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 third quarter of 2024. Our speakers today are George Elward, President and CEO, and Mike Angerthal, Chief Financial Officer. Following their prepared remarks, we will 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. It 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. So I'll start today with an overview of the results we reported this morning and then turn it over to Mike to give a little more in detail. We had strong operating and financial performance in the third quarter, which included higher sequential sales in all products, continued positive net flows in retail separate accounts, ETFs, and global funds, attractive long-term as well as recent investment performance across strategies, an operating margin at the highest level in two years, increased return of capital, including our seventh consecutive annual dividend increase, investments in the business, including for our CLO issuance and in the equity of an affiliate, and repayment of debt ending the quarter with modest net leverage and significant financial flexibility. While we had overall net outflows in the quarter, we were pleased with sales growth and momentum, as well as the improvement in net flows, which were reflective of a more favorable market environment for our strategies. As I noted, recent investment performance was strong across products, with 62% of assets outperforming peers in the third quarter. Quality coming back in favor particularly benefited our equity managers, with 82% of our equity assets outperforming peers in the quarter. We continue to be active in introducing new products and offerings. We recently introduced or filed to launch several new products, including an actively managed ETF from Kane Anderson Rudnick, focused on high-quality mid-cap equities. and an actively managed private credit CLO ETF from Sykes. These follow the second quarter introduction of Alpha Simplex Managed Futures ETF. Turning now to a review of the results, total assets under management increased 6% to $183.7 billion due to market performance and positive net flows in retail separate accounts, ETFs, and global funds. The strong contribution from market performance was favorably impacted by our meaningful exposure to small, SMID, and mid-caps, which represented 61% of equity AUM. Sales increased 7% with growth in each product category and momentum building throughout the quarter, with September having our highest level of sales since January. Net outflows of $1.7 billion improved from $2.6 billion in the prior quarter, with sequential improvements in both open-end funds and institutional, and again with September being the best month of flows of the quarter. Per institutional, net outflows of $1.1 billion improved sequentially from $1.7 billion. The net outflows were largely driven by redemptions of lower fee mandates, with the average fee rate on redemptions meaningfully lower than the rate on inflows. Institutional flows also included the issuance of the new $0.3 billion SIX CLO, Sykes, which launched its leveraged loan strategy nearly 20 years ago, now manages 10 CLOs with approximately $3.4 billion in assets that generate an attractive return and meaningful cash flow. Retail separate accounts generated positive net flows of $0.4 billion and have delivered 5% organic growth rate over the past year with consistent positive net flows in the intermediary sole channel and in private client, which is our wealth management business at Kane Anderson Rudnick. The business had $8.7 billion of AUM on September 30th and has generated over five years of positive net flows, more than doubling its assets under management over the period. Keynes Wealth Management Business is ranked seventh on the Forbes top RIA firms list for 2024, and for Barron's top 100 independent advisors, they had rankings of third for 2024, and have been in the top 10 for 12 consecutive years. Open-end fund net outflows of $1 billion improved from $1.3 billion in the second quarter, primarily due to fixed income strategies, which generated positive net flows. In terms of what we're seeing so far in October, retail separate accounts, global funds, and ETFs continue to be positive in net flows, and U.S. retail funds are tracking similarly to the third quarter. For institutional, while known redemptions for the fourth quarter currently exceed known wins, the revenue in back would be essentially neutral given the redemptions would be from lower fee mandates. In terms of our financial results, the third quarter reflected modestly higher average AUM levels and our ongoing management of expenses. The operating margin was 34.4%, up sequentially from 32.5%. due to higher investment management fees and lower employment and other operating expenses. The operating margin reached its highest level in two years, benefiting from higher revenues and the leverageability of our business, as well as a disciplined management of discretionary expenses. We have maintained other operating expenses in a consistent range, despite inflationary pressure, reflecting various initiatives, including the streamlining of investment systems and data usage that have delivered run rate cost savings. Earnings per share have adjusted of $6.92, increased 6% from the second quarter to the highest level since the first quarter of 2022. Turning now to capital, our business generates a significant amount of quarterly cash flow that supports our consistent return of capital, shareholders, and investment in growth of the business. In the third quarter, we increased our share buyback to $15 million, raised our quarterly dividend for the seventh consecutive year, and made a discretionary payment on our term loan, ending the quarter with a very modest net debt position of 0.1 times EBITDA. Our solid balance sheet and cash flow generation provide flexibility to continue to balance all elements of our capital management strategy. We have consistently applied a balanced approach to capital management. Over the past five years, we have repurchased 1.4 million shares for approximately $265 million, reducing the share count by 12% on a net basis, and have consistently raised the quarterly dividend by double digits each year. We also invested meaningfully in the growth of the business, aiding four new managers in seeding new products and strategies that have supported our AUM growth over the period, and that positions us for the continued growth over time. With that, I'll turn the call over to Mike. Mike?