Virtus Investment Partners, Inc.

Good morning, my name is Michelle and I will be your conference operator today. I would like to welcome everyone to the Veritas Investment Partners quarterly conference call. The slide presentation for this call is available in the investor relations section of the Veritas website at www.veritas.com. This call is being recorded and will be available for replay on the Veritas 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 2023. Our speakers today are George Elward, President and CEO, and Mike Angerthal, Chief Financial Officer. Following the 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 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'd like to turn the call over to George. George?

Thank you, Sean, and good morning, everyone. I'll start today with an overview of the results we reported earlier before turning it over to Mike to provide more detail. Key highlights of the first quarter included a meaningful improvement in open-end fund flows from lower redemptions and a strong increase in sales of equity strategies, positive net flows in retail separate accounts and ETFs, solid investment performance across product types, a sequential improvement in our operating margin, excluding seasonal items, and we continue to have a well-positioned balance sheet with modest net leverage at quarter end. After the quarter on April 1st, we closed on our acquisition of Alpha Simplex, which expands and diversifies our alternative non-correlated investment offerings and further advances our strategy to offer clients a broad array of capabilities that can appeal across market cycles and through changes in investor preferences. Turning now to a review of the results, Total assets under management increased 4% to $155 billion due to market appreciation, partially offset by net outflows. Sales declined sequentially to $6.2 billion due to lower institutional sales in the prior quarter, which included a meaningful client funding and a CLO issuance. Retail fund sales were unchanged at $3 billion, with a meaningful increase in equity sales offset by lower fixed income and alternatives. Retail separate account sales increased 12%, led by SMIT equities. Total net of flows were $1.9 billion, a significant improvement from the prior quarter due to lower redemptions in all products, but particularly in mutual funds, where net flows improved by $2 billion. By product, retail separate accounts delivered positive net flows due to private clients, but also included improved intermediary-sponsored net flows. Fund net outflows of $1.8 billion improved from $3.8 billion, with improvements in nearly all strategies and marking the best net flow performance since the fourth quarter of 2021. Emerging markets, SMID, and large-cap equity funds each generated positive net flows. Institutional had bondus net outflows of $0.2 billion, down from the positive net flows in the prior quarter. While this business is inherently lumpy on a short-term basis, over the past four quarters, institutional has generated organic growth in a challenging environment. In terms of what we've seen in April, our institutional pipeline is as strong as we've seen it and expected funding to see no redemptions over the next several quarters. Though, as you know, there's a lot of volatility in the timing of institutional flows. For open-end funds, trends are similar to what we saw early in the first quarter. Our first quarter financial results reflected the impact of our normal, seasonally higher employment expenses absent which we achieved sequential improvements in both operating income and margin as we continued to closely manage expenses while generating higher revenues. Excluding the seasonal employment expenses, the operating margin was 33.2%, up 140 basis points from the fourth quarter due to lower variable incentive comp and lower other operating expenses. Earnings per share as adjusted at $4.20 included $1.11 of seasonal employment expenses, excluding those items, EPS as adjusted increased 3% over the prior quarter. Turning now to capital, we ended the quarter with a modest net debt position as the first quarter represents our highest quarter of cash utilization given the timing of annual incentives and the revenue participation payment. In addition to those items, we net settled approximately 71,000 shares for $12 million to satisfy employee tax obligations. We did not repurchase shares in the open market in the first quarter, given other cash priorities, but we continue to view share buybacks as an important element of our capital management strategy. After quarter end, we completed the acquisition of Alpha Simplex for $130 million using balance sheet resources, including our revolving credit facility. Our balanced and prudent approach to capital management has positioned us to continue to invest in growth initiatives, such as the addition of Alpha Simplex, and other recent additions of affiliated managers, while returning capital to shareholders and maintaining appropriate levels of working capital and leverage. With that, I'll turn the call over to Mike. Mike?