Greetings, and welcome to the AMG Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Patricia Figueroa, Head of Investor Relations for AMG. Thank you. You may begin.

Good morning, and thank you for joining us today to discuss AMG's results for the third quarter of 2025. Before we begin, I'd like to remind you that during this call, we may make a number of forward-looking statements, which could differ from our actual results materially and AMG assumes no obligation to update these statements. Also, please note that nothing on this call constitutes an offer of any products, investment vehicles, or services of any AMG affiliate. A replay of today's call will be available on the Investor Relations section of our website along with a copy of our earnings release and reconciliations of any non-GAAP financial measures, including any earnings guidance provided. In addition, we have posted an updated investor presentation to our website and encourage investors to consult our site regularly for updated information. With us today to discuss the company's results for the quarter are Jay Horgen, Chief Executive Officer; Tom Wojcik, President and Chief Operating Officer; and Dava Ritchea, Chief Financial Officer. With that, I'll turn the call over to Jay.

Thanks, Patricia, and good morning, everyone. It has been a landmark year for AMG with record net inflows in alternative strategies and near record levels of capital deployed in growth investments across both new and existing affiliates. Our third quarter results reflect the building momentum in our business with a 17% year-over-year increase in EBITDA and a 27% growth rate in economic earnings per share. In addition, our organic growth profile continued to improve in the third quarter, driven by alternative strategies with $9 billion in firm-wide net inflows, bringing our year-to-date total net inflows to $17 billion which represents a 3% annualized organic growth rate. Through the third quarter across both organic growth and new affiliate investments, AMG has added approximately $76 billion in alternative assets under management, representing an increase of nearly 30% in our total alternative AUM. This increase includes $51 billion in net inflows into alternatives. Today, our affiliates manage $353 billion in alternative AUM contributing 55% of our EBITDA on a run rate basis and including sizable contributions from 2 of AMG's largest and longest-standing Affiliates, Pantheon and AQR. Both firms continue to capitalize on the tailwinds in their respective areas by leveraging their scale, innovative cultures and differentiated expertise which are collectively driving strong ongoing organic growth for AMG. These elements are continuing to have a meaningful impact on our business profile and earnings. And as you know, we expect each affiliate to be a double-digit contributor to AMG's earnings this year. Given the substantial increase in our alternative AUM, the significant growth and margin expansion at AQR and Pantheon, the positive contributions resulting from capital deployed in growth investments and the positive impact of our ongoing allocation of capital to share repurchases, we anticipate a meaningful increase in our full year economic earnings…

Thank you, Jay, and good morning, everyone. AMG's activities over the course of this year illustrate our strategy in action. As we evolve our business mix more toward alternatives, our business is generating strong organic growth in both liquid alternatives and private markets. And we continue to invest in both our affiliates and in AMG's own capabilities to support future growth opportunities. This year, we have entered 4 new investment partnerships with alternative firms squarely aligned with long-term secular growth trends. We also announced a strategic collaboration to bring structured credit products to the U.S. wealth marketplace with BBH Credit Partners highlighting the strength of AMG's capital formation capabilities. And we engage strategically with our affiliates across a range of business initiatives, including new product launches, building out adjacent capabilities and supporting 2 of our private markets affiliates and their sales to consolidators. Taken together, these strategic actions and many other elements of our unique model drove significant earnings growth and cash flow generation, which we have invested and will continue to invest for growth. Fueling the execution of our strategy and the forward evolution of our business, while simultaneously returning capital through share repurchases and further delivering value to our shareholders. In the third quarter, AMG delivered $9 billion in net client cash inflows and $17 billion on a year-to-date basis, representing an annualized organic growth rate of 3% thus far in 2025. Our strong organic growth this year reflects rapidly growing client demand for liquid alternative strategies and ongoing momentum in private markets fundraising. In the quarter, our affiliates generated $18 billion in net inflows in alternatives, more than offsetting $9 billion in outflows in active equities and highlighting the advantages of AMG's business profile that is increasingly weighted toward high-growth alternative asset classes. In liquid alternatives, our…

Thank you, Tom, and good morning, everyone. It has been an exciting year for AMG. In 2025 to date, we have committed approximately $1.5 billion in capital across growth investments and share repurchases, and we continue to be in a strong position to execute on future growth opportunities and return capital to shareholders, given our significant cash generation and strong balance sheet. I will start by walking through the results for the quarter then will discuss the positive impact of recent capital activity on our forward earnings power and conclude with a discussion on our balance sheet. In the third quarter, we reported adjusted EBITDA of $251 million, which grew 17% year-over-year. This included $11 million in net performance fee earnings and reflected a full quarter contribution from Verition and Peppertree's final contribution. Fee-related earnings, which exclude net performance fees, grew 15% year-over-year driven by the positive impact of our investment performance and organic growth in our alternative strategies, partially offset by outflows from fundamental equity strategies. Economic earnings per share of $6.10 grew 27% year-over-year, additionally benefiting from share repurchases. Now moving to fourth quarter guidance. We expect adjusted EBITDA to be in the range of $325 million and $370 million based on current AUM levels, reflecting our market blend, which was up 1% quarter-to-date as of Friday and including net performance fees of $75 million to $120 million, bringing expected performance fees for this year to between $110 million and $155 million. This guidance includes a full quarter contribution from Montefiore, a full quarter contribution from Comvest's private credit business and no impact from our announced investments in Qualitas Energy and BBH Credit Partners, which are expected to close in Q4 and Q1 2026, respectively. We expect fourth quarter economic earnings per share to be between $8.10 and…

[Operator Instructions] Our first question comes from the line of Bill Katz with TD Cowen.

Jay, maybe one for you. I think the theme coming out of today's call is just the franchise momentum both from a de novo perspective as well as incrementally through inorganic. A, maybe I was wondering if you could just maybe delve a little bit more into BBH, how that sort of rose? Did they seek you out? And then just as you look at the pipeline looking ahead, how should we be thinking about activity level into next year after a really strong 2025?

Great. Bill, and thanks for your questions. I will -- let me take the first one just on the momentum. Tom, I'm going to ask you maybe to talk about BBH and then maybe you can send it back to me and we can talk about pipeline. So check them all off. So yes, thanks, Bill. I think I agree with your setup. It has been a landmark year for AMG, an output of our strategy, as you've heard us talk about it over the last 6 years, both inorganic and organic, our flow profile, which is driven by alternatives. It's been improving for some time now. This quarter is our second significantly positive quarter. It is building and we feel good about the continued strength of it. Our strategic engagement with affiliates, collaborating with them to magnify their long-term success is generated meaningful results at places like Pantheon, AQR, Artemis, Garda and many others where we're working on business development initiatives to enhance their value. It's been, as you've seen, one of the most active years for us in terms of new investment activity, near record levels of capital deployment. We've announced for new investments and a strategic collaboration with BBH, which Tom will talk about in a moment. We've had two stake sales from -- two consolidators in Peppertree and Comvest. So it's just been an extraordinarily active year for us. Maybe looking at where the business stands today, alternatives contribute 55% of our EBITDA on a run rate basis. We're working hard to increase that to more than 2/3 in just a few years from now. We think that will continue to sustain our organic growth and also we see good opportunities to make those new investments. And finally, as we have been committed to disciplined capital allocation, it has resulted in $350 million of repurchases this year. You heard Dava say that we've just updated our guidance to at least $500 million for 2025. So it has been an extraordinary year in terms of both new investments and organic growth. And that lays the groundwork for accelerating EBITDA and earnings growth in 2026. So maybe, Tom, if you would mind, give us a bit more detail on BBH.

Yes, happy to. Thanks for your question, Bill, I think Jay provided a lot of very good context in terms of our strategy overall. And really, when we think about the BBH strategic collaboration, it aligns very well with a number of different elements of our strategy and key themes and areas that we're really focused on like alternatives and like the growing opportunity for alternatives in U.S. wealth. Over the course of the past couple of years, you've heard us on earnings calls and some of our meetings talk about this repositioning that we've gone through in our U.S. wealth business really to just focus that organization on the opportunity and alternatives. We've built a new affiliate product strategy team. We've channelized our sales force to address both RIAs and the wire house opportunity. And we're partnering very closely with affiliates like Pantheon to build, seed and distribute differentiated investment solutions to U.S. wealth clients. So in a lot of ways, the strategic collaboration with BBH is both a recognition of the success that we've had to date in going through that change to our U.S. wealth platform and the opportunity and the success that we're seeing, but also the next chapter in terms of opportunity to build on that success with a great partner like BBH. BBH is one of the most respected and trusted brands in financial services globally, and we're very excited to work closely together with them. You asked how this came together. And effectively, I would say we found each other. They had an opportunity that they were thinking about in terms of an excellent structured credit franchise. We had a strong view on structured credit as an opportunity in U.S. wealth and there was a real complementary opportunity for us to come together…

Yes. Great. I'll just say one thing. It was very validating and rewarding that our capital formation capabilities, and that's an area, which, as Tom just mentioned, we've invested heavily in repositioning it. It was a centerpiece of this strategic collaboration with BBH and we do think it will allow us to drive more product in the wealth space around alternatives. So we're very excited about that. Turning to the pipeline, Bill. So I know you heard me say that already that it's been near record levels of deployment from our perspective. We continue to see opportunities to invest for growth in new and existing affiliates. Our pipeline reflects this opportunity set. And maybe just giving a bit of color at a high level, we stay -- we're staying focused on areas of secular growth, both within private markets and liquid alternatives. Importantly, we are interested in businesses where AMG's strategic capabilities can add value and firms that would like to have a strategic partner. So that has increasingly become a part of the dialogue and part of our differentiated area for success. We'd like to be able to magnify our affiliates business plans, their business initiatives, and we're doing so through our active engagement with affiliates. We've had a proven track record of providing capital and resources in these areas, business development, product development and distribution. So we're excited about continuing to add new affiliates in areas that we think we can help them grow. This unique sort of advantage that we have now in addition to just preserving independence, which we've always done very well, as you know, the ability to magnify the advantages of partner-owned firms has really added to our attractiveness in the market. The last thing I'd just say around our pipeline, in addition to, we continue to have a significant opportunity to invest our capital and growth initiatives. We will remain disciplined as always. The goal is to ensure that we deploy our capital at the highest -- in the highest quality opportunities with a target mid- to high-teens returns as we've said in the past. We have been successful in doing that over the past 6 years. But if we cannot find good investment opportunities, we will look to return capital through share repurchases, and we've done that also during this period, having reduced our share count by 40%. So maybe I'll just leave you with a summary of our new investment opportunity. We feel really good about it. We feel good about our ability to originate and invest in new affiliates in areas of secular growth and we're confident that we'll continue to meaningfully evolve our business through these growth investments and enhance shareholder value over time. So thanks, Bill, for your questions.

Our next question comes from the line of Alex Blostein with Goldman Sachs.

So lots of enthusiasm from you guys in 2026. It feels like it's a little bit earlier than typical to give guidance in 2026, but I was wondering if you kind of could help contextualize what that could mean for next year given a number of moving pieces including you alluded to expansion in the margins at AQR and Pantheon, that sounds like it's an important part of the story here as well. So any way you can help us frame what sort of the growth expectations you might have so far into 2026, would be helpful.

Yes. Thanks, Alex, and good morning to you. I'll let Dava do the meat of this. Maybe just to set it up. One of the reasons why we're so excited about 2026 is that, as you've seen in the past, when we do new investments, the year in which we do invest new investments is a partial year. And so the full year contribution from those new investments actually happens in the next year, in this case, 2026. We've also had the added benefit this year of having organic growth really come into the middle of the year and continues -- the momentum continues. And as you heard and you rightfully pointed out, there's an added benefit there because it's into businesses where we actually have margin expansion opportunity. So maybe I'll let Dava expand on what we're seeing in terms of mix and forward look. It is a little early to land on to 2026, but I think we can give you a sense for it.

That's right. Thanks, Jay, and thanks, Alex, for the question. At a high level, we expect the combination of new investments, share repurchases and the impact of net inflows from alternatives to be impactful to our 2026 EPS. Really, given the strategic evolution of our business profile over the last 6 years towards greater participation and alternatives, the EBITDA impact of the growth that we're seeing today is really meaningful. The largest driver of that has been a turnaround in our net flow profile as we've moved the business from what was shrinking organically around 10% annually to a business that today grew 3% annualized on a year-to-date basis and 5% annualized this quarter. And as we've experienced an even larger EBITDA contribution, the past 2 quarters from our net flows than our organic growth rate would indicate. So we're seeing some further expansion in EBITDA than you would expect in our net organic growth rate. This trend is occurring because of the bifurcation we've seen between strong organic growth on the alternative side, and the headwinds on the traditional side. The growth in alternatives is moving the business towards a higher fee and longer lock strategies that, in some cases, have future performance fee and carry potential while the outflows have been more isolated to lower fee open-ended equity funds. So even though we tend to own more of the firms where we're experiencing outflows, the higher fee rate from the alternative products have more than offset this impact. And we'll give some further guidance on the next earnings call in terms of our overall thoughts on 2026.

Dava, you might just want to also talk about just the composition between NFRE and PRE just briefly. I think that's also something that's meaningful that's happening.

Sure. So what's exciting that we've seen to date, again, based on both the combination of the new investment profile that we've been -- that we've had this year and also in terms of organic growth, we've seen our year-over-year aggregate fee rate and real growth in fee-related earnings. So you've seen that up about 15% on a quarter year-over-year basis. And the shift mix of our business is moving towards a higher contribution from fee-related earnings.

Our next question comes from the line of Dan Fannon with Jefferies.

This is Rick Roy on for Dan. So you reported another quarter of accelerating liquid alts flows, and it sounds like momentum in the tax were AQR strategies continues to be a big contributor towards that. So maybe on that, I was hoping you could add a little bit more color on the full diversity of flows coming from the AQR broader franchise and maybe perhaps also describing the performance fee potential of the broader set of AQR strategies that are gathering inflows? And then maybe separately, if you could note any notable private markets fund raises to be aware of in the near-term and into 2026, that would be helpful.

Thanks, Rick. I'm going to let Tom just sort of give you an overview of flows, and I'm sure within that, he will drill down on some of the trends that we're seeing.

Rick, thanks for the question and Jay, actually, maybe after I go through this, you can give a little bit more color on AQR specifically, but I'll give you the whole picture and then we can fill in from there. To put the whole thing in context, our flows are primarily a function of 3 key drivers. The first is the alignment between our affiliates' investment strategies and overall client demand trends. The second is the evolution of our business mix and Dava just talked about some of this as to Jay, over time through both organic growth rates, the relative organic growth rates of our different business lines, and the investments that AMG is making to form new partnerships and growth areas in line with our strategy. And then finally, the third driver is really the lift that we're able to provide at the AMG level to our affiliates through new product development and distribution. In terms of alignment with client demand trends, with approximately 55% of our EBITDA now coming from alternative asset classes and a growing portion coming from wealth clients our overall positioning is very well aligned with forward trends. In terms of where we go from here, as we look to continue to push that percentage of EBITDA from all closer to the 2/3 level over the course of time, all of our recent new investment partnerships have been focused on alternatives. And significantly more than 100% of our total net flows over the past few years have also been in alternatives. And over that same time frame, we've grown alternatives AUM on our U.S. wealth platform from about $1 billion to more than $7 billion. And you're seeing the cumulative impact of that business mix evolution on AUM on our fee rate, as Dava…

And Rick, let me address AQR specifically. Incrementally, it has been very helpful to our flow profile, but maybe I'll highlight a few key attributes about that business is a very diverse business. And the way I describe it is it's a liquid alts business, 1 of the top 3 in the world. It has a pretty significant tax-aware wealth business that has a different dynamic than just its overall institutional liquid alts business. And then it has a 40 Act long-only business as well. Because of its excellent performance, it's seeing inflows in each of these areas. And so I think we would be remiss without sort of stating the obvious, which is a very big, diverse business with lots of different strategies and lots of different opportunities within it. Maybe I'll highlight, though, as I did last quarter, sort of a paradigm shift that's occurring in the wealth channel. And AQR is leading -- or has a leading position in this paradigm shift. The basic strategies to harvest losses, they've been around for decades, but AQR, they brought in additional set of tools and capabilities to it. They've kind of unlocked the power of investing for after-tax outcomes with the use of liquid alternatives, specifically using long-short investing techniques, either to track market data or they have a goal of absolute return, and that has generated superior after-tax outcomes, and that's what's leading to the significant flows. The shift in focus by RIAs to after-tax outcomes from their historical convention of evaluating on pre-tax returns, we think this is just in the very early innings. So the AQR has quite an opportunity ahead of them. As you know, they've been an innovator in liquid alternatives for more than 20 years now, their ability to bring new strategies and…

Ladies and gentlemen, this concludes our Q&A session and will conclude our call today. We thank you for your interest and participation. You may now disconnect your lines.