• Total Assets Under Management (AUM): $175 billion as of December 31, 2024, down 5% sequentially from $183.7 billion.
• Sales: $6.4 billion in the fourth quarter, compared to $6.6 billion in the third quarter.
• Total Net Outflows: $4.8 billion, including a $3.3 billion partial institutional redemption.
• Operating Margin: 35.1%, the highest level since Q2 2022, up from 34.4% in the previous quarter.
• Earnings Per Share (EPS) Adjusted: $7.50, an 8% increase from the third quarter.
• Net Cash Position: $30 million at year-end.
• Share Repurchases: Over 250,000 shares for $57 million during the year.
• Quarterly Dividend Increase: 18%, marking the seventh consecutive annual increase.
• Investment Management Fees: $192.2 million, a 4% increase reflecting higher average AUM.
• Employment Expenses: $104.3 million, representing 49.2% of revenues.
• Other Operating Expenses: $31 million, up from $29.8 million in the previous quarter.
• Cash and Equivalents: $265.9 million at December 31, 2024.
• EBITDA: $88 million in the fourth quarter, a 5% sequential increase.

• Warning! GuruFocus has detected 2 Warning Sign with VRTS.

Release Date: January 31, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Virtus Investment Partners Inc (NYSE:VRTS) reported strong financial and operating performance in the fourth quarter, with an operating margin at its highest level in 2.5 years.
• The company saw positive net flows in focus areas such as ETFs, global funds, and retail separate accounts, indicating growth in these segments.
• Virtus Investment Partners Inc (NYSE:VRTS) introduced new products, including a new ETF from Sykes, and has several others in development, showcasing ongoing innovation.
• The company ended the year in a net cash position with significant financial flexibility, allowing for continued capital returns through share repurchases and dividends.
• Earnings per share as adjusted increased by 8% in the third quarter, reaching the highest level since the first quarter of 2022, and grew 20% for the full year.

Negative Points

• Total assets under management decreased sequentially from $183.7 billion to $175 billion due to net outflows and negative market performance.
• The company experienced total net outflows of $4.8 billion, largely due to a $3.3 billion partial institutional redemption.
• Open-end fund net outflows of $1.1 billion were essentially unchanged sequentially, consistent with market trends.
• Institutional net outflows of $3.8 billion were primarily due to a lower fee partial redemption, indicating challenges in retaining institutional clients.
• Despite positive flows in certain areas, the overall sales of $6.4 billion were down modestly from $6.6 billion in the prior quarter.

Q & A Highlights

Q: How do you see the year unfolding, especially with the strong S&P performance in recent years? Where do you see the best opportunities in 2025? A: George Aylward, President and CEO, mentioned that predicting 2025 is challenging, but the strategy is to have diversified offerings. They are seeing continued positive flows in fixed income and are having conversations about mandates in previously out-of-favor fixed income asset classes. The focus is on meeting demand, particularly in ETFs, global funds, and institutional offerings.

Q: How are you thinking about the use of capital this year, including stock repurchases, dividend increases, and M&A? A: George Aylward stated that they generate a nice level of cash earnings and have low leverage, allowing flexibility in returning capital and investing in growth. They are active in evaluating M&A opportunities that add high strategic value. They prioritize returning capital as part of their strategy.

Q: Can you provide more details on the $3.3 billion partial institutional redemption and your confidence in the relationship? A: George Aylward explained that the redemption was due to an additional manager being added to a multi-manager mandate, resulting in reallocation. They view it as a good relationship and do not see the reallocation as indicative of future issues.

Q: Has there been any change in your thinking about tax reporting, particularly regarding non-GAAP EPS and tax shields? A: George Aylward and Michael Angerthal, CFO, noted that they periodically reevaluate non-GAAP measures and highlight the economic value of tax attributes. They aim to provide transparency and clarity, ensuring investors are aware of the tax asset's value.

Q: How active are you in M&A, and how do you view leverage in potential transactions? A: George Aylward stated they are as active as ever in evaluating M&A opportunities, focusing on strategic value. They are flexible in transaction structures, considering acquisitions, partnerships, or JVs. They manage their balance sheet to maintain flexibility and are open to higher leverage for the right transaction.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.