Good day, and welcome to the Artisan Partners Asset Management Business Update and First Quarter Earnings Call. All participants will be in a listen-only mode. Please note that this event is being recorded. I would now like to turn the conference over to Brennan Hughes, Head of Investor Relations. Please go ahead.

Welcome to the Artisan Partners Asset Management business update and earnings call. Today's call will include remarks from Eric Colson, CEO; Jason Gottlieb, President; and C.J. Daley, CFO. Following these remarks, we will open the line for questions. Our latest results and investor presentation are available on the Investor Relations section of our website. Before we begin today, I would like to remind you that comments made during today's call, including responses to questions, may include forward-looking statements. These are subject to known and unknown risks and uncertainties, including, but not limited to, the factors set forth in our earnings release and detailed in our SEC filings. These risks and uncertainties may cause actual results to differ materially from those disclosed in the statement, and we assume no obligation to update or revise any of these statements following the presentation. In addition, some of our remarks today will include references to non-GAAP financial measures. You can find reconciliations of these measures to the most comparable GAAP measures in the earnings release and the supplemental materials, which can be found on our Investor Relations website. Also, please note that nothing on this call constitutes an offer or solicitation to purchase or sell an interest in any Artisan investment product or a recommendation for any investment service. I will now turn it over to Eric.

Thank you for joining the call or reading the transcript. We value your time. Artisan Partners is built for the uncertainty and volatility of markets. Our investment teams have the autonomy, experience, and degrees of freedom to execute through these periods, the ability to use cash, geography, market cap, and an array of instruments to take and manage risk and the judgment, discipline, and patience to remain true to their investment philosophies and client expectations. Historically, our investment teams have taken advantage of uncertainty and volatility to add value for clients. We believe the same will be true this time around. Our business model is a source of stability for our people, our clients, and our shareholders. A majority of our expenses, including compensation, adjust automatically with changes in our AUM, allowing us to remain focused on executing for our clients and thoughtfully growing our business. In that regard, volatility creates opportunity for us in the broader marketplace as asset allocators seek established and trusted managers and investment talent seeks a stable long-term home. For Artisan, disruption truly creates opportunity. Since 2013, we've expanded from five investment teams to 11. We have increased the number of investment strategies we offer from 12 to 27. We have evolved from a long-only public equity manager to a multi-asset class investment platform. We now have two fixed income teams, four fixed income strategies, and six alternative strategies. And we have reoriented our firm to align with demand from both the traditional institutional channel and the private wealth market. This includes realigning our distribution structure and team and evolving from a bought, not sold mentality to a sales culture. Today, approximately 60% of our AUM is managed on behalf of what we consider intermediated wealth clients. Through all this change, we have demonstrated the repeatability of our model and process across investment leaders, generations, geographies, asset classes, and distribution channels. We have performed for existing clients, thoughtfully grown the firm from next-generation high value-added investing, and generated a healthy return for shareholders. Slide 2 is a snapshot of our repeatable success. This shows our 11 strategies with track records of more than 10 years. Developing World, which Jason will discuss, will join this group in July. The returns on this slide are average annual return since inception after fees and expenses. To help better understand the significance of our outperformance, let me translate one of these outcomes into dollars. $1 million invested in the Artisan Global Value strategy 18 years ago would be worth $4.1 million today after fees. Had the same $1 million been invested in the same manner as the index, it would be worth $2.9 million today. Artisan's Global Value 205 basis points of average annual outperformance after fees translated into $1.2 million of more wealth, over 40% more wealth than the index approach. In addition to the consistency of the absolute and excess returns, we are equally proud of the consistency of our investment talent and their execution through time. We have done what we have told our clients we would do over long periods of time. Even the strategies no longer led by founding portfolio managers are led by portfolio managers with long tenures at Artisan. They are known entities. We have achieved these long-term outcomes by knowing who we are, focusing on what we can influence, taking a long-term view, and avoiding trying to be all things to all people. We try to maintain an ideal home for investment talent. We provide that talent with expanding degrees of freedom to generate absolute returns and manage risk. We launched strategies we believe will have long-term demand from sophisticated investors who understand the scarcity of alpha. We execute through periods of short-term noise, uncertainty, and volatility to generate long-term outcomes for our people, our clients, and our shareholders. Jason will discuss several recent examples of this process at work.

Thank you, Eric. I'm going to discuss several investment strategies, all of which embody the themes and characteristics Eric has been describing for many years. Talent-driven, increasing degrees of freedom, high value-added, differentiated investing, long-term demand, in particular, in the private wealth space. The first is the Artisan Global Special Situation strategy. We launched this new strategy in March. It is led by Brian Louko, who joined the Artisan International Value Group in September of last year. The investment strategy is multi-asset focused on issuers experiencing stress or dislocation. The portfolio will be highly differentiated, targeting attractive risk-adjusted absolute returns through market cycles. In addition to managing Global Special Situations, Brian and his team will provide corporate credit and special situations expertise to the broader International Value Group, led by David Samra. This is the second time David has added new capabilities to the International Value Group. In 2020, Beini Zhou and Anand Vasagiri launched the Artisan International Explorer strategy, which has generated over 540 basis points of average annual outperformance since inception after fees. Beini and Anand now manage over $600 million, including net inflows of almost $221 million during the first quarter. We are excited to have started the journey with Brian, his team, and the Global Special Situation strategy. And we are very pleased to see David Samra and the International Value Group further expand their degrees of freedom and capabilities into fixed income, special situations, and alternatives. Our second new strategy is the Artisan Franchise strategy managed by the growth teams, Jim Hamel and Angela Wu. The Franchise strategy is a highly concentrated global equity strategy that seeks to generate significant alpha for investors willing to hold through periods of volatility and tracking error. In particular, we expect the Franchise strategy will be attractive to family offices and other intermediated wealth clients. In addition to representing a new investment offering from the growth team, the Franchise strategy is yet another demonstration of the team's thoughtful and methodical development of investment talent. Moving from new launches to important milestones on Slide 4. On April 1st, we marked the third anniversary of the Artisan Global Unconstrained strategy. Tomorrow, the Emerging Market Debt Opportunities strategy will hit 3 years. And in August, the Emerging Markets Local Opportunities strategy will do so as well. All three strategies have performed extremely well since inception. The absolute return-oriented Global Unconstrained strategy has generated average annual returns of 9.87% net of fees and a Sharpe ratio of 2.1. Since inception, Emerging Market Debt Opportunities and Emerging Market Local Opportunities rank in the first and seventh percentiles, respectively, of their eVestment peer universes. All three strategies have large institutional anchor clients. Historically, the three-year mark has been an inflection point for business development. With the foundation firmly established, we are increasing our marketing and distribution efforts across the EMsights strategies. We have raised over $300 million for EMsights so far this year, and we expect to do much more across distribution channels and geographies. In July, we will celebrate the 10th anniversary of the Developing World strategy. As Eric mentioned, it will become our 12th strategy with a 10-plus year track record. When portfolio manager Lewis Kaufman joined Artisan more than a decade ago, we very intentionally set out to do something different to design an investment strategy that could capture the potential of emerging markets but provide Lewis with the degrees of freedom to move optimally, capture the economic opportunity, and better manage risk. Lewis has dared to be different, methodically communicated his unique approach, remained disciplined around a core set of principles, and delivered. As we approach the 10-year anniversary, we believe the Developing World team is a great example of our strategy of identifying unique talent and supporting them with broader degrees of freedom to add value for clients over long periods. We believe the 10-year track record will make Developing World that much more appealing to investors seeking an emerging market strategy with degrees of freedom to navigate geopolitical and economic uncertainty.

Thank you, Jason. It is gratifying to see our established investment franchise is adding degrees of freedom and our more recent franchise is hitting important milestones with impressive investment and business results. It speaks directly to the repeatability of our business model and philosophy. Our approach to thoughtful growth has always emanated from who we are, a high value-added investment firm designed for talent to thrive in a thoughtful growth environment. Consistent with that, we have always focused on the intersection of investment talent, alpha opportunity, and long-term asset allocation demand. Historically, that led us to design much of our business primarily with an eye towards institutional investors and the consultants who serve them. That remains an important part of our business today and will continue long into the future. Today, though, we are increasingly designing and evolving our business primarily with an eye towards the private wealth market. Private wealth is large and growing with demand for high value-added management. We have a significant presence in this market today. Of our $162 billion in AUM at quarter-end, approximately $97 billion was sourced from the intermediated wealth channel. In the intermediated wealth, we have approximately 172 relationships of greater than $50 million, and 117 are invested in three or more strategies. We believe there is a tremendous opportunity for us to further grow in the intermediated wealth channel. We will continue to bring together unique investment talent with large opportunity sets requiring active management. We will continue to align interest between investment talent, clients, and the firm. And we will continue to reorient our distribution structure and team to better access and service the intermediated wealth channel. By remaining focused on who we are and executing on this strategy, I'm highly confident we will continue to generate successful long-term outcomes for our people, our clients, and our shareholders. I will now turn it over to C.J. to discuss our recent financial results.

Thanks, Eric. First quarter results reflect lower revenues, primarily as a result of the absence of $17 million of performance fees realized in the fourth quarter of 2024. The fourth quarter included performance fees realized in seven different strategies. The majority of our performance fee arrangements pay annually and have measurement states at the end of December. The expected absence of performance fees in the first quarter and higher seasonal expenses led to a 7% decline in revenues, 19% lower adjusted operating income, and a 470 basis points decrease in our adjusted operating margin from the fourth quarter of 2024. Assets under management ended the March quarter at $162 billion, up slightly from last quarter and from a year ago. Ending assets under management for the March quarter reflect $4.1 billion of market returns, including $1.8 billion or 110 basis points of returns in excess of benchmarks. Net client cash outflows during the March quarter were approximately $2.8 billion and included a $1.2 billion outflow from a separate account rebalancing within our mid-cap growth strategy. Gross outflows for the quarter, excluding the separate account rebalance, were in line with historical levels. Equity outflows in the quarter were partially offset by positive flows into our fixed income and alternative businesses. The first quarter of 2025 marks the 11th consecutive quarter of positive fixed income flows. Average AUM for the quarter was up 1% sequentially and up 8% compared to the March 2024 quarter. Slide 9 is a new cut of our AUM by distribution channel. Eric has highlighted how Artisan has become firmly established in the wealth channel. This view of AUM provides a five-year view of the strength of our intermediated wealth relationships and the $97 billion of assets sourced from that channel. The intermediated wealth channel has grown tremendously over that period and now accounts for 60% of total AUM with an annualized organic growth rate over that period of 5%. As discussed in Eric's remarks, our distribution efforts continue to focus on this channel with more dedicated resources and a build-out of enhanced digital marketing and sales enablement capabilities. Our complete GAAP and adjusted results are presented in our earnings release. Revenues for the quarter decreased 7% compared to the December 2024 quarter and are up 5% compared to the prior year first quarter. In addition to the seasonal decline in performance fees, $5.4 million of the decline in revenue was attributable to two fewer days in the first quarter of 2025 compared to the fourth quarter of 2024. Our weighted average recurring fee rate for the quarter remained at 68 basis points. Adjusted operating expenses for the quarter were flat from the fourth quarter, with variable expenses declining 6% on lower revenues, offsetting seasonal increases in fixed expenses of 8% or $7.5 million. In comparison to the same quarter last year, adjusted operating expenses are up 3%, primarily from higher incentive compensation expense due to increased revenues. For the full year of 2025, fixed expenses are still expected to increase mid- to low-single digits, consistent with our previous guidance. Adjusted operating income is down 19% sequentially from the absence of performance fees and up 9% compared to the same quarter last year as a result of revenue growth outpacing increases in operating expenses. Adjusted net income per adjusted share declined 21% compared to last quarter, again, primarily from the expected absence of performance fees and up 9% compared to the same quarter last year. In calculating our non-GAAP measures, non-operating income includes only interest expense and interest income. Although valuation changes on our seed investments impact shareholder economics, we fully exclude these valuation changes from our adjusted results to provide transparency into our core business operations. Turning to Slide 11. Our balance sheet remains strong. We currently have $138 million of seed capital in our investment products with ample liquidity to seed future strategies. As strategies reach scale and our seed investments are redeemed, any gains realized are included in the cash available for corporate purposes, future seed investment needs, or as an addition to our year-end special dividend. During the first quarter of 2025, we fully redeemed our remaining $23 million seed investments in our Credit Opportunities Fund with a cost basis of $8 million. The original seed investment of $22 million was made in 2017 and generated total realized gains of $27 million and an annualized return of 13%. As a result of the redemption of the remaining seed capital, the Credit Opportunities Fund was deconsolidated from our balance sheet during the first quarter. Moving to our borrowings. Our $100 million revolving credit facility remains unused and $60 million of senior notes will mature in August 2025. We currently expect to refinance all or a significant portion of the maturing amounts with a new series of long-term senior notes. We continue to return capital to shareholders on a consistent and predictable basis through quarterly cash dividend payments and a year-end special dividend. Consistent with our dividend policy, our Board of Directors declared a quarterly dividend of $0.68 per share with respect to the March 2025 quarter. The decline in the dividend from Q4 reflects lower cash generation from the absence of performance fees in the first quarter of 2025. That concludes my prepared remarks. I will now turn the call back to the operator.

Thank you. We will now begin the question-and-answer session. Your first question today will come from Alex Blostein with Goldman Sachs. Please go ahead.

Hey, good afternoon. This is Anthony on for Alex. I guess to first start, I would say congrats, Jason, on the new role. But for my first question, you guys have talked about fixed income and alternatives being the key strategic growth areas for the firm. Could you maybe expand on opportunities you see here, specifically in the retail or insurance channel?

Thank you for the kind words, Anthony. There are several ways we can continue to grow and expand. One of the key methods is to increase our degrees of freedom within our current investment franchises, where we believe there’s significant potential, particularly with our high-income and EMsights teams. I want to emphasize our Global Unconstrained franchise, which spans fixed income and alternatives and aligns well with the high-net-worth market. This liquid alternative functions both as a traditional and nontraditional fixed income option, a cash surrogate, or simply as part of an alternative investment strategy. We see this as a major opportunity and are committed to expanding in this area. Additionally, there are various avenues for growth; having only two teams indicates that we can pursue opportunities through team lift-outs or mergers and acquisitions. We will keep assessing these prospects, and when we identify what we consider a clear opportunity that aligns well with our strong investment capabilities, we will act on it. These areas represent clear growth paths for us in both the intermediated wealth channel and through pure platform expansion.

Got you. That's helpful. And I guess for my follow-up, expenses came in well managed this quarter, especially on the non-comp side. So how should we think about normalized expenses from here? And if uncertainty continues, what kind of levers can you use to maintain margins?

Thanks, Anthony. Good question. Our guidance for the full year really hasn't changed much. I think there was a bit of a miss from folks on G&A. We did have some FX gains this quarter and travel typically slows down a bit in the first quarter after a heavy fourth quarter. So that guidance still remains. So I think you'll see the rest of the quarters pick up the savings that you had in your model for the first quarter. On the variable expenses, obviously, they fluctuate with revenues and then long-term incentive comp guidance is still similar to what we gave for the full year. In the first quarter, there is a little bit of a holiday because our 2025 grant happens at the end of January. So there isn't a full quarter of expensing there. But all the guidance that we gave in January related to 2025 remains intact.

Okay, thanks guys.

And your next question today will come from John Dunn with Evercore ISI. Please go ahead.

Hi, congratulations, Jason. I wanted to ask about just given the movement in markets, are there any areas you wanted to highlight about being capacity constrained or the reverse having a lot of capacity?

Yes. We're always in constant communication with the teams about capacity management. There are certainly a couple of strategies that have been in the soft close mode for several years now, and we don't anticipate them to be adjusted or changed or opened. That being said, there are some opportunities where there could be the potential for a shift there. And it comes down to the team being comfortable taking on that additional capacity. And certainly, we want to work with them and evaluate why that potential is available. Is it the dislocation in the market and that there's opportunities, has there been some attrition that they're looking to replace? And so it's a bit of an ongoing dialogue and discussion with teams, but we do think in the not-too-distant future, there is the potential for some capacity opening coming in the form of these soft closes being removed.

Got it. And then also just with the market movements. On the M&A front, a bunch of your peers have seen like a renewed interest in maybe doing some team lift-out of small deals in private markets, with smaller firms looking for better distribution in the wealth channel. Can you just kind of give us your thoughts around that topic?

Yes, there are plenty of opportunities in the market right now, and we are very active, just as we have always been. However, we will adhere to our established process of assessing each opportunity based on its investment expertise and the asset allocation trends we observe. I want to emphasize that we see many promising and interesting opportunities, but we will be very careful about how we expand our capabilities. These opportunities may come through lift-outs or potentially through mergers and acquisitions. The current market volatility, as you've pointed out, is actually beneficial for us. While disruptions may not be well-received, we see them as valuable opportunities that align with what you mentioned.

Thank you.

And your next question today will come from Bill Katz with TD Cowen. Please go ahead.

Thank you very much, and congratulations, Jason. I appreciate the new disclosure, and I took some time to review it last night. I have a couple of questions regarding your comments on the 172 relationships and the 117. Could you clarify what you mean by those relationships? Additionally, when considering the overall franchise, the institutional business has faced significant pressure over the past five years. How do you view the current landscape for that business? Do you expect it to continue seeing declines in flows, or do you think there is a chance for it to stabilize and support the wealth side? Thank you.

Hey Bill, it's Eric. I want to emphasize the progress we've made in the wealth sector. We differentiated between intermediated wealth and wealth management. We see ourselves as a specialized investment platform for talent that desires significant freedom. Many individuals in this space are looking to manage assets and engage in this growth area. We're not aiming to develop accounting, tax, legal services, or overall portfolio allocation to compete directly in wealth management, but many of our clients are sourcing assets through the wealth channel. Our relationships in this area have been increasing, and we want to highlight this aspect. The characteristics align well with what we envisioned for the institutional channel from the beginning. We aimed for high entry barriers, which we found in the institutional channel through research. We want to compete based on investment performance and operational quality rather than on sales or marketing fees. This research barrier allows strategies the time they need to generate excess returns. Importantly, it facilitates leverage in institutional relationships, particularly with consultants. In the intermediated wealth channel, our partnerships with RIAs and broker-dealers provide that leverage, which is reflected in the growth of relationships involving more than three strategies. We're increasingly aligning our distribution for growth in this area. We have discussed the evolution of our distribution, and this is the outcome we're targeting. Regarding the institutional space, we've expanded in the U.S. and taken our approach internationally. We believe this will continue to be a strong growth area for us, although we noticed a shift during this period from equities to credit and alternatives. We have adapted our organization to include more fixed income strategies and alternatives. Therefore, we expect the institutional space to remain a robust area for us.

Thank you. As a follow-up regarding the pipeline, I am curious about Jason's greater responsibilities in leading both the credit division and your platform. Is there any change in strategy? While you mentioned sticking to your established capabilities, is there anything different this time? It seems like there is more emphasis on fostering organic growth. Historically, you have sought to limit that growth, but is there now a greater openness to expanding without focusing on fee reductions to achieve that growth? Thank you.

We've definitely been focused on growth. We've talked about our distribution evolution. We've talked about going from being bought to being sold. And as we focus on the intermediated space, we have shifted our sales team and grown our headcount. Last year was primarily in sales. So the focus is building on that intermediated wealth, really restructuring how we're selling into that channel. And more importantly, the strategies that Jason highlighted and the groups we're looking at is to build out investment opportunities and strategies that fit that channel, whether it's within team or within a lift-out, which we think is quite opportunistic right now given the amount of teams available. So we definitely feel that we're positioned well for that channel, and we are focused on growth.

Okay, thank you. I will get back into queue. Thank you.

And your next question today will come from Kenneth Lee with RBC Capital Markets. Please go ahead.

Hey, good afternoon and thanks for taking my question. I just wanted to add my congratulations to Jason on the new role. And one follow-up here on the intermediate wealth growth opportunity here. When you look out for further growth here, are there any particular segments that are possibly faster growing? I think you mentioned briefly family offices for the Franchise strategy there. And somewhat relatedly, is it going to require a different mix of strategies or vehicles to really optimize that growth in that channel going forward? Thanks.

Yes. I think when you look at the long-term asset allocation of that client mix, it is slightly different than the institutional. So we've always looked at long-term asset allocation to drive the type of strategies that fit within Artisan. We believe that we need the time required to resource and play out those strategies. So when they do build a three-year track record, such as the records we highlighted on the call with the EMsights Group with Global Unconstrained, MDO and MLO all coming into three-year track records. We think that will play out quite well in the intermediated space, whether it's in Europe or in the U.S. So really, the types of strategies we are looking for will be slightly different because of that wealth space. And I think that's a great opportunity for us. But in many cases, our existing strategies, given the track records we've highlighted, also play quite well. So we think the combination of what we have, the track records we've built, more recently, we're starting to see a bulk of our platform producing good alpha and solid performance given the volatility in the marketplace. And more and more, we'll see new strategies that fit the intermediated wealth space.

Got you. Very helpful there. And just one follow-up, if I may, on the institutional side and realize it's still early days, but just given the more recent market volatility there, could you provide a little color around what you're seeing in terms of either RFP activity, due diligence activity, any kind of potential changes that you're seeing in terms of client allocations there? Thanks.

In the first quarter, we observed significant rebalancing in the equity sector. We mentioned a large client that shifted $1.2 billion away, a move they had been indicating for some time. This involved a defined contribution plan transitioning from single manager options to a multi-manager plan. The strategy in question was Mid-Cap Growth, which has shown a performance of 12.78% since its inception. Such strong performance tends to attract substantial assets. As clients realign their investments back into a multi-manager program and revert to their target allocations, we often see reductions. This trend was prevalent across our platform in the first quarter, reflecting a general rebalancing back to target allocations. Additionally, there was heightened interest in the credit sector, where the majority of discussions revolved around concerns regarding market uncertainty and volatility, as well as how teams are positioning themselves in response. Overall, I would characterize the quarter as involving a lot of communication and engagement with our clients, which is a positive sign, although it did not lead to much immediate action.

Got you, very helpful there. Thanks again.

That will conclude today's question-and-answer session as well as the conference call. Thank you for attending today's presentation. You may now disconnect your lines and have a great day.