ARTISAN PARTNERS ASSET MANAGEMENT INC. 2026 Q3 Earnings Call

Thank you for joining the call today. Artisan Partners is a talent-driven investment platform that brings together exceptional investors, the autonomy to pursue disciplined investment processes, and the resources and business leadership necessary to build enduring investment franchises. We believe this combination differentiates Artisan Partners and drives long-term value creation for clients and shareholders. Our third quarter results reflect both the strength and the challenges of our business. While investment performance and client flows were challenged in portions of our equity platform, we continue to demonstrate the growth potential of our expanding credit and alternatives businesses. We are also making meaningful progress broadening our investment capabilities, developing new investment vehicles, and positioning the platform for future growth. Investment performance is the foundation of everything we do. Our long-term investment results across asset classes, investment franchises, investing styles, and inception dates demonstrates the strength and consistency of our platform.

At quarter end, 92% of our assets under management outperformed their benchmarks over 10 years, and 99% since inception, gross of fees. Short-term investment performance was less favorable during the quarter, with relative underperformance across several of our larger equity strategies. The one and three-year numbers shown on the slide were particularly impacted by the performance of our International Value and Global Value strategies, both of which have had very strong performance in October. Calculated as of October 26th, 75% and 84% of our AUM are outperforming over the trailing one and three-year periods respectively. We continue to see strong results in credit and alternatives. 100% of our credit AUM has outperformed the benchmark over the reported time periods since inception of our first credit franchise in 2014. EMsights Capital Group has also established an outstanding investment track record.

All three of the franchise's strategies have generated double-digit annualized returns since inception, gross of fees, and meaningful excess returns relative to their respective benchmarks. These results demonstrate the breadth of our multi-asset investment platform and reinforce our confidence in the long-term value of our business. Turning to slide 4, net client outflows totaled $10.6 billion for the quarter. As previously disclosed, approximately $7.8 billion of the net outflows included $1.9 billion associated with the US value team wind down and $5.9 billion related to the rebalancing of a large Global Value client relationship. Business development in credit and alternatives remained strong. Combined, our credit and alternative strategies generated $1.1 billion in net inflows during the third quarter and have raised $3.2 billion year to date.

For the quarter, credit strategies generated approximately $290 million of net inflows, marking the 17th consecutive quarter of positive credit flows, and we raised approximately $770 million in alternatives, led by strong growth in the Artisan Global Unconstrained Mutual Fund. Turning to the next slide. Over the past five years, combined credit and alternatives AUM has nearly doubled to more than $26 billion, increasing from 8% to 15% of firm-wide AUM. During that period, we have added Custom Credit Solutions and the Floating Rate strategy to the Artisan Credit team's lineup. We have onboarded the EMsights Capital Group and launched Global Unconstrained, Emerging Markets Debt Opportunities, and Emerging Markets Local Opportunities. We have added fixed income talent to the International Value Group and launched the Global Special Situations strategy.

At the beginning of this year, we acquired Grandview Property Partners and recently closed on an anchor investor for their fourth flagship fund. The Artisan Credit team demonstrates what we believe we can accomplish with each of these other franchises. Since launching in 2014, the credit team has established an outstanding investment track record and built a diversified credit business with over $16 billion in assets under management. We see significant opportunities to build on that success by expanding the team's investment capabilities across public and private credit, broadening its geographic reach, and developing new investment vehicles. These initiatives represent the next phase of growth for our credit franchise, leveraging the team's established investment expertise and our broader operating and distribution capabilities.

Across our platform, including equities, we are working with our investment teams to further develop their franchises, broaden degrees of freedom, increase the breadth and quality of talent, and expand the ways clients can access their investment expertise. During 2026, we have launched 13 new UCITS fund share classes to complement our expanding reach into the U.K. and European wealth market. In the fourth quarter, we anticipate launching an ETF share class of the Artisan Select Equity Fund and Artisan Focus Fund to broaden investor access in the wealth market. We are developing an interval fund structure to bring our public and private credit capabilities to wealth clients in 2027. We believe the opportunity set available to Artisan today is broader than at any point in our history. We have proven our platform works across equities, credit, and alternatives.

We are excited about further growing with existing franchises as well as partnering with external talent via lift-outs or acquisitions. We can do more and move faster, yet stay true to our principles, maintaining the highest investment standards, aligning interests, delivering a distraction-free investment environment, and maintaining a long-term orientation. I will now turn the call over to CJ to discuss our financial results.

Thanks, Jason. Our complete GAAP and adjusted results are detailed in our earnings release. Assets under management ended the quarter at $169 billion, a decrease of 8% from the June quarter and 7% from a year ago. Approximately 75% of the net outflows that contributed to the quarterly AUM decline were attributable to two discrete events Jason discussed. Both events had a relatively modest impact on revenues in the quarter. Average assets under management were $180.5 billion, down 1% sequentially and up 2% compared to the September 2025 quarter. Year-to-date average AUM improved 7% over the prior nine-month period. Revenues for the quarter were $313 million, up 1% from the June quarter, primarily reflecting an additional day during the quarter and a slight increase in our average fee rate, which more than offset the modest decline in average AUM.

Compared to the September 2025 quarter, revenue increased 4%, driven by higher average assets under management and an increase in our average fee rate. Our weighted average fee rate for the quarter increased to 69 basis points, up from the June quarter. The increase primarily reflects the impact of the two previously mentioned discrete redemption events. Adjusted operating expenses declined 2% from the June quarter, primarily reflecting a decline in employee-related costs and the continued roll-off of seasonal expenses, offset in part by increased variable incentive compensation associated with increased revenues. Compared to the prior year quarter, adjusted operating expenses increased 5%, primarily reflecting higher employee-related and professional fee expenses, as well as the addition of the operating expenses of Grandview Property Partners, which we acquired in January of this year.

As a result, adjusted operating income increased 9% sequentially, adjusted operating margin expanded 260 basis points to 35.5%, and adjusted earnings per share increased to $1.03. Compared to the same quarter in 2025, adjusted operating income increased 2% and adjusted earnings per share increased 1%. Our adjusted operating margin declined 70 basis points, primarily reflecting the higher operating expense. Year to date, average AUM and revenues increased 7% compared to the first nine months of last year. Year to date, adjusted operating expenses increased 8%, reflecting higher incentive compensation associated with increased revenues, employee-related costs, and the addition of Grandview. Adjusted operating income increased 6% to $307 million. Adjusted operating margin was relatively stable at 33%, and adjusted earnings per share increased 6% to $2.84. In our non-GAAP measures, non-operating income includes only interest income and expense. Our balance sheet remains strong with $352 million of cash.