Virtus Investment Partners(VRTS) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Assets under management (AUM) decreased to $159 billion from $169 billion due to net outflows and market performance [6][14] - Total sales were $5.3 billion, down from $6.3 billion in the previous quarter [6][15] - Net outflows totaled $8.1 billion, significantly higher than $3.9 billion in the prior quarter [7][16] - Earnings per share (EPS) adjusted was $6.50, a decline from $6.69 in the previous quarter [9][21] - Operating margin decreased to 32.4% from 33% in the prior quarter [9][20] Business Line Data and Key Metrics Changes - Equity net outflows were primarily driven by quality-oriented strategies, with institutional net outflows of $3 billion [7][16] - Fixed income net flows were modestly negative at $0.1 billion, but certain strategies saw positive flows [7] - ETFs generated $0.6 billion of positive net flows, continuing strong momentum [16] Market Data and Key Metrics Changes - The market environment favored momentum-driven stocks, leading to underperformance in quality-oriented equity strategies [3] - January sales showed improvement, reaching the highest level since June, indicating a potential shift in investor sentiment [8] Company Strategy and Development Direction - The company is focusing on broadening product offerings, including the introduction of new actively managed ETFs and expansion into private markets [4][5] - The acquisition of Keystone National Group aims to enhance private market offerings and provide differentiated strategies [12][13] - The company is also exploring opportunities for growth in non-U.S. markets and other distribution channels [29][50] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging environment for quality-oriented equity strategies but expressed confidence in their long-term performance [3][10] - There are encouraging signs of broadening investor sentiment, with hopes for a recovery in quality strategies [8][41] - The company remains committed to balancing capital priorities, including investments in the business and returning capital to shareholders [11][54] Other Important Information - The company repurchased approximately 60,000 shares for $10 million in the quarter, totaling $60 million for the year [11][22] - The effective tax rate was 25.3%, expected to decrease to 23%-24% with the addition of Keystone [21] Q&A Session Summary Question: Can you elaborate on the fee rate compression in the quarter? - The fee rate was impacted by discrete expenses, particularly on the ETF side, but remained relatively stable [25][26] Question: What are the future transaction opportunities for diversification? - The company is considering both private markets and growth equity strategies for future transactions [28][29] Question: What is the software exposure across AUM? - The company is generally underweight in technology, which has affected the performance of quality-oriented equities [38][39] Question: What drove the acceleration in negative flows quarter to quarter? - The underperformance of quality-oriented strategies and seasonal tax loss harvesting contributed to increased outflows [40][41] Question: Can you discuss the growth opportunities with the Keystone transaction? - There is significant potential to leverage Keystone's capabilities in wealth management and institutional channels [48][50] Question: How will capital deployment priorities shift with recent transactions? - The company will maintain a balanced approach to capital allocation, emphasizing repurchases and dividends while considering new investments [52][54]