

Thank you, Sean. Good morning, everyone. I'll start today with an overview of the results we reported this morning and give an update on the Westchester Capital Management transaction before turning it over to Mike to provide more detail on the quarter. Then, before taking your questions, I'll make some comments on our recent announcement of the agreement with Stone Harbor Investment Partners. Turning to the performance for the quarter, we continue to deliver very strong results. demonstrating the value of our business model and collection of distinctive investment managers. For the second quarter, we reported a significant increase in assets under management, the fifth consecutive quarter of positive net flows, record levels of operating profitability and margin, our highest level of earnings per share is adjusted, strong cash generation with EBITDA more than double prior year levels, and consistent return of capital to shareholders and debt reductions. Our track record of strong growth and profitability is the product of execution on our long-term strategy and the actions we have taken to build a differentiated partnership of managers offering diverse, compelling products and strategies supported by effective distribution and experienced business resources. Over the past year, we have built on that foundation, adding scale and complementary investment capabilities to support continued organic growth while maintaining a balance sheet that provides flexibility for continued return of capital and as well as to be strategically opportunistic with inorganic opportunities. Over the past year, we finalized our partnership with Allianz GI, adding significant scale and complementary investment strategies in the U.S. retail market, executed and are completing our transaction with Westchester Capital, adding well-regarded event-driven strategies that will meaningfully expand our alternative offerings, and announced an agreement to acquire Stone Harbor. adding emerging market debt capabilities, and enhancing our non-U.S. institutional opportunities. The Subadvisory partnership with AGI and the additions of boutique affiliates like NFJ, Westchester Capital, and Stone Harbor is illustrative of our multifaceted approach to inorganic growth and underscores a key element of our value proposition. While our long-term growth is not dependent on M&A, our model is designed to allow us to partner with distinctive managers and support growth by offering their strategies through our broad distribution platform and into additional product structures. Our model is attractive to high-quality managers and allows us to partner selectively with distinctive firms for particular investment capabilities. So turning now to the results, total assets under management increased by nearly $10 billion to $178.6 billion at June 30th, up 6% sequentially due to market performance and net flows. Over the past year, AUM has increased by 65%, also from market performance and positive flows, as well as the addition of the AGI assets. Sales of $9.6 billion represented our second highest quarter of inflows, and sales increased 21% on a year-to-date basis on growth in retail separate accounts, open-end funds, and ETFs. For the quarter, we achieved $1.3 billion of positive net flows, with contributions from retail separate accounts, institutional, and ETFs. retail separate accounts continued to deliver positive net flows with a double-digit organic growth rate and positive flows across investment strategies. Institutional net flows were positive for the third consecutive quarter with continued traction at multiple affiliates in both new mandates and existing accounts. Open end funds had modest net outflows largely due to domestic equity. Organic growth for the trailing 12-month period exceeded 7%. with essentially all product categories and major asset classes having generated positive flows. In terms of the flows we're seeing so far in July, while it's still early in the quarter, we have not seen any fundamental change in activity levels from the second quarter. We continue to see some pressure on equity funds, though trends in other strategies, including fixed income, remain favorable. Our profitability for the quarter again reached a new high, reflecting the meaningful growth in assets under management and the leverageability of the model. Operating income as adjusted increased by 32% sequentially and more than doubled over the prior year, and the related margin of 48.9% increased from 41.6% in the prior quarter and by nearly 15 percentage points from the same period a year ago. Earnings per share as adjusted were $9.07, up 34% sequentially, due to higher revenues and lower expenses. Turning now to capital, during the quarter, we repurchased or net settled approximately 41,000 shares for $11.6 million and continued paying down debt. Our balance sheet remained strong when we again ended the quarter in a net cash position and increased our working capital. We continue to generate significant cash flow that has meaningfully increased providing flexibility to fund upcoming transaction-related payments with existing resources while continuing to invest in the growth of the business and return capital to shareholders. Before I turn the call over to Mike for more detail on the results, let me provide a brief update on our transaction with Westchester Capital. We remain on track with the approval process of anticipating closing the transaction near the end of the quarter. Westchester continues to perform well, with asset center management at June 30th of $5 billion, up 9% sequentially from the $4.6 billion at March 31st. The increase was largely driven by $361 million of positive flows, representing double-digit annualized organic growth. We look forward to offering their event-driven strategies, which have traditionally had low correlation to the equity markets, through our strong retail distribution to an expanded set of retail investors. particularly given some of the recent volatility we've seen in the equity markets. We expect the transaction to be immediately accretive to EPS as suggested. We have updated our accretion estimate to approximately 7% based upon second quarter EPS as suggested, as Westchester Capital has more than kept pace with our very strong earnings growth. With that, I'll turn the call over to Mike. Mike?