Virtus Investment Partners, Inc.

Good morning. My name is Deedee, 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 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 Fertus Investment Partners, I would like to welcome you to the discussion of our operating and financial results for the third quarter of 2023. Our speakers today are George Elward, President and CEO, and Mike Engerthal, Chief Financial Officer. Following the prepared remarks, we'll have a Q&A period. Before we begin, please note the disclosures on page 2 of the slide presentation. Certain matters discussed on this column 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, included 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 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 before turning it over to Mike to provide the detail. In the third quarter, we continued to operate in a challenging and volatile environment, and the key highlights of our results included higher retail sales and positive net flows in retail separate accounts, global funds, and ETFs, increased net earnings and operating margin, higher return of capital, including our sixth consecutive annual dividend increase, Investments in the growth of the business, including in a CLO and in an affiliate. Attractive investment performance across strategies and products, both long-term and year-to-date. And repayment of debt, ending the quarter with a well-positioned balance sheet and modest net leverage. To turn you now to the review of the results, total assets under management decreased 3% to $163 billion, primarily due to market impact, in addition to net outflows in retail funds. Sales were $5.8 billion, with a 16% increase in retail sales, more than offset by a decline in institutional, which had a large mandate in the prior quarter. In retail, open-end fund sales increased 5%, with sequentially higher alternatives to fixed income and domestic equity, and retail separate account sales were significantly higher, up 37%, due to strength in SMIT cap. Net outflows were $1.5 billion, down from break-even last quarter, By product, institutional had net outflows of $0.4 billion, compared with net inflows of $2.2 billion last quarter, which included a large mandate. This business is inherently variable on a quarterly basis, but has generated organic growth year-to-date and in each of the last three calendar years, with contributions across affiliates, strategies, and geographies. Retail separate accounts generated positive net flows of $0.3 billion and were positive for the year-to-date period. We continue to build out additional strategies and capabilities in retail separate accounts where we continue to see meaningful growth opportunities. Open-end fund net outflows of $1.5 billion improved from $2.2 billion in the second quarter with a favorable net flow trend across most strategies and notably in alternatives with AlphaSimplex generating positive net flows since they joined us in April. SminCap and Global Equities again generated positive net flows and we are seeing particularly strong traction in mid-cap at Keene. Within open-end funds, ETFs again generated positive net flows, and we continue to see opportunities to further broaden the product lineup with additional actively managed fixed income funds as well as other distinctive strategies. We also saw positive net flows in global funds, where we continue to expand that product set. In terms of what we're seeing in October, the trend for retail open-end funds remains similar to the third quarter, For institutional, the pipeline remains strong, with one but not funded mandate exceeding known redemptions. As always, though, the timing of institutional fundings and redemptions is very difficult to predict and can be lumpy from quarter to quarter, especially in this volatile market in which we are seeing a longer funding cycle. Our third quarter financial results reflected higher average AUM levels and our ongoing management of expenses. The operating margin was 33.9%. up sequentially from $32.3 due to higher investment management fees and relatively unchanged costs. This demonstrates the leverageability of the business as was also illustrated by a 78% incremental margin. Earnings per share as adjusted of $6,021 increased 14% from $5.43 in the second quarter due to higher revenues and stable expenses. as well as higher interest income, largely related to a CLO we issued in 2022. Turning now to capital, during the quarter, we invested in the growth of the business, repaid debt, and increased capital return. In August, we announced a 15% increase in our quarterly dividend, which we have raised annually for six consecutive years. We also repurchased over 74,000 shares for $15 million, up from $10 million in the prior quarter, as repurchases were attractive given the valuation. We also continue to invest in the growth of the business, including $26 million to sponsor a new CLO issued by Sykes, and $21 million to increase our ownership in SGA, reflecting equity purchases that were part of the original transaction intended to facilitate succession. We ended the quarter in modest net debt position after repaying $20 million of our credit facility, and we continue to generate significant cash flow, providing ongoing opportunities to invest in the growth of the business, return capital shareholders. With that, I'll turn the call over to Mike. Mike?