BrightSphere Investment Group Inc. (NYSE:BSIG) Q1 2023 Earnings Call Transcript May 5, 2023

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the BrightSphere Investment Group Earnings Conference Call and Webcast for the First Quarter 2023. During the call, all participants will be in a listen-only mode. After the presentation, we will conduct a question-and-answer session. [Operator Instructions] Please note, this call is being recorded today, Thursday, May 4, 2023, at 11 a.m. Eastern Time. I would now like to turn the meeting over to Melody Huang, Senior Vice President, Director of Finance and Investor Relations. Please go ahead, Melody.

Melody Huang: Good morning and welcome to BrightSphere’s conference call to discuss our results for the first quarter ended March 31, 2023. Before we get started, please note that we may make forward-looking statements about our business and financial performance. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected. Additional information regarding these risks and uncertainties appears in our SEC filings, including the Form 8-K filed today containing the earnings release in our 2022 Form 10-K. Any forward-looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update them as a result of new information or future events.

We may also reference certain non-GAAP financial measures. Information about any non-GAAP measures reflected, including a reconciliation of those measures to GAAP measures can be found on our website along with the slides that we will use as part of today’s discussion. Finally, nothing herein shall be deemed to be an offer or solicitation to buy any investment products. Suren Rana, our President and Chief Executive Officer will lead the call. And now, I’m pleased to turn the call over to Suren.

Suren Rana: Thanks, Melody. Good morning, everyone, and thanks for joining us today. As usual, I’ll start off with the highlights on Slide 5 of the deck. For Q1 2023, the company reported ENI per share of $0.28 compared to $0.52 in Q1 of 2022. The drop in earnings was driven by lower AUM due to equity market declines throughout 2022 and also lower performance fee in the quarter compared to 1Q 2022. We’re pleased, however, that Acadian’s investment performance has continued to be strong throughout this volatile period. As of March 31, 2023, 87%, 86% and 90% of strategies by revenue beat their benchmarks over the prior three, five and 10-year periods respectively. We also reported third straight quarter of positive net flows with $0.1 billion of net inflows, and our sales pipeline remains strong historically.

We remain on track on executing on our organic growth initiatives. On systematic credit, we have the core team mostly in place and they continue to work on progressively more advanced versions of the investment model and data and infrastructure. We expect it all to be ready in the second half of 2023. And at that point we expect to start investing in the strategy with seed capital. On Acadian’s Equity Alternatives platform, you may recall, we seeded it in Q4 of 2022 with $15 million of seed capital and are now building an investment track record. We’re off to a good start on that front. Over time, we expect these initiatives to help generate sustained organic growth for Acadian. Turning to capital management. We had a cash balance of $154 million as of March 31 2023.

During the quarter, Acadian drew down on their operating revolver and ended the quarter with an outstanding balance of $87 million. As we have discussed in prior years, this revolving credit facility is at Acadian operating level and is not linked to our corporate cash balance. Acadian draws on this facility at the beginning of the year for first quarter seasonal needs, mainly to pay prior year’s annual bonuses. And the facility is then paid down fully by year-end from cash generated by the business. We expect this year to be no different. As our business continues to generate strong free cash flow, we expect to continue deploying capital to support our organic growth and to buy back our shares whenever opportunities come up. Let me conclude with our long-term strategy on slide 15.

We will continue to invest in our core capabilities and leverage our unique quant platform to expand into new areas, like we’re doing with systematic credit and equity alternatives initiatives. We will continue using our free cash flow to support organic growth and for share repurchases whenever opportunities are available. And we remain focused on maximizing shareholder value. Now, let me turn the call back to the operator. Happy to answer questions at this point.

Q&A Session

Operator: [Operator Instructions] Our first question comes from Michael Cyprys with Morgan Stanley. Please go ahead.

Operator: [Operator Instructions] All right. And this concludes our question-and-answer session. I’d like to turn the conference call back over to Suren Rana.

Suren Rana: Thank you, operator. Thank you everyone for joining us today and we appreciate you taking the time.