Q1 2024 Virtus Investment Partners Inc Earnings Call
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Dede: Good morning. My name is Dede, 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.
D D: Good morning, My name is D D 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 dot.
D D: British dotcom.
D D: This call is being recorded and will be available for replay on the Virtus website.
D D: At this time all participants are in a listen only mode. After the Speakers' 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.
Sean Rourke: Thank you, VD, 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 2024. 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.
Sean Rourke: Thank you Judy and good morning, everyone on behalf of Virtus investment partners I would like to welcome you to the discussion of our operating and financial results for the first quarter of 2024.
Sean Rourke: Our speakers today are George Aylward, President and CEO.
Sean Rourke: Mike Anderson Chief Financial Officer.
Sean Rourke: Following their prepared remarks, we will have a Q&A period.
Sean Rourke: Before we begin, please note the disclosures on page 2 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 file. These risks and uncertainties may cause actual results to differ materially from those discussed in this statement.
Sean Rourke: Before we begin please note the disclosures on page two of the slide presentation certain.
Sean Rourke: Certain matters discussed on this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Sean Rourke: 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.
Sean Rourke: And discussed in our SEC filings.
Sean Rourke: These risks and uncertainties may cause actual results to differ materially from those discussed in the statements.
Sean Rourke: 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 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. Now, I'd like to turn the call over to George
Sean Rourke: In addition to results presented on a GAAP basis, we use certain non-GAAP measures to evaluate our financial results are non-GAAP financial measures are not substitutes forgets GAAP financial results should be read in conjunction with them.
Sean Rourke: Reconciliations of these non-GAAP financial measures to the applicable GAAP measures are included in today's news release.
Sean Rourke: Supplement which are available on our website.
George Robert Aylward: Now I'd like to turn the call over to George George Thank.
George Robert Aylward: Thank you, Sean, and good morning, everyone. I will start with an overview of the results we reported this morning, and then I'll turn it over to Mike to provide a little more detail. Market strength continued into the first quarter despite ongoing investor uncertainty over the path of inflation and interest rates, leading to growth in our assets under management to $179 billion. We saw meaningful increases in retail and institutional sales and improved net flows across asset classes and strategies, given the diversity of our product offerings, compelling investment performance, and effective distribution.
George: Thank you, Sean and good morning, everyone.
George: I will start with an overview of the results. We reported this morning, and then I'll turn it over to Mike to provide a little more detail.
George: Okay strength continued into the first quarter, despite ongoing investor uncertainty over the past some inflation and interest rates leading to growth in our assets under management to 179 billion we.
Michael Aaron Angerthal: We saw meaningful increases in retail and institutional sales and improved net flows across asset classes and strategies given the diversity of our product offerings compelling investment performance and effective distribution.
George Robert Aylward: We were also pleased with the recognition in Barron's of our investment performance earlier this year, which identified us as a top five fund family for all periods under review, including for the year of 2023, as well as for a longer term five and 10 year period.
Michael Aaron Angerthal: We were also pleased with the recognition and barron's of our investment performance earlier, this year, which identified us as a top five funds family for all periods under review, including for the year of 2023 as well as the longer term five and 10 year periods.
George Robert Aylward: For the quarter, our highlights included a 22% increase in sales, with strong growth in all product categories; positive net flows in retail separate accounts, ETFs, and global funds; growth in operating earnings and the margin, excluding seasonal expenses; attractive investment performance across strategies and continued return of capital through share repurchases, net settlements, and our dividend; and we ended the quarter with reasonable levels of leverage. Turning now over to the results, total assets owned and management increased 4% to $179 billion, primarily due to favorable market performance, in addition to positive net flows in retail separate accounts, partially offset by net outflows in institutional and open-end funds.
Michael Aaron Angerthal: For the quarter, our highlights included a 22% increase in sales with strong growth in all product categories.
Michael Aaron Angerthal: Net flows in retail separate accounts Etfs and global funds.
Michael Aaron Angerthal: Growth in operating earnings and the margin excluding seasonal expenses.
Michael Aaron Angerthal: Attractive investment performance across strategies and continued return of capital through share repurchases net settlements in our dividend and we ended the quarter with reasonable levels of leverage.
Michael Aaron Angerthal: Turning now over to the results total assets under management increased 4% to 179 billion, primarily due to favorable market performance. In addition to positive net flows in retail separate accounts, partially offset by net outflows in institutional and open end funds.
George Robert Aylward: Sales increased 22% to $7.6 billion, with double-digit growth in all product categories, including a 47% increase in sales of institutional, 18% in open-end funds, and 12% in retail separate accounts, as investors slowly began to put some cash back to work as equity markets reached new highs. Open-end fund sales reached their highest level in two years with growth across most strategies, and our retail separate account sales were the highest in three years. Net outflows were $1.2 billion, an improvement from the net outflows of $3.8 billion in the prior period.
Michael Aaron Angerthal: Sales increased 22% to $7 6 billion with double digit growth in all product categories, including a 47% increase in sales of institutional 18% in open end funds and 12% in retail separate accounts as investors. So they began to put some cash back to work as equity markets reached new highs.
Michael Aaron Angerthal: Open end fund sales reached their highest level in two years with growth across most strategies and our retail separate account sales were the highest in three years.
Michael Aaron Angerthal: Net outflows were $1 2 billion an improvement from the net outflows of $3 8 billion in the prior quarter.
George Robert Aylward: By product, institutional net outflows of $1.3 billion, a sequential improvement from $2.2 billion. The redemptions include the rebalancing by several accounts given the strong equity market appreciation over the past two quarters. Thus, we continue to see board-based interest in our strategy. Retail separate accounts generated positive net flows of $0.7 billion, the highest level in two years.
Michael Aaron Angerthal: By product institutional net outflows of $1 3 billion, a sequential improvement from the $2 2 billion.
Michael Aaron Angerthal: The redemptions included a rebalancing by several accounts given the strong equity market appreciation over the past few quarters.
Institutional is inherently variable on a quarterly basis.
Michael Aaron Angerthal: So we continue to see broad based interest in our strategies.
Michael Aaron Angerthal: Retail separate accounts generated positive net flows of <unk> 7 billion the highest level in two years.
George Robert Aylward: Demand for SMID and MidCap has been strong, and we continue to introduce additional strategies to complement those offerings to drive growth over time. Open end fund net outflows of $0.6 billion were at their best level since the second quarter of 2021 and improved from $2.0 billion in the fourth quarter, with better flows in most strategies and positive net flows in SMIC cap, global equity, and, In terms of what we're seeing so far in April, many of the first quarter trends have continued, including solid momentum in retail separate accounts and ETFs, as well as generally similar retail fund flow trends with pockets of In institutional, we have high levels of activity across both geographies and strategies, though based on known fundings and redemptions, the second quarter is tracking similarly to the first.
Michael Aaron Angerthal: And for small and mid cap has been strong and we continue to introduce additional strategies to complement those offerings to drive growth over time.
Michael Aaron Angerthal: Open end fund net outflows of <unk> 6 billion were at their best level since the second quarter of 2021 and improved from 2.1 billion in the fourth quarter with better flows in most strategies and positive net flows and smid cap global equity and fixed income.
Michael Aaron Angerthal: In terms of what we're seeing so far in April many of the first quarter trends have continued including solid momentum in retail separate accounts and Etfs as well as generally similar retail fund flow trends with pockets of strength in certain strategies.
Michael Aaron Angerthal: In institutional we had.
Michael Aaron Angerthal: High levels of activity across both geographies strategies there'll based on known fundings and redemptions the second quarter's tracking similarly to the first.
George Robert Aylward: Our first quarter financial results reflected the impact of seasonally higher employment expenses, absent which we achieved sequential improvements in both operating income and margin as we generated higher revenues and closely managed... Excluding seasonal employment expenses, the operating margin was 33.6, up 60 basis points from the fourth quarter due to higher revenues and lower other operating expenses. Earnings per share, as adjusted, at $5.41, declined from the fourth quarter due to $1.11 of seasonal expenses. Including those expenses, EPS increased just 7%. On a more comparable year-over-year basis, earnings per share has adjusted, increased 29%.
Michael Aaron Angerthal: Our first quarter financial results reflected the impact of seasonally higher employment expenses absent, which we achieved sequential improvements in both operating income and margin as we generated higher revenues and closely managed expenses.
Michael Aaron Angerthal: Excluding the seasonal employment expenses, the operating margin was $33 six up 60 basis points from the fourth quarter due to higher revenues and lower other operating expenses.
Michael Aaron Angerthal: Earnings per share as adjusted of $5 41 decline from the fourth quarter due to a $1 11 incentive seasonal expenses.
Michael Aaron Angerthal: Excluding those expenses EPS as adjusted increased 7% sequentially.
Michael Aaron Angerthal: On a more comparable year over year basis earnings per share as adjusted increased 29%.
George Robert Aylward: Turning to our capital, during the quarter, we repurchased or net settled approximately 64,000 shares for $15 million. We continue to take a balanced approach to capital management by investing in our growth, returning capital to shareholders, and maintaining appropriate levels of leverage. Over the past year, we've repurchased or net settled $296,000 of our shares for $61 million and reduced outstanding shares by 2%, raised a quarterly dividend by $50,000, closed on a strategic acquisition that increased our product capabilities, and maintained that leverage below 0.5x.
Michael Aaron Angerthal: Turning to capital during the quarter, we repurchased or net settled approximately 64000 shares for $50 million.
Michael Aaron Angerthal: We continue to take a balanced approach to capital management by investing in our growth returning capital to shareholders and maintaining appropriate levels of leverage.
Michael Aaron Angerthal: Over the past year, we have repurchased or net settled 296000 of our shares for $61 million and reduced outstanding shares by 2%.
Michael Aaron Angerthal: Raised our quarterly dividend by 15%.
Michael Aaron Angerthal: Close on a strategic acquisition that increased our product capabilities and maintain that leverage below <unk> buybacks.
George Robert Aylward: We ended the quarter in a modest net debt position, as the first quarter represents our highest quarter of cash utilization, given the timing of annual incentives and a revenue participation payment. 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'm going to turn the call over to Mike.
Michael Aaron Angerthal: We ended the quarter and modest net debt position as the first quarter represents our highest quarter of cash utilization given the timing of annual incentives and our revenue participation payments we.
We continued to generate significant cash flow, providing ongoing opportunities to invest in the growth of the business and return capital to shareholders and with that I'll now turn the call over to Mike Mike.
Michael Aaron Angerthal: Thank you George.
Michael Aaron Angerthal: Good to be with you all this morning.
Michael Aaron Angerthal: Good to be with you all this morning. Starting with our results on slide 7, Assets Under Management. At March 31st, assets under management were $179.3 billion, up 4% from $172.3 billion at December 31st, due to $8.7 billion of favorable market performance partially offset by net outflows of $1.2 billion. Average assets under management in the quarter increased 7% to $173.4 billion with ending assets, 3% above the quarter's average. Our assets under management continue to represent a broad range of asset classes and products.
Michael Aaron Angerthal: Starting with our results on slide seven assets under management.
Michael Aaron Angerthal: At March 31 assets under management were 179 3 billion.
Michael Aaron Angerthal: Up 4% from $172 3 billion at December 31.
Michael Aaron Angerthal: Due to $8 7 billion of favorable market performance, partially offset by net outflows of $1 2 billion.
Michael Aaron Angerthal: Okay.
Michael Aaron Angerthal: Average assets under management in the quarter increased 7% to $173 4 billion with ending assets, 3% above the quarter's average.
Michael Aaron Angerthal: Okay.
Michael Aaron Angerthal: Our assets under management continue to represent a broad range of asset classes and products.
Michael Aaron Angerthal: Institutional was 36% of AUM. Retail Separate Accounts, which has delivered consistent organic growth, was at 26% of assets. Global Funds and ETS, while a relatively small portion of our AUM at a combined 4%, have had consistent organic growth, and their combined AUM is up 36% over the prior year period. We also continue to have compelling long-term relative investment performance across products and strategies. As of March 31st, approximately 53% of institutional assets, 85% of retail separate account assets, and 56% of rated mutual fund assets were outperforming their benchmarks over five years. For mutual funds, 62% outperformed the median of their peer groups over the five-year period.
Michael Aaron Angerthal: Institutional was 36% of AUM.
Michael Aaron Angerthal: Retail separate accounts, which has delivered consistent organic growth was at 26% of assets.
Michael Aaron Angerthal: Global funds and Etfs, while a relatively small portion of our AUM at a combined 4% have.
Michael Aaron Angerthal: We have had consistent organic growth and their combined AUM is up 36% over the prior year period.
Michael Aaron Angerthal: We also continue to have compelling long term relative investment performance across products and strategies.
Michael Aaron Angerthal: As of March 31, approximately 53% of institutional assets.
85% of retail separate account assets and 56% of rated mutual fund assets were up.
Michael Aaron Angerthal: Outperforming their benchmarks over five years.
Michael Aaron Angerthal: For mutual funds.
Michael Aaron Angerthal: 62% outperformed the median of their peer groups over the five year period.
Michael Aaron Angerthal: In addition, 63% of rated fund assets had four or five stars, and 91% were in three, four, or five-star funds. We have 35 funds that were rated 4 or 5 stars, including 11 with AUM of $1 billion or more. And we had six ETFs that were rated four or five stars as well.
Michael Aaron Angerthal: In addition, 63% of rated fund assets had four or five stars and.
Michael Aaron Angerthal: And 91% were in three four or five star funds.
Michael Aaron Angerthal: We have 35 funds that were rated four or five stars, including 11 with AUM of $1 billion or more.
Michael Aaron Angerthal: And we had six Etfs that were rated four or five stars as well.
Michael Aaron Angerthal: Turning to slide 8, Asset Flows. Total sales of $7.6 billion increased 22% from $6.2 billion due to growth in all product categories. Institutional sales of $1.7 billion increased from $1.2 billion in the prior quarter. Retail separate account sales of $2.4 billion increased 12% from $2.1 billion.
Michael Aaron Angerthal: Turning to slide eight asset flows.
Michael Aaron Angerthal: Total sales of $7 6 billion increased 22% from $6 2 billion due to growth in all product categories.
Institutional sales of $1 7 billion increased from $1 2 billion in the prior quarter.
Michael Aaron Angerthal: Retail separate account sales of $2 4 billion increased 12% from $2 1 billion.
Michael Aaron Angerthal: Open-end fund sales of $3.5 billion increased 18% from $2.9 billion due to growth across most investment strategies, with strong growth in small cap, where we recently reopened two strategies that had been soft closed. Total net outflows were $1.2 billion, with a marked improvement from $3.8 billion of net outflows in the prior quarter. Reviewing by product.
Michael Aaron Angerthal: Open end fund sales of $3 5 billion increased 18% from.
From $2 9 billion due to growth across most investment strategies.
Michael Aaron Angerthal: With strong growth in small cap.
Michael Aaron Angerthal: Where we recently reopened two strategies that had been soft closed.
Michael Aaron Angerthal: Total net outflows were $1 2 billion with marked an improvement from $3 8 billion of net outflows.
Michael Aaron Angerthal: In the prior quarter.
Michael Aaron Angerthal: Reviewing byproduct.
Michael Aaron Angerthal: Constitutional net outflows of $1.3 billion improved from $2.2 billion in the fourth quarter. However, as always, institutional flows will fluctuate depending on the timing of client action. In retail separate accounts, positive net flows of $0.7 billion increased from $0.4 billion in the prior quarter and represented our highest net flows in two years. Both intermediaries selling and private clients continued to generate positive net flows. For open-end funds, net outflows were $0.6 billion, compared with $2 billion in the fourth quarter, due to higher sales and lower redemption, and positive net flows in small cap funds.
Michael Aaron Angerthal: Institutional net outflows of $1 3 billion improved from $2 2 billion in the fourth quarter.
Michael Aaron Angerthal: As always institutional flows will fluctuate depending on the timing of client actions.
Michael Aaron Angerthal: Okay.
Michael Aaron Angerthal: In retail separate accounts positive net flows of <unk> 7 billion.
Michael Aaron Angerthal: Increased from <unk> 4 billion in the prior quarter and.
That represented our highest net flows in two years.
Michael Aaron Angerthal: Intermediary sold and private client.
Michael Aaron Angerthal: Continued to generate positive net flows.
Michael Aaron Angerthal: Our open end funds net outflows were <unk> 6 billion compared with $2 billion in the fourth quarter due to higher sales and lower redemptions.
And included positive net flows in small cap.
Michael Aaron Angerthal: Global Equity and Fixed Income. ETFs were again positive and have generated a 34% organic growth rate over the past year. Global fund net flows were also positive, with organic growth of 12% for the past year. Turning to slide nine.
Michael Aaron Angerthal: Global equity.
Michael Aaron Angerthal: In fixed income.
Michael Aaron Angerthal: Etfs were again positive.
Michael Aaron Angerthal: <unk> generated a 34% organic growth rate over the past year.
Michael Aaron Angerthal: Global Fund net flows were also positive with organic growth of 12% for the past year.
Michael Aaron Angerthal: Turning to slide nine.
Michael Aaron Angerthal: Investment management fees, as adjusted, of $180.5 million increased $6.1 million, or 3%, reflecting the 7% increase in average assets under management that was partially offset by lower performance fees which were elevated in the prior quarter. The average fee rate of 41.9 basis points compared with 42.6 basis points in the prior quarter, which included 0.8 basis points of performance. The first quarter average fee rate was unfavorably impacted by discrete fund reimbursement costs of 0.2 basis points, normalizing for that, as well as point one basis points of performance fees. The average fee rate in the quarter was $42,000, modestly higher than the 41.8 basis point normalized fourth quarter average fee rate. Looking ahead,
Michael Aaron Angerthal: Investment management fees as adjusted of $185 million increase.
Michael Aaron Angerthal: Increased $6 1 million or 3%.
Michael Aaron Angerthal: Reflecting the 7% increase in average assets under management.
That was partially offset by lower performance fees, which were elevated in the prior quarter.
Michael Aaron Angerthal: The average fee rate of $41 nine basis points compared with $42 six basis points in the prior quarter, which included <unk> eight basis points of performance fees.
Michael Aaron Angerthal: The first quarter average fee rate was unfavorably impacted by discrete fund reimbursement costs of <unk> two basis points.
Michael Aaron Angerthal: Normalizing for that as well as 0.1 basis points of performance fees.
Michael Aaron Angerthal: Average fee rate in the quarter was 42 basis points modestly higher than the 41 eight basis points normalized fourth quarter average fee rate.
Michael Aaron Angerthal: Looking ahead we.
Michael Aaron Angerthal: We believe the normalized first quarter average fee rate is reasonable for modeling purposes. However, as always, the fee rate will be impacted by markets and the mix of assets. Slide 10 shows the five-quarter trend in employment expenses. Total employment expenses, as adjusted, of $111.6 million increased 15% sequentially, reflecting $10.9 million of seasonal employment expenses related to the timing of annual incentives, primarily incremental payroll taxes and benefits. Excluding the seasonal items, employment expenses increased by 4% sequentially due to higher profit and sales-based variable incentive compensation.
Michael Aaron Angerthal: We believe the normalized first quarter average fee rate is reasonable for modeling purposes.
Michael Aaron Angerthal: As always the fee rate will be impacted by markets and the mix of assets.
Michael Aaron Angerthal: Yes.
Michael Aaron Angerthal: Slide 10 shows the five quarter trend in employment expenses total employment expenses as adjusted of $111 6 million.
Michael Aaron Angerthal: Increased 15% sequentially, reflecting $10 $9 million of seasonal employment expenses.
Michael Aaron Angerthal: Related to the timing of annual incentives.
Michael Aaron Angerthal: Primarily incremental payroll taxes and benefits.
Michael Aaron Angerthal: Excluding the seasonal items employment expenses increased by 4% sequentially.
Michael Aaron Angerthal: Due to higher profit and sales based variable incentive compensation.
Michael Aaron Angerthal: Employment expenses were 55.7% of revenue as adjusted, and excluding the seasonal items, they were 50.3%, slightly above the prior quarter level of 50 percent, due to higher variable incentives. Looking ahead, we believe employment expenses as a percentage of revenues in a range of 49% to 51% is reasonable. Though, as always, they will be variable based on market performance in particular, as well as profits and sales. Turning to slide 11.
Michael Aaron Angerthal: Employment expenses were 55, 7% of revenue as adjusted.
Michael Aaron Angerthal: And excluding the seasonal items they were 53% slightly.
Michael Aaron Angerthal: Slightly above the prior quarter level of 50%.
Due to higher variable incentives.
Michael Aaron Angerthal: Looking ahead, we believe employment expenses as a percentage of revenues in a range of 49% to 51% is reasonable.
Michael Aaron Angerthal: As always it will be variable based on market performance in particular as.
Michael Aaron Angerthal: As well as profits and sales.
Michael Aaron Angerthal: Yes.
Michael Aaron Angerthal: Turning to slide 11.
Michael Aaron Angerthal: Other operating expenses, as adjusted, were $30.2 million, down $1 million, or 3% from the fourth quarter. We have maintained other operating expenses within a narrow range over the past two years despite inflationary pressure and the addition of a new affiliate last year, reflecting management of some of our longer-term contractual expenses and by limiting discretionary spend. Looking ahead, the quarterly range of $30 to $32 million for other operating expenses as adjusted remains reasonable. For modeling purposes, keep in mind that our Annual Board of Directors Equity Grants occur in the second quarter.
Michael Aaron Angerthal: Other operating expenses as adjusted were $30 2 million down $1 million or 3% from the fourth quarter.
Michael Aaron Angerthal: We have maintained other operating expenses within a narrow range over the past two years, despite inflationary pressure and the addition of a new affiliate last year.
Michael Aaron Angerthal: Reflecting management of some of our longer term contractual expenses and.
Michael Aaron Angerthal: And by limiting discretionary spending.
Michael Aaron Angerthal: Looking ahead, the quarterly range of $30 million to $32 million for other operating expenses as adjusted remains reasonable.
Michael Aaron Angerthal: For modeling purposes keep in mind that our annual board of directors equity grants occur in the second quarter.
Michael Aaron Angerthal: Slide 12 illustrates the trend in earnings. Operating income as adjusted, of $56.4 million, declined $7.4 million or 12% sequentially due to seasonal employment expenses. Excluding those items, operating income increased 5%. Looking at the more comparable year-over-year period, operating income increased 19%.
Michael Aaron Angerthal: Slide 12 illustrates the trend in earnings operating income as adjusted of $56 4 million declined $7 4 million or 12% sequentially due to the seasonal employment expenses.
Michael Aaron Angerthal: Excluding those items operating income increased 5%.
Michael Aaron Angerthal: Looking at the more comparable year over year period operating income increased 19%.
Michael Aaron Angerthal: The operating margin adjusted to 28.2% compared with 33% in the fourth quarter. Excluding the seasonal employment expenses, the operating margin was 33.6%, an improvement of 60 basis points, with an incremental margin of approximately 50%. On a year-over-year basis, the operating margin improved by 140 basis points, with respect to non-operating items.
Michael Aaron Angerthal: The operating margin as adjusted of 28, 2% compared with 33% in the fourth quarter.
Michael Aaron Angerthal: Excluding the seasonal employment expenses, the operating margin was 33, 6% an improvement of 60 basis points.
Michael Aaron Angerthal: With an incremental margin of approximately 50%.
Michael Aaron Angerthal: On a year over year basis, the operating margin improved by 140 basis points.
Michael Aaron Angerthal: With respect to non operating items.
Michael Aaron Angerthal: Interest expense decreased by 5% sequentially, reflecting lower gross debt due to the repayment of our revolving credit line in the fourth quarter. Non-controlling interest, however, increased by $1 million, reflecting growth in affiliate earnings. Debt income as adjusted of $5.41 per diluted share, which included $1.11 of seasonal expenses, compared with $6.11 in the fourth quarter, and increased 29% over the prior year period. In terms of GAAP results, that income per share of $4.10 compared with $4.21 per share in the fourth quarter and included $0.69 of unfavorable fair value adjustments to affiliate minority interests, and 11 cents of Acquisition and Integration Cost.
Interest expense decreased by 5% sequentially, reflecting lower gross debt due to the repayment of our revolving credit line in the fourth quarter.
Michael Aaron Angerthal: Noncontrolling interest increased by $1 million, reflecting growth in affiliate earnings.
Michael Aaron Angerthal: Net income as adjusted of $5 41 per diluted share, which included $1 11, a seasonal expenses.
Michael Aaron Angerthal: Compared with $6 11 in the fourth quarter.
Michael Aaron Angerthal: And increased 29% over the prior year period.
In terms of GAAP results.
Michael Aaron Angerthal: Net income per share of $4 10, compared with $4 21 per share in the fourth quarter.
Michael Aaron Angerthal: And included 69 cents of unfavorable fair value adjustments to affiliate minority interests.
Michael Aaron Angerthal: And 11 of acquisition and integration costs.
Michael Aaron Angerthal: Okay.
Michael Aaron Angerthal: Slide 13 shows the trend of our capital liquidity and select balance sheet items. Working capital was $123.4 million at March 31st, up sequentially from $109.1 million, as cash generated by the business more than offset the return of capital to shareholders. Cash and equivalents declined sequentially to $123.9 million from $239.6 million on December 31st. Cash utilization in the quarter included the annual incentives and the revenue participation payment, as well as a return of capital to shareholders through the dividend.
Michael Aaron Angerthal: Slide 13 shows the trend of our capital liquidity and select balance sheet items working capital was $123 4 million at March 31.
Michael Aaron Angerthal: Up sequentially from $109 1 million.
Michael Aaron Angerthal: As cash generated by the business more than offset.
Michael Aaron Angerthal: Churn of capital to shareholders.
Michael Aaron Angerthal: Cash and equivalents declined sequentially to $123 9 million from $239 6 million at December 31.
Michael Aaron Angerthal: Cash utilization in the quarter included the annual incentives and the revenue participation payment as.
Michael Aaron Angerthal: As well as return of capital to shareholders through the dividend.
Michael Aaron Angerthal: Share Purchases and Net Settlement. As a reminder, the first quarter typically represents the lowest point of our cash during the year. The contingent consideration liability was reduced by a $24.2 million revenue participation payment to $66.7 million. The majority of that liability will be paid annually over the next two years in the first quarter. At March 31st, gross debt to EBITDA was 0.9 times, at the same level as December 31st. Net debt at March 31st was $134.0 million, or 0.4 times EBITDA.
Michael Aaron Angerthal: Share repurchases and net settlements.
As a reminder, the first quarter typically represents the low point of our cash during the year.
Michael Aaron Angerthal: The contingent consideration liability was reduced by a $24 $2 million revenue participation payment.
Michael Aaron Angerthal: To $66 7 million.
Michael Aaron Angerthal: The majority of that liability will be paid annually over the next two years in the first quarter.
Michael Aaron Angerthal: At March 31, gross debt to EBITDA was <unk> nine times.
Michael Aaron Angerthal: At the same level as December 31.
Michael Aaron Angerthal: Net debt at March 31 was $134 million or four times EBITDA.
Michael Aaron Angerthal: We generated $69 million of EBITDA in the first quarter, down sequentially due to seasonal employment items but up 17% from the prior year level. During the quarter, we repurchased 21,108 shares of common stock for $5 million and net settled an additional 42,588 shares for $9.9 million to satisfy employee tax obligations. Over the past year, we have reduced total shares by 2.2 percent.
Michael Aaron Angerthal: We generated $69 million of EBITDA in the first quarter down sequentially due to seasonal employment items.
Michael Aaron Angerthal: But up 17% from the prior year level.
Michael Aaron Angerthal: During the quarter, we repurchased 21108 shares of common stock for $5 million and net settled an additional 42588 shares for $9 9 million to satisfy employee tax obligations.
Michael Aaron Angerthal: Over the past year, we have reduced total shares.
Michael Aaron Angerthal: Two 2%.
George Robert Aylward: With that, let me turn the call back over to George. George. Thanks, Mike. So we will now take your questions. DeeDee, would you open up the lines, please? Thank you.
Michael Aaron Angerthal: With that let me turn the call back over to George George Thanks, Mike. So we will now take your questions DB, which of the lines. Please.
Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster, and one moment for our first question. And our first question comes from Crispin Love on Piper Sandler. Your line is open.
Speaker Change: Thank you <unk>.
Operator: <unk> to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster and one moment for our first question.
George: And our first question comes from Crispin Love of Piper Sandler Your line is open.
George Robert Aylward: Thanks and good morning everyone. I'm just looking forward to flows based on your comments. Seems like April to date is shaping up to be pretty similar to the first quarter. This versus that pair, and then do you think that's sustainable just given the some of the volatility we've seen in April so far in markets and rates, and have you been pleased with those flows so far in April in this backdrop, and just if there's anything else to call out product wise, that'd be great. Thank you.
Crispin Elliot Love: Thanks, Pat and good morning, everyone I'm just looking forward on close based on your comments it seems like April.
Crispin Elliot Love: And that could be pretty similar to the first quarter. This person was that.
Crispin Elliot Love: Do you think that's sustainable just given.
Crispin Elliot Love: Some of the volatility we've seen remote broker building end market and rates have you been pleased with those flows so far in April in those backdrop I'm, just as opposed to anything else to.
Speaker Change: Callout product line that'd be great. Thank you.
George Robert Aylward: Yeah, so for funds for a bit. So what's interesting, obviously, is that market conditions at the very end of March are not similar to some of the volatility and weakness we've had over the last few weeks. We did indicate that they're generally trending similar. But I think what the difference is, and we referred to some pockets, is that in this quarter, while you're seeing continued strength in some of the SMID and the MID, you're seeing some more interest in the less correlated strategies, given that volatility in the market, which makes total sense.
Speaker Change: Yes, so for.
Speaker Change: I'll talk about funds for a bit so what's interesting obviously is the the market conditions at the very end of March are not similar to some of the volatility and weakness we've had over the last few weeks. We did indicate that they are generally trending similar I think what the differences and we referred some pockets is in this quarter.
Speaker Change: Youre actually why or where you're seeing continued strength in some of the smid and the mid youre seeing some more interest in the less correlated strategies given that volatility in the market, which makes total sense, we did see a little bit of a rebalancing, but even with that.
George Robert Aylward: We did see a little bit of a rebalancing, but even with that, the trajectory is very similar to what we saw in the first quarter. You know, if things continue the way they are now, it just may be a difference in composition, whereas a lot of the first quarter was about people taking advantage of the highs of the equity markets. You may see a little bit more in the second quarter where people are looking for lower correlation or really making different decisions in terms of their fixed income allocations. And I think that will continue. You know, the trends for retail separate accounts and ETFs are very similar.
Speaker Change: The trajectory is very similar to what we saw in the first quarter.
Speaker Change: If things continue the way they are now it just may be a difference in composition, whereas a lot of the first quarter was about people taking advantage of the high to the equity markets you may see it a little bit more in the second quarter were people looking for lower correlation or really making different decisions in terms of their fixed income allocations and I think that continues the <unk>.
Speaker Change: For the retail separate accounts and Etfs very similar to what we saw.
George Robert Aylward: Thanks. That's helpful, and that makes a lot of sense in the less correlated strategies for April. And then just one last question for me. Can you give us your kind latest views and thoughts on the potential to add additional affiliate managers? M&A activity was light in 2023, but do you think we could be entering an environment where you could see some more activity here? And what are the areas where you're most interested in? And then, just kind of, to start the year, have conversations been picking up, stalling, or kind of pretty stable with potential new managers? Thank you.
Speaker Change: In the first quarter.
Speaker Change: Thanks, that's helpful and that makes a lot of sense.
Speaker Change: Less correlated strategies for <unk>.
Speaker Change: Just one last question from me can you just give us your kind of latest views and thoughts on the potential to add additional affiliate Minders M&A was light on 2023, but Steve we could be entering an environment, where you could see some more activity here.
Speaker Change: The areas, where you are most interested in and then just kind of to start the year off conversations been picking up stall a more kind of pretty stable with potential new managers. Thank you.
George Robert Aylward: Yeah, so overall, I mean, conversations have always continued. So the activity, probably, other than a couple of recent announcements in the industry, maybe it's been a little bit low.
Yeah. So overall I mean conversations are always continue so the activity probably other than a couple of recent announcements in the industry.
George Robert Aylward: But my view, my perspective, and I think it's shared by others, is that there have been ongoing dialogues and conversations about firms looking for different ways to partner with each other. I think the interest in doing that has remained. I think people have been more thoughtful about the nature of the conversations. And again, I think they are generally getting more creative in terms of the ways that they're partnering, as opposed to maybe some of the more traditional ways of doing that. So we continue to remain just as active as we've always been in our conversations.
Speaker Change: He has been a little bit low, but my view my perspective, and I think it's shared by others is there has been ongoing dialogues and conversations.
Speaker Change: Firms looking on different ways to partner with each other I think be the interest in doing that has remained I think people have been more thoughtful about the nature of the conversations and again I think they generally are getting more creative in terms of the ways that they're partnering as opposed to maybe some of the more traditional.
Speaker Change: Ways of doing that so we continue to me remain just as active as we've always been in our conversations.
George Robert Aylward: For us, it only makes sense if it meets certain strategic fits for us, either in terms of product capability, distribution access, or our relative scale. So, you know, that is something we continue to evaluate. We always focus first on our organic growth, but we do look at those opportunities. And just in terms of what could be interesting, again, you never know what that may be. But in our last few transactions, they have really focused a little bit more on the less correlated types of liquid alternatives.
Speaker Change: For us it only makes sense if it meets certain strategic fits for us either in terms of product capability distribution access or our relative scale. So.
Speaker Change: That is something we continue to evaluate we always focus first on our organic growth, but we do look at those opportunities and just in terms of what could be interesting again.
Speaker Change: No what that may be but in our last three transactions. They were really focused a little bit more on the less correlated types of liquid alternatives. We continue to see that as an opportunity for further expansion as we're pretty well represented in the traditional.
George Robert Aylward: We continue to see that as an opportunity for further expansion, as we're pretty well represented in the traditional long-only categories. That's not to say that there couldn't be something that's interesting there, but generally the less. The non-correlated and less liquid areas would be areas...
Speaker Change: Long only cat.
Speaker Change: Categories, that's not to say that there couldnt be something thats interesting there, but generally the less the non correlated in less liquid areas would be areas of interest.
Operator: Great. Thank you, George. And I appreciate you taking my question. No, thank you. Thank you.
Speaker Change: Great. Thank you George and I appreciate you taking my question.
Operator: Thank you. One moment for the next question. And our next question comes from Michael Cyprys of Morgan Stanley. Your line is open.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next question comes from Michael Cyprus with Morgan Stanley. Your line is open.
Operator: Great, thank you. Good morning.
George Robert Aylward: I was hoping you could talk about the international distribution efforts. Maybe you could update us on how that is progressing, how much it is contributing to flows in AUM today, and talk about the progress and expansion of the team and how that's all coming together. And then more broadly, just on the institutional pipeline, if you could maybe elaborate a bit more on some of the strengths that you're seeing, the puts and takes between the different strategies and different sub-channels within the institutional broader channel. Thank you.
Michael J. Cyprys: Great. Thank you and good morning, I was hoping you could talk about the international distribution efforts, maybe you could update us on how that is progressing how much is that contributing to flows and AUM today and talk about the progress and expansion of the team and how Thats all coming together and then more broadly just on the institutional pipeline. If you could just maybe I will.
Michael J. Cyprys: Operate a bit more on some of the strength that youre seeing puts and takes between the different strategies and different sub channels within the institutional a broader channel. Thank you.
George Robert Aylward: Yeah, so a couple of quick thoughts and then I'll ask Mike to add to that. So we continue to be, you know, very optimistic about our opportunities on the non-U.S. institutional side. We've been pleased from the very beginning with the recognition of our capabilities by some of our newer resources and them being very effective in terms of getting us in front of potential clients and consultants that we might not otherwise previously have had access to given we didn't have the presence outside the U.S. And over the last few years, you know, we highlighted in several quarters where we've had significant mandates.
Speaker Change: Yes. So a couple of quick thoughts and then I'll ask Mike to add to that so we continue to be very optimistic about our opportunities on the non U S. Institutional side, we've been pleased.
Speaker Change: In the very beginning with the the.
Michael Aaron Angerthal: Embracing of our capabilities by some of our newer resources and them being very effective in terms of getting us in front of potential clients and consultants that we might not otherwise previously have had access to given we didn't have the presence outside the U S and over the last few years, we've highlighted on several quarters, where we are.
Michael Aaron Angerthal: <unk> had significant mandates across strategies I think one quarter when I think we had a.
George Robert Aylward: I think one quarter when I think we had a large cap growth equity, I think we had a fixed income, and we had a global REIT all in one quarter, all outside the U.S. So we continue to see those levels of activity. As we've commented previously, we have seen some lengthening of the decision periods for that, but we continue to be optimistic in that area and see that as a good opportunity.
Michael Aaron Angerthal: Our large cap growth equity I think we had a fixed income and we have a global REIT all in one quarter all outside the U S. So we continue to see those levels of activity. We've commented previously we have seen some lengthening of the decision periods for that but we continue to be optimistic.
Michael Aaron Angerthal: In that area and see that as a good opportunity for us Mike.
Michael Aaron Angerthal: Yeah, and Michael, good morning. I think we talked about the sales increase sequentially across all product types. Certainly, we saw that on institutional as well. So we were pleased to see that tick up, and you know, we're seeing that across our affiliates and across geographies. We've talked before about contribution across several of our managers in actual funding as well as what we see in the pipeline. You know, the business isn't inherently lumpy.
Michael J. Cyprys: Michael Good morning.
I think we talked about.
Michael J. Cyprys: Our sales in.
Michael J. Cyprys: Increase sequentially.
Michael J. Cyprys: All across all product types, certainly we saw that on institutional as well. So we were pleased to see that tick up and.
Michael J. Cyprys: We're seeing that across.
Michael J. Cyprys: Our affiliates and across geographies, we've talked before about <unk>.
Michael J. Cyprys: Contribution across several of our managers in actual fundings as well as what we see in the pipeline.
Michael J. Cyprys: Business is inherently lumpy we are pleased that.
Michael Aaron Angerthal: We are pleased that we had improvement, marked improvement, on the net outflows sequentially, and when we, you know, look to the pipeline, there is contribution continued across our managers and across geographies, and that includes higher levels of activity. And that activity is, you know, meaningful from multiple geographies and includes meetings, RFPs, and strong activities that are ongoing. So it's difficult to forecast flows, but, you know, we're pleased with the activities that we're seeing across the team.
Michael J. Cyprys: We had improvement marked improvement on the net outflows sequentially.
Michael J. Cyprys: And when we look to the pipeline there is contribution continued.
Michael J. Cyprys: Across.
Michael J. Cyprys: Our managers and across geographies and that includes higher levels of activity and that activity is.
Michael J. Cyprys: Meaningful from multiple geographies and <unk>.
Michael J. Cyprys: Includes meetings Rfps in.
Michael J. Cyprys: Strong activities that are that are ongoing so difficult to forecast flows, but we're pleased with the activities that we're seeing across the teams.
George Robert Aylward: Great, thanks. And just a follow-up question on the ETF side, seeing some strength there, year on year that you had called out, just hoping you could update us more broadly on your overall ETF strategy. To what extent is there any sort of appetite for doing mutual fund to ETF conversions, as we're seeing from some other managers, and more broadly on active ETFs, what's the sort of appetite for broadening out the offering of active ETF strategies too?
Speaker Change: Great. Thanks, and then just a follow up question on the ETF side seeing some strength there year on year that you had called out just hoping you could update us more broadly on your overall ETF strategy.
Speaker Change: To what extent is there any sort of appetite for doing mutual funds to Etfs conversion says, we're seeing from some other managers and more broadly on active etfs, what's the sort of appetite.
Speaker Change: For broadening out the offering up active ETF strategies too.
George Robert Aylward: Yeah, no, a great question. I think in terms of the utilization of ETFs, you know, our perspective is that there continues to be further refinement on the utilization by specific financial advisors and how they want to access investment strategies, and I think that is leading to more of an evolution in terms of not purely utilizing the ETF as sort of lower-cost beta but instead using it as a vehicle of choice for certain actively managed strategies.
Speaker Change: Yes, no great question I think in terms of utilization of Etfs. Our perspective is as there continues to be further refinement on the utilization by specific financial advisors and how they want to access investment strategies.
Speaker Change: And I think that is leading to more of an evolution in terms of <unk>.
Speaker Change: Purely utilizing the ETF is sort of lower cost beta, but instead using it as a vehicle of choice for certain actively managed strategies I think you, particularly see that in fixed income I think we and others have been introducing fixed income Etfs are the reason that it's become a more preferred vehicle for.
George Robert Aylward: I think you particularly see that in fixed income. I think, you know, we and others have been introducing, you know, fixed income ETFs, the reason that they've become, you know, a more preferred vehicle for that. I think that is continuing.
Speaker Change: For that I think that is continuing I think most of our <unk>.
George Robert Aylward: I think most of our recent product introductions have been on the ETF side, and a lot of the things that we currently have in development will be to expand those ETF offerings. And again, it's really because, you know, our goal has always been to make our managers and strategies available and allow, you know, potential clients to access them through different vehicles. So we increasingly see, you know, the opportunities that some people may still want to access them via the traditional open-end fund.
Speaker Change: Most of our recent product introductions have have been on the ETF side and a lot of the things that we currently have in development will be to expand those ETF offerings and.
Speaker Change: And again, it's really because our goal has always been to make our managers and strategies available and allowing potential clients to access it through different vehicles. So we increasingly see the opportunity set as some people may still want access it via the traditional open end fund, we've obviously seen the growth in the in the <unk>.
George Robert Aylward: We've obviously seen growth in demand on the retail separate account side, and you see that more on the actively managed side for ETFs, a little more so for fixed income right now than maybe equity, and also on the less correlated, non-correlated types of strategies.
Speaker Change: Demand on the retail separate accounts side and you see that more on the actively managed side for Etfs little more so for fixed income right now than maybe equity and also on the the less correlated non correlated types of strategies. So we continue to see that as an area for growth.
George Robert Aylward: So we continue to see that as an area for growth. In terms of your questions around, you know, conversions, and I think, as you know, there's also activity around people considering the opportunity to utilize the share cash structure. You know, we keep our minds open to those. Again, we have the ability to do open-end funds, and we have the ability to do ETFs, and, theoretically, we also have the ability to do conversions. I think in terms of the conversions, and I think there was a recent article I remember seeing where a lot of the success in the conversions has really been limited to like one or two firms in that. So again, if that's something that we think is an opportunity for us, we would consider it, but we don't have anything in filing related.
Speaker Change: In terms of your question is around you know conversions.
Speaker Change: And I think as you know there is also activity around people considering.
Speaker Change: The opportunity to utilize the share cash structure, we keep our mind open to those again, we have the ability to open end funds.
Speaker Change: And we have the ability to Etfs theoretically you also have the ability to do conversions I think in terms of the conversions and I think there was some recent recent article I remember seeing where a lot of the success and the conversions is really been limited to like one or two firms in that so again, if thats something that we think is an opportunity for us we would consider.
Speaker Change: <unk>, but we don't have anything in filing related to that.
George Robert Aylward: Just on that point, if I could follow up on the conversions, just curious what you think drives success, where that is happening in the marketplace, and what would sort of lead you to evolve your views on that point, or sort of what holds you back from stepping into that?
Speaker Change: Just on that point, if I could follow up on the conversions.
Speaker Change: Curious what you think drives success, where that is happening in the marketplace.
Speaker Change: What sort of lead you to evolve your views on that point or sort of what holds you back from stepping into that.
George Robert Aylward: Well, I think it gets to, ultimately, I think there are logical reasons for people to make the decisions to do the conversions in terms of what they think is the right connection between the ultimate client and the vehicle that they're trying to access, right? So the choice is to either convert or to, you know, just introduce through a different wrapper. So I think it's very specific. It's specific to the nature of the type of financial advisors that utilize your vehicles, as well as the channel that you sell them through.
Speaker Change: Well I think it gets to ultimately I think for Theres logical reasons for people to make the decision to use the conversions in terms of what they think is the right connection between the ultimate client in the vehicle that they are trying to access rights of the choices to either convert or to just introduce.
Speaker Change: Through through a different wrapper. So I think it's very specific I think its specific to the nature of the type of financial advisors that utilize.
George Robert Aylward: So some of the firms that have made those conversions, they would align very easily with the specific advisor group that utilizes their strategy or the channel in which, you know, they're available. So all of those things would be things that we would kind of factor in if we were to do that. Great, thank you.
Speaker Change: Your vehicles as well as the channel that you sell them and so in some of the some of the firms that have made those conversions.
Speaker Change: They would align very easily with this specific advisory group that utilize their strategy or to the channel in which.
Speaker Change: They are available so all of those things would be things that we would kind of factor in if we were to make that decision.
Operator: Thank you. One moment for our next question. And our next question comes from Bradley Hayes of TD Cal, and your line is open.
Speaker Change: Great. Thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next question comes from Bradley Hayes of TD Cowen Your line is open.
Operator: Hi, good morning. This is Bradley Havon on behalf of Bill Katz. Starting on the balance sheet, how should we think about the cadence of rebuilding the cash balance? And related to that, how should we think about the priorities for deployment between buyback, debt paydown, M&A, etc.?
Hi, Good morning, it's probably behave on for Bill Katz, starting with balance sheet, how should we think about the cadence of rebuilding the cash balance and related to that how should we think about the priorities for deploying that between buyback debt paydown M&A et cetera.
Michael Aaron Angerthal: Yeah. Hey, Bradley. Good morning.
Speaker Change: Yes, Hey, Bradley good morning, it's Mike and your thoughts.
Michael Aaron Angerthal: It's Mike Angerthal. I think the cash balance, just as we cited, the first quarter is the highest use period for us for cash with the payment of annual incentives. And we had our third revenue participation payment of $24 million occur in the first quarter. But just the cadence of those payments will typically be in Q1 the lowest part of the year, and then you'll naturally rebuild cash as it's generated from the business through the remainder of the year.
Speaker Change: The cash balance just as we cited the first quarter is the highest use period for us for for cash with the payment of annual incentives and we had our third.
Michael Aaron Angerthal: Revenue participation payment of $24 million occur in the first quarter, but just the cadence of those payments.
Michael Aaron Angerthal: You will see typically be Q1 of the lowest part of the year and then youll naturally rebuild cash as it is generated from the business through the remainder of the year.
Michael Aaron Angerthal: So as you saw in the fourth quarter last year, that was the highest point of capital in cash for the year. It's just the typical seasonal cash build for the business. I think in terms of capital priorities, you know, we talked about our balanced approach to capital management. I think 2023 is a good depiction of how we use capital in connection with the strategic acquisition during the year that closed in April of 2023.
Michael Aaron Angerthal: So as you saw in the in the fourth quarter.
Michael Aaron Angerthal: Last year that was the highest point of capital and cash for the for the year. It's just the typical seasonal cash build for the business.
Michael Aaron Angerthal: I think in terms of capital priorities, we talked about our balanced approach to capital management I think 2023 is a good depiction of that we use.
Michael Aaron Angerthal: Used capital in connection with the strategic.
Michael Aaron Angerthal: Acquisition during the year that closed in April of 2023.
Michael Aaron Angerthal: We raised our dividend for the sixth consecutive year in the third quarter and bought back a meaningful amount of shares while continuing to invest in the business, which included seeding new strategies and supporting one of our affiliates with a launch of a CLO. So investing in the business, paying down debt for strategic investments in the business, and then returning meaningful capital to shareholders are all priorities and representative of our approach to capital management.
Michael Aaron Angerthal: Raised our dividend for.
Michael Aaron Angerthal: For the sixth consecutive year in the third quarter and.
Michael Aaron Angerthal: Got back a meaningful amount of shares while continuing to invest in the business, which included <unk>.
Michael Aaron Angerthal: Seeding new strategies and.
Michael Aaron Angerthal: We supported one of our affiliates.
Michael Aaron Angerthal: With the launch of <unk>.
Michael Aaron Angerthal: Cielo, so investing in the business.
Michael Aaron Angerthal: Paying down debt for strategic investments in the business and then returning meaningful capital to shareholders are all priorities and representative of our approach to capital management.
George Robert Aylward: Okay, thank you very much. I know you probably saw the strategic partnership announcement from one of your peers. Is there any appetite to explore something similar?
Speaker Change: Okay. Thank you very much.
Speaker Change: I know you probably saw the strategic partnership announcement from one of your peers is there any appetite to explore something similar.
George Robert Aylward: Yeah, I'm, you know, we don't comment on other specific types of transactions. But again, our view is that we evaluate any way that we believe could potentially create long-term value for shareholders. And in terms of partnering, and I, in my earlier comments, I kind of made reference to I think there continues to be sort of an evolution in the ways that people approach partnering. I do think that would be a good example of other less traditional ways of doing that. So again, we would evaluate any different type of structure if we thought that there was a strategic fit and it was a value creator for sure.
Speaker Change: Yes, we don't comment on other specific types of transactions, but again, our view is as we evaluate any way that we believe could potentially create long term value for shareholders.
Speaker Change: And in terms of partnering in my earlier comments that kind of made reference to I think there continues to be sort of an evolution in the ways that people approach partnering I do think that would be a good example of other less traditional ways of doing that so again, we would evaluate any any different type of structure.
Speaker Change: If we thought that there was a strategic fit and it was a value creator for shareholders.
George Robert Aylward: Okay, and then if there's time for one more, looking at fixed income, how are you thinking about your various strategies and subasset classes given the higher for longer environment we're increasingly seeing ourselves in? Is there a greater focus to develop or push more active strategies? Anything opportunistic there? Yeah, well, our strategy is from...
Speaker Change: Okay, and then if there's time for one more.
Looking at fixed income how are you thinking about your various strategies.
Speaker Change: Sub asset classes, given the higher for longer environment, we're increasingly.
Speaker Change: Seeing ourselves is there a greater focus to develop or push more active strategies anything opportunistic there.
Speaker Change: Yes, well our spray ease.
George Robert Aylward: Yeah, well, our strategies from the three managers we have with a fixed income really cross the spectrum, right? So we have, what's kind of interesting is, you know, between the capabilities that we have at New Fleet, which has strategies in the shorter duration, which probably were less in favor, the intermediate now being much stronger, and then separately we have the Sykes, in particular, their loans and their high yield capabilities, as well as then Stone Harbor, you know, with their emerging market debt.
Speaker Change: It is from that.
Speaker Change: The three managers, we have with the fixed income really across the spectrum right. So we have.
Speaker Change: What's kind of interesting is.
Speaker Change: Between the capabilities that we have at.
Speaker Change: New fleet.
Speaker Change: Which which has strategies in the shorter duration, which probably were less in favor of the intermediate now being much stronger and then separately we have the sites in particular they are alone in the high yield capabilities as well as then stone Harbor.
George Robert Aylward: So we actually think that there are lots of different new opportunities as we try to, you know, encourage fixed income investors, as everyone else is, to not rely totally on treasuries given where they currently are but sort of avail themselves. And we saw a little bit of the strength in that in some of the loan fund flows, but there are other ways to diversify their income stream. And we do think we have several managers that would be compelling in that environment. And that's one of the things our sales force does.
Speaker Change: With their emerging market debt. So we actually think that there is lots of different opportunities as we try to encourage fixed income investors as everyone else is to not rely totally on treasuries, given where they currently are but sort of avail themselves and we saw a little bit of the strength in that in some of the loan.
Speaker Change: The loan fund flows.
Speaker Change: But there are other ways to diversify their income stream and we do think we have several managers.
Speaker Change: That would be compelling in that environment and Thats one of the things that our sales force is focused on.
George Robert Aylward: Thank you. This concludes our question and answer session. I would now like to turn the conference back over to Mr. Aylward.
Speaker Change: Great. Thank you.
Speaker Change: Thank you. This concludes our question and answer session I would now like to turn the conference back over to Mr. Al word.
George Robert Aylward: Great, thank you so much. And I just want to thank everyone today for joining us, and obviously, as always, we encourage you to reach out if you have any further questions. Thank you.
al: Great. Thanks, so much and I just want to thank everyone today for joining us and obviously as always we encourage you to reach out and give any other further questions. Thank you.
Operator: That concludes today's call. Thank you for participating, and you may now disconnect.
Speaker Change: That concludes today's call. Thank you for participating and you may now disconnect.
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