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 to your host, Sean Rourke.

Thank you, DeeDee, 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 fourth quarter of 2023. Our speakers today are George Elward, President and CEO, and Mike Engerthal, 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 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 the GAAP financial results and should be read in conjunction with them. 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. I would like to turn the call over to George. George?

Thank you, Sean. Good morning, everyone. So I'll start with an overview of the results we reported this morning before turning it over to Mike to provide some more detail. Though still volatile, markets trended more favorably in the fourth quarter on views of inflation and interest rate expectations leading to an increase in assets under management. And while we had net outflows driven by open-end funds consistent with the industry, as well as specific institutional accounts, we also had Strong retail sales, including the highest retail separate account sales in two years. Positive net flows in retail separate accounts and ETFs, each of which had organic growth for the full year. Lower total operating expenses for the quarter, with other operating expenses essentially flat for the full year. Increased return of capital, including $20 million of share buybacks. Attractive investment performance across strategies, both long-term and for the one-year period. and repayment of debt, ending the quarter with low net leverage and a well-positioned balance sheet. Turning now to a review of the results, total assets earned in management increased 6% to $172 billion, primarily due to favorable market impact in addition to positive net flows in retail separate accounts. Sales increased 7% to $6.2 billion due to a 12% increase in retail sales, with particularly strong growth in retail separate accounts which grew 15% led by private client. Open unfund sales increased 9% with sequentially higher sales of domestic equity, fixed income, and alternative strategies. Net outflows were 3.8 billion and compared with net outflows of 1.5 billion last quarter. So by product, institutional had net outflows of 2.2 billion compared with net outflows of 0.4 billion last quarter, and included redemptions related to repositioning by several retirement plan mandates. The institutional business is inherently variable on a quarterly basis, but it's generated organic growth in three of the last four years with contributions across affiliates, strategies, and geographies. Retail separate accounts generated positive net flows of 0.4 billion and were positive for the full year. As we previously said, we continue to see retail separate accounts as a key growth area as we expand offerings with additional strategies to complement our strength in small, SMID, and mid-cap equities. Open-end net outflows of $2 billion compared with $1.5 in the third quarter due to a higher level of redemptions across strategies, though SMID, CAP, and global equities continue to generate organic growth. ETFs again generated positive net flows and for the full year delivered 14% organic growth as we've continued to broaden the product lineup, with additional distinctive active strategies. In terms of what we saw in January for flows, retail and institutional net flows were each improved meaningfully. On the retail side, while it was just one month, January was the best month for net flows in open-end funds since September of 2021, with net outflows for approximately $150 million. That represents less than 25% of the average monthly net outflow in the fourth quarter, with improvement across asset classes, including break-even net flows in domestic equity and positive net flows in alternatives. I would also note that earlier this week, we reopened two capacity-constrained small-cap strategies that have been closed since 2018 and have already seen a meaningful level of interest for them. For institutional, we had a large funding early in January that had been delayed from the fourth quarter, All else being equal, institutional is generally trending towards flattened flows for the first quarter based on known and expected upcoming funding and redemption activity. This business can fluctuate in the short term, and we have seen a more prolonged funding cycle. However, the pipeline continues to be strong in terms of size and with broad representation across affiliates, strategies, and geographies. Our fourth quarter financial results reflected lower average AUM largely due to the timing of market performance and net outflows, partially offset by lower total operating expenses. The operating margin was 33% down sequentially from 33.9 due to lower investment management fees and was up 120 basis points from the prior year period. Earnings per share has adjusted of $6.11 compared with $6.21 in the prior quarter and we're up 18% from $5.17 in the fourth quarter of 2022. Turning now to capital, during the quarter, we continued to take a balanced approach to capital management. We repurchased approximately 98,000 shares for $20 million, up from $15 million in the prior quarter. For the full year, we repurchased approximately 224,000 shares and reduced outstanding shares by 1%. In 2023, we increased our quarterly dividend by 15%, our sixth consecutive annual increase in our dividend. We also repaid the remaining $20 million outstanding on our revolving credit facility and ended the quarter in modest net debt position and gross debt below one-time EBITDA. We continue to generate significant cash flow, providing ongoing opportunities to invest in the growth of the business and return capital to shareholders. With that, I'll turn the call over to Mike.