Summary of Virtus Investment Partners Conference Call Company Overview - **Company**: Virtus Investment Partners (NYSE: VRTS) - **Acquisition Target**: Keystone National Group - **Transaction Date**: Announcement on December 5, 2025 - **Transaction Value**: $200 million for a 56% majority stake, with up to $170 million in deferred consideration over two years [11][12] Key Points and Arguments Strategic Rationale - The acquisition of Keystone National Group aims to expand Virtus's investment capabilities to include private market strategies, particularly in asset-based lending [4][5] - Keystone specializes in asset-centric private credit, which is expected to meet the growing demand for differentiated private market strategies [5][6] - The transaction is anticipated to be immediately accretive to margins and Non-GAAP EPS upon closing in Q1 2026 [6][13] Financial Performance - Keystone has shown strong financial performance with a revenue and EBITDA CAGR exceeding 35% over the past three years [5] - The firm has grown assets under management to $2.5 billion, primarily through the RIA channel [7] - Keystone's flagship fund, the Keystone Private Income Fund, has gained traction with leading wealth managers due to its attractive performance [9][10] Investment Strategy - Keystone's asset-based lending approach is characterized by secured financing, shorter durations, and strong covenants, providing more downside protection compared to traditional private credit strategies [9][18] - The firm focuses on collateralized loans, ensuring that the underlying assets are critical to the borrower's operations [33] Market Position and Growth Opportunities - The acquisition is expected to enhance Keystone's ability to manage its strategies while benefiting from Virtus's support model, including distribution and marketing capabilities [10][11] - There are significant growth opportunities in both retail and institutional channels, with plans to expand Keystone's existing capabilities [36][37] Financial Impact - The transaction is projected to improve operating margins by approximately 200 basis points and contribute about $1.50 to adjusted EPS in 2026 [13] - Anticipated annual tax savings of approximately $5 million due to intangible assets created by the transaction [13] Additional Insights - The management teams of both companies share similar philosophies, emphasizing investment excellence and long-term value creation [6] - Keystone's management will retain significant equity and has entered into long-term employment agreements to ensure continuity [6][12] - The firm has a strong track record of sourcing and origination, focusing on smaller ticket sizes in less crowded market segments [29][30] Conclusion - The acquisition of Keystone National Group represents a strategic move for Virtus Investment Partners to enhance its private market offerings and capitalize on growth opportunities in the wealth management space. The transaction is expected to provide immediate financial benefits and align with the company's long-term strategic objectives.

Acquisition Overview - Virtus Investment Partners will acquire a 56% majority interest in Keystone National Group for $200 million in cash at closing[13] - Up to $170 million in deferred consideration, including earnout payments, may be paid based on future revenue targets[13] - Management will retain a 44% stake, with Virtus increasing ownership to 75% through staged equity purchases in years 3-6[13] Keystone National Group Highlights - Keystone manages $2.5 billion in assets under management (AUM) across four core strategies[8, 11] - Keystone's flagship $2.0 billion tender offer fund (KPIF) is available in the RIA market[8, 11] - Keystone has invested over $6 billion of capital in more than 750 transactions since its founding in 2006[11] - Keystone's Real Estate Private Credit AUM is ~$400 million and Real Estate Equity AUM is ~$100 million[12] Financial Impact - The transaction is expected to increase Virtus' operating margin by approximately 200 basis points[13] - The estimated contribution to 2026 EPS, as adjusted, is approximately $1.50[13] - Intangible assets are expected to create annual tax savings of approximately $5 million per year[13] Market Context - Non-bank financing represents $1.9 trillion of the ~$5.5 trillion US Specialty Finance market[20] - Private credit accounts for $200-300 billion of the Specialty Finance market[20]

Core Viewpoint - Vertiqal Studios has appointed Nikki Stone to its Board of Directors, bringing extensive experience in media, marketing, and commerce to support the company's growth strategy [1][2][5]. Company Overview - Vertiqal Studios is a leading digital-channel network and video-production studio, owning North America's largest gaming and lifestyle network on social media [1][9]. - The company manages over 200 channels across platforms like TikTok, Instagram, YouTube, and Snapchat, producing more than 100 pieces of content daily for a community of over 52 million followers [10]. Appointment of Nikki Stone - Nikki Stone has over two decades of senior leadership experience and is recognized for transforming organizations and enhancing brand performance through data-driven strategies [2][3]. - Her previous role as Chief Commerce Officer at GroupM Canada involved modernizing the group's market approach and expanding capabilities across media and commerce [3][4]. - Stone's expertise aligns with Vertiqal's focus on monetization opportunities, strategic brand partnerships, and enhancing content and data connections [5]. Strategic Implications - The addition of Nikki Stone is expected to strengthen Vertiqal's competitive position and support its ongoing momentum in the digital media landscape [6]. - Stone's insights into strategy and operational excellence will be crucial for shaping Vertiqal's long-term roadmap and optimizing its business model for sustainable revenue growth [5][6].

Core Viewpoint - The Virtus Terranova U.S. Quality Momentum ETF (JOET) has successfully utilized a quantitative approach to identify high-potential stocks, outperforming the Invesco S&P 500 Equal Weight ETF (RSP) this year [1][2]. Investment Strategy - The ETF's holdings are selected based on a strict rules-based methodology, screening the 500 largest U.S. companies for those with the highest positive momentum over the past 12 months, resulting in a selection of the top 250 stocks [2]. - These selected stocks are then evaluated on three quality factors: return on equity, debt-to-equity ratio, and annualized sales growth rate over the past three years, leading to a final selection of the top 125 stocks for the ETF [3]. Fund Management - Although JOET is not actively managed in a traditional sense, it undergoes quarterly rebalancing, allowing the strategy to capture alpha without emotional biases [4]. - The fund has demonstrated the ability to identify and capitalize on market trends, such as the early investment in Palantir, which has seen significant price appreciation [5][6]. Future Plans - The company plans to expand its suite of ETF products to include other asset classes, such as small-cap and European equities, while maintaining its successful investment strategy [7]. - The JOET fund has an expense ratio of 0.29% and manages approximately $240 million in assets [8].

Core Insights - Vertiqal Studios reported a revenue increase of 16% year-over-year for Q3 2025, reaching $2,158,802, attributed to the acquisition of Enthusiast Gaming assets [5][7] - The company aims to achieve positive normalized EBITDA in 2026, marking a significant milestone in its operational history [3] Financial Performance - Q3 2025 revenues were $2,158,802 compared to $1,863,636 in Q3 2024, reflecting a 16% increase [5] - Gross profit for Q3 2025 was $1,233,483, a 24% increase from $993,474 in Q3 2024, resulting in a gross margin of 57% [5][7] - Total expenses for Q3 2025 were $4,263,224, a significant increase of 668% compared to $555,297 in Q3 2024 [8] - Normalized EBITDA for Q3 2025 was $(576,315), a 40% increase in losses compared to $(465,962) in Q3 2024 [8] Management Strategy - The company is focused on integrating newly acquired assets and expects integration costs to decrease while synergy savings materialize in upcoming quarters [3][7] - Management is prioritizing the expansion of higher-margin direct advertising partnerships and aims to fully monetize its network through Q4 2025 and into 2026 [7] Company Overview - Vertiqal Studios operates North America's largest gaming and lifestyle network, managing over 200 channels across platforms like TikTok, Instagram, YouTube, and Snapchat [9][10] - The company produces over 100 pieces of content daily for a community of more than 52 million followers, generating revenue through direct brand partnerships and platform monetization [10]

Core Insights - Vertiqal Studios has renewed its partnership with a US government agency, marking its second deal with this agency in 2025, with total campaign spending reaching seven figures [1][2][4] - The company has significantly expanded its US audience footprint, primarily targeting Gen Z and young millennials, with over 50 million viewers engaged monthly [1][2][3] - The renewal of the partnership highlights the effectiveness of Vertiqal Studios in engaging younger demographics through culturally relevant content [2][3] Company Expansion - Following the acquisition of Enthusiast Gaming's digital media assets, Vertiqal Studios has increased its US audience base, with a majority of its audience now located in the US [2] - The company emphasizes the importance of relevance in its US expansion strategy, which has led to significant partnerships and campaign spending [4] Strategic Positioning - Vertiqal Studios is positioned as a strategic partner for both public and private institutions, leveraging data-driven approaches and creative expertise to connect with younger audiences [3] - The company’s platform is recognized for its effectiveness in communicating important messages to hard-to-reach demographics [3]

Financial Performance - Total sales in Q3 2025 were $6.3 billion, a decrease of $0.3 billion, or 4.9%, from $6.6 billion in Q3 2024[106] - Total revenues for Q3 2025 were $216.4 million, a decrease of $10.6 million, or 4.7%, from $227.0 million in Q3 2024[110] - Operating income for Q3 2025 was $47.1 million, down $8.2 million, or 14.8%, from $55.3 million in Q3 2024[110] - Net income per diluted share was $4.65 in Q3 2025, a decrease of $1.06, or 18.6%, from $5.71 in Q3 2024[110] - Net income attributable to Virtus Investment Partners, Inc. decreased by $9.1 million, or 22.1%, to $31.9 million for the three months ended September 30, 2025[123] Assets and Management - Total assets under management as of September 30, 2025, were $169.3 billion, a decrease of $14.4 billion, or 7.8%, from $183.7 billion as of September 30, 2024[107] - The average assets under management decreased by $4.6 billion, or 2.6%, from $174.8 billion in 2024 to $170.3 billion in 2025[108] - Institutional accounts saw a decrease of $8.7 billion, or 13.4%, in assets under management from $64.6 billion in 2024 to $55.9 billion in 2025[108] - Retail separate accounts experienced a decline of $3.8 billion, or 7.5%, from $50.6 billion in 2024 to $46.8 billion in 2025[108] Cash Flow and Investments - Operating cash flow for the nine months ended September 30, 2025, was $180.2 million, reflecting a 72.4% increase from $104.6 million in the same period last year[156] - Net cash used in investing activities was $5.4 million, an increase of 12.6% from $4.8 million in the prior year[157] - Net cash used in financing activities decreased to $114.2 million, down 11.8% from $129.5 million in the same period last year[158] - Investments increased to $149.5 million, a rise of 25.4% from $119.2 million at the end of 2024[150] Expenses - Operating expenses decreased by $2.4 million, or 1.4%, to $169.3 million for the three months ended September 30, 2025, and by $25.7 million, or 4.7%, to $516.0 million for the nine months ended September 30, 2025[130] - Employment expenses decreased by $6.7 million, or 6.4%, for the three months and by $20.5 million, or 6.3%, for the nine months ended September 30, 2025, primarily due to a decrease in profit- and sales-based compensation[131] - Distribution and other asset-based expenses decreased by $2.1 million, or 8.9%, for the three months and by $5.3 million, or 7.4%, for the nine months ended September 30, 2025, mainly due to decreases in assets under management[132] Debt and Equity - Total debt increased by 68.3% to $390.6 million from $232.1 million at the end of 2024[150] - The company refinanced its credit agreement, securing a $400.0 million term loan and a $250.0 million revolving credit facility[159] - Total equity rose to $919.8 million, a 2.0% increase from $901.6 million at the end of 2024[150] Market Trends - Net flows were $(3.9) billion in Q3 2025 compared to $(1.7) billion in Q3 2024, indicating a worsening trend in asset retention[106] - The company reported net outflows of $(10.8) billion from December 31, 2024, partially offset by $6.6 billion from positive market performance[107] - Equity assets decreased by $14.7 million, or 13.8%, while fixed income assets increased by $736 million, or 1.9%[115] Fees and Income - Average management fees for open-end funds decreased from 49.7 basis points in 2024 to 47.0 basis points in 2025[117] - Investment management fees decreased by $10.1 million, or 5.2%, for the three months ended September 30, 2025, primarily due to decreased average assets under management[126] - Distribution and service fees decreased by $1.1 million, or 7.7%, for the three months ended September 30, 2025, due to lower sales and average assets under management[127] Tax and Compliance - The provision for income taxes reflected an estimated effective tax rate of 27.0% for the nine months ended September 30, 2025, compared to 24.4% for the same period in 2024, primarily due to a change in valuation allowances[148] - The company remains compliant with all minimum net capital requirements for its subsidiaries as of September 30, 2025[153]

Core Points - Vertiqal Studios has successfully closed a non-brokered private placement of unsecured convertible debentures, raising gross proceeds of $2,298,000 [1][2] - The company targets over 50 million Gen Z and young millennial viewers monthly through its digital-channel network and video production services [1][10] - The debentures will mature on October 31, 2027, with an interest rate of 15% per annum, payable at maturity [3] - Holders of the debentures can convert them into common shares at a conversion price of $0.025 per share, starting 18 months before maturity [4] - The offering is subject to regulatory approvals and includes a four-month hold period for the issued securities [5] Company Overview - Vertiqal Studios is a leading digital strategy and creative holding company specializing in viral video production for brands [10] - The company manages over 130 channels across platforms like TikTok, Instagram, and Snapchat, producing more than 100 pieces of content daily [10] - Vertiqal Studios collaborates with major brands such as RBC, Samsung, and Coca-Cola to develop innovative advertising solutions [10]

Core Insights - The article discusses the importance of enabling Javascript and cookies in browsers to prevent access issues [1] Group 1 - The article emphasizes that users may be blocked from proceeding if an ad-blocker is enabled [1]

Financial Data and Key Metrics Changes - The company reported total assets under management (AUM) of $169 billion as of September 30, which is slightly below the previous quarter level due to net outflows despite favorable market performance [8] - Earnings per share (EPS) increased to $6.69 from $6.25 in the second quarter, reflecting a 7% increase, while year-over-year EPS decreased by 3% due to lower average assets [10][19] - Operating margin improved by 170 basis points to 33%, with an incremental margin above 50% [10][18] Business Line Data and Key Metrics Changes - The ETF business saw significant growth, with AUM reaching $4.7 billion, a 79% increase year-over-year, and the highest quarterly sales and net flows at $0.9 billion each [5][14] - Total sales increased by 12% to $6.3 billion, driven by higher sales in fixed income and alternative strategies [15] - Net outflows for the quarter were $3.9 billion, unchanged from the previous quarter, with institutional net outflows improving from $2.2 billion to $1.5 billion [8][15] Market Data and Key Metrics Changes - Positive net flows were observed in fixed income and alternative strategies, while equity strategies faced headwinds due to a focus on quality-oriented strategies [9][10] - The company noted that flows across products and asset classes in October were trending similarly to the third quarter, with strong ETF sales continuing [9] Company Strategy and Development Direction - The company aims to increase retail separate account offerings, expand ETF availability in key channels, and grow the wealth management business [4][5] - Inorganic growth opportunities remain a focus, with a disciplined approach to adding capabilities or increasing scale [7][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging environment for quality-oriented strategies, which have underperformed compared to momentum strategies over the past two years [27][33] - The company remains optimistic about the potential for quality strategies to regain favor, which could enhance performance and flows [27][33] Other Important Information - The company completed a debt refinancing, providing significant liquidity and flexibility to invest in the business and return capital to shareholders [11][20] - The quarterly dividend was increased for the eighth consecutive year, reflecting a commitment to returning capital to shareholders [5][11] Q&A Session Summary Question: What are the key strategies attracting interest in ETFs? - Management indicated that both the ETF wrapper and specific strategies are driving interest, with a focus on expanding access and offerings [24][25] Question: Any updates on inorganic opportunities? - Management confirmed that the environment remains active for potential acquisitions, focusing on high-performing capabilities and private market expansion [26][28] Question: How to improve net flows moving forward? - Management highlighted positive flows in fixed income and alternative strategies, while addressing the need to grow areas less correlated to quality-oriented strategies [32][33] Question: Details on office space consolidation and operating expenses? - Management noted that the benefits of office consolidation are now reflected in the run rate, with expectations for lower operating expenses moving forward [37][38] Question: Status of discrete expenses and buyback activity? - Management stated that discrete expenses related to inorganic activities are ongoing, and buybacks remain a core part of the capital strategy [43][45]