Virtus Investment Partners (NYSE:VRTS) Q3 2025 Earnings Call October 24, 2025 10:00 AM ET Company ParticipantsMichael Cyprys - Managing Director of Equity ResearchCrispin Love - Director of Equity ResearchGeorge Aylward - President and CEOSean Rourke - VP of Investor RelationsMike Angerthal - CFOConference Call ParticipantsBill Katz - Senior Equity AnalystBen Budish - Director and Senior Equity Research AnalystOperatorGood morning. My name is Deedee, and I will be your conference operator today. I would lik ...

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 [9] - Earnings per share (EPS) increased to $6.69 from $6.25 in the second quarter, marking a 7% increase sequentially, although it decreased 3% year-over-year due to lower average assets [11][19] - The operating margin improved by 170 basis points to 33%, with an adjusted margin of 33.4% excluding discrete items [11][18] Business Line Data and Key Metrics Changes - The ETF business saw significant growth, with AUM reaching $4.7 billion, up 79% year-over-year, and achieving the highest quarterly sales and net flows of $0.9 billion each [5][14] - Fixed income strategies experienced positive net flows, contributing to overall sales growth of 12% to $6.3 billion, driven by higher sales in institutional and ETFs [15][16] - Despite positive flows in fixed income and alternative strategies, the company faced total net outflows of $3.9 billion, unchanged from the prior quarter, primarily due to outflows in quality equity strategies [9][10] Market Data and Key Metrics Changes - The company noted that 77% of ETF AUM outperformed benchmarks over a three-year period, indicating strong investment performance [6] - The equity net outflows were attributed to the company's focus on quality-oriented strategies, which have underperformed in a momentum-driven market environment [10][30] Company Strategy and Development Direction - The company aims to increase retail separate account offerings, expand ETF availability in key channels, and grow its wealth management business [4] - Inorganic growth opportunities remain a focus, with a disciplined approach to adding new capabilities or increasing scale [7][28] - The company is actively working on broadening access to its ETFs and introducing new offerings, including several actively managed funds expected to launch in the coming quarters [6][25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term performance of quality-oriented strategies, anticipating a reversion in market favor that could enhance performance and flows [27][30] - The company highlighted the importance of diversifying its offerings to mitigate the impact of current market trends favoring momentum over quality [30][33] Other Important Information - The company completed a debt refinancing, securing a new $400 million term loan and a $250 million revolving credit facility, enhancing financial flexibility [12][20] - The quarterly dividend was increased for the eighth consecutive year, reflecting the company's commitment to returning capital to shareholders [5][12] Q&A Session Summary Question: What are the key strategies attracting interest in ETFs? - Management noted that both the ETF wrapper and specific strategies are driving interest, with a focus on expanding access and building track records in various strategies [23][24] 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 given recent trends? - Management highlighted positive flows in fixed income and alternative strategies, emphasizing the need to grow areas less correlated to quality-oriented equity strategies [30][31] Question: What is the outlook for operating expenses following office consolidation? - Management indicated that the benefits of office consolidation are now reflected in the run rate, with expectations for lower operating expenses moving forward [34][35] Question: Are there any updates on buybacks? - Management reiterated that buybacks remain a core component of their capital strategy, with no specific plans announced for the near term [39][41] Question: What trends are observed in institutional allocations? - Management noted strength in emerging market debt and REITs, particularly in non-U.S. markets, indicating a varied investor profile [42][43]

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 due to net outflows despite favorable market performance [10] - Earnings per share (EPS) as adjusted increased to $6.69 from $6.25 in the second quarter, but decreased 3% year-over-year due to lower average assets [13][25] - Operating margin improved by 170 basis points to 33%, with an incremental margin above 50% [13][24] - Total sales increased by 12% to $6.3 billion from $5.6 billion in the second quarter [10][18] Business Line Data and Key Metrics Changes - ETF assets reached $4.7 billion, up 79% year-over-year, with the highest quarterly sales and net flows of $900 million each [6][16] - Fixed income strategies saw positive net flows, while quality equity strategies experienced significant outflows [11][20] - Institutional sales increased to $2 billion, driven by fixed income and multi-asset strategies [18] Market Data and Key Metrics Changes - The company faced net outflows of $3.9 billion, unchanged from the previous quarter, primarily due to outflows in quality equity strategies [10][20] - Positive net flows were observed in fixed income and alternative strategies, indicating a shift in investor preference [11][20] Company Strategy and Development Direction - The company aims to expand its retail separate account offerings, increase ETF availability in key channels, and grow its wealth management business [5][6] - Inorganic growth opportunities remain a focus, with a disciplined approach to acquisitions that align with strategic goals [7][39] Management's Comments on Operating Environment and Future Outlook - Management noted that quality-oriented strategies have underperformed in a momentum-driven market but expect a reversion to favor quality in the future [44][47] - The company is optimistic about the potential for positive flows in fixed income and alternative strategies, despite current challenges in equity strategies [43][46] Other Important Information - The company completed a debt refinancing, increasing financial flexibility with a new $400 million term loan and a $250 million revolving credit facility [13][26] - A quarterly dividend increase of 7% was announced, marking the eighth consecutive annual increase [14][27] Q&A Session Summary Question: What are the key strategies driving interest in ETFs? - Management indicated that both the ETF wrapper and specific strategies are driving interest, with a focus on transparency and tax efficiency [30][32] Question: Any updates on inorganic opportunities? - Management confirmed that the environment remains favorable for acquisitions, focusing on high-performing capabilities and private market expansion [36][39] Question: How can the company improve net flows? - Management highlighted positive flows in fixed income and alternative strategies, emphasizing the need to grow non-quality correlated strategies [43][46] Question: What is the outlook for operating expenses following office consolidation? - Management noted that the benefits of office consolidation are reflected in the current run rate, with expectations for lower operating expenses moving forward [49][51] Question: Is the company back in the market for buybacks? - Management stated that buybacks remain a core part of the capital strategy, with no specific announcements at this time [57][58] Question: What trends are observed in institutional allocations? - Management noted strength in emerging market debt and global REITs, particularly in non-U.S. institutional markets [60][62]