Good morning. My name is Didi, 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. [Operator Instructions] I will now turn the conference to your host, Sean Rourke.

Thanks, Didi, 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 2025. 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. 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 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 these 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 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. George?

Thank you, Sean, and good morning, everyone. I'll start with an overview of the results we reported this morning, and then I'll turn it over to Mike to give a little more detail. We delivered solid financial results in the third quarter, supported by higher average assets under management and favorable market momentum. We did, however, have net outflows as our quality-oriented strategies continue to face headwinds in a market environment that has largely favored momentum. Our focus remains on our initiatives to increase our retail separate account offerings, expand the availability of ETFs in key channels and grow the wealth management business. Key highlights of the quarter included higher earnings per share and operating margin, strong growth in ETF assets with our highest level of quarterly sales and net flows, positive net flows in both fixed income and alternative strategies, an increase in our quarterly dividend for the eighth consecutive year, and we completed a debt refinancing, providing significant liquidity and flexibility to invest in the business and return capital to shareholders. Our exchange-traded fund business was a particular highlight this quarter. ETF assets reached $4.7 billion, up 79% over the prior year with a strong organic growth rate over the period. In the third quarter, ETF sales and flows reached their highest quarterly level at $0.9 billion each, benefiting from strong investment performance and demand for some of our strategies. As of September 30, 77% of ETF AUM were beating benchmarks over the 3-year period and 85% were outperforming peers over the same period. We continue to focus on broadening access to our ETFs in key distribution channels and introducing compelling new offerings. We currently have 21 ETFs across a variety of strategies, and we have several actively managed funds in filing that we anticipate will launch over…

Thank you, George. Good to be with you all this morning. Starting with our results on Slide 7, assets under management. Our total assets under management at September 30 were $169.3 billion, and average assets increased 2% to $170.3 billion. Our AUM represented a broad range of products and asset classes. By product, institutional is our largest category at 33% of AUM. Retail separate accounts, including wealth management at 28% and U.S. retail mutual funds at 27%. The remaining 12% comprises closed-end funds, global funds and ETFs. Within open-end funds, ETF assets under management grew to $4.7 billion, up by $1 billion sequentially on continued strong net flows and have increased 79% over the prior year. We are also diversified within asset classes in equities between international and domestic and within domestic, well represented among mid, small and large-cap strategies. And fixed income is well diversified across duration, credit quality and geography. Turning to Slide 8, asset flows. Sales grew 12% to $6.3 billion with higher sales of both fixed income and alternative strategies. Reviewing by product, institutional sales of $2 billion compared with $1.3 billion last quarter, driven by fixed income and multi-asset strategies and included the issuance of a new $0.4 billion CLO. Retail separate account sales were $1.4 billion, essentially unchanged from the prior quarter. Open-end fund sales of $2.8 billion were consistent with the prior quarter as strong growth in ETF sales were offset by lower sales of U.S. retail funds. ETF sales were $0.9 billion, more than double the prior quarter level. Total net outflows were $3.9 billion, consistent with the prior quarter. Reviewing by product. Institutional net outflows of $1.5 billion improved from $2.2 billion due to the increase in inflows into fixed income strategies. As always, institutional flows will fluctuate depending on the…

Thank you, Mike. So we'll now take your questions. Didi, would you open up the lines, please?

[Operator Instructions] And our first question comes from Ben Budish of Barclays.

Maybe just first on the ETF side, you've noticed -- noted that that's an area of strength. Could you just maybe unpack for us a little bit, what are the key strategies that are attracting the most interest? Is it the wrapper itself? Is it the particular strategies that are offered in that wrapper, the franchises? And how do you think about that in terms of what informs the future pipeline? You mentioned a couple of things upcoming. But as you think about the next couple of years, how are you thinking what might make sense either to launch or to kind of rewrap? How you're thinking about all that?

Sure. Yes. So I think in terms of what's driving, I think it's both components. So I think the ETF wrapper itself is highly preferred by a large number of investors and financial advisers. Transparency benefits, tax efficiency. So I think in certain instances for specific strategies, it's become a vehicle of choice. In terms of what strategies people are accessing. So for us, our ETF business is a newer business, and we've been building out track records in many of our strategies. And currently, we've seen growth occurring in several of them, particularly those that I think we noted in the alt space or that have certain kinds of return patterns that are being found to be very attractive. So I commented a little bit on some of our pipeline because we really do see a lot of opportunities for very specific types of strategies in the ETF wrapper that increasingly will be utilized in portfolios. I also made comments for us, getting availability for ETFs is a big focus. A lot of times with newer ETFs, it's harder to get access in certain of the subchannels. So as we grow them, and so including in this quarter, we had one that we got to a level of access and that drove some of our flows this quarter. So that continues to be a priority for us. And then just separately, I would note for the ETF share class relief, we are one of the firms that do have filings in process related to that as well.

Very helpful. Maybe just following up in terms of growth priorities. You mentioned inorganic opportunities in your kind of brief comments about uses of capital. Just any update on pipeline potential timing? And are there any changes in the environment that make things more or less feasible? You talked about sort of growth versus momentum. Does that sort of inform the types of assets you're interested in acquiring? Just any update there would be helpful as well.

Yes. But on the last point in terms of the quality versus momentum, and again, having been in a period where for the last 2 years, quality has significantly underperformed the momentum. That is a current event. So in terms of a long-term M&A strategy, that might not necessarily have a huge impact on it, though it would influence it. We look forward to the reversion for quality coming back into favor, which is generally when quality-oriented strategies have their best performance. So unless momentum continues to lead the markets for the next multiple years, will have a headwind. But when it inverts, we will be well positioned to take care of that. In terms of inorganic, again, I repeated some of the comments from last quarter, which is that the activity remains very active and that there is a lot of opportunities in terms of things that could potentially make sense. We really focus in on a very disciplined and focused approach on what really makes sense in terms of either adding another differentiated high-performing traditional capability or private market expansion or something that would allow us to have access to more clients outside the U.S. Those are the 3 areas I believe we previously have commented on. And we do think all of those could potentially be interesting opportunities for us. We have nothing specific to announce at this time on anything that we're doing. But again, it continues to be a very active area for us.

And our next question comes from Crispin Love of Piper Sandler.

First, just looking big picture at net flows, they've been pretty elevated for 4 consecutive quarters net outflows. When you look forward, do you see any key levers to be able to improve those flows to get to more neutral, at least less negative outside of just quality coming more into favor versus momentum?

Yes. Well, I mean, a couple of things. So we did have positive flows in fixed income strategies in the quarter. We had positive flows in alternative strategies. We have positive flows in our ETF. And in multi-asset, I think we were kind of breakeven. So a lot of our flows are really around our overweight to quality-oriented equity strategies. Actually, our equity strategies that are not highly correlated to quality actually are in positive flows. So it's just the significant overweight that we have to those types of strategies is the reason that it's overshadowed any of the other areas that have been positive. So what we're focusing in on primarily now while the cycle is still negative towards us is to grow those things that don't have that same correlation. So as I commented on some of our more style agnostic or momentum-oriented equity strategies actually were in positive flows, and we're actually seeing activity there. But they're just such a smaller part of our business they're not going to overshadow the quality and the momentum. But in terms of the quality momentum, and again, this has really been -- and we highlighted how bad of a 2-year period this has been to give some examples. So for the S&P MidCap Quality Index, it trailed the S&P MidCap momentum by about 32%, which is really kind of ranks in the 93rd percentile of the data that goes all the way back to 1992 and actually, it's the worst level since October of 2000. And similarly, on the small cap, the Morningstar U.S. Small Cap quality trailed the Morningstar U.S. Small Cap momentum by about 82%, and that's the worst level going back to 2008. So it really has been an unusually stark underperformance of quality versus momentum for…

Great. I appreciate all the color there. And then just second question for me on other OpEx. You had the office space consolidation. Is this something that you've been thinking about for several quarters? And then shouldn't that drive down the run rate for OpEx going forward? Or are there offsets in there as well? And then also, if you can just detail what the $1 million of discrete business initiative expenses were in the quarter?

Sure, Crispin. I'll jump in. It's Mike. So with respect to the office consolidation, this is the quarter that you actually see it in the run rate. Those are some actions that we have taken starting late last year and earlier this year that have now been reflected in the run rate. So we talked about the $30 million to $32 million range ex the discrete items sort of coming in at the low end of that range given the benefit of that office consolidation. So we provided the transparency around the discrete items. As George alluded to, they're generally related to at elevated levels based on some of the inorganic activity that we have been focused on. So we thought providing that transparency would be helpful in the analysis of other operating. So again, it is specific to some of those activities and at levels higher than what we would anticipate a more normalized level.

And our next question comes from Bill Katz of TD Cowen.

Okay. Just sticking on the discrete spend here. Is that now over? Or should we anticipate that, that will persist? And then relatedly, are you back in the market for buyback at present?

Yes. So on the first part of the question, again, in the prepared comments, we're clear that we're still being very active, and there's still a lot of opportunities for us. So we'll sort of stand by that and sort of saying we are still being very active in evaluating potential opportunities. And as it relates, we don't have anything specific to discuss or announce at this point, but that continues to be an area where we are being very active. And on buybacks, nothing specific to say other than we continue to view that as a core element of our capital strategy. Halfway through the year, we had done $50 million, which has gotten us to the highest level of over 2 years. So that will continue to be something that we will always evaluate. But as always, we have to balance it with other factors and other considerations for that. So nothing specific on what that might be in the short term other than to say we still view return of capital as a critical part of our capital strategy.

Okay. And just as a follow-up, just going back to your commentary that the fourth quarter, the institutional trends are still looking like they were in prior quarter. Can you unpack that a little bit, where you're seeing strength, where you're seeing the weakness? And underneath that, I was sort of wondering if you could just talk about what you're just sort of seeing generally in terms of allocations. And I'm curious specifically about the demand for liquid alts.

Yes. And actually, 2 of the areas that actually I was actually very happy to see is, I mentioned emerging market debt, right, which is an area that had previously maybe not been as much in favor as some of us believe it should have been. So I think I commented on opportunities that we've seen in emerging market debt as well as global REIT as well as domestic REIT. So those are really nice to see there. I think generally, in the institutional, which for us, we have a nice non-U.S. institutional business. And I believe both of the ones I referenced are non-U.S. You kind of have a slightly different investor profile there. So that's why sometimes we can see interest in strategies that may not be as in favor in the U.S. retail market, even the U.S. institutional market, but have some opportunities there. So I mean, those are the 2 that I would highlight, but I think there's a variety of managers. Mike, I don't know if there's anything else you'd add to that.

No, I think you covered it. We -- the pipeline is across managers and across geographies, including from our European and Middle Eastern teams.

And our next question comes from Michael Cyprys of Morgan Stanley.

Just want to ask about ETFs. I was hoping maybe you could speak to how broadly distributed your ETFs are today across the wires, IBDs, RIAs, et cetera, how that is compared to where you'd like that to be? Talk about some of the steps you're taking to expand your distribution presence for your ETFs, including in models? And if you could maybe just update us on how models are contributing, if at all, today.

Yes. No, it's a great question, and that's specific to the comments we made and where we're focusing and one of the main areas of focus is increasing the availability of our ETFs in certain channels. Because as you're kind of intimating, getting access is not the same in every channel, right, the wires versus the RIAs as well as getting access into some of the big model providers and professional ETF buyers. So for us, we're focused on all of those areas where we are not where we want to be. We think we have a great opportunity, particularly if we can get some of our ETFs up to a certain level of scale, which will matter in some of the channels, say, like the wirehouses where you need a certain period of time and you need a certain asset level to have access. We always have focused in on some of the model providers and the professional buyers. But again, I still think that's a huge opportunity for us. I mean one of the reasons that we're focused on both sides of increasing the distribution as well as increasing the offerings because we just really see that there is just a great opportunity set for us and some of the areas that we kind of focus in on as we move forward. So our hope is that the growth will come from getting a lot more of the assets that we currently don't have that we do want and -- but then expanding those offerings to provide more building blocks for ETF models as well as for individual investors. And I think as I commented on a previous call, another area that we focus in on is our own models and using our ETFs for solution-oriented, outcome-oriented types of capabilities, which we have seeded and designed several things along that way. So that's why it's just been a big area for focus for us. And I think as you've seen, almost all of our product development has either been on the ETF side or the global fund side as well as -- and I don't want to leave retail separate accounts out because retail separate accounts, our focus there has really been on expanding the offerings. We have a strong placement in retail separate accounts on the equity side, and we have been just expanding the number of fixed income offerings and have put together several structures to allow us to take advantage of that. So that's another area that we would like to see some additional growth because we think we have a good opportunity set.

Great. And then just a follow-up question on inorganic activity. I was hoping maybe you could elaborate on the types and size of properties that you're evaluating. Talk about your process of how you're going about sifting and sorting through these properties and remind us of your criteria and hurdle rates. Does the transaction need to be accretive day 1 or within the first 12 months? How are you thinking about that?

Yes. So when we speak about inorganic, we're covering the whole continuum of those things which are really -- could add meaningful scale, those things that can add capabilities that are quite additive to our current set of offerings, and that would also include expanding us from the public market offerings into the private markets. When we talk about inorganic, we also, because of our flexible model, that could include things like joint ventures or other types of structures. So we kind of leave ourselves open to a variety of different opportunity set and kind of evaluate -- primarily what we're trying to evaluate is the best strategic fit, the financial benefit and really the long-term value creation. So we'll include a lot of factors, which will include things like accretion, but we'll also include factors like what impact we'll have in our growth rates, et cetera. So I don't have specific hurdles that I would provide, but we do go through a filter of various elements as we determine between 2 alternatives or 3 alternatives, what we would prioritize. The good news is, again, with our current level of net debt being de minimis and our cash flow still generating, we do have flexibility to evaluate different types of opportunities.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Aylward.

Great. Now thank you, and I want to thank everyone today for joining us. And obviously, as always, if you have any other questions, please reach out. And thank you very much.

That concludes today's call. Thank you for participating, and you may now disconnect.