Virtus Investment Partners, Inc.

Good morning. My name is Andrew, and I'll 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 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 session. Instructions will follow at that time. I will now turn the conference over to your host, Sean Roark.

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 second quarter of 2022. Our speakers today are George Aylward, President and CEO, and Mike Angerthal, Chief Financial Officer. Following their prepared remarks, we'll have a Q&A period. Before we begin, please note the disclosures on page two of the slide presentation. Certain matters discussed on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Act of 95, 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'd like to turn the call over to George. George?

Thank you, Sean. Good morning, everyone. I'll start with an overview of the results we reported earlier today, and then Mike will provide a little more detail. As a traditional asset manager, we were not immune to the historically challenging markets and tumultuous macroeconomic environment that shaped the first half of the year. The steep market declines across asset classes set the context for our results, which were largely driven by sequentially lower average assets under management. Though we reported lower AUM in earnings per share as adjusted, I would note several important highlights, including a highest level of institutional sales and seventh consecutive quarter of positive institutional net flows, positive flows in ETFs and in our private client business, solid operating margin, increased capital return to shareholders, and a modest level of leverage positioning us for continued balance sheet flexibility. We believe the challenging environment is one in which active managers have the ability to differentiate themselves in the investments we have made in our range of strategy and product offerings to appeal to clients across changing market environments and preferences, position us to capture assets as the market environment evolves. Turning now to review the results, total assets under management decreased 15% to $155.4 billion, largely due to the significant market declines across asset classes in addition to retail net outflows. Sales of $7.9 billion compared with $9.4 billion in the first quarter as retail investor demand declined meaningfully amidst challenging financial markets in an uncertain economic environment. Sales were lower across nearly all equity, fixed income, and multi-asset investment strategies, though alternatives increased sequentially. On the institutional side, however, we reached a record level of sales of $3.5 billion, again benefiting from a diverse set of mandates across affiliates and asset classes. For net flows by product, we had net outflows in open-end funds and intermediary distributed retail separate accounts, while institutional ETFs and private clients generated positive net flows. Fund net outflows of $4.5 billion were higher sequentially driven by bank loan strategies and international equity, while emerging market debt and domestic small cap delivered a sequential improvement. Retail separate account net flows turned negative, with net outflows of $0.7 billion largely related to changes in investment allocations at several distribution partners in the intermediary sold channel. Institutional, which represents 32% of assets under management, generated positive net flows for the seventh consecutive quarter. The investments we have made in institutional have supported growth, and the integration of Stone Harbor's non-U.S. distribution team has added depth to our global reach. In terms of what we're seeing in July, while retail open-end funds continue to be in net outflows, the pace of net outflows has improved from the month of the second quarter, and July is on track to be the second lowest month of net outflows this year. The institutional pipeline remains strong, with expected fundings over the next two quarters exceeding known redemptions, and with solid diversity across strategies, affiliates, and geographies. Our second quarter financial results reflected the impact of the market declines that began earlier this year. Operating income, as suggested, was 78 million, down from 90 million sequentially, and the related margin of 39.2 declined from 40.6. Earnings per share, as suggested, decreased 13%, $6.86, reflecting the 10% decline in average assets under management. Turning now to capital, we continued our balanced and prudent approach to capital management while again increasing the level of capital returned to shareholders. During the quarter, we increased the level of stock buybacks to $40 million from $30 million in the prior quarter, contributing to a meaningful reduction in our shares outstanding. We also repaid $10.7 million of term loan debt, ending the quarter with a modest net debt position of $12.4 million. Against the more challenging market backdrop, given our balance sheet and cash flow generation, we continue to return meaningful capital to shareholders while maintaining appropriate levels of working capital and leverage and are positioned to continue to be flexible in prioritizing capital allocation as circumstances warrant. Before turning it over to Mike to provide more detail on the results, I wanted to comment on our announcement earlier this week on the expansion of our investment capabilities with the addition of two experienced portfolio management teams. As indicated in the release, we are pleased to have added two teams, Virtus Systematic and Virtus Multi-Asset, that will add systematic quantitative investing and multi-asset allocation capabilities that will broaden our offerings of individual and comprehensive investment solutions for clients. We look forward to making these strategies, which are additive to our current offerings, available to investors as well as broadening their strategies into other asset classes and investment products. With that, I'll turn the call over to Mike. Mike?